EDGAR 10-K Filing

Company CIK: 1593195
Filing Year: 2021
Filename: 1593195_10-K_2021_0001593195-21-000020.json

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ITEM 1. BUSINESS
Item 1. Business
Overview
Tribune Publishing Company, together with its subsidiaries (collectively, the “Company” or “Tribune”), is a media company rooted in award-winning journalism. Headquartered in Chicago, Illinois, Tribune operates local media businesses in eight markets with titles including the Chicago Tribune, New York Daily News, The Baltimore Sun, Hartford Courant, South Florida’s Sun Sentinel, Orlando Sentinel, Virginia’s Daily Press and The Virginian-Pilot, and The Morning Call of Lehigh Valley, Pennsylvania. Tribune also operates Tribune Content Agency (“TCA”). Tribune’s major daily newspapers have served their respective communities with local, regional, national and international news and information for more than 150 years. The Hartford Courant is the nation’s oldest continuously published newspaper and celebrated its 256th anniversary in October 2020.
Tribune’s unique and valuable content across its brands have earned a combined 65 Pulitzer Prizes and are committed to informing, inspiring and engaging local communities. Tribune’s brands create and distribute content across our media portfolio, offering integrated marketing, media, and business services to consumers and advertisers, including digital solutions and advertising opportunities.
The Company’s results of operations, when examined on a quarterly basis, reflect the seasonality of Tribune’s revenues. Second and fourth quarter advertising revenues are typically higher than first and third quarter revenues. Results for the second quarter reflect spring advertising revenues, while the fourth quarter includes advertising revenues related to the holiday season.
Agreement and Plan of Merger
On February 16, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among Tribune Enterprises, LLC, a Delaware limited liability company (“TELLC”), Tribune Merger Sub, Inc., a Delaware corporation and a direct, wholly owned subsidiary of TELLC (“Merger Sub”), and the Company, pursuant to which Merger Sub will merge (the “Merger”) with and into the Company, with the Company surviving as a wholly owned subsidiary of TELLC. TELLC is the acquirer and is an affiliate of Alden Global Opportunities Master Fund, L.P. and Alden Global Value Recovery
Master Fund, L.P. (collectively, “Alden”), the Company’s largest shareholder. Upon completion of the transaction the Company will become a privately held company, and its common stock will no longer be listed on any public market.
Subject to the terms and conditions set forth in the Merger Agreement, at the closing of the Merger, each share of common stock, par value $0.01 per share (other than treasury stock or common stock held by TELLC or any of its affiliates) issued and outstanding immediately as of the closing (other than dissenting shares) will be converted into the right to receive $17.25 in cash, without interest (the “Merger Consideration”).
The consummation of the Merger (the “Closing”) is subject to certain customary mutual conditions, including (i) the approval of the Company’s stockholders holding two-thirds of the outstanding shares of Company Common Stock not owned by TELLC and its affiliates, (ii) the expiration or termination of any waiting period applicable to the closing of the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”) and (iii) the absence of any order of any U.S. court that prohibits, renders illegal or permanently enjoins the consummation of the Merger. The obligation of each party to consummate the Merger is also conditioned upon (i) the accuracy of the representations and warranties of the other party as of the date of the Merger Agreement and as of the Closing (subject to customary materiality qualifiers), (ii) compliance by the other party in all material respects with its pre-Closing obligations under the Merger Agreement and (iii) in TELLC’s case, the absence of a material adverse effect with respect to the Company.
The Company and TELLC have each made customary representations, warranties and covenants in the Merger Agreement. Subject to certain exceptions, the Company has agreed, among other things, to covenants relating to the conduct of its business during the interim period between the execution of the Merger Agreement and the consummation of the Merger. The parties have also agreed to use their respective reasonable best efforts to obtain governmental and regulatory approvals. In addition, subject to certain exceptions, the Company has agreed to covenants relating to (i) the submission of the Merger Agreement to the Company’s stockholders at a special meeting thereof for approval, (ii) the recommendation by the board of directors of the Company in favor of the adoption by the Company’s stockholders of the Merger Agreement and (iii) non-solicitation obligations of the Company relating to alternative acquisition proposals.
Either the Company or TELLC may terminate the Merger Agreement if (i) TELLC, Merger Sub and the Company agree by mutual written consent to do so, (ii) the Merger has not been consummated on or before December 31, 2021 (the “End Date”), (iii) any court has issued an order permanently restraining, enjoining or otherwise prohibiting the Merger and such order or other action is, or has become, final and non-appealable, (iv) the approval of the Company’s stockholders is not obtained at a meeting of the Company’s stockholders called for the purpose of adopting the Merger Agreement or (v) the other party breaches any representation, warranty or covenant that results in the failure of the related closing condition to be satisfied, subject to a cure period in certain circumstances. In addition, the Company may, under certain circumstances, terminate the Merger Agreement in order for the Company to enter concurrently into a definitive written agreement with respect to an unsolicited superior acquisition proposal, subject to the Company having first complied with certain matching rights and other obligations set forth in the Merger Agreement. Additionally, TELLC may, under certain circumstances, terminate the Merger Agreement if (i) the board of directors of the Company changes or adversely modifies its recommendation that the Company’s stockholders vote in favor of adopting the Merger Agreement or (ii) the Company materially breaches its non-solicitation obligations and such breach results in an alternative transaction proposal.
If the Merger Agreement is terminated (i) by the Company in order for the Company to enter into a definitive written agreement with respect to an unsolicited superior acquisition proposal, (ii) by TELLC because (a) the board of directors of the Company changes or adversely modifies its recommendation that the Company’s stockholders vote in favor of adopting the Merger Agreement or (b) the Company materially breaches its non-solicitation obligations and such breach results in an alternative transaction proposal, or (iii) by (x) either party because the Merger was not consummated on or before the End Date (as it may be extended) or approval of the Company’s stockholders was not obtained or (y) by TELLC if the Company commits a breach of any representation, warranty or covenant that results in the failure of the related closing condition to be satisfied (subject to a cure period in certain circumstances), but only if, in the case of this clause (iii), an alternative acquisition proposal was previously made and, within 12 months after termination of the Merger Agreement, the Company enters into an agreement for an alternative transaction or an acquisition transaction is consummated, then, in each case, the Company will be obligated to pay to TELLC a one-time fee equal to $20 million in cash.
If the Merger Agreement is terminated by the Company (i) if TELLC breaches any representation, warranty or covenant that results in the failure of the related closing condition to be satisfied, subject to a cure period in certain circumstances or (ii) if the conditions to TELLC’s obligations to consummate the Merger are satisfied or waived, and TELLC does not consummate the Merger when required by the Merger Agreement, then TELLC will be obligated to pay to the Company a one-time liquidated damages amount equal to $50 million in cash.
Pursuant to the Merger Agreement, TELLC agreed to vote all of its shares of common stock in favor of the adoption of the Merger Agreement and the approval of the transactions contemplated thereby, including the Merger, so long as the board of directors of the Company has not changed or adversely modified its recommendation in favor of the Merger Agreement. The Merger Agreement also prohibits TELLC from transferring any of its shares of common stock, subject to certain exceptions.
Alden Global Opportunities Master Fund, L.P. and Alden Global Value Recovery Master Fund, L.P. (each, a “Guarantor”) have entered into a Limited Guarantee dated February 16, 2021 (the “Limited Guarantee”) with the Company to guarantee TELLC’s obligation to pay the liquidated damages amount to the Company and certain other specified payments to the Company, subject to the terms and obligations set forth in the Limited Guarantee.
The Guarantors have also entered into an equity commitment letter dated as of February 16, 2021 (the “Equity Commitment Letter”) with TELLC pursuant to which the Guarantors have made an equity commitment of $375 million to TELLC to fund the payment of the aggregate Merger Consideration. The Company is a third-party beneficiary of the Equity Commitment Letter and has the right to specifically enforce the Guarantors’ obligations thereunder, if the conditions to TELLC’s obligations to consummate the Merger are satisfied or waived, and the Merger is consummated substantially simultaneously.
Concurrent with the signing of the merger agreement, Alden has signed a non-binding term sheet to sell The Baltimore Sun to Sunlight for All Institute, a public charity formed by Stewart Bainum Jr.
COVID-19
With the global outbreak of COVID-19 and the declaration of a pandemic by the World Health Organization on March 11, 2020, the governments in the states in which Tribune operates have deemed news publishing and media services as “critical infrastructure” providing essential services and information during this global emergency. As a provider of critical infrastructure, Tribune is not subject to business closure requirements and has taken steps to keep employees working safely and news and information being distributed. Tribune remains focused on protecting the health and well-being of its employees and the communities in which it operates while assuring the continuity of its business operations. See Item 7 - Management’s Discussion and Analysis for additional information on the Company’s response to COVID-19.
In response to the COVID-19 pandemic, the Company negotiated rent relief from lessors in various forms, including lease restructuring, rent abatement, deferrals or lease terminations. During the year ended December 27, 2020, the Company permanently vacated 972,699 square feet of office, production and distribution space. The space was vacated as some of our locations have transitioned to long-term remote working arrangements and the Company outsourced printing at two of our locations. See Note 4 to the Consolidated Financial Statements for additional information on leases.
On May 8, 2020, the Board of Directors of the Company (the “Board”) suspended the Company's quarterly cash dividend program until further notice given the unprecedented economic disruption caused by COVID-19.
Significant transactions and recent events
On July 23, 2019, the Company entered into an agreement to sell real property located in Norfolk, Virginia, for a sales price of $9.5 million. The sale closed on January 22, 2020. Additionally, on November 2, 2020, the Company completed the sale of real property located in Virginia Beach, Virginia for a cash sales price of $5.2 million. The Company leased back 39,975 square feet of the Virginia Beach property for a distribution center at $0.2 million per year for an initial term of two years with an option to renew for an additional two years. See Note 10 to the Consolidated Financial Statements for additional information on the property sales.
On February 19, 2020, the Company declared dividends of $0.25 per common share, to be paid to shareholders of record as of March 2, 2020. The cash dividend totaling $9.3 million was paid on March 16, 2020. See Note 20 to the Consolidated Financial Statements for additional information on dividends declared.
In the first quarter of 2020, the Company offered a Voluntary Severance Incentive Plan (“2020 VSIP”) which provided enhanced separation benefits to eligible employees with more than eight years of service. See Note 6 to the Consolidated Financial Statements for additional information on the 2020 VSIP.
In the second quarter of 2020, the Company entered a contract with a third party to outsource the printing and packaging of The Virginian-Pilot. The services were fully transitioned to the third party at the end of the third quarter. In the fourth quarter of 2020, the Company contracted with a third party to outsource the printing and packaging of the Hartford
Courant. The services were fully transitioned to the third party at the end of 2020. See Note 6 to the Consolidated Financial Statements for additional information on changes in operations.
In 2018, the Company’s last employee that was a member of the CWA/ITU Union at the Company’s Baltimore location retired. This retirement effected a partial withdrawal from the CWA/ITU Negotiated Pension Plan. During the year ended December 27, 2020, the Company accrued $1.0 million to reflect this obligation. See Note 16 to the Consolidated Financial Statements for additional information on the Company’s multiemployer pension plans.
On July 27, 2020, the Board declared a dividend of one preferred stock purchase right (a “Right”) for each of the Company’s outstanding shares of common stock, $0.01 par value. The dividend Right was issued on August 7, 2020, to holders of record as of the close of business on that date. The Rights will expire on July 27, 2021, unless earlier exercised, exchanged, amended or redeemed. See Note 20 to the Consolidated Financial Statements for additional information on the Rights Agreement.
On December 11, 2020, the Company, entered into a Membership Unit Purchase Agreement (the “BR Agreement”), by and among the Company and BR Holding Company, Inc. (collectively the "Sellers"), BestReviews LLC (“BestReviews”) and Nexstar Inc. (“Nexstar”), pursuant to which the Sellers will sell 100% of BestReviews to Nexstar (the “BR Transaction”). BestReviews is a company engaged in the business of testing, researching and reviewing consumer products and generates referral fee revenue by directing online traffic from their published reviews to websites where the products can be purchased. BestReviews has affiliate agreements with online sellers, of which the largest is Amazon.com. BestReviews receives a referral fee once the product is purchased. The sale closed on December 29, 2020, subsequent to the Company’s fiscal year-end, for a cash sales price of $160.0 million plus a $9.4 million working capital adjustment. As of the balance sheet date, BestReviews was owned 60% by the Company and 40% by BR Holding Company, Inc. Under the terms of the BR Transaction, the Company received 60% of the cash selling price net of transaction fees upon the closing on December 29, 2020. BestReviews is presented under discontinued operations in the accompanying financial statements. All prior periods have been adjusted. See Note 8 to the Consolidated Financial Statements for additional information on the related discontinued operations.
Segments
In the first quarter of 2020, the Company realigned its operations by combining the print and digital operations of its media groups together under the leadership of the Chief Executive Officer, who is also the chief operating decision maker for Tribune, as defined in Accounting Standards Codification (“ASC”) Topic 280. As a result of the realignment, the Company no longer reports separate segment results for its print and digital operations. The Company now manages its business as nine operating segments that are aggregated into one reportable segment, comprised of the Company’s media groups, digital revenues, third-party and affiliate websites, mobile applications, digital only subscriptions and TCA.
Revenue Sources
The Company’s three primary revenue streams are circulation, advertising and marketing services, and third-party printing and distribution. In the year ended December 27, 2020, 47.3% of the Company’s operating revenues were derived from circulation revenue. Circulation revenue results from the sale of print and digital editions of the newspapers and other owned publications to individual subscribers, the sale of print editions of newspapers to sales outlets that re-sell the newspapers, and the sale of digital subscription access to the Company’s websites.
In the year ended December 27, 2020, 35.0% of the Company’s operating revenues were derived from advertising. These revenues were generated from the sale of advertising space in published issues of the newspapers, and on interactive websites, from the delivery of preprinted advertising supplements and from marketing services.
Newspaper print advertising is typically in the form of display, classified or preprint advertising. Advertising and marketing services revenues are comprised of three basic categories: retail, national and classified. Retail is a category of customers who tend to do business directly with the general public, National is a category of customers who tend to do business directly with other businesses. Classified is a type of advertising which is other than display or preprint.
Digital advertising can be in the form of display, banner ads, advertising widgets, coupon ads, video, search advertising and linear ads placed on Tribune and affiliated websites. Digital marketing services include development of mobile websites, search engine marketing and optimization, social media account management and content marketing for its customer’s web presence for small to medium-sized businesses.
In the year ended December 27, 2020, 17.7% of the Company’s operating revenues were derived from other revenues. Other revenues are derived from commercial printing and delivery services provided to other newspapers, direct mail advertising and services, content syndication and licensing, referral fees and other related activities. The Company contracts with a number of national and local newspapers to both print and distribute their respective publications in local markets where it is a newspaper publisher. In some instances where it prints publications, it also manages and procures newsprint, ink and plates on their behalf. These arrangements allow the Company to leverage its investment in infrastructure in those markets that support its own publications. As a result, these arrangements tend to contribute incremental profitability and revenues. The Company currently distributes national newspapers (including The New York Times, USA Today, and The Wall Street Journal) in its local markets under multiple agreements. Additionally, in New York, Chicago, and South Florida, the Company provides some or all of these services to other local publications.
Products and Services
The Company’s product mix consists of three primary publication types: (i) daily newspapers, (ii) weekly newspapers and (iii) niche publications and direct mail. The key characteristics of each of these types of publications are summarized in the table below.
Daily Newspapers Weekly Newspapers Niche Publications
Cost: Paid Paid and free Paid and free
Distribution: Distributed four to seven days per week Distributed one to three days per week Distributed weekly, monthly or on an annual basis
Income: Revenue from advertisers, subscribers, rack/box sales Paid: Revenue from advertising, subscribers, rack/box sales Paid: Revenue from advertising, rack/box sales
Free: Advertising revenue only Free: Advertising revenue only
As of December 27, 2020, the Company’s prominent print publications and websites included:
Media Group City Masthead Website Circulation
Type Paid or
Free
Chicago Tribune Media Group
Chicago, IL Chicago Tribune www.chicagotribune.com Daily Paid
Chicago, IL Chicago Magazine www.chicagomag.com Monthly Paid
New York Daily News Media Group
New York, NY New York Daily News www.nydailynews.com Daily Paid
The Baltimore Sun Media Group
Baltimore, MD The Baltimore Sun www.baltimoresun.com Daily Paid
Annapolis, MD The Capital Gazette www.capitalgazette.com Daily Paid
Westminster, MD Carroll County Times www.carrollcountytimes.com Daily Paid
Hartford Courant Media Group
Hartford County, CT
Middlesex County, CT
Tolland County, CT Hartford Courant www.courant.com Daily Paid
Sun Sentinel Media Group
Broward County, FL
Palm Beach County, FL Sun Sentinel www.sun-sentinel.com Daily Paid
Broward County, FL
Palm Beach County, FL el Sentinel www.sun-sentinel/elsentinel.com Weekly Free
Orlando Sentinel Media Group
Orlando, FL Orlando Sentinel www.orlandosentinel.com Daily Paid
Orlando, FL el Sentinel www.orlandosentinel/elsentinel.com Weekly Free
Virginia Media Group
Newport News, VA
(Peninsula) Daily Press www.dailypress.com Daily Paid
Norfolk, VA The Virginian-Pilot www.pilotonline.com Daily Paid
The Morning Call Media Group
Lehigh Valley, PA The Morning Call www.themorningcall.com Daily Paid
TCA is a syndication and licensing business providing quality content solutions for publishers around the globe that traces its roots to 1918. Working with a vast collection of the world’s best news and information sources, TCA delivers a daily news service and syndicated premium content to more than 2,000 media and digital information publishers in nearly 70 countries. Tribune News Service delivers the best material from 70 leading publishers, including Chicago Tribune, Bloomberg News, Miami Herald, The Dallas Morning News, Seattle Times, The Philadelphia Inquirer, and the Los Angeles Times. Tribune Premium Content syndicates columnists such as Leonard Pitts, Cal Thomas, Clarence Page, Ask Amy and Rick Steves. TCA manages the licensing of premium content from publications such as Rolling Stone, The Atlantic, Fast Company, Mayo Clinic, Inc. and many more.
Competition
Each of the Company’s nine major daily newspapers holds a leading market position in their respective designated market areas as determined by Nielsen and competes for readership and advertising with both local or community newspapers as well as national newspapers and other traditional and web-based media sources. Increasingly, the Company is facing competition from digital platforms that have content, search, aggregation and social media functionality, magazines, broadcast, cable and satellite television, over-the-top video services, radio, direct mail, yellow pages, outdoor, and other media as advertisers adjust their spending based on the perceived value of the audience reached and the cost to reach that audience. Over time, less competition for advertising dollars is coming from the traditional local, regional and national newspapers.
The secular shift of how content is consumed, including the ubiquity of mobile platforms, has led to increased competition from a wide variety of new digital content offerings, many of which are often free to users. Besides price, variables impacting customer acquisition and retention include the quality and nature of the user experience and the quality of the content offered.
To address the structural shift to digital media, the Company provides editorial content on a wide variety of platforms and formats - from the printed daily newspaper to the Company’s leading local websites; on social network sites such as Facebook, Apple News and Twitter; on smartphones, tablets and e-readers; on websites and blogs; in niche online publications and in e-mail newsletters.
Raw Materials
As a publisher of newspapers, Tribune utilizes substantial quantities of various types of paper. During 2020, we consumed approximately 106 thousand metric tons of newsprint. Our earnings are sensitive to changes in newsprint prices. The Company currently obtains substantially all of its newsprint under a long-term contract with a national purchasing aggregator who then draws upon U.S. and internationally based newsprint producers. We believe that our current source of paper supply is adequate. Newsprint and ink expense accounted for 4.2% of total operating expenses in the year ended December 27, 2020.
Human Capital
As of December 27, 2020, we had approximately 2,865 full-time and part-time employees, including approximately 1,143 employees represented by various employee unions. Of our full-time employees, we have 896 editorial staff including journalists, 369 advertising staff and 1,270 printing and production staff. These numbers reflect a 30.4% decrease in total headcount as a result of the Company’s strategy to flatten its management organization. Additionally, there was a decrease of 36.8% in printing and production staff primarily associated with the outsourcing of the printing and packaging at The Virginian-Pilot and the Hartford Courant.
During 2020, the Company implemented strategic pillars around our employees to attract and retain top talent and drive our business through supporting the success of our employees. Initiatives were implemented to increase employee engagement, encourage open communication with employees, support employee learning and development and focus on employee diversity and inclusion.
To increase employee engagement and retention, the Company has implemented recognition programs, team building and appreciation programs and a brand ambassador program. The Company has committed to open communication with employees, including informal business updates and quarterly town hall meetings. To support employee learning and development, the Company has rolled out additional learning support with an emphasis on leadership in a diverse and inclusive environment, coaching for success, a new manager playbook and managing in today’s remote and virtual work team environment. The Company increased its commitment to diversity and inclusion initiatives throughout 2020. In addition to the leadership training noted above, the Company aims to achieve its diversity and inclusion goals through initiatives including:
•publishing an enhanced newsletter that focuses on diversity and highlights diverse employees throughout the organization;
•setting goals with an emphasis on increasing diverse representation in management roles;
•holding panel discussions on relevant topics throughout the year;
•supporting our Employee Resource Groups (ERGs), including new ERG development;
•providing industry-leading training for our newsrooms to promote accurate and equitable reporting on the diverse communities we serve;
•providing a discussion guide for managers to promote a continued dialogue on these topics;
•revising our diverse talent acquisition strategy; and
•establishing a steering committee that oversees this important work.
Intellectual Property
Currently, our operations are generally not reliant on patents owned by third parties. However, because we operate a large number of websites and mobile applications in high-visibility markets, we do defend patent litigation, from time to time, brought primarily by non-practicing entities, as opposed to marketplace competitors. We have sought patent protection in certain instances; however, we do not consider patents to be material to our business as a whole. Of greater importance to our overall business are the federal, international and state trademark registrations and applications that protect, along with our common law rights, our brands, certain of which are long-standing and well known, such as Chicago Tribune, New York Daily News and Hartford Courant. Generally, the duration of a trademark registration is perpetual if it is renewed on a timely basis and continues to be used properly as a trademark. We also own a large number of copyrights, none of which individually is material to the business. We maintain certain licensing and content sharing relationships with third-party content providers that allow us to produce the particular content mix we provide to our customers in our markets. The Company entered into a number of agreements with Tribune Media Company, formerly Tribune Company, or its subsidiaries (collectively, “TCO”) that provide for licenses to certain intellectual property, and in particular, we entered into a license agreement with TCO that provides a non-exclusive, royalty-free license for us to use certain trademarks, service marks and trade names, including the Tribune name. Other than the foregoing and commercially available software licenses, we do not believe that any of our licenses to third-party intellectual property are material to our business as a whole.
Available Information
Tribune maintains its corporate website at www.tribpub.com. The Company makes available free of charge on www.tribpub.com this Annual Report on Form 10-K, the Company’s Quarterly Reports on Form 10-Q, the Company’s Current Reports on Form 8-K, and amendments to all those reports, all as filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after the reports are electronically filed with or furnished to the Securities and Exchange Commission (“SEC”).

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ITEM 1A. RISK FACTORS
Item 1A. Risk Factors
Investors should carefully consider each of the following risks, together with all of the other information in this Annual Report on Form 10-K, in evaluating an investment in the Company’s common stock. The following risks relate to the Company’s business, the securities markets and ownership of the Company’s common stock. If any of the following risks and uncertainties develop into actual events, the Company could be materially and adversely affected. If this occurs, the trading price of the Company’s common stock could decline, and investors may lose all or part of their investment.
Risks Relating to the Proposed Merger
There are a number of risks and uncertainties associated with the proposed merger.
The Closing of the Merger is subject to customary closing conditions as described above in Item 1. Business, under the heading “Agreement and Plan of Merger”, including approval of the Company’s stockholders holding two-thirds of the outstanding shares of Company Common Stock not owned by TELLC and its affiliates and the expiration or termination of any applicable HSR Act waiting period. The proposed Merger is subject to various risks and uncertainties, including the following:
•risks that the Merger may not be completed in a timely manner or at all;
•uncertainties as to the percentages of our stockholders that will support the Merger;
•the possibility that competing offers or acquisition proposals for the Company will be made;
•the possibility that any or all of the various conditions to the consummation of the Merger may not be satisfied or waived, including the failure to receive any regulatory approvals from any applicable governmental entities (or any conditions, limitations or restrictions placed on such approvals);
•the occurrence of any event, change or other circumstance that could give rise to the termination of the Merger Agreement including circumstances that would require us to pay a termination fee;
•the effect of the announcement or pendency of the Merger on our ability to retain and hire key personnel, our ability to maintain relationships with our customers, subscribers and others with whom we do business, or otherwise on our operating results and business generally;
•risks related to diverting management’s attention from our ongoing future business operations; and
•the risk that stockholder litigation in connection with the Merger may result in significant costs of defense, indemnification and liability.
If the Merger is not consummated for any reason, our stockholders will not receive the consideration that Alden has agreed to pay upon the consummation of the Merger, and the price of our common stock may decline to the extent that its current market price reflects an assumption that the Merger will be consummated. Such decline could be significant.
Risks Relating to Our Business
The outbreak of the novel coronavirus has adversely affected our results of operations and could materially impact our business, financial condition, results of operations and cash flows in the future.
The outbreak of COVID-19 and ensuing pandemic has created significant volatility, uncertainty and economic disruption as federal, state and local governments take increasingly broad actions to mitigate this public health crisis. We have experienced significant disruption to our business, both in our operations and from the adverse effect on overall economic conditions. We have seen a decrease in demand for advertising as our customers cope with the uncertainties related to the pandemic and its related business closures, particularly in the retail and consumer services sectors. The volume under our commercial production and distribution contracts has also decreased. Additionally, the Company has closed many of its facilities and implemented widespread remote working arrangements which has changed our normal processes.
Additionally, our liquidity could be negatively impacted if these conditions continue for a significant period of time. We have taken extensive steps to mitigate the economic impact COVID-19 has had on our results of operations. These steps include salary reductions, elimination of staff positions, employee furloughs, revisions to manufacturing and distribution processes, reducing third-party spending, freezing discretionary spending, eliminating incentive and discretionary bonuses and delaying non-essential repairs and maintenance. However, these measures may not be sufficient to prevent adverse impacts on our business and financial condition from COVID-19. The COVID-19 pandemic has highlighted existing impediments to operational flexibility that have slowed our financial response to the decrease in revenue. These include a number of significant longer-term leases, multiemployer pension plans and collective bargaining issues which limit our ability to respond quickly to the rapidly changing economic environment. Our mitigation steps may also exacerbate certain existing operational risks such as retaining senior management or key employees given the salary reductions, and potential disputes with third parties. Capital and credit markets have been disrupted by the crisis and our ability to obtain any required financing is not guaranteed and largely dependent upon evolving market conditions and other factors. Depending on the continued impact of the crisis, further actions may be required to improve the Company’s cash position and capital structure.
A sustained economic downturn may also result in the carrying value of our goodwill or other intangible assets exceeding their fair value, which may require us to recognize an impairment to those assets in future periods, as we did in 2020. A sustained downturn in the financial markets and related pension asset values may have the effect of increasing our pension funding obligations in order to ensure that our qualified pension plan continues to be adequately funded, which may divert cash flow from other uses.
The extent to which the COVID-19 outbreak ultimately impacts our business, sales, results of operations and financial condition will depend on future developments which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume. Even after the COVID-19 outbreak has subsided, we may continue to experience significant impacts to our business as a result of its global economic impact, including any economic downturn or recession that has occurred or may occur in the future.
Our efforts to protect the health and safety of our employees may not be adequate, which could materially impact our business, financial condition and results of operations.
We rely on our employees’ ability to interact with the public. The COVID-19 pandemic, and the restrictions placed on social interaction, has impacted our ability to protect the health and safety of our employees. Though most of our employees are able to work remotely, we have certain employees who must physically work together in our production facilities to produce our products, employees that interact with personnel in distribution locations to deliver such products and reporters who must interact with the public to gather information. We have to date and may in the future incur costs to ensure the safety of our employees, including medical testing, additional facility and equipment cleaning, process changes to ensure social distancing is maintained, and purchases of personal protective equipment, including masks, gloves, etc. Additionally, we could incur workers’ compensation or medical costs if our employees contract the virus. If we cannot adequately protect the health and safety of our employees, our business, financial condition and results of operations could be adversely affected.
Decreases, or slow growth, in print circulation may adversely affect our print circulation and advertising revenues.
Our newspapers, and the newspaper industry as a whole, are experiencing reduced consumer demand for print circulation and decreased print circulation revenue. This results from, among other factors, increased competition from other media, particularly the online media outlets (which are often free to users), changing newspaper readership demographics and shifting preferences among some consumers to receive all or a portion of their news from sources other than a newspaper. These factors could affect our ability to implement circulation price increases, or even maintain current pricing for our print products. As a result, our print circulation and circulation revenue may decline or may decline at a faster rate than anticipated.
In addition, our circulation revenue is sensitive to discretionary spending available to subscribers in the markets we serve, as well as their perceptions of economic trends and uncertainty. Weak economic indicators in various regions across the nation may adversely impact subscriber sentiment and therefore impair our ability to maintain and grow our circulation.
A continued decline in print circulation could affect the rate and volume of advertising revenue. To maintain a certain level of our circulation base, we may incur additional costs, and may not be able to recover these costs through circulation and advertising revenue. To address declining print circulation, we may increase spending on marketing designed to retain our existing subscriber base and continue or create niche publications targeted at specific market groups. We may also increase marketing efforts to drive traffic to our proprietary websites.
Slow growth in digital circulation may adversely affect our digital circulation and advertising revenues
The increasing number of digital media options available on the Internet, through social networking tools and through mobile and other devices distributing news and other content, is expanding consumer choice significantly. Faced with a multitude of media choices and a dramatic increase in accessible information, consumers may place greater value on when, where, how and at what price they consume digital content than they do on the source or reliability of such content. Further, as existing newspaper readers get older, younger generations may not develop similar readership habits. News aggregation websites and customized news feeds (often free to users) may reduce our traffic levels by driving interaction away from our websites or our digital applications. If traffic levels stagnate or decline, we may not be able to create sufficient advertiser interest in our digital businesses or to maintain or increase the advertising rates of the inventory on our digital platforms.
In addition, the range of advertising choices across digital products and platforms and the large inventory of available digital advertising space have historically resulted in significantly lower rates for digital advertising than for print advertising. Digital advertising networks and exchanges, real-time bidding and other programmatic buying channels that allow advertisers to buy audiences at scale are also playing a significant role in the advertising marketplace, which may cause downward pricing pressure. In addition, evolving standards for delivery of digital advertising, such as viewability, could adversely affect advertising revenues. Consequently, our digital advertising revenue may not be able to replace print advertising revenue lost as a result of the shift to digital consumption. A decrease in our customers’ advertising expenditures, reduced demand for our offerings or a surplus of advertising inventory could lead to a reduction in pricing and advertising revenue, which could have an adverse effect on our businesses and assets. Our inability to maintain and/or improve the performance of our customers’ advertising results on our digital properties may negatively influence rates we achieve in the marketplace for our advertising inventory.
Paywalls on our newspaper websites require users to pay for content after accessing a limited number of pages or news articles for free over a specified period of time. Our ability to build a subscriber base on our digital platforms depends on market acceptance, consumer habits, pricing, terms of delivery, platforms and other factors. Stagnation or a decline in website traffic levels may adversely affect our advertiser base and advertising rates and result in a decline in digital revenue. In order to
retain and grow our digital subscription base and audience, we may have to further evolve our digital subscription model, address changing consumer requirements and develop and improve our digital products while continuing to deliver high-quality journalism and content that is interesting and relevant to our audience. There can be no assurance that we will be able to successfully maintain and increase our digital subscription base and audience or that we will be able to do so without taking steps such as reducing pricing or increasing costs that would affect our financial condition and results of operations.
Advertising demand is expected to continue to be affected by changes in economic conditions and fragmentation of the media landscape.
Advertising revenue is our second largest source of revenue. Expenditures by advertisers tend to be cyclical, reflecting overall economic conditions, as well as budgeting and buying patterns. National and local economic conditions, particularly in major metropolitan markets, affect the levels of retail, national and classified newspaper advertising revenue. Changes in gross domestic product, consumer spending, auto sales, fuel prices, housing sales, unemployment rates, job creation, and circulation levels and rates, as well as federal, state and local election cycles and customers reactions to health epidemics, all affect demand for advertising. For example, the impact of widespread health emergencies may adversely impact the demand for advertising, such as the potential impact from the recent outbreak of the coronavirus, which originated in Wuhan, Hubei Province, China but has now spread to other countries.
The trend towards online shopping has negatively impacted retailers, which constitute a primary advertising channel of the Company. A decline in the economic prospects of advertisers or the economy in general could alter current or prospective advertisers’ spending priorities. Consolidation across various industries, such as large department store and telecommunications companies, may also reduce overall advertising revenue.
Competition from other media, including other metropolitan, suburban and national newspapers, websites, including news aggregation websites, social media websites and search engines, broadcasters, cable systems and networks, satellite television and radio, magazines, direct marketing and solo and shared mail programs, affects our ability to retain advertising clients and maintain or raise rates. In recent years, Internet sites devoted to recruitment, automotive and real estate have become significant competitors of our newspapers and websites for classified advertising and have significantly eroded our share of classified advertising revenue.
Seasonal variations in consumer spending cause our quarterly advertising revenue to fluctuate. Second and fourth quarter advertising revenue is typically higher than first and third quarter advertising revenue, reflecting the slower economic activity in the winter and summer and the stronger fourth quarter holiday season.
Demand for our products is also one of many factors in determining advertising rates. For example, circulation levels for our newspapers have been declining which could affect the rate and volume of advertising revenue.
All of these factors continue to contribute to a difficult advertising sales environment and may further adversely affect our ability to grow or maintain our advertising revenue. Our advertising revenues may decline or may decline at a faster rate than anticipated.
Increasing popularity of digital media and the shift in newspaper readership demographics, consumer habits and advertising expenditures from traditional print to digital media have adversely affected and may continue to adversely affect our operating revenues and may require significant capital investments due to changes in technology.
Technology in the media industry continues to evolve rapidly. Advances in technology have led to an increasing number of methods for delivery of news and other content and have resulted in a wide variety of consumer demands and expectations, which are also rapidly evolving. If we are unable to exploit new and existing technologies to distinguish our products and services from those of our competitors or adapt to new distribution methods that provide optimal user experiences, our business and financial results may be adversely affected.
Any changes we make to our business model to address these challenges may require significant capital investments. We have invested, and expect to continue to invest, in digital technologies. However, we may be limited in our ability to invest funds and resources in digital products, services or opportunities and we may incur costs of research and development in building and maintaining the necessary and continually evolving technology infrastructure. Some of our competitors may have greater operational, financial and other resources or may otherwise be better positioned to compete for opportunities and as a result, our digital businesses may be less successful, which may adversely affect our business and financial results.
Our business operates in highly competitive markets and our ability to maintain market share and generate operating revenues depends on how effectively we compete with our competition.
Our business operates in highly competitive markets. Our newspapers often times compete for audiences and advertising revenue with other newspapers as well as with other media such as the Internet, magazines, broadcast, cable and satellite television, radio, direct mail, and yellow pages. Some of our competitors have greater financial and other resources than we do.
Our operating revenues primarily consist of advertising and paid circulation. Competition for advertising expenditures and paid circulation comes from a variety of sources, including local, regional and national newspapers, the Internet, including news aggregation websites, social media websites and search engines, magazines, broadcast, cable and satellite television, radio, direct mail, yellow pages, outdoor billboards, and other media. Free daily newspapers are available in several metropolitan markets, and there can be no assurance that free daily publications, or other publications, will not be introduced in any markets in which we publish newspapers. Competition for newspaper advertising revenue is based largely upon advertiser results, advertising rates, readership, demographics, and circulation levels. Competition for circulation is based largely upon the content of the newspaper, its price, editorial quality, customer service, and other sources of news and information. Circulation revenue and our ability to achieve price increases for, or even maintain prices for, our print products may be affected by competition from other publications and other forms of media available in our various markets, declining consumer spending on discretionary items like newspapers, decreasing amounts of free time, and declining frequency of regular newspaper buying among certain demographics. We may incur higher costs competing for advertising dollars and paid circulation. If we are not able to compete effectively for advertising dollars and paid circulation, our operating revenues may decline and our financial condition and results of operations may be adversely affected.
Our primary strategy is to transition from a print-focused media company to a digital platform media company, and if we are not successful in our transition, our business, financial condition and prospects will be adversely affected.
Our ability to successfully transition from a print-focused media company to a digital platform media company depends on various factors, including, among other things, the ability to:
•increase digital audiences;
•increase the amount of time spent on our websites, the likelihood of users returning to our websites, and their level of engagement;
•attract advertisers to our websites;
•serve and monetize increasingly mobile news readers with product enhancements, advertising revenue capabilities and subscription conversion rates that are as strong as those of our desktop products;
•maintain or increase online advertising rates;
•exploit new and existing technologies to distinguish our products and services from those of competitors and develop new content, products and services; and
•invest funds and resources in digital opportunities.
There are no assurances that we will be able to attract and retain employees with skill sets and knowledge base needed to successfully operate in a digital business structure, that our sales force will be able to effectively sell advertising in the digital advertising arena versus our historical print advertising business, or that we will be able to effect the operational changes necessary to transition from a print-focused business to a digital-focused business. We may be limited in our ability to invest funds and resources in digital products, services or opportunities, and we may incur research and development costs in building, maintaining and evolving our technology infrastructure.
We rely on revenue from the printing and distribution of publications for third parties that may be subject to many of the same business and industry risks that we are.
In 2020, we generated approximately 9.9% of our revenue from printing and distributing third-party publications. As a result, if macroeconomic and industry trends described herein, such as the sensitivity to perceived economic weakness of discretionary spending available to advertisers and subscribers, circulation declines, shifts in consumer habits and the increasing popularity of digital media affect those third parties, we may lose, in whole or in part, a substantial source of revenue, which may adversely impact our results of operations.
Our business, operating results and reputation may be negatively impacted, and we may be subject to legal and regulatory claims if there is a loss, destruction, disclosure, misappropriation or alteration of or unauthorized access to data owned or maintained by us, or if we are the subject of a significant data breach or cyberattack.
We rely on our information technology and communications systems to manage our business data, including communications, news and advertising content, digital products, order entry, fulfillment and other business processes. These technologies and systems also help us manage many of our internal controls over financial reporting, disclosure controls and procedures and financial systems. Attempts to compromise information technology and communications systems occur regularly across many industries and sectors, and we may be vulnerable to security breaches resulting from accidental events (such as human error) or deliberate attacks. Moreover, the techniques used to attempt attacks and the perpetrators of such attacks are constantly expanding. We face threats both from use of malicious code (such as malware, viruses and ransomware), employee theft or misuse, advanced persistent threats, and phishing and denial-of-service attacks. For example, in December 2018, the Company was attacked by a ransomware virus, which locked up certain Company systems and data, requiring implementation of components of the Company’s business continuity plans and restoration of data from backups. The Company investigated the incident and determined that it did not result in any unauthorized access to or acquisition of sensitive data stored within its systems. Additionally, between late 2018 and mid-2019, the Company identified and investigated unrelated activity involving unauthorized access gained to certain Company staff email accounts and payroll-related user accounts, which was the result of email phishing attacks. The Company has complied with all applicable legal requirements relating to this activity and is taking steps to implement additional safeguards to reduce the risk of successful email phishing attacks. Neither the malware infection nor the email phishing attacks resulted in any material costs to the Company. As cyberattacks become increasingly sophisticated, and as tools and resources become more readily available to malicious third parties, the Company will incur increased costs to secure its technology environment and there can be no guarantee that the Company’s and our third-party vendors’ actions, security measures and controls designed to prevent, detect or respond to security breaches, to limit access to data, to prevent destruction, alteration, or exfiltration of data, or to limit the negative impact from such attacks, can provide absolute security against compromise. As a result, our business data, communications, news and advertising content, digital products, order entry, fulfillment and other business processes may be lost, destroyed, disclosed, misappropriated, altered or accessed without consent and various controls, automated procedures and financial systems could be compromised.
A significant security breach or other successful attack could result in significant remediation costs, including repairing system damage, engaging third-party experts, deploying additional personnel or vendor support, training employees, and compensation or incentives offered to third parties whose data has been compromised. These incidents may also lead to lost revenues resulting from a loss in competitive advantage due to the unauthorized disclosure, alteration, destruction or use of business data, the failure to retain or attract customers, the disruption of critical business processes or systems, and the diversion of management’s attention and resources. Moreover, such incidents may result in adverse media coverage, which may harm our reputation. These incidents may also lead to legal claims or proceedings, including regulatory investigations and actions and private lawsuits, and related legal fees, as well as potential settlements, judgments and fines. We maintain insurance, but the coverage and limits of our insurance policies may not be adequate to reimburse us for losses caused by security breaches.
Our possession and use of personal information, including payment methods of our customers, present risks and expenses that could harm our business. A security breach involving such data, whether through breach of our security measures or otherwise, could expose us to liabilities and costly litigation and damage our reputation.
Our information technology and communications systems store and process subscriber, employee and other personal information, such as names, email addresses, payment method information, addresses, personal health information, social security numbers, and other personal information. Maintaining the security of this information and our systems 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’, information technology and communications systems could jeopardize the security of this personal information. Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage information technology and communications 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 or omissions by an employee, can also result in a security breach. A party that is able to circumvent our security measures could misappropriate the personal information relating to our customers, users or employees. As a result of any such breaches, we may be subject to legal claims, and these events may adversely impact our reputation and interfere with our ability to provide our products and services, all of which may have a material 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 personal 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 or our third-party vendors 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 security breach or that we or our third-party service providers may make some other act or omission that could result in a security 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 personal information of our customers and employees or to provide affected individuals with adequate notice of any security breach where required by law could also subject us to liabilities imposed by United States federal and state regulatory agencies or courts.
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, including laws at the city, state and federal level in the United States. For instance, 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. Additionally, as these laws and regulations continue to evolve and continue to be interpreted by courts and regulators, compliance may result in increasing regulatory and public scrutiny and escalating levels of enforcement, litigation, damages and sanctions and may necessitate shifts in business practices that could impact revenue. For example, California enacted the California Consumer Privacy Act (“CCPA”) which came into effect on January 1, 2020. The CCPA gives California residents several additional rights, including the right to access and delete their personal information, restrict certain personal information sharing, and receive greater transparency about how their personal information is used. The CCPA provides for civil penalties for violations, as well as a limited private right of action for security breaches that is expected to increase security breach litigation. The CCPA could mark the beginning of a trend toward more stringent privacy legislation in the United States, which could increase our potential liability and compliance costs and adversely affect our business. The law has already been amended and may be amended again. Additionally, the California Attorney General’s office has issued proposed rules, which may be further adjusted before becoming final. These changes make it difficult to predict how the CCPA will affect our business or operations. Aside from actions by state legislatures, the Federal Trade Commission and state attorneys general are active in enforcing against alleged privacy and data protection failures through authority granted to them under broad consumer protection laws, which could also create potential liability and adversely affect our business.
If in the future, we decide to expand any existing or future lines of our business outside of the United States, we may become subject to additional privacy and data protection obligations by other nations’ privacy laws. For example, an expansion into European Union countries may subject us to the European Union’s existing data protection law, the General Data Protection Regulation (“GDPR”). The GDPR has several very specific and often burdensome compliance requirements that apply to the processing of personal data, including stringent conditions for consent when relied upon for processing, granting of rights for individuals (including erasure, access, portability and rectification), conditions applicable to the trans-border flow of such data, more burdensome security breach reporting and other requirements. The GDPR also has significant penalties for non-compliance (up to 20 million euros, or approximately 23 million U.S. dollars, or 4% of an entity’s worldwide annual turnover in the preceding financial year, whichever is higher) and increases the enforcement powers of the data protection authorities and private citizens. The European Union is also considering an update to its Privacy and Electronic Communication (e-Privacy) Directive with a regulation to, among other things, amend the current directive’s rules on the use of cookies and email marketing.
Our failure to comply with any of these laws or regulations, foreign or domestic, may have an adverse effect on our business, financial condition and results of operations. Any failure, or perceived failure, by us to comply with laws and regulations that govern our business operations, as well as any failure, or perceived failure, by us to comply with our own posted policies, could result in claims against us by governmental entities or others and/or increased costs to change our practices. They could also result in negative publicity and a loss of confidence in us by our users and advertisers. All of these potential consequences could adversely affect our business and results of operations.
If we are unable to execute cost-control measures successfully, our total operating costs may be greater than expected, which would adversely affect our profitability.
We continually assess our operations in an effort to identify opportunities to enhance operational efficiencies and reduce expenses. These activities have in the past included, and could include in the future, outsourcing of various functions or operations, additional abandonment of leased space, offering employee buyouts, amending retirement benefits and other activities that may result in changes to employee headcount. See Note 6 to the Consolidated Financial Statements for more information on changes in operations during 2020. The Company expects to continue to take actions deemed appropriate to control expenses and enhance profitability but does not currently know whether or when any such actions will occur or the potential costs and expected savings. If we do not achieve expected savings, are unable to implement additional cost-control measures, or our operating costs increase as a result of investments in strategic initiatives, our total operating costs would be greater than anticipated. In addition, if we do not manage our costs properly, such efforts may affect the quality of our products and our ability to generate future revenues. Reductions in staff and employee benefits and changes to our compensation structure could also adversely affect our ability to attract and retain key employees. Finally, depending on the actions taken and the timing of any such actions, the anticipated cost savings could be recognized in fiscal periods that do not correspond to the fiscal period(s) in which the charges are recognized. As a result, our net income trends could be impacted and more difficult to predict.
Significant portions of our expenses are fixed costs that neither increase nor decrease proportionately with revenues. If we are not able to implement further cost-control efforts or reduce our fixed costs sufficiently in response to a decline in our revenues, this could adversely affect our results of operations.
Newsprint prices and availability may continue to be volatile and difficult to predict and control.
Newsprint and ink expense was 4.2% of our total operating expenses for the year ended December 27, 2020. The price of newsprint has historically been subject to change, and the consolidation of North American newsprint mills over the years has reduced the number of suppliers and the available supply of newsprint. We have historically been able to realize favorable newsprint pricing by virtue of our company-wide volume and a long-term contract with a significant supplier. Failure to maintain our current consumption levels, further supplier consolidation or the inability to maintain our existing relationships with our newsprint suppliers may adversely affect newsprint prices in the future.
We may not be able to adapt to technological changes.
Advances in technologies or alternative methods of content delivery or changes in consumer behavior driven by these or other technologies have had and could continue to have a negative effect on our business. New delivery platforms may lead to pricing restrictions, the loss of distribution control and the loss of a direct relationship with consumers. Our advertising and circulation revenues have declined, reflecting general trends in the newspaper industry, including declining newspaper buying (by young people in particular) and the migration to other available forms of media for news. We may also be adversely affected if the use of technology developed to block the display of advertising on websites and mobile devices, fraudulent traffic generated by “bots,” or malware proliferate. We cannot predict the effect such technologies will have on our operations. In addition, the expenditures necessary to implement these new technologies could be substantial and other companies employing such technologies before we are able to do so could aggressively compete with our business.
We rely on third-party service providers for various services.
We rely on third-party service providers for various services. We do not control the operation of these service providers. If any of these third-party service providers terminate their relationship with us, or do not provide an adequate level of service, it could be disruptive to our business as we seek to replace the service provider or remedy the inadequate level of service. This disruption may adversely affect our operating results.
Significant problems with our key systems or those of our third-party service providers could have a material adverse effect on our operating results.
The systems underlying the operations of each of our businesses are complex and diverse, and must efficiently integrate with third-party systems, such as wire feeds, video playback systems and credit card processors. Key systems include, without limitation, billing, website and database management, customer support, editorial content management, advertisement and circulation serving and management systems, information technology and communications systems, print and insert production systems, and internal financial systems. Some of these systems and/or support thereof are outsourced to third parties. We or our third-party service providers may experience problems with these systems. All information technology and
communication systems are subject to reliability issues, integration and compatibility concerns, and security-threatening intrusions. The continued and uninterrupted performance of our key systems is critical to our success. Unanticipated problems affecting these systems could cause interruptions in our services. In addition, if our third-party service providers face financial or other difficulties, our business could be adversely impacted. Any significant errors, damage, failures, interruptions, delays, or other problems with our systems, our backup systems or our third-party service providers or their systems could adversely impact our ability to satisfy our customers or operate our businesses and could have a material adverse effect on our operating results.
Our brands and reputation are key assets, and negative perceptions or publicity could adversely affect our business, financial condition and results of operations.
Our brands are key assets of the Company, and our success depends on our ability to preserve, grow and leverage the value of our brands. We believe that our brands are trusted by consumers and have excellent reputations for high-quality journalism and content. To the extent consumers perceive the quality of our products to be less reliable or our reputation is damaged, our business, financial condition or results of operations may be adversely affected.
We may not be able to adequately protect our intellectual property and other proprietary rights that are material to our business, or to defend successfully against intellectual property infringement claims by third parties.
Our ability to compete effectively depends in part upon our intellectual property rights, including our trademarks, copyrights and proprietary technology. Protecting our intellectual property rights and proprietary technology requires us to continually police against the unauthorized use of our products and services and related intellectual property and rely on our contractual provisions, confidentiality procedures and agreements, and trademark, copyright, unfair competition, trade secret and other laws, all which may not be adequate.
Despite our best efforts to enforce our intellectual property rights, developments in technology may increase the threat of content piracy by making it easier to duplicate and widely distribute pirated material. Protection of our intellectual property rights is dependent on the scope and duration of our rights as defined by applicable laws in the U.S. and abroad and the manner in which those laws are construed. If those laws are drafted or interpreted in ways that limit the extent or duration of our rights, or if existing laws are changed, our ability to generate revenue from intellectual property may decrease, or the cost of obtaining and maintaining rights may increase. There can be no assurance that our efforts to enforce our rights and protect our products, services and intellectual property will be successful in preventing content piracy.
Litigation may be necessary to enforce our intellectual property rights and protect our proprietary technology, or to defend against claims by third parties that the conduct of our businesses or our use of intellectual property infringes upon such third-party’s intellectual property rights. Any intellectual property litigation or claims brought against us, whether or not meritorious, could result in substantial costs and diversion of our resources, and there can be no assurances that favorable final outcomes will be obtained in all cases. The terms of any settlement or judgment may require us to pay substantial amounts to the other party or cease exercising our rights in such intellectual property. In addition, we may have to seek a license to continue practices found to be in violation of a third-party’s rights, which may not be available on reasonable terms, or at all. Our business, financial condition or results of operations may be adversely affected as a result.
Adverse results from litigation or governmental investigations can impact our business practices and operating results.
From time to time, we are party to litigation, including matters relating to alleged libel or defamation, breaches of fiduciary duties by our Board, employment-related matters or claims that may provide for statutory damages, in addition to regulatory, environmental and other proceedings with governmental authorities and administrative agencies. The coverage, if any, and limits of our insurance policies may not be adequate to reimburse us for all costs and/or losses associated with lawsuits or investigations. If we are not successful in our defense of any claims that may be asserted against us and/or those claims are not covered by insurance or exceed our insurance coverage, we may have to pay damage awards, indemnify our officers and directors from damage awards that may be entered against them and pay the costs and expenses incurred in defense of, or in any settlement of, such claims. Any such payments or settlement arrangements could be significant and have a material adverse effect on our business, financial condition, results of operations or cash flows if the claims are not covered by our insurance carriers or if damages exceed the limits of our insurance coverage. Furthermore, regardless of the outcome of any claims that may be filed against us, defending litigation itself could result in substantial costs and divert management’s attention and resources, which could have a material adverse effect on our business, operating results, financial condition and ability to finance our operations.
In some instances, we may have an obligation to indemnify a third-party for liabilities related to litigation or governmental investigations. It is possible that the resolution of one or more such legal matters could result in significant monetary damages, which could adversely affect our financial condition and cash flow. For example, as part of the Nant Transaction, the Company provided Nant Capital indemnification with respect to certain legal matters which were at various states of adjudication at the date of the sale. On August 19, 2019, the Los Angeles Times received an unfavorable jury verdict in an indemnified employment litigation matter. On December 27, 2019, the judge in this case overturned the jury verdict on the grounds that the monetary damages were excessive and could not be justified by the evidence. A new trial will be held solely for the purpose of determining damages. This future award could adversely affect our financial condition.
In other instances, third parties may have an obligation to indemnify us for liabilities related to litigation or governmental investigations, and may be unable to, or fail to fulfill such obligations. It is possible that the resolution of one or more such legal matters could result in significant monetary damages. If such third parties were to fail to indemnify us, we would be responsible for the monetary damages, which could adversely affect our financial condition and cash flow.
We may not achieve the acquisition component of our business strategy, or successfully complete strategic acquisitions, investments or divestitures.
We continuously evaluate our businesses and make strategic acquisitions, investments and divestitures as part of our strategic plan. These transactions involve challenges and risks in negotiation, execution, valuation and integration. There can be no assurance that any such acquisitions, investments or divestitures can be completed.
Acquisitions are an important component of our business strategy; however, there can be no assurance that we will be able to grow our business through acquisitions, that any businesses acquired will perform in accordance with expectations or that business judgments concerning the value, strengths and weaknesses of businesses acquired will prove to be correct.
Acquisitions involve a number of risks, including (i) the challenges in achieving strategic objectives, cost savings and other anticipated benefits; (ii) potential adverse short-term effects on operating results through increased costs or otherwise; (iii) diversion of management’s attention and failure to recruit new, and retain existing, key personnel of the acquired business; (iv) stockholder dilution if an acquisition is consummated (in whole or in part) through an issuance of our securities; (v) failure to successfully implement systems integration; (vi) potential future impairments of goodwill associated with the acquired business; (vii) the risks inherent in the systems of the acquired business and risks associated with unanticipated events or liabilities, any of which could have a material adverse effect on our business, financial condition and results of operations (viii) exceeding the capability of our systems; (ix) problems implementing disclosure controls and procedures for the newly acquired business; and (x) unforeseen difficulties extending internal control over financial reporting and performing the required assessment at the newly acquired business.
Our ability to execute an acquisition strategy may also encounter limitations in completing transactions. Among other considerations, we may not be able to obtain necessary financing on attractive terms or at all, and we may face regulatory considerations that limit the candidates with whom we are permitted to proceed or may impose transaction execution delays. Future acquisitions may result in the Company incurring debt and contingent liabilities, pension obligations, an increase in interest and amortization expense and significant charges relative to integration costs. Our strategy could be impeded if we do not identify suitable acquisition candidates and our financial condition and results of operations will be adversely affected if we overpay for acquisitions. Even if successfully negotiated, closed and integrated, certain acquisitions may prove not to advance our business strategy and may fall short of expected returns.
Strategic investments are an important component of our business strategy as well. Investments in other companies expose us to the risk that we may not be able to control the operations of the companies we have invested in, which could decrease the benefits we realize from a particular relationship. The success of these investments is dependent on the companies we invest in, as well as other investors. We also are exposed to the risk that a company in which we have made an investment may encounter financial difficulties, which could lead to disruption of that company’s business or operations. Further, our ability to monetize the investments and/or the value we may receive upon any disposition may depend on the actions of the companies we have invested in and other investors. As a result, our ability to control the timing or process relating to a disposition may be limited, which could adversely affect the liquidity of these investments or the value we may ultimately attain upon disposition. If the value of the companies in which we invest declines, we may be required to record a charge to earnings. There can be no assurances that we will receive a return on these investments or that they will result in revenue growth or will produce equity income or capital gains in future years.
If we are unable to successfully operate our business in new markets we may enter, our business, financial condition, and results of operations could be adversely affected.
Part of our strategy is to expand through both organic and inorganic growth. Our future financial results will depend in part on our ability to profitably manage our business in these and any other new markets that we may enter. In order to successfully execute on our growth initiatives, we will need to, among other things, anticipate and react to market conditions and develop expertise in areas outside of our business’s traditional core competencies. If we are unable to do so, our business, financial condition, and results of operations could be adversely affected.
Continued economic uncertainty and the impact on our business or changes to our business and operations may result in goodwill and masthead impairment charges.
Because we have grown in part through acquisitions, goodwill and other acquired intangible assets represent a substantial portion of our assets. We also have long-lived assets consisting of property and equipment, right of use lease assets and other identifiable intangible assets which we review both on an annual basis as well as when events or circumstances indicate that the carrying amount of an asset may not be recoverable. Erosion of general economic, market or business conditions could have a negative impact on our business and stock price, which may require that we record impairment charges in the future, which negatively affects our results of operations. If a determination is made that a significant impairment in value of goodwill, other intangible assets or long-lived assets has occurred, such determination could require us to impair a substantial portion of our assets. Asset impairments could have a material adverse effect on our financial condition and results of operations.
We assumed underfunded pension liabilities as part of the New York Daily News acquisition and our pension obligations under this plan, or other pension plans we may assume in future acquisitions, could increase.
In connection with acquisitions, we have in the past assumed, and may in the future assume, single-employer and/or multiemployer pension obligations of the acquired entity(ies) which may or may not be fully funded at the time of acquisition. In connection with our acquisition of the New York Daily News, we assumed the Daily News Retirement Plan (“NYDN Pension Plan”) which is currently underfunded. The Company’s contributions to the NYDN Pension Plan were $2.6 million in fiscal 2020. There are no unfunded commitments of the NYDN Pension Plan as of December 27, 2020. Our pension funding requirements could increase due to a reduction in the plan’s funded status. The extent of underfunding of this plan is directly affected by a variety of factors, including performance of financial markets, changing interest rates, changes in assumptions or investments that do not achieve adequate or expected returns, and liquidity of the plan’s investments. It also is affected by the rate and age of employee retirements, along with actual experience compared to actuarial projections. These items affect pension plan assets and the calculation of pension obligations and expenses. Such changes could increase the cost to our obligations, which could have a material adverse effect on our results and our ability to meet those obligations. In addition, changes in the law, rules, or governmental regulations with respect to pension funding could also materially and adversely affect cash flow and our ability to meet our pension obligations.
Our annual pension funding obligations could also further increase if we assume additional pension plans (whether or not unfunded) in connection with future acquisitions. No assurances can be made regarding whether we will assume other pension plan obligations and, if we do, the level of any underfunded status, if any.
We may be obligated to make greater contributions to multiemployer defined benefit pension plans that cover our union-represented employees in the next several years than previously required, placing greater liquidity needs upon our operations.
As of December 27, 2020, we participate in, and make periodic contributions to, nine multiemployer pension plans that cover many of our current and former union employees. The risks of participating in multiemployer plans are different from single-employer plans in that assets contributed are pooled and may be used to provide benefits to employees of other participating employers. If a participating employer withdraws from or otherwise ceases to contribute to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers. Our required contribution to these plans could increase because of a shrinking contribution base as a result of the insolvency or withdrawal of other companies that currently contribute to these plans, the inability or failure of withdrawing companies to pay their withdrawal liability, low interest rates, lower than expected returns on pension fund assets or the other funding deficiencies. Our withdrawal liability for any multiemployer pension plan will depend on the nature and timing of any triggering event and the extent of that plan’s funding of vested benefits.
Under federal pension law, special funding rules apply to multiemployer pension plans that are classified as “endangered,” “critical” or “critical and declining.” If plans in which we participate are in one of these statuses, benefit reductions may apply and/or we could be required to make additional contributions.
Three of the multiemployer plans that we contribute to are in critical and declining status and project insolvency at various dates within the next 10 years. All three of these plans have adopted rehabilitation plans designed to forestall the plans’ insolvency dates. A fourth plan, the IAM National Pension Fund, is in critical status, but not critical and declining status. This plan adopted a rehabilitation plan designed to enable it to emerge from critical status within the time frame stipulated by the Internal Revenue Code.
Rehabilitation plans are required to be reviewed annually and modified if necessary to meet federal requirements. Therefore, there can be no assurances that the funding obligations under the rehabilitation plans will not increase in the future or that the rehabilitation plans will be successful in preventing or forestalling the projected insolvency of the multiemployer plans.
Given the critical and declining status of the three plans, the trustees may amend the current, or adopt new, rehabilitation plans with increased funding obligations. Trustees of a plan or the PBGC also may decide to terminate a multiemployer plan rather than permit it to become insolvent, and a termination would result in additional liabilities for the participating employers.
With respect to three of the nine multiemployer defined benefit pension plans to which we are obligated to contribute, we are among only a limited number of participating employers. As a result, if one or more of the other contributing employers withdraws from, or ceases to contribute to, such plans, our required contributions to such plans could increase. A withdrawal by a significant percentage of participating employers may result in a mass withdrawal, which would require us to record additional withdrawal liabilities. Additionally, if we are the last remaining participating employer in such plan, we may become obligated to fund the plan’s future liabilities more quickly as if it were a single employer plan and the unfunded liability could reside on our financial statements which would impact our financial condition.
If, in the future, we elect to withdraw from an underfunded multiemployer plan, or if we trigger a partial withdrawal due to declines in contribution base units or a partial cessation of our obligation to contribute, additional liabilities would be required to be recorded that could have an adverse effect on our business, results of operations, financial condition or cash flows. We are not currently able to quantify such potential increased contributions or withdrawal liabilities. See Note 16 to the Consolidated Financial Statements for additional information on individual multiemployer plans.
Labor strikes, lockouts and protracted negotiations can lead to business interruptions and increased operating costs.
As of December 27, 2020, union employees comprised approximately 39.9% of our workforce. We are required to negotiate collective bargaining agreements across our business units on an ongoing basis. Complications in labor negotiations can lead to work slowdowns or other business interruptions and greater overall employee costs. Additionally, certain of our employee groups could elect to unionize in the future. If we or our suppliers are unable to negotiate new or renew expiring collective bargaining agreements, it is possible that the affected unions or others could take action in the form of strikes or work stoppages. Such actions, higher costs in connection with these agreements or a significant labor dispute could adversely affect our business by disrupting our ability to provide customers with our products or services. Depending on its duration, any lockout, strike or work stoppage may have an adverse effect on our operating revenues, cash flows or operating income or the timing thereof.
Our revenues and operating results fluctuate on a seasonal basis and may suffer if revenues during the peak season do not meet our expectations.
Our advertising business is seasonal, and our quarterly revenues and operating results typically exhibit this seasonality. Our revenues and operating results tend to be higher in the second and fourth quarters than the first and third quarters. Results for the second quarter reflect spring advertising revenues, while the fourth quarter includes advertising revenues related to the holiday season. Our operating results may suffer if advertising revenues during the second and fourth quarters do not meet expectations. Our working capital and cash flows also fluctuate as a result of this seasonality. Moreover, the operational risks described elsewhere in these risk factors may be significantly exacerbated if those risks were to occur during the fourth quarter.
Our ability to operate effectively could be impaired if we fail to attract, integrate and retain our senior management team.
We rely heavily on the skills and expertise of our senior management team and therefore, our success depends, in part, upon the services they provide us. For example, in January 2020, we appointed a new Chief Executive Officer, new Interim Chief Financial Officer and new Chairman of the Board. If we are unable to assimilate these new senior managers, if they or our other leaders fail to perform effectively, if we are unable to retain them, or if we are unable to attract additional qualified senior managers as needed, our strategic initiatives could be adversely impacted which could adversely affect our business, financial condition and results of operations.
We may not be able to access the credit and capital markets at the times and in the amounts needed and on acceptable terms.
From time to time we may need to access the long-term and short-term capital markets to obtain financing. Our access to, and the availability of, financing on acceptable terms and conditions in the future will be impacted by many factors, including: (i) our financial performance, (ii) our credit ratings or absence of a credit rating, (iii) the liquidity of the overall capital markets and (iv) the state of the economy. There can be no assurance that we will have access to the capital markets on terms acceptable to us.
We may incur significant costs to address contamination issues at certain sites operated or used by our publishing businesses.
We may incur costs in connection with the investigation or remediation of contamination at sites currently or formerly owned or operated by us. Issues generally relate to sites previously owned, operated or used by the Company’s publishing businesses and in some cases, continue to be used for our publishing businesses at which contaminations were identified. Historically, our publishing business was obligated to investigate and remediate contamination at certain of these sites. We were also required to contribute to cleanup costs at certain of these sites that were third-party waste disposal facilities at which it disposed of its wastes. In addition, we acquired real property in connection with our acquisitions of the New York Daily News and The Virginian-Pilot, which includes sites at which contaminations were identified. The sellers in these acquisitions have agreed to indemnify us for certain environmental liabilities, but we may have additional investigation and remediation obligations and be required to contribute to cleanup costs at these facilities. We could have additional investigation and remediation obligations and be required to contribute to cleanup costs at these facilities. Environmental liabilities, including investigation and remediation obligations, could adversely affect our operating results or financial condition.
Macroeconomic trends may adversely impact our business, financial condition and results of operations.
Our operating revenues are sensitive to discretionary spending available to advertisers and subscribers in the markets we serve, as well as their perceptions of economic trends and uncertainty. Weak economic indicators, such as high unemployment rates, weakness in housing, fuel prices and uncertainty regarding the national and state governments’ ability to resolve fiscal issues, may adversely impact advertiser and subscriber sentiment. These types of conditions could impair our ability to maintain and grow our advertiser and subscriber bases.
Events beyond our control may result in unexpected adverse operating results.
Our results could be affected in various ways by global or domestic events beyond our control, such as wars, political unrest, acts of terrorism, natural disasters, Internet outages or disruption caused by health epidemics, such as the coronavirus outbreak. Such events can quickly result in significant declines in advertising revenue and significant increases in news gathering costs. There are no assurances that our business continuity or disaster recovery plans are adequate or that they will be implemented successfully if any such events were to occur.
Risks Relating to our Common Stock and the Securities Market
Concentration of ownership among our existing directors and principal stockholders may prevent new investors from influencing significant corporate decisions.
As of March 5, 2021, our two largest shareholders are (i) Alden Funds which beneficially owned approximately 31.6% of our outstanding common stock, and (ii) Nant Capital, together with Dr. Patrick Soon-Shiong, which beneficially owned approximately 23.9% of our outstanding common stock. Dr. Patrick Soon-Shiong is the indirect sole owner of Nant Capital. The interests of the Alden Funds and Nant Capital may differ from those of the Company’s other stockholders. The Alden
Funds and Nant Capital are in the business of making investments in companies and maximizing the return on those investments. They currently may have and may from time to time in the future acquire, interests in businesses that directly or indirectly compete with certain aspects of our business or that supply us with goods and services.
Due to their significant stockholdings, the Alden Funds and Nant Capital and their affiliates may be able to significantly influence matters requiring approval of stockholders, including the election of directors, amendment of our certificate of incorporation and approval of significant corporate transactions. For additional information on the purchase agreements under which the Alden Funds and Nant Capital acquired their shares, see Note 20 to the Consolidated Financial Statements.
The Adoption of the Rights Agreement reduces the likelihood that a potential acquirer could gain, or seek to gain, influence or control the Company.
The Board has adopted the Rights Agreement to reduce the likelihood that a potential acquirer would gain (or seek to influence or change) control of the Company through acquisitions from other stockholders, open market accumulation or other tactics without paying an appropriate premium for the Company’s shares. In general terms and subject to certain exceptions, it works by imposing a significant penalty upon any person or group (including a group of persons that are acting in concert with each other) that acquires 10% or more of the outstanding Common Stock of the Company without the approval of the Board.
The Rights Agreement includes antidilution provisions designed to prevent efforts to diminish the effectiveness of the Rights.
Certain provisions of our certificate of incorporation, by-laws, and Delaware law may discourage takeovers.
Our amended and restated certificate of incorporation and amended and restated by-laws contain certain provisions that may discourage, delay or prevent a change in our management or control over us. For example, our amended and restated certificate of incorporation and amended and restated by-laws, collectively:
•authorize the issuance of “blank check” preferred stock that could be issued by our Board to thwart a takeover attempt;
•provide that vacancies on our Board, including vacancies resulting from an enlargement of our Board, may be filled only by a majority vote of directors then in office;
•prohibit stockholders from calling special meetings of stockholders;
•prohibit stockholder action by written consent;
•establish advance notice requirements for nominations of candidates for elections as directors or to bring other business before an annual meeting of our stockholders; and
•require the approval of holders of at least 66 2/3% of the outstanding shares of our common stock to amend certain provisions of our amended and restated certificate of incorporation or to amend our amended and restated by-laws.
Additionally, Section 203 of the General Corporation Law of the State of Delaware (“DGCL”) restricts certain business combinations with interested stockholders in certain situations. In general, this statute prohibits a publicly held Delaware corporation from engaging in a business combination with an interested stockholder for a period of three years after the date of the transaction by which that person became an interested stockholder, unless the business combination is approved in a prescribed manner. For purposes of Section 203, a business combination includes a merger, asset sale or other transaction resulting in a financial benefit to the interested stockholder, and an interested stockholder is a person who, together with affiliates and associates, owns, or within three years prior, did own, 15% or more of voting stock.
These provisions could discourage potential acquisition proposals and could delay or prevent a change in control, even though a majority of stockholders may consider such proposal, if effected, desirable. Such provisions could also make it more difficult for third parties to remove and replace the members of the Board. Moreover, these provisions may inhibit increases in the trading price of our common stock that may result from takeover attempts or speculation.
Substantial sales, or stock issuances by us, of our common stock or the perception that such sales or issuances might occur, could depress the market price of our common stock.
Any sales of substantial amounts of our common stock in the public market, including resales by our investors such as those to whom we have granted registration rights, or the perception that such sales might occur, could depress the market price of our common stock. Pursuant to the purchase agreement under which Nant Capital acquired shares from us, certain of the
restrictions on resales of those shares expired and, therefore, Nant Capital could sell a significant number of shares either in the open market or in privately negotiated transactions. There is no assurance that there will be sufficient buying interest to offset any such public market sales, and, accordingly, the price of our common stock may be depressed by those sales and have periods of volatility.
In addition, we could from time to time issue new securities (debt or equity) or use treasury stock to fund potential acquisitions. Any issuance of common stock by us could dilute the ownership of current stockholders and could impact the price per share of our common stock. In addition, if we were to issue debt and/or preferred equity, the holders of such securities would have rights senior to those of our common stockholders. There can be no assurances whether we will issue additional securities in the future and, if so, how many and how such issuance could impact our current stockholders and our share price.
The market price for our common stock may be volatile.
Many factors could cause the trading price of our common stock to rise and fall, including the following: (i) declining newspaper print circulation; (ii) declining operating revenues derived from our core business; (iii) variations in quarterly results; (iv) announcements regarding dividends; (v) announcements of technological innovations by us or by competitors; (vi) introductions of new products or services or new pricing policies by us or by competitors; (vii) acquisitions or strategic alliances by us or by competitors; (viii) recruitment or departure of key personnel or key groups of personnel; (ix) the gain or loss of significant advertisers or other customers; (x) changes in the estimates of our operating performance or changes in recommendations by any securities analysts that elect to follow our stock; and (xi) market conditions in the newspaper industry, the media industry, the industries of our customers, and the economy as a whole.
We may be subject to the actions of activist shareholders, which could adversely impact our business.
Activist shareholders and other third parties have made, or may in the future make, strategic proposals, including unsolicited takeover proposals, suggestions or requested changes concerning the Company’s operations, strategy, governance, management, business or other matters. Responding to these campaigns or proposals can be costly and time-consuming, disrupt our operations, and divert the attention of management and our employees from our strategic initiatives. These activities can create perceived uncertainties as to our future direction, strategy, or leadership and may result in the loss of potential business opportunities, harm our ability to attract new investors and customers, and cause the price of our common stock to be depressed and have periods of volatility. We cannot predict, and no assurances can be given, as to the outcome or timing of any matters relating to the foregoing, and such matters may adversely affect our ability to effectively and timely implement our current initiatives, retain and attract key employees, and execute on our business strategy.
Our ability to pay regular dividends to our stockholders is subject to the discretion of our Board.
We have previously paid quarterly cash dividends on our common stock. On May 8, 2020, the Board suspended the Company’s quarterly dividend program until further notice given the unprecedented economic disruption caused by COVID-19. Our Board may, in its sole discretion, change the amount or frequency of dividends or discontinue the payment of dividends entirely. The declaration and payment of dividends to holders of our common stock is at the discretion of our Board in accordance with applicable law after taking into account various factors, including actual results of operations, liquidity and financial condition, restrictions imposed by applicable law, our taxable income, our operating expenses, changes in our business needs, including working capital and funding for business initiatives or acquisitions, changes in corporate strategy, and other factors our Board deems relevant. In addition, because we are a holding company with no material direct operations, we are dependent on loans, dividends and other payments from our operating subsidiaries to generate the funds necessary to pay dividends on our common stock. We expect to cause our subsidiaries to make distributions to us in an amount sufficient for us to pay dividends. However, their ability to make such distributions will be subject to their operating results, cash requirements and financial condition and the applicable provisions of Delaware law that may limit the amount of funds available for distribution, and our ability to pay cash dividends will be subject to covenants and financial ratios related to existing or future indebtedness and other agreements with third parties.
In addition, each of the companies in our corporate chain must manage its assets, liabilities and working capital in order to meet all of its cash obligations, including the payment of dividends or distributions. As a consequence of these various limitations and restrictions, we may not be able to make, or may have to reduce or eliminate, the payment of dividends on our common stock. Any change in the level of our dividends or the suspension of the payment thereof could adversely affect the market price of our common stock.
If securities or industry analysts do not publish research or publish misleading or unfavorable research about our business, our stock price and trading volume could decline.
The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us or our business. If one or more of the security or industry analysts downgrades our stock, ceases coverage of our company, fails to publish reports on us regularly, or publishes misleading or unfavorable research about our business, demand for our stock may decrease, which could cause our stock price or trading volume to decline.
Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed to us or our stockholders by any of our directors, officers, employees or agents, (iii) any action asserting a claim against us arising under the DGCL, our amended and restated certificate of incorporation or our amended and restated by-laws or (iv) any action asserting a claim against us that is governed by the internal affairs doctrine. By becoming a stockholder in our company, you will be deemed to have notice of and have consented to the provisions of our amended and restated certificate of incorporation related to choice of forum. The choice of forum provision in our amended and restated certificate of incorporation may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments
None.

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ITEM 2. PROPERTIES
Item 2. Properties
Our owned facilities are approximately 0.2 million square feet, which primarily includes a former printing plant in Virginia. Our leased facilities are approximately 4.0 million square feet in the aggregate. The Company currently has leased office and newspaper production facilities in Connecticut, Florida, Illinois, Maryland, New Jersey, Pennsylvania, Texas and Virginia, however approximately 1.0 million square feet of the leased space has been permanently vacated. The Company also leases numerous small warehouse facilities for use as distribution centers in the regions of its newspapers. Tribune owns substantially all of the production equipment at locations where the Company continues to print newspapers. See Note 4 to the Consolidated Financial Statements for additional information about the Company’s leases.
We believe that our current facilities, including the terms and conditions of the relevant lease agreements, are adequate to operate our businesses as currently conducted.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings
We are subject to various legal proceedings and claims that have arisen in the ordinary course of business. The legal entities comprising our operations are defendants from time to time in actions for matters arising out of their business operations. In addition, the legal entities comprising our operations are involved from time to time as parties in various regulatory, environmental and other proceedings with governmental authorities and administrative agencies.
The Company does not believe that any matters or proceedings presently pending will have a material adverse effect, individually or in the aggregate, on our consolidated financial position, results of operations or liquidity. However, legal matters and proceedings are inherently unpredictable and subject to significant uncertainties, some of which are beyond our control. As such, there can be no assurance that the final outcome of these matters and proceedings will not materially and adversely affect our consolidated financial position, results of operations or liquidity.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
The common stock of Tribune is traded on The Nasdaq Global Select Market (“Nasdaq”) under the symbol “TPCO.” On March 5, 2021, the closing price for the Company’s common stock as reported on Nasdaq was $16.99. The approximate number of stockholders of record of the common stock at the close of business on such date was 20. A substantially greater number of holders of Tribune’s common stock are “street name” or beneficial holders, whose shares of record are held by banks, brokers, and other financial institutions.
On May 8, 2020, the Board suspended the Company's quarterly cash dividend program until further notice given the unprecedented economic disruption caused by COVID-19. This action, along with many other operational actions taken at the Company, will help preserve liquidity. Future cash dividends, if any, will be at the discretion of our Board and the amount of cash dividends per share will depend upon, among other things, our future earnings, financial condition, results of operations, level of indebtedness, capital requirements and surplus, contractual restrictions, number of shares of common stock outstanding, as well as legal requirements, regulatory constraints, industry practice and other factors that our Board deems relevant.
Tribune Stock Comparative Performance Graph
The following graph compares the cumulative total stockholder return on our common stock for the period commencing December 24, 2015 through December 24, 2020 (the last trading day of fiscal 2020) with the cumulative total return on the Standard & Poor’s 500 Stock Index (“S&P 500”) and the Standard & Poor’s Publishing Stock Index (“S&P Publishing Index”).
Total return values were calculated based on cumulative total return assuming (i) the investment of $100 in our common stock, the S&P 500 and the S&P Publishing Index and (ii) reinvestment of dividends.
The following stock performance graph and related information shall not be deemed “soliciting material” or “filed” with the SEC, nor should such information be incorporated by reference into any future filings under the Securities Act or the Exchange Act, except to the extent that we specifically incorporate it by reference in such filing.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. Selected Financial Data
The Company has early adopted the removal of the disclosure required by this item, as permitted by SEC rule changes effective February 10, 2021.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with the other sections of this Annual Report on Form 10-K, including the Consolidated Financial Statements and related Notes thereto and “Cautionary Statement Concerning Forward-Looking Statements.” Management’s Discussion and Analysis of Financial Condition and Results of Operations contains a number of forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and other factors described throughout this Form 10-K, including the factors disclosed under “Item 1A. - Risk Factors.”
We believe that the assumptions underlying the Consolidated Financial Statements included in this Annual Report are reasonable. However, the Consolidated Financial Statements may not necessarily reflect our results of operations, financial position and cash flows for future periods.
Overview
Tribune is a media company rooted in award-winning journalism. Headquartered in Chicago, Tribune operates local media businesses in eight markets, with titles including the Chicago Tribune, New York Daily News, The Baltimore Sun, Hartford Courant, South Florida’s Sun Sentinel, Orlando Sentinel, Virginia’s Daily Press and The Virginian-Pilot, and The
Morning Call of Lehigh Valley, Pennsylvania. Tribune also operates TCA.
Tribune’s unique and valuable content across its brands have earned a combined 65 Pulitzer Prizes and are committed to informing, inspiring and engaging local communities. Tribune’s brands create and distribute content across our media portfolio, offering integrated marketing, media, and business services to consumers and advertisers, including digital solutions and advertising opportunities.
The Company continually assesses its operations in an effort to identify opportunities to enhance operational efficiencies and reduce expenses. These activities have in the past included, and could include in the future, outsourcing of various functions or operations, additional abandonment of leased space and other activities which may result in changes to employee headcount. See Note 6 to the Consolidated Financial Statements for further information on changes in operations during fiscal year 2020. The Company expects to continue to take actions deemed appropriate to enhance profitability but does not currently know whether or when any such actions will occur or the potential costs and expected savings. Depending on the actions taken and the timing of any such actions, the anticipated cost savings could be recognized in fiscal periods that do not correspond to the fiscal period(s) in which the charges are recognized.
COVID-19
As discussed in Item - 1. Business, Tribune remains focused on protecting the health and well-being of its employees and the communities in which it operates while assuring the continuity of its business operations. The Company has proactively implemented its business continuity plans and has taken a variety of measures to ensure the ongoing availability of its newspapers and information, while taking appropriate health and safety measures, including implementing remote work policies, where possible, and implementing enhanced cleaning and hygiene protocols in its production facilities. To date, as a result of these business continuity measures, the Company has not experienced disruptions in the distribution of news and information through the Company’s newspapers and websites.
Until fiscal 2019, advertising revenue was historically Tribune’s largest source of revenue. The Company’s advertising customers are typically local and regional, small and mid-sized businesses that purchase advertising to drive traffic to their businesses. These are the businesses that have been hit particularly hard by the widespread closures of businesses, government facilities and schools, cancellation of events and sports leagues, restriction on gathering and a significant reduction in economic activity. The decrease in advertising revenue and ongoing disruptions in Tribune’s operations due to the COVID-19 pandemic have adversely impacted its business, results of operations, financial condition and cash flows. The degree to which COVID-19 may impact Tribune’s results of operations and financial condition in the future is unknown at this time and will depend on future developments, including the severity and the duration of the pandemic.
The Company has taken extensive steps to mitigate the economic impact COVID-19 has had on its results of operations. These steps include evaluation of and adjustments to manufacturing and distribution processes, delaying non-essential repairs and maintenance, reducing third-party spending, freezing discretionary spending, eliminating incentive and discretionary bonuses and salary reductions and employee furloughs. These mitigation measures may not be sufficient to prevent adverse impacts on our business and financial condition from COVID-19.
As part of the Company’s reduction in spending, it withheld payment of rent for a majority of its leased facilities in April, May and June and requested rent relief in various forms, as described in Note 4 to the Consolidated Financial Statements. Tribune has been notified by a number of lessors that it is in default under the terms of its respective leases. Certain of such lessors have formally filed complaints in their local jurisdictions. The Company is negotiating with such lessors on the terms of the potential rent relief and the lessors’ remedies and is responding timely to all filed complaints.
2020 Highlights and Recent Events
•In response to the COVID-19 pandemic, the Company negotiated rent relief from lessors in various forms, including lease restructuring, rent abatement, deferrals or lease terminations. Additionally, during the year ended December 27, 2020, the Company permanently vacated 972,699 square feet of office, production and distribution space. The space was vacated as some of our locations have transitioned to long-term remote working arrangements and outsourced printing at the Hartford Courant. See Note 4 to the Consolidated Financial Statements for additional information on leases.
•On July 23, 2019, the Company entered into an agreement to sell real property located in Norfolk, Virginia, for a sales price of $9.5 million. The sale closed on January 22, 2020. Additionally, on November 2, 2020, the Company completed the sale of real property located in Virginia Beach, Virginia for a cash sales price of $5.2
million. The Company leased back 39,975 square feet of the Virginia Beach property for a distribution center at $0.2 million per year for an initial term of two years with an option to renew for an additional two years. See Note 10 to the Consolidated Financial Statements for additional information on the property sales.
•On February 19, 2020, the Company declared dividends of $0.25 per common share, to be paid to shareholders of record as of March 2, 2020. The cash dividend totaling $9.3 million was paid on March 16, 2020. On May 8, 2020, the Board of Directors of the Company (the “Board”) suspended the Company's quarterly cash dividend program until further notice given the unprecedented economic disruption caused by COVID-19. See Note 20 to the Consolidated Financial Statements for additional information on dividends declared.
•In the first quarter of 2020, the Company offered a the 2020 VSIP which provided enhanced separation benefits to eligible employees with more than eight years of service. See Note 6 to the Consolidated Financial Statements for additional information on the 2020 VSIP.
•In the second quarter of 2020, the Company entered a contract with a third party to outsource the printing and packaging of The Virginian-Pilot. The services were fully transitioned to the third party at the end of the third quarter. In the fourth quarter of 2020, the Company contracted with a third party to outsource the printing and packaging of the Hartford Courant. The services were fully transitioned to the third party at the end of 2020. See Note 6 to the Consolidated Financial Statements for additional information on changes in operations.
•In 2018, the Company’s last employee that was a member of the CWA/ITU Union at the Company’s Baltimore location retired. This retirement effected a partial withdrawal from the CWA/ITU Negotiated Pension Plan. During the year ended December 27, 2020, the Company accrued $1.0 million to reflect this obligation. See Note 16 to the Consolidated Financial Statements for additional information on the Company’s multiemployer pension plans.
•On July 27, 2020, the Board declared a dividend of one preferred stock purchase right (a “Right”) for each of the Company’s outstanding shares of common stock, $0.01 par value. The dividend Right was issued on August 7, 2020, to holders of record as of the close of business on that date. The Rights will expire on July 27, 2021, unless earlier exercised, exchanged, amended or redeemed. See Note 20 to the Consolidated Financial Statements for additional information on the Rights Agreement.
•On December 11, 2020, the Company, entered into the BR Agreement, by and among the Sellers, BestReviews and Nexstar, pursuant to which the Sellers will sell 100% of BestReviews to Nexstar. The sale closed on December 29, 2020, subsequent to the Company’s fiscal year-end, for a cash sales price of $160.0 million plus a $9.4 million working capital adjustment. As of the balance sheet date, BestReviews was owned 60% by the Company and 40% by BR Holding Company, Inc. Under the terms of the BR Transaction the Company received 60% of the cash selling price net of transaction fees upon the closing on December 29, 2020. BestReviews is presented as discontinued operations in the accompanying financial statements. All prior periods have been adjusted. See Note 8 to the Consolidated Financial Statements for additional information on the related discontinued operations.
•On February 16, 2021, the Company entered into a Merger Agreement by and among TELLC, Merger Sub and the Company, pursuant to which Merger Sub will merge with and into the Company, with the Company surviving as a wholly owned subsidiary of TELLC. TELLC is the acquirer and is an affiliate of Alden Global Opportunities Master Fund, L.P. and Alden Global Value Recovery Master Fund, L.P., the Company’s largest shareholder. Upon completion of the transaction the Company will become a privately held company, and its common stock will no longer be listed on any public market. See Note 20 to the Consolidated Financial Statements for additional information on the Merger Agreement.
Results of Operations
The Company intends for the following discussion of its financial condition and results of operations to provide information that will assist in understanding the Company’s Consolidated Financial Statements, the changes in certain key items in those statements from period to period and the primary factors that accounted for those changes as well as how certain accounting principles, policies and estimates affect the Company’s Consolidated Financial Statements.
Operating results for the years ended December 27, 2020, December 29, 2019, and December 30, 2018, are shown in the table below (in thousands). References in this discussion to individual markets include daily newspapers in those markets and their related businesses.
Year ended Year ended
December 27, 2020 December 29, 2019 % Change December 29, 2019 December 30, 2018 % Change
Operating revenues $ 746,250 $ 945,777 (21.1 %) $ 945,777 $ 1,005,662 (6.0 %)
Compensation 303,027 360,779 (16.0 %) 360,779 441,558 (18.3 %)
Newsprint and ink 33,777 56,785 (40.5 %) 56,785 66,134 (14.1 %)
Outside services 267,644 326,807 (18.1 %) 326,807 347,551 (6.0 %)
Other operating expenses 95,753 147,415 (35.0 %) 147,415 145,858 1.1 %
Depreciation and amortization 33,834 44,615 (24.2 %) 44,615 51,055 (12.6 %)
Impairment 78,739 14,496 * 14,496 1,872 *
Operating expenses 812,774 950,897 (14.5 %) 950,897 1,054,028 (9.8 %)
Loss from operations (66,524) (5,120) * (5,120) (48,366) (89.4 %)
Interest income (expense), net (773) 499 * 499 (11,338) *
Loss on early extinguishment of debt - - * - (7,666) *
Loss on equity investments, net (817) (2,988) (72.7 %) (2,988) (1,868) 60.0 %
Other income (expense), net 1,368 45 * 45 14,513 (99.7 %)
Loss from continuing operations before income taxes (66,746) (7,564) * (7,564) (54,725) (86.2 %)
Income tax benefit (19,930) (434) * (434) (13,078) (96.7 %)
Loss from continuing operations (46,816) (7,130) * (7,130) (41,647) (82.9 %)
Plus: Income from discontinued operations, net of tax 15,320 6,886 * 6,886 291,294 (97.6 %)
Net income (loss) (31,496) (244) * $ (244) $ 249,647 *
Less: Income attributable to noncontrolling interest 7,516 4,825 55.8 % $ 4,825 $ 856 *
Net income (loss) attributable to Tribune common stockholders $ (39,012) $ (5,069) * $ (5,069) $ 248,791 *
* Represents positive or negative change in excess of 100%
Year ended December 27, 2020 compared to the year ended December 29, 2019
Circulation Revenue-Circulation revenues decreased 3.4%, or $12.6 million, in the year ended December 27, 2020, compared to the year ended December 29, 2019. Home delivery revenue decreased $20.1 million and single copy sales decreased $9.0 million. These decreases were partially offset by an increase of $16.5 million in digital subscription revenue as consumers turn to digital delivery.
Advertising Revenue-Advertising revenues decreased 34.6%, or $138.1 million, in the year ended December 27, 2020, compared to the year ended December 29, 2019, due to decreases in all revenue categories. Year over year retail advertising decreased $113.4 million, classified advertising decreased $15.1 million and national advertising decreased $10.7 million. The COVID-19 pandemic continues to exacerbate the decline in advertising revenue.
Other Revenue-Other revenues consist of commercial print and delivery, direct mail and marketing, and content syndication and licensing, and other revenue. Other revenues decreased 27.0%, or $48.8 million, in the year ended December 27, 2020, compared to the year ended December 29, 2019. Commercial print and delivery revenue decreased $20.2 million, direct mail revenue decreased $11.8 million, and revenue from the TSA agreement decreased $17.0 million.
In response to these continuing revenue declines which have been accelerated by the COVID-19 pandemic, the Company has taken significant cost management measures as we work to position the Company for a post-pandemic digital future. While we are aggressively managing all expenses, our efforts are particularly focused on our fixed-cost infrastructure, including flattening
our management structure, reductions in leased facilities and outsourcing of production, all of which are reflected in the following comparisons.
Compensation Expense-Compensation expense decreased 16.0%, or $57.8 million, in the year ended December 27, 2020, compared to the prior period. This decrease was due primarily to a decrease in salary and payroll tax expense of $49.8 million, a decrease in incentive compensation of $13.0 million, a decrease in stock-based compensation of $8.0 million, a decrease in workers compensation insurance expense of $2.8 million, and a decrease in multiemployer pension expense of $3.2 million. These decreases were partially offset by increased severance costs of $21.2 million related to personnel restructuring and production outsourcing.
Newsprint and Ink Expense-Newsprint and ink expense decreased 40.5%, or $23.0 million, in the year ended December 27, 2020, compared to the prior year. This decrease was due primarily to a decrease in the average cost per ton of newsprint related to the repeal of the tariff on certain newsprint products sourced from Canada and a decrease in volume.
Outside Services Expense-Outside services expense decreased 18.1%, or $59.2 million, in the year ended December 27, 2020, compared to the prior year. This decrease was primarily due to a reduction of $23.7 million in third-party delivery expense, $8.7 million in outside printing and production costs, $7.1 million in consulting costs, $4.0 million in legal expense, $4.0 million in temporary help and a decrease of $3.3 million in freelance purchased content.
Other Operating Expenses-Other operating expenses include occupancy costs, promotion and marketing costs, affiliate fees and other miscellaneous expenses. These expenses decreased 35.0%, or $51.7 million, in the year ended December 27, 2020, compared to the prior year primarily due to decreases in almost all categories. The largest decreases were a decrease of $12.7 million in promotion expenses, an $8.4 million decrease in occupancy costs, an $8.2 million decrease in supplies and repairs and maintenance and a $4.3 million decrease in travel, entertainment and other employee expenses. Additionally, other operating expenses include gains of $13.0 million related to lease terminations and $6.4 million related to the sale of real estate in Virginia. Although the Company has withheld payment for a number of its leased facilities, as discussed in Note 4 to the Consolidated Financial Statements, the Company has continued to recognize rent expense pursuant to the contractual terms of its lease agreements and has accrued $4.9 million as of December 27, 2020 for withheld rent payments.
Depreciation and Amortization Expense-Depreciation and amortization expense decreased 24.2%, or $10.8 million, for the year ended December 27, 2020, compared to the prior year. This decrease was due primarily to decreased depreciation related to asset retirements in previous periods partially offset by accelerated depreciation on equipment related to printing and packaging outsourcing at The Virginian-Pilot and the Hartford Courant.
Impairment Expense-The Company recorded a non-cash impairment charge of $78.7 million with $69.2 million related to the long-lived assets, $7.1 million related to mastheads, and $2.5 million related to goodwill. Long-lived asset impairments include $34.7 million associated with the lease right of use asset and leasehold improvements of abandoned lease space. See Notes 4, 10 and 11 to the Consolidated Financial Statements for additional information on impairments.
Loss on Equity Investments, Net-Loss on equity investments, net decreased $2.2 million due primarily to additional reserves for certain of the Company’s investments recorded in the prior year.
Income Tax Expense (Benefit)-Income tax expense decreased $19.5 million for the year ended December 27, 2020, over the prior year period primarily due to a decrease in taxable income. For the year ended December 27, 2020, the Company recorded an income tax benefit of $19.9 million including a $1.7 million benefit from the CARES Act relating to the carryback of the Company’s 2019 net operating loss to a period with a higher tax rate. The effective tax rate on pretax income was 29.9% in the year ended December 27, 2020. This rate differs from the U.S. federal statutory rate of 21.0% due primarily to state income taxes, net of federal benefit, tax expense related to vesting of stock-based compensation and non-deductible expenses.
For the year ended December 29, 2019, the Company recorded income tax benefit of $0.4 million. The effective tax rate on pretax income was 5.7% in the year ended December 29, 2019. This rate differs from the U.S. federal statutory rate of 21.0% due primarily to state income taxes, net of federal benefit and non-deductible expenses.
Year ended December 29, 2019 compared to the year ended December 30, 2018
Circulation Revenue-Circulation revenues decreased 0.6%, or $2.4 million in the year ended December 29, 2019, compared to the year ended December 30, 2018. Single copy sales decreased $11.6 million and home delivery revenue decreased $7.6 million. These decreases were partially offset by an increase of $10.1 million in digital subscription revenue as customers turn to digital delivery. These decreases were partially offset by revenues attributable to the acquisition of The Virginian-Pilot
which contributed $16.5 million in the year ended December 29, 2019, compared to $9.8 million in the year ended December 30, 2018.
Advertising Revenue-Advertising revenues decreased 12.0%, or $54.6 million, in the year ended December 29, 2019, compared to the year ended December 30, 2018, due decreases in all revenue categories. Retail advertising revenue decreased $54.8 million, national advertising decreased $6.0 million and classified advertising decreased $4.0 million. These decreases were partially offset by contributions from the acquisition of The Virginian-Pilot in the second quarter of 2018 which contributed $35.8 million in revenue during the year ended December 29, 2019, compared to $24.7 million during the year ended December 30, 2018.
Other Revenue-Other revenues consist of commercial print and delivery, direct mail and marketing, and content syndication and licensing, and other revenue. Other revenues decreased 1.6%, or $2.9 million, in the year ended December 29, 2019, compared to the year ended December 30, 2018. Commercial print and delivery revenue decreased $9.2 million. This decrease was partially offset by an increase in direct mail revenue of $3.1 million and an increase in the revenue from the TSA agreement of $2.3 million and by revenues attributable to the acquisition of The Virginian-Pilot which contributed $3.9 million in the year ended December 29, 2019, compared to $2.3 million in the year ended December 30, 2018.
Compensation Expense-Compensation expense decreased 18.3%, or $80.8 million, in the year ended December 29, 2019, compared to the prior period. This decrease was due primarily to a decrease in salary and payroll tax expense of $57.7 million, a decrease in severance expense of $34.5 million and a decrease in medical insurance expense of $9.3 million as a result of the reduction in headcount related to personnel restructuring in prior periods. This decrease was partially offset by increased pension expense of $8.3 million due primarily to contributions to the Drivers' Plan, and increased compensation expense due to the acquisitions which contributed $17.6 million in the year ended December 29, 2019, compared to $16.6 million in the year ended year ended December 30, 2018.
Newsprint and Ink Expense-Newsprint and ink expense decreased 14.1%, or $9.3 million, in the year ended December 29, 2019, compared to the prior year. This decrease was due primarily to a decrease in the average cost per ton of newsprint related to the repeal of the tariff on certain newsprint products sourced from Canada and a decrease in volume. The decreases in price and volume were partially offset by increased newsprint and ink expense from the acquisition of The Virginian-Pilot which contributed $4.0 million in the year ended December 29, 2019, compared to $3.0 million during the year ended December 30, 2018.
Outside Services Expense-Outside services expense decreased 6.0%, or $20.7 million in the year ended December 29, 2019 compared to the prior year. This decrease was due primarily to $12.5 million of expense recorded in 2018 related to the Consulting Agreement described in Note 7 to the Consolidated Financial Statements. Additionally, there was a reduction of $5.2 million in third-party delivery expense, $4.2 million in temporary help, $2.9 million in outside printing and production costs, and $2.0 million in consulting costs. The decreases were partially offset by increases due to the acquisitions which contributed $17.8 million in the year ended December 29, 2019, compared to $10.2 million during the year ended December 30, 2018.
Other Operating Expenses-Other operating expenses include occupancy costs, promotion and marketing costs, affiliate fees and other miscellaneous expenses. These expenses increased 1.1%, or $1.6 million, in the year ended December 29, 2019, compared to the prior year. This increase was due primarily to $23.9 million of operating expense previously allocated to the California Properties in the prior year. These allocated operating expenses are recovered as a component of TSA revenue in periods subsequent to the sale. Additionally, acquisitions contributed $12.9 million in other operating expenses for the year ended December 29, 2019, compared to $6.5 million for the year ended December 30, 2018. These increases were partially offset by decreases in all categories, primarily a $7.4 million decrease in occupancy costs, a $5.2 million decrease in insurance expense, a $3.9 million decrease in bad debt expense and a $2.3 million decrease in travel, entertainment and other employee expenses.
Depreciation and Amortization Expense-Depreciation and amortization expense decreased 12.6%, or $6.4 million, for the year ended December 29, 2019, compared to the prior year. This decrease was due primarily to accelerated depreciation in 2018 related to the shortened lives for certain assets removed from service. This decrease was partially offset by increases due to the acquisitions which contributed $4.7 million in the year ended December 29, 2019, compared to $0.5 million during the year ended December 30, 2018.
Impairment Expense-In the fourth quarter of 2019, the Company recorded a non-cash impairment charge of $14.5 million related to the goodwill associated with The Baltimore Sun Media Group and Virginia Media Group.
Interest Expense, Net-Interest expense, net decreased as the Senior Term Facility was repaid in full in June 2018.
Loss on Early Extinguishment of Debt-In June 2018, the Company repaid the outstanding principal balance under the Senior Term Facility and terminated the agreement. As a result of the early extinguishment of debt, the Company incurred a $7.7 million loss in 2018 to expense the remaining balance of original issue discount and debt origination fees.
Loss on Equity Investments, net-Loss on equity investments, net increased $1.1 million due primarily to additional reserves for certain of the Company’s investments.
Other Income (Expense), Net-The decrease in other non-operating income, net is primarily due to credits related to periodic benefit costs, In 2018, the Company terminated the non-union post-retirement medial plan. As such, remaining amounts in accumulated other comprehensive income were amortized to expense during 2018.
Income Tax Expense (Benefit)-Income tax expense increased by $12.6 million for the year ended December 29, 2019, over the prior year period. For the year ended December 29, 2019, the Company recorded an income tax expense of $0.4 million including a discrete item which resulted in a tax benefit of $1.5 million relating to an adjustment in state tax expense for the treatment of the Nant Transaction gain for state apportionment in selected states. The effective tax rate on pretax income was 5.7% in the year ended December 29, 2019. This rate differs from the U.S. federal statutory rate of 21.0% due primarily to state income taxes, net of federal benefit, tax expense related to vesting of stock-based compensation and non-deductible expenses.
For the year ended December 30, 2018, the effective Company recorded income tax benefit of $13.1 million. The effective tax rate on pretax income (loss) was 23.9% in the year ended December 30, 2018. This rate differs from the U.S. federal statutory rate of 21.0% due primarily to state income taxes, net of federal benefit and non-deductible expenses.
Liquidity and Capital Resources
The Company believes that its working capital and future cash from operations will provide adequate resources to fund its operating and financing needs for the foreseeable future. The Company’s access to, and the availability of, financing in the future will be impacted by many factors, including its credit rating, the liquidity of the overall capital markets, the current state of the economy and other risks described in Part 1, Item 1A of this report. There can be no assurances that the Company will have access to capital markets on acceptable terms.
Sources and Uses
The Company expects to fund capital expenditures, pension payments, dividend payments, and other operating requirements through a combination of existing cash balances and cash flows from operations. The Company’s financial and operating performance remains subject to prevailing economic and industry conditions, and to financial, business and other factors, some of which are beyond the control of the Company and, despite the Company’s current liquidity position, no assurances can be made that existing cash balances, cash flows from operations, or dispositions of assets or operations will be sufficient to satisfy the Company’s future liquidity needs.
The table below summarizes the total operating, investing and financing activity cash flows from operations for the years ended December 27, 2020, December 29, 2019, and December 30, 2018 (in thousands):
Year ended
December 27, 2020 December 29, 2019 December 30, 2018
Net cash provided by operating activities $ 32,493 $ 44,425 $ 47,552
Net cash provided by (used for) investing activities 11,181 (18,707) (95,125)
Net cash used for financing activities (17,438) (65,075) (357,420)
Increase (decrease) in cash attributable to continuing operations 26,236 (39,357) (404,993)
Increase in cash attributable to discontinued operations 10,421 72 351,057
Net increase (decrease) in cash $ 36,657 $ (39,285) $ (53,936)
Cash flow generated from operations is the Company’s primary source of liquidity. Net cash provided by continuing operations was $32.5 million for the year ended December 27, 2020, a decrease of $11.9 million from $44.4 million for the year ended December 29, 2019. The decrease in cash provided by operating activities was primarily driven by a decrease in
operating results of $6.4 million (defined as net income (loss) adjusted for non-working capital items) as well as a decrease in cash from working capital of $5.5 million primarily related to unfavorable changes in accounts receivable and accounts payable, partially offset by favorable changes in prepaid expenses. For the year ended December 29, 2019, net cash provided by continuing operations was $44.4 million, a decrease of $3.1 million from $47.6 million for the year ended December 30, 2018. The decrease in cash provided by operating activities was primarily driven by an increase in operating results of $48.2 million, partially offset by a decrease in cash from working capital of $51.3 million related to unfavorable changes in accounts payable and prepaid expenses, partially offset by favorable changes in accounts receivable.
Net cash provided by investing activities totaled $11.2 million in the year ended December 27, 2020, due primarily to the net proceeds of $17.9 million related to the sale of the Virginia properties, partially offset by $10.1 million used for capital expenditures. For the year ended December 29, 2019, net cash used for investing activities totaled $18.7 million, due primarily to $18.6 million used for capital expenditures. We anticipate that capital expenditures for the year ended December 26, 2021, will be approximately $6.0 million to $10.0 million.
Net cash used for financing activities totaled $17.4 million in the year ended December 27, 2020, due primarily to payment of cash dividends to the Company’s common stockholders of $9.1 million and repayment of the capital lease obligation of $7.0 million. For the year ended December 29, 2019, net cash used for financing activities totaled $65.1 million, due primarily the payment of cash dividends to the Company’s common stockholders of $62.9 million.
Net cash provided by discontinued operations totaled $10.4 million for the year ended December 27, 2020 related to BestReviews operating results partially offset by the payment of dividends to noncontrolling interests of $9.8 million. For the year ended December 29, 2019, net cash used for discontinued operations totaled $0.1 million, primarily related to BestReviews operating results partially offset by the payment of dividends to noncontrolling interests of $6.6 million and the final tax payment of $6.0 million associated with the sale of the California Properties.
Dividends
On February 19, 2020, the Board declared a cash dividend of $0.25 per share of common stock outstanding. The cash dividend of $9.1 million was paid on March 16, 2020, to shareholders of record as of March 2, 2020. Additionally, the Company accrued dividend equivalents of $0.2 million for restricted stock units (“RSUs”) outstanding as of the record date.
On May 8, 2020, the Board suspended the Company's quarterly cash dividend program until further notice given the unprecedented economic disruption caused by COVID-19. This action, along with many other operational actions taken at the Company, will help preserve liquidity. The Board will continue to monitor liquidity needs and capital allocation in the future.
Multiemployer pension
During 2018, the trustees of the Drivers’ Plan agreed to a plan of merger with the Teamsters Fund. On December 13, 2018, the Drivers’ Plan adopted an amendment to its prior rehabilitation plan under which the Company will make contributions of $68.4 million over seven years. During the year ended December 27, 2020, the Company made contributions of $7.3 million to the Drivers’ Plan and the Teamsters Fund under the amended rehabilitation plan. During the year ended December 26, 2021, the Company expects to contribute $9.1 million under the rehabilitation plan.
In 2018, the Company’s last employee that was a member of the CWA/ITU Union at the Company’s Baltimore location retired. This retirement effected a partial withdrawal from the CWA/ITU Negotiated Pension Plan. The partial withdrawal creates a liability for which the Company is required to pay quarterly installments over a 20-year period. The Company accrued $1.0 million to reflect this obligation which is reflected in other long-term obligations in the Consolidated Balance Sheets. See Note 16 to the Consolidated Financial Statements for additional information on the Company’s multiemployer pension plans.
Stock Repurchases
On March 13, 2019, the Company announced that the Board authorized a stock repurchase program. Under the program, the Company may purchase up to $25.0 million of its outstanding common stock over the next 24 months. The purchases may be made in open-market transactions or privately negotiated transactions and may be made from time to time depending on market conditions, share price, trading volume, cash needs and other business factors. As of December 27, 2020, no repurchases had been made under the program.
Acquisitions
Virginian-Pilot
On May 28, 2018, the Company acquired Virginian-Pilot Media Companies, LLC (“Virginian-Pilot”), the owner of The Virginian-Pilot daily newspaper based in Norfolk, Virginia, pursuant to a Securities Purchase Agreement, entered into on the same date, by and among the Company, Virginian-Pilot and Landmark Media Enterprises, LLC for a cash purchase price of $34.0 million, less a post-closing working capital adjustment of $0.1 million received from the seller.
Debt
In June 2018, the Company used a portion of the proceeds received from the Nant Transaction to repay the outstanding principal amount under the Senior Term Facility and to terminate the Senior ABL Facility. Refer to Note 13 of the Consolidated Financial Statements for detailed information related to the Company’s Term Loan Credit Agreement, Senior Term Facility, ABL Credit Agreement, Senior ABL Facility and Letter of Credit Agreement.
Employee Reductions
See Note 6 to the Consolidated Financial Statements for information related to the Company’s charges and payments for employee reductions.
Critical Accounting Policies
The Company’s significant accounting policies are summarized in Note 2 to the Consolidated Financial Statements. These policies conform with United States generally accepted accounting principles (“U.S. GAAP”) and reflect practices appropriate to Tribune’s businesses. The preparation of the Company’s Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying Notes thereto. The Company bases its estimates on past experience and assumptions that management believes are reasonable under the circumstances and evaluates its policies, estimates and assumptions on an ongoing basis.
Leases-Tribune determines if an arrangement is a lease at inception. Operating leases are included in lease ROU assets, current portion of long-term lease liabilities, and long-term lease liabilities on the Consolidated Balance Sheets. Finance leases are included in property, plant and equipment, current portion of long-term debt and long-term debt on the Consolidated Balance Sheets. Amortization of the operating leases ROU assets is included in other operating expenses. Amortization of finance lease assets is included in depreciation expense. Sublease income is included as an offset to lease expense in other operating expenses.
Operating lease 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. As most of the Company’s leases do not provide an implicit rate, Tribune uses its incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The recorded operating lease ROU assets on the balance sheet reflects lease payments made to date and excludes lease incentives and initial direct costs incurred. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the option will be exercised. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Certain lease agreements have lease and non-lease components, which are generally accounted for together. See Note 4 to the Consolidated Financial Statements for additional information related to leases.
Revenue Recognition-Tribune’s primary sources of revenue are from the sales of newspapers, digital subscriptions and other publications to distributors and individual subscribers; sales of advertising space in published issues of its newspapers and other publications and on websites owned by, or affiliated with, Tribune; distribution of preprinted advertising inserts; the provision of commercial printing and delivery services to third parties, primarily other newspaper companies; and ecommerce referral fee revenue. 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 goods or services. Revenues are recognized as performance obligations that are satisfied either at a point in time, such as when an advertisement is published or referral fee revenue is earned, or over time, such as for content licensing. See Note 5 to the Consolidated Financial Statements for additional revenue recognition disclosures.
Goodwill and Other Intangible Assets-Goodwill and other intangible assets are summarized in Note 11 to the
Consolidated Financial Statements. The Company reviews goodwill and other indefinite-lived intangible assets, which include only newspaper mastheads, for impairment annually, or more frequently if events or changes in circumstances indicate that an asset may be impaired. In the first quarter of 2020, the Company identified the market effects of the COVID-19 pandemic as an economic indicator of a potential impairment of goodwill and determined that an interim evaluation was required. Under ASC Topic 350, the impairment review of goodwill and other intangible assets not subject to amortization must be based on estimated fair values. Impairment would occur when the carrying amount of a reporting unit with recorded goodwill or an individual masthead is greater than its fair value. The Company has determined that, following its segment realignment in the first quarter of 2020, the reporting units at which goodwill will be evaluated are the eight newspaper media groups, TCA and BestReviews.
The Company’s annual impairment review measurement date is in the beginning of the fourth quarter of each year. The estimated fair value of goodwill is determined using many critical factors, including projected future operating cash flows, revenue and market growth, market multiples, discount rates and consideration of market valuations of comparable companies. The estimated fair values of other intangible assets subject to the annual impairment review are calculated based on projected future discounted cash flow analysis. The development of estimated fair values requires the use of assumptions, including assumptions regarding revenue and market growth as well as specific economic factors in the publishing industry such as operating margins and royalty rates for newspaper mastheads. These assumptions reflect Tribune’s best estimates, but these items involve inherent uncertainties based on market conditions generally outside of Tribune’s control. See Note 11 to the Consolidated Financial Statements for additional information related to the goodwill and other intangible impairment charges related to the Orlando Sentinel, New York Daily News and Sun Sentinel Media Groups.
Impairment Review of Long-Lived Assets-Tribune evaluates the carrying value of long-lived assets to be held and used whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset or asset group may be impaired. The carrying value of a long-lived asset or asset group may be impaired when the projected future undiscounted cash flows to be generated from the asset or asset group over its remaining depreciable life are less than its current carrying value. In the first quarter of 2020, the Company identified the market effects of the COVID-19 pandemic as an economic indicator of a potential impairment of long-lived assets and determined that an interim evaluation was required for certain asset groups. Under ASC Topic 360, an impairment exists if the carrying value of an asset group exceeds its fair value and is considered not recoverable. See Note 10 for additional information related to long-lived asset impairment charges.
Pension Plans-The Company is the sponsor of a single employer pension plan, the NYDN Pension Plan. The Company follows accounting guidance under ASC Topic 715 for single employer defined benefit plans. Plan assets and the projected benefit obligation are measured each December 31, and the Company records as an asset or liability the net funded or underfunded position of the plans. Certain changes in actuarial valuations related to returns on plan assets and projected benefit obligations are recorded to other comprehensive income (loss) and are amortized to net periodic pension expense over the weighted average remaining life of plan participants. Net periodic pension expense is recognized each period by accruing interest expense on the projected benefit obligation and accruing a return on assets associated with the plan assets.
Multiemployer Pension Plans-Contributions made to union-sponsored plans are based upon collective bargaining agreements and are accounted for under guidance related to multiemployer plans. See Note 16 to the Consolidated Financial Statements for further information.
New Accounting Standards
See Note 2 to the Consolidated Financial Statements for a description of new accounting standards issued and/or adopted in the year ended December 27, 2020.
Non-GAAP Measures
Adjusted EBITDA-The Company defines Adjusted EBITDA as income (loss) from continuing operations before equity in earnings of unconsolidated affiliates, income taxes, loss on early debt extinguishment, interest income (expense), other (expense) income, realized gain (loss) on investments, reorganization items, depreciation and amortization, impairment, net income attributable to noncontrolling interest, and other items that the Company does not consider in the evaluation of ongoing operating performance. These items include stock-based compensation expense, restructuring charges, transaction expenses,
and certain other charges and gains that the Company does not believe reflects the underlying business performance as detailed below.
Year ended
(In thousands) December 27, 2020 % Change December 29, 2019 % Change December 30, 2018
Loss from continuing operations $ (46,816) * $ (7,130) (82.9 %) $ (41,647)
Income tax benefit (19,930) * (434) (96.7 %) (13,078)
Interest expense (income), net 773 * (499) * 11,338
Loss on early extinguishment of debt - * - * 7,666
Loss on equity investments, net 817 (72.7 %) 2,988 60.0 % 1,868
Other expense (income), net (1,368) * (45) (99.7 %) (14,513)
Loss from operations (66,524) * (5,120) (89.4 %) (48,366)
Depreciation and amortization 33,834 (24.2 %) 44,615 (12.6 %) 51,055
Impairment 78,739 * 14,496 * 1,872
Restructuring and transaction costs (1)
20,556 7.1 % 19,191 (74.4 %) 75,024
Stock-based compensation 5,198 (60.5 %) 13,170 26.0 % 10,453
Adjusted EBITDA $ 71,803 (16.8 %) $ 86,352 (4.1 %) $ 90,038
* Represents positive or negative change in excess of 100%
(1) - Restructuring and transaction costs include costs related to Tribune’s internal restructuring, such as severance, charges associated with vacated space, costs related to completed and potential acquisitions and a one-time charge related to the Consulting Agreement in 2018. See Note 7 for further information on the Consulting Agreement.
Adjusted EBITDA is a financial measure that is not calculated in accordance with U.S. GAAP. Management believes that because Adjusted EBITDA excludes (i) certain non-cash expenses (such as depreciation, amortization, impairment, stock-based compensation, and gain/loss on equity investments) and (ii) expenses that are not reflective of the Company’s core operating results over time (such as restructuring costs, including the employee voluntary separation program and gain/losses on employee benefit plan terminations, litigation or dispute settlement charges or gains, premiums on stock buybacks and transaction-related costs), this measure provides investors with additional useful information to measure the Company’s financial performance, particularly with respect to changes in performance from period to period. The Company’s management uses Adjusted EBITDA (a) as a measure of operating performance; (b) for planning and forecasting in future periods; and (c) in communications with the Company’s Board of Directors concerning the Company’s financial performance. In addition, Adjusted EBITDA, or a similarly calculated measure, has been used as the basis for certain financial maintenance covenants that the Company was subject to in connection with certain credit facilities. Since not all companies use identical calculations, the Company’s presentation of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies and should not be used by investors as a substitute or alternative to net income or any measure of financial performance calculated and presented in accordance with U.S. GAAP. Instead, management believes Adjusted EBITDA should be used to supplement the Company’s financial measures derived in accordance with U.S. GAAP to provide a more complete understanding of the trends affecting the business.
Although Adjusted EBITDA is frequently used by investors and securities analysts in their evaluations of companies, Adjusted EBITDA has limitations as an analytical tool, and investors should not consider it in isolation or as a substitute for, or more meaningful than, amounts determined in accordance with U.S. GAAP. Some of the limitations to using non-GAAP measures as an analytical tool are:
•they do not reflect the Company’s interest income and expense, or the requirements necessary to service interest or principal payments on the Company’s debt;
•they do not reflect future requirements for capital expenditures or contractual commitments; and
•although depreciation and amortization charges are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and non-GAAP measures do not reflect any cash requirements for such replacements.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data
The Consolidated Financial Statements, together with the Reports of Independent Registered Public Accounting Firm, are included elsewhere in this Annual Report on Form 10-K. Financial statement schedules have been omitted because the required information is contained in the Consolidated Financial Statements or related Notes, or because such information is not applicable.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company conducted an evaluation under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and the Interim Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Securities Exchange Act of 1934, as amended (“Exchange Act”)), as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and the Interim Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report.
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Internal control over financial reporting is a process designed by, or under the supervision of, the Chief Executive Officer and the Interim Chief Financial Officer, to provide reasonable assurance regarding the reliability of the Company’s financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
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 risks that controls may become inadequate because of change in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management, including our Chief Executive Officer and our Interim Chief Financial Officer, assessed the effectiveness of the Company’s internal control over financial reporting as of December 27, 2020 based on the framework established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Management has concluded that the Company’s internal control over financial reporting was effective as of December 27, 2020.
The effectiveness of our internal control over financial reporting as of December 27, 2020, has been audited by Ernst & Young LLP, the independent registered public accounting firm that has also audited the Company’s consolidated financial statements as of and for the year ended December 27, 2020. Ernst & Young’s report on the Company’s internal control over financial reporting appears below.
Changes in Internal Control Over Financial Reporting
There were no changes in the Company’s internal control over financial reporting during the fourth quarter of the fiscal year covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
We have not experienced any material change in our internal controls over financial reporting despite most of our employees working remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the COVID-19 impact on our internal controls to minimize the impact on their design and operating effectiveness
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Tribune Publishing Company
Opinion on Internal Control Over Financial Reporting
We have audited the internal control over financial reporting of Tribune Publishing Company (the Company) as of December 27, 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, the Company maintained, in all material respects, effective internal control over financial reporting as December 27, 2020, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2020 consolidated financial statements of the Company, and our report dated March 8, 2021, 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
Dallas, Texas
March 8, 2021

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ITEM 9B. OTHER INFORMATION
Item 9B. Other Information
Not applicable.
PART III

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this item is incorporated by reference to information under the captions “Corporate Governance,” “Board Composition,” “Executive Officers” and “Consideration of Stockholder-Recommended Director Nominees” in our definitive proxy statement relating to the 2021 Annual Meeting of Stockholders. The definitive proxy statement will be filed with the SEC within 120 days after the end of the 2020 fiscal year.
Tribune has a Code of Ethics and Business Conduct that applies to all directors, officers and employees, and a Code of Ethics and Business Conduct for CEO and Senior Financial Officers which can be found at the Company’s website, www.tribpub.com. The Company will post any amendments to the Code of Ethics and Business Conduct, as well as any waivers that are required to be disclosed by the rules of either the SEC or Nasdaq, on the Company’s website. Information on Tribune’s website is not incorporated by reference to the Annual Report on Form 10-K.
The Company’s Board has adopted Corporate Governance Guidelines and charters for the Audit and Compensation, Nominating and Corporate Governance Committees of the Board. These documents can be found at the Company’s website, www.tribpub.com.
A stockholder can also obtain, without charge, a printed copy of any of the materials referred to above by contacting the Company at the following address:
Tribune Publishing Company
560 W. Grand Avenue
Illinois 60654
Attn: Corporate Secretary
Telephone: (312) 222-9100

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation
The information required by this item is incorporated by reference to information under the captions “Compensation Discussion and Analysis,” “Compensation, Nominating and Corporate Governance Committee Report,” “CNCG Committee Interlocks and Insider Participation,” “Named Executive Officer Compensation” and “Director Compensation” in our definitive proxy statement relating to the 2021 Annual Meeting of Stockholders. The definitive proxy statement will be filed with the SEC within 120 days after the end of the 2020 fiscal year.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item is incorporated by reference to information under the caption “Security Ownership of Certain Beneficial Owners, Directors, and Management” in our definitive proxy statement relating to the 2021 Annual Meeting of Stockholders. The definitive proxy statement will be filed with the SEC within 120 days after the end of the 2020 fiscal year.
Securities Authorized for Issuance under Equity Compensation Plans
The information required by this item is incorporated by reference to information under the caption “Security Ownership of Certain Beneficial Owners, Directors, and Management” in our definitive proxy statement relating to the 2021 Annual Meeting of Stockholders. The definitive proxy statement will be filed with the SEC within 120 days after the end of the 2020 fiscal year.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item is incorporated by reference to information under the captions “Policies and Procedures for the Review and Approval or Ratification of Transactions with Related Persons” and “Corporate Governance” in
our definitive proxy statement relating to the 2021 Annual Meeting of Stockholders. The definitive proxy statement will be filed with the SEC within 120 days after the end of the 2020 fiscal year.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accountant Fees and Services
The information required by this item is incorporated by reference to information under the caption “Independent Registered Public Accounting Firm’s Fees Report” in our definitive proxy statement relating to the 2021 Annual Meeting of Stockholders. The definitive proxy statement will be filed with the SEC within 120 days after the end of the 2020 fiscal year.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits and Financial Statement Schedules
(a) The following documents are filed as part of this Form 10-K:
(1) Index and Consolidated Financial Statements
The list of Consolidated Financial Statements set forth in the accompanying Index to Financial Statements at page herein is incorporated herein by reference. Such Consolidated Financial Statements are filed as part of this Form 10-K.
(2) The financial schedules required by Regulation S-X are either not applicable or are included in the information provided in the Consolidated Financial Statements or related Notes, which are filed as part of this Form 10-K.
(b) Exhibits
Exhibits marked with an asterisk (*) are incorporated by reference to documents previously filed by the Company with the Securities and Exchange Commission, as indicated. All other documents are filed as part of this Form 10-K. Exhibits marked with a tilde (~) are management contracts, compensatory plan contracts or arrangements filed pursuant to Item 601(b)(10)(iii)(A) of Regulation S-K. Certain agreements are included as exhibits to this Annual Report on Form 10-K to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about the Company or the parties to the agreement. Each agreement may contain representations and warranties by the parties to the agreement. These representations and warranties have been made solely for the benefit of the other party or parties to the agreement and (1) should not in all instances be treated as categorical statements of fact, but rather as a means of allocating the risk to one of the parties if those statements prove to be inaccurate; (2) may have been qualified by disclosures that were made to the other party or parties in connection with the negotiation of the attached agreement, which disclosures are not necessarily reflected in the agreement; (3) may apply standards of materiality in a manner that is different from what may be viewed as material to you or other investors; and (4) were made only as of the date of the agreement or other date or dates that may be specified in the agreement and are subject to more recent developments. Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time.
Exhibit Description
Number
2.1* Partnership Interest Purchase Agreement, dated September 3, 2017, by and among Daily News, L.P., TRX Pubco, LLC, Tribune Publishing Company, LLC, Mortimer B. Zuckerman, New DN Company, The Mortimer B. Zuckerman 1983 Family Trust, New DN Company (as the Sellers’ Representative) and the Management Trust defined in the Purchase Agreement (incorporated by reference to Exhibit 2.1 to the Form 8-K filed on September 5, 2017).
2.2* Acquisition Agreement, dated February 6, 2018, by and among Best Reviews Inc., Best Reviews LLC, Tribune Publishing Company, LLC, and Tronc, Inc., and Denis Grosz (as the Sellers’ Representative), and the Stockholders defined in the Purchase Agreement (incorporated by reference to Exhibit 2.1 to the Form 8-K filed on February 7, 2018).
2.3* Membership Interest Purchase Agreement, dated February 7, 2018, by and among Nant Capital, LLC, and Tronc, Inc. (incorporated by reference to Exhibit 2.1 to the Form 8-K filed on February 7, 2018).
2.4* Asset Purchase Agreement, dated March 13, 2018, by and among ForSaleByOwner.com, LLC, In-House Realty LLC and Tribune Publishing company, LLC (incorporated by reference to Exhibit 2.1 to the Form 8-K filed on May 23, 2018).
2.5* Securities Purchase Agreement, dated May 28, 2018, by and among Tribune Publishing Company, LLC, Virginian-Pilot Media Companies, LLC and Landmark Media Enterprises, LLC (incorporated by reference to Exhibit 2.1 to the Form 8-K filed on May 29, 2018).
2.6* Membership Unit Purchase Agreement, dated December 11, 2020, by and among Nexstar Inc., BestReviews LLC, and Tribune Publishing Company, LLC and BR Holding Company, Inc. (incorporated by reference to Exhibit 2.1 to the Form 8-K filed on December 17, 2020).
2.7** Agreement and Plan of Merger by and among Tribune Enterprises, LLC, Tribune Merger Sub, Inc., and Tribune Publishing Company, dated as of February 16, 2021 (incorporated by reference to Exhibit 2.1 to the Form 8-K filed on February 17, 2021).
2.8* Limited Guarantee by Alden Global Opportunities Master Fund, L.P. and Alden Global Value Recovery Master Fund, L.P. in favor of Tribune Publishing Company, dated February 16, 2021 (incorporated by reference to Exhibit 2.2 to the Form 8-K filed on February 17, 2021).
3.1* Amended and Restated Certificate of Incorporation of Tribune Publishing Company, as amended (incorporated by reference to Exhibit 3.1 to the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2018 filed on November 8, 2018).
3.2* Certificate of Designation of Series A Participating Cumulative Preferred Stock (incorporated by reference to Exhibit 3.1 to the Form 8-K filed on July 28, 2020).
3.3* Amended and Restated By-laws of Tribune Publishing Company (incorporated by reference to Exhibit 3.2 to the Form 8-K filed on October 9, 2018).
4.1 Description of the Company’s Securities (incorporated by reference to Exhibit 4.1 to the Annual Report on Form 10-K filed on March 11, 2020).
4.2* Rights Agreement, dated as of July 28, 2020, between Tribune Publishing Company and Computershare Trust Company, N.A., as Rights Agent (incorporated by reference to Exhibit 4.1 to the Form 8-K filed on July 28, 2020).
4.3* Amendment No. 1 to Rights Agreement by and between Tribune Publishing Company and Computershare Trust Company, N.A., dated as of February 16, 2021 (incorporated by reference to Exhibit 4.1 to the Form 8-K filed on February 17, 2021).
10.1* Tax Matters Agreement, by and between Tribune Media Company and Tribune Publishing Company, dated as of August 4, 2014 (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on August 7, 2014).
10.2* Securities Purchase Agreement, by and among Tribune Publishing Company, Nant Capital, LLC and Dr. Patrick Soon-Shiong, dated as of May 22, 2016 (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on May 23, 2016).
10.3* Registration Rights Agreement, by and between Tribune Publishing Company and Nant Capital, LLC, dated as of May 22, 2016 (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on May 23, 2016).
10.4* Amended and Restated Cooperation Agreement, dated as of July 1, 2020, by and among Tribune Publishing Company, Alden Global Opportunities Master Fund, L.P., Alden Global Value Recovery Master Fund, L.P., and Alden Global Capital LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on July 2, 2020).
10.5*~ tronc, Inc. 2014 Omnibus Incentive Plan, as amended (incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q for the quarterly period ended June 26, 2016 filed on August 5, 2016).
10.6*~ Form of Restricted Stock Unit Award Agreement (Non-Employee Director Form) (incorporated by reference to Exhibit 10.7 to the Quarterly Report on Form 10-Q/A for the quarterly period ended September 28, 2014 filed November 19, 2014).
10.7*~ Form of Restricted Stock Award Agreement (Non-Employee Director) for awards made beginning in 2017 (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q for the quarterly period ended September 24, 2017 filed November 3, 2017).
10.8*~ Form of Stock Option Agreement (Employee Form) (incorporated by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q for the quarterly period ended June 26, 2016 filed on August 5, 2016).
10.9*~ Form of Restricted Stock Unit Award Agreement (Employee Form) (incorporated by reference to Exhibit 10.5 to the Quarterly Report on Form 10-Q for the quarterly period ended June 26, 2016 filed on August 5, 2016).
10.10*~ Form of Annual Performance Incentive Award Notice (incorporated by reference to Exhibit 10.9 to the Annual Report on Form 10-K for the fiscal year ended December 28, 2014 filed March 25, 2015).
10.11*~ Form of Annual Performance Incentive Award Notice (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q for the quarterly period ended March 26, 2017 filed May 3, 2017).
10.12~ Form of Director Compensation Conversion Election Form (incorporated by reference to Exhibit 10.13 to the Annual Report on Form 10-K filed on March 14, 2016).
10.13*~ Executive Employment Agreement by and between Terry Jimenez and Tribune Publishing Company, LLC, dated April 4, 2018 (incorporated by reference to Exhibit 10.25 to the Annual Report on Form 10-K filed on March 28, 2018).
10.14*~ Executive Employment Agreement by and between Julie K. Xanders and Tribune Publishing Company, LLC, dated December 20, 2017 and effective January 4, 2018 (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on December 22, 2017).
10.15~ Executive Employment Agreement by and between Mike Lavey and Tribune Publishing Company, LLC, dated April 4, 2018 (incorporated by reference to Exhibit 10.18 to the Annual Report on Form 10-K filed on March 11, 2020).
10.16*~ Form of Indemnification Agreement (Directors) (incorporated by reference to Exhibit 10.6 to the Quarterly Report on Form 10-Q for the quarterly period ended March 27, 2016 filed on May 5, 2016).
10.17*~ Form of Director Restricted Stock Award Agreement for awards in May 2018 (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form-Q for the quarterly period ended July 1, 2018 filed on August 10, 2018).
10.18 Amendment to Executive Employment Agreement by and between Terry Jimenez and Tribune Publishing Company, LLC, dated February 15, 2021 and effective April 3, 2021.
21.1 Subsidiaries.
23.1 Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.
24.1 Power of Attorney (see signature page to this Annual Report on Form 10-K).
31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32 Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS Inline XBRL Instance Document
101.SCH Inline XBRL Taxonomy Extension Scheme Document
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page formatted as Inline XBRL and contained Exhibit 101
** Schedules omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company agrees to furnish a supplemental copy of any omitted schedule to the Securities and Exchange Commission upon request.