Annual
Report
2020
About Gannett
Gannett is a subscription-led and digitally focused media and marketing
solutions company committed to empowering communities to thrive. We aim
to be the premiere source for clarity, connections, and solutions within our
communities.
The broad reach of our newsroom network links leading national journalism at
USA TODAY, our local property network in 46 states in the U.S., and Newsquest
in the U.K. with more than 120 local media brands. This gives us the ability to
deepen our relationships with consumers at both the national and local levels. We
bring consumers local news and information that impacts their day-to-day lives
while keeping them informed of the national events that impact their country.
Our USA TODAY NETWORK newsrooms have won 96 Pulitzer Prizes.
Gannett also owns the digital marketing services companies ReachLocal,
UpCurve and WordStream, which are marketed under the LOCALiQ brand. We
have strong relationships with thousands of local and national businesses in both
our U.S. and U.K. markets due to our large local and national sales forces and a
robust advertising and digital marketing solutions product suite.
USA TODAY NETWORK Ventures, our events and promotions business, is the
largest media-owned events business in the U.S.
The foundation of our business is the employees who make our day-to-day
operations possible. We invest in our employees by providing resources and
programs to empower personal and professional advancement. Inclusion,
Diversity and Equity are core pillars of our organization and influence all that we
do.
Letter to Shareholders
Dear Shareholders:
As I wrote my letter to you last year, the COVID-19
pandemic had just turned our lives upside down
and brought on a deep economic slowdown felt
globally. We were faced with an enormous amount
of uncertainty, which prompted us to move quickly
to ensure the safety of our employees, to continue
to deliver our trusted, comprehensive content to
our communities, and to strengthen our balance
sheet and liquidity position. I am incredibly proud of
what our Company was able to accomplish, despite
this disruption, and am excited about where we are
headed.
2020 Operational Highlights
Our top operational priority in 2020 was to reduce
our debt with an eye toward refinancing the
entirety of the 11.5% term loan by the end of 2021.
In addition to generating free cash flow for debt
paydown, we had committed to completing $100
million - $125 million in asset sales over that same
time frame. During 2020, we outperformed that
goal, completing over $195 million in asset sales,
the proceeds of which were used to repay over $180
million of debt during the year. We also refinanced
approximately $500 million of term loans using
proceeds from our issuance of 6% Senior Secured
Convertible Notes due in 2027. This reduced the
outstanding 11.5% term loan to $1.075 billion at
the close of 2020, which quickly put us on a path to
refinancing that remaining amount in early 2021.
Another key priority was to integrate our legacy
companies to achieve an expected $300 million in
annualized synergies by the end of 2021. Despite
the pandemic, our integration plans moved ahead
of schedule with $177 million in savings benefitting
2020 and ending the year on an annualized run
rate of $245 million. We expect to outperform our
anticipated $300 million annualized synergies target
both in size and timeline.
In response to the pandemic, the Company further
reduced its expense base to create incremental
savings of $125 million in the second quarter, initially
through temporary actions such as furloughs and
wage reductions. As the pandemic continued into
the second half of 2020, we shifted those actions
to permanent savings, which will benefit 2021 and
beyond.
While many of the pandemic’s impacts were outside
of our control, we executed strongly against our
stated top priorities and ended 2020 with a stronger
balance sheet than when we began. We also did
so while keeping our mission to empower our
communities to thrive at the center of all that we do.
2020 Content & Community Highlights
2020 was a very challenging year for our
communities; they navigated a global pandemic, a
divisive U.S. Presidential election, over 30 natural
disasters, and widespread civil unrest in protest of
racial injustice in the U.S. The demand for trusted
news and how these issues impacted their local
communities was apparent in the sustained, strong
engagement we saw with our content. We also
reached a significant milestone in the third quarter of
2020, surpassing 1 million digital-only subscribers to
our local media sites.
In response to the pandemic, we launched over
35 Coronavirus newsletters as well as the Nation’s
Health daily section in USA TODAY. All pandemic-
focused content was made available digitally, free
of charge, and garnered over 650 million views
during the first half of the year. Our production and
distribution teams managed through the year’s
challenges without any significant disruptions to
service, ensuring that our communities received
their content when they needed it most. And our
marketing solutions and product teams quickly
mobilized to launch the Support Local initiative,
which created free business listings that shared
how the community could continue to support local
businesses and take advantage of their ongoing
services.
Our award-winning content continued to be
recognized, with the Louisville Courier Journal
awarded the Pulitzer Prize for breaking news
reporting on its coverage of Kentucky Governor Matt
Bevin’s pardons and commutations during his last
days in office. It also led coverage of the Breonna
Taylor tragedy, leading to a partnership with ABC’s
“20/20” that aired in November 2020. In the U.K.,
The Impartial Reporter received recognition at
the Amnesty International UK Media Awards for
its outstanding investigation into historical sexual
Letter to Shareholders
abuse. We are incredibly proud of our journalism
and appreciative for the many recognitions beyond
these that were received during 2020.
2021 and Beyond
In the fourth quarter of 2020, we were able to grow
Adjusted EBITDA as compared to the prior year and
have seen marked improvement to our revenue
trends from the initial impact of the pandemic in
the second quarter. This strong financial outcome
as well as our aggressive debt paydown and partial
term loan refinancing during 2020 enabled us to
take advantage of strong credit markets in early
2021. In February 2021, we closed on a broadly
syndicated $1.045 billion term loan facility at a
rate of LIBOR+700 with a 0.75% LIBOR floor. The
combination of debt repayment, refinancing
using the convertible notes, and refinancing of
the remaining term loan is expected to save the
Company $90 million in annual cash interest during
2021 as compared to 2020. The Company remains
committed to debt reduction, targeting first lien net
leverage of 1.0x by the end of 2022.
We have also outlined five key operating priorities
for 2021 and beyond: accelerating digital subscriber
growth, driving digital marketing services growth,
optimizing our traditional print operations and
advertising businesses, prioritizing investments
into growth businesses that support our vision,
and building our inclusive and diverse culture. In
2021, you will hear us speak to these priorities
regularly and share data points with you to track
our progress. We expect this strategy to create
significant stockholder value in the coming years
by driving increased revenue from digital products,
bringing our Company’s total revenue trend
back toward growth, and allowing us to continue
significant debt reduction.
Sincerely,
Michael E. Reed
Chairman and Chief Executive Officer
April 1, 2021
Cautionary Note Regarding Forward-Looking Statements
Certain items herein may constitute forward-looking
statements within the meaning of the Private Securities
Litigation Reform Act of 1995, including statements
regarding measures expected to result in over $90 million
in annualized cash interest savings, our ability to achieve
our operating priorities and increase stockholder value,
our digital revenue performance, shifts in our revenue mix
and the timing of realizing such shifts, the potential sales
of non-core assets, including the anticipated use of any
proceeds from such sales, integration of our acquisitions,
our ability to achieve or exceed $300 million of synergies
through measures expected to be implemented by the
end of 2021 or sooner, our expectations, in terms of both
amount and timing, with respect to debt repayment, real
estate sales and debt refinancing, growth of our digital-
only subscriptions, digital marketing services, and events
and promotions businesses, the impact from and our
response to the COVID-19 pandemic, our strategy, and
future revenue trends and our ability to influence trends.
These statements are based on management’s current
expectations and beliefs and are subject to a number of
evolving risks and uncertainties. These and other risks and
uncertainties could cause actual results to differ materially
from those described in the forward-looking statements,
many of which are beyond our control. The Company can
give no assurance that its expectations will be attained.
Accordingly, you should not place undue reliance on any
forward-looking statements contained herein. For a
discussion of some of the risks and important factors that
could cause actual results to differ from such forward-
looking statements, see also the risk factors described in
the Company’s most recent Annual Report on Form 10-K,
our Quarterly Reports on Form 10-Q, and other filings filed
with the Securities and Exchange Commission. Furthermore,
new risks and uncertainties emerge from time to time, and
it is not possible for the Company to predict or assess the
impact of every factor that may cause its actual results
to differ from those contained in any forward-looking
statements. Such forward-looking statements speak only
as of the date of this press release. Except to the extent
required by law, the Company expressly disclaims any
obligation to release publicly any updates or revisions to
any forward-looking statements contained herein to reflect
any change in the Company’s expectations with regard
thereto or change in events, conditions or circumstances on
which any statement is based.
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 31, 2020
☐ 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 001-36097
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)
38-3910250
(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
Preferred Stock Purchase Rights
Trading Symbol
GCI
N/A
Name of Each Exchange on Which Registered
The New York Stock Exchange
The New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. 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 every Interactive Data File required to be submitted 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 such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company,"
and "emerging growth company" in Rule 12b-2 of the Exchange Act:
Large accelerated filer ☐
Accelerated filer ☒
Non-accelerated filer ☐
Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of
its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report. ☒
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 30, 2020 was approximately $187,837,799. The registrant
has no non-voting common equity.
As of February 19, 2021, 139,033,905 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 Stockholders for 2021 is incorporated by reference in Part III
to the extent described therein.
INDEX TO GANNETT CO., INC.
2020 FORM 10-K
Cautionary Note Regarding Forward Looking Statements
Part I
Item 1.
Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Properties
Legal Proceedings
Item 4. Mine Safety Disclosures
Part II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Item 6.
Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Item 8.
Item 9.
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other information
Part III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions and Director Independence
Item 14. Principal Accountant Fees and Services
Part IV
Item 15. Exhibits and Financial Statement Schedules
Item 16. Form 10-K Summary
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CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
Certain statements in this Annual Report on Form 10-K may constitute forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995 that reflect our current views regarding, among other things, our future
growth, results of operations, performance, and business prospects and opportunities as well as other statements that are other
than historical fact. Words such as “anticipate(s),” “expect(s),” “intend(s),” “plan(s),” “target(s),” “project(s),” “believe(s),”
“will,” “aim,” “would,” “seek(s),” “estimate(s)” and similar expressions are intended to identify such forward-looking
statements.
Forward-looking statements are based on management’s current expectations and beliefs and are subject to a number of
known and unknown risks, uncertainties, and other factors that could lead to actual results materially different from those
described in the forward-looking statements. We can give no assurance our expectations will be attained. Our actual results,
liquidity, and financial condition may differ from the anticipated results, liquidity, and financial condition indicated in these
forward-looking statements. These forward-looking statements are not a guarantee of future performance and involve risks and
uncertainties, and there are certain important factors that could cause our actual results to differ, possibly materially, from
expectations or estimates reflected in such forward-looking statements, including, among others:
• Risks and uncertainties associated with the ongoing COVID-19 pandemic;
• General economic and market conditions;
• Economic conditions in the various regions of the United States, the United Kingdom, and other regions in which we
operate our business;
• The shift within the publishing industry from traditional print media to digital forms of publication;
• Risks and uncertainties associated with our Digital Marketing Solutions 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;
• Declining print advertising revenue and circulation subscribers;
• Our ability to grow our digital marketing services initiatives, digital audience, and advertiser base;
• Our ability to grow our business organically;
• Variability in the exchange rate relative to the U.S. dollar of currencies in foreign jurisdictions in which we operate;
• The risk that we may not realize the anticipated benefits of our acquisitions;
• The availability and cost of capital for future investments;
• Our indebtedness may restrict our operations and/or require us to dedicate a portion of cash flow from operations to
payments associated with our debt;
• Our current intention not to pay dividends and our ability to pay dividends consistent with prior practice or at all;
• Our ability to reduce costs and expenses;
• Risks and uncertainties associated with the termination of the Amended Management Agreement (as defined below)
and the transition from external management to self-management of the Company;
• Our ability to remediate a material weakness in our internal control over financial reporting;
• The competitive environment in which we operate; and
• Our ability to recruit and retain key personnel, as well as any shortage of skilled or experienced employees, including
journalists.
Additional risk factors that could cause actual results to differ materially from our expectations include, but are not limited
to, the risks identified by us under the heading “Risk Factors” in Item 1A of this report and the statements made in subsequent
filings. Such forward-looking statements speak only as of the date they are made. Except to the extent required by law, we
expressly disclaim any obligation to release publicly any updates or revisions to any forward-looking statements contained
herein to reflect any change in our expectations with regard thereto or change in events, conditions, or circumstances on which
any statement is based.
3
ITEM 1. BUSINESS
Overview
PART I
Gannett Co., Inc. ("Gannett", "we", "us", "our", or the "Company") is a subscription-led and digitally focused media and
marketing solutions company committed to empowering communities to thrive. We aim to be the premiere source for clarity,
connections, and solutions within our communities. Our strategy is focused on driving audience growth and engagement by
delivering deeper content experiences to our consumers, while offering the products and marketing expertise our advertisers
desire. The execution of this strategy is expected to enable the Company to continue its evolution from a more traditional print
media business to a digitally focused content platform. Until November 19, 2019, our corporate name was New Media
Investment Group Inc. ("New Media") and Gannett Co., Inc. was a separate publicly traded company. On November 19, 2019,
New Media completed its acquisition of Gannett Co., Inc. (which was renamed Gannett Media Corp. and is referred to as
“Legacy Gannett”). In connection with the acquisition, New Media changed its name to Gannett Co., Inc. and assumed Legacy
Gannett's ticker symbol "GCI" (having previously traded under "NEWM").
Our current portfolio of media assets includes USA TODAY, local media organizations in 46 states in the U.S., and
Newsquest, a wholly owned subsidiary operating in the United Kingdom ("U.K.") with more than 120 local news media brands.
Gannett also owns the digital marketing services companies ReachLocal, Inc. ("ReachLocal"), UpCurve, Inc. ("UpCurve"), and
WordStream, Inc. ("WordStream"), which are marketed under the LOCALiQ brand, and runs the largest media-owned events
business in the U.S., USA TODAY NETWORK Ventures.
Through USA TODAY, our local property network, and Newsquest, Gannett delivers high-quality, trusted content where
and when consumers want to engage with it on virtually any device or platform. Additionally, the Company has strong
relationships with hundreds of thousands of local and national businesses in both our U.S. and U.K. markets due to our large
local and national sales forces and a robust advertising and digital marketing solutions product suite. The Company reports in
two operating segments, Publishing and Digital Marketing Solutions, plus a corporate and other category. A full description of
our segments is included in Note 14 — Segment reporting of the notes to the consolidated financial statements.
The Company has made both internal and external investments to align with the shift in spending habits to digital products
by both consumers and marketers. In 2020, total Digital advertising and marketing services revenues were $808.4 million, or
24% of our total revenues. Our U.S. media network, which includes USA TODAY and our local properties, has more than 4,350
journalists. We expect to and are invested in growing the number of journalists, as we seek to accelerate growth of a
subscription-led business model, anchored on high-quality, original, impactful journalism. Our U.S. media network averaged
150 million(1) unique visitors monthly during 2020 who access content through desktops, laptops, smartphones, and tablets. In
the U.K., Newsquest is a publishing and digital leader with approximately 655 journalists and a network of websites that
attracts over 39 million unique visitors monthly. As of December 31, 2020 we had approximately 1.1 million digital-only
subscribers, up 29% year over year.
Publishing Segment
Our Publishing segment comprises the following core products:
•
253 daily media brands, including USA TODAY and our local property network in the U.S., with total paid circulation
of over 2.6 million and Sunday circulation of 3.0 million;
308 weekly media brands (published up to three times per week) with total circulation of approximately 1.6 million;
375 locally-focused websites, which extend our businesses onto digital platforms;
•
•
• USA TODAY Group, which includes USATODAY.com and its mobile applications, our sports network (owned and
operated as well as affiliates), and Reviewed.com, an affiliate marketing business;
121 daily and weekly news media brands with related digital platforms as well as over 100 magazines in the U.K.; and
•
• Our community events platform, USA TODAY NETWORK Ventures.
In addition to our core products, we also opportunistically produce niche publications that address specific local market
interests such as recreation, sports, healthcare, and real estate. Many of our publications are located in small and mid-size
markets where we are often the primary provider of comprehensive local market news and information. Our content is primarily
devoted to topics we believe are highly relevant and of interest to our audiences such as local news and politics, community and
regional events, youth sports, opinion and editorial pages, local schools, obituaries, weddings, and crime news.
4
More than 80% of our daily media brands have been published for more than 100 years. We believe the longevity of our
publications demonstrates the value and relevance of the local information we provide and has created a strong foundation of
reader loyalty and a highly-recognized media brand name in each community we serve.
Since its introduction in 1982, USA TODAY has been a cornerstone of the national media landscape under its recognizable
and respected brand. It also serves as the foundation for our newsroom network, the USA TODAY NETWORK, which allows
for content sharing capabilities across our local and national markets. Since 1918, our USA TODAY NETWORK newsrooms
have won 96 Pulitzer Prizes. Most recently, the Louisville Courier Journal won the 2020 Pulitzer Prize for breaking news
reporting for its coverage of the flurry of pardons and commutations given by Kentucky Gov. Matt Bevin during his final days
in office. This followed three wins in 2018, when the USA TODAY NETWORK was awarded Pulitzer Prizes for local
reporting, editorial writing, and explanatory journalism, highlighting our ability to integrate in-depth reporting and cutting-edge
technology.
The scale of our consumer audience across the Publishing segment makes us an attractive marketing partner to various
local and national businesses trying to reach consumers. We are the leading news media publisher in the U.S. in terms of
circulation and have the fifth largest digital audience in the News and Information category, based on December 2020
Comscore Media Metrics; per those metrics, our content reaches more people digitally than Fox News, CBSnews.com, New
York Times Digital, BuzzFeed.com, or WashingtonPost.com.(1)
•
•
In our U.S. local property network, the combined average daily print readership is approximately 6.9 million on
Sundays and 5.6 million daily Monday through Saturday, while the digital audience reached 74.6 million(1) monthly
unique visitors, on average, in 2020. At USA TODAY, print readership averages 2.7 million daily Monday to Friday,
while the digital audience reached approximately 105.1 million(1) monthly unique visitors, on average, in 2020. While
our print audience tends to skew to an older demographic, our digital audience skews younger as evidenced by 52%(1)
of the total U.S. digital millennial audience (ages 18 - 34) accessing our USA TODAY NETWORK content monthly.
In the U.K., our wholly-owned subsidiary, Newsquest, has a total average print readership of over 5.1 million every
week. Newsquest’s digital audience in 2020 had an average of 39 million monthly unique users.
The Publishing segment generates revenue primarily through advertising and subscriptions to our print and digital
publications and, to a lesser extent, commercial printing and distribution. The USA TODAY NETWORK has developed an
efficient operating model utilizing a single content management platform and integrated shared support for back-office
operations such as accounting and finance, content design and layout services, print and digital creative development, and
certain sales and service platforms. We also strive to manage production and distribution efficiently across our entire newsroom
network.
Advertising and marketing: In 2020, Publishing segment Advertising and marketing services revenues of $1.410 billion,
which represents 46% of total Publishing segment revenues, down from 50% in 2019.
We track our Print advertising revenues in three primary categories: local, national, and classified. Below are descriptions
of the three categories:
• Local advertising is associated with local merchants or locally owned businesses. Ads run in our print products, such
as our daily or non-daily publications, and are either run-of-press (ROP) or preprinted inserts (typically stand-alone,
multiple page fliers inserted into daily and Sunday print products);
• National advertising is principally associated with advertisers who are promoting national products or brands.
Examples are retailers, commercial banks, airlines, and telecommunications. It also includes national brands that
advertise in our local markets. Similar to local advertising, ads are either ROP or preprinted inserts; and
• Classified advertising includes major categories such as legal, obituaries, automotive, employment, and real estate or
rentals. Classified advertising is published in the classified or other sections within the publication.
We track Digital advertising and marketing services revenues in three main categories: digital media, digital classified, and
digital marketing services. Below are descriptions of these three categories:
• Digital media represents all display advertising either delivered on our products or off-platform on partner channels
such as Facebook Instant Articles and Apple News;
• Digital classified encompasses digital advertising revenues associated with our classified partnerships, including auto
(cars.com for a portion of 2020), employment (ZipRecruiter, Recruitology), and real estate (Homes.com) as well as
legal, and obituaries; and
5
• Digital marketing services represents our integrated marketing platform helping local businesses build their online
presence, drive awareness and leads, manage and nurture leads, and measure which activities are most effective.
Our advertising teams employ a multi-platform approach to advertising sales under the LOCALiQ brand, which can be
specifically tailored to the individual needs of advertisers from small, locally-owned merchants to large, complex businesses.
We believe local and national advertisers find it challenging to manage the complexity of their media budgets, particularly on
the digital side, and are seeking to reach a shifting audience while also desiring to influence attitudes and behavior at each stage
of the purchase path. Our diverse sales force, unique industry scale, and broad portfolio of print and digital advertising and
marketing products position us well to solve these challenges. Through our media planning process, we present advertisers with
targeted, integrated solutions that help them reach this shifting audience.
The Publishing segment's Advertising and marketing services revenues are subject to moderate seasonality primarily due to
fluctuations in advertising volumes. Our Advertising and marketing services revenues are typically highest during the 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.
Circulation: In 2020, Publishing segment Circulation revenues of $1.392 billion comprised 45% of total Publishing
segment revenues, up from 39% in 2019, which makes it our single largest revenue category. In a trend generally consistent
within the domestic publishing industry, print circulation volumes declined in 2020. Circulation revenues in the U.S. are
derived from our All Access Content Subscription Model, single-copy sales, and digital-only subscriptions. Circulation
revenues at Newsquest are more centered on single-copy sales, with a larger portion of weekly paid-for titles and free titles as
compared to our U.S. publications.
Our All Access Content Subscription Model in our local markets includes access to our 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. As
of December 31, 2020, we had 2.5 million daily subscribers. We offer our customers EZ Pay, a payment system which
automatically deducts subscription payments from customers' credit cards or bank accounts. We see better subscriber retention
with our EZ Pay customers. At the end of 2020, EZ Pay was used by 56% of all subscribers across our U.S. local property
network (not including USA TODAY).
Growing our digital-only subscribers is a strategic priority and, in 2020, our digital-only subscribers increased by 29% on a
total Company basis to approximately 1.1 million. Our primary digital subscriber acquisition strategies include converting our
organic traffic through on-platform promotion, paywalls and dynamic meters for our premium content, conversion through our
freemium funnel, paid social, and email marketing. A variety of pricing strategies are used throughout the year, including
discounted introductory periods and sales, to encourage trial and habituation before transitioning to the full price rate. In the
U.S. local markets, approximately 86% of Circulation revenues are derived from our All Access Content Subscription Model
and digital-only subscriptions.
In addition to the subscription model in our U.S. local markets, single-copy print editions continue to be sold at retail
outlets and account for approximately 11% of daily and 19% of Sunday net paid circulation volume. Approximately 66% of the
net paid circulation volumes of USA TODAY are generated by single-copy sales at retail outlets, vending machines, or hotels
that provide copies to their guests. The remainder is generated by home and office delivery, mail, educational, and other sales.
Events: USA TODAY NETWORK Ventures, our events and promotions business, was started in late 2015 by leveraging
our local brands to create community focused events in the markets we serve. In 2020, USA TODAY NETWORK Ventures
produced over 250 events for the Company with a collective attendance over 700,000. Given the COVID-19 pandemic, nearly
all events in 2020 were held virtually, building digital communities for consumers to create experiences with one another.
Despite the virtual pivot, USA TODAY NETWORK Ventures was able to maintain 88% of its 2019 pro forma revenue
performance.
Our signature event series produced across many of our markets includes the nation's largest high school athlete
recognition program and the official community's choice awards for dozens of markets across the country. We were also one of
the largest active producers of endurance events in North America as well as one of the largest race timing companies in the
U.S. Additional offerings include a variety of themed expos focused on target audiences, including men, women, seniors, and
young families, as well as recognition awards for social influencers in categories such as beauty. USA TODAY NETWORK
Ventures also offers white label event services for retailers and other media companies.
6
USA TODAY NETWORK Ventures revenues are generated primarily through sponsorship sales, race registrations, ticket
sales, and print and digital advertising.
Production and Distribution: Gannett Publishing Services ("GPS") owns and operates 45 print facilities. Our print
facilities produce 21 publications on average and are generally located within 120 miles of the communities served. By
clustering our production resources or outsourcing where cost beneficial, we are able to reduce the operating costs of our
publications while increasing the quality of our small and mid-size market publications that would typically not otherwise have
access to high quality production facilities. We also believe we are able to reduce future capital expenditure needs by having
fewer overall pressrooms and buildings. We believe our superior production quality is critical to maintaining and enhancing our
position as the leading provider of local news coverage in the markets we serve.
GPS leverages our existing assets, including employee talent and experience, physical plants and equipment, and our vast
national and local distribution networks. GPS is particularly focused on maximizing our geographic footprint to most efficiently
produce and transport our printed product. GPS is responsible for internal and external printing, packaging, and distribution.
The distribution of our daily newspapers is typically outsourced to independent, locally based, third-party distributors that also
distribute a majority of our weekly newspapers and non-newspaper publications. We continuously evaluate lower cost options
for newspaper delivery. In addition, certain of our shopper and weekly publications are delivered via the U.S. Postal Service.
Newsquest operates its publishing activities in a similar manner to GPS, through 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. and U.K. publishing operations and affiliated digital platforms compete with other media and
digital companies for advertising and marketing spend. Our Publishing operations also compete for circulation and readership
against other news and information outlets and amateur content creators. Each of our publications compete for advertising
revenues to varying degrees with traditional media outlets such as direct mail, yellow pages, radio, outdoor advertising,
broadcast and cable television, magazines, local, regional and national newspapers, shoppers, and other print and online media
sources, including local blogs. We also increasingly compete with digital and social media companies for advertising revenues.
Development of opportunities in, and competition from, digital and social media, including websites, tablet, mobile, and
social products continues to increase. There is very little barrier to entry and limited capital requirements for new companies to
enter the market with competitive digital products. Additionally, we are generally not compensated for the use of our original
content by third-party digital products and social platforms.
The Company expects to continue to expand its audience reach in the digital media industry through internal audience
development efforts, content distribution programs, acquisitions, and partnerships to protect its audience market share.
Additionally, the Company expects to continue to improve its suite of advertising and marketing services products through both
internal development, acquisitions, and partnerships to protect its advertising market share.
Government Regulation: We are subject to a variety of laws, rules and regulations in numerous jurisdictions within the
United States and in each of the countries where we conduct business. These laws, rules and regulations cover several diverse
areas including environmental matters, employee health and safety, data and privacy protection and anti-trust provisions. We are
committed to conducting our business in accordance with applicable laws, rules and regulations. Compliance with
governmental regulations did not have during fiscal 2020, and is not expected to have, a material impact on our capital
expenditures, results of operations or competitive position.
Environmental Regulation: The Company is committed to protecting the environment. Our goal is to ensure our
production and distribution facilities comply with federal, state, local, and foreign environmental laws and to incorporate
appropriate environmental practices and standards in our operations. We are one of the industry leaders in the use of recycled
newsprint. During 2020, 14% of our domestic newsprint purchases contained recycled content, with average recycled content of
31%.
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 legal consultant who, along with internal and outside
counsel, provides advice on regulatory compliance and preventive measures. We believe we are in substantial compliance with
all applicable laws and regulations for the protection of the environment and the health and safety of our employees based upon
existing facts presently known to us. Compliance with federal, state, and local environmental laws and regulations relating to
7
the discharge of substances into the environment, the disposal of hazardous wastes, and other related activities has had, and will
continue to have, an impact on our operations but has been accomplished to date without having a material adverse effect on
our operations. While it is difficult to estimate the timing and ultimate costs to be incurred due to uncertainties about the status
of laws, regulations, and technology, based on information currently known to us and insurance procured with respect to certain
environmental matters, we do not expect environmental costs or contingencies to be material or to have a material adverse
effect on our financial performance. Our operations involve risks in these areas, however, and we cannot assure we will not
incur material costs or liabilities in the future which could adversely affect us.
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. For example, in the first half of 2018, many Canadian producers were
subjected to significant anti-dumping and countervailing duties upon importation of newsprint into the U.S. which resulted in
higher newsprint prices and tighter supply from the Canadian producers. Prices came down in the second half of the year as the
duties were eliminated by the International Trade Commission in September 2018, but this example serves as a reminder of the
price and supply volatility that can impact the market. Our ability to supply the needs of our publishing operations depends
upon the continuing availability of newsprint at an acceptable price, and the results of operations of our Publishing segment
may be impacted significantly by changes in newsprint prices. We generally maintain only a 45 to 55-day inventory of
newsprint. The availability and price of newsprint is subject to numerous risks and uncertainties, which are described more
fully under "Risk Factors" in this Annual Report on Form 10-K.
We purchase newsprint primarily from 16 domestic and global suppliers. During 2020, our total newsprint consumption
was approximately 195,030 metric tons, including consumption by our owned and operated print sites, third-party printing sites,
and Newsquest. Newsprint consumption in 2020 was 44% higher than in 2019 primarily due to the acquisition of Legacy
Gannett.
Joint Operating Agencies: Our publishing subsidiaries in Detroit and York each participate in a joint operating agency
("JOA"). In each instance, the JOA performs the production, sales, distribution, and back office functions for our subsidiaries
and the publisher of another publication pursuant to a joint operating agreement. Operating results for the Detroit and York
JOAs are fully consolidated along with a charge for the minority partners' share of profits.
Digital Marketing Solutions Segment
The mission of our Digital Marketing Solutions ("DMS") segment is to deliver customers to local businesses. DMS is
currently comprised of three brands that are expected to be integrated in 2021 under the banner LOCALiQ DMS :
• ReachLocal, which was founded in 2004 and acquired in 2016, helps local businesses advertise online to find
customers;
• UpCurve, which provides cloud-based products with expert guidance and support; and
• WordStream, which was acquired by Gannett in 2018, is a provider of cloud-based software-as-a-service (SaaS)
solutions for local and regional businesses and agencies to optimize their digital advertising campaigns.
We believe local businesses want a single, unified solution to solve their digital marketing needs. Our DMS products and
solutions can be separated into four main categories:
• Build online presence (websites, local listings, search engine optimization, social media management, live chat);
• Drive consumer awareness and business leads ("leads") with advertising (search engine marketing, social advertising,
mobile advertising, display advertising, video and over the top advertising, targeted email marketing);
• Manage and nurture leads (lead alert tools, lead management, lead engagement and automation, job management); and
• Measure what works and optimize future marketing campaigns (conversion analytics, cross-channel optimization, lead
attribution, phone tracking, campaign reporting).
We run an efficient operating model by leveraging our entire sales organization, who utilize a single customer relationship
management tool and service all clients and campaigns through our LOCALiQ platform. The LOCALiQ platform has
centralized post-sales functions and utilizes integrated shared support for back-office operations such as accounting and finance.
Products: Digital marketing requires a holistic view of how online presence, advertising and conversion efforts work
together to get results. Our solutions work across the USA TODAY NETWORK and major online platforms such as Google,
Facebook, Yahoo!, Microsoft, Snap and others. Our product portfolio offers a simple all-in-one platform powered by artificial
intelligence and service experts that grows and adapts with the needs of local business owners. For example, some businesses
might need to significantly improve their website and focus on converting sales leads, while others may need to focus on
8
building awareness of their business and driving more leads to their site and social pages. LOCALiQ DMS identifies the
biggest opportunities and provides solutions by recommending the right mix of product platform features and measures results.
We have a proprietary set of technologies that enable a business to receive a score on their overall marketing efforts, show
them how they stack up against their competitors, and recommend a comprehensive set of solutions to help them achieve their
goals. This customized solution is sold as a subscription to our LOCALiQ DMS platform. This platform removes the concerns
of unexpected overages and misaligned goals and allows us to set performance-based pricing. The platform optimizes to
produce the best results for the business and service experts are assigned to assist with each account, as needed.
• Our online presence solutions offer high conversion websites, with e-commerce, custom content creation to empower
businesses to look professional, and human or bot-enabled live chat which ties into our lead conversion tools. These
products are designed to work in concert with our digital advertising products with a goal of enhancing clients’
marketing return on investment.
• Our online advertising products include award-winning technology for bidding and budget management that cover
more than 90% of the U.S. online audience. They also include patent-pending machine learning algorithms which
optimize multiple advertising channels and campaigns toward a goal with a single budget. Search engine marketing,
which is recorded as Advertising and marketing services revenues accounted for 56% of our DMS segment's total
revenues for the year ended December 31, 2020.
• Our lead conversion software is a marketing automation platform that includes tools for capturing web traffic
information and converting leads into new customers for clients. We provide tools designed to significantly improve
the conversion of leads to customers and to help 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 reminding them to follow up
on each lead. Our lead conversion software also provides reports to show how many leads they are getting from each
marketing source and other important business insights.
• Offer additional cloud-based software solutions, offered as a channel partner, include a customer relationship
management solution tailored for small and medium-sized businesses ("SMBs"), a market-leading collaboration and
productivity tool, and voice-over-IP software. Our software solutions are available in North America and our lead
conversion software is available in all of our markets.
Distribution: We deliver our suite of products and solutions to local businesses through a combination of our proprietary
technology platform, our sales force, and select third-party agencies and resellers. Our DMS segment has sales operations in the
United States, Canada, New Zealand, and the U.K. Approximately 94% of our DMS segment revenues are generated in North
America and the remaining 6% from other international markets. All DMS segment 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, we compete with SMB marketing providers who offer solutions tailored for specific
verticals. In addition, the online publishers that we utilize for 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.
Termination of the Amended and Restated Management Agreement
For the year ended December 31, 2020, we were externally managed and advised by FIG LLC (the "Manager"), an affiliate
of Fortress Investment Group LLC ("Fortress") pursuant to a management agreement. On August 5, 2019, in connection with
the entry into the agreement to acquire Legacy Gannett, the Company and the Manager entered into the Amended and Restated
Management and Advisory Agreement (the "Amended Management Agreement"), which became effective upon the closing of
the acquisition on November 19, 2019. The Amended Management Agreement (i) established a termination date for the
Manager’s services of December 31, 2021, in lieu of annual renewals of the term; (ii) reduced the "incentive fee" payable under
the Amended Management Agreement from 25% to 17.5% for the remainder of the term; (iii) reduced by 50% the number of
options that would otherwise be issuable in connection with the issuance of shares as consideration for the acquisition, and
imposed a premium on the exercise price; (iv) eliminated the Manager’s right to receive options in connection with future
equity raises by the Company; and (v) eliminated certain payments otherwise due at or after the end of the term of the prior
management agreement.
In connection with entering into the Amended Management Agreement and the consummation of the acquisition, the
Company issued to the Manager 4,205,607 shares of Company common stock, par value $0.01 per share (the "Common
Stock") and granted to the Manager options to acquire 3,163,264 shares of Company Common Stock. The Manager was
9
restricted from selling the issued shares until the expiration of the Amended Management Agreement, or otherwise upon a
change in control and certain other extraordinary events. The options have an exercise price of $15.50 and become exercisable
upon the first trading day immediately following the first 20 consecutive trading day period in which the closing price of the
Company Common Stock (on its principal U.S. national securities exchange) is at or above $20 per share (subject to
adjustment) and also upon a change in control and certain other extraordinary events.
On December 21, 2020, we entered into a Termination Agreement (the "Termination Agreement") with the Manager
providing for the early termination of the Amended Management Agreement, effective at 11:59 p.m. Eastern Time on December
31, 2020. Upon termination of the Amended Management Agreement, the Manager ceased providing external management
services to the Company, and the Manager no longer is the employer of the person serving in the role of Chief Executive
Officer of the Company. In connection with the Termination Agreement, the Company made a one-time cash payment of $30.4
million to the Manager. In addition, all transfer restrictions contained in the Amended Management Agreement on shares of our
Common Stock owned by the Manager, or acquired by the Manager upon the exercise of stock options to acquire Common
Stock, lapsed. In connection with the termination of our relationship with the Manager, we extended offers of employment to
certain employees of the Manager or its affiliates who provided services to the Company, including to our Chief Executive
Officer. Certain indemnification and other obligations in the Amended Management Agreement survived the termination of our
relationship with the Manager.
Strategy
Gannett’s vision is to be the premiere source for clarity, connections and solutions within our communities. We are
committed to a subscription-led business strategy, that drives audience growth and engagement by delivering deeper content
experiences to our consumers, while offering the products and marketing expertise our advertisers desire. The execution of this
strategy is expected to allow the Company to continue its evolution from a more traditional print media business to a digitally
focused content platform.
We intend to create stockholder value through a variety of methods including organic growth driven by our consumer and
business-to-business strategies as well as through paying down the debt assumed to consummate the acquisition of Legacy
Gannett. However, there is no guarantee we will be able to accomplish any of these strategic initiatives. The key elements of
our strategy include:
Accelerating digital subscriber growth
The broad reach of our newsroom network, linking leading national journalism at USA TODAY, our local property network
in 46 states in the U.S. and Newsquest in the U.K. with more than 120 local media brands, gives us the ability to deepen our
relationships with consumers at both the national and local levels. We bring consumers local news and information that impacts
their day-to-day lives while keeping them informed of the national events that impact their country. We believe this local
content is not readily obtainable elsewhere, and we are able to deliver that content to our customers across multiple print and
digital platforms. As such, a key element of our consumer strategy is growing our paid digital-only subscriber base. We also
expect to launch new digital subscription offerings tailored to specific users.
Driving digital marketing services growth by engaging more clients in a subscriber relationship
We are now of significant digital scale, with unique reach at both the national and local community levels. We expect to
leverage our integrated sales structure and lead generation strategy to continue to aggressively expand our digital marketing
services business into our local markets, both domestically and internationally. Given our extensive client base and volume of
digital campaigns, we will also use data and insights to inform new and dynamic advertising products that we believe will
deliver superior results.
Optimizing our traditional businesses across print and advertising
We will continue to drive the profitability of our traditional print operations through economies of scale, process
improvements, and optimizations. We are focused on optimizing our pricing and improving customer service for our print
subscribers. Print advertising continues to offer a compelling branding opportunity across our network due to our scale and
unique reach at both the national and local community levels.
10
Prioritizing investments into growth businesses that have significant potential and support our vision
By leveraging our unique footprint, trusted brands, and media reach, we identify, experiment, and invest in potential
growth businesses. USA TODAY NETWORK Ventures is a strong example of one such experiment that has grown
significantly since its founding in 2015. During 2020, the Company was able to successfully pivot to hosting its events
virtually, hosting over 250 events and maintaining 88% of USA TODAY NETWORK Venture's revenues compared to 2019.
Building on our inclusive and diverse culture to center around meaningful purpose, individual growth and customer
focus
Inclusion, Diversity and Equity are core pillars of our organization and influence all that we do, from recruiting,
development and retention, to day-to-day operations including hiring, onboarding, education, leadership training and
professional development. We have published our inclusion goals for 2025 and our efforts underway to progress toward them
and expect to publish our first workforce diversity report in the first quarter of 2021. We believe aligning our culture around
empowering our communities to thrive and putting our customers at the center of everything we do will provide the foundation
for our broader strategic efforts.
Challenges
As a publisher of locally-based print and online media, we face a number of challenges, including the risks that:
• The growing shift within the publishing industry from traditional print media to digital may compromise our ability to
•
generate sufficient advertising revenues;
Investments in growing our digital and marketing services and events business may not be successful, which could
adversely affect our results of operations; and
• Our Advertising and marketing services revenues and Circulation revenues may further decline if we are unable to
compete effectively with other companies in the local media industry.
For more information about the risks and challenges we face, see "Risk Factors" under Item 1A of this Annual Report on
Form 10-K.
Employees and Human Capital Resources
We believe the foundation of our business is the people and employees who make our day-to-day operations possible. A
major focus in 2020 was our integration of Legacy Gannett onto a common infrastructure platform to manage all aspects of the
employee experience including record keeping, communication and learning platforms, Employee Resource Group (“ERGs”)
programs, benefits offerings and employment support services. This investment allowed for enhanced offerings in wellness,
mental health benefits, safety and security guidance. These enhancements allowed us to deliver more consistent content and
outreach to offer a social safety net to our employees as they navigated the COVID-19 pandemic, social unrest, and the U.S.
political climate.
At the start of the COVID-19 pandemic, we quickly prioritized the safety of our employees, while preserving our ability to
produce vital news, by asking our employees to work remotely where possible and implementing new safety procedures for our
manufacturing and distribution teams. By late March of 2020, we had transitioned 95% of our non-production and delivery
employees to work remotely. For our production and delivery employees, we implemented social distancing measures and
hygiene best practices in line with guidelines from the Centers for Disease Control and Prevention and the World Health
Organization for all our facilities. These adjustments have allowed us to maintain our news delivery without any major
disruptions to our communities. We continue to monitor the situation with respect to the pandemic and the health and safety of
our employees continues to be of the utmost importance to us.
Enabling a positive employee experience, within a values-based, inclusive work culture, is a top priority at Gannett.
Aligned to our purpose, we provide engaging work and foster a culture that supports our employees’ ability to reach their goals
and grow through learning and development. We cultivate a safe, diverse, inclusive, and equitable culture with broad
promotion of ERGs. Two-way communication strategies include intersectional ERG events, monthly Town Hall meetings with
our Chief Executive Officer and senior leadership, and our Together newsletter, which shares strategies on topics such as
remote working, staying connected, and vaccination information and resources.
11
We are committed to building a workforce that reflects our communities and providing equal opportunities for each
employee to thrive. We regularly track our progress and expect to share our workforce demographics publicly in the future. In
addition, we are in the process of expanding our demographic data to help us better understand and serve our workforce, by
providing employees the opportunity to voluntarily self-identify certain demographic information. We are confident that our
efforts will help us reach our goal in being a workforce at parity with the diversity of our nation by 2025.
We listen through bi-annual Your Voice Engagement surveys, multiple Pulse surveys targeting current concerns, and
Lifecycle surveys to understand the Gannett employee experience. The performance review process includes goal setting as
well as regular manager feedback and coaching to assist with the career growth of our employees, and the use of development
plans for individual career growth. Due to the 2020 pandemic, we postponed the formal portion of this process. In 2021, our
full process is expected to resume with an annual review and quarterly check-ins. Our learning programs have been designed to
successfully orient employees, build leadership capabilities and meet individual development needs. Through our centralized
Learning Experience Platform, we deliver and manage both internally developed and customized programs such as our
leadership development program, as well as partner programs. To further our employees experience we offer a volunteer time
benefit and community giving campaigns and have added two additional holidays beginning in 2021: Martin Luther King Jr.
Day and Juneteenth.
As of December 31, 2020, we employed approximately 18,100 employees in the U.S., of which approximately 15% are
represented by labor unions, most of which are affiliated with one of seven international unions. Our employee base reflects our
integration of Legacy Gannett to date, which has included consolidating production and distribution facilities, integrating and
centralizing back office functions, centralizing and regionalizing our publishing sales, content, and circulation marketing
organizations, and consolidating our marketing solutions organizations. It also reflects our alignment to business conditions
brought on by the COVID-19 pandemic. As of December 31, 2020, there were approximately 2,700 employees outside of the
U.S., including approximately 2,100 employed by Newsquest in the U.K. Our U.K. subsidiaries bargain with two unions over
working practices, wages, and health and safety issues only. Most of our unionized employees work under collective bargaining
agreements that are under negotiation or will expire in 2022, or are negotiating towards an initial collective bargaining
agreement. As of December 31, 2020, there were approximately 88 existing collective bargaining agreements and 8 bargaining
units negotiating initial contracts. We believe relations with our employees are generally good, and we have had no work
stoppages during 2020 at any of our publications.
Corporate Governance and Public Information
The address of Gannett’s website is http://www.gannett.com/. Stockholders can access a wide variety of information on
Gannett’s website, under the "Investor Relations" tab, including corporate governance information, news releases, SEC filings,
information Gannett is required to post online pursuant to applicable SEC and NYSE rules, and online links. Gannett makes
available via its website all filings it makes under the Securities and Exchange Act of 1934, as amended, including Forms 10-K,
10-Q, and 8-K, as well as any related amendments as soon as reasonably practicable after they are filed with, or furnished to,
the SEC. All such filings are available free of charge. Neither the content of Gannett’s website nor any other website referred to
in this report are incorporated by reference into this report unless expressly noted.
References
(1) 2021 Comscore Inc, US Multi-Platform, Desktop 2+ and Total Mobile 18+, December 2019-December 2020
Major Publications and Markets We Serve
Products
Our traditional media product mix consists of four publication types: (i) daily newspapers, (ii) weekly newspapers,
(iii) shoppers, and (iv) niche publications. Most of these publications have a digital presence as discussed in the following table.
Some of the key characteristics of each of these types of publications are also summarized in the table below:
12
Cost:
Distribution:
Daily Newspapers
Paid
Distributed four to seven
days per week
Weekly Newspapers
Paid and free
Distributed one to three
days per week
Shoppers
Paid and free
Distributed weekly
Niche Publications
Paid and free
Distributed on a weekly, bi-weekly,
monthly, quarterly, or annual basis
Printed on newsprint,
folded
Printed on newsprint,
folded
Printed on newsprint,
folded, or booklet
Printed on newsprint or glossy,
folded, booklet, magazine, or book
Format:
Content:
Editorial (local news and
coverage of community
events, some national
headlines) and ads
(including classifieds)
Income:
Revenue from advertisers,
subscribers, rack/box sales
Internet
Availability:
Maintain locally oriented
websites, mobile sites, and
mobile apps for most
locations
Overview of Operations
Editorial (local news and
coverage of community
events, some national
headlines for smaller
markets which cannot
support a daily newspaper)
and ads (including
classifieds)
Paid: Revenue from
advertising, subscribers,
rack/box sales
Free: Advertising revenue
only, provide 100% market
coverage
Major publications
maintain locally oriented
websites and mobile sites
for select locations
Almost 100% ads,
primarily classifieds,
display, and inserts
Niche content and targeted ads
(e.g., city guides, tourism guides,
directories, and calendars)
Paid: Revenue from
advertising, rack/box sales
Free: Advertising revenue
only, provide 100% market
coverage
Major publications
maintain locally oriented
websites
Paid: Revenue from advertising,
rack/box sales
Free: Advertising revenue only
Selectively available online
We reach a large, diverse audience through our print and digital daily and non-daily publications throughout the U.S. and
Guam and the U.K. Our journalism network is powered by an integrated and award-winning news organization comprised of
more than 5,000 journalists with deep roots in 252 local communities, plus USA TODAY, and across our U.K. markets. We
expect to and are invested in growing the number of our journalists, as we seek to accelerate growth of a subscription-led
business model, anchored on high-quality, original, impactful journalism. During 2020, our combined monthly digital reach
averaged 150 million monthly unique visitors in the U.S., while our U.K. media organizations attracted over 39 million unique
visitors monthly.
13
The following table sets forth information regarding the number of publications and production facilities in our Publishing
segment as of December 31, 2020:
LOCAL PROPERTY NETWORK MEDIA ORGANIZATIONS
Publications
State / Territory
Alabama
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
Florida
Georgia
Guam
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Total
Dailies
3
1
2
8
3
1
1
19
3
1
11
10
5
10
2
7
—
2
10
15
2
2
7
1
—
1
2
9
6
12
12
1
21
5
2
13
2
3
3
8
9
1
1
2
1
1
11
252
Weeklies
1
—
5
9
5
—
4
10
7
—
12
7
9
10
—
5
2
1
77
13
7
1
10
—
2
1
3
11
—
13
4
—
35
3
2
2
—
4
3
6
18
—
—
—
—
2
4
308
14
Production
Facilities
1
1
—
1
1
—
1
5
1
1
1
2
1
1
1
—
—
—
1
1
—
1
1
—
—
—
1
2
1
1
2
1
2
2
1
—
1
—
1
2
4
—
—
—
—
—
2
45
The following table lists information for our major publications and their affiliated digital platforms in the U.S. as of
December 31, 2020:
Title
Related Website(s)
USA TODAY
Detroit Free Press
The Columbus Dispatch
The Arizona Republic
Milwaukee Journal Sentinel
The Oklahoman
The Indianapolis Star
The Cincinnati Enquirer
The Courier-Journal
The Austin American-Statesman
The Record
The Des Moines Register
Democrat and Chronicle
The Akron Beacon Journal
The Providence Journal
The Tennessean
(1) Daily and Sunday combined average circulation is print, digital replica, digital non-replica, and affiliated publications according to the Alliance for Audited
www.usatoday.com
www.freep.com
www.dispatch.com
www.azcentral.com
www.jsonline.com
www.oklahoman.com
www.indystar.com
www.cincinnati.com
www.courier-journal.com
www.statesman.com
www.northjersey.com
www.desmoinesregister.com
www.democratandchronicle.com Rochester, New York
www.beaconjournal.com
www.providencejournal.com
www.tennessean.com
Combined Average Circulation
Sunday(1)
802,678
908,802
114,954
337,863
129,887
60,857
160,031
107,537
127,833
78,039
62,057
98,676
81,574
54,210
49,190
112,382
Location
McLean, Virginia
Detroit, Michigan
Columbus, Ohio
Phoenix, Arizona
Milwaukee, Wisconsin
Oklahoma City, Oklahoma
Indianapolis, Indiana
Cincinnati, Ohio
Louisville, Kentucky
Austin, Texas
Bergen, New Jersey
Des Moines, Iowa
Daily(1)
1,064,666
113,233
112,739
116,665
83,628
56,256
63,328
57,396
52,299
52,863
47,004
45,206
46,213
43,068
40,755
38,738
Akron, Ohio
Providence, Rhode Island
Nashville, Tennessee
Media's September 2020 Quarterly Publisher's Statement.
Newsquest has a portfolio of over 120 news brands and more than 100 magazines, published in print and online in the U.K.
With a digital audience of more than 39 million users a month and more than 5.1 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
s1jobs and s1Homes, 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 31, 2020. All circulation figures are according to Joint Industry Currency for
Regional Media Research results for the period January to June 2020.
15
DAILY PAID-FOR LOCAL MEDIA ORGANIZATIONS AND AFFILIATED DIGITAL PLATFORMS / NEWSQUEST
Title
Related Website(s)
Location
Basildon & Southend Echo
Bolton News
Bournemouth - The Daily Echo
Bradford Telegraph & Argus
Colchester Daily Gazette
Dorset Echo
Glasgow - Evening Times(1)
Greenock Telegraph(1)
Lancashire Telegraph
Oxford Mail
South Wales Argus - Newport
Southampton - Southern Daily Echo www.dailyecho.co.uk
Swindon Advertiser
The Argus Brighton
The Herald, Scotland(1)
www.echo-news.co.uk
www.theboltonnews.co.uk
www.bournemouthecho.co.uk
www.thetelegraphandargus.co.uk
www.gazette-news.co.uk
www.dorsetecho.co.uk
www.eveningtimes.co.uk
www.greenocktelegraph.co.uk
www.lancashiretelegraph.co.uk
www.oxfordmail.co.uk
www.southwalesargus.co.uk
www.swindonadvertiser.co.uk
www.theargus.co.uk
www.heraldscotland.co.uk
www.thenational.scot
www.thisisthenortheast.co.uk
www.yorkpress.co.uk
www.worcesternews.co.uk
www.leaderlive.co.uk
www.nwemail.co.uk
www.newsandstar.co.uk
Basildon, Southend on Sea
Bolton
Bournemouth
Bradford
Colchester
Dorset
Glasgow
Greenock
Blackburn, Burnley
Oxford
Newport
Southampton
Swindon
Brighton
Glasgow, Edinburgh
Glasgow, Edinburgh
Darlington
York
Worcester
Wrexham
Cumbria
Carlisle
The National, Scotland(1)
The Northern Echo
The Press - York
Worcester News
The Leader
The Mail
News & Star
(1) Circulation figures are according to BPA Worldwide results for the period January to December 2019 as auditing occurs annually and is not yet available
Circulation
Monday - Saturday
14,392
6,517
9,589
8,944
6,715
6,983
15,672
7,644
5,733
7,465
7,312
11,206
6,859
8,948
22,415
9,983
16,212
9,792
5,090
5,584
4,254
5,131
for 2020.
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Item 1A. RISK FACTORS
You should carefully consider the following risks and other information in this Annual Report on Form 10-K in evaluating
us and our Common Stock. Any of the following risks could materially and adversely affect our results of operations, our
financial condition, our ability to make distributions on our Common Stock and the market price of our Common Stock.
Although the risk factors are grouped by general category, many of the risks described in a given category relate to multiple
categories.
Risk Factor Summary
The following is a summary of some of the risks and uncertainties that could materially adversely affect our business, financial
condition and results of operations, which are discussed in more detail below:
• Our substantial indebtedness could materially and adversely affect our business or financial condition.
• Our inability to raise funds necessary to settle conversions of, or to repurchase, the Company's 6.0% Senior Secured
Convertible Notes due 2027 (the "2027 Notes"), upon a fundamental change as described in the indenture governing the
2027 Notes, may lead to defaults under such indenture and under agreements governing our existing or future
indebtedness.
• Our business currently relies on sources of revenues that have been, and likely will continue to be, negatively affected
by digital commerce and media. In addition, our strategy of growing our paid digital-only subscriber base is expected to
negatively impact advertising revenues in the near term.
• We may be unsuccessful in our efforts to execute our digital revenue strategy and optimize our revenue streams.
• Our ReachLocal business purchases most of its media from Google, and its business could be adversely affected if
Google takes actions that are adverse to our interests. Similar actions from Yahoo!, Microsoft, Facebook and other
media providers could also adversely affect these businesses.
• We may not achieve all the intended benefits of the acquisition of Legacy Gannett.
• Our future results will suffer if we do not effectively manage the expanded scope of our operations as a result of our
acquisition of Legacy Gannett.
• The diversion of resources and management’s attention to the integration of Legacy Gannett could adversely affect our
day-to-day business.
• Our ability to generate revenues is highly sensitive to the strength of the economies in which we operate and the
demographics of the local communities that we serve.
• We expect the COVID-19 pandemic to have a material negative impact on our business and results of operations in the
near term, and possibly longer.
• Uncertainty and adverse changes in the general economic conditions of markets in which we participate, including due
to the COVID-19 pandemic, may continue to negatively affect our business.
• The collectability of accounts receivable under adverse economic conditions could deteriorate to a greater extent than
provided for in our financial statements and in our projections of future results.
• Our financial results are subject to risks associated with our international operations.
•
• The U.K.'s exit from the European Union could adversely impact our business, results of operations, and financial
Foreign exchange variability could materially and adversely affect our consolidated operating results.
condition.
• Domestic and/or foreign jurisdictions may enact gross receipts taxes on our digital services which, if we are required to
pay, could adversely affect our cash flows and financial condition.
• Our business is subject to seasonal and other fluctuations, which affects our revenues and operating results.
• The value of our intangible assets may become impaired, which could adversely affect future reported results of
operations and stockholders’ equity.
• Our management and independent auditors have identified a material weakness in our internal control over financial
reporting, which could, if not remediated in an appropriate and timely way, result in material misstatements in our
financial statements.
• We may not be able to protect intellectual property rights upon which our business relies and, if we lose intellectual
property protection, our assets may lose value.
• We are subject to environmental and employee safety and health laws and regulations that could cause us to incur
significant compliance expenditures and liabilities.
• Our possession and use of personal information and the use of payment cards by our customers present risks and
expenses that could harm our business. Unauthorized access to or disclosure or manipulation of such data, whether
through breach of our network security or otherwise, could expose us to liabilities and costly litigation and damage our
reputation.
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•
Privacy-related laws are constantly evolving and may increase our compliance costs and potential for liability, either of
which may have an adverse effect on our business, financial condition and results of operations.
• We could incur significant liability if the separation of Legacy Gannett from its former parent were determined to be a
taxable transaction.
• The Internal Revenue Service may disallow all or part of a worthless stock loss and bad debt deduction.
• We may not be able to generate future taxable income which may prevent our realization of deferred tax assets.
• We are required to use a portion of our cash flows to make contributions to our pension plans, which diverts cash flow
from operations, and the amount of required future contributions may be difficult to estimate.
• We depend on key personnel, and we may not be able to operate or grow our business effectively if we lose the services
of any of our key personnel or are unable to attract qualified personnel in the future.
• A shortage of skilled or experienced employees, including journalists, in the media industry, or our inability to retain
such employees, could pose a risk to achieving improved productivity and reducing costs, which could adversely affect
our profitability.
• A number of our employees are unionized, and our business and results of operations could be adversely affected if
current or additional labor negotiations or contracts were to further restrict our ability to maximize the efficiency of our
operations.
Sustained increases in costs of employee health and welfare benefits may reduce our profitability.
•
• Our inability to successfully transition to self-management following termination of the Amended Management
Agreement may result in the loss of key employees, disruptions to our business and operational inefficiencies that could
hinder our business, financial condition and results of operations.
• The Manager is not liable to us for certain acts or omissions performed in accordance with, and prior to the termination
of, the Amended Management Agreement, and for certain matters in connection with the termination of our relationship
with the Manager, and we may incur liability for such acts or omissions.
• There can be no assurance that the market for our stock will provide adequate liquidity.
• Our Common Stock may be delisted from the NYSE if we fail to comply with continued listing standards.
•
Sales or issuances of shares of our Common Stock, including upon conversion of the 2027 Notes, could adversely affect
the market price of our Common Stock.
• We presently have no intention to declare or pay a dividend and we may not be able to pay dividends in the future or at
all.
• The percentage ownership of our existing stockholders may be diluted in the future, including upon conversion of the
2027 Notes.
• An "ownership change" could limit our ability to utilize our net operating loss carryforwards and other tax attributes,
which could result in our payment of income taxes earlier than if we were able to fully utilize our net operating loss and
other tax benefit carryforwards.
•
• We have entered into a Section 382 Rights Agreement, and if the share purchase rights issued pursuant to such
agreement are exercised, it could materially and adversely affect the market price of our Common Stock.
Provisions in our amended and restated certificate of incorporation and amended and restated bylaws and of Delaware
law may prevent or delay an acquisition of the Company, which could decrease the trading price of our Common Stock.
Future offerings of debt securities, which would rank senior to our Common Stock upon our liquidation, and future
offerings of equity securities, may be senior to our Common Stock for the purposes of dividend and liquidating
distributions, may adversely affect the market price of our Common Stock.
•
Our substantial indebtedness could materially and adversely affect our business or financial condition.
Risks Related to Our Indebtedness
On February 9, 2021, the Company entered into a five-year, senior-secured term loan facility with Citibank, N.A. in an
aggregate principal amount of $1.045 billion (the "5-Year Term Loan"). The 5-Year Term Loan matures on February 9, 2026
and, at the Company's option, bears interest of the London Interbank Offered Rate plus a margin equal to 7.00% per annum or
an alternate base rate plus a margin equal to 6.00% per annum. Accordingly, we are required to dedicate a substantial portion of
cash flow from operations to fund interest payments. The 5-Year Term Loan amortizes at a rate equal to 10% per annum (or, if
the ratio of Total Indebtedness secured on an equal priority basis with the 5-Year Term Loan (net of Unrestricted Cash) to
Consolidated EBITDA (as such terms are defined in the 5-Year Term Loan) is equal to or less than a specified ratio, 5% per
annum) payable in equal quarterly installments. In addition, we are required to repay our credit facility from time to time with
(i) the proceeds of non-ordinary course asset sales and casualty and condemnation events and (ii) the aggregate amount of cash
and cash equivalents on hand at the Company and its restricted subsidiaries in excess of $100 million as of the last day of any
fiscal year of the Company (beginning with the fiscal year ending December 31, 2021). Our debt service obligations reduce the
amount of cash flow available to fund our working capital, capital expenditures, investments and potential distributions to
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stockholders. Moreover, there can be no assurance that we will be able to generate sufficient cash flow to satisfy our debt
service obligations. Our ability to satisfy our debt service obligations depends on our ability to generate cash flow from
operations, which is subject to a variety of risks, including general economic conditions and the strength of our competitors,
which are outside our control.
The terms of our indebtedness impose significant operating and financial restrictions on us. The 5-Year Term Loan and the
2027 Notes require us to comply with numerous affirmative and negative covenants, including a requirement to maintain
minimum liquidity of $30 million, and restrictions limiting our ability to, among other things, incur additional indebtedness,
make investments and acquisitions, pay certain dividends, sell assets, merge, incur certain liens, enter into agreements with our
affiliates, change our business, engage in sale/leaseback transactions, and modify our organizational documents. With respect to
dividends, under the 5-Year Term Loan, we can only pay cash dividends up to an agreed-upon amount, provided the ratio of
Total Indebtedness secured on an equal priority basis with the 5-Year Term Loan (net of Unrestricted Cash) to Consolidated
EBITDA (as such terms are defined in the 5-Year Term Loan) does not exceed a specified ratio. The indenture for the 2027
Notes (the "Indenture") contains a similar dividend restriction and also provides that, at any time that the Company’s Total
Gross Leverage Ratio (as defined in the Indenture) exceeds 1.5 and the Company approves the declaration of a dividend, the
Company must offer to purchase a principal amount of 2027 Notes equal to the proposed amount of the dividend. This
repurchase offer requirement may make it impractical to declare and pay dividends at any time that the requirement is in effect.
Stockholders also should be aware that they have no contractual or other legal right to dividends that have not been declared.
A failure to satisfy our debt service obligations on the remaining 5-Year Term Loan, a breach of a covenant in our credit
facility, or a material breach of a representation or warranty in our credit facility, among other events specified in the credit
facility, could give rise to a default, which could give rise to the right of our lenders to declare our indebtedness, together with
accrued interest and other fees, to be immediately due and payable. A failure to satisfy our debt service or conversion
obligations on the 2027 Notes, among other events specified in the Indenture, could also give rise to a default, which could give
rise to the right of noteholders to declare the principal of the 2027 Notes, together with accrued and unpaid interest, to be
immediately due and payable. An acceleration of our indebtedness would have a material adverse effect on our business,
financial condition, results of operations, cash flows and stock price.
Our inability to raise funds necessary to settle conversions of, or to repurchase, the 2027 Notes, upon a fundamental
change as described in the indenture governing the 2027 Notes, may lead to defaults under such indenture and under
agreements governing our existing or future indebtedness.
If we settle the 2027 Notes by cash, or by a combination of cash and shares of our Common Stock, upon a fundamental
change as described in the Indenture, we will be required to make cash payments with respect to the 2027 Notes being
converted. However, we may not have enough available cash or be able to obtain financing at the time we are required to make
purchases of the 2027 Notes being surrendered or converted. In addition, our ability to repurchase the 2027 Notes or to pay cash
upon conversion of the 2027 Notes is limited by the agreements governing our existing indebtedness (including the 5-Year
Term Loan) and may also be limited by law, by regulatory authority or by agreements that will govern our future indebtedness.
Our failure to repurchase 2027 Notes at a time when the repurchase is required by the Indenture or to pay cash payable on
future conversions of the 2027 Notes as required by the Indenture would constitute a default under the Indenture. A default
under the Indenture or the fundamental change itself could also lead to a default under agreements governing our existing or
future indebtedness (including the 5-Year Term Loan).
Risks Related to Digital Commerce and Media
Our business currently relies on sources of revenues that have been, and likely will continue to be, negatively affected
by digital commerce and media. In addition, our strategy of growing our paid digital-only subscriber base is expected to
negatively impact advertising revenues in the near term.
In recent years, we have experienced declining revenue (on a same-store basis). The majority of our revenues are from (i)
advertising and marketing services and (ii) paid circulation (in each case, both in print and digital mediums). Print advertising
alone accounted for approximately 26% of our total revenues for the year ended December 31, 2020.
To date, our revenue declines have been driven primarily by a pronounced decline across all categories of print advertising
revenue (national, local and classified) related to the rise of digital media and commerce. The increased popularity of digital
media and commerce has shifted demand from print advertising to digital advertising, and large digital platforms, such as
Facebook, Google and Amazon, which have extensive audience reach, data and targeting capabilities, command a large share of
the digital advertising market. Further, media companies generally charge much lower rates for digital advertising than for print
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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. Additionally, brick-
and-mortar businesses are significant consumers of print advertising and with the rise of digital commerce many of these types
of businesses have, and continue to, close retail outlets, which adversely affects the demand for print advertising.
Circulation revenue has been affected to a lesser extent, but more marked future declines in circulation revenue are
possible. Revenue from paid circulation is a function of the volume of subscribers and the price of subscriptions. In recent
years, we have experienced significant declines in the number of subscribers to our newspapers, as a result of competition from
digital media and the demographic shift of traditional print newspaper readers getting older while younger generations tend to
consume media through digital platforms. We have also focused on growing the volume of digital subscribers, but there can be
no assurance that we will be able to grow, or even retain, our current digital subscriber volume, especially at rates similar to the
rates we are able to charge for our print products.
A key element of our consumer strategy is growing our paid digital-only subscriber base which initially is expected to lead
to declines in our existing advertising revenue. To implement our strategy and grow our paid digital-only subscriber base, we
may need to restrict certain content from non-subscriber access or limit the amount of content non-subscribers can view in an
effort to encourage non-subscribers to become paid digital subscribers. In the short-term, this strategy is expected to reduce the
number of unique visitors accessing our content and, in turn, reduce our digital advertising revenue. Over time, the anticipated
increase in the number of paid digital-only subscribers is expected to increase our circulation revenue derived from paid digital-
only subscribers as well as our digital advertising revenues. However, there can be no assurance that we will be able to increase
the number of our digital-only subscribers and, if we are unable to grow or retain the volume of such subscribers, our
circulation and advertising revenues could decline adversely affecting our results of operations and financial condition.
Declining subscriber volume can also lead to more marked declines in advertising revenue. Print subscriber volume
declines directly impact preprint and other print revenues that are linked to number of subscribers. In terms of digital
advertising revenues, news aggregation websites and customized news feeds (often free to users) reduce traffic on our websites
and related digital advertising revenues. These types of websites also compete with us in selling digital-only subscriptions to
our websites, which reduces our ability to monetize our content digitally. If traffic levels stagnate or decline, and/or print
subscriber volume continues to decline, we may not be able to maintain or increase the advertising rates or attract new
advertising customers. Further, we are generally not compensated for the consumption of our original content on third-party
digital products and social platforms.
We also generate revenues from a commercial printing and distribution business that manages printing and distribution of
publications for third parties, which generated approximately 5% of our total revenues in 2020. Our commercial and/or printing
businesses could also be adversely affected by the same secular trends that are affecting our core advertising and circulation
revenues. These third parties are experiencing the same print volume declines our business experiences and, as such, our
commercial printing and distribution revenues could experience declines in the future. In addition, our relationships with these
third parties are generally pursuant to short-term contracts, and a decision by any of the three largest national publications or the
major local publications to cease publishing in those markets or seek alternatives to their current business practice of partnering
with us could have an additional adverse effect on our revenue trends. For all of the foregoing reasons, we may experience
persistent declines in revenue, which could adversely affect our results of operations and financial condition, our ability to make
distributions on our Common Stock and the market price of our Common Stock.
We may be unsuccessful in our efforts to execute our digital revenue strategy and optimize our revenue streams.
Print-related revenue streams have continued to decline at a significant pace. We have focused on offsetting traditional
print advertising and circulation revenue declines in part by diversifying our sources of revenue through the development and
acquisition of complementary businesses with growth potential. For example, our business USA TODAY NETWORK Ventures
produces local events. In addition, with the acquisition of Legacy Gannett, we expanded our digital marketing solutions
businesses to include ReachLocal and WordStream.
There can be no assurance that we will be able to grow revenue from these or other complementary businesses we may
develop internally or acquire, or that any revenue generated by new business lines will be adequate to offset revenue declines
from our legacy businesses. For example, technological developments could adversely affect the availability, applicability,
marketability and profitability of the suite of SMB services we offer. Technological developments and any changes we make to
our business strategy may require significant capital investments, and such investments may be restricted by the 5-Year Term
Loan.
20
These complementary businesses also face competition from various digital media providers, such as Google and Yahoo!,
which may have more resources to invest in product development and marketing. Our salesforce may not be able to utilize the
relationships we have throughout our local property network to effectively sell these products. If we are unable to diversify our
traditional revenues with revenues from complementary businesses, we may experience persistent declines in revenue which
could adversely affect our results of operations and financial condition.
Our ReachLocal business purchases most of its media from Google, and its business could be adversely affected if
Google takes actions that are adverse to our interests. Similar actions from Yahoo!, Microsoft, Facebook and other media
providers could also adversely affect these businesses.
Most of ReachLocal and WordStream's cost of sales 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 certain
foreign markets is often even greater. As a result, we expect our ReachLocal and WordStream businesses 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 otherwise 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 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 with whom we do business, including Yahoo!, Facebook and
Microsoft.
Risks Related to Our Acquisition and Integration of Legacy Gannett
We may not achieve all the intended benefits of the acquisition of Legacy Gannett.
We completed the acquisition of Legacy Gannett in November 2019 and have already begun experiencing many of the
benefits from the acquisition. However, there can be no assurance that we will be able to realize every intended benefit of the
transaction. There are many challenges associated with integrating a material acquisition, such as our acquisition of Legacy
Gannett, including the integration of executive and other employee teams with historically different cultures and priorities; the
coordination of personnel located across multiple geographic locations; retaining key management and other employees;
consolidating corporate and administrative infrastructures and eliminating duplicative operations; the diversion of
management’s attention from ongoing business concerns; retaining existing business and operational relationships, including
customers, suppliers and other counterparties, and attracting new business and operational relationships; unanticipated issues in
integrating information technology, communications and other systems; as well as unforeseen expenses associated with the
acquisition. Although we have already realized a number of anticipated synergies and benefits from the acquisition of Legacy
Gannett, we may not achieve every expected benefit in the expected timeframe or at all.
If we fail to realize anticipated synergies in the amount and within the timeframe expected, our actual financial condition
and results of operations may differ materially from the illustrative financial information disclosed in connection with the
acquisition, which was based on various assumptions and estimates that may prove to be incorrect. Such illustrative financial
information did not constitute management’s projections of future financial performance or results of operations; however, any
material variance from such illustrative financial information could result in negative investor reactions that materially and
adversely affect the market price of our Common Stock. Our actual financial condition and results of operations may differ
materially even if synergies are realized, due to macroeconomic and other external factors or a variety of other risks to our
business that are independent of the acquisition.
Our future results will suffer if we do not effectively manage the expanded scope of our operations as a result of our
acquisition of Legacy Gannett.
With completion of the Legacy Gannett acquisition, the size and geographical scope of our business has increased
significantly. Our continued success depends, in part, upon our ability to manage these expanded business operations, including
across the U.S. and the United Kingdom, which poses substantial challenges for management, including challenges related to
the management and monitoring of new operations and associated increased costs and complexity. As part of managing the
expanded business, we are in the process of implementing a strategic initiative expected to achieve cost-savings and
efficiencies. The initiative includes outsourcing certain of our administrative operations to outside the U.S. There can be no
assurance that we will be successful in managing the scope of our expanded operations or that we will realize the expected
operating efficiencies, cost savings, and other benefits from the combined business that we currently anticipate.
21
The diversion of resources and management’s attention to the integration of Legacy Gannett could adversely affect our
day-to-day business.
The integration of Legacy Gannett places a significant burden on our management and internal resources. The diversion of
management’s attention away from day-to-day business concerns and any difficulties encountered in the transition and
integration process could adversely affect our financial results.
Risks Related to Macroeconomic Factors
Our ability to generate revenues is highly sensitive to the strength of the economies in which we operate and the
demographics of the local communities that we serve.
Our advertising revenues and, to a lesser extent, circulation revenues, depend upon a variety of factors specific to the
communities that our publications serve. These factors include, among others, the size and demographic characteristics of the
local population, local economic conditions in general and the economic condition of the retail segments of the communities
that our publications serve. The effects of the COVID-19 pandemic, including mandatory business closures, have generally
worsened the economic condition of many retail segments. If the local economy, population or prevailing retail environment of
a community we serve experiences a downturn, our publications, revenues and profitability in that market could be adversely
affected. Our advertising revenues are also susceptible to negative trends in the general economy that affect customer spending.
The advertisers in our newspapers and other publications and related websites are primarily retail businesses that can be
significantly affected by regional or national economic downturns and other developments. For example, many traditional retail
companies continue to face greater competition from online retailers and face uncertainty in their businesses, which has reduced
and may continue to reduce their advertising spending. Declines in the U.S. economy could also significantly affect key
advertising revenue categories, including classified ads such as help wanted, real estate, and automotive. The effects of the
COVID-19 pandemic have generally exacerbated these circumstances.
We expect the COVID-19 pandemic to have a material negative impact on our business and results of operations in the
near term, and possibly longer.
While we are generally exempt from governmental mandates requiring closures of non-essential businesses in response to
the COVID-19 pandemic, actions taken to mitigate the pandemic could materially and adversely affect our business. Our ability
to generate revenues is highly sensitive to the strength of the economies in which we operate, and actions taken to mitigate the
COVID-19 pandemic, including widespread business closures and social distancing measures, could lead to an economic
recession. During the year ended December 31, 2020, we experienced revenue and profitability declines in connection with the
COVID-19 pandemic. Since March 2020, we have experienced decreasing demand for our advertising and digital marketing
services as well as reductions in the single copy and commercial distribution of our newspapers. Declining revenue may impair
our ability to generate sufficient cash flows to service the 5-Year Term Loan and the 2027 Notes. Accordingly, the COVID-19
pandemic has had the effect of heightening various risks described in this Form 10-K.
While we have implemented, and continue to implement, measures intended to reduce costs and preserve cash flow in
response to the COVID-19 pandemic (including, but not limited to, employee furloughs, decreases in employee compensation
and reductions in discretionary spending), there can be no assurance that we will be able to offset the negative impacts of the
pandemic and that we will have sufficient cash flow to satisfy our commitments. In addition, measures taken to preserve cash
flow and defer payments into future periods, such as the deferral of pension obligations, may have a greater impact on cash
flow in future periods as we also incur such payments in the normal course of business. Moreover, such measures, and further
measures we may implement in the future in response to the COVID-19 pandemic, may negatively impact our reputation and
our ability to attract and retain employees. See "Risks Related to Pension Obligations and Employees" below.
In the long-term, the ultimate impact of the COVID-19 pandemic on our business and results of operations will depend on
the severity and length of the pandemic, the duration, effectiveness, and extent of the mitigation measures and governmental
actions designed to combat the pandemic, including the development and availability of effective treatments or vaccines, as
well as changes in customer behavior as a result of the pandemic, all of which are highly uncertain. The COVID-19 pandemic
and mitigation measures could continue to, depending upon the duration of the pandemic, have a material negative impact on
our business and results of operations.
22
Uncertainty and adverse changes in the general economic conditions of markets in which we participate, including due
to the COVID-19 pandemic, may continue to negatively affect our business.
Current and future conditions in the economy have an inherent degree of uncertainty, which has been magnified by the
COVID-19 pandemic. As a result, it is difficult to estimate the level of growth or contraction for the economy as a whole. It is
even more difficult to estimate growth or contraction in various parts, sectors and regions of the economy, including the
markets in which we participate. In particular, the COVID-19 pandemic and related measures to contain its spread have created
significant volatility and economic uncertainty, which is expected to continue in the near term. In addition, advertisers may
respond to such uncertainty by reducing their budgets or shifting priorities or spending patterns, which could have a material
adverse impact on our business.
Adverse changes may also occur as a result of weak global economic conditions, declining oil prices, wavering customer
confidence, increasing unemployment, volatility in stock markets, contraction of credit availability, declines in real estate
values, natural disasters, or other factors affecting economic conditions in general. These changes may negatively affect the
sales of our products, increase exposure to losses from bad debts, increase the cost and decrease the availability of financing, or
increase costs associated with publishing and distributing our publications.
The collectability of accounts receivable under adverse economic conditions could deteriorate to a greater extent than
provided for in our financial statements and in our projections of future results.
Adverse economic conditions in the U.S. may increase our exposure to losses resulting from financial distress, insolvency
and the potential bankruptcy of our advertising customers. We have recorded write-offs of accounts receivable relating to recent
bankruptcies of national retailers. Our accounts receivable is stated at net estimated realizable value, and our allowance for
doubtful accounts has been determined based on several factors, including receivable agings, significant individual credit risk
accounts and historical experience. If such collectability estimates prove inaccurate, adjustments to future operating results
could occur.
Our financial results are subject to risks associated with our international operations.
Risks Related to International Operations
Newsquest operates in the U.K., and ReachLocal has international sales operations in Australia, New Zealand and Canada,
as well as campaign support services in India. Revenue from Newsquest accounted for 6% of our Publishing segment's total
revenues for the year ended December 31, 2020. Revenue from international operations outside North America accounted for
5% of our Digital Marketing Solutions segment's total revenue for the year ended December 31, 2020. Our ability to manage
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, including the COVID-19
pandemic;
• Difficulties or delays in developing a network of clients in international markets;
• Restrictions on the ability of U.S. companies to do business in certain foreign countries;
• Compliance with legal or regulatory requirements, including with respect to internet services, privacy and data
protection, censorship, banking and money transfers, and sale transactions, 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;
•
• Difficulties in staffing and managing foreign operations, as well as the existence of workers' councils and labor unions,
which could make it more difficult to terminate underperforming employees;
• Currency fluctuations and price controls or other restrictions on foreign currency; and
•
Potential adverse tax consequences, including difficulties in repatriating earnings generated abroad.
Any of the foregoing factors could adversely impact our international operations, which could harm our overall business,
operating results, and financial condition.
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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. Weakening in the British pound sterling to U.S. dollar exchange rate
has in the past, and could in the future, diminish Newsquest's contributions to our results of operations. In addition, ReachLocal
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.
The U.K.'s exit from the European Union could adversely impact our business, results of operations, and financial
condition.
The U.K. left the European Union on January 31, 2020 ("Brexit") and on January 1, 2021, left the European Union single
market and customs union. On December 24, 2020, the U.K. and European Union entered into the EU-UK Trade and
Cooperation Agreement ("TCA"). The TCA went into effect on January 1, 2021 and is being applied provisionally from that
date until it is fully ratified or rejected by the European Parliament, or until February 28, 2021. The TCA provides, among other
things, for a duty- and quota-free trade agreement between the U.K. and the European Union with respect to goods originating
in the free trade area, however, custom formalities went into effect upon the U.K.’s exit from the single market and customs
union. The TCA does not address a number of important aspects of the new relationship between the U.K. and the European
Union, including providing for the free movement of services, which ended on December 31, 2020. As a result, uncertainty
remains regarding the future relationship between the U.K. and the European Union, which could result in a decline in trade
among them and other countries. Such a decline in trade could affect the attractiveness of the U.K. as a global investment center
and, as a result, could have a detrimental impact on economic growth in the country. Furthermore, there are likely to be changes
in the legal rights and obligations of commercial parties across all industries following Brexit, and British regulatory
requirements could be subject to significant change. Any of the foregoing could result in an economic downturn in Newsquest’s
markets, which could depress the demand for our products and services.
Domestic and/or foreign jurisdictions may enact gross receipts taxes on our digital services which, if we are required to
pay, could adversely affect our cash flows and financial condition.
On July 22, 2020, a Digital Services Tax ("DST") was enacted in the United Kingdom. This 2% tax became effective April
1, 2020. The DST applies to gross revenue of specified digital business models deriving value from participation of their U.K.-
based users. While the tax is intended to apply to search engines, social media platforms, and online marketplaces, it may be
applied to online advertising when users of our publications receive advertising based on their participation with the
publications. If that is the case, we may have to pay additional cash taxes, which could adversely affect our results of
operations, financial condition, and cash flows.
On February 12, 2021, Maryland enacted the first tax targeting digital advertising in the United States. The scaled rate
between 2.5% and 10% Digital Advertising Gross Revenues Tax will be imposed on annual gross revenues derived from digital
advertising services in Maryland. The rate of tax varies depending on the amount of revenue a company earns. However,
pending legislation would exempt digital advertising by a ‘broadcast entity’ or a ‘news media entity.’ Maryland’s new digital
advertising tax could be the beginning of a wave of similar new taxes on digital advertising enacted by other states that are
experiencing budget shortfalls and economic distress as a result of the COVID-19 pandemic
Additional Risks Related to Our Business
Our business is subject to seasonal and other fluctuations, which affects our revenues and operating results.
Our business is subject to seasonal fluctuations that we expect to continue to be reflected in our operating results in future
periods. Our first fiscal quarter of the year tends to be our weakest quarter because advertising volume is at its lowest levels
following the December holiday season. Correspondingly, our second and fourth fiscal quarters tend to be our strongest because
they include heavy holiday and seasonal advertising. Other factors that affect our quarterly revenues and operating results may
be beyond our control, including changes in the pricing policies of our competitors, the hiring and retention of key personnel,
wage and cost pressures, distribution costs, changes in newsprint prices and general economic factors.
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The value of our intangible assets may become impaired, which could adversely affect future reported results of
operations and stockholders’ equity
Our goodwill and indefinite-lived intangible assets, which include mastheads, are subject to annual impairment testing, and
more frequent testing upon the occurrence of certain events or significant changes in our circumstances, to determine whether
the fair value of such assets is less than their carrying value. In such a case, a non-cash charge to earnings may be necessary in
the relevant period, which could adversely affect future reported results of operations and stockholders’ equity. At
December 31, 2020, the carrying value of our goodwill, indefinite-lived intangible assets and amortizable intangible assets was
$534.1 million, $171.4 million and $653.2 million, respectively.
Consistent with past practice, we performed our annual impairment test in the second quarter of 2020. In connection with
our review, we noted that the market capitalization of the Company declined significantly during the six months ended June 30,
2020 and there was widespread stock-market volatility, resulting from the COVID-19 pandemic. As a result, in the second
quarter of 2020, we recognized impairment charges of $362.4 million, $8.0 million, and $23.0 million related to goodwill,
indefinite-lived intangible assets (mastheads) and amortizable intangible assets, respectively.
Management assumptions used to calculate fair value are highly subjective and involve forecasts of future economic and
market conditions and their impact on operating performance. Changes in key assumptions impacting the analyses could result
in the recognition of additional impairment. The severity and length of the COVID-19 pandemic, the duration and extent of the
mitigation measures and governmental actions designed to combat the pandemic, as well as the changes in customers behavior
as a result of the pandemic, all of which are highly uncertain and difficult to predict at the current time, could negatively impact
our future assessment of projected results of operations and the underlying assumptions utilized in the determination of the
estimated fair values of the reporting units and related mastheads.
Our management and independent auditors have identified a material weakness in our internal control over financial
reporting, which could, if not remediated in an appropriate and timely way, result in material misstatements in our financial
statements.
The Sarbanes-Oxley Act and related rules and regulations require that management report annually on the effectiveness of
our internal control over financial reporting and assess the effectiveness of our disclosure controls and procedures on a quarterly
basis. Maintaining and adapting our internal controls is expensive and requires significant management attention. Moreover, as
we continue to grow, our internal controls may become more complex and require additional resources to ensure they remain
effective amid dynamic regulatory and other guidance.
As described in Item 9A, "Controls and Procedures" of this Annual Report on Form 10-K, we concluded that our disclosure
controls and procedures were not effective as of December 31, 2020 and December 31, 2019 and that we had, as of such date, a
material weakness in our internal control over financial reporting related to internal control deficiencies over the revenue
recognition process; specifically, the Company did not maintain effective controls due to the aggregation of control deficiencies
related to inadequate manual preventative and detective controls and information technology general controls. A material
weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a
reasonable possibility that a material misstatement of our annual or interim consolidated financial statements would not be
prevented or detected on a timely basis. This material weakness identified did not result in any adjustments or restatements of
our audited and unaudited consolidated financial statements or disclosures for any prior period previously reported by the
Company. However, until the material weakness is remediated, and our associated disclosure controls and procedures improved,
or if additional material weaknesses or significant deficiencies in our internal control over financial reporting occur in the
future, our future consolidated financial statements or other information filed with the SEC may contain material misstatements.
We are in the process of remediating the material weakness, however if we are unable to remediate the material weakness
in an appropriate and timely manner, or if we identify additional control deficiencies that individually or together constitute
significant deficiencies or material weaknesses, our ability to accurately record, process, and report financial information and
consequently, our ability to prepare financial statements within required time periods, could be adversely affected. Failure to
establish and maintain effective internal control over financial reporting could result in material misstatements in our financial
statements, violations of applicable securities laws, stock exchange listing requirements, and the covenants under our debt
agreements, subject us to litigation and investigations, negatively affect investor confidence in our financial statements, and
adversely impact our stock price and ability to access capital markets.
We are evaluating and developing a plan, which will include the implementation of appropriate processes and controls to
remediate the material weakness described above. While we work toward the design and implementation of these processes and
controls, we may rely significantly on manual procedures to assist us with meeting the objectives otherwise fulfilled by an
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effective control environment. The implementation of new procedures and controls could be costly and distract management
from other activities.
We may not be able to protect intellectual property rights upon which our business relies and, if we lose intellectual
property protection, our assets may lose value.
Our business depends on our intellectual property, including, but not limited to, our titles, mastheads, content and
proprietary software, which we may attempt to protect through patents, copyrights, trade laws and contractual restrictions, such
as confidentiality agreements. We believe our proprietary and other intellectual property rights are important to our success and
our competitive position.
Despite our efforts to protect our proprietary rights, unauthorized third parties may attempt to copy or otherwise obtain and
use our content, services and other intellectual property, and we cannot be certain that the steps we have taken will prevent any
misappropriation or confusion among consumers and merchants, or unauthorized use of these rights. If we are unable to
procure, protect and enforce our intellectual property rights, we may not realize the full value of these assets, and our business
may suffer. If we must litigate to enforce our intellectual property rights or determine the validity and scope of the proprietary
rights of third parties, such litigation may be costly and divert the attention of our management from day-to-day operations.
We are subject to environmental and employee safety and health laws and regulations that could cause us to incur
significant compliance expenditures and liabilities.
Our operations are subject to federal, state and local laws and regulations pertaining to the environment, storage tanks and
the management and disposal of wastes at our facilities. Under various environmental laws, a current or previous owner or
operator of real property may be liable for contamination resulting from the release or threatened release of hazardous or toxic
substances or petroleum at that property. Such laws often impose liability on the owner or operator without regard to fault, and
the costs of any required investigation or cleanup can be substantial. Although in connection with certain of our acquisitions we
have rights to indemnification for certain environmental liabilities, these rights may not be sufficient to reimburse us for all
losses that we might incur if a property acquired by us has environmental contamination. In addition, although in connection
with certain of our acquisitions we have obtained insurance policies for coverage for certain potential environmental liabilities,
these policies have express exclusions to coverage as well as express limits on amounts of coverage and length of term.
Accordingly, these insurance policies may not be sufficient to provide coverage for us for all losses that we might incur if a
property acquired by us has environmental contamination.
Our operations are also subject to various employee safety and health laws and regulations, including those pertaining to
occupational injury and illness, employee exposure to hazardous materials and employee complaints. Environmental and
employee safety and health laws tend to be complex, comprehensive and frequently changing. As a result, we may be involved
from time to time in administrative and judicial proceedings and investigations related to environmental and employee safety
and health issues. These proceedings and investigations could result in substantial costs to us, divert our management’s
attention and adversely affect our ability to sell, lease or develop our real property. Furthermore, if it is determined that we are
not in compliance with applicable laws and regulations, or if our properties are contaminated, it could result in significant
liabilities, fines or the suspension or interruption of the operations of specific printing facilities.
Future events, such as changes in existing laws and regulations, new laws or regulations or the discovery of conditions not
currently known to us, may give rise to additional compliance or remedial costs that could be material.
Our possession and use of personal information and the use of payment cards by our customers present risks and
expenses that could harm our business. Unauthorized access to or disclosure or manipulation of such data, whether through
breach of our network security or otherwise, could expose us to liabilities and costly litigation and damage our reputation.
Our online systems store and process confidential subscriber and other sensitive data, such as names, email addresses,
addresses, and other personal information. Therefore, maintaining our network security is critical. Additionally, we depend on
the security of our third-party service providers. Unauthorized use of or inappropriate access to our, or our third-party service
providers’ networks, computer systems and services could potentially jeopardize the security of confidential information,
including payment card (credit or debit) information, of our customers. Because the techniques used to obtain unauthorized
access, disable or degrade service, or sabotage systems change frequently and often are not recognized until launched against a
target, we or our third-party service providers may be unable to anticipate these techniques or to implement adequate
preventative measures. Non-technical means, for example actions by an employee, can also result in a data breach. A party that
is able to circumvent our security measures could misappropriate our proprietary information or the information of our
customers or users, cause interruption in our operations, or damage our computers or those of our customers or users. As a
26
result of any such breaches, customers or users may assert claims of liability against us and these activities may subject us to
legal claims, adversely impact our reputation, and interfere with our ability to provide our products and services, all of which
may have an adverse effect on our business, financial condition and results of operations. The coverage and limits of our
insurance policies may not be adequate to reimburse us for losses caused by security breaches.
A significant number of our customers authorize us to bill their payment card accounts directly for all amounts charged by
us. These customers provide payment card information and other personally identifiable information which, depending on the
particular payment plan, may be maintained to facilitate future payment card transactions. Under payment card rules and our
contracts with our card processors, if there is a breach of payment card information that we store, we could be liable to the
banks that issue the payment cards for their related expenses and penalties. In addition, if we fail to follow payment card
industry data security standards, even if there is no compromise of customer information, we could incur significant fines or
lose our ability to give our customers the option of using payment cards. If we were unable to accept payment cards, our
business would be seriously harmed.
There can be no assurance that any security measures we, or our third-party service providers, take will be effective in
preventing a data breach. We may need to expend significant resources to protect against security breaches or to address
problems caused by breaches. If an actual or perceived breach of our security occurs, the perception of the effectiveness of our
security measures could be harmed and we could lose customers or users. Failure to protect confidential customer data or to
provide customers with adequate notice of our privacy policies could also subject us to liabilities imposed by United States
federal and state regulatory agencies or courts. We could also be subject to evolving state laws that impose data breach
notification requirements, specific data security obligations, or other customer privacy-related requirements. Our failure to
comply with any of these laws or regulations may have an adverse effect on our business, financial condition and results of
operations.
Privacy-related laws are constantly evolving and may increase our compliance costs and potential for liability, either of
which may have an adverse effect on our business, financial condition and results of operations.
Many jurisdictions have enacted or are considering enacting privacy or data protection laws and regulations that apply to
the processing or protection of personal information. These laws and regulations may impose additional security breach
notification requirements, notice and consent requirements and specific data security obligations, and may also provide for a
private right of action or statutory damages. The compliance costs and operational burdens imposed by these laws and
regulations could be significant. Failure to protect confidential data, provide individuals with adequate notice of our privacy
policies or obtain required valid consent, could subject us to liabilities imposed by the jurisdictions where we operate. Further,
because some of our products and services are available on the internet, we may be subject to laws or regulations exposing us to
liability or compliance obligations even in jurisdictions where we do not have a substantial presence.
Existing privacy-related laws and regulations are evolving and are subject to potentially differing interpretations. Various
federal and state legislative and regulatory bodies, as well as foreign legislative and regulatory bodies, may expand current laws
or enact new laws regarding privacy and data protection. For example, the General Data Protection Regulation adopted by the
European Union imposes stringent data protection requirements and significant penalties for noncompliance; California’s
Consumer Privacy Act creates new data privacy rights; and the European Union’s anticipated ePrivacy Regulation is expected
to impose, with respect to electronic communications, stricter data protection and data processing requirements. Any failure, or
perceived failure, by us or the third parties upon which we rely to comply with laws and regulations that govern our business
operations, as well as any failure, or perceived failure, by us or the third parties upon which we rely to comply with our own
posted policies, could result in claims against us by governmental entities or others, negative publicity and a loss of confidence
in us by our users and advertisers. Each of these potential consequences could adversely affect our business and results of
operations.
We could incur significant liability if the separation of Legacy Gannett from its former parent were determined to be a
taxable transaction.
In connection with the separation of Legacy Gannett from its former parent, Legacy Gannett’s former parent received an
opinion from outside tax counsel to the effect that the requirements for tax-free treatment under Section 355 of the Internal
Revenue Code of 1986, as amended (the "Code") would be satisfied. The opinion relied on certain facts, assumptions,
representations, and undertakings from Legacy Gannett's former parent and Legacy Gannett 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
27
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 Legacy Gannett or its former parent after the separation. If the separation were
determined to be taxable for U.S. federal income tax purposes, Legacy Gannett’s 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.
The Internal Revenue Service may disallow all or part of a worthless stock loss and bad debt deduction.
The IRS could challenge an election made in 2017 to treat one of our ReachLocal international subsidiaries as a
disregarded entity for U.S. federal income tax purposes, which resulted in worthless stock and bad debt deductions of $101.0
million, yielding a tax benefit of $32.0 million. These tax deductions are subject to audit and possible adjustment by the IRS,
which could result in the reversal of all or part of the income tax benefit. To account for this uncertainty, a reserve of $11.0
million has been established to reduce the benefit to an estimated realizable value of $21.0 million. While we believe this
represents our best estimate of the benefit to be realized upon final acceptance of our tax return, the IRS could reject or reduce
the amount of tax benefit related to these deductions. If the IRS rejects or reduces the amount of this income tax benefit, we
may have to pay additional cash income taxes, which could adversely affect our results of operations, financial condition, and
cash flows. We cannot guarantee what the ultimate outcome or amount of the benefit we receive, if any, will be.
We may not be able to generate future taxable income which may prevent our realization of deferred tax assets.
We have deferred tax assets reported on our balance sheet, net of valuation allowances of $83.4 million. If we do not have
taxable income in future years, we may be required to reestablish a valuation allowance against the remaining deferred tax
assets.
Risks Related to Pension Obligations and Employees
We are required to use a portion of our cash flows to make contributions to our pension plans, which diverts cash flow
from operations, and the amount of required future contributions may be difficult to estimate.
We, along with our subsidiaries, sponsor various defined benefit retirement plans, including plans established under
collective bargaining agreements. Our retirement plans include (i) the Gannett Retirement Plan ("GR Plan"), (ii) the Newsquest
and Romanes Pension Schemes in the U.K. ("U.K. Pension Plans"), (iii) the Newspaper Guild of Detroit Pension Plan, (iv) the
George W. Prescott Publishing Company Pension Plan (the "GWP Plan") and (v) the Times Publishing Company Defined
Benefit Pension Plan (the "TPC Plan").
Our pension plans invest in a variety of equity and debt securities. Future volatility and disruption in the equity and bond
markets could cause declines in the asset values of our pension plans. As of December 31, 2020, the value of our pension assets
exceeded our pension benefit obligations and our retirement plans were overfunded by a total of $64.2 million on a U.S.
generally accepted accounting principles ("GAAP") basis.
As of December 31, 2020, we made a $5.0 million contribution to the GR Plan and we have committed to make quarterly
contributions of $5.0 million to the GR Plan through September 2022. 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. Various factors, including future investment returns, interest rates, and potential pension
legislative changes, may impact the timing and amount of future pension contributions. In addition, decreases in the discount
rate used to determine minimum funding requirements could result in increased future contributions. As a result, we may need
to make additional pension contributions above what is currently estimated, which could reduce the cash available for our
businesses.
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We depend on key personnel, and we may not be able to operate or grow our business effectively if we lose the services
of any of our key personnel or are unable to attract qualified personnel in the future.
The success of our business is heavily dependent on our ability to retain our management and other key personnel and to
attract and retain qualified personnel in the future. Competition for senior management personnel is intense, and we may not be
able to retain our key personnel. Although we have entered into employment agreements with certain of our key personnel,
these agreements do not ensure that our key personnel will continue in their present capacity with us for any particular period of
time. We do not have key employee insurance for any of our current management or other key personnel. The loss of any key
personnel would require our remaining key personnel to divert immediate and substantial attention to seeking a replacement.
An inability to find a suitable replacement for any departing executive officer on a timely basis could adversely affect our
ability to operate or grow our business.
A shortage of skilled or experienced employees, including journalists, in the media industry, or our inability to retain
such employees, could pose a risk to achieving improved productivity and reducing costs, which could adversely affect our
profitability.
Production and distribution of our various publications requires skilled and experienced employees, including journalists. A
shortage of such employees, or our inability to retain such employees, could have an adverse impact on our productivity and
costs, our ability to expand, develop and distribute new products and our entry into new markets. The cost of retaining or hiring
such employees could exceed our expectations, which could adversely affect our results of operations.
A number of our employees are unionized, and our business and results of operations could be adversely affected if
current or additional labor negotiations or contracts were to further restrict our ability to maximize the efficiency of our
operations.
As of December 31, 2020, we employed 18,141 employees, of whom 2,356 (or approximately 15%) were represented
by seven unions. 43% of the unionized employees are in four states: Michigan, Ohio, Wisconsin and Indiana and
represent 14%, 7%, 13% and 10% of all our union employees, respectively.
Although our newspapers have not experienced a union strike in the recent past nor do we anticipate a union strike to
occur, we cannot preclude the possibility that a strike may occur at one or more of our newspapers at some point in the future.
We believe that, in the event of a newspaper strike, we would be able to continue to publish and deliver to subscribers, which is
critical to retaining advertising and circulation revenues, although there can be no assurance of this. Further, settlement of
actual or threatened labor disputes or an increase in the number of our employees covered by collective bargaining agreements
can have unknown effects on our labor costs, productivity and flexibility.
Sustained increases in costs of employee health and welfare benefits may reduce our profitability.
In recent years, we have experienced significant increases in the cost of employee benefits because of economic factors
beyond our control, including increases in health care costs. Some of these factors may continue to put upward pressure on the
cost of providing medical benefits. Although we have actively sought to control increases in these costs, there can be no
assurance that we will succeed in limiting cost increases, and continued upward pressure could reduce the profitability of our
businesses.
Risks Related to the Termination of our Relationship with our Former Manager
Our inability to successfully transition to self-management following termination of the Amended Management
Agreement may result in the loss of key employees, disruptions to our business and operational inefficiencies that could
hinder our business, financial condition and results of operations.
On December 21, 2020, we terminated the Amended Management Agreement, effective as of 11:59 p.m., Eastern Time, on
December 31, 2020. Until the termination of the Amended Management Agreement, we were dependent on the Manager and its
affiliates to manage our operations, and acquire and manage our investments. After the termination, we are self-managing our
operations and investments. Achieving the anticipated benefits from the termination of the Amended Management Agreement is
subject to a number of uncertainties related to our successful transition to self-management.
In connection with the Termination Agreement, we extended offers of employment to certain employees of the Manager or
its affiliates who provided services to us prior to the termination, including our Chief Executive Officer. While the extension of
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such offers of employment are intended to mitigate any disruption in the transition from being Manager-operated to self-
managed, this transition has inherent risks, including, but not limited to, whether we can successfully retain key employees and
successfully transition our management from external to in-house.
Transitioning to self-management may be more difficult, costly or time-consuming than anticipated. We may experience
business disruptions and operational inefficiencies during such transition if such transition is more difficult or more costly than
we anticipate or if the transition is otherwise inefficient or unsuccessful to any degree. As a result, we could experience material
adverse effects to our business, financial condition and results of operations.
The Manager is not liable to us for certain acts or omissions performed in accordance with, and prior to the termination
of, the Amended Management Agreement, and for certain matters in connection with the termination of our relationship
with the Manager, and we may incur liability for such acts or omissions.
Pursuant to, and prior to the termination of, the Amended Management Agreement, the Manager assumed no responsibility
other than to render the services called for thereunder in good faith and was not responsible for any action of our Board of
Directors in following or declining to follow its advice or recommendations. The Manager, its members, managers, officers and
employees are not liable to us or any of our subsidiaries, to our Board of Directors, or our or any subsidiary’s stockholders or
partners for any acts or omissions by the Manager, its members, managers, officers or employees, except by reason of acts
constituting bad faith, willful misconduct, gross negligence or reckless disregard of the Manager’s duties under the Amended
Management Agreement that occurred prior to its termination. Pursuant to the Termination Agreement, our indemnification
obligations to the Manager and its affiliates under the Amended Management Agreement survive its termination indefinitely. In
addition, pursuant to the Termination Agreement, the Manager will be held harmless with respect to certain acts and omissions
performed in connection with the Termination Agreement except by reason of acts or omissions constituting bad faith, willful
misconduct, gross negligence or reckless disregard of the Manager’s performance under the Termination Agreement. As a
result, we may incur liabilities as a result of certain acts or omissions by the Manager, which could materially and adversely
impact our business and results of operations.
There can be no assurance that the market for our stock will provide adequate liquidity.
Risks Related to our Common Stock
The market price of our Common Stock may fluctuate widely, depending upon many factors, some of which may be
beyond our control. These factors include, without limitation:
• Risks and uncertainties associated with the ongoing COVID-19 pandemic;
• Our business profile and market capitalization may not fit the investment objectives of any stockholder;
• A shift in our investor base;
• Our quarterly or annual earnings, or those of other comparable companies;
• Actual or anticipated fluctuations in our operating results;
• Changes in accounting standards, policies, guidance, interpretations or principles;
• Risks relating to our ability to meet long-term forecasts;
• Announcements by us or our competitors of significant investments, acquisitions or dispositions;
• The failure of securities analysts to cover our Common Stock;
• Changes in earnings estimates by securities analysts or our ability to meet those estimates;
• The operating and stock price performance of other comparable companies;
• Negative public perception of us, our competitors, or industry;
• Overall market fluctuations; and
• General economic conditions.
Stock markets in general and recently have experienced volatility that has often been unrelated to the operating
performance of a particular company. These broad market fluctuations may adversely affect the trading price of our Common
Stock. Additionally, these and other external factors have caused and may continue to cause the market price and demand for
our Common Stock to fluctuate, which may limit or prevent investors from readily selling their shares of Common Stock and
may otherwise negatively affect the liquidity of our Common Stock.
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Our Common Stock may be delisted from the NYSE if we fail to comply with continued listing standards.
Our Common Stock currently trades on the New York Stock Exchange ("NYSE"), and the continued listing of our
Common Stock on the NYSE is subject to our compliance with a number of listing standards, including minimum share price
requirements. If we fall out of compliance with NYSE’s listing standards and fail to regain compliance within the applicable
cure periods, our Common Stock may be delisted from the NYSE. Failure to maintain our NYSE listing could negatively
impact us and our stockholders by reducing the willingness of investors to hold our Common Stock because of the resulting
decreased price, liquidity and trading of our Common Stock, and analyst coverage, among others.
Sales or issuances of shares of our Common Stock, including upon conversion of the 2027 Notes, could adversely affect
the market price of our Common Stock.
Sales or issuances of substantial amounts of shares of our Common Stock in the public market, or the perception that such
sales or issuances might occur, could adversely affect the market price of our Common Stock. The issuance of our Common
Stock in connection with property, portfolio or business acquisitions or the settlement of awards that may be granted under our
Incentive Plans (as defined below) or otherwise could also have an adverse effect on the market price of our Common Stock.
In accordance with the Investor Agreement among the Company and the holders of the 2027 Notes (the “Holders”)
establishing certain terms and conditions concerning the rights and restrictions on the Holders with respect to the Holders’
ownership of the Notes, the Holders have certain registration rights with respect to the shares of Common Stock to be issued
upon conversion of the 2027 Notes. In addition, Holders who receive Common Stock upon conversion of the 2027 Notes may
be able to sell these shares of Common Stock pursuant to any applicable exemption under the Securities Act of 1933, as
amended, or the rules promulgated thereunder, including Rule 144, if applicable. If significant quantities of the Common Stock
are sold, or if it is perceived that they may be sold, the trading price of the Common Stock could be adversely affected.
We presently have no intention to declare or pay a dividend and we may not be able to pay dividends in the future or at
all.
On April 1, 2020, we announced that our Board of Directors determined that it is in the best interests of our stockholders
for the Company to preserve liquidity by suspending our quarterly dividend. We presently have no intention to reinstate the
dividend, and there can be no assurance that we will resume paying dividends on a regular basis.
Our credit facility contains terms that restrict our ability to pay dividends or other distributions. In addition, under the 5-
Year Term Loan, we can only pay cash dividends up to an agreed-upon amount and provided that the ratio of Total Indebtedness
secured on an equal priority basis with the 5-Year Term Loan (net of Unrestricted Cash) to Consolidated EBITDA (as such
terms are defined in the 5-Year Term Loan) does not exceed a specified ratio. The Indenture contains a similar dividend
restriction and also provides that, at any time that the Company’s Total Gross Leverage Ratio (as defined in the Indenture)
exceeds 1.5 and the Company approves the declaration of a dividend, the Company must offer to purchase a principal amount
of 2027 Notes equal to the proposed amount of the dividend. This repurchase offer requirement may make it impractical to
declare and pay dividends at any time that the requirement is in effect. Stockholders also should be aware that they have no
contractual or other legal right to dividends that have not been declared.
Any determination by our Board of Directors regarding dividends will depend on a variety of factors, including the
Company’s GAAP net income, free cash flow generated from operations or other sources, liquidity position and potential
alternative uses of cash, such as acquisitions, as well as economic conditions and expected future financial results. There can be
no guarantee regarding the timing and amount of any dividends. Our ability to resume payment of dividends in the future will
depend on our future financial performance, which, in turn, depends on the successful implementation of our strategy and on
financial, competitive, regulatory, technical and other factors, general economic conditions, demand and selling prices for our
products and other factors specific to our industry or specific projects, many of which are beyond our control. Therefore, our
ability to generate free cash flow depends on the performance of our operations and could be limited by decreases in our
profitability or increases in costs, capital expenditures, or debt servicing requirements.
The percentage ownership of our existing stockholders may be diluted in the future, including upon conversion of the
2027 Notes.
We have issued and may continue to issue equity in order to raise capital or in connection with future acquisitions and
strategic investments, which would dilute investors’ percentage ownership in Gannett. In addition, a stockholder's percentage
ownership may be diluted if we issue equity instruments such as debt and equity financing.
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To the extent that we raise additional capital through the sale of equity or convertible debt securities (such as the 2027
Notes), a stockholder's ownership interest in our Company may be diluted, and the terms of these securities may include
liquidation or other preferences that adversely affect your rights as a stockholder. Debt and equity financings, if available, may
involve agreements that include covenants limiting or restricting our ability to take specific actions, such as redeeming our
shares, making investments, incurring additional debt, making capital expenditures, declaring dividends or placing limitations
on our ability to acquire, sell or license intellectual property rights.
The percentage ownership of our existing stockholders may be diluted in the future as result of the issuance of Common
Stock due to conversion of the 2027 Notes. Each 2027 Note may be converted into shares of Common Stock at an initial
conversion rate of 200 shares of Common Stock per $1,000 principal amount of Notes (subject to adjustment as provided in the
Indenture, the “Conversion Rate”). Based on the number of shares outstanding on February 19, 2021, conversion of all of the
2027 Notes into Common Stock (assuming no adjustments to the Conversion Rate) would result in the issuance of an aggregate
of 99,418,800 shares of the Common Stock representing approximately 42% of the shares outstanding as of February 19, 2021
and conversion of all of the 2027 Notes into Common Stock (assuming the maximum increase in the Conversion Rate as a
result of certain events, including, subject to exceptions as described in the Indenture, the acquisition of 50% or more of voting
power of our securities by a person or group, a stockholder-approved liquidation of us, the delisting of our common stock, or
certain changes of control, but no other adjustments to the Conversion Rate) would result in the issuance of an aggregate of
294,153,187 shares of the Common Stock representing approximately 68% of the shares outstanding as of February 19, 2021.
Any sales in the public market of the common stock issuable upon such conversion could adversely affect prevailing market
prices of our common stock. In addition, the existence of the 2027 Notes may encourage short selling by market participants
because the conversion of the 2027 Notes could be used to satisfy short positions. Further, the anticipated conversion of the
2027 Notes into shares of our common stock could depress the price of our common stock.
The percentage ownership of our existing stockholders may also be diluted in the future as result of the issuance of
Common Stock upon the exercise of outstanding 10-year warrants (the "Gannett Warrants"). As of December 31, 2020, the
Gannett Warrants, if exercised, would represent approximately 0.6% of our Common Stock outstanding at a strike price of
$46.35.
Furthermore, the percentage ownership in Gannett may be diluted in the future because of options issued to our Manager.
As of December 31, 2020, there were 6,068,075 options outstanding at a weighted average exercise price of $13.97 held by our
Manager and/or its affiliates.
Dilution may also result from the issuances of shares under our equity compensation plans (our "Incentive Plans"), which
provide for the grant of equity and equity-based awards, including restricted stock, stock options, stock appreciation rights,
performance awards, and other equity-based and non-equity based awards, in each case to our directors, officers, employees,
among others. As of December 31, 2020, the number of shares remaining available for future issuance under our Incentive
Plans, excluding shares to be issued upon exercise of outstanding options, warrants and rights, was 18.6 million.
An "ownership change" could limit our ability to utilize our net operating loss carryforwards and other tax attributes,
which could result in our payment of income taxes earlier than if we were able to fully utilize our net operating loss and
other tax benefit carryforwards.
Federal and state tax laws impose restrictions on the utilization of net operating loss ("NOL") carryforwards and other tax
attributes in the event of an "ownership change" as defined by Section 382 of the Code ("Section 382"). Generally, an
"ownership change" occurs if the percentage of the value of the stock that is owned by one or more direct or indirect "five
percent stockholders" increases by more than 50% over their lowest ownership percentage at any time during an applicable
testing period (typically, three years). Under Section 382, if a corporation undergoes an "ownership change," such corporation’s
ability to use its pre-change NOL carryforwards and other pre-change tax attributes to offset its post-change income may be
limited. While no "ownership change" has resulted in annual limitations, future changes in our stock ownership, which may be
outside of our control, may trigger an "ownership change." In addition, future equity offerings or acquisitions that have equity
as a component of the consideration could result in an "ownership change." Furthermore, the issuance of Common Stock upon
the conversion of the 2027 Notes (in the event we elect to issue Common Stock upon any such conversions, rather than cash),
may trigger an "ownership change." If an "ownership change" occurs in the future, utilization of our NOL carryforwards or
other tax attributes may be limited, which could potentially result in increased future tax liability to us. We have adopted a
Section 382 Rights Agreement, discussed below, to protect our utilization of our NOL carryforwards and other tax attributes.
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We have entered into a Section 382 Rights Agreement, and if the share purchase rights issued pursuant to such
agreement are exercised, it could materially and adversely affect the market price of our Common Stock.
We entered into a Section 382 Rights Agreement on April 6, 2020 (the "Rights Agreement"), with American Stock Transfer
& Trust Company, LLC, a federally chartered trust company, as Rights Agent. The Rights Agreement is intended to discourage
acquisitions of our Common Stock which could result in a cumulative "ownership change" as defined under Section 382,
thereby preserving our current ability to utilize NOL carryforwards to offset future income tax obligations, which would
become subject to limitations if we were to experience an "ownership change," as defined under Section 382. While the Rights
Agreement is intended to preserve our current ability to utilize NOL carryforwards, it effectively deters current and future
purchasers from accumulating more than 4.99% of our Common Stock, which could delay or discourage takeover attempts that
our stockholders may consider favorable. An Acquiring Person, as defined in the Rights Agreement, that acquires 4.99% or
more of our Common Stock could suffer substantial dilution of its ownership interest under the terms of the Rights Agreement
through the issuance of Common Stock or common stock equivalents to all stockholders other than the Acquiring Person. In
addition, if the share purchase rights issued pursuant to the Rights Agreement are exercised, additional shares of our Common
Stock will be issued, which could materially and adversely affect the market price of our Common Stock. Moreover, sales in the
public market of any shares of our Common Stock issued upon such exercise, or the perception that such sales may occur, could
also adversely affect the market price of our Common Stock. These issuances may also cause our per share net income, if any,
to decrease in future periods.
Provisions in our amended and restated certificate of incorporation and amended and restated bylaws and of Delaware
law may prevent or delay an acquisition of the Company, which could decrease the trading price of our Common Stock.
Our amended and restated certificate of incorporation, amended and restated bylaws and Delaware law contain provisions
that are intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids
unacceptably expensive to the raider and to encourage prospective acquirers to negotiate with our Board rather than to attempt a
hostile takeover. These provisions provide for:
• Amendment of provisions in our amended and restated certificate of incorporation and amended and restated bylaws
regarding the election of directors, the term of office of directors, the filling of director vacancies and the resignation
and removal of directors only upon the affirmative vote of at least 80% of the then issued and outstanding shares of
our capital stock entitled to vote thereon;
• Amendment of provisions in our amended and restated certificate of incorporation regarding corporate opportunity
only upon the affirmative vote of at least 80% of the then issued and outstanding shares of our capital stock entitled to
vote thereon;
• Removal of directors only for cause and only with the affirmative vote of at least 80% of the voting interest of
stockholders entitled to vote in the election of directors;
• Our Board to determine the powers, preferences and rights of our preferred stock and to issue such preferred stock
•
without stockholder approval, including in connection with our Rights Agreement;
Provisions in our amended and restated certificate of incorporation and amended and restated bylaws prevent
stockholders from calling special meetings of our stockholders;
• Advance notice requirements applicable to stockholders for director nominations and actions to be taken at annual
meetings;
• A prohibition, in our amended and restated certificate of incorporation, stating that no holder of shares of our Common
Stock will have cumulative voting rights in the election of directors, which means that the holders of majority of the
issued and outstanding shares of our Common Stock can elect all the directors standing for election; and
• Action by our stockholders outside a meeting, in our amended and restated certificate of incorporation and our
amended and restated bylaws, only by unanimous written consent.
Public stockholders who might desire to participate in these types of transactions may not have an opportunity to do so,
even if the transaction is considered favorable to stockholders. These anti-takeover provisions could substantially impede the
ability of public stockholders to benefit from a change in control or a change in our management and Board and, as a result,
may adversely affect the market price of our Common Stock and your ability to realize any potential change of control
premium.
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Future offerings of debt securities, which would rank senior to our Common Stock upon our liquidation, and future
offerings of equity securities, may be senior to our Common Stock for the purposes of dividend and liquidating distributions,
may adversely affect the market price of our Common Stock.
We may raise additional capital through the issuance of debt or equity securities (including preferred stock) from time to
time. Upon liquidation, holders of our debt securities (including holders of our 2027 Notes) and preferred stock and lenders
with respect to other borrowings (including the lenders under our existing senior secured credit facility with Apollo) will be
entitled to our available assets prior to the holders of our Common Stock. Preferred stock could have a preference on liquidating
distributions or a preference on dividend payments that could limit our ability to pay dividends to the holders of our common
stock. Because our decision to issue debt or equity securities in any future offering will depend on market conditions and other
factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, holders of
our Common Stock bear the risk of our future offerings reducing the market price of our Common Stock and diluting the value
of their stock holdings in us.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Our corporate headquarters are in McLean, VA, where we lease approximately 175,758 square feet. The lease provides for
an initial term of 15 years with two five-year renewal options. We also have executive offices located in Pittsford, NY, where
we lease approximately 25,870 square feet under a lease terminating in October 2022.
Our domestic facilities occupy approximately 9.5 million square feet in the aggregate, of which approximately 3.9 million
square feet are leased from third parties. Many of our local media organizations also have outside news bureaus, sales offices,
and distribution centers that are leased from third parties. A listing of publishing centers and key locations can be found in Item
1. Business, under "Major Publications and Markets We Serve." We own some 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.
Newsquest, our subsidiary headquartered in London, occupies approximately 0.9 million square feet in the U.K. spread
over 70 locations. Of this, 0.2 million square feet (or 41 locations) are leased from third parties. Newsquest's owned premises
include three printing facilities. A fourth printing facility is leased.
ReachLocal, our subsidiary headquartered in Woodland Hills, CA, has sales and other offices in 19 locations in 13 states -
California, Colorado, Florida, Georgia, Louisiana, Maryland, Massachusetts, Minnesota, New York, North Carolina, Texas,
Virginia, and Washington. Our UpCurve subsidiary has sales and other offices in two locations in California and Massachusetts.
In addition, ReachLocal has 11 locations in four additional countries - Australia, Canada, India, and New Zealand. These
properties, which total approximately 55,886 square feet, include leased buildings and data centers. Excluded from total square
footage but included in location counts are serviced office spaces.
All of our material real properties owned by our material domestic subsidiaries are mortgaged as collateral for our 5-Year
Term Loan. We believe 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 in connection with acquisition of Legacy Gannett may be found in Note 13 —
Commitments, contingencies and other matters of the notes to the Consolidated financial statements, which is incorporated
herein by reference.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER
PURCHASES OF EQUITY SECURITIES
Market Information and Holders
Our common stock trades on the New York Stock Exchange (the "NYSE") under the trading symbol "GCI." As of
February 19, 2021, there were approximately 4,707 holders of record of our Common Stock.
Dividends
On April 1, 2020, we announced that our Board of Directors determined that it is in the best interests of our stockholders
for the Company to preserve liquidity by suspending our quarterly dividend. We presently have no intention to reinstate the
dividend, and there can be no assurance that we will resume paying dividends on a regular basis. In addition, the terms of our
indebtedness, including our credit facility, the 5-Year Term Loan, and the Indenture for the 2027 Notes have terms that restrict
our ability to pay dividends.
Issuer Purchases of Equity Securities
See "Share Repurchase Program" in Note 12 — Supplemental equity information of the notes to the Consolidated financial
statements.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
We are a subscription-led and digitally focused media and marketing solutions company committed to empowering
communities to thrive. We aim to be the premiere source for clarity, connections and solutions within our communities. Our
strategy is focused on driving audience growth and engagement by delivering deeper content experiences to our consumers,
while offering the products and marketing expertise our advertisers desire. The execution of this strategy is expected to allow
the Company to continue its evolution from a more traditional print media business to a digitally focused content platform.
Until November 19, 2019, our corporate name was New Media Investment Group Inc. ("New Media") and Gannett Co.,
Inc. was a separate publicly traded company. On November 19, 2019, New Media completed its acquisition of Gannett Co., Inc.
(which was renamed Gannett Media Corp. and is referred to as "Legacy Gannett"). In connection with the acquisition, New
Media changed its name to Gannett Co., Inc. and assumed Legacy Gannett's ticker symbol "GCI" (having previously traded
under "NEWM"). As a result of the acquisition, historical results for 2019 represents legacy New Media’s results up to and
through the date of the acquisition plus the new consolidated company’s results of operations for the approximately six-week
period between the date of acquisition and the 2019 fiscal year end.
Our current portfolio of media assets includes USA TODAY, local media organizations in 46 states in the U.S. and Guam,
and Newsquest, a wholly owned subsidiary operating in the United Kingdom ("U.K.") with more than 120 local news media
brands. Gannett also owns the digital marketing services companies ReachLocal, Inc. ("ReachLocal"), UpCurve, Inc.
("UpCurve"), and WordStream, Inc. ("WordStream"), which are marketed under the LOCALiQ brand, and runs the largest
media-owned events business in the U.S., USA TODAY NETWORK Ventures.
Through USA TODAY, our local property network, and Newsquest, Gannett delivers high-quality, trusted content where
and when consumers want to engage with it on virtually any device or platform. Additionally, the Company has strong
relationships with hundreds of thousands of local and national businesses in both our U.S. and U.K. markets due to our large
local and national sales forces and a robust advertising and digital marketing solutions product suite. The Company reports in
two operating segments, Publishing and Digital Marketing Solutions ("DMS"). We also have a corporate and other category that
includes activities not directly attributable to a specific operating segment and includes broad corporate functions such as legal,
human resources, accounting, analytics, finance, and marketing. A full description of our operating segments is included in
Note 14 — Segment reporting of the notes to the Consolidated financial statements.
A discussion regarding our results of operations and changes in financial condition for 2019 as compared to 2018 is
included in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the "2019 Form
10-K"), filed with the Securities and Exchange Commission (the "SEC") on March 2, 2020, and is incorporated by reference
herein.
Business Trends
We have considered several industry trends when assessing our business strategy:
•
•
Print advertising continues to decline as the audience increasingly moves to digital platforms. We look to optimize our
print operations to efficiently manage for this declining print audience. We are focused on converting the growing
digital audience into digital-only subscribers to our publications.
Small and medium-sized businesses ("SMBs") are facing an increasingly complex marketing environment and need to
create digital presence to capture audience online. We offer a broad suite of DMS products that offer a single, unified
solution to meet their digital marketing needs.
• Consumers are looking for experience-based, emotional connections and communities. USA TODAY NETWORK
Ventures was designed to celebrate local communities and create opportunities for meaningful in-person and virtual
experiences.
When evaluating public company publishing peers for revenue trends, we include Legacy Gannett (and legacy New Media
for the period when they were separate companies), Lee Enterprises, Inc., A. H. Belo Corporation, and Tribune Publishing
Company. We have tracked average revenue trends for this peer group for 2018 – 2020 across the print advertising, digital
36
advertising, and circulation categories, which is available through the third quarter of 2020. The COVID-19 pandemic had a
significant impact on revenue trends across the industry during 2020, which we have described below:
•
Print advertising revenues were down 13%-19% annually prior to the pandemic, worsening to down 26%-47% during
the second and third quarters of 2020;
• Digital advertising revenues (which often includes digital marketing services products) performed between down 5%
to up 5% annually prior to the pandemic. The majority of companies did not provide digital advertising breakouts
during the second and third quarters of 2020; and
• Circulation revenues were down 3%-10% annually prior to the pandemic, performing at the lower end of that range,
down 9%, during the second and third quarters of 2020.
Certain matters affecting comparability
Reclassifications
Certain amounts in prior period consolidated financial statements have been reclassified to conform to the current year
presentation. Pursuant to our acquisition of Legacy Gannett, in the fourth quarter of 2019 we realigned the presentation of
marketing services revenues generated by our UpCurve subsidiary from Other revenues to Advertising and marketing services
revenues on the Consolidated statements of operations and comprehensive income (loss). As a result of this updated
presentation, Advertising and marketing services revenues increased and Other revenues decreased $58.2 million for the year
ended December 30, 2018. Operating revenues, net income, retained earnings, and earnings per share remained unchanged.
Acquisitions
•
In November 2019, we acquired substantially all of the assets, properties, and business of Legacy Gannett for an aggregate
purchase price of $1.315 billion. The acquisition was funded by a five-year, senior-secured term loan facility with Apollo
Capital Management, L.P. ("Apollo") in an aggregate principal amount of approximately $1.792 billion (the "Acquisition
Term Loan") and available cash on hand.
• During 2019 prior to the acquisition of Legacy Gannett, we acquired substantially all the assets, properties, and business of
certain publications and businesses (the "2019 Acquisitions"), including 11 daily newspapers, 11 weekly publications, nine
shoppers, a remnant advertising agency, five events production businesses, and a business community and networking
platform for an aggregate purchase price of $53.4 million, including estimated working capital. As part of one of the 2019
Acquisitions, we also acquired a 58% equity interest in the acquiree, and the minority equity owners retained a 42%
interest, which has been classified as a redeemable non-controlling interest on the Consolidated statements of operations
and comprehensive income (loss). The 2019 Acquisitions were financed from available cash on hand.
Dispositions
• On October 30, 2020, we completed the sale of BridgeTower Media, LLC. As a result of the sale, we recognized a pre-tax
gain of approximately $8.2 million, net of selling expenses which is included in Net (gain) loss on sale or disposal of assets
on the Consolidated statements of operations and comprehensive income (loss) for the year ended December 31, 2020.
Integration and reorganization costs
•
•
•
For the year ended December 31, 2020, we incurred Integration and reorganization costs of $145.7 million. Of the total
costs incurred, $86.3 million were related to severance activities and $59.4 million were related to other costs incurred to
consolidate and streamline our operations in connection with the acquisition of Legacy Gannett and ongoing
implementation of our plans to reduce costs and preserve cash flow, including a $30.4 million expense related to the early
termination of the Amended and Restated Management and Advisory Agreement (the "Amended Management
Agreement") with FIG LLC (the "Manager").
For the year ended December 31, 2020, we ceased operations of 40 printing facilities as part of the synergy and ongoing
cost reduction programs. As a result, we recognized accelerated depreciation of $49.6 million during the year ended
December 31, 2020.
For the year ended December 31, 2019, we incurred Integration and reorganization costs of $52.2 million. Of the total costs
incurred, $40.6 million were related to severance activities and $11.7 million were related to other costs incurred to
streamline our operations.
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•
For the year ended December 31, 2019, we ceased operations of three printing publications and 12 printing operations as
part of the ongoing cost reduction programs. As a result, we recognized accelerated depreciation of $7.9 million during the
year ended December 31, 2019.
Asset impairments
•
•
For the year ended December 31, 2020, we recognized Asset impairments of $11.0 million, primarily related to the
Publishing segment as a result of the annual impairment analysis as well as fixed asset disposals related to the continued
consolidation of operations and as a result of our recoverability test for long-lived asset groups performed as of June 30,
2020.
For the year ended December 31, 2019, we recognized Asset impairments of $3.0 million recorded within the Publishing
segment as a result of fixed asset disposals.
Goodwill and intangible impairments
•
•
For the year ended December 31, 2020, we recognized $393.4 million of Goodwill and intangible impairments primarily
due to the impact of the COVID-19 pandemic on the Company’s operations.
For the year ended December 31, 2019, we recognized $100.7 million in Goodwill and intangible impairments, as a result
of softening business conditions which led to the decline in revenue projections that negatively impacted the fair value of
our reporting units and newspaper mastheads.
Foreign currency
The Company's U.K. publishing operations are conducted through its Newsquest subsidiary. In addition, the Company's
ReachLocal subsidiary has foreign operations in regions such as Canada, Australia/New Zealand and India. 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. Translation fluctuations impact revenue,
expense, and operating income results for international operations.
Outlook for 2021
Strategy
Our areas of strategic focus for 2021 include:
Accelerating digital subscriber growth
The broad reach of our newsroom network, linking leading national journalism at USA TODAY, our local property network
in 46 states in the U.S. and Newsquest in the U.K. with more than 120 local media brands, gives us the ability to deepen our
relationships with consumers at both the national and local levels. We bring consumers local news and information that impacts
their day-to-day lives while keeping them informed of the national events that impact their country. We believe this local
content is not readily obtainable elsewhere, and we are able to deliver that content to our customers across multiple print and
digital platforms. As such, a key element of our consumer strategy is growing our paid digital-only subscriber base. We also
expect to launch new digital subscription offerings tailored to specific users.
Driving digital marketing services growth by engaging more clients in a subscriber relationship
We are now of significant digital scale, with unique reach at both the national and local community levels. We expect to
leverage our integrated sales structure and lead generation strategy to continue to aggressively expand our digital marketing
services business into our local markets, both domestically and internationally. Given our extensive client base and volume of
digital campaigns, we will also use data and insights to inform new and dynamic advertising products that we believe will
deliver superior results.
Optimizing our traditional businesses across print and advertising
We will continue to drive the profitability of our traditional print operations through economies of scale, process
improvements, and optimizations. We are focused on optimizing our pricing and improving customer service for our print
38
subscribers. Print advertising continues to offer a compelling branding opportunity across our network due to our scale and
unique reach at both the national and local community levels.
Prioritizing investments into growth businesses that have significant potential and support our vision
By leveraging our unique footprint, trusted brands, and media reach, we identify, experiment, and invest in potential
growth businesses. USA TODAY NETWORK Ventures is a strong example of one such experiment that has grown
significantly since its founding in 2015. During 2020, USA TODAY NETWORK Ventures was able to successfully pivot to
hosting its events virtually, hosting over 250 events and maintaining 88% of USA TODAY NETWORK Venture's revenues
compared to 2019 pro forma revenue performance.
Building on our inclusive and diverse culture to center around meaningful purpose, individual growth and customer focus
Inclusion, Diversity and Equity are core pillars of our organization and influence all that we do, from recruiting,
development and retention, to day-to-day operations including hiring, onboarding, education, leadership training and
professional development. We have published our inclusion goals for 2025 and our efforts underway to progress toward those
goals and expect to publish our first workforce diversity report in the first quarter of 2021. We believe aligning our culture
around empowering our communities to thrive and putting our customers at the center of everything we do will provide the
foundation for our broader strategic efforts.
Impacts of COVID-19
The ongoing COVID-19 pandemic and related measures to contain its spread have resulted in significant volatility and
economic uncertainty, which is expected to continue in the near term. While we have generally been exempt from mandates
requiring closures of non-essential business and have been able to continue operations, these circumstances are expected to
continue to create volatility and unfavorable trends in our financial results as individuals and businesses rationalize
expenditures during this time of uncertainty.
During the year ended December 31, 2020, the Company experienced decreased demand for its advertising and digital
marketing services, commercial print and distribution services, as well as reductions in events and the single copy and
commercial distribution of its newspapers. The Company currently expects that the COVID-19 pandemic will continue to have
a negative impact on the Company’s business and results of operations in the near-term. Longer term, the ultimate impact of the
COVID-19 pandemic on the Company’s business and results of operations will depend on the severity and length of the
pandemic, the duration and extent of the mitigation measures and governmental actions designed to combat the pandemic, as
well as the changes in customer behavior as a result of the pandemic, all of which remain highly uncertain.
As a result, the Company has implemented, and continues to implement, measures to reduce costs and preserve cash flow.
These measures include suspension of the quarterly dividend and refinancing of our debt, as well as reductions in discretionary
spending. In addition, the Company has deferred certain payroll tax remittance as permitted under the Coronavirus Aid, Relief
and Economic Security Act ("CARES Act") and negotiated the deferral of pension contributions, as well as continuing with its
previously disclosed plan to monetize non-core assets.
Seasonality
Our revenues are subject to moderate seasonality, due primarily to fluctuations in advertising volumes. Advertising and
marketing services revenues for our Publishing segment 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.
Recent Developments
Senior Secured Convertible Notes due 2027
On November 17, 2020, the Company entered into an Exchange Agreement (the "Exchange Agreement") with certain of
the lenders (the "Exchanging Lenders") under the Acquisition Term Loan pursuant to which the Company and the Exchanging
Lenders agreed to exchange $497.1 million in aggregate principal amount of the Company’s newly issued 6.0% Senior Secured
Convertible Notes due 2027 (the "2027 Notes") for the retirement of an equal amount of term loans under the Acquisition Term
Loan (the "Exchange"). Following the Exchange, the outstanding balance under the Acquisition Term Loan as of December 31,
39
2020 was $1.019 billion (the "Remaining Term Loan"). The 2027 Notes were issued pursuant to an Indenture (the "Indenture")
dated as of November 17, 2020, between the Company and U.S. Bank National Association, as trustee. The Indenture, as
supplemented by the Second Supplemental Indenture (the "Second Supplemental Indenture") dated as of February 9, 2021,
between the Company and U.S. Bank National Association as trustee, includes affirmative and negative covenants that are
substantially consistent with the 5-Year Term Loan, as well as customary events of default. Please see the disclosure below
under "Liquidity and Capital Resources - Senior Secured Convertible Notes due 2027" and Note 8 — Debt for additional
information regarding the 2027 Notes.
Termination of the Amended and Restated Management Agreement
For the year ended December 31, 2020, we were externally managed and advised by the Manager. On August 5, 2019, in
connection with the entry into the agreement to acquire Legacy Gannett, the Company and the Manager entered into the
Amended Management Agreement, which became effective upon the closing of the acquisition on November 19, 2019. On
December 21, 2020, we entered into a Termination Agreement (the "Termination Agreement") with the Manager providing for
the early termination of the Amended Management Agreement, effective at 11:59 p.m. Eastern Time on December 31, 2020.
Upon termination of the Amended Management Agreement, the Manager ceased providing external management services to the
Company, and the Manager no longer is the employer of the person serving in the role of Chief Executive Officer of the
Company. In connection with the Termination Agreement, the Company made a one-time cash payment of $30.4 million to the
Manager. In addition, all transfer restrictions contained in the Amended Management Agreement on shares of our Common
Stock owned by the Manager, or acquired by the Manager upon the exercise of stock options to acquire Common Stock, lapsed.
In connection with the termination of our relationship with the Manager, we extended offers of employment to certain
employees of the Manager or its affiliates who provided services to the Company, including to our Chief Executive Officer.
Certain indemnification and other obligations in the Amended Management Agreement survived the termination of our
relationship with the Manager.
Term Loan Refinancing
On February 9, 2021, the Company entered into a five-year, senior-secured term loan facility with Citibank, N.A. in an
aggregate principal amount of $1.045 billion (the "5-Year Term Loan"). The 5-Year Term Loan matures on February 9, 2026
and, at the Company's option, bears interest at the rate of the London Interbank Offered Rate plus a margin equal to 7.00% per
annum or an alternate base rate plus a margin equal to 6.00% per annum. Accordingly, we are required to dedicate a substantial
portion of cash flow from operations to fund interest payments. Please see the disclosure below under "Liquidity and Capital
Resources - Term Loan Refinancing" and Note 16 — Subsequent events for additional information regarding the 5-Year Term
Loan.
Special Meeting of Stockholders
At the special meeting of stockholders of the Company, held on February 26, 2021 (the "Special Meeting"), our
stockholders approved, for purposes of Rule 312.03(c) of the New York Stock Exchange, of the issuance of the maximum
number of shares of Common Stock issuable upon conversion of the 2027 Notes. Following receipt of the stockholder approval,
the Company has the flexibility to settle conversion of the 2027 Notes with shares of Common Stock in full (rather than cash of
an equivalent value).
40
RESULTS OF OPERATIONS
Consolidated summary
The following table summarizes results of operations for the Company by segment for the years ended December 31, 2020
and 2019.
In thousands, except per share amounts
Operating revenues:
Publishing
Digital Marketing Solutions
Corporate and other
Intersegment eliminations
Total operating revenues
Operating expenses:
Publishing
Digital Marketing Solutions
Corporate and other
Intersegment eliminations
Total operating expenses
Operating income (loss)
Non-operating (income) expense
Income (loss) before income taxes
Provision (benefit) for income taxes
Net income (loss)
Net loss attributable to redeemable noncontrolling interests
Net income (loss) attributable to Gannett
Earnings (loss) per share attributable to Gannett - basic
Earnings (loss) per share attributable to Gannett - diluted
*** Indicates an absolute value percentage change greater than 100.
2020
3,080,447 $
428,605
10,960
(114,342)
3,405,670
3,268,911
481,177
217,812
(114,342)
3,853,558
(447,888)
257,959
(705,847)
(33,450)
(672,397) $
(1,918)
(670,479) $
(5.09) $
(5.09) $
$
$
$
$
$
Year ended December 31,
Change
2019
% Change
1,792,652 $
149,242
4,554
(78,539)
1,867,909
1,772,323
164,023
157,079
(78,539)
2,014,886
(146,977)
60,207
(207,184)
(85,994)
(121,190) $
(1,348)
(119,842) $
(1.77) $
(1.77) $
1,287,795
279,363
6,406
(35,803)
1,537,761
1,496,588
317,154
60,733
(35,803)
1,838,672
(300,911)
197,752
(498,663)
52,544
(551,207)
(570)
(550,637)
(3.32)
(3.32)
72 %
***
***
46 %
82 %
84 %
***
39 %
46 %
91 %
***
***
***
(61 %)
***
42 %
***
***
***
Intersegment eliminations in the preceding table represent digital marketing services revenues and expenses associated
with products sold by our U.S. local publishing sales teams but which are fulfilled by our DMS segment. When discussing
segment results, these revenues and expenses are presented gross and are eliminated in consolidation.
Operating revenues
Total Operating Revenues were $3.406 billion for the year ended December 31, 2020, an increase of $1.538 billion from
2019. Acquired revenues related to Legacy Gannett were $2.185 billion for the year ended December 31, 2020 compared to
$299.2 million for the six-week period ended December 31, 2019.
For the Publishing segment, Operating revenues increased $1.288 billion, driven by higher Advertising and marketing
services revenues of $511.9 million, including both print and digital, higher Circulation revenues of $687.2 million and higher
Other revenues of $88.7 million. Advertising and marketing services revenues are generated by the sale of local, national, and
classified print advertising products, digital advertising offerings such as digital classified advertisements, digital media such as
display advertisements run on our platforms as well as third-party sites, and digital marketing services such as search
advertising offered through and delivered by our DMS segment. Circulation revenues are derived principally from home
delivery and single copy sales of our publications and distribution of our publications on our digital platforms. Other revenues
are derived mainly from commercial printing and distribution arrangements and our events business.
For the DMS segment, Operating revenues increased $279.4 million, driven by higher Advertising and marketing services
revenues of $280.9 million and lower Other revenues of $1.6 million. Our DMS segment generates Advertising and marketing
services revenues through multiple services, including search advertising, display advertising, search optimization, social
media, website development, web presence products, customer relationship management, Google-suite offerings, and software-
as-a-service solutions. Other revenues in our DMS segment are derived from systems integration services, cloud offerings, and
software licensing.
41
For the Corporate and Other category, Operating revenues increased $6.4 million, driven by higher Other revenues of $5.9
million. Other revenues at our Corporate and Other category are driven by third party newsprint sales.
Operating expenses
Total Operating expenses were $3.854 billion for the year ended December 31, 2020, an increase of $1.839 billion,
compared to 2019. Operating expenses consist primarily of the following:
• Operating costs at the Publishing segment include labor, newsprint and delivery costs and at the DMS segment include
the cost of online media acquired from third parties and costs to manage and operate our marketing solutions and
technology infrastructure;
Selling, general and administrative expenses include labor, payroll, outside services, and benefits costs;
•
• Depreciation and amortization;
•
Integration and reorganization costs include severance charges and facility consolidation expenses as well as
integration-related costs;
• Acquisition related costs;
•
Impairment charges, including costs incurred related to goodwill, intangible assets and property, plant and equipment;
and
• Gains or losses on the sale or disposal of assets.
For the year ended December 31, 2020, Operating expenses at our Publishing segment increased $1.497 billion, reflecting
an increase in Operating costs of $797.0 million, an increase in Selling, general and administrative expenses of $294.4 million,
an increase in Depreciation and amortization of $119.9 million, an increase in Integration and reorganization costs of $37.4
million, an increase in Asset impairments of $7.3 million, and an increase in Goodwill and intangible impairments of $252.2
million, partially offset by an increase in the Gain on the sale or disposal of assets of $11.6 million.
For the year ended December 31, 2020, Operating expenses at our DMS segment increased $317.2 million, reflecting an
increase in Operating costs of $177.6 million, an increase in Selling, general and administrative expenses of $72.8 million, an
increase in Depreciation and amortization of $19.3 million, an increase in Integration and reorganization costs of $4.5 million,
an increase in Goodwill and intangible impairments of $40.5 million, and an increase in the Loss on the sale or disposal of
assets of $1.7 million.
For the year ended December 31, 2020, Operating expenses at Corporate and other an increase $60.7 million, due to an
increase in Operating costs of $20.4 million, an increase in Selling, general and administrative expenses of $25.9 million, an
increase in Depreciation and amortization expenses of $12.7 million, and an increase in Integration and reorganization costs of
$51.7 million, partially offset by a decrease in Acquisition costs of $49.5 million.
Refer to the discussion of segment results below for further information.
Non-operating (income) expense
Interest expense: For the year ended December 31, 2020, Interest expense was $228.5 million compared to $63.7 million
for 2019. The increase in interest expense was mainly due to a full year of interest expense on the Acquisition Term Loan in
2020 compared to 2019.
Loss on early extinguishment of debt: For the year ended December 31, 2020, Loss on early extinguishment of debt was
$43.8 million compared to $6.1 million for 2019. The increase was mainly due to the Exchange of the Acquisition Term Loan in
2020.
Non-operating pension income: For the year ended December 31, 2020, Non-operating pension income was $72.1 million
compared to $9.1 million for 2019. The increase in Non-operating pension income was primarily due to the increased expected
return on plan assets held by the Gannett Retirement Plan (the "GR Plan") in excess of interest costs on benefit obligations
compared to the prior year.
Unrealized loss on Convertible notes derivative: For the year ended December 31, 2020, Unrealized loss on Convertible
notes derivative was $74.3 million, representing the increase in the fair value of the derivative liability as a result of the increase
in the Company's stock price from the original issue date through December 31, 2020.
42
Gain on sale of investments: For the year ended December 31, 2020, Gain on sale of investments was $8.0 million,
compared to none for 2019. The increase in the Gain on sale of investments was due to the disposal of a cost-method
investment held by the DMS segment during 2020.
Other non-operating items, net: Our non-operating items, net, are driven by certain items that fall outside of our normal
business operations. For the year ended December 31, 2020, Non-operating items, net, was income of $8.5 million compared to
$0.4 million in for 2019.
Provision (benefit) for income taxes
The following table summarizes our Income (loss) before income taxes and income tax accounts.
In thousands
Income (loss) before income taxes
Provision (benefit) for income taxes
Effective tax rate
Year ended December 31,
2019
2020
(207,184)
(705,847)
$
$
(33,450)
4.7 %
(85,994)
41.5 %
Our effective tax rate for the year ended December 31, 2020, was 4.7%. The rate was primarily impacted by the tax effect
of non-deductible asset impairments, non-deductible officers' compensation, disallowed loss on the Convertible notes derivative
and the increase in valuation allowances against non-deductible interest expense and capital losses carryforwards. Without the
federal and foreign valuation allowance activity, our effective tax rate would have been 18.5%, which is lower than the statutory
rate primarily due to non-deductible asset impairments, nondeductible officers' compensation and disallowed loss on
Convertible notes derivative. Our effective tax rate for the year ended December 31, 2019, was 41.5%. The rate was primarily
impacted by the release of a valuation allowance for $46.9 million related to legacy New Media's U.S. federal deferred tax
assets and federal net operating losses. If we do not have taxable income in future years, we may be required to reestablish a
valuation allowance against our federal net operating loss deferred tax assets.
Net loss attributable to Gannett and diluted loss per share attributable to Gannett
For the year ended December 31, 2020, Net loss attributable to Gannett and diluted loss per share attributable to Gannett
were $670.5 million and $5.09, respectively, compared to $119.8 million and $1.77 for the year ended December 31, 2019,
respectively. The change reflects the various items discussed above.
43
Publishing segment
A summary of our Publishing segment results is presented below:
In thousands
Operating revenues:
Advertising and marketing services
Circulation
Other
Total operating revenues
Operating expenses:
Operating costs
Selling, general and administrative expenses
Depreciation and amortization
Integration and reorganization costs
Asset impairments
Goodwill and intangible impairments
Net (gain) loss on sale or disposal of assets
Total operating expenses
Operating income (loss)
*** Indicates an absolute value percentage change greater than 100.
Operating revenues
2020
Year ended December 31,
Change
2019
% Change
$
1,409,500 $
1,391,983
278,964
3,080,447
897,585 $
704,811
190,256
1,792,652
1,842,825
787,770
221,746
60,852
10,312
352,947
(7,541)
3,268,911
(188,464) $
1,045,807
493,360
101,881
23,487
3,009
100,743
4,036
1,772,323
20,329 $
$
511,915
687,172
88,708
1,287,795
797,018
294,410
119,865
37,365
7,303
252,204
(11,577)
1,496,588
(208,793)
57 %
97 %
47 %
72 %
76 %
60 %
***
***
***
***
***
84 %
***
The following table provides the breakout of Total operating revenues by category:
In thousands
Local and national print advertising
Classified print advertising
Print advertising
Digital media
Digital classified
Digital marketing services
Digital advertising and marketing services
$
2020
584,929 $
316,392
901,321
Year ended December 31,
Change
2019
477,707 $
211,099
688,806
107,222
105,293
212,515
% Change
341,259
57,990
108,930
508,179
125,756
30,717
52,306
208,779
215,503
27,273
56,624
299,400
Advertising and marketing services
1,409,500
897,585
511,915
Print circulation
Digital-only circulation
Circulation
Other
Total operating revenues
1,316,695
75,288
1,391,983
683,529
21,282
704,811
633,166
54,006
687,172
278,964
190,256
88,708
$
3,080,447 $
1,792,652 $
1,287,795
*** Indicates an absolute value percentage change greater than 100.
The increase in Local and national print advertising revenues and Classified print advertising revenues was due to acquired
revenues related to Legacy Gannett of $327.5 million and $174.3 million, respectively, for the year ended December 31, 2020
compared to $61.7 million and $23.1 million, respectively, for the six-week period ended December 31, 2019. Excluding the
acquisition of Legacy Gannett, Local and national print advertising revenues and Classified print advertising revenues
44
22 %
50 %
31 %
***
89 %
***
***
57 %
93 %
***
97 %
47 %
72 %
decreased $158.6 million and $45.9 million, respectively, for the year ended December 31, 2020. The decline in Print
advertising was driven by secular industry trends and the negative impact of the COVID-19 pandemic on all categories. The
decline in Local and national print advertising revenues was driven by lower advertising volume and a decline in advertiser
inserts. Classified print advertising revenues declined due to reduced spend in legal, automotive and real estate classified
advertisements.
The increase in Digital media, Digital classified and Digital marketing services revenues was due to acquired revenues
related to Legacy Gannett, which were $266.0 million, $38.2 million and $75.7 million, respectively, for the year ended
December 31, 2020 compared to $35.1 million, $5.7 million, and $10.4 million, respectively, for the six-week period ended
December 31, 2019. Excluding the acquisition of Legacy Gannett, Digital media, Digital classified and Digital marketing
services revenues decreased $15.5 million, $5.3 million and $8.6 million, respectively, for the year ended December 31, 2020
due to lower local digital media spend, a reduction in spend in automotive and employment classified advertisements and lower
client counts for Digital marketing services, as well as the negative impact of the COVID-19 pandemic.
The increase in Print circulation revenues and Digital-only circulation revenues was due to acquired revenues related to
Legacy Gannett of $801.8 million and $55.3 million, respectively, for the year ended December 31, 2020 compared to $102.4
million and $4.9 million, respectively, for the six-week period ended December 31, 2019. Excluding the acquisition of Legacy
Gannett, for the year ended December 31, 2020, Print circulation revenues decreased $66.3 million due to declines driven by a
reduction in the volume of home delivery due to subscriber declines and single copy sales, reflecting the impact of COVID-19
on businesses that buy and sell copies of our publications and Digital-only circulation revenues increased $3.6 million due to an
increase in digital only subscribers. Digital-only subscribers for the total company increased 29% to approximately 1.1 million
as of December 31, 2020.
The increase in Other revenues was due to acquired revenues related to Legacy Gannett which were $156.2 million for the
year ended December 31, 2020 compared to $21.0 million for the six-week period ended December 31, 2019. Excluding the
acquisition of Legacy Gannett, Other revenues decreased $46.5 million due to declines in the commercial print and delivery
business as a result of the overall secular trends and the COVID-19 pandemic as well as the absence of revenues related to the
disposition of BridgeTower Media LLC in the fourth quarter of 2020.
Operating expenses
For the year ended December 31, 2020, Operating costs increased $797.0 million. The following table provides the
breakout of the increase in Operating costs:
In thousands
Newsprint and ink
Distribution
Compensation and benefits
Outside services
Other
Total operating costs
*** Indicates an absolute value percentage change greater than 100.
2020
130,912 $
406,784
629,643
333,435
342,051
1,842,825 $
$
$
Year ended December 31,
2019
Change
100,911 $
185,256
348,744
149,020
261,876
1,045,807 $
30,001
221,528
280,899
184,415
80,175
797,018
% Change
30 %
***
81 %
***
31 %
76 %
For the year ended December 31, 2020, Newsprint and ink costs increased $30.0 million as a result of acquired newsprint
and ink costs related to Legacy Gannett operations. The Company's Newsprint and ink benefited $32.7 million from declines in
print circulation and print advertising volumes, lower paper prices, and page count reductions driven by efficiency initiatives in
printing operations.
For the year ended December 31, 2020, Distribution costs increased $221.5 million due to higher acquired hauling and
delivery costs. The Company's Distribution costs benefited $14.1 million from declines in print circulation and print advertising
volumes.
For the year ended December 31, 2020, Compensation and benefits increased $280.9 million due to costs related to Legacy
Gannett operations. The Company's Compensation and benefits benefited $66.3 million from cost-containment initiatives
implemented in connection with the COVID-19 pandemic and ongoing integration efforts, including employee furloughs and
headcount reductions.
45
For the year ended December 31, 2020, Outside services, which includes outside printing, professional and outside
services, paid search and ad serving, feature services, and credit card fees, increased $184.4 million due to acquired costs
associated with the Legacy Gannett operations. Outside services benefited $8.0 million as a result of declines in activity driven
by lower revenues and cost containment initiatives, as well as a decline in third-party printing activity.
For the year ended December 31, 2020, Selling, general and administrative expenses increased by $294.4 million. The
following table provides the breakout of the increase in Selling, general and administrative expenses:
In thousands
Compensation and benefits
Outside services
Other
Total selling, general and administrative expenses
2020
396,017 $
45,972
345,781
787,770 $
$
$
Year ended December 31,
2019
Change
269,825 $
35,780
187,755
493,360 $
126,192
10,192
158,026
294,410
% Change
47 %
28 %
84 %
60 %
For the year ended December 31, 2020, Compensation and benefits costs increased $126.2 million due to acquired costs
associated with the acquisition of Legacy Gannett. Overall, Compensation and benefits benefited $54.9 million from cost-
containment initiatives implemented in connection with the COVID-19 pandemic and ongoing integration efforts, including
employee furloughs and headcount reductions.
For the year ended December 31, 2020, Outside services costs, which include outside printing as well as professional and
outside services, increased $10.2 million due to acquired costs. Outside services benefited $10.0 million from declines in
activity and cost containment initiatives.
For the year ended December 31, 2020, Other costs increased $158.0 million due to acquired costs and benefited $14.3
million from declines in activity and cost containment initiatives.
For the year ended December 31, 2020, Depreciation and amortization expense increased $119.9 million compared to
2019, due to acquired property and intangible assets from the Legacy Gannett acquisition, an increase in accelerated
depreciation of $41.7 million as a result of ongoing cost-reduction programs and an increase in the number of printing facilities
closed in 2020 compared to 2019.
For the year ended December 31, 2020, Integration and reorganization costs increased $37.4 million compared to 2019 due
to an increase in severance costs of $36.1 million driven by our voluntary severance program and our plan to outsource certain
processes to a third party, as well as the continued consolidation of our operations as a result of the ongoing implementation of
our plans to reduce costs and preserve cash flow.
For the year ended December 31, 2020, Asset impairments increased $7.3 million compared to 2019, due to an increase in
the number of printing facilities closed in 2020 compared to 2019.
For the year ended December 31, 2020, Goodwill and intangible impairments increased $252.2 million compared to 2019,
due to the write-off of Goodwill and Indefinite-lived intangible assets during 2020 as a result of the impact of the COVID-19
pandemic on our operations.
For the year ended December 31, 2020, the increase in the Gain on the sale or disposal of assets of $11.6 million was
driven by gains related to the sale of assets in 2020, including BridgeTower Media, LLC, compared to losses incurred in 2019
related to various asset sales.
46
Publishing segment Adjusted EBITDA
In thousands
Net income (loss) attributable to Gannett
Interest expense
Non-operating pension income
Gain on sale of investments
Other non-operating (income) expense, net
Depreciation and amortization
Integration and reorganization costs
Asset impairments
Goodwill and intangible impairments
Net (gain) loss on sale or disposal of assets
Other items
Adjusted EBITDA (non-GAAP basis)
*** Indicates an absolute value percentage change greater than 100.
2020
(108,606) $
142
(71,858)
(195)
(6,029)
221,746
60,852
10,312
352,947
(7,541)
7,425
459,195 $
$
$
Year ended December 31,
Change
2019
% Change
22,523 $
123
(2,486)
—
1,517
101,881
23,487
3,009
100,743
4,036
14,083
268,916 $
(131,129)
19
(69,372)
(195)
(7,546)
119,865
37,365
7,303
252,204
(11,577)
(6,658)
190,279
***
15 %
***
***
***
***
***
***
***
***
(47 %)
71 %
For the year ended December 31, 2020, Adjusted EBITDA for our Publishing segment increased 71% compared to 2019
primarily attributable to acquired Adjusted EBITDA for Legacy Gannett and ongoing operating efficiencies, offset by lower
demand beginning near the end of the first quarter of 2020, which was impacted by the ongoing economic effects of COVID-
19.
Digital Marketing Solutions segment
A summary of our Digital Marketing Solutions segment results is presented below:
In thousands
Operating revenues:
Advertising and marketing services
Other
Total operating revenues
Operating expenses:
Operating costs
Selling, general and administrative expenses
Depreciation and amortization
Integration and reorganization costs
Acquisition costs
Asset impairments
Goodwill and intangible impairments
Net (gain) loss on sale or disposal of assets
Total operating expenses
Operating loss
*** Indicates an absolute value percentage change greater than 100.
2020
Year ended December 31,
Change
2019
% Change
$
411,940 $
16,665
428,605
131,003 $
18,239
149,242
276,859
128,834
25,878
6,663
—
717
40,499
1,727
481,177
(52,572) $
99,272
56,058
6,534
2,202
(38)
—
—
(5)
164,023
(14,781) $
$
280,937
(1,574)
279,363
177,587
72,776
19,344
4,461
38
717
40,499
1,732
317,154
(37,791)
***
(9 %)
***
***
***
***
***
(100 %)
***
***
***
***
***
47
Operating revenues
For the year ended December 31, 2020, Advertising and marketing services revenues increased $280.9 million. The
increase was due to acquired revenues related to Legacy Gannett of $358.2 million for the year ended December 31, 2020,
compared to $42.6 million for the six-week period ended December 31, 2019. Excluding the acquisition of Legacy Gannett,
Advertising and marketing services revenues decreased $34.7 million for the year ended December 31, 2020, primarily due to
lower digital advertising across our small and medium-sized business marketing customers driven by the negative impact of the
COVID-19 pandemic.
Operating expenses
For the year ended December 31, 2020, Operating costs increased $177.6 million. The following table provides the
breakout of the increase in Operating costs:
In thousands
Compensation and benefits
Outside services
Other
Total operating costs
*** Indicates an absolute value percentage change greater than 100.
2020
44,441 $
216,847
15,571
276,859 $
$
$
Year ended December 31,
Change
2019
% Change
27,162 $
66,753
5,357
99,272 $
17,279
150,094
10,214
177,587
64 %
***
***
***
For the year ended December 31, 2020, Compensation and benefits increased $17.3 million due to acquired costs
associated with the acquisition of Legacy Gannett. Our Compensation and benefits benefited $8.0 million from cost-
containment initiatives implemented in connection with the COVID-19 pandemic and ongoing integration efforts, including
employee furloughs and headcount reductions.
For the year ended December 31, 2020, Outside services, which includes professional and outside services, paid search and
ad serving and feature services, increased $150.1 million due to acquired costs associated with the Legacy Gannett operations.
Outside services benefited $13.0 million as a result of declines in activity driven by lower revenues and cost containment
initiatives.
For the year ended December 31, 2020, Selling, general and administrative expenses increased $72.8 million. The
following table provides the breakout of the increase in Selling, general and administrative expenses:
In thousands
Compensation and benefits
Outside services
Other
Total selling, general and administrative expenses
*** Indicates an absolute value percentage change greater than 100.
2020
113,314 $
11,629
3,891
128,834 $
$
$
Year ended December 31,
Change
2019
% Change
42,880 $
5,929
7,249
56,058 $
70,434
5,700
(3,358)
72,776
***
96 %
(46 %)
***
For the year ended December 31, 2020, Compensation and benefits costs increased $70.4 million due to acquired costs
associated with the acquisition of Legacy Gannett. Our Compensation and benefits benefited $11.2 million from cost-
containment initiatives implemented in connection with the COVID-19 pandemic and ongoing integration efforts, including
employee furloughs and headcount reductions.
For the year ended December 31, 2020, Outside services increased $5.7 million due to acquired costs associated with the
acquisition of Legacy Gannett.
For the year ended December 31, 2020, Depreciation and amortization expense increased $19.3 million compared to 2019,
due to acquired property and intangible assets from the Legacy Gannett acquisition and an increase in amortization expense
from software development costs capitalized during 2020 for new product development initiatives.
For the year ended December 31, 2020, Integration and reorganization costs increased $4.5 million compared to 2019 due
to higher severance costs of $4.4 million driven by the continued consolidation of our operations as a result of the ongoing
implementation of our plans to reduce costs and preserve cash flow.
48
For the year ended December 31, 2020, Goodwill and intangible asset impairments increased $40.5 million compared to
2019 due to the write-off of Goodwill and Indefinite-lived intangible assets during 2020 as a result of the impact of the COVID-
19 pandemic on our operations.
For the year ended December 31, 2020, the increase in the Loss on the sale or disposal of assets of $1.7 million was driven
by the sale of a business during the fourth quarter of 2020 compared to no significant sales or disposals of assets during 2019.
Digital Marketing Solutions segment Adjusted EBITDA
In thousands
Net income (loss) attributable to Gannett
Gain on sale of investments
Other non-operating (income) expense, net
Depreciation and amortization
Integration and reorganization costs
Acquisition costs
Asset impairments
Goodwill and intangible impairments
Net (gain) loss on sale or disposal of assets
Other items
Adjusted EBITDA (non-GAAP basis)
*** Indicates an absolute value percentage change greater than 100.
2020
(42,494) $
(7,800)
(2,278)
25,878
6,663
—
717
40,499
1,727
1,449
24,361 $
$
$
Year ended December 31,
2019
Change
(14,006) $
—
(775)
6,534
2,202
(38)
—
—
(5)
2,809
(3,279) $
(28,488)
(7,800)
(1,503)
19,344
4,461
38
717
40,499
1,732
(1,360)
27,640
% Change
***
***
***
***
***
(100 %)
***
***
***
(48 %)
***
Adjusted EBITDA for our DMS segment was $24.4 million for the year ended December 31, 2020, compared to negative
$3.3 million in 2019, primarily due to additional Adjusted EBITDA from Legacy Gannett and ongoing operating efficiencies,
offset by lower demand beginning near the end of the first quarter of 2020, which was impacted by the ongoing economic
effects of COVID-19.
Corporate and other category
For the year ended December 31, 2020, Corporate and other operating revenues were $11.0 million compared to $4.6
million in 2019. The increase was due to acquired revenues related to Legacy Gannett of $7.1 million for the year ended
December 31, 2020, compared to $0.9 million for the six-week period ended December 31, 2019. Excluding the acquisition of
Legacy Gannet, operating revenues increased slightly, driven by an increase in sales of newsprint to third parties.
For the year ended December 31, 2020, Corporate and other Operating expenses were $217.8 million, an increase of $60.7
million compared to 2019, due to an increase in Operating costs of $20.4 million, an increase in Selling, general and
administrative expenses of $25.9 million and an increase in Depreciation and amortization expense of $12.7 million driven by
acquired costs associated with the acquisition of Legacy Gannett. In addition, Integration and reorganization costs increased
$51.7 million due to the continued consolidation of our operations resulting from the ongoing implementation of our plans to
reduce costs and preserve cash flow, including a $30.4 million expense in the fourth quarter related to the early termination of
the Amended Management Agreement with the Manager, partially offset by a decrease in Acquisition costs of $49.5 million due
to lower costs associated with the acquisition of Legacy Gannett in 2020 compared to 2019.
LIQUIDITY AND CAPITAL RESOURCES
Our primary cash requirements are for working capital, debt obligations, and capital expenditures.
We expect to fund our operations through cash provided by operating activities. We expect we will have adequate capital
resources and liquidity to meet our working capital needs, borrowing obligations, and all required capital expenditures for at
least the next twelve months.
49
Details of our cash flows are included in the table below:
In thousands
Net cash provided by operating activities
Net cash provided by (used for) investing activities
Net cash provided by (used for) financing activities
Effect of currency exchange rate change
Net increase in cash
Year Ended
$
December 31,
2020
57,770 $
160,136
(201,342)
1,498
18,062 $
December 31,
2019
25,535
(785,060)
898,913
(3,494)
135,894
$
Cash flows provided by operating activities: Our largest source of cash provided by our operations is advertising revenues
primarily generated from local and national advertising and marketing services revenues (retail, classified, and online).
Additionally, we generate cash through circulation subscribers, commercial printing and delivery services to third parties, and
events. Our primary uses of cash from our operating activities include compensation, newsprint, delivery, and outside services.
Net cash provided by operating activities was $57.8 million for the year ended December 31, 2020, compared to $25.5
million for 2019. This increase in net cash provided by operating activities was primarily due to a decrease in pension and
postretirement payments of $44.2 million and an increase in tax refunds of $5.2 million, offset by an increase in interest paid of
$177.9 million and an increase in severance payments of $73.1 million. The remainder of the change is due to the acquisition of
Legacy Gannett, as well as overall timing of receipts and payments.
Cash flows provided by (used for) investing activities: Net cash provided by investing activities was $160.1 million for the
year ended December 31, 2020 compared to $785.1 million used for investing activities for 2019. This increase was primarily
due to a year-over-year decrease of $796.5 million in cash used to fund acquisitions and an increase of $168.9 million in funds
received from the sale of businesses and other assets, partially offset by a year over year decrease of $23.0 million for capital
expenditures.
Cash flows provided by (used for) financing activities: Net cash used for financing activities was $201.3 million for the
year ended December 31, 2020, compared to $898.9 million provided by financing activities for 2019. This decrease was
primarily due to decreased borrowings under term loans of $1.792 billion and an increase in repayments for term loans of
$200.0 million. Cash used for term loans was partially offset by proceeds from the 2027 Notes of $497.1 million as well as a
decrease in the repayments of the convertible debt of $198.0 million. In addition, payments of debt issuance costs decreased
$118.9 million and the payment of dividends decreased $91.9 million as there were no dividend payments in 2020.
50
Debt
Senior Secured Convertible Notes due 2027
On November 17, 2020, the Company entered into the Exchange Agreement with the Exchanging Lenders under the
Acquisition Term Loan pursuant to which the Company and the Exchanging Lenders agreed to exchange $497.1 million in
aggregate principal amount of the Company’s newly issued 2027 Notes for the retirement of an equal amount of term loans
under the Acquisition Term Loan (the "Exchange"). Following the Exchange, the outstanding balance under the Acquisition
Term Loan was $1.019 billion (the "Remaining Term Loan") as of December 31, 2020. The 2027 Notes were issued pursuant to
an Indenture (the "Indenture") dated as of November 17, 2020, between the Company and U.S. Bank National Association, as
trustee. The Indenture, as supplemented by the Second Supplemental Indenture, includes affirmative and negative covenants
that are substantially consistent with the 5-Year Term Loan, as well as customary events of default.
In connection with the Exchange, the Company entered into an Investor Agreement (the "Investor Agreement") with the
holders of the 2027 Notes (the "Holders") establishing certain terms and conditions concerning the rights and restrictions on the
Holders with respect to the Holders' ownership of the 2027 Notes. The Company also entered into an amendment to the
Registration Rights Agreement dated November 19, 2019, between the Company and FIG LLC. In addition, the Remaining
Term Loan was amended as described below (the "Amendment").
Interest on the 2027 Notes is payable semi-annually in arrears. The 2027 Notes mature on December 1, 2027, unless earlier
repurchased or converted. The 2027 Notes may be converted at any time by the holders into cash, shares of the Company’s
Common Stock or any combination of cash and Common Stock, at the Company's election. The initial conversion rate is 200
shares of Common Stock per $1,000 principal amount of the 2027 Notes, which is equal to a conversion price of $5.00 per
share of Common Stock (the "Conversion Price").
The conversion rate is subject to customary adjustment provisions as provided in the Indenture. In addition, the conversion
rate will be subject to adjustment in the event of any issuance or sale of Common Stock (or securities convertible into Common
Stock) at a price equal to or less than the Conversion Price in order to ensure that following such issuance or sale, the 2027
Notes would be convertible into approximately 42% of the Common Stock after giving effect to such issuance or sale
(assuming the initial principal amount of the 2027 Notes remains outstanding).
Upon the occurrence of a "Make-Whole Fundamental Change" (as defined in the Indenture), the Company will in certain
circumstances increase the conversion rate for a specified period of time. If a "Fundamental Change" (as defined in the
Indenture) occurs, the Company will be required to offer to repurchase the 2027 Notes at a repurchase price of 110% of the
principal amount thereof.
Holders of the 2027 Notes will have the right to put up to approximately $100 million of the 2027 Notes at par on or after
the date that is 91 days after the maturity date of the 5-Year Term Loan.
Under the Indenture, the Company can only pay cash dividends up to an agreed-upon amount, provided the ratio of
consolidated debt to EBITDA (as such terms are defined in the Indenture) does not exceed a specified ratio. In addition, the
Indenture provides that, at any time that the Company’s Total Gross Leverage Ratio (as defined in the Indenture) exceeds 1.5
and the Company approves the declaration of a dividend, the Company must offer to purchase a principal amount of 2027
Notes equal to the proposed amount of the dividend.
Until the four-year anniversary of the issuance date, the Company will have the right to redeem for cash up to
approximately $99.4 million of the 2027 Notes at a redemption price of 130% of the principal amount thereof, with such
amount reduced ratably by any principal amount of 2027 Notes that has been converted by the holders or redeemed or
purchased by the Company.
The 2027 Notes are guaranteed by Gannett Holdings LLC and any subsidiaries of the Company (collectively, the
"Guarantors") that guarantee the 5-Year Term Loan. The Notes are secured by the same collateral securing the 5-Year Term
Loan. The 2027 Notes rank as senior secured debt of the Company and are secured by a second priority lien on the same
collateral package securing the indebtedness incurred in connection with the 5-Year Term Loan.
For the year ended December 31, 2020, no shares were issued upon conversion, exercise, or satisfaction of the required
conditions. Refer to additional discussion regarding fair value of the 2027 Notes, including debt and embedded derivative
51
components in Note 8 — Debt and refer to Note 12 — Supplemental equity information for details on the convertible debt's
impact to diluted earnings per share under the if-converted method.
Permitted Financing Under the 2027 Notes
The Company may refinance the Remaining Term Loan with new first lien debt, as long as the new first lien debt satisfies
the requirements of a Permitted Refinancing. New first lien debt will constitute a "Permitted Refinancing" so long as, among
other things, (i) the principal amount of the new debt does not exceed the balance of the Remaining Term Loan (plus interest
and fees), (ii) the all-in-yield of the new debt does not exceed 9.5% per annum and (iii) the other terms of the new debt are no
less favorable to the Company.
Refer to "Term Loan Refinancing" below and Note 16 — Subsequent events for discussion of the refinancing of the
Remaining Term Loan on February 9, 2021, as permitted by the Indenture. Holders of the 2027 Notes had the option to require
the Company to repurchase their 2027 Notes at a price equal to 101.5% of par, which amount would increase by 1.5% on each
three-month anniversary of the issuance date of the 2027 Notes. The Indenture permits the Company to raise additional first
lien or second lien debt to finance any such repurchases, subject to certain conditions set forth therein. No holders of the 2027
Notes exercised their option to require the Company to repurchase their 2027 Notes in connection with the refinancing of the
Remaining Term Loan.
Acquisition Term Loan
On November 19, 2019, pursuant to the acquisition of Legacy Gannett, the Company entered into the Acquisition Term
Loan, which matures on November 19, 2024. Origination fees totaled 6.5% of the total principal amount of the financing at
closing.
In connection with the Exchange, the Company, the Guarantors, Alter Domus Products Corp., as administrative agent and
collateral agent, and the lenders under the Acquisition Term Loan executed the Amendment which, among other things, (i)
requires quarterly amortization payments in an amount equal to the interest rate savings resulting from the Exchange for the
applicable quarter, (ii) increases the threshold under the requirement for prepayment of the Acquisition Term Loan with
unrestricted cash and cash equivalents in excess of $40 million from $40 million to $70 million for the 2020 fiscal year and (iii)
replaces Apollo's right to appoint directors to the Board in the event the gross leverage ratio exceeds certain thresholds with the
right to increase the size of the Board of Directors and to nominate directors for election to the Board in the event the gross
leverage ratio exceeds such thresholds. As of December 31, 2020, the total gross leverage ratio exceeded certain thresholds,
whereby Apollo had the right to nominate one voting director. As of December 31, 2020, the Company is in compliance with all
of the covenants and obligations under the Acquisition Term Loan. Upon the occurrence and during the continuance of an Event
of Default (as defined in the Acquisition Term Loan), the interest rate increases by 2.0%. The proceeds from the 5-Year Term
Loan were used to repay the Acquisition Term Loan (the "Payoff"), and we are no longer subject to the terms of the Acquisition
Term Loan.
In connection with the Acquisition Term Loan, the Company incurred approximately $4.9 million of fees and expenses and
$116.6 million of lender fees which were capitalized and will be amortized over the term of the Acquisition Term Loan using
the effective interest method.
The Company used the proceeds of the Acquisition Term Loan to (i) partially fund the acquisition of Legacy Gannett, (ii)
repay, prepay, repurchase, redeem, or otherwise discharge in full each of the existing financing facilities (as defined in the
agreement and discussed in part below), and (iii) pay fees and expenses incurred to obtain the Acquisition Term Loan. The
Company is permitted to prepay the principal of the Acquisition Term Loan, in whole or in part, at par plus accrued and unpaid
interest, without any prepayment premium or penalty. The Acquisition Term Loan is guaranteed by the material wholly-owned
subsidiaries of the Company, and all obligations of the Company and its subsidiary guarantors are or will be secured by first
priority liens on certain material real property, equity interests, land, buildings, and fixtures. The Acquisition Term Loan
contains customary representations and warranties, affirmative covenants, and negative covenants applicable to the Company
and its subsidiaries, including, among other things, restrictions on indebtedness, liens, investments, fundamental changes,
dispositions, dividends and other distributions, capital expenditures, and events of default.
During the year ended December 31, 2020, the Company recorded $194.0 million in interest expense, $24.0 million in
amortization of deferred financing costs, and $43.8 million for the loss on early extinguishment of debt. During the year ended
December 31, 2020, the Company paid interest of $217.5 million.
52
Senior Convertible Notes due 2024
On April 9, 2018, Legacy Gannett completed an offering of 4.75% convertible senior notes (the "2024 Notes"), with an
initial offering size of $175.0 million aggregate principal amount. As part of the offering, the initial purchaser of the 2024 Notes
exercised its option to purchase an additional $26.3 million aggregate principal amount of notes, resulting in total aggregate
principal of $201.3 million and net proceeds of approximately $195.3 million. Interest on the 2024 Notes is payable semi-
annually in arrears. The 2024 Notes mature on April 15, 2024, with the earliest redemption date being April 15, 2022. The
stated conversion rate of the notes is 82.4572 shares per $1,000 in principal or approximately $12.13 per share.
Upon conversion, we have the option to settle in cash, shares of our common stock, or a combination of the two.
Additionally, holders may convert the 2024 Notes at their option prior to January 15, 2024, only if one or more of the following
conditions are present: (i) if, during any 20 of the 30 trading days immediately preceding a quarter end, our common stock
trading price is 130% of the stated conversion price, (ii) if, during the 5 business day period after any 10 consecutive trading
day period, the trading price per $1,000 principal amount of notes is less than 98% of the product of (a) the last reported sale
price of the Company's common stock and (b) the conversion rate on each such trading day, or (iii) a qualified change in control
event occurs. Depending on the nature of the triggering event, the conversion rate may also be subject to adjustment.
The Company's acquisition of Legacy Gannett constituted a Fundamental Change and Make-Whole Fundamental Change
under the terms of the indenture governing the 2024 Notes. At the acquisition date, the Company delivered to the holders of the
2024 Notes a notice offering the right to surrender all or a portion of their notes for cash on December 31, 2019. Holders were
required to surrender their notes by December 30, 2019, and in return, the Company redeemed the 2024 Notes for either (i) cash
at a repurchase price equal to 100% of the principal amount, plus accrued and unpaid interest from October 15, 2019, to
December 29, 2019, or (ii) converted equity plus cash at the stated conversion rate of 82.4572 shares per $1,000 in principal,
comprised of 0.5427 shares of Parent common stock, plus $6.25 of cash. On December 31, 2019, the Company completed the
redemption of $198.0 million in aggregate principal in exchange for cash.
As of December 31, 2020 and 2019, the $3.3 million principal value of the 2024 Notes is reported as Convertible debt in
the Consolidated balance sheets. The effective interest rate on the notes was 6.05% as of December 31, 2020. During the year
ended December 31, 2020, the Company recorded $0.2 million in interest expense, of which $0.1 million is cash interest paid
on aforementioned redemption.
Term Loan Refinancing
On February 9, 2021, the Company entered into the 5-Year Term Loan, a five-year, senior secured term loan facility with
Citibank N.A. in an aggregate principal amount of $1.045 billion. The 5-Year Term Loan matures on February 9, 2026 and, at
the Company's option, bears interest at the rate of the London Interbank Offered Rate plus a margin equal to 7.00% per annum
or an alternate base rate plus a margin equal to 6.00% per annum. Accordingly, we are required to dedicate a substantial portion
of cash flow from operations to fund interest payments.
The proceeds from the 5-Year Term Loan were used for the Payoff, and to pay fees and expenses incurred to obtain the 5-
Year Term Loan and consummate the Payoff.
The 5-Year Term Loan will amortize quarterly at a rate of 10% per annum (or, if the ratio of Total Indebtedness secured on
an equal priority basis with the 5-Year Term Loan (net of Unrestricted Cash) to Consolidated EBITDA (as such terms are
defined in the 5-Year Term Loan) is equal to or less than a specified ratio, 5% per annum) payable in equal quarterly
installments (the "Quarterly Amortization Installment"), beginning September 30, 2021. In addition, we will be required to
repay the 5-Year Term Loan from time to time with (i) the proceeds of non-ordinary course asset sales and casualty and
condemnation events, (ii) the proceeds of indebtedness that is not otherwise permitted under the 5-Year Term Loan and (iii) the
aggregate amount of cash and cash equivalents on hand in excess of $100 million at the end of each fiscal year. The 5-Year
Term Loan is subject to a requirement to have minimum unrestricted cash of $30 million as of the last day of each fiscal
quarter.
Following this transaction, total debt outstanding will be $1.545 billion, which will include the $1.045 billion 5-Year Term
Loan, $497.1 million 2027 Notes, and $3.3 million 2024 Notes.
53
Additional information
At-the-Market Offering
On August 6, 2020, we filed a shelf registration statement for an at-the-market ("ATM") offering, which is a type of follow-
on offering of stock utilized by publicly traded companies in order to raise capital over time. Under the offering, we may offer
and sell shares of Common Stock having an aggregate offering price of up to $50 million from time to time. We currently
intend to use the net proceeds from sales of shares under the ATM program for general corporate purposes, including repayment
of indebtedness. The timing of any sales will depend on a variety of factors, including the underlying price of our Common
Stock and capital needs. We do not expect to utilize the shelf registration statement until such time that our stock rebounds to a
level that management believes more fully reflects the Company’s underlying value. However, we believe that the shelf
registration statement provides us with additional financing flexibility to efficiently access the capital markets when desired.
Other information
We continue to evaluate the impacts of the COVID-19 pandemic on our results of operations and cash flows. As part of
these measures, we have taken steps to manage cash outflow by rationalizing expenses and implementing various cost-
containment initiatives. These initiatives include, but are not limited to, strategic reductions in force, furloughs, and the
cancellation of certain non-essential expenditures. We continue to evaluate opportunities to manage the amount and timing of
significant expenditures associated with vendors, creditors, and pension regulators.
In connection with these measures, we previously announced that the Board of Directors had determined it is in the best
interest of the Company to preserve liquidity by suspending the quarterly dividend. We presently have no intention to reinstate
the dividend, and there can be no assurance if or when we will resume paying dividends on a regular basis. In addition, the
terms of our indebtedness, including our credit facility, the 5-Year Term Loan, and the Indenture for the 2027 Notes have terms
that restrict our ability to pay dividends.
The CARES Act, enacted March 27, 2020, provides various forms of relief to companies impacted by the COVID-19
pandemic. As part of the relief available under the Act, we deferred remittance of our 2020 Federal Insurance Contributions Act
taxes as allowed by the legislation. The Company was able to defer $41.6 million of the employer portion of FICA taxes for
payroll paid between from March 27, 2020 and December 31, 2020. The Company will have until December 31, 2021, to pay
50% of the FICA deferral with the remaining 50% to be remitted on or before December 31, 2022.
For the Gannett Retirement Plan in the U.S., we have deferred our contractual contribution and negotiated a contribution
payment plan of $5 million per quarter starting December 31, 2020, through the end of September 30, 2022. Additionally,
$11 million in minimum required contributions for the 2019 plan year, as required by the Employee Retirement Income
Security Act of 1974 ("ERISA"), were deferred until January 4, 2021, and have been paid.
We expect our capital expenditures during the year ended December 31, 2021, to total approximately $50.0 million. These
capital expenditures are anticipated to be primarily comprised of projects related to digital product development, maintenance
of our print and technology systems, and system upgrades.
Our leverage may adversely affect our business and financial performance and restricts our operating flexibility. The level
of our indebtedness and our ongoing cash flow requirements may expose us to a risk that a substantial decrease in operating
cash flows due to, among other things, continued or additional adverse economic developments or adverse developments in our
business, could make it difficult for us to meet the financial and operating covenants contained in our term loan. In addition, our
leverage may limit cash flow available for general corporate purposes such as capital expenditures and our flexibility to react to
competitive, technological, and other changes in our industry and economic conditions generally.
Although we currently forecast sufficient liquidity, the ultimate impact of the COVID-19 pandemic remains uncertain and
could have a material negative impact on the Company's liquidity and its ability to meet its ongoing obligations, including its
obligations under the 5-Year Term Loan. As the implications of the COVID-19 pandemic continue to evolve, we will continue
to closely monitor and explore additional opportunities to appropriately manage liquidity.
54
Contractual obligations and commitments
The following table reflects a summary of our contractual cash obligations, including estimated interest payments, where
applicable, as of December 31, 2020:
In thousands
Debt and interest obligations(a)
Operating lease obligations(b)
Purchase obligations(c)
Pension and other postretirement benefits(d)
$
Payments Due by Period
2022-2023
2024-2025
Thereafter
Total
2,145,859 $
520,460
548,005
79,593
21,665
3,315,582 $
2021
272,856 $
77,351
224,762
64,593
5,677
645,239 $
329,323 $
138,187
213,490
15,000
7,969
703,969 $
1,046,586 $
103,707
109,553
—
5,026
1,264,872 $
497,094
201,215
200
—
2,993
701,502
Other noncurrent liabilities(e)
Total
(a) Amounts represent future debt and interest obligations related to the Acquisition Term Loan, the 2027 Notes and the 2024 Notes as of December 31, 2020.
$
See Note 8 — Debt to the Consolidated financial statements for further information..
(b) See Note 3 — Leases to the Consolidated financial statements.
(c) Purchase obligations include printing contracts, licenses and IT support agreements, professional services, interactive marketing agreements, and other
legally binding commitments. Amounts for which we are liable under purchase orders outstanding at December 31, 2020 are reflected in the Consolidated
balance sheets as accounts payable and accrued liabilities and are excluded from the table above.
(d) Consists of amounts we are contractually obligated to contribute to the Company's pension and postretirement benefit plans. Contributions beyond 2022 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. 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.
(e) Other noncurrent liabilities primarily include IT leases at Newsquest, a subsidiary in the U.K.. Under international reporting standards, IT leases are
considered leases, however they do not meet the definition of a lease or purchase obligation under U.S. GAAP.
Due to uncertainty with respect to the timing of future cash flows associated with unrecognized tax benefits at December 31,
2020, we are unable to make reasonably reliable estimates of the period of cash settlement. Therefore, $40.9 million of
unrecognized tax benefits have been excluded from the contractual obligations table above. See Note 11 — Income taxes to the
consolidated financial statements for a further discussion of income taxes.
Off-balance sheet arrangements
As of December 31, 2020, we had no material off-balance sheet arrangements as defined in the rules of the SEC.
NON-GAAP FINANCIAL MEASURES
A non-GAAP financial measure is generally defined as one that purports to measure historical or future financial
performance, financial position, or cash flows, but excludes or includes amounts that would not be so adjusted in the most
comparable GAAP measure. We define and use Adjusted EBITDA, a non-GAAP financial measure, as set forth below.
Adjusted EBITDA
We define Adjusted EBITDA as Net income (loss) attributable to Gannett before:
Income tax expense (benefit);
Interest expense;
•
•
• Gains or losses on early extinguishment of debt;
• Non-operating pension income (expense);
• Unrealized (gain) loss on Convertible notes derivative;
• Other Non-operating items, primarily equity income;
• Depreciation and amortization;
•
• Asset impairments;
• Goodwill and intangible impairments;
• Gains or losses on the sale or disposal of assets;
•
• Acquisition costs;
• Gains or losses on the sale of investments; and
Integration and reorganization costs;
Share-based compensation expense;
55
• Certain other non-recurring charges.
Management’s Use of Adjusted EBITDA
Adjusted EBITDA is not a measurement of financial performance under GAAP and should not be considered in isolation
or as an alternative to income from operations, net income (loss), or any other measure of performance or liquidity derived in
accordance with GAAP. We believe this non-GAAP financial measure, as we have defined it, is helpful in identifying trends in
our day-to-day performance because the items excluded have little or no significance on our day-to-day operations. This
measure provides an assessment of controllable expenses and affords management the ability to make decisions which are
expected to facilitate meeting current financial goals as well as to achieve optimal financial performance.
Adjusted EBITDA provides us with a measure of financial performance, independent of items that are beyond the control
of management in the short-term, such as depreciation and amortization, taxation, non-cash impairments, and interest expense
associated with our capital structure. This metric measures our financial performance based on operational factors that
management can impact in the short-term, namely the cost structure or expenses of the organization. Adjusted EBITDA is one
of the metrics we use to review the financial performance of our business on a monthly basis.
We use Adjusted EBITDA as a measure of our day-to-day operating performance, which is evidenced by the publishing
and delivery of news and other media and excludes certain expenses that may not be indicative of our day-to-day business
operating results.
Limitations of Adjusted EBITDA
Adjusted EBITDA has limitations as an analytical tool. It should not be viewed in isolation or as a substitute for GAAP
measures of earnings or cash flows. Material limitations in making the adjustments to our earnings to calculate Adjusted
EBITDA and using this non-GAAP financial measure as compared to GAAP net income (loss) include: the cash portion of
interest/financing expense, income tax (benefit) provision, and charges related to asset impairments, which may significantly
affect our financial results.
A reader of our financial statements may find this item important in evaluating our performance, results of operations, and
financial position. We use non-GAAP financial measures to supplement our GAAP results in order to provide a more complete
understanding of the factors and trends affecting our business.
Adjusted EBITDA is not an alternative to net income as calculated and presented in accordance with GAAP. Readers of our
financial statements should not rely on Adjusted EBITDA as a substitute for any such GAAP financial measure. We strongly
urge readers of our financial statements to review the reconciliation of Net income (loss) attributable to Gannett to Adjusted
EBITDA along with our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. We also
strongly urge readers of our financial statements to not rely on any single financial measure to evaluate our business. In
addition, because Adjusted EBITDA is not a measure of financial performance under GAAP and is susceptible to varying
calculations, the Adjusted EBITDA measure as presented in this report may differ from and may not be comparable to similarly
titled measures used by other companies.
56
The table below shows the reconciliation of Net income (loss) attributable to Gannett to Adjusted EBITDA for the periods
presented:
In thousands
Net income (loss) attributable to Gannett
Provision (benefit) for income taxes
Interest expense
Loss on early extinguishment of debt
Non-operating pension income
Unrealized loss on Convertible notes derivative
Gain on sale of investments
Other non-operating (income) expense, net
Depreciation and amortization
Integration and reorganization costs
Acquisition costs
Asset impairments
Goodwill and intangible impairments
Net (gain) loss on sale or disposal of assets
Share-based compensation expense
Other items
Adjusted EBITDA (non-GAAP basis)
Year ended December 31,
2020
(670,479) $
(33,450)
228,513
43,760
(72,149)
74,329
(7,995)
(8,499)
263,819
145,731
11,152
11,029
393,446
(5,680)
26,350
14,018
413,895 $
2019
(119,842)
(85,994)
63,660
6,058
(9,085)
—
—
(426)
111,882
52,212
60,618
3,009
100,743
4,723
11,324
24,989
223,871
$
$
CRITICAL ACCOUNTING POLICIES AND THE USE OF ESTIMATES
The preparation of financial statements in conformity with GAAP requires management to make decisions based on
estimates, assumptions, and factors it considers relevant to the circumstances. Such decisions include the selection of applicable
principles and the use of judgment in their application, the results of which could differ from those anticipated.
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. Any excess of the purchase price over the estimated fair values of net assets
acquired is recorded as goodwill. When determining the fair value of assets acquired and liabilities assumed, we make
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. Our estimates of fair value are based upon
assumptions believed to be reasonable but which are inherently uncertain and unpredictable and, as a result, actual results may
differ from estimates.
Goodwill
Goodwill represents the excess of acquisition cost over the fair value of assets acquired, including identifiable intangible
assets, net of liabilities assumed. Goodwill is not amortized and is tested for impairment annually on the last day of our second
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.
We perform our impairment analysis on each of our reporting units. We evaluate our reporting units annually as of the end
of our second fiscal quarter, as well as when changes in our operating structure occur. The Company has the option to
qualitatively assess whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If the
Company elects to perform a qualitative assessment and concludes it is more likely than not that the fair value of the reporting
unit is equal to or greater than its carrying value, no further assessment of that reporting unit’s goodwill is necessary; otherwise
goodwill must be tested for impairment. In 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
57
would be received to sell the unit as a whole in an orderly transaction between market participants at the measurement date. The
Company generally determines the fair value of a reporting unit using a combination of a discounted cash flow analysis and a
market-based approach. Estimates of fair value include inputs that are subjective in nature, involve uncertainties, and involve
matters of significant judgment that are made at a specific point in time. Changes in key assumptions from period to period
could significantly affect the estimates of fair value. Significant assumptions used in the fair value estimates include projected
revenues and related growth rates over time, projected operating cash flow margins, discount rates, and future economic and
market conditions. If the carrying value of the reporting unit exceeds the estimate of fair value, we calculate the impairment as
the excess of the carrying value of goodwill over its implied fair value.
All three of our reporting units have goodwill balances. See Note 6 — Goodwill and intangible assets for a discussion of
impairment charges taken on Goodwill in the second fiscal quarter of 2020. During the second quarter of 2020, we recognized
goodwill impairment charges at all three of our reporting units. As such, the carrying value of each reporting unit was written
down to fair value at that time. We have not subsequently identified any indicators of impairment that would indicate our
reporting units are at risk of failing the goodwill impairment test, and therefore have not performed any additional impairment
tests subsequent to the second quarter of 2020.
Intangible Assets (Indefinite-Lived and Amortizable)
Intangible assets consist of newspaper mastheads, advertiser, customer and subscriber relationships, as well as other
intangibles, including trade names, and developed technology.
Newspaper mastheads (newspaper titles) are not subject to amortization as it has been determined that the useful life of
such mastheads are indefinite. Newspaper mastheads are tested for impairment annually, or more frequently if events or
changes in circumstances indicate the asset might be impaired. The impairment test consists of a comparison of the fair value of
each group of mastheads with their carrying amount. We used a relief from royalty approach, which utilizes a discounted cash
flow model to determine the fair value of newspaper mastheads. Our judgments and estimates of future operating results in
determining the reporting unit fair values are consistently applied in determining the fair value of mastheads.
Intangible assets subject to amortization, primarily advertiser and subscriber relationships, are amortized over their useful
lives and are tested for recoverability whenever events or changes in circumstances indicate their carrying amounts may not be
recoverable. The evaluation is performed by asset group, which is the lowest level of identifiable cash flows independent of
other assets. The assessment of recoverability is based on management’s estimates by comparing the sum of the estimated
undiscounted cash flows generated by the underlying asset groups to its carrying value of the asset groups to determine whether
an impairment existed at its lowest level of identifiable cash flows. If the carrying amount of the asset group is greater than the
expected undiscounted cash flows to be generated by the asset group, an impairment is recognized to the extent the carrying
value of such asset group exceeds its fair value.
See Note 6 — Goodwill and intangible assets for a discussion of impairment charges taken on Intangible assets.
Property, Plant, and Equipment
We account for long-lived assets in accordance with the provisions of ASC Topic 360, "Property, Plant and Equipment."
We assess the recoverability of our long-lived assets, including property, plant and equipment, whenever events or changes in
business circumstances indicate the carrying amount of the assets, or related group of assets, may not be fully recoverable. We
review our property, plant, and equipment assets for potential impairment at the asset group level by comparing the carrying
value of such assets with the expected undiscounted cash flows to be generated by those asset groups. In some cases the market
approach is used to estimate the fair value, particularly when there is a change in the use of an asset. Significant assumptions
used in the analysis include projected revenues and related growth rates over time, projected operating cash flow margins, and
future economic and market conditions. 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.
As part of ongoing cost-efficiency programs, the Company has ceased a number of print operations. Pursuant to these
actions, certain assets and real estate to be retired have been assessed for impairment. See Note 7 — Integration and
reorganization costs and asset impairments for a discussion of impairment charges taken.
58
Revenue Recognition
Revenues are recognized when control of the promised goods or services is transferred to customers, in an amount that
reflects the consideration the Company expects to be entitled to in exchange for those goods or services.
Advertising and Marketing Services Revenues
The Company generates Print advertising revenues primarily by delivering advertising in its national publication, USA
TODAY, and in its local publications including newspapers. Advertising revenues are categorized as local retail, local
classified, online, and national. Print advertising revenue is recognized upon publication of the advertisement.
Digital advertising and marketing revenues are generated primarily by online marketing products provided by our DMS
segment. The Company enters into agreements for products in which our clients typically pay in advance and on a monthly
basis. These prepayments include all charges for the included technology and any media services, management, third-party
content, and other costs and fees, all of which are accounted for as a single performance obligation. Revenue is then recognized
as we purchase and deliver media on behalf of the customer and perform other marketing-related services.
For our Advertising and marketing services revenues, we evaluate whether we are the principal (i.e., report revenues on a
gross basis) or agent (i.e., report revenues on a net basis) by performing analyses regarding whether we control the provision of
specified goods or services before they are transferred to our customers. We report Advertising and marketing services revenues
gross when we control advertising inventory before it is transferred to the customer. Our control is evidenced by us being
primarily responsible or sharing responsibility for the fulfillment of services and maintaining control over transaction pricing.
We recognize revenue when the performance obligation is satisfied.
Circulation Revenues
Circulation revenues are derived from print and digital subscriptions as well as single copy sales at retail stores, vending
racks and boxes. Circulation revenues from subscribers are generally billed to customers at the beginning of the subscription
period and are typically recognized over the subscription period as the performance obligations are delivered. The term of
customer subscriptions normally ranges from one to twelve months. Circulation revenues from single-copy income are
recognized based on the date of publication, net of provisions for related returns.
Other Revenues
The Company provides commercial printing services to third parties as a means to generate incremental revenue and utilize
excess printing capacity. Customers consist primarily of other publishers that do not have their own printing presses and do not
compete with other Gannett publications. The Company also prints other commercial materials, including flyers, business cards
and invitations. Revenue is generally recognized upon delivery. In addition, the Company generates revenues from its events
and promotions business. Revenues are generated primarily through ticket sales, endurance events and race management
services. Revenue is generally recognized when the event occurs.
Practical Expedients and Exemptions
The Company expenses sales commissions or other costs to obtain contracts when incurred because the amortization period
is generally one year or less. These costs are recorded within Selling, general and administrative expenses.
The Company does not disclose unsatisfied performance obligations for (i) contracts with an original expected length of
one year or less and (ii) contracts for which the Company recognizes revenue at the amount to which the Company has the right
to invoice for services performed.
Deferred revenues
The Company records deferred revenues when cash payments are received in advance of the Company’s performance. The
Company's primary source of Deferred revenues is from circulation subscriptions paid in advance of the service provided,
which represents future delivery of publications performance obligation to subscription customers. The Company expects to
recognize the revenue related to unsatisfied performance obligations over the next one to twelve months in accordance with the
terms of the subscriptions.
59
The Company's payment terms vary by the type and location of the customer and the products or services offered. The
period between invoicing and when payment is due is not significant. For certain products or services and customer types, the
Company requires payment before the products or services are delivered to the customer. The majority of our subscription
customers are billed and pay on monthly terms.
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.
We account for income taxes under the provisions of ASC Topic 740, "Income Taxes" ("ASC 740"). Under this method,
deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets
and liabilities using tax rates in effect for the year in which the differences are expected to affect taxable income. The
assessment of the realizability of deferred tax assets involves a high degree of judgment and complexity. Valuation allowances
are established when necessary to reduce deferred tax assets to the amounts that are expected to be realized. When we
determine that it is more likely than not that we will be able to realize our deferred tax assets in the future in excess of our net
recorded amount, an adjustment to the deferred tax asset would be made and reflected either in income or as an adjustment to
goodwill. This determination will be made by considering various factors, including our expected future results, that in our
judgment will make it more likely than not that these deferred tax assets will be realized.
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.
FASB issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes, an interpretation of SFAS No. 109" and
now codified as ASC 740. ASC 740 prescribes a comprehensive model for how a company should recognize, measure, present
and disclose in its financial statements uncertain tax positions that a company has taken or expects to take on a tax return.
Under ASC 740, the financial statements reflect expected future tax consequences of such positions presuming the taxing
authorities’ full knowledge of the position and all relevant facts, but without considering time values. Recognized income tax
positions are measured at the largest amount that has a greater than 50% likelihood of being realized. Changes in recognition or
measurement are reflected in the period in which the change in judgment occurs.
Pension and Postretirement Liabilities
ASC Topic 715, "Compensation—Retirement Benefits," requires recognition of an asset or liability in the consolidated
balance sheet reflecting the funded status of pension and other postretirement benefit plans, such as retiree health and life, with
current-year changes in the funded status recognized in the statement of stockholders’ equity.
The determination of pension plan obligations and expense is based on a number of actuarial assumptions. Two critical
assumptions are the expected long-term rate of return on plan assets and the discount rate applied to pension plan obligations.
For other postretirement benefit plans, which provide for certain health care and life insurance benefits for qualifying retired
employees and which are not funded, critical assumptions in determining other postretirement benefit obligations and expense
are the discount rate and the assumed health care cost-trend rates.
Our pension plans have assets valued at $3.2 billion as of December 31, 2020 and the plans' benefit obligation is $3.2
billion, resulting in the plans being 102% funded.
For 2020, the assumption used for the funded status discount rate was 2.60% 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 2020 would have increased plan obligations by approximately $95.0 million. A 50 basis point change
in the discount rate used to calculate 2020 expense would have changed total pension plan expense for 2020 by approximately
$6.2 million. To determine the expected long-term rate of return on pension plan assets, we consider the current and expected
asset allocations, as well as historical and expected returns on various categories of plan assets, input from the actuaries and
investment consultants, and long-term inflation assumptions. We used an assumption of 6.8% for our expected return on
60
pension plan assets for 2020. If we were to reduce our expected rate of return assumption by 50 basis points, the expense for
2020 would have increased by approximately $8.1 million.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
We are exposed to market risk from changes in interest rates, commodity prices, and foreign currency exchange rates.
Changes in these factors could cause fluctuations in earnings and cash flow. In the normal course of business, exposure to
certain of these market risks is managed as described below.
Interest Rates
As of December 31, 2020, our aggregate debt was entirely fixed rate and totaled $1.6 billion. There were no interest rate
swaps in place during this period. Subsequent to December 31, 2020, we entered into the 5-Year Term Loan that has a variable
rate based on the London Interbank Offered Rate plus a margin equal to 7.00% per annum or an alternate base rate plus a
margin equal to 6.00% per annum. See NOTE 8 — Debt to our Consolidated financial statements for further discussion of our
debt.
Commodity Prices
Certain operating expenses of ours are sensitive to commodity price fluctuations. Our primary commodity price exposures
are newsprint and, to a lesser extent, ink, which in the aggregate represented approximately 3% and 5% of our total operating
expenses for the years ended December 31, 2020 and 2019, respectively.
A $10 per metric ton increase in newsprint price would result in a corresponding annualized increase in our loss before
income taxes of $2.0 million based on newsprint usage for the year ended December 31, 2020, of approximately 195,030 metric
tons.
Foreign Currency
We are exposed to foreign exchange rate risk due to our publishing operations in the U.K., for which the British pound
sterling is the functional currency. We are also exposed to foreign exchange rate risk due to our Digital Marketing Solutions
segment which has operating activities denominated in currencies other than the U.S. dollar, including the Australian dollar,
Canadian dollar, Indian rupee and New Zealand dollar.
Translation gains or losses affecting the Consolidated statements of operations and comprehensive income (loss) have not
been significant in the past.
Cumulative foreign currency translation adjustments reported as part of equity totaled $9.7 million and $7.3 million at
December 31, 2020 and 2019, respectively.
Newsquest's assets and liabilities were translated from British pounds sterling to U.S. dollars at the December 31, 2020
exchange rate of 1.36. Newsquest's financial results were translated at an average rate of 1.28 for the year ended December 31,
2020.
If the price of the British pound sterling against the U.S. dollar had been 10% more or less than the actual price, operating
loss would have decreased or increased approximately $10.6 million for the year ended December 31, 2020. A 10% fluctuation
in each of ReachLocal's currencies relative to the U.S. dollar would have had an immaterial impact on operating income for the
year ended December 31, 2020.
61
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
Consolidated Statements of Operations and Comprehensive Income (Loss)
Consolidated Statements of Cash Flows
Consolidated Statements of Equity
Notes to Consolidated Financial Statements
Page
63 .......
66 .......
67 .......
68 .......
69 .......
70 .......
62
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Gannett Co., Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Gannett Co., Inc. (the Company) as of December 31, 2020
and December 30, 2019, the related consolidated statements of operations and comprehensive income (loss), equity and cash
flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the
“consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects,
the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 2020, in conformity with U.S. generally accepted accounting
principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of December 31, 2020, 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 26, 2021 expressed an adverse opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that
were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as
a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit
matters or on the accounts or disclosures to which they relate.
63
Description of the
Matter
Goodwill and Intangible Assets with Indefinite Lives Impairment Assessment
At December 31, 2020, the Company’s goodwill and intangible assets with indefinite lives,
which consist of newspaper mastheads, were $534.1 million and $171.4 million, respectively.
As discussed in Note 1 of the consolidated financial statements, goodwill and intangible assets
with indefinite lives are tested for impairment at least annually or when events occur that
indicate impairment could exist. As a result of these assessments, the Company recognized
impairments of $393.4 million during the year ended December 31, 2020.
Auditing management’s impairment tests of goodwill and newspaper masthead intangible
assets was complex and judgmental and required the involvement of specialists due to the
estimation required in determining the fair value of the reporting units and newspaper
mastheads. In particular, the estimates of the fair value of the reporting units are sensitive to
significant assumptions such as the revenue growth rates, discount rates and projected EBITDA
margins. The estimates of fair value of the newspaper masthead intangible assets are sensitive
to significant assumptions including the royalty rates, discount rates and revenue growth rates.
These assumptions are affected by expectations about future economic and industry factors.
How We Addressed
the Matter in Our
Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of
controls over the Company’s goodwill and intangible assets with indefinite lives impairment
review process. For example, we tested controls over management’s review of the significant
assumptions described above as well as management’s review of the reasonableness of the
underlying data used in the valuation analyses.
To test the estimated fair value of the Company’s reporting units and newspaper masthead
intangible assets, we performed audit procedures that included, among others, assessing the
valuation methodologies used, testing the significant assumptions described above and testing
the completeness and accuracy of the underlying data the Company used in its analyses. For
example, we compared the revenue growth rates and projected EBITDA margins used in the
valuations to current industry and economic trends and assessed the historical accuracy of
management’s estimates. With the assistance of our internal valuation specialists, we also
developed an independent range of the discount rate and royalty rate assumptions and
compared them to the rates determined by management. We performed sensitivity analyses of
the significant assumptions to evaluate the changes in the fair value of the reporting units and
the newspaper masthead intangible assets that would result from changes in the assumptions. In
addition, we tested management’s reconciliation of the fair value of the reporting units to the
market capitalization of the Company.
Defined Benefit Pension Obligation
At December 31, 2020, the Company’s aggregate obligation for its defined benefit pension
plans was $3.2 billion, with related pension assets of $3.2 billion, resulting in a net pension
asset of $64.2 million as of December 31, 2020. The Company recorded a net periodic pension
benefit of $71.8 million for the year-ended December 31, 2020. As described in Note 9 of the
consolidated financial statements, the Company updates the estimates used to measure the
defined benefit pension assets and obligations annually or upon a remeasurement event to
reflect the actual return on plan assets and updated actuarial assumptions.
Auditing the defined benefit pension obligations and net periodic pension benefit was complex
and required the involvement of specialists due to the judgmental nature of the actuarial
assumptions such as the discount rate and expected return on plan assets used in the
measurement process. These assumptions have a significant effect on the projected defined
benefit pension obligation and net periodic pension benefit.
Description of the
Matter
64
How We Addressed
the Matter in Our
Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of
the controls over management’s measurement and valuation of the defined benefit pension
obligations and net periodic pension benefit. For example, we tested controls over
management’s review of the defined benefit pension obligation calculations, the significant
actuarial assumptions, and the data inputs used in the actuarial models.
To test the defined benefit pension obligation and net periodic pension benefit, our audit
procedures included, among others, evaluating the methodology used, the significant actuarial
assumptions described above, and the underlying data used by the Company. We compared the
actuarial assumptions used by management to historical trends. We involved actuarial
specialists in the evaluation of management’s methodology for determining the discount rate
that reflects the maturity and duration of the benefit payments and is used to measure the
defined benefit pension obligation. To perform this evaluation, we compared the discount rate
to an independent range of discount rates developed using the projected benefit cash outlays. As
part of this assessment, we compared the projected cash flows to the historical cash flows and
compared the current year benefits paid to the plans’ prior year projected cash flows. We also
tested the completeness and accuracy of the underlying data, including the participant data
provided to the Company’s actuarial specialists. To evaluate the expected return on plan assets,
we assessed whether management’s assumption is consistent with a range of returns for a
portfolio of comparative investments.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2007.
Tysons, VA
February 26, 2021
65
GANNETT CO., INC.
CONSOLIDATED BALANCE SHEETS
In thousands, except share amounts
Assets
Current assets:
Cash and cash equivalents
Accounts receivable, net of allowance for doubtful accounts of $20,843 and $19,923, respectively
Inventories
Prepaid expense and other current assets
Total current assets
Property, plant and equipment, net
Operating lease assets
Goodwill
Intangible assets, net
Deferred tax assets
Other assets
Total assets
Liabilities and equity
Current liabilities:
Accounts payable and accrued liabilities
Deferred revenue
Current portion of long-term debt
Other current liabilities
Total current liabilities
Long-term debt
Convertible debt
Deferred tax liabilities
Pension and other postretirement benefit obligations
Long-term operating lease liabilities
Other long-term liabilities
Total noncurrent liabilities
Total liabilities
Redeemable noncontrolling interests
Commitments and contingent liabilities (see Note 13)
December 31,
2020
December 31,
2019
$
$
$
170,725 $
314,305
35,075
116,581
636,686
590,272
289,504
534,088
824,650
90,240
143,474
3,108,914 $
378,246 $
186,007
128,445
48,602
741,300
890,323
581,405
6,855
99,765
274,460
151,847
2,004,655
2,745,955
(1,150)
156,042
438,523
55,090
129,460
779,115
815,807
309,112
914,331
1,012,564
76,297
112,876
4,020,102
453,628
218,823
3,300
42,702
718,453
1,636,335
3,300
9,052
235,906
297,662
136,188
2,318,443
3,036,896
1,850
Equity
Preferred stock, $0.01 par value, 300,000 shares authorized, of which 150,000 shares are designated as
Series A Junior Participating Preferred Stock, none of which were outstanding at December 31, 2020 and
December 31, 2019
Common stock, $0.01 par value, 2,000,000,000 shares authorized; 139,494,741 shares issued and
138,102,993 shares outstanding at December 31, 2020; 129,386,258 shares issued and 128,991,544
shares outstanding at December 31, 2019
Treasury stock, at cost, 1,391,748 and 394,714 shares at December 31, 2020 and December 31, 2019,
respectively
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive income
Total equity
Total liabilities and equity
—
—
1,395
1,294
(4,903)
1,103,881
(786,437)
50,173
364,109
3,108,914 $
(2,876)
1,090,694
(115,958)
8,202
981,356
4,020,102
$
The accompanying notes are an integral part of these consolidated financial statements.
66
GANNETT CO., INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
In thousands, except per share amounts
Advertising and marketing services
Circulation
Other
Total operating revenues
Operating costs
Selling, general and administrative expenses
Depreciation and amortization
Integration and reorganization costs
Acquisition costs
Asset impairments
Goodwill and intangible impairments
Net (gain) loss on sale or disposal of assets
Total operating expenses
Operating income (loss)
Interest expense
Loss on early extinguishment of debt
Non-operating pension income
Unrealized loss on Convertible notes derivative
Gain on sale of investments
Other (income) expense, net
Non-operating expense
Income (loss) before income taxes
Provision (benefit) for income taxes
Net income (loss)
Net loss attributable to redeemable noncontrolling interests
Net income (loss) attributable to Gannett
Earnings (loss) per share attributable to Gannett - basic
Earnings (loss) per share attributable to Gannett - diluted
Dividends declared per share
Other comprehensive income (loss):
Foreign currency translation adjustments
Pension and other postretirement benefit items:
$
December 31,
2020
1,710,244 $
1,391,996
303,430
3,405,670
2,034,272
999,789
263,819
145,731
11,152
11,029
393,446
(5,680)
3,853,558
(447,888)
228,513
43,760
(72,149)
74,329
(7,995)
(8,499)
257,959
(705,847)
(33,450)
(672,397) $
(1,918)
(670,479) $
December 31,
2019
952,644 $
704,842
210,423
1,867,909
1,079,593
602,106
111,882
52,212
60,618
3,009
100,743
4,723
2,014,886
(146,977)
63,660
6,058
(9,085)
—
—
(426)
60,207
(207,184)
(85,994)
(121,190) $
(1,348)
(119,842) $
December 30,
2018
786,577
574,963
164,484
1,526,024
865,234
502,631
84,791
15,011
2,651
1,538
—
(3,971)
1,467,885
58,139
36,072
2,886
(1,435)
—
—
597
38,120
20,019
1,912
18,107
(89)
18,196
$
$
$
$
$
$
(5.09) $
(5.09) $
— $
(1.77) $
(1.77) $
1.52 $
0.31
0.31
1.49
2,466 $
7,266 $
—
Net actuarial gain (loss)
Amortization of net actuarial loss (gain)
Change in prior service cost
Other
60,471
37
(1,905)
(2,108)
56,495
58,961
16,990
41,971
(630,426)
(1,918)
(628,508) $
The accompanying notes are an integral part of these consolidated financial statements.
Total pension and other postretirement benefit items
Other comprehensive income (loss) before tax
Income tax provision related to components of other comprehensive income (loss)
Other comprehensive income (loss), net of tax
Comprehensive income (loss)
Comprehensive income (loss) attributable to redeemable noncontrolling interests
Comprehensive income (loss) attributable to Gannett
$
12,534
86
—
305
12,925
20,191
5,108
15,083
(106,107)
(1,348)
(104,759) $
(1,509)
89
—
—
(1,420)
(1,420)
—
(1,420)
16,687
(89)
16,776
67
GANNETT CO., INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands
Operating activities
Net income (loss)
Adjustments to reconcile net income (loss) to operating cash flows:
Depreciation and amortization
Facility consolidation costs
Share-based compensation
Non-cash interest expense
Non-cash acquisition related costs
Provision (benefit) for deferred income taxes
Net (gain) loss on sale or disposal of assets
Unrealized loss on Convertible notes derivative
Non-cash charge to investments
Non-cash loss on early extinguishment of debt
Asset impairments
Goodwill and intangible impairments
Pension and other postretirement benefit obligations
Change in assets and liabilities:
Accounts receivables, net
Inventory
Prepaid expenses
Accounts payable and accrued liabilities
Deferred revenue
Other assets and liabilities
Net cash provided by operating activities
Investing activities
Acquisitions, net of cash acquired
Purchases of property, plant, and equipment
Proceeds from sale of publications, real estate and other assets
Insurance proceeds received for damaged of property
Change in other investing activities
Net cash provided by (used for) investing activities
Financing activities
Payments of debt issuance costs
Borrowings under term loans
Borrowings under revolving credit facility
Repayments under term loans
Repayments under revolving credit facility
Repayments of convertible debt
Proceeds from convertible debt
Issuance of common stock, net of underwriters' discount
Payments of dividends
Changes in other financing activities
Net cash provided by (used for) financing activities
Effect of currency exchange rate change
Increase in cash, cash equivalents and restricted cash
Balance of cash, cash equivalents and restricted cash at beginning of year
Cash, cash equivalents and restricted cash at end of year
December 31,
2020
December 31,
2019
December 30,
2018
$
(672,397) $
(121,190) $
18,107
263,819
3,629
26,350
24,086
—
(30,175)
(5,680)
74,329
—
43,760
11,029
393,446
(117,522)
111,506
19,965
4,078
(66,377)
(19,348)
(6,728)
57,770
—
(36,975)
196,344
1,643
(876)
160,136
111,882
148
11,324
3,851
26,411
(87,765)
4,723
—
—
6,058
3,009
100,743
(100,452)
12,608
5,150
7,016
44,311
(8,326)
6,034
25,535
(796,502)
(13,978)
27,486
—
(2,066)
(785,060)
(121,223)
1,792,000
153,900
(481,058)
(153,900)
(197,950)
—
—
(91,936)
(920)
898,913
(3,494)
135,894
52,770
188,664 $
84,791
—
3,156
1,996
—
202
(3,971)
—
505
2,886
1,538
—
(2,575)
15
(4,336)
3,338
5,489
(7,642)
6,060
109,559
(204,877)
(11,639)
15,040
—
—
(201,476)
(800)
79,675
20,000
(3,093)
(20,000)
—
—
111,099
(87,195)
(1,161)
98,525
—
6,608
46,162
52,770
(2,307)
—
—
(681,050)
—
—
497,094
4
—
(15,083)
(201,342)
1,498
18,062
188,664
206,726 $
The accompanying notes are an integral part of these consolidated financial statements.
$
68
GANNETT CO., INC.
CONSOLIDATED STATEMENTS OF EQUITY
In thousands, except share data
Balance at December 31, 2017
Net income attributable to Gannett
Restricted share grants
Other comprehensive loss, net of
income taxes of $0
Share-based compensation expense
Issuance of common stock, net of
underwriters' discount
Purchase of treasury stock
Restricted share forfeiture
Dividends declared
Balance at December 30, 2018
Net loss attributable to Gannett
Restricted share grants
Restricted stock awards settled, net of
withholdings
Other comprehensive income, net of
income taxes of $5,108
Share-based compensation expense
Impact of adoption of ASC 842 -
Leases
Issuance of common stock to former
Legacy Gannett stockholders
Issuance of common stock to Fortress
Purchase of treasury stock
Restricted share forfeiture
Dividends declared
Other activity
Balance at December 31, 2019
Net loss attributable to Gannett
Restricted share grants
Restricted stock awards settled, net of
withholdings
Other comprehensive income, net of
income taxes of $16,990
Share-based compensation expense
Issuance of common stock
Remeasurement of redeemable
noncontrolling interests
Purchase of treasury stock
Restricted share forfeiture
Other activity
Balance at December 31, 2020
Common stock
Shares
Amount
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
(Accumulate
d Deficit)
53,367,853 $ 534 $ 683,168 $
—
2
—
240,396
—
223
—
—
—
—
—
3,156
110,650
—
—
(75,592)
6,900,000
—
—
—
69
—
—
—
60,508,249 $ 605 $ 721,605 $
—
3
—
300,952
—
(3)
1,981,556
—
—
—
20
—
—
—
(462)
—
11,324
—
423,232
26,369
—
51
(91,838)
416
62,389,894
4,205,607
—
—
—
—
624
42
—
—
—
—
129,386,258 $ 1,294 $ 1,090,694 $
—
58
—
5,846,313
—
(60)
(5,461) $
—
—
(1,420)
—
—
—
—
—
(6,881) $
—
—
—
15,083
—
—
(2,767)
18,196
—
—
—
—
—
—
(11,662)
3,767
(119,842)
—
—
—
—
117
—
—
—
—
—
—
8,202 $
—
—
—
—
—
—
—
—
(115,958)
(670,479)
—
Treasury stock
Total
Shares
Amount
140,972 $ (1,081) $ 674,393
18,196
225
—
—
—
—
—
—
—
—
(1,420)
3,156
—
(792)
—
—
—
46,237
14,754
—
110,719
(792)
—
(87,254)
201,963 $ (1,873) $ 717,223
(119,842)
—
—
—
—
—
—
—
—
—
—
—
—
—
(442)
15,083
11,324
117
—
—
(1,002)
(1)
—
—
—
—
68,150
124,601
—
—
423,856
26,411
(1,002)
50
(91,838)
416
394,714 $ (2,876) $ 981,356
(670,479)
(2)
—
—
—
—
3,585,190
—
—
676,980
36
—
—
7
(11,037)
—
26,350
1,614
—
—
—
—
—
—
—
—
139,494,741 $ 1,395 $ 1,103,881 $
(3,878)
—
—
198
—
41,971
—
—
—
—
—
—
50,173 $
—
—
—
—
—
—
—
—
(11,001)
41,971
26,350
1,621
—
—
—
—
—
—
—
(3,878)
(2,020)
(7)
198
(786,437) 1,391,748 $ (4,903) $ 364,109
—
349,338
647,696
—
—
(2,020)
(7)
—
The accompanying notes are an integral part of these consolidated financial statements.
69
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — Description of business, basis of presentation, and summary of significant accounting policies
Description of Business
Gannett Co., Inc. ("Gannett", "we", "us", "our", or the "Company") is a subscription-led and digitally focused media and
marketing solutions company committed to empowering communities to thrive. We aim to be the premiere source for clarity,
connections and solutions within our communities. Our strategy is focused on driving audience growth and engagement by
delivering deeper content experiences to our consumers, while offering the products and marketing expertise our advertisers
desire. The execution of this strategy is expected to allow the Company to continue its evolution from a more traditional print
media business to a digitally focused content platform.
Until November 19, 2019, our corporate name was New Media Investment Group Inc. ("New Media") and Gannett Co.,
Inc. was a separate publicly traded company. On November 19, 2019, New Media completed its acquisition of Gannett Co., Inc.
(which was renamed Gannett Media Corp. and is referred to as "Legacy Gannett"). In connection with the acquisition, New
Media changed its name to Gannett Co., Inc. and assumed Legacy Gannett's ticker symbol "GCI" (having previously traded
under "NEWM"). As a result of the acquisition, historical results for 2019 represents legacy New Media’s results up to and
through the date of the acquisition plus the new consolidated company’s results of operations for the approximately six-week
period between the date of acquisition and the 2019 fiscal year end.
Our current portfolio of media assets includes USA TODAY, local media organizations in 46 states in the U.S. and Guam,
and Newsquest, a wholly owned subsidiary operating in the United Kingdom ("U.K.") with more than 120 local news media
brands. Gannett also owns the digital marketing services companies ReachLocal, Inc. ("ReachLocal"), UpCurve, Inc.
("UpCurve"), and WordStream, Inc. ("WordStream"), which are marketed under the LOCALiQ brand, and runs the largest
media-owned events business in the U.S., USA TODAY NETWORK Ventures.
Through USA TODAY, our local property network, and Newsquest, Gannett delivers high-quality, trusted content where
and when consumers want to engage on virtually any device or platform. Additionally, the Company has strong relationships
with thousands of local and national businesses in both our U.S. and U.K. markets due to our large local and national sales
forces and a robust advertising and marketing solutions product suite. The Company reports in two operating segments,
Publishing and Digital Marketing Solutions ("DMS"), plus a corporate and other category. A full description of our segments is
included in Note 14 — Segment reporting.
COVID-19 Pandemic: The newspaper industry and the Company have experienced declining same-store revenue and
profitability over the past several years, and these industry trends are expected to continue in the future. Additionally, during the
year ended December 31, 2020, the Company experienced additional revenue and profitability declines in connection with the
COVID-19 pandemic. More specifically, during March 2020, the Company began to experience decreased demand for its
advertising and digital marketing services, commercial print and distribution services, as well as reductions in the single copy
and commercial distribution of its newspapers. At this point, the Company’s newspaper production operations have not been
significantly impacted and the vast majority of the Company's non-production employees are currently working remotely.
However, the COVID-19 pandemic had a significant negative impact on the Company's business and results of operations
during the year ended December 31, 2020. Longer-term, the impact of the COVID-19 pandemic on the Company's business and
results of operations will depend on the severity and length of the pandemic, the duration and extent of the mitigation measures
and governmental actions designed to combat the pandemic, as well as the changes in customer behavior as a result of the
pandemic, all of which are highly uncertain. As a result, the Company has implemented, and continues to implement, measures
to reduce costs and preserve cash flow. These measures include refinancing our debt to reduce costs, suspension of the quarterly
dividend, and decreases in employee compensation through the third quarter, as well as reductions in discretionary spending. In
addition, the Company has deferred certain payroll tax remittance as permitted under the Coronavirus Aid, Relief and Economic
Security Act ("CARES Act") and negotiated the deferral of pension contributions, as well as continuing with its previously
disclosed plan to monetize non-core assets. The Company believes these initiatives, along with cash on hand and cash provided
by operating activities, will provide sufficient cash flow to enable the Company to meet its commitments. However, these
measures are not expected to fully offset the negative impact of the COVID-19 pandemic on the Company's business and
results of operations.
70
Basis of presentation
The consolidated financial statements include all the assets, liabilities, revenues, expenses and cash flows of entities which
Gannett controls due to ownership of a majority voting interest ("subsidiaries"). All significant intercompany accounts and
transactions between consolidated entities have been eliminated in consolidation.
Use of estimates: The preparation of financial statements in conformity with U.S. generally accepted accounting principles
("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those estimates.
Significant estimates and judgments inherent in the preparation of the consolidated financial statements include pension
and postretirement benefit obligation assumptions, income taxes, goodwill and intangible asset impairment analysis, valuation
of property, plant and equipment and the mark to market of the conversion feature associated with debt.
Fiscal year: Starting in 2019 and subsequent to our acquisition of Legacy Gannett, our fiscal period end coincides with the
Gregorian calendar. In periods prior to the acquisition, our fiscal periods ended on the last Sunday of the calendar month.
Reclassifications: Certain amounts in prior period consolidated financial statements have been reclassified to conform to
the current year presentation. Pursuant to our acquisition of Legacy Gannett, in the fourth quarter of 2019 we realigned the
presentation of marketing services revenues generated by our UpCurve subsidiary from Other revenues to Advertising and
marketing services revenues on the Consolidated statements of operations and comprehensive income (loss). As a result of this
updated presentation, Advertising and marketing services revenues increased and Other revenues decreased $58.2 million for
the year ended December 30, 2018. Operating revenues, net income, retained earnings, and earnings per share remained
unchanged. We also realigned the presentation of facility consolidation charges incurred by New Media to reflect the disclosure
methodology of the combined Company. As a result of this updated presentation, Selling, general and administrative expenses
decreased and Integration and reorganization costs increased by $4.8 million. Net income, retained earnings, and earnings per
share remained unchanged.
Summary of Significant Accounting Policies
Cash, cash equivalents and restricted cash: Cash equivalents represent highly liquid certificates of deposit which have
original maturities of three months or less. Restricted cash is held as cash collateral for certain business operations. Restricted
cash primarily consists of funding for letters of credit, cash held in an irrevocable grantor trust for our deferred compensation
plans and cash held with banking institutions for insurance plans.
The following table presents a reconciliation of cash, cash equivalents and restricted cash:
In thousands
Cash and cash equivalents
Restricted cash included in prepaid expenses and other current assets
Restricted cash included in other assets
Total cash, cash equivalents and restricted cash
Year ended December 31,
2019
156,042 $
10,800
21,822
188,664 $
2020
170,725 $
11,356
24,645
206,726 $
$
$
2018
48,651
4,119
—
52,770
Accounts receivable: Accounts receivable are stated at amounts due from customers, net of an allowance for doubtful
accounts. The Company’s allowance for doubtful accounts is based upon several factors including the length of time the
receivables are past due, historical payment trends and current economic factors. The Company generally does not require
collateral.
Inventories: Inventory consists principally of newsprint, which is valued at the lower of net realizable value. Cost is
determined using the first-in, first-out ("FIFO") method.
Property, plant, and equipment, software development costs and depreciation: Property, plant, and equipment are
recorded at cost or at fair value for property, plant and equipment related to acquired businesses. Routine maintenance and
repairs are expensed as incurred. Depreciation is calculated under the straight-line method over the estimated useful lives.
Leasehold improvements are amortized under the straight-line method over the shorter of the lease term or estimated useful life
of the asset.
71
We capitalize costs to develop software for internal use 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 Operating costs in the accompanying Consolidated statements of
operations and comprehensive income (loss).
Property, plant and equipment and software development costs are evaluated for impairment in accordance with our policy
for amortizable intangible assets and other long-lived assets.
A breakout of property, plant and equipment and software is presented below:
Year ended December 31,
2020
In thousands
Land
74,549 $
Buildings and improvements
348,591
Machinery and equipment
426,348
96,739
Furniture, fixtures and computer software(a)
Construction in progress
6,074
Total
952,301
Less: accumulated depreciation
(362,029)
Property, plant and equipment, net
590,272 $
(a) Costs capitalized as internal use software are amortized on a straight-line basis over an estimated useful life of 3 to 5 years.
$
$
Useful Life
(Up to)
40 years
30 years
10 years
2019
105,805
416,537
474,418
82,651
13,687
1,093,098
(277,291)
815,807
Depreciation expense was $155.3 million, $67.2 million, and $50.8 million for the years ended December 31, 2020,
December 31, 2019, and December 30, 2018, respectively.
Business combinations: The operating results of the acquired business are reflected in the Company’s consolidated
financial statements as of the acquisition date. 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. Any excess of the purchase
price over the estimated fair values of net assets acquired is recorded as goodwill. Goodwill is assigned to the reporting unit that
benefits from the synergies arising from the business combination. When determining the fair value of assets acquired and
liabilities assumed, we make significant estimates and assumptions, especially with respect to intangible assets. Transaction
costs are expensed as incurred.
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. Our estimates of fair value are based upon
assumptions believed to be reasonable but which are inherently uncertain and unpredictable and, as a result, actual results may
differ from estimates.
Goodwill, intangible and long-lived assets: Goodwill represents the excess of acquisition cost over the fair value of assets
acquired, including identifiable intangible assets, net of liabilities assumed. Indefinite-lived intangible assets consist of
newspaper mastheads and finite-lived intangible assets consist of advertiser, customer and subscriber relationships, we well as
trade names, and developed technology. Newspaper mastheads are not amortized because it has been determined that the useful
lives of such mastheads are indefinite. Intangible assets that have finite useful lives are amortized over those useful lives.
Goodwill is tested for impairment annually on the last day of our second 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. We
perform our impairment analysis on each of our reporting units. We evaluate our reporting units annually, as well as when
changes in our operating structure occur. The Company has the option to qualitatively assess whether it is more likely than not
that the fair value of a reporting unit is less than its carrying value. If the Company elects to perform a qualitative assessment
and concludes it is more likely than not that the fair value of the reporting unit is equal to or greater than its carrying value, no
further assessment of that reporting unit’s goodwill is necessary; otherwise goodwill must be tested for impairment. In 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. The Company generally determines the fair value of a
reporting unit using a combination of a discounted cash flow analysis and a market-based approach. Estimates of fair value
include inputs that are subjective in nature, involve uncertainties, and involve matters of significant judgment that are made at a
72
specific point in time. Changes in key assumptions from period to period could significantly affect the estimates of fair value.
Significant assumptions used in the fair value estimates include projected revenues and related growth rates over time,
projected operating cash flow margins, discount rates, and future economic and market conditions. If the carrying value of the
reporting unit exceeds the estimate of fair value, we calculate the impairment as the excess of the carrying value of goodwill
over its implied fair value.
Indefinite-lived intangible assets, which are newspaper mastheads, are tested for impairment annually on the last day of our
second quarter or more frequently if events or changes in circumstances indicate the asset might be impaired. The impairment
test consists of a comparison of the fair value of each group of mastheads with their carrying amount. We used a relief from
royalty approach which utilizes a discounted cash flow model to determine the fair value of newspaper mastheads. Our
judgments and estimates of future operating results in determining the reporting unit fair values are consistently applied in
determining the fair value of mastheads.
The Company assesses the recoverability of its long-lived assets, including property, plant and equipment and finite-lived
intangible assets, whenever events or changes in circumstances indicate their carrying amounts may not be recoverable. The
evaluation is performed by asset group, which is the lowest level of identifiable cash flows independent of other assets. The
assessment of recoverability is based on management’s estimates by comparing the sum of the estimated undiscounted cash
flows generated by the underlying asset groups to its carrying value of the asset groups to determine whether an impairment
existed at its lowest level of identifiable cash flows. If the carrying amount of the asset group is greater than the expected
undiscounted cash flows to be generated by the asset group, an impairment is recognized to the extent the carrying value of
such asset group exceeds its fair value.
All three of our reporting units have goodwill balances. See Note 6 — Goodwill and intangible assets for a discussion of
impairment charges taken on Goodwill in the second fiscal quarter of 2020. We have not subsequently identified any indicators
of impairment that would indicate our reporting units are at risk of failing the goodwill or indefinite-lived intangible asset
impairment test.
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. The Company establishes a valuation allowance if it is
more likely than not that all or a portion of a deferred tax asset will not be realized. See Note 11 — 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 upon
consideration of 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.
Fair value of financial instruments: The carrying value of the Company’s cash equivalents, accounts receivable, accounts
payable, and accrued liabilities approximate fair value due to the short maturity of these instruments. An estimate of the fair
value of the Company’s debt and embedded conversion option is disclosed in Note 8 — Debt. For further details surrounding
our policies on fair value measurement, including the fair values of our pension plan assets, refer to Note 10 — Fair value
measurement.
Deferred financing costs: Deferred financing costs consist of costs incurred in connection with debt financings and are
recorded as a contra-liability in Long-term debt on the Consolidated balance sheets. Such costs are amortized using the
effective interest method over the estimated remaining term of the debt. This amortization represents a component of Interest
expense.
Advertising costs: Advertising costs are expensed in the period incurred. The Company incurred total advertising expenses
for the years ended December 31, 2020, December 31, 2019, and December 30, 2018 of $50.0 million, $26.8 million, and $18.2
million, respectively.
73
Pension and postretirement liabilities: Pension and other postretirement benefit costs under our defined benefit retirement
plans are actuarially determined. For plans with frozen benefits, we recognize the cost of postretirement benefits such as
pension, medical, and life insurance benefits on an accrual basis over the average life expectancy of employees expected to
receive such benefits. For active plans, costs are recognized over the estimated average future service period. See Note 9 —
Pensions and other postretirement benefit plans for further details.
Self-insurance liability accruals: The Company maintains self-insured medical and workers’ compensation programs. The
Company purchases stop loss coverage from third parties, which limits our exposure to large claims. The Company records a
liability for healthcare and workers’ compensation costs during the period in which they occur, including an estimate of
incurred but not reported claims.
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 international operations, totaled approximately $231.5 million for the year ended December 31, 2020. Our long-
lived assets in foreign countries, principally in the U.K. and ReachLocal international operations, totaled approximately $280.1
million at December 31, 2020.
Leases: We determine if an arrangement is a lease at inception. Operating leases are included in Operating lease assets,
Other current liabilities, and Long-term operating lease liabilities on our Consolidated balance sheets. Operating lease right-of-
use ("ROU") assets and operating lease liabilities are recognized based on the present value of the future minimum lease
payments over the lease term at commencement date. The rates implicit within the Company's leases are generally not
determinable; therefore, the Company uses judgment to determine the incremental borrowing rate used to calculate the present
value of lease payments. The incremental borrowing rate for each lease is primarily based on publicly available information for
companies within the same industry and with similar credit profiles and adjusted for the impact of collateralization, the lease
term, and other specific terms included in the Company’s lease arrangements. ROU assets are assessed for impairment in
accordance with the Company’s accounting policy for long-lived assets.
Our lease terms include options to extend or terminate. The period which is subject to an option to extend the lease is
included in the lease term if it is reasonably certain that the option will be exercised. The period which is subject to an option to
terminate the lease is included if it is reasonably certain that the option will not be exercised. Lease expense for minimum lease
payments is recognized on a straight-line basis over the lease term.
For certain equipment leases, we apply a portfolio approach to account for the operating lease ROU assets and liabilities.
Accounts payable and accrued liabilities: A breakout is presented below:
In thousands
Accounts payable
Compensation
Taxes (primarily property and sales taxes)
Benefits
Interest
Other
Accounts payable and accrued liabilities
Year ended December 31,
2019
2020
131,797 $
146,995
131,006
115,061
18,073
30,834
33,070
22,821
23,602
3,676
100,882
74,057
378,246 $
453,628
$
$
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
currency exchange rates 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 Comprehensive income (loss) in the Consolidated statements of operations and
comprehensive income (loss) and are classified as Accumulated other comprehensive income in the Consolidated balance
sheets and Consolidated statements of equity.
74
Supplementary cash flow information: Supplementary cash flow information, including non-cash investing and financing
activities, are as follows:
In thousands
Net cash (refund) paid for taxes
Cash paid for interest
Accrued capital expenditures
Common stock issued in exchange for Legacy Gannett shares
Recent accounting pronouncements adopted
December 31,
2020
Year Ended
December 31,
2019
December 30,
2018
$
(3,964) $
218,110
544
—
1,192 $
40,208
2,227
391,809
1,272
31,178
69
—
The following are new accounting pronouncements which we have adopted in fiscal year 2020:
Financial Instruments—Credit Losses: In June 2016, the Financial Accounting Standards Board ("FASB") issued new
guidance which amends the principles around the recognition of credit losses by mandating entities incorporate an estimate of
current expected credit losses when determining the value of certain assets. The guidance also amends reporting around
allowances for credit losses on available-for-sale marketable securities. This guidance is effective for fiscal years beginning
after December 15, 2019, with early adoption permitted. Adopting this guidance did not have a material impact on our
consolidated financial statements. Refer to Note 4 — Accounts Receivable, net for further details.
Intangibles—Internal Use Software: In August 2018, the FASB issued new guidance which aligns the requirements for
capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for
capitalizing implementation costs incurred to develop or obtain internal-use software and hosting arrangements that include an
internal-use software license. This guidance is effective for fiscal years beginning after December 15, 2019. Early adoption is
permitted, including adoption in any interim period. The guidance can be applied either retrospectively or prospectively to all
implementation costs incurred after the date of adoption. This guidance was adopted prospectively and did not have a material
impact on our consolidated financial statements. Capitalized costs are recognized within prepaid expenses and other current
assets or other assets within the consolidated balance sheet.
Fair Value Measurement—Disclosure Framework: In August 2018, the FASB issued new guidance that changes disclosure
requirements related to fair value measurements as part of the disclosure framework project. The disclosure framework project
aims to improve the effectiveness of disclosures in the notes to the financial statements by focusing on requirements that clearly
communicate the most important information to users of the financial statements. This guidance is effective for fiscal years
beginning after December 15, 2019, with early adoption permitted. Adopting this guidance did not have a material impact on
our Consolidated financial statements.
Compensation—Retirement Plans: In August 2018, the FASB issued new guidance that changes disclosures related to
defined benefit pension and other postretirement benefit plans as part of the disclosure framework project. This guidance is
effective for fiscal years ending after December 15, 2020, with early adoption permitted. Adopting this guidance did not have a
material impact on our Consolidated financial statements.
Recent accounting pronouncements not yet adopted
The following are new accounting pronouncements that we are evaluating for future impacts on our financial position:
Simplifying the Accounting for Income Taxes: In December 2019, the FASB issued new guidance that simplifies the
accounting for income taxes. The guidance amends the rules for recognizing deferred taxes for investments, performing
intraperiod tax allocations and calculating income taxes in interim periods. It also reduces complexity in certain areas,
including accounting for transactions that result in a step-up in the tax basis of goodwill and allocating taxes to members of a
consolidated group. This guidance is effective for fiscal years beginning after December 15, 2020, with early adoption
permitted. We are evaluating the provisions of the updated guidance and assessing the impact on our Consolidated financial
statements.
Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity: In August 2020, the FASB issued new
guidance that simplifies the accounting for convertible instruments by reducing the number of accounting models for
convertible debt instruments and convertible preferred stock. In addition to eliminating certain accounting models, the guidance
75
amends the disclosures for convertible instruments and earnings-per-share ("EPS") guidance. It also amends the guidance for
the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting
conclusions. This guidance is effective for fiscal years beginning after December 15, 2023, with early adoption permitted no
earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. We are
evaluating the impacts that the adoption of ASU 2020-06 will have on our accounting for the 2027 Notes, and the impact on our
Consolidated financial statements. See Note 8 — Debt for further discussion of the 2027 Notes.
NOTE 2 — Revenues
Revenues are recognized when control of the promised goods or services is transferred to customers, in an amount that
reflects the consideration the Company expects to be entitled to in exchange for those goods or services.
The following table presents our revenues disaggregated by source.
In thousands
Print advertising
Digital advertising and marketing services
Total advertising and marketing services
Circulation
Other
Total revenues
$
December 31,
2020
901,805 $
808,439
1,710,244
1,391,996
303,430
3,405,670 $
$
Year Ended
December 31,
2019
689,595 $
263,049
952,644
704,842
210,423
1,867,909 $
December 30,
2018
625,065
161,512
786,577
574,963
164,484
1,526,024
Revenues generated from international operations comprised 6.8% for the year ended December 31, 2020, and 2.0% for the
year ended December 31, 2019, which consisted of approximately six weeks of operations from Legacy Gannett.
Advertising and Marketing Services Revenues
The Company generates Print advertising revenues primarily by delivering advertising in its national publication, USA
TODAY, and in its local publications including newspapers. Advertising revenues are categorized as local retail, local
classified, online, and national. Print advertising revenue is recognized upon publication of the advertisement.
Digital advertising and marketing revenues are generated primarily by online marketing products provided by our DMS
segment. The Company enters into agreements for products in which our clients typically pay in advance and on a monthly
basis. These prepayments include all charges for the included technology and any media services, management, third-party
content, and other costs and fees, all of which are accounted for as a single performance obligation. Revenue is then recognized
as we purchase and deliver media on behalf of the customer and perform other marketing-related services.
For our Advertising and marketing services revenues, we evaluate whether we are the principal (i.e., report revenues on a
gross basis) or agent (i.e., report revenues on a net basis) by performing analyses regarding whether we control the provision of
specified goods or services before they are transferred to our customers. We report Advertising and marketing services revenues
gross when we control advertising inventory before it is transferred to the customer. Our control is evidenced by us being
primarily responsible or sharing responsibility for the fulfillment of services and maintaining control over transaction pricing.
We recognize revenue when the performance obligation is satisfied.
Circulation Revenues
Circulation revenues are derived from print and digital subscriptions as well as single copy sales at retail stores, vending
racks and boxes. Circulation revenues from subscribers are generally billed to customers at the beginning of the subscription
period and are typically recognized over the subscription period as the performance obligations are delivered. The term of
customer subscriptions normally ranges from one to twelve months. Circulation revenues from single-copy income are
recognized based on the date of publication, net of provisions for related returns.
76
Other Revenues
The Company provides commercial printing services to third parties as a means to generate incremental revenue and utilize
excess printing capacity. Customers consist primarily of other publishers that do not have their own printing presses and do not
compete with other Gannett publications. The Company also prints other commercial materials, including flyers, business cards
and invitations. Revenue is generally recognized upon delivery. In addition, the Company generates revenues from its events
and promotions business. Revenues are generated primarily through ticket sales, endurance events and race management
services. Revenue is generally recognized when the event occurs.
Practical Expedients and Exemptions
The Company expenses sales commissions or other costs to obtain contracts when incurred because the amortization period
is generally one year or less. These costs are recorded within Selling, general and administrative expenses.
The Company does not disclose unsatisfied performance obligations for (i) contracts with an original expected length of
one year or less and (ii) contracts for which the Company recognizes revenue at the amount to which the Company has the right
to invoice for services performed.
Deferred revenues
The Company records deferred revenues when cash payments are received in advance of the Company’s performance. The
Company's primary source of Deferred revenues is from circulation subscriptions paid in advance of the service provided,
which represents future delivery of publications performance obligation to subscription customers. The Company expects to
recognize the revenue related to unsatisfied performance obligations over the next one to twelve months in accordance with the
terms of the subscriptions.
The Company's payment terms vary by the type and location of the customer and the products or services offered. The
period between invoicing and when payment is due is not significant. For certain products or services and customer types, the
Company requires payment before the products or services are delivered to the customer. The majority of our subscription
customers are billed and pay on monthly terms.
The following table presents the change in the Deferred revenues by type of revenue for years ended December 31, 2020
and 2019, respectively:
Year ended December 31, 2020
Year ended December 31, 2019
Advertising,
Marketing
Services and
Other
67,444 $
—
278,131
(287,903)
(5,986) $
51,686 $
Circulation
151,379
—
1,159,831
(1,170,300)
(6,589)
134,321
$
$
$
Advertising,
Marketing
Services and
Other
Total
218,823 $
—
1,437,962
(1,458,203)
(12,575) $
186,007 $
$
$
22,542 $
42,369
128,504
(125,971)
— $
67,444 $
Circulation
82,645
95,341
529,004
(555,611)
—
151,379
Total
105,187
137,710
657,508
(681,582)
—
218,823
$
$
In thousands
Beginning balance
Acquired deferred revenue
Cash receipts
Revenue recognized
Reduction due to dispositions
Ending balance
NOTE 3 — Leases
We lease certain real estate, vehicles, and equipment. Our leases have remaining lease terms of 1 to 15 years, some of
which may include options to extend the leases, and some of which may include options to terminate the leases. The exercise of
lease renewal options is at our sole discretion. The depreciable lives of assets and leasehold improvements are limited by the
expected lease term unless there is a transfer of title or purchase option reasonably certain of exercise.
As of December 31, 2020, our Consolidated balance sheets include $289.5 million of operating lease right-to use assets,
$42.9 million of short-term operating lease liabilities included in Other current liabilities, and $274.5 million of long-term
operating lease liabilities.
77
The components of operating lease expense were as follows:
In thousands
Operating lease cost (a)
38,985
Short-term lease cost (b)
5,086
Total lease expense
44,071
(a) Includes variable lease costs of $12.8 million and $8.4 million, respectively, and sublease income of $3.8 million and $2.5 million, respectively, for the year
96,218 $
5,663
101,881 $
$
$
Year ended December 31,
2019
2020
ended December 31, 2020 and 2019.
(b) Excluding expenses relating to leases with a lease term of one month or less.
Supplemental information related to leases were as follows:
In thousands, except lease term and discount rate
Cash paid for amounts included in the measurement of operating lease liabilities
Right-of-use assets obtained in exchange for operating lease obligations
Loss on sale and leaseback transactions, net
Weighted-average remaining lease term (in years)
Weighted-average discount rate
Future minimum lease payments under non-cancellable leases are as follows:
In thousands
2021
2022
2023
2024
2025
Thereafter
Total future minimum lease payments
Less: Imputed interest
Total
$
Year ended December 31,
2019
2020
86,999 $
36,247
3,821
7.7
12.9 %
35,837
28,545
—
8.3
12.4 %
Year ended
December 31,
77,351
75,560
62,627
56,021
47,686
201,215
520,460
203,090
317,370
$
$
As of December 31, 2020, we have entered into leases that have not yet commenced with future lease payments of $12.0
million, that are not yet recorded on the Consolidated balance sheets.
NOTE 4 — Accounts Receivable, net
The Company performs its evaluation of the collectability of trade receivables based on customer category. For example,
trade receivables from individual subscribers to our publications are evaluated separately from trade receivables related to
advertising customers. For advertising trade receivables, the Company applies a "black motor formula" methodology as the
baseline to calculate the allowance for doubtful accounts. The reserve percentage is calculated as a ratio of total net bad debts
(less write-offs and recoveries) for the prior three-year period to total outstanding trade accounts receivable for the same three-
year period. The calculated reserve percentage by customer category is applied to the consolidated gross advertising receivable
balance, irrespective of aging. In addition, each category has specific reserves for at risk accounts that vary based on the nature
of the underlying trade receivables. Due to the short-term nature of our circulation receivables, the Company reserves all
receivables aged over 90 days.
78
The following table presents changes in the allowance for doubtful accounts:
In thousands
Beginning balance
Current period provision
Write-offs charged against the allowance
Recoveries of amounts previously written-off
Disposition
Foreign currency
Ending balance
Year ended December
31, 2020
$
$
19,923
28,654
(29,532)
2,824
(1,011)
(15)
20,843
The calculation of the allowance considers current economic, industry and customer-specific conditions relative to their
respective operating environments in the incremental allowances recorded related to high-risk accounts, bankruptcies,
receivables in repayment plan and other aging specific reserves. As a result of this analysis, the Company adjusts specific
reserves and the amount of allowable credit as appropriate. The collectability of trade receivables related to advertising,
marketing services and other customers depends on a variety of factors, including trends in the local and general economic
conditions that affect our customers' ability to pay. The advertisers in our newspapers and other publications and related
websites are primarily retail businesses that can be significantly affected by regional or national economic downturns and other
developments that may impact our ability to collect on the related receivables. Similarly, while circulation revenues related to
individual subscribers are primarily prepaid, changes in economic conditions may also affect our ability to collect on amounts
owed from single copy circulation customers.
For the years ended December 31, 2020, and December 31, 2019, the Company recorded $28.7 million and $9.7 million in
bad debt expense, respectively, which is included in Selling, general and administrative expenses on the Consolidated
statements of operations and comprehensive income (loss).
NOTE 5 — Acquisitions and dispositions
Acquisitions during 2019
Legacy Gannett acquisition
The Company acquired substantially all the assets, properties, and business of Legacy Gannett on November 19, 2019. The
acquisition, which included the USA TODAY NETWORK (made up of USA TODAY ("USAT") and 109 local media
organizations in 46 states in the U.S. and Guam, including digital sites and affiliates), ReachLocal, Inc. ("ReachLocal"), a
marketing solutions company, and Newsquest (a wholly owned subsidiary of Legacy Gannett operating in the United Kingdom
with more than 120 local media brands), was completed for an aggregate purchase price of $1.3 billion. The acquisition was
financed from the Acquisition Term Loan as described in Note 8 — Debt and the issuance of common stock to Legacy Gannett
stockholders as described in Note 12 — Supplemental equity information. The rationale for the acquisition was primarily the
attractive nature of the various publications, businesses, and digital platforms as well as the estimated cash flows and cost-
saving and revenue-generating opportunities. The fair values of the assets and liabilities for the Legacy Gannett acquisition
were finalized during the second quarter of 2020.
79
The following table summarizes the final fair values of the assets and liabilities for the Legacy Gannett acquisition:
Final fair value as
adjusted
Estimated fair value as
previously reported (a)
Measurement period
adjustments (b)
$
In thousands
149,452 $
Cash and restricted cash acquired
Current assets
383,965
Other assets
97,459
Property, plant and equipment
536,511
Operating lease assets
200,550
Developed technology
47,770
Advertiser relationships
272,740
Subscriber relationships
104,490
Other customer relationships
63,820
Trade names
16,470
Mastheads
97,340
Goodwill
644,766
Total assets
2,615,333
Current liabilities
513,752
Long-term liabilities
787,019
Total liabilities
1,300,771
Net assets
1,314,562 $
(a) As previously reported in our Annual Report on Form 10-K for the year ended December 31, 2019.
(b) The Company recorded measurement period adjustments during the second quarter of 2020. The measurement period adjustments were primarily related to
obtaining new facts and circumstances that existed as of the acquisition date that impact the financial projections and carrying values used to value acquired
assets and liabilities, including the finalization of certain contracts with customers that impacted the value of intangible assets recorded. The increase to
Long-term liabilities was primarily the result of $5.8 million in multi-employer pension liabilities offset by a decrease of $4.0 million in deferred tax
liabilities. All measurement period adjustments were offset against Goodwill.
— $
—
—
—
—
(11,670)
(16,580)
6,100
3,540
(630)
8,420
13,018
2,198
95
2,103
2,198
149,452
383,965
97,459
536,511
200,550
36,100
256,160
110,590
67,360
15,840
105,760
657,784
2,617,531
513,847
789,122
1,302,969
1,314,562
— $
$
2019 Acquisitions
The Company also acquired substantially all the assets, properties and business of certain publications and businesses in
2019 (the "2019 Acquisitions"), which included 11 daily newspapers, 11 weekly publications, nine shoppers, a remnant
advertising agency, five events production businesses, and a business community and networking platform for an aggregate
purchase price of $53.4 million including estimated working capital. As part of one of the 2019 Acquisitions, the Company also
acquired a 58% equity interest in the acquiree, and the minority equity owners retained a 42% interest, which has been
classified as a redeemable non-controlling interest on the Consolidated statements of operations and comprehensive income
(loss). Additionally, for specified 2019 Acquisitions, additional consideration is earned based on the achievement of EBITDA
targets outlined in the asset purchase agreement. As of December 31, 2020, there is no consideration payable to the former
stockholders. The 2019 Acquisitions were financed from cash on hand. The rationale for the 2019 Acquisitions was primarily
the attractive nature, as applicable, of the various publications, businesses, and digital platforms as well as the estimated cash
flows and cost-saving and revenue-generating opportunities available. The fair values of the assets and liabilities for the 2019
Acquisitions were finalized during the second quarter of 2020.
80
The following table summarizes the final fair values of the assets and liabilities for the aforementioned acquisitions:
Final fair value as
adjusted
Estimated fair value as
previously reported (a)
Measurement period
adjustments (b)
$
— $
323 $
In thousands
Cash and restricted cash acquired
Current assets
Other assets
Property, plant and equipment
Non-compete agreements
Advertiser relationships
Subscriber relationships
Other customer relationships
Software
Trade names
Mastheads
Goodwill
Total assets
Current liabilities
Long-term liabilities
Total liabilities
Minority interest
Net assets
(a) As previously reported in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.
(b) During the six months ended June 30, 2020, the Company recognized a contingent liability of $7.0 million for earnout payments not made and finalized the
allocation of purchase price to certain customer relationships, software, and trade name intangible assets acquired. The contingent liability was paid in full
during the third quarter of 2020 and was included in financing activities on the Consolidated statement of cash flows.
9,320
950
20,492
280
2,357
1,457
1,323
140
299
2,896
20,850
60,687
11,961
463
12,424
1,651
46,612 $
(112)
—
730
—
279
—
2,942
2,130
2,105
—
(1,248)
6,826
—
50
50
—
6,776 $
323
9,208
950
21,222
280
2,636
1,457
4,265
2,270
2,404
2,896
19,602
67,513
11,961
513
12,474
1,651
53,388
$
The following unaudited pro forma consolidated results of operations assume that the acquisition of Legacy Gannett, along
with transactions necessary to finance the acquisition, occurred at the beginning of 2019 and 2018:
Year Ended
Unaudited; In thousands (except per share amounts)
Total revenues
Net loss
Loss per share - diluted
$
December 31,
2019
4,177,583 $
(292,395)
(2.27)
December 30,
2018
4,440,491
(169,617)
(1.31)
The unaudited 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.
Dispositions during 2020
On October 30, 2020, we completed the sale of BridgeTower Media, LLC. As a result of the sale, we recognized a pre-tax
gain of approximately $8.2 million, net of selling expenses and is included in Net (gain) loss on sale or disposal of assets on the
Consolidated statements of operations and comprehensive income (loss) for the year ended December 31, 2020.
81
NOTE 6 — Goodwill and intangible assets
Goodwill and intangible assets consisted of the following:
In thousands
Finite-lived intangible assets:
Advertiser relationships
Customer relationships
Subscriber relationships
Other intangible assets
Sub-total
Indefinite-lived intangible
Mastheads
Total Intangible assets
Goodwill
Year ended December 31, 2020
Year ended December 31, 2019
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
$
$
460,331 $
102,925
255,702
68,687
887,645 $
112,468 $
23,682
71,271
26,982
234,403 $
347,863 $
79,243
184,431
41,705
653,242 $
534,161 $
109,674
259,391
76,552
979,778 $
75,363 $
14,303
44,878
11,229
145,773 $
458,798
95,371
214,513
65,323
834,005
171,408
824,650
$
$
534,088
178,559
$ 1,012,564
$
914,331
As of December 31, 2020, the weighted average amortization periods for amortizable intangible assets are 11.3 years for
advertiser relationships, 9.9 years for customer relationships, 10.3 years for subscriber relationships, and 4.0 years for other
intangible assets. The weighted average amortization period in total for all amortizable intangible assets is 10.3 years.
For the years ended December 31, 2020, December 31, 2019, and December 30, 2018, amortization expense was $108.5
million, $44.7 million, and $34.0 million, respectively.
As of December 31, 2020, estimated future amortization expense as is as follows:
In thousands
2021
2022
2023
2024
2025
Thereafter
Total
$
$
103,298
96,997
91,875
90,548
82,082
188,442
653,242
Changes in the carrying amount of Goodwill by segment are as follows:
In thousands
Balance at December 30, 2018, net of accumulated impairment losses of $25,641:
Goodwill acquired in business combinations
Goodwill impairment
Goodwill related to divestitures
Measurement period adjustments
Foreign currency exchange rate changes
Balance at December 31, 2019, net of accumulated impairment losses of $87,921:
Goodwill impairment
Goodwill related to divestitures
Measurement period adjustments
Foreign currency exchange rate changes
Balance at December 31, 2020, net of accumulated impairment losses of $455,844:
Publishing
Digital
Marketing
Solutions
$
$
$
280,295 $
498,061
(62,280)
(42)
(852)
1,152
716,334 $
(321,851)
(20,328)
45,205
(2,743)
416,617 $
30,442 $
167,555
—
—
—
—
197,997 $
(40,499)
(6,592)
(33,435)
—
117,471 $
Total
310,737
665,616
(62,280)
(42)
(852)
1,152
914,331
(362,350)
(26,920)
11,770
(2,743)
534,088
82
Consistent with the Company's past practice, the Company performed its annual goodwill and indefinite-lived intangible
asset impairment assessment in the second quarter of 2020 with the assistance of third-party valuation specialists. In the
impairment analyses performed, the Company considered the current and expected future economic and market conditions and
the impact on the fair value of each of the reporting units. The primary factor that impacted the decrease in fair value was the
impact of the COVID-19 pandemic on the Company’s operations. The most significant assumptions utilized in the
determination of the estimated fair values include revenue and EBITDA projections, discount rates and long-term growth rates.
The long-term growth rates are dependent on overall market growth rates, the competitive environment, inflation and relative
currency exchange rates and could be adversely impacted by a sustained decrease in any of these measures, all of which the
Company considered in determining the long-term growth rates used in the analysis, which ranged from negative 0.5% to
positive 3%. The discount rate, which is consistent with a weighted average cost of capital that is likely to be expected by a
market participant, is based upon industry required rates of return, including consideration of both debt and equity components
of the capital structure. The discount rate may be impacted by adverse changes in the macroeconomic environment and
volatility in the equity and debt markets. The Company considered these factors in determining the discount rates used in the
analysis, which ranged from 10.0% to 15.5%.
For Goodwill, the Company primarily utilized a discounted cash flow method to calculate the fair value of each reporting
unit. Market-based metrics were reviewed to evaluate the reasonableness of the Company’s calculation. The Company
compared the fair value of each reporting unit to its carrying amount, which resulted in the carrying value of all the reporting
groups being in excess of the fair value. As a result, during the second quarter of 2020, we recorded goodwill impairment
charges of $256.5 million, $65.4 million and $40.5 million in our Domestic Publishing, Newsquest and Digital Marketing
Solutions reporting units, respectively.
For newspaper mastheads, the Company applied a "relief from royalty" approach, a discounted cash flow model, reflecting
current assumptions, to fair value the indefinite-lived intangible assets. We compared the fair value of each indefinite-lived
asset to its carrying amount, and accordingly, the Company recorded impairments of $4.0 million in both our Domestic
Publishing and Newsquest reporting units during the second quarter of 2020.
During the second quarter of 2020, the Company considered the impact of the COVID-19 pandemic on the Company’s
operations to be an indicator of impairment under ASC 360. As such, during the second quarter of 2020, the Company
performed a recoverability test for the long-lived asset groups, reflecting current assumptions, to determine whether an
impairment loss should be measured. The undiscounted cash flows used in the recoverability test for the Newsquest long-lived
asset group were less than the long-lived asset group carrying amount. The Company calculated the fair value of the long-lived
asset group and recorded a $23.0 million impairment to advertiser and other customer relationships intangible assets during the
second quarter of 2020. The discount rate and long-term growth rate assumptions were consistent with the Goodwill
assumptions discussed above. Refer to Note 7 — Integration and reorganization costs and asset impairments for further details
on the impairment of property, plant and equipment.
The severity and length of the COVID-19 pandemic, the duration and extent of the mitigation measures and governmental
actions designed to combat the pandemic, as well as the changes in customer behavior as a result of the pandemic, all of which
are highly uncertain and difficult to predict at the current time, could continue to further negatively impact the Company’s
future assessment of its results of operations and the underlying assumptions utilized in the determination of the estimated fair
values of the reporting units and related mastheads.
The newspaper industry and the Company have experienced declining same-store revenues and profitability over the past
several years. Should general economic, market or business conditions continue to decline and have a negative impact on
estimates of future cash flow and market transaction multiples, the Company may be required to record additional impairment
charges in the future.
As of December 31, 2020, the Company performed a review of potential impairment indicators noting that its financial
results and forecasted net cash flows have not changed materially since the annual impairment assessment performed in the
second quarter of 2020, and it was determined that no indicators of impairment were present.
In connection with our impairment assessment performed in connection with the acquisition of Legacy Gannett, we
recorded goodwill and intangible asset impairment charges of $100.7 million in 2019. Subsequent to the acquisition of Legacy
Gannett, as of December 31, 2019, the Company performed a review of potential impairment indicators, noting its financial
results and forecast had not changed materially since impairment assessment performed in connection with the acquisition, and
it was determined no indicators of impairment were present.
83
NOTE 7 — Integration and reorganization costs and asset impairments
Over the past several years, in furtherance of the Company’s cost-reduction and cash-preservation plans, the Company has
engaged in a series of individual restructuring programs designed primarily to right-size the Company’s employee base,
consolidate facilities, and improve operations, including those of recently acquired entities. These initiatives impact all of the
Company’s geographic regions and are often influenced by the terms of union contracts within the region. All costs related to
these programs, which primarily include severance expense, are accrued at the time of the program announcement or over the
remaining service period.
Severance-related expenses
We recorded expenses for severance and related costs by segment as follows:
In thousands
Publishing
Digital Marketing Solutions
Corporate and other
Total
December 31,
2020
Year Ended
December 31,
2019
December 30,
2018
$
$
55,655 $
6,320
24,322
86,297 $
19,556 $
1,916
19,080
40,552 $
11,678
—
262
11,940
A rollforward of the accrued severance and related costs included in Accounts payable and accrued liabilities on the
Consolidated balance sheets for the years ended December 31, 2020 and December 31, 2019 is outlined below:
In thousands
Balance at December 30, 2018
Acquired restructuring provision balances
Restructuring provision included in Integration and reorganization costs
Cash payments
Balance at December 31, 2019
Restructuring provision included in Integration and reorganization costs
Cash payments
Balance at December 31, 2020
The restructuring reserve balance is expected to be paid out over the next twelve months.
Facility consolidation and other restructuring-related expenses
We recorded facility consolidation charges and other restructuring-related costs by segment as follows:
Severance and
Related Costs
2,554
$
692
40,552
(13,013)
30,785
86,297
(86,139)
30,943
$
In thousands
Publishing
Digital Marketing Solutions
Corporate and other(a)
Total
(a) Includes a $30.4 million expense related to the early termination of the Amended and Restated Management and Advisory Agreement with FIG LLC.
5,197 $
343
53,894
59,434 $
3,931 $
286
7,443
11,660 $
$
$
2,809
—
262
3,071
December 31,
2020
Year Ended
December 31,
2019
December 30,
2018
84
Asset impairments and accelerated depreciation
As part of ongoing cost-efficiency programs, the Company has ceased a number of print operations. Pursuant to these
actions, we recorded Asset impairments by segment as follows:
In thousands
Publishing
Digital Marketing Solutions
Total
December 31,
2020
Year Ended
December 31,
2019
December 30,
2018
$
$
10,312 $
717
11,029 $
3,009 $
—
3,009 $
1,538
—
1,538
We also recorded accelerated depreciation at the Publishing segment of $49.6 million, $7.9 million, and $3.6 million for the
years ended December 31, 2020, December 31, 2019 and December 30, 2018, respectively, which are included in Depreciation
and amortization on the Consolidated statements of operations and comprehensive income (loss).
NOTE 8 — Debt
Senior Secured Convertible Notes due 2027
On November 17, 2020, the Company entered into an Exchange Agreement (the "Exchange Agreement") with certain of
the lenders (the "Exchanging Lenders") under the Company’s five-year, senior-secured 11.5% term loan facility with Apollo
Capital Management, L.P. ("Apollo") in an aggregate principal amount of approximately $1.792 billion dated November 19,
2019, (the "Acquisition Term Loan") pursuant to which the Company and the Exchanging Lenders agreed to exchange $497.1
million in aggregate principal amount of the Company’s newly issued 6.0% Senior Secured Convertible Notes due 2027 (the
"2027 Notes") for the retirement of an equal amount of term loans under the Acquisition Term Loan (the “Exchange”).
Following the Exchange, the outstanding balance under the Acquisition Term Loan was $1.019 billion (the "Remaining Term
Loan") as of December 31, 2020. The 2027 Notes were issued pursuant to an Indenture (the "Indenture") dated as of
November 17, 2020, between the Company and U.S. Bank National Association, as trustee. The Indenture, as supplemented by
the Second Supplemental Indenture, includes affirmative and negative covenants that are substantially consistent with the 5-
Year Term Loan, as well as customary events of default.
In connection with the Exchange, the Company entered into an Investor Agreement (the "Investor Agreement") with the
holders of the 2027 Notes (the "Holders") establishing certain terms and conditions concerning the rights and restrictions on the
Holders with respect to the Holders' ownership of the 2027 Notes. The Company also entered into an amendment to the
Registration Rights Agreement dated November 19, 2019, between the Company and FIG LLC. In addition, the Remaining
Term Loan was amended as described below (the "Amendment").
Interest on the 2027 Notes is payable semi-annually in arrears. The 2027 Notes mature on December 1, 2027, unless earlier
repurchased or converted. The 2027 Notes may be converted at any time by the holders into cash, shares of the Company’s
Common Stock or any combination of cash and Common Stock, at the Company's election. The initial conversion rate is 200
shares of Common Stock per $1,000 principal amount of the 2027 Notes, which is equal to a conversion price of $5.00 per
share of Common Stock (the "Conversion Price").
The conversion rate is subject to customary adjustment provisions as provided in the Indenture. In addition, the conversion
rate will be subject to adjustment in the event of any issuance or sale of Common Stock (or securities convertible into Common
Stock) at a price equal to or less than the Conversion Price in order to ensure that following such issuance or sale, the 2027
Notes would be convertible into approximately 42% of the Common Stock after giving effect to such issuance or sale
(assuming the initial principal amount of the 2027 Notes remains outstanding).
Upon the occurrence of a "Make-Whole Fundamental Change" (as defined in the Indenture), the Company will in certain
circumstances increase the conversion rate for a specified period of time. If a "Fundamental Change" (as defined in the
Indenture) occurs, the Company will be required to offer to repurchase the 2027 Notes at a repurchase price of 110% of the
principal amount thereof.
Holders of the 2027 Notes will have the right to put up to approximately $100 million of the 2027 Notes at par on or after
the date that is 91 days after the maturity date of the 5-Year Term Loan.
85
Under the Indenture, the Company can only pay cash dividends up to an agreed-upon amount, provided the ratio of
consolidated debt to EBITDA (as such terms are defined in the Indenture) does not exceed a specified ratio. In addition, the
Indenture provides that, at any time that the Company’s Total Gross Leverage Ratio (as defined in the Indenture) exceeds 1.5
and the Company approves the declaration of a dividend, the Company must offer to purchase a principal amount of 2027
Notes equal to the proposed amount of the dividend.
Until the four-year anniversary of the issuance date, the Company will have the right to redeem for cash up to
approximately $99.4 million of the 2027 Notes at a redemption price of 130% of the principal amount thereof, with such
amount reduced ratably by any principal amount of 2027 Notes that has been converted by the holders or redeemed or
purchased by the Company.
The 2027 Notes are guaranteed by Gannett Holdings LLC and any subsidiaries of the Company (collectively, the
"Guarantors") that guarantee the 5-Year Term Loan. The Notes are secured by the same collateral securing the 5-Year Term
Loan. The 2027 Notes rank as senior secured debt of the Company and are secured by a second priority lien on the same
collateral package securing the indebtedness incurred in connection with the 5-Year Term Loan.
As of December 31, 2020, the $497.1 million principal value of the 2027 Notes is separated into two components: (i) a debt
component and (ii) a derivative component. We have determined that the conversion option is not clearly and closely related to
the economic characteristics of the 2027 Notes, nor does the conversion option meet the scope exception related to contracts in
an entity’s own equity as we do not currently have the ability to control whether the settlement of the conversion feature, if
settled in full, would be in cash or shares due to the approval requirement to issue those shares. As a result, we concluded that
the embedded conversion option must be separated from the debt liability, separately valued, and accounted for as a derivative
liability. The initial value allocated to the derivative liability was $115.3 million, with a corresponding reduction in the carrying
value of the 2027 Notes. The derivative liability, which is reported within Convertible debt in the Consolidated balance sheets,
will be marked to fair value through earnings. At the Special Meeting of stockholders of the Company, held on February 26,
2021 (the "Special Meeting"), our stockholders approved the issuance of the maximum number of shares of Common Stock
issuable upon conversion of the 2027 Notes. As a result, the conversion option can be share-settled in full and the conversion
option qualifies for equity classification and meets the scope exception to derivative accounting as of February 26, 2021.
The $389.1 million debt liability component was initially measured at fair value using the present value of its cash flows at
a discount rate of 10.7% and is reported as Convertible debt in the Consolidated balance sheets. The debt component of the
2027 Notes is classified as Level 2 because it is measured at fair value using commonly accepted valuation methodologies and
indirectly observable, market-based risk measurements and historical data, and a review of prices and terms available for
similar debt instruments that do not contain a conversion feature.
As of November 17, 2020, the date of issuance and December 31, 2020, the estimated fair value of the derivative liability
for the embedded conversion feature is $115.3 million and $189.6 million, respectively, and is reported within Convertible debt
in the Consolidated balance sheets. The derivative liability is classified as Level 3 because it is measured at fair value on a
recurring basis using a binomial lattice model using assumptions based on market information and historical data, and
significant unobservable inputs. The increase in the fair value of the derivative liability of $74.3 million from its initial value
was due to the increase in our stock price and was recorded in Non-Operating Other (income) expense, net in the Consolidated
statements of operations and comprehensive income (loss) for the year ended December 31, 2020. The assumptions used to
determine the fair value as of December 31, 2020 were:
Annual volatility
Discount rate
December 31, 2020
70.0 %
9.3 %
Increases or decreases in the discount rate would have inverse impacts on the fair value of the derivative liability, while
changes in the volatility would have corresponding increases or decreases in the fair value of the derivative liability.
Total debt issuance costs of $2.3 million will be amortized over the 7-year contractual life of the 2027 Notes. The total
unamortized discount of $110.3 million and $108.7 million as of November 17, 2020, and December 31, 2020, respectively,
will be amortized over the remaining contractual life of the 2027 Notes. For the year ended December 31, 2020, interest
expense on the 2027 Notes totaled $3.6 million. Amortization of debt issuance costs were immaterial for the year ended
December 31, 2020. Amortization of the discount was $1.6 million for the year ended December 31, 2020. The effective
interest rate on the liability component of the 2027 Notes was 10.5% as of December 31, 2020.
86
For the year ended December 31, 2020, no shares were issued upon conversion, exercise, or satisfaction of the required
conditions. Refer to Note 12 — Supplemental equity information for details on the convertible debt's impact to diluted earnings
per share under the if-converted method.
Permitted Financing Under the 2027 Notes
The Company may refinance the Remaining Term Loan with new first lien debt, as long as the new first lien debt satisfies
the requirements of a Permitted Refinancing. New first lien debt will constitute a "Permitted Refinancing" so long as, among
other things, (i) the principal amount of the new debt does not exceed the balance of the Remaining Term Loan (plus interest
and fees), (ii) the all-in-yield of the new debt does not exceed 9.5% per annum and (iii) the other terms of the new debt are no
less favorable to the Company.
Refer to Note 16 — Subsequent events for discussion of the refinancing of the Remaining Term Loan on February 9, 2021,
as permitted by the Indenture. Holders of the 2027 Notes had the option to require the Company to repurchase their 2027 Notes
at a price equal to 101.5% of par, which amount would increase by 1.5% on each three month anniversary of the issuance date
of the 2027 Notes. The Indenture permits the Company to raise additional first lien or second lien debt to finance any such
repurchases, subject to certain conditions set forth therein. No holders of the 2027 Notes exercised their option to require the
Company to repurchase their 2027 Notes in connection with the refinancing of the Remaining Term Loan.
Acquisition Term Loan
On November 19, 2019, pursuant to the acquisition of Legacy Gannett, the Company entered into the Acquisition Term
Loan, which matures on November 19, 2024. Origination fees totaled 6.5% of the total principal amount of the financing at
closing.
In connection with the Exchange, the Company, the Guarantors, Alter Domus Products Corp., as administrative agent and
collateral agent, and the lenders under the Acquisition Term Loan executed the Amendment which, among other things, (i)
requires quarterly amortization payments in an amount equal to the interest rate savings resulting from the Exchange for the
applicable quarter, (ii) increases the threshold under the requirement for prepayment of the Acquisition Term Loan with
unrestricted cash and cash equivalents in excess of $40 million from $40 million to $70 million for the 2020 fiscal year and (iii)
replaces Apollo's right to appoint directors to the Board in the event the gross leverage ratio exceeds certain thresholds with the
right to increase the size of the Board of Directors and to nominate directors for election to the Board in the event the gross
leverage ratio exceeds such thresholds. As of December 31, 2020, the total gross leverage ratio exceeded certain thresholds,
whereby Apollo had the right to nominate one voting director. As of December 31, 2020, the Company is in compliance with all
of the covenants and obligations under the Acquisition Term Loan. Upon the occurrence and during the continuance of an Event
of Default (as defined in the Acquisition Term Loan), the interest rate increases by 2.0%. The proceeds from the 5-Year Term
Loan were used to repay the Acquisition Term Loan (the "Payoff"), and we are no longer subject to the terms of the Acquisition
Term Loan.
In connection with the Acquisition Term Loan, the Company incurred approximately $4.9 million of fees and expenses and
$116.6 million of lender fees which were capitalized and will be amortized over the term of the Acquisition Term Loan using
the effective interest method.
The Company used the proceeds of the Acquisition Term Loan to (i) partially fund the acquisition of Legacy Gannett, (ii)
repay, prepay, repurchase, redeem, or otherwise discharge in full each of the existing financing facilities (as defined in the
agreement and discussed in part below), and (iii) pay fees and expenses incurred to obtain the Acquisition Term Loan. The
Company is permitted to prepay the principal of the Acquisition Term Loan, in whole or in part, at par plus accrued and unpaid
interest, without any prepayment premium or penalty. The Acquisition Term Loan is guaranteed by the material wholly-owned
subsidiaries of the Company, and all obligations of the Company and its subsidiary guarantors are or will be secured by first
priority liens on certain material real property, equity interests, land, buildings, and fixtures. The Acquisition Term Loan
contains customary representations and warranties, affirmative covenants, and negative covenants applicable to the Company
and its subsidiaries, including, among other things, restrictions on indebtedness, liens, investments, fundamental changes,
dispositions, dividends and other distributions, capital expenditures, and events of default.
As of December 31, 2020, the Company had $1.075 billion in aggregate principal outstanding under the Acquisition Term
Loan, $2.4 million of deferred financing costs, and $54.0 million of capitalized lender fees. During the year ended December
31, 2020, the Company recorded $194.0 million in interest expense, $24.0 million in amortization of deferred financing costs,
87
and $43.8 million related to loss on early extinguishment of debt, including $34.0 million related to the Exchange and $9.8
million related to early prepayments. During the year ended December 31, 2020, the Company paid interest of $217.5 million.
The effective interest rate is 12.9%. As of December 31, 2020, the Company reclassified $128.4 million of the Acquisition Term
Loan to the Current portion of long-term debt on the Consolidated balance sheets, which represents (i) 50% of the Company's
excess cash flow (as such term is defined in the Acquisition Term Loan) and (ii) quarterly amortization payments in an amount
equal to the interest rate savings resulting from the Exchange measured at the end of 2020.
Senior Convertible Notes due 2024
On April 9, 2018, Legacy Gannett completed an offering of 4.75% convertible senior notes (the "2024 Notes"), with an
initial offering size of $175.0 million aggregate principal amount. As part of the offering, the initial purchaser of the 2024 Notes
exercised its option to purchase an additional $26.3 million aggregate principal amount of notes, resulting in total aggregate
principal of $201.3 million and net proceeds of approximately $195.3 million. Interest on the 2024 Notes is payable semi-
annually in arrears. The 2024 Notes mature on April 15, 2024 with the earliest redemption date being April 15, 2022. The stated
conversion rate of the notes is 82.4572 shares per $1,000 in principal or approximately $12.13 per share.
Upon conversion, we have the option to settle in cash, shares of our common stock, or a combination of the two.
Additionally, holders may convert the 2024 Notes at their option prior to January 15, 2024, only if one or more of the following
conditions are present: (i) if, during any 20 of the 30 trading days immediately preceding a quarter end, our common stock
trading price is 130% of the stated conversion price, (ii) if, during the 5 business day period after any 10 consecutive trading
day period, the trading price per $1,000 principal amount of notes is less than 98% of the product of (a) the last reported sale
price of the Company's common stock and (b) the conversion rate on each such trading day, or (iii) a qualified change in control
event occurs. Depending on the nature of the triggering event, the conversion rate may also be subject to adjustment.
The Company's acquisition of Legacy Gannett constituted a Fundamental Change and Make-Whole Fundamental Change
under the terms of the indenture governing the 2024 Notes. At the acquisition date, the Company delivered to the holders of the
2024 Notes a notice offering the right to surrender all or a portion of their notes for cash on December 31, 2019. Holders were
required to surrender their notes by December 30, 2019, and in return, the Company redeemed the 2024 Notes for either (i) cash
at a repurchase price equal to 100% of the principal amount, plus accrued and unpaid interest from October 15, 2019, to
December 29, 2019, or (ii) converted equity plus cash at the stated conversion rate of 82.4572 shares per $1,000 in principal,
comprised of 0.5427 shares of Parent common stock, plus $6.25 of cash. On December 31, 2019, the Company completed the
redemption of $198.0 million in aggregate principal in exchange for cash.
As of December 31, 2020 and 2019, the $3.3 million principal value of the 2024 Notes is reported as Convertible debt in
the Consolidated balance sheets. The effective interest rate on the notes was 6.05% as of December 31, 2020. During the year
ended December 31, 2020, the Company recorded $0.2 million in interest expense, of which $0.1 million is cash interest paid
on aforementioned redemption.
Future debt obligation payments
Future debt obligation payments are as follows:
In thousands
2021
2022
2023
2024
2025
Thereafter
Total debt obligations
Year ended
December 31,
128,065
27,340
27,340
895,705
—
497,094
1,575,544
$
$
88
NOTE 9 — Pensions and other postretirement benefit plans
The Company, along with our subsidiaries, sponsor various defined benefit plans, including plans established under
collective bargaining agreements. Our retirement plans include: the Gannett Retirement Plan ("GR Plan"), the Newsquest and
Romanes Pension Schemes in the U.K. ("U.K. Pension Plans"), the Newspaper Guild of Detroit Pension Plan, the George W.
Prescott Publishing Company Pension Plan (the "GWP Plan") and the Times Publishing Company Defined Benefit Pension
Plan (the "TPC Plan") plan. The GWP Plan was amended to freeze all future benefit accruals by December 31, 2008, except for
a select group of union employees whose benefits were frozen in 2009, the GR Plan was amended to freeze all future benefit
accruals by August 1, 2008, except for a select group of unions and the TPC Plan was frozen as of May 31, 2007, prior to the
Company's acquisition of the TPC Plan.
The Company also maintains several postretirement medical and life insurance plans which cover certain employees. 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.
The following table presents the change in the projected benefit obligation for the years ended December 31:
In thousands
Projected benefit obligation at beginning of period
Service cost
Interest cost
Change in prior service cost
Actuarial (gain) loss
Foreign currency translation
Benefits and expenses paid
Acquisitions
Settlements
Participant contributions
Administrative expenses
Employer implicit subsidy fulfilled
Projected benefit obligation at end of period
Pension Benefits
2020
2,973,182 $
2,618
82,581
1,905
257,110
38,003
(187,014)
—
(6,336)
—
(903)
—
3,161,146 $
2019
74,190 $
999
12,408
—
3,701
11,812
(111,842)
2,981,914
—
—
—
—
2,973,182 $
$
$
Postretirement Benefits
2019
2020
73,667 $
105
2,315
—
6,648
—
(7,149)
—
—
—
—
—
75,586 $
4,330
17
419
—
(484)
—
(1,117)
70,325
—
200
—
(23)
73,667
89
The following table presents the change in the fair value of plan assets for the years ended December 31 and the plans’
funded status at December 31:
In thousands
Fair value of plan assets at beginning of period
Actual return on plan assets
Employer contributions
Participant contributions
Acquisitions
Settlements
Benefits paid
Administrative expenses
Foreign currency translation
Expenses paid
Fair value of plan assets at end of period
Funded status at end of period
Unrecognized actuarial (gain) loss
Unrecognized prior service cost
Net accrued benefit cost
$
$
Pension Benefits
2020
2,856,296 $
481,311
41,018
—
—
(6,322)
(187,014)
(903)
40,986
—
3,225,372 $
64,226
(69,640)
1,905
(3,509)
2019
54,035 $
38,054
91,466
—
2,771,796
—
(111,022)
—
12,787
(820)
2,856,296 $
(116,886)
(4,527)
—
(121,413)
Postretirement Benefits
2019
2020
— $
—
7,078
—
—
—
(7,078)
—
—
—
— $
(75,586)
5,195
—
(70,391)
—
—
844
164
—
—
(1,008)
—
—
—
—
(73,667)
(1,518)
—
(75,185)
Amounts recognized in the Consolidated balance sheets at December 31 are listed below:
In thousands
Other assets
Accounts payable and accrued liabilities
Pension and other postretirement benefit obligations
Accumulated other comprehensive (loss) income
Net accrued benefit cost
Pension Benefits
2020
2019
Postretirement Benefits
2019
2020
$
$
95,180 $
332
30,622
67,735
(3,509) $
58,818 $
6,771
168,933
4,527
(121,413) $
— $
6,443
69,143
(5,195)
(70,391) $
—
6,694
66,973
1,518
(75,185)
Accumulated pension benefit obligations were $3.2 billion and $3.0 billion as of December 31, 2020 and 2019,
respectively. For the Funded plans, the fair value of plan assets exceeds the projected benefit obligation and accumulated
benefit obligation. For the Underfunded plans, the projected benefit obligation and accumulated benefit obligation exceed the
fair value of plan assets. Information about funded and unfunded pension plans at December 31:
In thousands
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
Funded plans
2020
$ 2,957,432 $
2,956,973
3,052,612
2019
932,357 $
932,357
991,173
Underfunded plans
2020
203,714 $
201,755
172,760
2019
2,040,825
2,039,075
1,865,123
Net periodic benefit cost and amounts recognized in Other comprehensive income (loss)
The combined net pension and postretirement benefit recognized in the Consolidated statements of operations was $69.4
million, $8.1 million and $0.8 million for the years ended December 31, 2020, December 31, 2019, and December 30, 2018,
respectively.
90
The following table presents the components of net periodic benefit expense (benefit) at December 31, 2020, December 31,
2019 and December 30, 2018:
In thousands
Components of net periodic benefit cost:
Operating expenses:
Service cost
Non-operating expenses:
Interest cost
Expected return on plan assets
Amortization of unrecognized loss (gain)
Other adjustment
Non-operating (income) expense included in
Other (income) expense
Net periodic expense (benefit)
Other changes in plan assets and benefit
obligations recognized in Other
comprehensive income (loss):
Net actuarial loss (gain)
Change in prior service cost
Amortization of net actuarial gain (loss)
Other adjustment
Amount recognized in Other comprehensive
income (loss)
Pension Benefits
2019
2018
2020
Postretirement Benefits
2019
2020
2018
$
2,618 $
999 $
606 $
105 $
17 $
82,581
(157,082)
102
—
(74,399)
$ (71,781) $
12,408
(22,303)
158
305
(9,432)
(8,433) $
2,775
(4,452)
113
—
(1,564)
(958) $
2,315
—
(65)
—
2,250
2,355 $
419
—
(72)
—
347
364 $
$
(67,119) $ (12,050) $
1,905
(102)
2,108
—
(158)
(305)
$ (63,208) $ (12,513) $
1,872 $
—
(113)
—
1,759 $
6,648 $
—
65
—
6,713 $
(484) $
—
72
—
(412) $
7
153
—
(24)
—
129
136
(363)
—
24
—
(339)
The aggregate amount of net actuarial gain related to the Company’s pension plans recognized in other comprehensive
(loss) income as of December 31, 2020 was $67.1 million.
Assumptions
The following assumptions were used in connection with the Company’s actuarial valuation of its pension plans and
postretirement benefit obligations at December 31:
Pension Benefits
2020
2019
Postretirement Benefits
2019
2020
Weighted average discount rate
Rate of increase in future compensation levels (a)
Current year medical trend
Ultimate year medical trend
Year of ultimate trend
(a) Relates only to the GR Plan, the 2015 SERP and the Newspaper Guild of Detroit defined benefit pension plans.
2.2 %
2.0 %
N/A
N/A
N/A
2.9 %
2.0 %
N/A
N/A
N/A
2.6 %
N/A
5.5 %
4.5 %
2025
3.3 %
N/A
5.9 %
4.5 %
2034
The following assumptions were used to calculate the net periodic benefit cost for the Company’s pension plans and
postretirement benefit obligations at December 31, 2020 and 2019 and December 30, 2018:
Pension Benefits
2019
2020
2018
Postretirement Benefits
2019
2020
2018
Weighted average discount rate
Rate of increase in future compensation levels
(a)
Weighted average expected return on assets
Current year medical trend
Ultimate year medical trend
Year of ultimate trend
(a) Relates only to the GR Plan, the 2015 SERP and the Newspaper Guild of Detroit defined benefit pension plans.
3.1 %
2.0 %
6.1 %
N/A
N/A
N/A
2.9 %
2.0 %
5.8 %
N/A
N/A
N/A
3.5 %
— %
7.5 %
N/A
N/A
N/A
3.3 %
N/A
N/A
6.0 %
4.5 %
2025
3.3 %
N/A
N/A
6.1 %
4.5 %
2035
3.3 %
N/A
N/A
6.4 %
4.5 %
2026
91
To determine the expected long-term rate of return on pension plan assets, the Company considers the current and expected
asset allocations as well as historical and expected returns on various categories of plan assets, input from the actuaries and
investment consultants, and long-term inflation assumptions. The expected allocation of pension plan assets is based on a
diversified portfolio consisting of domestic and international equity securities and fixed income securities. This expected return
is then applied to the fair value of plan assets. The Company amortizes experience gains and losses, including the effects of
changes in actuarial assumptions and plan provisions, over a period equal to the average future service of plan participants or
over the average remaining life expectancy of inactive participants.
The fiduciaries of the pension plans set investment policies and strategies for the pension trusts. Objectives include
preserving the funded status of the plan and balancing risk against return.
The weighted average target asset allocation of our plans for 2021 and allocations at the end of 2020 and 2019, 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.
Target
Allocation
2021
30%
52%
18%
100%
Allocation of Plan Assets
2019
2020
39%
36%
46%
50%
15%
14%
100%
100%
During the year ended December 31, 2020, we contributed $41.0 million and $7.1 million to our pension and other
postretirement plans, respectively. In response to the COVID-19 pandemic, the GR Plan in the U.S. has deferred certain
contractual contributions and negotiated a contribution payment plan of $5 million per quarter starting December 31, 2020,
through the end of September 30, 2022. Additionally, $11 million in minimum required contributions for the 2019 plan year, as
required by the Employee Retirement Income Security Act of 1974 ("ERISA"), were deferred until January 4, 2021 and have
been paid.
Expected Future Benefit Payments
We expect to make the following benefit payments, which reflect expected future service. The amounts below represent the
benefit payments for our pension plans.
In thousands
2021
2022
2023
2024
2025
Thereafter
$
Pension
Benefits
Postretirement
Benefits
196,340 $
192,772
188,865
187,303
184,634
818,771
6,415
6,130
5,840
5,543
5,238
22,044
The amounts above exclude the participants' share of the benefit cost. We expect no subsidy benefits for 2021 and beyond.
Employer contributions, for the Company's defined benefit pension plans, expected to be paid during the year ending
December 31, 2021, is $58.2 million.
Multiemployer plans
The Company is a participant in six multiemployer pension plans covering certain employees with collective bargaining
agreements ("CBAs"). The risks of participating in these multiemployer plans are different from single-employer plans in the
following aspects:
• The Company plays no part in the management of plan investments or any other aspect of plan administration;
• Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other
participating employers;
92
•
•
If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the
remaining participating employers; and
If the Company chooses to stop participating in some of its multiemployer plans, the Company may be required to pay
those plans an amount based on the unfunded status of the plan, referred to as withdrawal liability.
The Company’s participation in these plans for the year ended December 31, 2020, is outlined in the table below. The
"EIN/Pension Plan Number" column provides the Employee Identification Number (EIN) and the three-digit plan number.
Unless otherwise noted, the two most recent Pension Protection Act (PPA) zone statuses available are for the plans for the years
ended December 31, 2020, and December 31, 2019, respectively. The zone status is based on information the Company
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 (i) less than 80% funded and (ii) 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. The Company makes all required contributions to these plans as determined under the respective
CBAs. For each of the plans listed below, the Company’s contribution represented less than 5% of total contributions to the
plan.
Pension Plan Name
CWA/ITU Negotiated Pension Plan
GCIU—Employer Retirement Benefit
Plan(a)
The Newspaper Guild International
Pension Plan(a)
IAM National Pension Plan(a) (b)
Teamsters Pension Trust Fund of
Philadelphia and Vicinity(a)
EIN
Number/Plan
Number
13-
6212879/001
91-
6024903/001
52-
1082662/001
51-
6031295/002
December
Zone Status
Year Ended
31, 2020 December
31, 2019
Red
Red
FIP/RP Status
Pending/Implemented
Implemented
Contributions
(In thousands)
2019 2018
2020
$ 393 $ 51 $ 9
Surcharge
Imposed
No
Red
Red
Red
Red
Implemented
Implemented
89
75
78
92
31
19
Expiration
Dates of
CBAs
Under
negotiation
1/5/2022
Under
negotiation
and June 8,
2019
1/7/2022
(c)
1/10/2022
No
No
Yes
N/A
N/A
Red
Red
Implemented
23-1511735/001 Yellow Yellow
Implemented
173
11 —
1,218 139 —
N/A
Central Pension Fund of the
International Union of Operating
Engineers and Participating
l
Total
(a) This plan has elected to utilize special amortization provisions provided under the Preservation of Access to Care for Medicare Beneficiaries and Pension
$ 2,024 $ 313 $ 106
Green as
of Jan.
31, 2019
Green as
of Jan.
31, 2020
36-
6052390/001
6 —
59
( )
Relief Act of 2010.
(b) The trustees of this plan have voluntarily elected to put the fund in critical status to strengthen its funding position.
(c)
In February 2018, an interim agreement was executed to maintain the terms and contributions of the plan past the expiration date of 12/31/2017. This
agreement is subject to additional negotiation.
The Company assumed three multiemployer plan withdrawal liabilities in connection with the acquisition of Legacy
Gannett. The liability on the acquisition date was estimated to be approximately $40.8 million, excluding interest. The penalties
are payable over 20 years. The total unpaid balance for the Company's withdrawal liabilities as of December 31, 2020, is
approximately $45.1 million.
Defined contribution plans
In connection with the acquisition of Legacy Gannett, the Company assumed sponsorship of the Gannett Co., Inc. 401(k)
Savings Plan, which was renamed the Gannett Media Corp 401(k) Savings Plan (the "Gannett 401(k) Plan") effective January
1, 2021. On January 1, 2021, the New Media Investment Group Inc. Retirement Savings Plan (the "New Media 401(k) Plan")
was merged into the Gannett 401(k) Plan (collectively, the "Savings Plans") and the New Media 401(k) Plan was discontinued.
Under the Gannett 401(k) Plan, employees are immediately eligible to participate, while under the New Media 401(k) Plan,
eligible employees were required to satisfy certain age and service requirements to participate. Effective January 1, 2021,
employees covered under collective bargaining agreements are eligible to participate in the Gannett 401(k) Plan only if
participation has been bargained, unless previously eligible in the New Media 401(k) Plan. Employees covered by the Gannett
401(k) Plan can elect to save up to 75% of compensation on a pre-tax basis, subject to IRS limitations and for most participants,
the plan's matching formula was 100% of the first 4% of employee contributions and 50% on the next 2% of employee
93
contributions. Under the New Media 401(k) Plan, eligible employees were able to contribute up to 100% of their eligible
compensation, subject to IRS limitations. The New Media 401(k) Plan also provided for discretionary matching and non-
elective contributions that could be made in separate amounts among different allocation groups. Matching contributions to the
Savings Plans, with the exception of certain employees covered under collective bargain agreements, were suspended in August
2020 and have not resumed. For the years ended December 31, 2020, December 31, 2019, and December 30, 2018, the
Company's matching contributions to the Savings Plans were $16.0 million, $4.9 million and $4.0 million.
NOTE 10 — Fair value measurement
In accordance with ASC 820, "Fair Value Measurement," fair value measurements are required to be disclosed using a
three-tiered fair value hierarchy which distinguishes between assumptions based on market data (observable inputs) and the
Company’s own assumptions (unobservable inputs). Level 1 refers to fair values determined based on quoted prices in active
markets for identical assets or liabilities, Level 2 refers to fair values estimated using significant other observable inputs and
Level 3 includes fair values estimated using significant unobservable inputs.
As of December 31, 2020, and December 31, 2019, assets and liabilities recorded at fair value and measured on a recurring
basis primarily consist of pension plan assets. As permitted by GAAP, we use net asset values ("NAV") as a practical expedient
to determine the fair value of certain investments. These investments measured at NAV have not been classified in the fair value
hierarchy.
The Acquisition Term Loan is recorded at carrying value, which approximates fair value, in the Consolidated balance
sheets and is classified as Level 3. Refer to additional discussion regarding fair value of the 2027 Notes, including debt and
embedded derivative components in Note 8 — Debt.
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). Assets held for sale (Level 3) are measured on a nonrecurring basis and are evaluated using executed purchase
agreements, letters of intent or third-party valuation analyses when certain circumstances arise. At December 31, 2020 and
December 31, 2019, the Company had Assets held for sale of $14.7 million and $25.5 million, respectively.
94
The following table sets forth by level, within the fair value hierarchy, the fair values of assets and liabilities related to the
following pension plans: the (i) GWP Plan, (ii) TPC Plan, (iii) GR Plan, (iv) U.K. Pension Plans and (v) Newspaper Guild of
Detroit Pension Plan as of December 31, 2020:
Pension Plan Assets and Liabilities as of December 31, 2020
In thousands
Assets:
Cash and cash equivalents
Corporate common stock
Real estate
Interest in common/collective trusts:
Equities
Fixed income
Interest in 103-12 investment entities
Partnership/joint venture interests
Hedge funds
Derivative contracts
Total plan assets at fair value excluding those measured at NAV
Instruments measured at NAV using the practical expedient:
Real estate funds
Interest in common/collective trusts:
Equities
Fixed income
Partnership/joint venture interests
Total plan assets at fair value
Liabilities:
Derivative liabilities
Total plan liabilities at fair value
$
$
$
$
Level 1
Level 2
Level 3
Total
14,975 $
517,123
—
19,398
23,481
—
—
—
3,307
578,284 $
4,577 $
—
1,096
559,190
1,427,963
76,430
—
—
—
2,069,256 $
— $
—
125,929
—
—
—
174,789
113,850
2
414,570 $
$
19,552
517,123
127,025
578,588
1,451,444
76,430
174,789
113,850
3,309
3,062,110
10,581
48,632
53,178
53,377
3,227,878
— $
— $
(498) $
(498) $
(2,008) $
(2,008) $
(2,506)
(2,506)
The following table set forth a summary of changes in the fair value of the Level 3 pension plan assets and liabilities that
for the year ended December 31, 2020:
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
Balance at
End of
Year
$
99,223 $
149,018
123,126
5
$ 371,372 $
2,556 $
2,845
5,724
(3)
11,122 $
— $
—
—
—
— $
— $
24,150 $
54,543
—
—
— $ 125,929
—
174,789
(15,000)
113,850
—
2
78,693 $ (31,617) $ (15,000) $ 414,570
(31,617)
—
—
$
2,008 $
— $
— $
— $
— $
— $
2,008
In thousands
Assets:
Real estate
Partnership/joint venture interests
Hedge funds
Derivative contracts
Total assets
Liabilities:
Derivative liabilities
There were no transfers between Levels 1 and 2 for the year ended December 31, 2020.
95
The following table sets forth by level, within the fair value hierarchy, the fair values of assets and liabilities related to the
following pension plans: the (i) GWP Plan, (ii) TPC Plan, (iii) GR Plan, (iv) U.K. Pension Plans and (v) the Newspaper Guild
of Detroit Pension Plan as of December 31, 2019:
Pension Plan Assets and Liabilities as of December 31, 2019
In thousands
Assets:
Cash and cash equivalents
Corporate common stock
Real estate
Interest in registered investment companies:
$
Equities
Fixed income
Interest in 103-12 investment entities
Partnership/joint venture interests
Hedge funds
Derivative contracts
Total plan assets at fair value, excluding those measured at NAV $
Assets measured at NAV using the practical expedient:
Real estate
Interest in common/collective trusts:
Equities
Fixed income
Partnership/joint venture interests
Total plan assets at fair value
Liabilities:
Derivative liabilities
Total plan liabilities at fair value
Level 1
Level 2
Level 3
Total
27,884 $
537,295
— $
19,191
27,237
—
—
—
—
611,607 $
4,003 $
—
1,202
— $
—
99,223
31,887
537,295
100,425
523,300
1,124,852
81,326
—
—
—
1,734,683 $
—
—
—
149,018
123,126
5
371,372 $
$
542,491
1,152,089
81,326
149,018
123,126
5
2,717,662
10,966
41,547
52,116
37,145
2,859,436
$
$
(634) $
(634) $
(498) $
(498) $
(2,008) $
(2,008) $
(3,140)
(3,140)
For the year ended December 31, 2019, the Company applied the practical expedient for certain assets where the NAV of
the fund was available from the administrator but was not provided to the Company on a daily basis. As a result, at
December 31, 2019, the Company presented these funds as measured at NAV using the practical expedient. As the fair value of
such assets was available to the Company on a daily basis, we have determined that the valuation of such assets should have
been included in the fair value hierarchy in accordance with ASU 2018-09 and have reflected this in the fair value measurement
table as of December 31, 2019 included above. The impact of this change was an increase in Interest in registered investment
companies and Interest in 103-12 investment entities of $989.0 million in the fair value hierarchy and a corresponding decrease
in those assets measured at NAV using the practical expedient as of December 31, 2019. There was no change to the total value
of plan assets as of December 31, 2019.
The following table set forth a summary of changes in the fair value of the Level 3 pension plan assets and liabilities that
for the year ended December 31, 2019:
In thousands
Assets:
Real estate
Partnership/joint
venture interests
Hedge funds
Derivative contracts
Total assets
Liabilities:
Derivative liabilities $
$
Actual Return on Plan
Assets
Relating to
Assets Still
Held at
Report
Date
Relating to
Assets Sold
During the
Period
Balance at
Beginning
of Year
Level 3
Assets
Acquired
Purchases
Sales
Settlements
Balance at
End of
Year
$
— $ 109,047 $
(1,324) $
2,911 $
— $ (11,411) $
— $ 99,223
147,225
121,588
4
—
—
—
— $ 377,864 $
3,185
1,538
1
3,400 $
—
—
—
2,911 $
133
—
—
133 $ (11,411) $
—
—
—
(1,525)
—
—
149,018
123,126
5
(1,525) $ 371,372
— $
2,008 $
— $
— $
— $
— $
— $
2,008
96
There were no transfers between Levels 1 and 2 for the year ended December 31, 2019.
Valuation methodologies used for pension plan assets and liabilities measured at fair value are as follows:
• Corporate common 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 using net asset values provided by the administrator of the underlying fund available daily to the
Company. Unit price of common/collective trusts are often based on underlying investments which are traded on an
active market. Where daily net asset values are not provided, interests in common/collective trusts and interests in 103-
12 investments are 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;
Investments in partnerships and joint venture interests classified in Level 3 are valued based on an assessment of each
underlying investment, considering items such as expected cash flows, changes in market outlook and subsequent
rounds of financing. These investments are included in Level 3 of the fair value hierarchy because exit prices tend to
be unobservable and reliance is placed on the above methods. Most of the partnerships are general leveraged buyout
funds, others include a venture capital fund, a fund formed to invest in special credit opportunities, an infrastructure
fund and a real estate fund. Interest in partnership investments could be sold on the secondary market but cannot be
redeemed. Instead, distributions are received as the underlying assets of the funds are liquidated. As of December 31,
2020 and 2019, there are $6.6 million and $7.0 million, respectively, 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 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 a potential 5% holdback; and
• 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 values, audited financial statements and additional information to evaluate fair value estimates from
our investment managers and/or fund administrator.
NOTE 11 — Income taxes
The components of Net income (loss) before income taxes consist of the following:
December 31,
2020
(646,795) $
(59,052)
(705,847) $
$
$
Year Ended
December 31,
2019
(206,270) $
(914)
(207,184) $
December 30,
2018
20,019
—
20,019
In thousands
Domestic
Foreign
Total
97
The Provision (benefit) for income taxes consists of the following:
In thousands
Current:
Federal
State and local
Foreign
Total current
Deferred:
Federal
State and local
Foreign
Total deferred
Provision (benefit) for income taxes
December 31,
2020
Year Ended
December 31,
2019
December 30,
2018
$
$
(6,896) $
1,877
1,744
(3,275)
(20,832)
(12,064)
2,721
(30,175)
(33,450) $
113 $
1,725
(68)
1,770
(85,144)
(2,833)
213
(87,764)
(85,994) $
—
1,679
—
1,679
(2,690)
2,923
—
233
1,912
The Provision (benefit) for income taxes varies from the Federal statutory tax rate as a result of the following differences:
Federal statutory tax rate
Increase (decrease) in taxes resulting from:
State and local income taxes, net of federal benefit
Debt refinancing
Change in valuation allowance
Non-deductible meals, entertainment, and other expenses
Transaction costs
Goodwill Impairment
Effective tax rate
*** Indicates a percentage that is not meaningful.
December 31,
2020
Year Ended
December 31,
2019
December 30,
2018
21.0 %
21.0 %
21.0 %
1.4
(2.5)
(9.2)
(0.4)
(0.1)
(5.5)
4.7 %
0.7
—
22.6
(0.8)
(2.0)
—
41.5 %
21.1
—
(13.4)
5.0
—
(24.1)
9.6 %
98
The tax effects of temporary differences that give rise to the deferred tax assets and deferred tax liabilities are presented
below:
In thousands
Deferred tax liabilities:
Fixed Assets
Right of use asset
Convertible debt
Definite and indefinite lived intangible assets
Total deferred tax liabilities
Deferred tax assets:
Accrued compensation costs
Accrued liabilities
Disallowed interest
Goodwill
Pension and other postretirement benefit obligations
Partnership investments including impairments
Loss carryforwards
Lease liabilities
Derivative liability
Other
Total deferred tax assets
Less: Valuation allowance
Total net deferred tax assets
Noncurrent net deferred tax assets (liabilities)
Year Ended
December 31,
2020
December 31,
2019
$
$
$
$
$
(31,439) $
(82,275)
(27,674)
(62,666)
(204,054) $
33,325
18,341
56,527
27,182
21,525
3,837
233,049
82,369
32,534
29,286
537,975 $
(250,536)
287,439 $
83,385 $
(30,246)
(83,588)
—
(85,528)
(199,362)
32,719
16,717
11,247
—
56,611
7,971
189,912
85,177
—
25,073
425,427
(158,820)
266,607
67,245
In assessing the realizability of deferred tax assets, management considered whether it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which those temporary differences become deductible. During the
year ended December 31, 2020, the Company recorded $90 million of valuation allowances against its deferred tax assets. The
Company considered all available evidence, both positive and negative, to determine whether, based on the weight of that
evidence, a valuation allowance for deferred tax assets was needed. The Company reached the conclusion it was appropriate to
record a valuation allowance against a portion of its federal deferred tax assets in light of available evidence. We relied on
evidence shown by reversing taxable temporary differences, as well as expectations of future taxable income with the
appropriate tax character. The increase in valuation allowance relates to non-deductible interest expense and capital loss
carryforwards. During the year ended December 31, 2019, the Company released $46.9 million of valuation allowance against
net deferred tax assets and federal net operating losses. The Company continues to maintain its existing valuation allowance
against net deferred tax assets in many of its state and foreign jurisdictions as it is not believed to be more likely than not that its
deferred tax assets will be realized in such jurisdictions.
The following table summarizes the activity related to our valuation allowance for deferred tax assets for the year ended
December 31, 2020 (In thousands):
Balance at
Beginning of
Period
Additions/(Reductions)
Charged to Expenses
Additions/(Reductions)
for
Acquisitions/Dispositions
Other Additions to
(Deductions from)
Reserves
Foreign Currency
Translation
Balance at End of
Period
$
158,820 $
90,444 $
— $
— $
1,272 $
250,536
The aforementioned valuation allowance relates to unamortizable intangible assets, nondeductible interest expense
carryforwards, capital losses, state and foreign net operating losses and other tax attributes that are deemed unrealizable as of
December 31, 2020.
As of December 31, 2020, the Company had $543.5 million of Federal net operating loss ("NOL") carryforwards, $219.7
million of Federal disallowed business interest expense carryforwards, $1.136 billion of apportioned state NOL carryforwards,
99
and $194.3 million of foreign net NOL carryforwards, which are available to offset future taxable income. Additionally, as of
December 31, 2020, the Company had $7.6 million of other business tax credits, $2.4 million of foreign tax credits, $5.8
million of state credits, and $34.7 million of foreign capital loss carryforwards. The Federal NOL carryforwards begin to expire
in 2031 and the state NOL carryforwards began to expire in 2020. A portion of the NOL's are subject to the limitations of
Internal Revenue Code Section 382. This section provides limitations on the availability of NOL's to offset current taxable
income if significant ownership changes have occurred for federal tax purposes.
The following table summarizes the activity related to unrecognized tax benefits, excluding the federal tax benefit of state
tax deductions:
In thousands
Change in unrecognized tax benefits
Balance at beginning of year
Additions based on tax positions related to the current year
Additions for tax positions of prior years
Reductions for tax positions of prior years
Increase due to current year business acquisitions
Balance at end of year
December 31,
2020
Year Ended
December 31,
2019
December 30,
2018
$
$
34,074 $
6,617
1,611
(1,417)
—
40,885 $
1,190 $
658
—
(352)
32,578
34,074 $
1,160
—
30
—
—
1,190
At December 31, 2020, the Company’s uncertain tax positions of $39.5 million, if recognized, would impact the effective
tax rate. It is reasonably possible that further adjustments to our unrecognized tax benefits may be made within the next twelve
months due to audit settlements and regulatory interpretations of existing tax laws. At this time, an estimate of potential change
to the amount of unrecognized tax benefits cannot be made. The Company recognizes interest and penalties related to
unrecognized tax benefits as a component of income tax expense. At December 31, 2020 and 2019, the accrual for uncertain tax
positions included $2.6 million and $1.9 million of interest and penalties, respectively.
The Company files a Federal consolidated income tax return for which the statute of limitations remains open for the 2015
tax year and subsequent years. U.S. state jurisdictions have statute of limitations generally ranging from 3 to 6 years. The
federal income tax returns for calendar years 2015-2017 for Legacy Gannett are under federal audit. The statute of limitations
for the Company's U.K. income tax return remains open for tax years for 2018 and forward. Section 2303 of the Coronavirus
Aid, Relief, and Economic Security (CARES) Act extended the carryback period for corporate net operating losses to five
years. This law change permitted the Company to carry back a loss from 2019 to claim a $7.8 million refund.
NOTE 12 — Supplemental equity information
Earnings (loss) per share
The following table sets forth the computation of basic and diluted earnings (loss) per share:
December 31,
2020
(670,479) $
$
Year Ended
December 31,
2019
(119,842) $
December 30,
2018
18,196
58,014
385
58,399
In thousands
Net income (loss) attributable to Gannett
Basic weighted average shares outstanding
Effect of dilutive securities: Stock options and restricted stock grants
Diluted weighted average shares outstanding
131,742
—
131,742
67,671
—
67,671
100
The Company excluded the following securities from the computation of diluted income per share because their effect
would have been antidilutive:
December 31,
2020
Year Ended
December 31,
2019
December 30,
2018
845
6,068
7,694
27,482
1,362
2,905
9,494
—
1,362
700
—
—
In thousands
Warrants
Stock options
Restricted stock grants (a)
2027 Notes (b)
(a) Includes Restricted stock awards ("RSA"), Restricted stock units ("RSU") and Performance stock units ("PSU").
(b) Represents 19.9% of Common Stock outstanding as of December 31, 2020.
The 2027 Notes may be converted at any time by the holders into cash, shares of the Company’s Common Stock or any
combination of cash and Common Stock, at the Company’s election. Assuming the maximum increase in the Conversion Rate
as a result of a Make-Whole Fundamental Change but no other adjustments to the Conversion Rate, the Company has excluded
approximately 266.7 million shares from the earnings (loss) per share calculation as the Company would have been required to
settle any conversion in cash for the year ended December 31, 2020.
Share repurchase program
On May 17, 2017, the Board of Directors authorized the repurchase of up to $100.0 million of the Company's common
stock ("Share Repurchase Program") over twelve months following that date. The Board of Directors had authorized extensions
of the Share Repurchase Program through May 19, 2020. The Plan expired on May 19, 2020 with no extension or replacement
plan in place. No shares were repurchased under the program during 2020.
At-the-Market Offering
On August 6, 2020, we filed a shelf registration statement for an at-the-market ("ATM") offering, which is a type of follow-
on offering of stock utilized by publicly traded companies in order to raise capital over time. Under the offering, we may offer
and sell shares of Common Stock having an aggregate offering price of up to $50 million from time to time. We currently
intend to use the net proceeds from sales of shares under the ATM program for general corporate purposes, including repayment
of indebtedness. The timing of any sales will depend on a variety of factors, including the underlying price of our Common
Stock and capital needs. We do not expect to utilize the shelf registration statement until such time that our stock rebounds to a
level that management believes more fully reflects the Company’s underlying value. However, we believe that the shelf
registration statement provides us with additional financing flexibility to efficiently access the capital markets when desired.
Manager stock options and warrants
Effective 11:59 p.m. on December 31, 2020, the Company’s relationship with FIG LLC (the "Manager") was terminated
and all transfer restrictions contained in the Amended Management Agreement on shares of our common stock owned by the
Manager, or acquired by the Manager upon the exercise of stock options to acquire common stock, lapsed.
Pursuant to the anti-dilution provisions of the New Media Nonqualified Stock Option and Incentive Award Plan (the "New
Media Incentive Plan"), the exercise price on the 652,311 remaining stock options granted to the Manager in 2014 were
equitably adjusted during the year ended December 31, 2019, from $12.95 to $11.46 as a result of return of capital distributions.
Also, these stock options were equitably adjusted during the year ended December 31, 2020, from $11.46 to $9.94 as a result of
return of capital distributions.
Pursuant to the anti-dilution provisions of the Incentive Plan, the exercise price on the 700,000 stock options granted to the
Manager in 2015 were equitably adjusted during the year ended December 31, 2019, from $18.94 to $17.45 as a result of return
of capital distributions. Also, these stock options were equitably adjusted during the year ended December 31, 2020, from
$17.45 to $15.93 as a result of return of capital distributions.
Pursuant to the anti-dilution provisions of the Incentive Plan, the exercise price on the 862,500 stock options granted to the
Manager in 2016 were equitably adjusted during the year ended December 31, 2019, from $13.24 to $11.75 as a result of return
of capital distributions. Also, these stock options were equitably adjusted during the year ended December 31, 2020, from
$11.75 to $10.23 as a result of return of capital distributions.
101
Pursuant to the anti-dilution provisions of the Incentive Plan, the exercise price on the 690,000 stock options granted to the
Manager in 2018 were equitably adjusted during the year ended December 31, 2019, from $16.45 to $14.96 as a result of return
of capital distributions. Also, these stock options were equitably adjusted during the year ended December 31, 2020, from
$14.96 to $13.44 as a result of return of capital distributions.
In connection with the acquisition of Legacy Gannett, during 2019 the Company issued 4,205,607 shares of its common
stock as consideration for the acquisition. For the purpose of compensating the Manager for its successful efforts in facilitating
the acquisition, the Company granted stock options to the Manager to purchase 3,163,264 shares of the Company’s common
stock at a price of $15.50, which had an aggregate fair value of approximately $0.3 million as of the grant date.
In addition to the above stock options, the Company has issued warrants collectively representing the right to acquire
common stock at a future date. As of December 31, 2020, the warrants, if exercised would represent approximately 0.6% of
common stock outstanding at a strike price of $46.35.
The following table includes additional information regarding the Manager stock options:
Outstanding at December 30, 2018
Granted
Outstanding at December 31, 2019
Granted
Outstanding at December 31, 2020
Exercisable at December 31, 2020
Share-based compensation
Number of
Options
(In thousands)
Weighted-
Average Grant
Date Fair Value
Weighted-
Average
Exercise Price
15.31
15.50
14.70
—
13.97
3.59 $
0.11 $
1.78 $
— $
1.78 $
2,905 $
3,163 $
6,068 $
— $
6,068 $
4,276 $
1.78 $
13.33
Weighted-
Average
Remaining
Contractual
Term (Years)
7.3
8.2
7.2
6.4
Share-based payments to employees and the board of directors, including grants of stock options and restricted stock, are
required to be recognized in the consolidated financial statements over the service period (generally the vesting period) based
on fair values measured on grant dates, less forfeitures.
The Company recognized compensation cost for share-based payments of $26.4 million for the year ended December 31,
2020, $11.3 million for the year ended December 31, 2019, and $3.2 million for the year ended December 30, 2018. The total
compensation cost not yet recognized related to non-vested awards as of December 31, 2020 was $17.6 million, which is
expected to be recognized over a weighted average period of 1.9 years through November 2022.
Restricted stock grants ("RSG")
In connection with our acquisition of Legacy Gannett, the Company assumed management of the Gannett Co. Inc. 2015
Omnibus Incentive Compensation Plan (the "2015 Incentive Plan"). Pursuant to a Form S-8 filed with the SEC on
November 20, 2019, we registered 16.4 million shares of common stock under this plan and two other plans assumed pursuant
to the acquisition. Of this total, approximately 10.5 million shares of Legacy Gannett common stock under the Gannett Co. Inc.
2015 Omnibus Incentive Compensation Plan which were outstanding immediately prior to the acquisition were registered for
issuance. On December 21, 2020, the Board authorized the freeze of the 2015 Incentive Plan such that no new awards will be
granted pursuant to the 2015 Incentive Plan after such date. The Board also approved Amendment No. 1 to the Company's 2020
Omnibus Incentive Compensation Plan (the "2020 Incentive Plan") to make available for grant under the 2020 Incentive Plan
the shares that remained available for issuance under the 2015 Incentive Plan as of such date, the use of which is subject to the
limitations of Rule 303A.08 of the NYSE Listed Company Manual.
On February 26, 2020, the Company adopted the 2020 Incentive Plan to reinforce the long-term commitment to the
Company's success of the Company's independent directors, officers and other employees and consultants, assist the Company
in attracting and retaining individuals with experience and ability, and to benefit the Company's stockholders by encouraging
high levels of performance by individuals whose performance is a key element in achieving the Company's continued success.
The 2020 Incentive Plan amended and restated the prior New Media Incentive Plan. The 2020 Incentive Plan provides that if
service terminates for certain specified conditions, all unvested shares of Restricted Stock may be forfeited. During the period
102
prior to the lapse and removal of the vesting restrictions, a grantee of a Restricted Stock Award ("RSA") will have all the rights
of a stockholder, including without limitation, the right to vote and the right to receive all dividends or other distributions. Any
dividends or other distributions that are declared with respect to the shares of Restricted Stock will be paid at the time such
shares vest. The value of the RSAs on the date of issuance is recognized in Selling, general, and administrative expense over the
vesting period with a corresponding increase to additional paid-in-capital.
The following table outlines Restricted stock unit ("RSU") and Performance stock unit ("PSU") activity specific to Legacy
Gannett:
Unvested at beginning of year
Granted
Vested
Forfeited
Unvested at end of year
Year Ended
December 31, 2020
December 31, 2019
Number
of RSUs &
PSUs
(In thousands)
Weighted-
Average
Grant Date
Fair Value
Number
of RSUs &
PSUs
(In thousands)
Weighted-
Average
Grant Date
Fair Value
7,368 $
282
(4,713)
(424)
2,513 $
6.28
0.90
6.27
2.81
6.28
— $
10,466
(3,081)
(17)
7,368 $
—
6.28
6.28
6.28
6.28
The following table outlines RSA activity for the Company:
December 31, 2020
Year Ended
December 31, 2019
Number
of RSAs
(In thousands)
Weighted-
Average
Grant Date
Fair Value
Number
of RSAs
(In thousands)
Weighted-
Average
Grant Date
Fair Value
December 30, 2018
Number
of RSAs
(In thousands)
Weighted-
Average
Grant Date
Fair Value
317 $
6,781
(1,280)
(637)
5,181 $
14.61
3.35
5.72
3.90
3.39
384 $
301
(274)
(94)
317 $
16.11
13.62
15.45
15.12
14.61
342 $
227
(170)
(15)
384 $
16.86
16.43
18.01
16.55
16.11
Unvested at beginning of year
Granted
Vested
Forfeited
Unvested at end of year
As of December 31, 2020, the consolidated aggregate intrinsic value of unvested RSGs was $25.9 million.
Rights Agreement
On April 6, 2020, the Company's Board of Directors adopted a stockholder rights plan in the form of a Section 382 Rights
Agreement ("Rights Agreement") to preserve and protect the Company's income tax net operating loss carryforwards ("NOLs")
and other tax assets. As of December 31, 2019, the Company had approximately $435 million of NOLs available which could
be used in certain circumstance to offset future federal taxable income.
Under the Rights Agreement, the Board declared a non-taxable dividend of one preferred share purchase right for each
outstanding share of Common Stock. The rights will be exercisable only if a person or group acquires 4.99% or more of
Gannett’s Common Stock. Gannett’s existing stockholders that beneficially own in excess of 4.99% of the Common Stock are
"grandfathered in" at their current ownership level and the rights then become exercisable if any of those stockholders acquire
an additional 0.5% or more of Common Stock of the Company. If the rights become exercisable, all holders of rights, other than
the person or group triggering the rights, will be entitled to purchase Gannett Common Stock at a 50% discount or Gannett may
exchange each right held by such holders for one share of Common Stock. Rights held by the person or group triggering the
rights will become void and will not be exercisable. The Board of Directors has the discretion to exempt any person or group
from the provisions of the Rights Agreement.
The rights issued under the Rights Agreement will expire on the day following the certification of the voting results for
Gannett’s 2021 annual meeting of stockholders, unless Gannett’s stockholders ratify the Rights Agreement at or prior to such
meeting, in which case the Rights Agreement will continue in effect until April 5, 2023. The Board of Directors also has the
ability to terminate the plan if it determines that doing so would be in the best interest of Gannett’s stockholders. The rights may
also expire at an earlier date if certain events occur, as described more fully in the Rights Agreement filed by the Company with
the SEC.
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Preferred Stock
The Company has authorized 300,000 shares of preferred stock, par value $0.01 per share, issuable in one or more series
designated by our board of directors, of which 150,000 shares have been designated as Series A Junior Participating Preferred
Stock, none of which are outstanding. There were no issuances of preferred stock during the year ended December 31, 2020.
Accumulated other comprehensive income (loss)
The changes in Accumulated other comprehensive income (loss) by component for the years ended December 31, 2020,
and December 31, 2019, are outlined below.
Pension and
Postretirement
Benefit Plans
$
Foreign
Currency
Translation
Total
In thousands
Balance at December 31, 2017
Other comprehensive loss before reclassifications
Amounts reclassified from accumulated other comprehensive loss (a)
Net current period other comprehensive loss, net of taxes
Balance at December 30, 2018
Other comprehensive income before reclassifications
Amounts reclassified from accumulated other comprehensive income (a)
Net current period other comprehensive income, net of taxes
Balance at December 31, 2019
Other comprehensive income before reclassifications
Amounts reclassified from accumulated other comprehensive income (a) (b)
Net current period other comprehensive income, net of taxes
Balance at December 31, 2020
(a) Accumulated other comprehensive income (loss) component represents amortization of actuarial loss and is included in the computation of net periodic
(5,461) $
(1,509)
89
(1,420)
(6,881) $
7,731
86
7,817
936 $
7,266
—
7,266
7,266 $
2,466
—
2,466
9,732 $
39,479
26
39,505
40,441 $
— $
—
—
—
— $
(5,461)
(1,509)
89
(1,420)
(6,881)
14,997
86
15,083
8,202
41,945
26
41,971
50,173
$
$
$
benefit cost. See Note 9 — Pensions and other postretirement benefit plans.
(b) Amounts reclassified from accumulated other comprehensive loss are recorded net of tax impacts of $0.01 million for the year ended December 31, 2020.
Dividends
On April 1, 2020, the Company announced that in light of the unprecedented economic disruption and uncertainty caused
by the COVID-19 pandemic, the Board of Directors had determined that it is in the best interests of stockholders for the
Company to preserve liquidity by suspending the Company's quarterly dividend. Therefore, the Company did not pay dividends
during the year ended December 31, 2020. During the year ended December 31, 2019, and December 30, 2018, the Company
paid dividends of $1.52 and $1.49 per share of Common Stock, respectively.
NOTE 13 — Commitments, contingencies and other matters
Legal Proceedings
The Company is and may become involved from time to time in legal proceedings in the ordinary course of its business,
including but not limited to such matters as libel, invasion of privacy, intellectual property infringement, wrongful termination
actions, complaints alleging employment discrimination, and regulatory investigations and inquiries. In addition, the Company
is involved from time to time in governmental and administrative proceedings concerning employment, labor, environmental,
and other claims. Insurance coverage mitigates potential loss for certain of these matters. Historically, such claims and
proceedings have not had a material adverse effect on the Company’s consolidated results of operations or financial position.
Environmental contingency
We assumed responsibility for certain environmental contingencies in connection with our acquisition of Legacy Gannett.
More specifically, in March 2011, the Advertiser Company ("Advertiser"), 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, AL.
The Advertiser is a member of the Downtown Environmental Alliance, which has agreed to jointly fund and conduct all
required investigation and remediation. In 2016, the Advertiser and other members of the Downtown Environmental Alliance
reached a settlement with the U.S. EPA regarding the costs the U.S. EPA spent to investigate the site. The U.S. EPA has
transferred responsibility for oversight of the site to the Alabama Department of Environmental Management, which has
104
approved the work plan for the additional site investigation that is currently underway. The Advertiser's final costs cannot be
determined until the investigation is complete, a determination is made on whether any remediation is necessary, and
contributions from other PRPs are finalized. In addition, neither our potential loss nor a range of potential loss in connection
with the Advertiser's final costs can be estimated until such time as we can reasonably make such estimate based on the
foregoing factors.
Other litigation
We are defendants in judicial and administrative proceedings involving matters incidental to our business. Although the
Company is unable to predict with certainty the eventual outcome of any litigation, regulatory investigation or inquiry, in the
opinion of management, the Company does not expect its current and any threatened legal proceedings to have a material
adverse effect on the Company’s business, financial position or consolidated results of operations. Given the inherent
unpredictability of these types of proceedings, however, it is possible that future adverse outcomes could have a material effect
on the Company’s financial results.
Other
Purchase obligations
We have future expected purchase obligations of $548.0 million related to printing contracts, licenses and IT support
agreements, professional services, interactive marketing agreements, and other legally binding commitments. Amounts which
we are liable for under purchase orders outstanding at December 31, 2020, are reflected in the Consolidated balance sheets as
Accounts payable and are excluded from the amounts 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 is in place). The liabilities, which are reflected in Accounts payable and
Other long-term liabilities in the Consolidated balance sheets, are established on an actuarial basis with the advice of consulting
actuaries and totaled $43.1 million and $65.4 million as of December 31, 2020 and December 31, 2019, respectively.
Redeemable noncontrolling interests
Equity purchase arrangements that are exercisable by the counterparty to the agreement and that are outside the sole control
of the Company are accounted for in accordance with ASC 480-10-S99-3A and are classified as Redeemable noncontrolling
interests in the Consolidated balance sheets.
NOTE 14 — Segment reporting
We define our reportable segments based on the way the Chief Operating Decision Maker (CODM), which is the Chief
Executive Officer, manages the operations for purposes of allocating resources and assessing performance. Our reportable
segments include the following:
• Publishing, which consists of our portfolio of local, regional, national, and international newspaper publishers. The
results of this segment include local, classified, and national advertising revenues consisting of both print and digital
advertising, circulation revenues from the distribution of our publications on our digital platforms, home delivery of
our publications, single copy sales, and other revenues from commercial printing and distribution arrangements. The
Publishing reportable segment is an aggregation of two operating segments: Domestic Publishing and the U.K.
• Digital Marketing Solutions, which is comprised of our digital marketing solutions subsidiaries ReachLocal and
UpCurve. The results of this segment include advertising and marketing services revenues through multiple services
including search advertising, display advertising, search optimization, social media, website development, web
presence products, and software-as-a-service solutions.
In addition to the above operating segments, we have a corporate and other 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, finance, and marketing, as well as other general business costs.
105
In the ordinary course of business, our reportable segments enter into transactions with one another. While intersegment
transactions are treated like third-party transactions to determine segment performance, the revenues and expenses recognized
by the segment that is the counterparty to the transaction are eliminated in consolidation and do not affect consolidated results.
The CODM uses Adjusted EBITDA to evaluate the performance of the segments and allocate resources. Adjusted EBITDA
is a non-GAAP financial performance measure we believe offers a useful view of the overall operation of our businesses and
may be different than similarly-titled non-GAAP financial measures used by other companies. We define Adjusted EBITDA as
net income (loss) attributable to Gannett before: (1) Income tax expense (benefit), (2) Interest expense, (3) Gains or losses on
early extinguishment of debt, (4) Non-operating pension income, (5) Unrealized (gain) loss on Convertible notes derivative, (6)
Other Non-operating items, primarily equity income, (7) Depreciation and amortization, (8) Integration and reorganization
costs, (9) Asset impairments, (10) Goodwill and intangible impairments, (11) Gains or losses on the sale or disposal of assets,
(12) Share-based compensation expense, (13) Acquisition costs, (14) Gains or losses on the sale of investments, and (15) certain
other non-recurring charges.
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.
The following table presents information by segment:
In thousands
Year ended December 31, 2020
Advertising and marketing services - external sales
Advertising and marketing services - intersegment sales
Circulation
Other
Total operating revenues
Publishing
Digital
Marketing
Solutions
Corporate
and Other
Intersegment
Eliminations Consolidated
$ 1,295,158 $
114,342
1,391,983
278,964
$ 3,080,447 $
411,940 $
—
—
16,665
428,605 $
3,146 $
—
13
7,801
10,960 $
— $ 1,710,244
—
1,391,996
303,430
(114,342) $ 3,405,670
(114,342)
—
—
Adjusted EBITDA (non-GAAP basis)
$
459,195 $
24,361 $
(69,661) $
— $
413,895
Year ended December 31, 2019
Advertising and marketing services - external sales
Advertising and marketing services - intersegment sales
Circulation
Other
Total operating revenues
$
819,046 $
78,539
704,811
190,256
$ 1,792,652 $
131,003 $
—
—
18,239
149,242 $
2,595 $
—
31
1,928
4,554 $
— $
(78,539)
—
—
952,644
—
704,842
210,423
(78,539) $ 1,867,909
Adjusted EBITDA (non-GAAP basis)
$
268,916 $
(3,279) $
(41,766) $
— $
223,871
Year ended December 30, 2018
Advertising and marketing services - external sales
Advertising and marketing services - intersegment sales
Circulation
Other
Total operating revenues
$
704,945 $
68,089
574,961
147,129
$ 1,495,124 $
80,086 $
—
—
15,785
95,871 $
1,546 $
—
2
1,570
3,118 $
— $
(68,089)
—
—
786,577
—
574,963
164,484
(68,089) $ 1,526,024
Adjusted EBITDA (non-GAAP basis)
$
220,415 $
(6,404) $
(33,718) $
— $
180,293
106
The following table presents our reconciliation of Net income (loss) attributable to Gannett to Adjusted EBITDA:
In thousands
Net income (loss) attributable to Gannett
Provision (benefit) for income taxes
Interest expense
Loss on early extinguishment of debt
Non-operating pension income
Unrealized loss on Convertible notes derivative
Gain on sale of investments
Other non-operating (income) expense, net
Depreciation and amortization
Integration and reorganization costs
Acquisition costs
Asset impairments
Goodwill and intangible impairments
Net (gain) loss on sale or disposal of assets
Share-based compensation expense
Other items
Adjusted EBITDA (non-GAAP basis)
$
December 31,
2020
(670,479) $
(33,450)
228,513
43,760
(72,149)
74,329
(7,995)
(8,499)
263,819
145,731
11,152
11,029
393,446
(5,680)
26,350
14,018
413,895 $
Year Ended
December 31,
2019
(119,842) $
(85,994)
63,660
6,058
(9,085)
—
—
(426)
111,882
52,212
60,618
3,009
100,743
4,723
11,324
24,989
223,871 $
$
December 30,
2018
18,196
1,912
36,072
2,886
(1,435)
—
—
597
84,791
15,011
2,651
1,538
—
(3,971)
3,156
18,889
180,293
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, net, interest expense, other
non-operating items, net, and provision for income taxes, as reported in the Consolidated financial statements, are not part of
operating income and are primarily recorded at the corporate level.
NOTE 15 — Related party transactions
As of December 31, 2020, the Manager, which is an affiliate of Fortress Investment Group LLC ("Fortress"), and its
affiliates owned approximately 4% of the Company’s outstanding stock. On November 18, 2020, 517,239 warrants held by
Fortress were cancelled and as of December 31, 2020, the Manager and its affiliates held approximately 2% of the Company’s
outstanding warrants. The Manager or its affiliates hold 6,068,075 stock options of the Company’s stock as of December 31,
2020. During the year ended December 31, 2020, no dividends were paid to Fortress and its affiliates. During both the years
ended December 31, 2019, and December 30, 2018, Fortress and its affiliates were paid $1.0 million in dividends. Effective
11:59 p.m. on December 31, 2020, the Company’s relationship with the Manager was terminated.
For the year ended December 31, 2020, the Company's Chief Executive Officer was an employee of Fortress (or one of its
affiliates), and his salary was paid by Fortress (or one of its affiliates). In connection with the termination of the Company’s
relationship with the Manager, the Company’s Chief Executive Officer became employed by the Company as of January 1,
2021.
Termination of the Amended and Restated Management Agreement
On November 26, 2013, New Media entered into a management agreement (as amended and restated, "the Management
Agreement") with the Manager, an affiliate of Fortress, pursuant to which the Manager managed the operations of New Media.
New Media paid the Manager an annual management fee equal to 1.50% of New Media’s Total Equity (as defined in the
Management Agreement), and the Manager was eligible to receive incentive compensation.
On August 5, 2019, in connection with the execution of the Legacy Gannett acquisition agreement, the Company and the
Manager entered into the Amended and Restated Management and Advisory Agreement (the "Amended Management
Agreement"). Effective upon the consummation of the acquisition on November 19, 2019, the Amended Management
Agreement replaced the Management Agreement. The Amended Management Agreement (i) established a termination date for
the Manager’s services of December 31, 2021, in lieu of annual renewals of the term; (ii) reduced the "incentive fee" payable
107
under the Amended Management Agreement from 25% to 17.5% for the remainder of the term; (iii) reduced by 50% the
number of options that would otherwise be issuable in connection with the issuance of shares as consideration for the
acquisition, and imposes a premium on the exercise price; (iv) eliminated the Manager’s right to receive options in connection
with future equity raises by the Company; and (v) eliminated certain payments otherwise due at or after the end of the term of
the prior management agreement. As discussed below, the Company’s relationship with the Manager terminated effective at
11:59 p.m. Eastern Time on December 31, 2020.
In connection with entering into the Amended Management Agreement and the occurrence of the consummation of the
acquisition of Legacy Gannett, the Company issued to the Manager 4,205,607 shares of common stock and granted to the
Manager stock options to acquire 3,163,264 shares of common stock.
On December 21, 2020, the Company entered into a Termination Agreement (the "Termination Agreement") with the
Manager providing for the early termination of the Amended Management Agreement, effective at 11:59 p.m. Eastern Time on
December 31, 2020. Upon termination of the Amended Management Agreement, the Manager ceased providing external
management services to the Company, and the Manager no longer is the employer of the person serving in the role of Chief
Executive Officer of the Company. In connection with the Termination Agreement, the Company made a one-time cash
payment of $30.4 million to the Manager. In addition, all transfer restrictions contained in the Amended Management
Agreement on shares of our common stock owned by the Manager, or acquired by the Manager upon the exercise of stock
options to acquire common stock, lapsed. In connection with the termination of our relationship with the Manager, we extended
offers of employment to certain employees of the Manager or its affiliates who provided services to the Company, including to
our Chief Executive Officer. Certain indemnification and other obligations in the Amended Management Agreement survived
the termination of our relationship with the Manager.
The following table provides the management and incentive fees recognized and paid to the Manager:
In thousands
Management fee expense
Incentive fee expense
Management fees paid
Incentive fees paid
Reimbursement for expenses
December 31,
2020
Year Ended
December 31,
2019
December 30,
2018
$
16,972 $
—
16,327
2,602
2,628
10,992 $
4,067
11,078
6,675
2,905
10,674
11,143
9,619
14,129
2,501
As of December 31, 2020, there was no outstanding liability for Management Agreement related fees and a liability of $6.5
million at December 31, 2019, included in Accounts payable and accrued liabilities on the Consolidated balance sheets.
NOTE 16 — Subsequent events
Term Loan Refinancing
On February 9, 2021, the Company entered into a five-year, senior-secured term loan facility with Citibank, N.A. in an
aggregate principal amount of $1.045 billion (the "5-Year Term Loan"). The 5-Year Term Loan matures on February 9, 2026
and, at the Company's option, bears interest at the rate of the London Interbank Offered Rate plus a margin equal to 7.00% per
annum or an alternate base rate plus a margin equal to 6.00% per annum. Accordingly, we are required to dedicate a substantial
portion of cash flow from operations to fund interest payments.
The proceeds from the 5-Year Term Loan were used for the Payoff, and to pay fees and expenses incurred to obtain the 5-
Year Term Loan and consummate the Payoff.
The 5-Year Term Loan will amortize quarterly at a rate of 10% per annum (or, if the ratio of Total Indebtedness secured on
an equal priority basis with the 5-Year Term Loan (net of Unrestricted Cash) to Consolidated EBITDA (as such terms are
defined in the 5-Year Term Loan) is equal to or less than a specified ratio, 5% per annum) payable in equal quarterly
installments (the "Quarterly Amortization Installment"), beginning September 30, 2021. In addition, we will be required to
repay the 5-Year Term Loan from time to time with (i) the proceeds of non-ordinary course asset sales and casualty and
condemnation events, (ii) the proceeds of indebtedness that is not otherwise permitted under the 5-Year Term Loan and (iii) the
aggregate amount of cash and cash equivalents on hand in excess of $100 million at the end of each fiscal year. The 5-Year
Term Loan is subject to a requirement to have minimum unrestricted cash of $30 million as of the last day of each fiscal
quarter.
108
Following this transaction, total debt outstanding will be $1.545 billion, which will include the $1.045 billion 5-Year Term
Loan, $497.1 million 2027 Notes, and $3.3 million 2024 Notes. In addition, we anticipate recording a loss on extinguishment of
the Acquisition Term Loan and other fees of approximately $27 million.
Special Meeting of Stockholders
At the Special Meeting, our stockholders approved, for purposes of Rule 312.03(c) of the New York Stock Exchange, of
the issuance of the maximum number of shares of Common Stock issuable upon conversion of the 2027 Notes. Following
receipt of the stockholder approval, the Company has the flexibility to settle conversion of the 2027 Notes with shares of
Common Stock in full (rather than cash of an equivalent value).
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 and
considering the material weakness discussed below, our principal executive officer and our principal financial officer have
concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this Annual
Report on Form 10-K for the year ended December 31, 2020. Additionally, our conclusion set forth in Item 9A of our Annual
Report on Form 10-K for the year ended December 31, 2019 (the "2019 Form 10-K"), incorrectly stated that, with the exception
of the material weakness in our internal control over financial reporting described herein, our disclosure controls and
procedures were effective as of December 31, 2019, and instead should have stated that our disclosure controls and procedures
for such period were ineffective.
Management's Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining effective internal control over financial reporting, as such
term is defined in Exchange Act Rule 13a-15(f). Our internal control system was designed under the supervision of our Chief
Executive Officer and our Chief Financial Officer and with the participation of management in order to provide reasonable
assurance regarding the reliability of our financial reporting and our preparation of financial statements for external purposes in
accordance with GAAP.
All internal control systems, no matter how well designed and tested, have inherent limitations, including, among other
things, the possibility of human error, circumvention or disregard. Therefore, even those systems of internal controls that have
been determined to be effective can provide only reasonable assurance that the objectives of the control system are met and 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.
Under the supervision of our Chief Executive Officer and our Chief Financial Officer and with the participation of
management, we conducted an assessment of the effectiveness of our internal control over financial reporting based on the
criteria set forth in "Internal Control-Integrated Framework" (the "COSO" criteria) issued by the Committee of Sponsoring
Organizations of the Treadway Commission in 2013. Based on management’s assessment using these criteria, we concluded
that, as of December 31, 2020, there was a material weakness in our internal control over financial reporting related to the
revenue recognition process, specifically related to the legacy New Media portion of our consolidated operations.
A material weakness is a deficiency or a combination of deficiencies in internal control over financial reporting, such that
there is a reasonable possibility that a material misstatement in our annual or interim financial statements will not be prevented
or detected on a timely basis. With respect to the aforementioned material weakness in the revenue recognition process, the
Company’s conclusion is based on the aggregation of control deficiencies related to manual preventative and detective controls
109
as well as information technology general controls primarily related to revenue recognition systems and processes. These
deficiencies also contributed to control deficiencies identified in related accounts receivable and deferred revenue. This material
weakness was previously identified by the Company in the 2019 Form 10-K. The material weakness described above did not
result in a material misstatement to the Company’s consolidated financial statements for any period in the three-year period
ended December 31, 2020. While we have implemented additional internal controls and procedures to help remediate this
material weakness (as further described below under the heading "Remediation Plan"), it has yet to be fully remediated as of
December 31, 2020.
Notwithstanding the identified material weakness, management, including our Chief Executive Officer and our Chief
Financial Officer, believes the consolidated financial statements included in this Form 10-K fairly represent, in all material
respects, our financial condition, results of operations and cash flows as of and for the periods presented in accordance with
GAAP.
These control deficiencies create a reasonable possibility that a material misstatement to the consolidated financial
statements will not be prevented or detected on a timely basis, and therefore we concluded that the deficiencies represent a
material weakness and our internal control over financial reporting was not effective as of December 31, 2020.
The effectiveness of internal control over financial reporting as of December 31, 2020 has been audited by the Company’s
independent registered public accounting firm, Ernst & Young LLP. Their assessment is included in the accompanying Report
of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting.
Remediation Plan
Management is committed to remediating the material weakness that has been identified. These remediation efforts,
summarized below, are intended to both address the identified material weakness and to enhance our overall financial control
environment. In this regard, our initiatives include:
• Organizational Enhancements – The Company has identified and implemented several organizational enhancements as
follows: (i) the hiring, in July 2020, of a Corporate Controller, (ii) the hiring, in November 2020, of a Senior Vice
President of Financial Shared Services, (iii) the centralization and consolidation of the previously federated, location
specific accounting teams into the centralized Advertising and Circulation Finance teams, and (iv) the standardization of
consistent accounting processes across the Company;
• Design Enhancements – The Company has established a project team to help re-design and remediate controls, including
controls related to the review of disaggregated financial statements, centralization of monitoring and analytical review
over revenues and the related accounts receivable and deferred revenue balances as well as the implementation of
additional manual preventative and detective controls related to initiation and fulfillment;
• Training – Training was provided to relevant personnel reinforcing existing Company policies with regards to the
appropriate steps and procedures required to be performed related to the execution and fulfillment of performance
obligations, as well as the appropriate level of documentation required to evidence such transactions; and
• Technology Systems and Overall Integration – The Company continues to execute its enterprise wide integration plan,
which includes the consolidation of revenue processes, internal controls and information technology systems across all
North American business units. The integration projects include the migration to IT systems, inclusive of information
technology general controls and implementation of automated controls, to more effectively address risks related contract
initiation and fulfillment of performance obligations in the revenue recognition process.
When fully implemented and operational, we believe the measures described above will remediate the material weakness
we have identified and strengthen our internal control over financial reporting. This material weakness will not be considered
remediated until the remediated and/or newly implemented internal controls operate for a sufficient period of time and
management has concluded, through testing, that these internal controls are operating effectively. We are working to have this
material weakness remediated as soon as possible and progress has been made since this issue was originally identified in early
2020. Additionally, we are in the process of implementing further internal control, process and system improvements to address
the material weakness. These improvements include taking steps to increase dedicated personnel, improve reporting processes,
implement additional group-wide monitoring controls and further centralizing revenue processes and controls as part of our
ongoing integration. We are committed to continuing to improve our internal control processes and will continue to review and
assess our financial reporting controls and procedures on an ongoing basis. As we continue to evaluate and improve our internal
control over financial reporting, our management may determine it is appropriate or necessary to take additional measures.
110
Changes in Internal Control Over Financial Reporting
Apart from the changes discussed above, there has been no change in our internal control over financial reporting that
occurred during the fiscal quarter ended December 31, 2020, that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
As a result of the COVID-19 pandemic, most of our workforce has shifted to a primarily work-from-home environment
since March 2020. The change to remote working was rapid and while pre-existing controls were not specifically designed to
operate in our current work-from-home operating environment, we believe that our internal control over financial reporting was
not materially impacted. We are monitoring and assessing the COVID-19 pandemic's effect on our internal controls to minimize
the impact on their design and effectiveness.
111
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Gannett Co., Inc.
Opinion on Internal Control Over Financial Reporting
We have audited Gannett Co., Inc.’s internal control over financial reporting as of December 31, 2020, 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). In our opinion, because of the effect of the material weakness described
below on the achievement of the objectives of the control criteria, Gannett Co., Inc. (the Company) has not maintained effective
internal control over financial reporting as of December 31, 2020, based on the COSO criteria.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there
is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be
prevented or detected on a timely basis. The following material weakness has been identified and included in management’s
assessment. Management has identified a material weakness in controls related to the Company’s revenue recognition process.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and December 30, 2019, the related
consolidated statements of operations and comprehensive income (loss), equity and cash flows for each of the three years in the
period ended December 31, 2020, and the related notes. This material weakness was considered in determining the nature,
timing and extent of audit tests applied in our audit of the 2020 consolidated financial statements, and this report does not affect
our report dated February 26, 2021, which expressed an unqualified opinion thereon.
Basis for Opinion
The Company’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 are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. 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.
Definition and Limitations of Internal Control Over Financial Reporting
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.
/s/ Ernst & Young LLP
Tysons, VA
February 26, 2021
112
ITEM 9B. OTHER INFORMATION
Not applicable.
113
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
The information captioned "Information Concerning our Directors, Including the Director Nominees" under the heading
"Proposal No. 1 Election of Directors," the information captioned "Executive Team and Named Executive Officers" under the
heading "Compensation Discussion & Analysis," the information under the heading "Delinquent Section 16(a) Reports," and
the information captioned "Statement on Corporate Governance," "Audit Committee," and "Nominating and Corporate
Governance Committee" under the heading "Environmental, Social and Governance Matters" in our 2021 proxy statement is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information under the headings "Compensation Discussion & Analysis," and "Compensation Committee Report" in our
2021 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" under the heading "Compensation Discussion &
Analysis" and the information under the heading "Common Stock Ownership of Certain Beneficial Owners and Management"
in our 2021 proxy statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The information captioned "Determination of Director Independence" under the heading "Environmental, Social and
Governance Matters" and the information under the heading "Related Persons Transactions" in our 2021 proxy statement is
incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information under the heading "Proposal No. 2 Ratification of Appointment of Ernst & Young LLP as Independent
Registered Public Accounting Firm" in our 2021 proxy statement is incorporated herein by reference.
114
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 62.
(2) Financial Statement Schedules.
All schedules are omitted as the required information is not applicable or the information is presented in the
Consolidated financial statements or related notes.
(3) Exhibits.
115
Exhibit
Number
2.1
2.2
3.1
3.2
3.3
3.4
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
10.1
10.2
10.3
Exhibit
Location
Agreement and Plan of Merger, dated as of August 5, 2019,
by and among New Media Investment Group Inc., Gannett
Co., Inc., Arctic Holdings LLC and Arctic Acquisition Corp.
First Amendment to Agreement and Plan of Merger, dated as
of October 29, 2019, by and among New Media Investment
Group Inc., Gannett Co., Inc., Arctic Holdings LLC and
Arctic Acquisition Corp.
Amended and Restated Certificate of Incorporation of the
Company.
Certificate of Amendment to the Amended and Restated
Certificate of Incorporation of the Company.
Certificate of Designation of Series A Junior Participating
Preferred Stock of Gannett Co., Inc.
Amended and Restated Bylaws of the Company.
Indenture (including Form of Note) with respect to 4.750%
Convertible Senior Notes due 2024, dated as of April 9, 2018,
between Gannett Co., Inc. and U.S. Bank National
Association, as trustee.
First Supplemental Indenture, dated as of November 19, 2019,
by and among Gannett Co., Inc., New Media Investment
Group Inc., and U.S. Bank National Association.
Indenture with respect to 6.000% Convertible Senior Secured
Notes due 2027, dated as of November 17, 2020, by and
between Gannett Co., Inc., the Subsidiary Guarantors and
U.S. Bank National Association, as trustee.
First Supplemental Indenture, dated as of December 21, 2020,
by and between Gannett Co., Inc., the Subsidiary Guarantors
from time to time party thereto and U.S. Bank National
Association, as trustee.
Second Supplemental Indenture, dated as of February 9, 2021,
by and between the Company, the Subsidiary Guarantors from
time to time party thereto and U.S. Bank National
Associations, as trustee.
Global Warrant Certificate of New Media Investment Group
Inc. (amended).
Description of Securities Registered under Section 12 of the
Securities Exchange Act of 1934.
Section 382 Rights Agreement, dated as of April 6, 2020, by
and between Gannett Co., Inc. and American Stock Transfer
& Trust Company LLC, as Rights Agent.
Credit Agreement, dated as of November 19, 2019, by and
among Gannett Co., Inc., Gannett Holdings LLC, each person
listed as a guarantor on the signature pages thereto, the
lenders from time to time party thereto and Cortland Capital
Market Services LLC, as collateral agent and administrative
agent.
Amendment No. 1, dated as of December 9, 2019, to the
Credit Agreement, by and among Gannett Co., Inc., Gannett
Holdings LLC, each person listed as a guarantor on the
signature pages thereto, the lenders from time to time party
thereto and Cortland Capital Market Services LLC, as
collateral agent and administrative agent.
Amendment No. 2, dated as of April 6, 2020, to the Credit
Agreement, by and among Gannett Co., Inc., Gannett
Holdings LLC, each person listed as a guarantor on the
signature pages thereto, the lenders from time to time party
thereto and Cortland Capital Market Services LLC, as
collateral agent and administrative agent.
Incorporated by reference to Exhibit 2.1 to the Company’s
Current Report on Form 8-K, filed August 6, 2019.
Incorporated by reference to Exhibit 2.1 to the Company’s
Current Report on Form 8-K, filed October 30, 2019.
Incorporated by reference to Exhibit 3.1 to the Company’s
Quarterly Report on Form 10-Q, filed August 2, 2018.
Incorporated by reference to Exhibit 3.1 to the Company’s
Current Report on Form 8-K, filed November 20, 2019.
Incorporated by reference to Exhibit 3.1 to the Company’s
Current Report on Form 8-K, filed April 7, 2020
Incorporated by reference to Exhibit 3.2 to the Company’s
Current Report on Form 8-K, filed November 20, 2019.
Incorporated by reference to Exhibit 4.1 to Legacy Gannett’s
Current Report on Form 8-K, filed April 9, 2018.
Incorporated by reference to Exhibit 4.1 to the Company’s
Current Report on Form 8-K, filed November 20, 2019.
Incorporated by reference to Exhibit 4.1 to the Company’s
Current Report on Form 8-K, filed November 18, 2020.
Incorporated by reference to Exhibit 10.2 to the Company’s
Current Report on Form 8-K, filed December 22, 2020.
Incorporated by reference to Exhibit 4.1 to the Company's
Current Report on 8-K, filed February 12, 2021.
Included in Exhibit 10.45.
Filed herewith.
Incorporated by reference to Exhibit 4.1 to the Company’s
Current Report on Form 8-K, filed April 7, 2020.
Incorporated by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K, filed November 20, 2019.
Incorporated by reference to Exhibit 10.3 to the Company’s
Quarterly Report on Form 10-Q, filed May 7, 2020.
Incorporated by reference to Exhibit 10.4 to the Company’s
Quarterly Report on Form 10-Q, filed May 7, 2020.
116
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
Amendment No. 3, dated as of October 30, 2020, to the Credit
Agreement, by and among Gannett Co., Inc., Gannett
Holdings LLC, each Guarantor party thereto, the lenders from
time to time party thereto and Alter Domus Products Corp. as
collateral and administrative agent.
Amendment No. 4, dated as of November 17, 2020, to the
Credit Agreement, by and among Gannett Co., Inc., Gannett
Holdings LLC, each Guarantor party thereto, the Lenders
from time to time party thereto and Alter Domus Products
Corp. as collateral and administrative agent.
Amendment No. 5, dated as of December 21, 2020, to the
Credit Agreement, by and among Gannett Co., Inc., Gannett
Holdings LLC, the lenders party thereto and Alter Domus
Products Corp., as administrative agent and collateral agent.
Form of Registration Rights Agreement between New Media
Investment Group Inc. and Omega Advisors, Inc.
Registration Rights Agreement, dated as of November 19,
2019, by and among Gannett Co., Inc., FIG LLC and such
other persons from time to time party thereto.
Amendment No. 1, dated as of November 17, 2020, to the
Registration Rights Agreement, by and among Gannett Co.,
Inc. and FIG LLC and such other persons from time to time
party thereto.
Amended and Restated Management and Advisory
Agreement, dated August 5, 2019, between New Media
Investment Group Inc. and FIG LLC.
Termination Agreement dated as of December 21, 2020, by
and between Gannett Co., Inc. and FIG LLC.
2020 Omnibus Incentive Compensation Plan, adopted as of
February 26, 2020.*
Amendment No. 1 to 2020 Omnibus Incentive Compensation
Plan.*
Form of Nonqualified Stock Option Agreement between New
Media Investment Group Inc. and Fortress Operating Entity I
LP.*
Form of Nonqualified Stock Option Agreement between New
Media Investment Group Inc. and Fortress Operating Entity I
LP.
Form of Gannett Co., Inc. Director Award Agreement (2020
Omnibus Incentive Compensation Plan).*
Gannett Co., Inc. Form of Employee Restricted Stock Grant
Agreement.*
2015 Omnibus Incentive Compensation Plan.*
Amendment No. 1 to 2015 Omnibus Incentive Compensation
Plan.*
Amendment No. 2 to 2015 Omnibus Incentive Compensation
Plan.*
Form of Gannett Co., Inc. Director Award Agreement (2015
Omnibus Incentive Compensation Plan).*
Filed herewith.
Incorporated by reference to Exhibit 10.4 to the Company’s
Current Report on Form 8-K, filed November 18, 2020.
Incorporated by reference to Exhibit 10.3 to the Company’s
Current Report on Form 8-K, filed December 22, 2020.
Incorporated by reference to Exhibit 4.5 to the Company’s
Registration Statement on Form 10/A (File No. 001-36097),
filed November 8, 2013.
Incorporated by reference to Exhibit 10.2 to the Company’s
Current Report on Form 8-K, filed November 20, 2019.
Incorporated by reference to Exhibit 10.3 to the Company’s
Current Report on Form 8-K, filed November 18, 2020.
Incorporated by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K, filed August 6, 2019.
Incorporated by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K, filed December 22, 2020.
Incorporated by reference to Exhibit 10.3 to the Company’s
Annual Report on Form 10-K, filed March 2, 2020.
Incorporated by reference to Exhibit 10.3 to the Company’s
Current Report on Form 8-K, filed December 28, 2020.
Incorporated by reference to Exhibit 10.38 of the Company’s
Annual Report on Form 10-K, filed March 19, 2014.
Included in Exhibit 10.10.
Filed herewith.
Filed herewith.
Incorporated by reference to Exhibit 4.1 to Legacy Gannett’s
Registration Statement on Form S-3, filed June 29, 2015.
Incorporated by reference to Exhibit 10.1 to Legacy Gannett’s
Current Report on Form 8-K, filed May 11, 2017.
Incorporated by reference to Exhibit 10.1 to Legacy Gannett’s
Current Report on Form 8-K, filed May 9, 2018.
Filed herewith.
Form of Executive Officer Restricted Stock Unit Award
Agreement (2019).*
Incorporated by reference to Exhibit 10.1 to Legacy Gannett’s
Current Report on Form 8-K, filed December 12, 2018.
Form of Executive Officer Performance Shares Award
Agreement (2019).*
Incorporated by reference to Exhibit 10.2 to Legacy Gannett’s
Current Report on Form 8-K, filed December 12, 2018.
Form of Executive Officer Performance Units Award
Agreement (2019).*
Incorporated by reference to Exhibit 10.3 to Legacy Gannett’s
Current Report on Form 8-K, filed December 12, 2018.
117
10.25
10.26
10.27
10.28
10.29
10.30
10.31
10.32
10.33
10.34
10.35
10.36
10.37
10.38
10.39
10.40
10.41
10.42
10.43
10.44
10.45
10.46
10.47
2015 Change in Control Severance Plan, as amended and
restated as of December 23, 2020.*
Incorporated by reference to Exhibit 10.2 to the Company's
Current Report on Form 8-K, filed December 28, 2020.
Key Employee Severance Plan, as amended and restated as of
December 23, 2020.*
Incorporated by reference to Exhibit 10.1 to the Company's
Current Report on Form 8-K, filed December 28, 2020.
Offer Letter of Employment, dated August 4, 2019, by and
between Gannett Co., Inc. and Paul J. Bascobert.*
Transition Services Agreement, dated as of January 6, 2020,
by and between Gannett Co., Inc. and Alison K. Engel.*
Employment Retention Agreement, dated as of January 15,
2019, by and between Gannett Co., Inc. and Alison K.
Engel.*
Amended and Restated 401(k) Savings Plan of Gannett Co.,
Inc. as of January 1, 2019.*
Incorporated by reference to Exhibit 10.1 to Legacy Gannett’s
Current Report on Form 8-K, filed August 6, 2019.
Incorporated by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K, filed January 8, 2020.
Incorporated by reference to Exhibit 10.1 to Legacy Gannett’s
Current Report on Form 8-K, filed January 18, 2019.
Incorporated by reference to Exhibit 4.16 to the Company’s
Post-Effective Amendment to Registration Statement on Form
S-8 (Registration No. 333-233509), filed November 21, 2019.
Amendment No. 1 to 401(k) Savings Plan of Gannett Co.,
Inc. as of January 1, 2019.*
Incorporated by reference to Exhibit 4.17 to the Company’s
Post-Effective Amendment to Registration Statement on Form
S-8 (Registration No. 333-233509), filed November 21, 2019.
2015 Deferred Compensation Plan Rules for Pre-2005
Deferrals.*
Amendment No. 1 to 2015 Deferred Compensation Plan
Rules for Pre-2005 Deferrals.*
Amendment No. 2 to 2015 Deferred Compensation Plan
Rules for Pre-2005 Deferrals.*
Amendment No. 3 to 2015 Deferred Compensation Plan
Rules for Pre-2005 Deferrals.*
2015 Deferred Compensation Plan Rules for Post-2004
Deferrals.*
Amendment No. 1 to 2015 Deferred Compensation Plan
Rules for Post-2004 Deferrals.*
Amendment No. 2 to 2015 Deferred Compensation Plan
Rules for Post-2004 Deferrals.*
Amendment No. 3 to 2015 Deferred Compensation Plan
Rules for Post-2004 Deferrals.*
Amendment No. 4 to 2015 Deferred Compensation Plan
Rules for Post-2004 Deferrals.*
Amendment No. 5 to 2015 Deferred Compensation Plan
Rules for Post-2004 Deferrals.*
Amendment No. 6 to 2015 Deferred Compensation Plan
Rules for Post-2004 Deferrals.*
Incorporated by reference to Exhibit 10.8 to Legacy Gannett’s
Current Report on Form 8-K, filed June 30, 2015.
Incorporated by reference to Exhibit 10.2 to Legacy Gannett’s
Current Report on Form 8-K, filed June 6, 2017.
Incorporated by reference to Exhibit 10.2 to Legacy Gannett’s
Current Report on Form 8-K, filed August 1, 2018.
Incorporated by reference to Exhibit 10.4 to Legacy Gannett’s
Quarterly Report on Form 10-Q for the quarter ended
September 30, 2018.
Incorporated by reference to Exhibit 10.9 to Legacy Gannett’s
Current Report on Form 8-K, filed June 30, 2015.
Incorporated by reference to Exhibit 10.1 to Legacy Gannett’s
Current Report on Form 8-K, filed December 2, 2016.
Incorporated by reference to Exhibit 10.1 to Legacy Gannett’s
Current Report on Form 8-K, filed June 6, 2017.
Incorporated by reference to Exhibit 10.1 to Legacy Gannett’s
Current Report on Form 8-K, filed August 1, 2018.
Incorporated by reference to Exhibit 10.2 to Legacy Gannett’s
Quarterly Report on Form 10-Q for the quarter ended
September 30, 2018.
Incorporated by reference to Exhibit 10.21 to Legacy
Gannett’s Annual Report on Form 10-K, filed on February 27,
2019.
Incorporated by reference to Exhibit 4.12 to the Company’s
Post-Effective Amendment to Registration Statement on Form
S-8 (Registration No. 333-233509), filed November 21, 2019.
Amendment No. 7 to 2015 Deferred Compensation Plan
Rules for Post-2004 Deferrals.*
Filed herewith.
Form of Indemnification Agreement to be entered into by
New Media Investment Group Inc. with each of its executive
officers and directors.
Amended and Restated Warrant Agreement dated January 15,
2014, by and between New Media Investment Group Inc. and
American Stock & Transfer Company, LLC.
Offer Letter Agreement, dated March 25, 2020, by and
between Gannett Co., Inc. and Douglas E. Horne.*
Exchange Agreement, dated as of November 17, 2020, by and
among Gannett Co., Inc. and the other Persons party thereto.
Incorporated by reference to Exhibit 10.11 to the Company’s
Registration Statement on Form 10/A (File No. 001-36097),
filed November 8, 2013.
Incorporated by reference to Exhibit 10.37 to the Company’s
Registration Statement on Form S-1/A (Registration No. 333-
192736), filed January 28, 2014.
Incorporated by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K, filed April 6, 2020.
Incorporated by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K, filed November 18, 2020.
118
10.48
10.49
10.50
10.51
21.1
23.1
31.1
31.2
32.1
32.2
101
104
Investor Agreement, dated as of November 17, 2020, by and
among Gannett Co., Inc., the other Persons signatory thereto
and such other Persons, if any, that from time to time become
party thereto as Holders.
Gannett Co., Inc. Performance Restricted Stock Unit Grant
Agreement, dated as of January 8, 2021.*
Offer Letter Agreement, dated December 21, 2020, by and
between Gannett Co., Inc. and Michael E. Reed.*
Credit Agreement dated as of February 9, 2021, among the
Company, Gannett Holdings LLC, each Guarantor party
thereto, the Lenders from time to time party thereto and
Citibank, N.A., as collateral and administrative agent.
Incorporated by reference to Exhibit 10.2 to the Company’s
Current Report on Form 8-K, filed November 18, 2020.
Incorporated by reference to Exhibit 99.1 to the Company’s
Registration Statement on Form S-8 (Registration No. 333-
251972), filed January 8, 2021.
Filed herewith.
Incorporated by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K, filed February 12, 2021.
List of subsidiaries.
Consent of Ernst & Young LLP.
Rule 13a-14(a)/15d-14(d) Certification of Principal Executive
Officer under the Securities Exchange Act of 1934.
Filed herewith.
Filed herewith.
Filed herewith.
Rule 13a-14(a)/15d-14(d) Certification of Principal Financial
Officer under the Securities Exchange Act of 1934.
Filed herewith.
Section 1350 Certification of Principal Executive Officer.
Section 1350 Certification of Principal Financial Officer.
The following financial information from Gannett Co., Inc.
Annual Report on Form 10-K for the year ended December
31, 2020, formatted in Inline XBRL includes: (i) Consolidated
Balance Sheets; (ii) Consolidated Statements of Operations
and Comprehensive Income (Loss); (iii) Consolidated
Statements of Cash Flows; (iv) Consolidated Statements of
Equity; and (v) the Notes to Consolidated Financial
Statements.
Cover Page Interactive Data File (formatted as Inline XBRL
and contained in Exhibit 101).
Filed herewith.
Filed herewith.
Filed herewith.
Filed herewith.
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.
ITEM 16. FORM 10-K SUMMARY
None.
119
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 26, 2021 GANNETT CO., INC. (Registrant)
By: /s/ Douglas E. Horne
Douglas E. Horne
Chief Financial Officer and
Chief Accounting Officer
(principal financial and
principal accounting 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 26, 2021
Dated: February 26, 2021
/s/ Michael E. Reed
Michael E. Reed
Chief Executive Officer and
President (principal executive
officer)
/s/ Douglas E. Horne
Douglas E. Horne
Chief Financial Officer and
Chief Accounting Officer
(principal financial and
principal accounting officer)
Dated: February 26, 2021 /s/ Theodore Janulis
Theodore Janulis, Director
Dated: February 26, 2021 /s/ John Jeffry Louis
John Jeffry Louis, Director
Dated: February 26, 2021 /s/ Maria Miller
Maria Miller, Director
Dated: February 26, 2021 /s/ Michael E. Reed
Michael E. Reed
Director, Chairman
Dated: February 26, 2021 /s/ Debra Sandler
Debra Sandler, Director
Dated: February 26, 2021 /s/ Kevin Sheehan
Kevin Sheehan, Director
Dated: February 26, 2021 /s/ Laurence Tarica
Laurence Tarica, Director
Dated: February 26, 2021 /s/ Barbara Wall
Barbara Wall, Director
120
Performance Graph
The following graph compares the cumulative total return for our common stock (stock price plus reinvested dividends) with
the comparable return of three indices: S&P 500, Russell 2000, and a peer group index we selected. The graph assumes an
investment of $100 in Gannett’s common stock and in each of the indices on December 31, 2015, and that all dividends were
reinvested. The past performance of Gannett’s common stock is not an indication of future performance.
Gannett Co., Inc.Period EndingIndex12/31/1512/31/1612/31/1712/31/1812/31/1912/31/20Gannett Co., Inc.100.0089.35103.5278.3950.6426.67S&P 500 Index100.00111.96136.40130.42171.49203.04Russell 2000 Index100.00121.31139.08123.76155.35186.36Peer Group100.00107.34122.50118.12132.92173.90Peer GroupA. H. Belo Corporation (AHC)E. W. Scripps Co. (SSP)Gannett Co. (GCI) - included through 11/19/19 when it was acquired by New Media InvestmentJournal Media Group Inc (JMG) - included through 4/8/16 when it was acquired by Gannett CoLee Enterprises Inc. (LEE)McClatchy Co. (MNI) - included through 10/2/20 when it filed for Chapter 11Meredith Corp. (MDP)New York Times Co. (NYT)TI Gotham Inc, formerly known as Time Inc. (TIME) included through 1/30/18 when it was acquired by MeredithTribune Publishing Company, formerly known as tronc, Inc. (TPCO)Source: S&P Global Market Intelligence© 202005010015020025012/31/1512/31/1612/31/1712/31/1812/31/1912/31/20Index ValueTotal Return PerformanceGannett Co., Inc.S&P 500 IndexRussell 2000 IndexPeer Group
Corporate Information
Board of Directors
Michael E. Reed – Chairman
Kevin M. Sheehan – Lead Director(a,b)
Vinayak Hedge – Board Member(a,d)
Theodore P. Janulis – Board Member(a, b, c)
John Jeffry Louis – Board Member(b,c)
Maria Miller – Board Member(a,c)
Debra Sandler – Board Member(c,d)
Laurence Tarica – Board Member(c,d)
Barbara Wall – Board Member(d)
Key:
(a) Member of Audit Committee
(b) Member of Compensation Committee
(c) Member of Nominating and Corporate Governance Committee
(d) Member of Transformation Committee
Corporate Officers
Michael E. Reed – Chief Executive Officer
Douglas E. Horne – Chief Financial Officer & Chief Accounting Officer
Corporate Headquarters
Gannett Co., Inc.
7950 Jones Branch Drive
McLean, VA 22107-0150
www.gannett.com
Independent Registered Public Accounting Firm
Ernst & Young LLP
Five Times Square
New York, NY 10036-6530
Shareholder Services, Transfer Agent & Registrar
American Stock Transfer & Trust Company
6201 15th Avenue
Brooklyn, NY 11219
800-937-5449
Stock Exchange Listing
Gannett Co., Inc. is listed on the New York Stock Exchange (NYSE:GCI)
Investor Information Services
Gannett Co., Inc.
7950 Jones Branch Drive
McLean, VA 22107-0150
Tel: 1-703-854-3000
Email: investors@gannett.com
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Gannett Co., Inc.
7950 Jones Branch Dr.
McLean, VA 22107
703-854-3000
gannett.com