UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM 10-Q
_______________________

☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
September 30, 2020

☐    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-36097
___________________________
GANNETT CO., INC.
(Exact name of registrant as specified in its charter)
___________________________
Delaware38-3910250
(State or Other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification No.)
Delaware38-3910250
(State or Other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification No.)
7950 Jones Branch Drive,McLean,Virginia22107-0910
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code: (703) 854-6000.854-6000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
Common Stock, par value $0.01 per shareGCIThe New York Stock Exchange
Preferred Stock Purchase Rights
N/A
The New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer☒☐Accelerated Filer☐☒
Non-Accelerated Filer☐Smaller Reporting Company☐
Emerging Growth Company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒
As of November 2, 2020, the total number ofMay 4, 2021, 142,506,800 shares of the registrant's Common Stock $0.01 par value, outstanding was 137,959,262.


were outstanding.





CAUTIONARY NOTE REGARDING FORWARD LOOKING INFORMATIONFORWARD-LOOKING STATEMENTS

Certain statements in this reportQuarterly Report on Form 10-Q may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that1995. Forward-looking statements reflect our current views regarding, among other things, our future growth, results of operations, performance, and business prospects and opportunities, as well as otherand are not statements that are other thanof historical fact. Words such as “anticipate(s)"anticipate(s),” “expect(s)" "expect(s),” “intend(s)" "intend(s),” “plan(s)" "plan(s),” “target(s)" "target(s),” “project(s)" "project(s),” “believe(s)" "believe(s),” “will,” “aim,” “would,” “seek(s)" "will," "aim," "would," "seek(s),” “estimate(s)”" "estimate(s)" and similar expressions are intended to identify such forward-looking statements.

Forward-looking statements are based on management’s current expectations and beliefs and are subject to a number of known and unknown risks, uncertainties, and other factors that could lead to actual results materially different from those described in the forward-looking statements. We can give no assurance our expectations will be attained. Our actual results, liquidity, and financial condition may differ from the anticipated results, liquidity, and financial condition indicated in these forward-looking statements. These forward-looking statements are not a guarantee of future performance and involve risks and uncertainties, and there are certain important factors that could cause our actual results to differ, possibly materially, from expectations or estimates reflected in such forward-looking statements, including, among others:

•General economic and market conditions;
•The competitive environment in which we operate;
•Risks and uncertainties associated with the ongoing COVID-19 pandemic;

General economic and market conditions;

•Economic conditions in the various regions of the United States;States, the United Kingdom, and other regions in which we operate our business;

•The growing shift within the publishing industry from traditional print media to digital forms of publication;

•Risks and uncertainties associated with our Digital Marketing Solutions segment, including its significant reliance on Google for media purchases, its international operations, and its ability to develop and gain market acceptance for new products or services;

•Declining print advertising revenue and circulation subscribers;

•Our ability to grow our digital marketing services initiatives, digital audience, and advertiser base;

•Our ability to grow our business organically;

•Variability in the exchange rate relative to the U.S. dollar of currencies in foreign jurisdictions in which we operate;

•The risk that we may not realize the anticipated benefits of our acquisitions;

•The availability and cost of capital for future investments;

•Our indebtedness may restrict our operations and/or require us to dedicate a portion of cash flow from operations to payments associated with our debt;

•Our current intention not to pay dividends and our ability to pay dividends consistent with prior practice or at all;

•Our ability to reduce costs and expenses;

The impact of any material transactions•Risks and uncertainties associated with the Manager (as defined below) or onetransition from external management to self-management of its affiliates, including the impact of any actual, potential, or perceived conflicts of interest;Company;

•Our ability to remediate a material weakness in our internal control over financial reporting; and
The competitive environment in which we operate; and

•Our ability to recruit and retain key personnel.personnel, as well as any shortage of skilled or experienced employees, including journalists.

Additional risk factors that could cause actual results to differ materially from our expectations include, but are not limited to, the risks identified by us under the heading “Risk Factors” in Item 1A of this reportour Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the Securities and Exchange Commission (the “SEC”) on February 26, 2021, and the statements made in subsequent


filings. Such forward-looking statements speak only as of the date they are made. Except to the extent required by law, we expressly disclaim any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or change in events, conditions, or circumstances on which any statement is based.





INDEX TO GANNETT CO., INC.
Q3 2020Q1 2021 FORM 10-Q
 
Item No.Page
Part I. Financial Information
1
2
2
21
3
38
4
38
Part II. Other Information
1
39
1A
39
2
39
3
39
4
39
5
39
6
39
41



Table of Contents



PART I. FINANCIAL INFORMATION
ItemITEM 1. Financial StatementsFINANCIAL STATEMENTS

GANNETT CO., INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
Gannett Co., Inc. and Subsidiaries
in thousands, except share dataSeptember 30, 2020 December 31, 2019
ASSETS(Unaudited)  
Current assets   
Cash and cash equivalents$188,960
 $156,042
Accounts receivable, net of allowance for doubtful accounts of $23,749 and $19,923288,400
 438,523
Inventories33,776
 55,090
Prepaid expenses and other current assets115,137
 129,460
Total current assets626,273
 779,115
Property, plant and equipment, at cost net of accumulated depreciation of $377,072 and $277,291704,931
 815,807
Operating lease assets295,775
 309,112
Goodwill560,215
 914,331
Intangible assets, net893,721
 1,012,564
Deferred income tax assets97,369
 76,297
Other assets136,019
 112,876
Total assets$3,314,303
 $4,020,102
    
LIABILITIES AND EQUITY   
Current liabilities   
Accounts payable and accrued liabilities$340,840
 $453,628
Deferred revenue207,597
 218,823
Current portion of long-term debt15,179
 3,300
Other current liabilities46,558
 42,702
Total current liabilities610,174
 718,453
Long-term debt1,615,984
 1,636,335
Convertible debt3,300
 3,300
Deferred tax liabilities6,256
 9,052
Pension and other postretirement benefit obligations198,220
 235,906
Long-term operating lease liabilities280,556
 297,662
Other long-term liabilities169,536
 136,188
Total noncurrent liabilities2,273,852
 2,318,443
Total liabilities2,884,026
 3,036,896
Redeemable noncontrolling interests4,148
 1,850
Commitments and contingent liabilities (See Note 13)


 


    
Equity   
Common stock of $0.01 par value per share, 2,000,000,000 shares authorized, 137,478,696 issued and 136,305,720 shares outstanding at September 30, 2020; 129,386,258 issued and 128,991,544 shares outstanding at December 31, 20191,375
 1,294
Treasury stock at cost, 1,172,976 and 394,714 shares at September 30, 2020 and December 31, 2019, respectively(4,841) (2,876)
Additional paid-in capital1,100,269
 1,090,694
Accumulated deficit(664,263) (115,958)
Accumulated other comprehensive income (loss)(6,411) 8,202
Total equity426,129
 981,356
Total liabilities and equity$3,314,303
 $4,020,102

In thousands, except share dataMarch 31, 2021December 31, 2020
Assets(Unaudited)
Current assets:
Cash and cash equivalents$163,505 $170,725 
Accounts receivable, net of allowance for doubtful accounts of $17,124 and $20,843 as of March 31, 2021 and December 31, 2020, respectively275,933 314,305 
Inventories32,457 35,075 
Prepaid expenses and other current assets118,082 116,581 
Total current assets589,977 636,686 
Property, plant and equipment, net of accumulated depreciation of $369,899 and $362,029 as of March 31, 2021 and December 31, 2020, respectively552,462 590,272 
Operating lease assets286,368 289,504 
Goodwill534,211 534,088 
Intangible assets, net797,862 824,650 
Deferred tax assets103,269 90,240 
Other assets190,302 143,474 
Total assets$3,054,451 $3,108,914 
Liabilities and equity
Current liabilities:
Accounts payable and accrued liabilities$377,370 $378,246 
Deferred revenue190,699 186,007 
Current portion of long-term debt81,057 128,445 
Other current liabilities48,396 48,602 
Total current liabilities697,522 741,300 
Long-term debt888,086 890,323 
Convertible debt394,146 581,405 
Deferred tax liabilities16,280 6,855 
Pension and other postretirement benefit obligations95,542 99,765 
Long-term operating lease liabilities271,496 274,460 
Other long-term liabilities151,388 151,847 
Total noncurrent liabilities1,816,938 2,004,655 
Total liabilities2,514,460 2,745,955 
Redeemable noncontrolling interests(1,661)(1,150)
Commitments and contingent liabilities (See Note 12)00
Equity
Preferred stock, $0.01 par value, 300,000 shares authorized, of which 150,000 shares are designated as Series A Junior Participating Preferred Stock, NaN of which were issued and outstanding at March 31, 2021 and December 31, 20200 0 
Common stock of $0.01 par value per share, 2,000,000,000 shares authorized, 144,443,628 shares issued and 142,541,701 shares outstanding at March 31, 2021; 139,494,741 shares issued and 138,102,993 shares outstanding at December 31, 20201,444 1,395 
Treasury stock at cost, 1,901,927 shares and 1,391,748 shares at March 31, 2021 and December 31, 2020, respectively(6,612)(4,903)
Additional paid-in capital1,421,977 1,103,881 
Accumulated deficit(928,753)(786,437)
Accumulated other comprehensive income53,596 50,173 
Total equity541,652 364,109 
Total liabilities and equity$3,054,451 $3,108,914 
The accompanying notes are an integral part of these condensed consolidated financial statements.



2


GANNETT CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
Gannett Co., Inc. and Subsidiaries(Unaudited)
Unaudited; in thousands, except share data
Three months ended March 31,
Three months ended Nine months ended
September 30, 2020 September 29, 2019 September 30, 2020 September 29, 2019
Operating revenues:       
In thousands, except per share amountsIn thousands, except per share amounts20212020
Advertising and marketing services$405,227
 $184,078
 $1,249,156
 $582,320
Advertising and marketing services$388,357 $487,010 
Circulation336,158
 146,254
 1,053,528
 449,269
Circulation325,437 374,723 
Other73,154
 46,317
 227,539
 137,047
Other63,290 86,949 
Total operating revenues814,539
 376,649
 2,530,223
 1,168,636
Total operating revenues777,084 948,682 
Operating expenses:       
Operating costs492,342
 218,369
 1,535,539
 681,271
Operating costs477,798 566,463 
Selling, general and administrative expenses241,652
 119,821
 767,275
 375,497
Selling, general and administrative expenses203,684 299,137 
Depreciation and amortization61,355
 24,482
 205,706
 68,733
Depreciation and amortization58,103 78,024 
Integration and reorganization costs13,417
 3,136
 73,978
 13,213
Integration and reorganization costs13,404 28,254 
Acquisition costs1,913
 12,181
 10,261
 15,318
Asset impairments1,585
 0
 8,444
 2,469
Asset impairments833 0 
Goodwill and intangible impairments0
 0
 393,446
 0
Loss on sale or disposal of assets795
 602
 1,540
 3,339
Net loss on sale or disposal of assetsNet loss on sale or disposal of assets4,745 657 
Other operating expensesOther operating expenses10,576 5,969 
Total operating expenses813,059
 378,591
 2,996,189
 1,159,840
Total operating expenses769,143 978,504 
Operating income (loss)1,480
 (1,942) (465,966) 8,796
Operating income (loss)7,941 (29,822)
Non-operating (income) expenses:       
Interest expense58,063
 10,030
 173,890
 30,376
Interest expense39,503 57,899 
Loss on early extinguishment of debt476
 0
 1,650
 0
Loss on early extinguishment of debt19,401 805 
Non-operating pension income(18,334) (208) (54,433) (625)Non-operating pension income(23,878)(18,489)
Gain on sale of investments(7,800) 0
 (7,995) 0
Other income, net(2,575) (22) (6,993) (176)
Non-operating expenses29,830
 9,800
 106,119
 29,575
Net loss before income taxes(28,350) (11,742) (572,085) (20,779)
Income tax expense (benefit)3,098
 7,226
 (22,200) 4,929
Loss on Convertible notes derivativeLoss on Convertible notes derivative126,600 0 
Other (income) expense, netOther (income) expense, net(1,875)1,590 
Non-operating expenseNon-operating expense159,751 41,805 
Loss before income taxesLoss before income taxes(151,810)(71,627)
(Benefit) provision for income taxes(Benefit) provision for income taxes(9,109)8,979 
Net loss(31,448) (18,968) (549,885) (25,708)Net loss(142,701)(80,606)
Net loss attributable to redeemable noncontrolling interests(188) (505) (1,580) (954)Net loss attributable to redeemable noncontrolling interests(385)(454)
Net loss attributable to Gannett$(31,260) $(18,463) $(548,305) $(24,754)Net loss attributable to Gannett$(142,316)$(80,152)
Loss per share attributable to Gannett - basic$(0.24) $(0.31) $(4.17) $(0.41)Loss per share attributable to Gannett - basic$(1.06)$(0.61)
Loss per share attributable to Gannett - diluted$(0.24) $(0.31) $(4.17) $(0.41)Loss per share attributable to Gannett - diluted$(1.06)$(0.61)
Dividends declared per share$0.00
 $0.38
 $0.00
 $1.14
       
Other comprehensive loss:       
Other comprehensive income (loss):Other comprehensive income (loss):
Foreign currency translation adjustments$7,677
 (3) $(8,908) 0
Foreign currency translation adjustments$3,037 $(14,033)
Pension and other postretirement benefit items:       Pension and other postretirement benefit items:
Net actuarial loss0
 0
 (8,078) 0
Amortization of net actuarial gain(11) (30) (36) (90)
Net actuarial gainNet actuarial gain1,126 0 
Amortization of net actuarial loss (gain)Amortization of net actuarial loss (gain)20 (14)
Other(714) 0
 347
 0
Other(554)966 
Total pension and other postretirement benefit items(725) (30) (7,767) (90)Total pension and other postretirement benefit items592 952 
Other comprehensive income (loss) before tax6,952
 (33) (16,675) (90)Other comprehensive income (loss) before tax3,629 (13,081)
Income tax expense (benefit) related to components of other comprehensive income1
 0
 (2,062) 0
Income tax provision (benefit) related to components of other comprehensive income (loss)Income tax provision (benefit) related to components of other comprehensive income (loss)206 (4)
Other comprehensive income (loss), net of tax6,951
 (33) (14,613) (90)Other comprehensive income (loss), net of tax3,423 (13,077)
Comprehensive loss(24,497) (19,001) (564,498) (25,798)Comprehensive loss(139,278)(93,683)
Comprehensive loss attributable to redeemable noncontrolling interests(188) (505) (1,580) (954)Comprehensive loss attributable to redeemable noncontrolling interests(385)(454)
Comprehensive loss attributable to Gannett$(24,309) $(18,496) $(562,918) $(24,844)Comprehensive loss attributable to Gannett$(138,893)$(93,229)
The accompanying notes are an integral part of these condensed consolidated financial statements.



3

Table of Contents

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY 
GANNETT CO., INC.
Unaudited; in thousands, except share data               
 Common stock Additional
Paid-in
Capital		 Accumulated other comprehensive income (loss) Retained
Earnings (Accumulated Deficit)		 Treasury stock  
 Shares AmountShares Amount Total
Three months ended September 30, 2020               
Balance as of June 30, 2020136,885,320
 $1,369
 $1,101,899
 $(13,362) $(633,003) 770,973
 $(4,818) $452,085
Net loss—
 —
 —
 —
 (31,260) —
 —
 (31,260)
Restricted stock awards settled, net of withholdings564,406
 6
 (866) —
 —
 —
 —
 (860)
Other comprehensive income, net of income taxes of $1—
 —
 —
 6,951
 

 —
 —
 6,951
Equity-based compensation expense—
 —
 3,844
 —
 —
 —
 —
 3,844
Issuance of common stock28,970
 —
 (961) —
 —
 —
 —
 (961)
Remeasurement of redeemable noncontrolling interests—
 —
 (3,878) —
 —
 —
 —
 (3,878)
Purchase of treasury stock—
 —
 —
 —
 —
 4,837
 (19) (19)
Restricted share forfeiture—
 —
 —
 —
 —
 397,166
 (4) (4)
Other activity—
 —
 231
 —
 —
 —
 —
 231
Balance as of September 30, 2020137,478,696
 1,375
 1,100,269
 (6,411) (664,263) 1,172,976
 (4,841) 426,129
                
Three months ended September 29, 2019               
Balance as of June 30, 201960,806,451
 $608
 $677,574
 $(6,938) $(2,409) 324,777
 $(2,573) $666,262
Net loss—
 —
 —
 —
 (18,463) —
 —
 (18,463)
Restricted share grants1,408
 —
 —
 —
 —
 —
 —
 —
Other comprehensive loss, net of income taxes of $0—
 —
 —
 (33) —
 —
 —
 (33)
Equity-based compensation expense—
 —
 691
 —
 —
 —
 —
 691
Purchase of treasury stock—
 —
 —
 —
 —
 1,599
 (16) (16)
Restricted share forfeiture—
 —
 —
 —
 —
 366
 —
 —
Dividends declared—
 —
 (22,983) —
 —
 —
 —
 (22,983)
Balance at September 29, 201960,807,859
 $608
 $655,282
 $(6,971) $(20,872) 326,742
 $(2,589) $625,458
                


GANNETT CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended March 31,
In thousands20212020
Operating activities
Net loss$(142,701)$(80,606)
Adjustments to reconcile net loss to operating cash flows:
Depreciation and amortization58,103 78,024 
Share-based compensation expense3,423 11,577 
Non-cash interest expense6,118 56,160 
Net loss on sale or disposal of assets4,745 657 
Loss on Convertible notes derivative126,600 0 
Loss on early extinguishment of debt19,401 805 
Asset impairments833 0 
Pension and other postretirement benefit obligations(48,538)(30,545)
Change in other assets and liabilities, net33,332 24,417 
Net cash provided by operating activities61,316 60,489 
Investing activities
Purchase of property, plant and equipment(7,607)(13,783)
Proceeds from sale of real estate and other assets10,123 10,400 
Change in other investing activities0 (36)
Net cash provided by (used for) investing activities2,516 (3,419)
Financing activities
Payments of debt issuance costs(33,921)0 
Borrowings under term loans1,045,000 0 
Repayments under term loans(1,083,791)(12,701)
Payments for employee taxes withheld from stock awards(1,707)(1,615)
Changes in other financing activities(280)(363)
Net cash used for financing activities(74,699)(14,679)
Effect of currency exchange rate change on cash314 1,554 
(Decrease) increase in cash, cash equivalents and restricted cash(10,553)43,945 
Balance of cash, cash equivalents and restricted cash at beginning of period206,726 188,664 
Balance of cash, cash equivalents and restricted cash at end of period$196,173 $232,609 
The accompanying notes are an integral part of these condensed consolidated financial statements.





4
Unaudited; in thousands, except share data               
 Common stock Additional
Paid-in
Capital		 Accumulated other comprehensive income (loss) Retained
Earnings (Accumulated Deficit)		 Treasury stock  
 Shares AmountShares Amount Total
Nine months ended September 30, 2020               
Balance as of December 30, 2019129,386,258
 $1,294
 $1,090,694
 $8,202
 $(115,958) 394,714
 $(2,876) $981,356
Net loss—
 —
 —
 —
 (548,305) —
 —
 (548,305)
Restricted share grants4,346,313
 44
 (44) —
 —
 —
 —
 —
Restricted stock awards settled, net of withholdings3,072,991
 31
 (10,819) —
 —
 —
 —
 (10,788)
Other comprehensive loss, net of income tax benefit of $2,062—
 —
 —
 (14,613) —
 —
 —
 (14,613)
Equity-based compensation expense—
 —
 22,812
 —
 —
 —
 —
 22,812
Issuance of common stock673,134
 6
 1,609
 —
 —
 —
 —
 1,615
Remeasurement of redeemable noncontrolling interests—
 —
 (3,878) —
 —
 —
 —
 (3,878)
Purchase of treasury stock—
 —
 —
 —
 —
 322,524
 (1,960) (1,960)
Restricted share forfeiture—
 —
 —
 —
 —
 455,738
 (5) (5)
Other activity—
 —
 (105) —
 —
 —
 —
 (105)
Balance as of September 30, 2020137,478,696
 1,375
 1,100,269
 (6,411) (664,263) 1,172,976
 (4,841) 426,129
                
Nine months ended September 29, 2019               
Balance as of December 30, 201860,508,249
 $605
 $721,605
 $(6,881) $3,767
 201,963
 $(1,873) $717,223
Net loss—
 —
 —
 —
 (24,754) —
 —
 (24,754)
Restricted share grants299,610
 3
 (3) —
 —
 —
 —
 —
Other comprehensive loss, net of income taxes of $0—
 —
 —
 (90) —
 —
 —
 (90)
Equity-based compensation expense—
 —
 2,534
 —
 —
 —
 —
 2,534
Impact of adoption of ASC 842 - Leases—
 —
 —
 —
 115
 —
 —
 115
Purchase of treasury stock—
 —
 —
 —
 —
 54,320
 (716) (716)
Restricted share forfeiture—
 —
 —
 —
 —
 70,459
 —
 —
Dividends declared—
 —
 (68,854) —
 —
 —
 —
 (68,854)
Balance at September 29, 201960,807,859
 608
 655,282
 (6,971) (20,872) 326,742
 (2,589) 625,458
                

The accompanying notes are an integral partTable of these consolidated financial statements.

Contents


GANNETT CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSEQUITY
Gannett Co., Inc. and Subsidiaries(Unaudited)
Unaudited; in thousands
Three months ended March 31, 2021
Common stockAdditional
Paid-in
Capital		Accumulated other comprehensive income (loss)Accumulated DeficitTreasury stock
In thousands, except share dataSharesAmountSharesAmountTotal
Balance as of December 30, 2020139,494,741 $1,395 $1,103,881 $50,173 $(786,437)1,391,748 $(4,903)$364,109 
Net loss attributable to Gannett— — — — (142,316)— — (142,316)
Restricted stock awards settled, net of withholdings1,056,642 10 (1,895)— — — — (1,885)
Restricted share grants3,877,836 39 (39)— — — — 0 
Equity feature of Convertible notes— — 316,252 — — — — 316,252 
Other comprehensive income, net of income tax provision of $206— — — 3,423 — — — 3,423 
Share-based compensation expense— — 3,423 — — — — 3,423 
Issuance of common stock14,409 0 61 — — — — 61 
Remeasurement of redeemable noncontrolling interests— — 126 — — — — 126 
Treasury stock— — — — — 330,318 (1,707)(1,707)
Restricted share forfeiture— — — — — 179,861 (2)(2)
Other activity— — 168 — — — — 168 
Balance at March 31, 2021144,443,628 $1,444 $1,421,977 $53,596 $(928,753)1,901,927 $(6,612)$541,652 
 Nine months ended
 September 30, 2020 September 29, 2019
    
Cash flows from operating activities:   
Net loss$(549,885) $(25,708)
Adjustments to reconcile net income to operating cash flows:   
Depreciation and amortization205,706
 68,733
Equity-based compensation expense22,812
 2,534
Non-cash interest expense17,813
 1,034
Loss on sale or disposal of assets1,540
 3,339
Loss on early extinguishment of debt1,650
 0
Goodwill and intangible impairments393,446
 0
Asset impairments8,444
 2,469
Pension and other postretirement benefit obligations, net of contributions(77,274) (1,116)
Change in other assets and liabilities, net50,028
 47,245
Net cash provided by operating activities74,280
 98,530
Cash flows from investing activities:   
Acquisitions, net of cash acquired0
 (49,666)
Purchase of property, plant and equipment(28,944) (7,281)
Proceeds from sale of real estate and other assets26,186
 10,314
Insurance proceeds received for damage to property1,643
 0
Change in other investing activities(864) 0
Net cash used for investing activities(1,979) (46,633)
Cash flows from financing activities:   
Repayments under term loans(27,619) (11,296)
Borrowings under revolving credit facility0
 136,400
Repayments under revolving credit facility0
 (128,400)
Deferred payments for acquisitions(7,544) 0
Payments for employee taxes withheld from stock awards(1,960) (716)
Issuance of common stock4
 0
Payment of dividends0
 (68,886)
Changes in other financing activities(352) 0
Net cash used for financing activities(37,471) (72,898)
Effect of currency exchange rate change on cash439
 0
Increase (decrease) in cash, cash equivalents and restricted cash35,269
 (21,001)
Balance of cash, cash equivalents and restricted cash at beginning of period188,664
 52,770
Balance of cash, cash equivalents and restricted cash at end of period$223,933
 $31,769
    
Supplemental cash flow information:   
Cash paid for taxes, net of refunds$(4,510) $1,046
Cash paid for interest$176,402
 $22,902
Non-cash investing and financing activities:   
Accrued capital expenditures$758
 $105
Three months ended March 31, 2020
Common stockAdditional
Paid-in
Capital		Accumulated other comprehensive income (loss)Accumulated DeficitTreasury stock
In thousands, except share dataSharesAmountSharesAmountTotal
Balance as of December 31, 2019129,386,258 $1,294 $1,090,694 $8,202 $(115,958)394,714 $(2,876)$981,356 
Net loss attributable to Gannett— — — — (80,152)— — (80,152)
Restricted stock awards settled, net of withholdings2,257,335 22 (9,844)— — — — (9,822)
Restricted share grants815,034 8 (8)— — — — 0 
Other comprehensive loss, net of income tax benefit of $4— — — (13,077)— — — (13,077)
Share-based compensation expense— — 11,577 — — — — 11,577 
Issuance of common stock256,905 3 1,549 — — — — 1,552 
Treasury stock— — — — — 262,451 (1,615)(1,615)
Other activity— — (263)— — — — (263)
Balance at March 31, 2020132,715,532 $1,327 $1,093,705 $(4,875)$(196,110)657,165 $(4,491)$889,556 
The accompanying notes are an integral part of these condensed consolidated financial statements.



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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — Basis of presentation and summary of significant accounting policies

Description of business: Business and basis of presentation

Description of Business
Gannett Co., Inc. ("Gannett", "we", "us", "our", or the "Company") is an innovative,a subscription-led and digitally focused media and marketing solutions company committed to fosteringempowering communities to thrive. We aim to be the communities inpremiere source for clarity, connections and solutions within our networkcommunities. Our strategy is focused on driving audience growth and helping them build relationships with their local businesses. On November 19, 2019, New Media Investment Group Inc. ("Legacy New Media") completedengagement by delivering deeper content experiences to our consumers, while offering the products and marketing expertise our advertisers desire. The execution of this strategy is expected to allow the Company to continue its acquisition of Gannett Co., Inc. (which was renamed Gannett Media Corp. and is referred herein as "Legacy Gannett"), which retained the name Gannett Co., Inc. and trades on the New York Stock Exchange under the ticker symbol "GCI".evolution from a more traditional print media business to a digitally focused content platform.

Our current portfolio of media assets includes USA TODAY, local media organizations in 46 states in the U.S. and Guam,, and Newsquest, (aa wholly owned subsidiary operating in the United Kingdom (the "U.K.") with more than 140120 local media brands).brands. Gannett also owns the digital marketing services companies ReachLocal, Inc. ("ReachLocal"), UpCurve, Inc. ("UpCurve"), and WordStream, Inc. ("WordStream"), which are marketed under the LOCALiQ brand, and runs the largest media-owned events business in the U.S., GateHouse Live.USA TODAY NETWORK Ventures.

Through USA TODAY, our local property network, and Newsquest, Gannett delivers high-quality, trusted content where and when consumers want to engage on virtually any device or platform. Additionally, the Company has strong relationships with hundreds of thousands of local and national businesses in both our U.S. and U.K. markets due to our large local and national sales forces and a robust advertising and marketing solutions product suite. The Company reports in 2 segments: Publishing and Digital Marketing Solutions.Solutions ("DMS"). A full description of our segments is included in Note 1413 — Segment reporting ofin the notes to the condensed consolidated financial statements.

COVID-19 Pandemic: The newspaper industry and the Company have experienced declining same-store revenue and profitability over the past several years, and these industry trends are expected to continue in the future. Additionally, during the nine months ended September 30, 2020, the Company experienced additional revenue and profitability declines in connection withImpacts of the COVID-19 global pandemic. More specifically, during March 2020,pandemic

As a result of the Company beganCOVID-19 pandemic, we continue to experience decreased demand for itsour advertising and digital marketing services, commercial print and distribution services, as well as reductions in and constraints on in-person events and the sales of single copy and commercial distributionnewspapers. While we have seen operating trends improve since the second quarter of its newspapers. At this point,2020, which represents the Company’s newspaper production operations have not beenquarter that was most significantly impacted andby the vast majority of the Company’s non-production employees are currently working remotely. However,pandemic, we expect that the COVID-19 global pandemic hadwill continue to have a significant negative impact on the Company’sour business and results of operations duringin the nine months ended September 30, 2020, and we expect it to continue to have an impact in future periods. Longer-term, the impact of the COVID-19 pandemic on the Company’s business and results of operations will depend on the severity and length of the pandemic, the duration and extent of the mitigation measures and governmental actions designed to combat the pandemic, as well as the changes in customer behavior as a result of the pandemic, all of which are highly uncertain. near-term.
As a result, the Company haswe have implemented, and continuescontinue to implement, measures to reduce costs and preserve cash flow. These measures include, evaluating and applying for all governmental relief programs for which we are eligible, including the Paycheck Protection Program ("PPP"), suspension of the quarterly dividend employee furloughs and decreases in employee compensation through the third quarter,refinancing of our debt, as well as reductions in discretionary spending. In addition, the Company has deferred certain payroll tax remittance as permitted under the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") and negotiated the deferral of pension contributions, as well aswe are continuing with itsour previously disclosed plan to monetize non-core assets. The Company believes these initiatives, along with cash on hand and cash provided by operating activities, will provide sufficient cash flowRefer to enable the Company to meet its commitments. However, these measures are not expected to fully offset the negative impactNote 15 — Subsequent events for further discussion of the COVID-19 pandemic on the Company's business and results of operations.PPP.


Basis of presentation: presentation

Our condensed consolidated financial statements are unaudited; however, in the opinion of management, they contain all of the adjustments (consisting of those of a normal, recurring nature) considered necessary to present fairly the financial position, results of operations, and cash flows for the periods presented in conformity with U.S. generally accepted accounting principles ("U.S. GAAP") applicable to interim periods. All significant intercompany accounts and transactions have been eliminated in consolidation. The Company consolidates entities that it controls due to ownership of a majority voting interest. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019.2020.

Use of estimates: estimates

The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and footnotes thereto. Actual results could differ from those estimates. The COVID-19 pandemic has caused increased uncertainty

Significant estimates inherent in estimates and assumptions affecting the reported amounts of assets and liabilities as of the datepreparation of the condensed consolidated financial statements.



Examples of significant estimatesstatements include pension and postretirement benefit obligation assumptions, income taxes, leases, self-insurance liabilities,goodwill and intangible asset impairment analysis, stock-based compensation, business combinations and valuation of


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property, plant and equipment and intangible assets. Actual results could differ from those estimates.
Fiscal period: Starting in 2019assets and subsequentthe mark to our acquisitionmarket of Legacy Gannett, our fiscal period end coincidesthe conversion feature associated with the Gregorian calendar. In periods prior to the acquisition, our fiscal periods ended on the last Sunday of the calendar month. Our fiscal period end for the third quarter of 2019 was September 29, 2019.convertible debt.

Advertising and marketing services revenues: Pursuant to our acquisition of Legacy Gannett, we realigned the presentation of marketing services revenues generated by our UpCurve subsidiary from other revenues to advertising and marketing services revenue on the Condensed consolidated statements of operations and comprehensive income (loss). As a result of this updated presentation, Advertising and marketing services revenues increased and Other revenues decreased $16.6 million and $51.4 million for the three and nine months ended September 29, 2019, respectively. Operating revenues, Net income (loss), Retained earnings, and Earnings per share remained unchanged.

Segment presentation: In connection with our Legacy Gannett acquisition and as noted above, we reorganized our reportable segments to include (1) Publishing, which consists of our portfolio of regional, national, and international newspaper publishers and (2) Marketing Solutions, which is comprised of our marketing solutions subsidiaries ReachLocal, UpCurve and WordStream. In addition to these operating segments, we have a Corporate and other category that includes activities not directly attributable to a specific segment. This category primarily consists of broad corporate functions and includes legal, human resources, accounting, analytics, finance, and marketing as well as activities and costs not directly attributable to a particular segment and other general business costs.

Cash and cash equivalents, including restricted cash: Cash equivalents represent highly liquid certificates of deposit which have original maturities of three months or less. Restricted cash is held as cash collateral for certain business operations. Restricted cash primarily consists of funding for letters of credit and cash held in an irrevocable grantor trust for our deferred compensation plans. The restrictions will lapse when benefits are paid to plan participants and their beneficiaries as specified in the plans.
The following table presents a reconciliation of cash, cash equivalents, and restricted cash:
In thousandsSeptember 30, 2020 September 29, 2019
Cash and cash equivalents$188,960
 $28,641
Restricted cash included in other current assets10,796
 3,128
Restricted cash included in investments and other assets24,177
 0
Total cash, cash equivalents and restricted cash$223,933
 $31,769


NewRecent accounting pronouncements adopted:adopted The following are new accounting pronouncements that we adopted in the first nine months of 2020:

Simplifying the Accounting for Income Taxes
Financial Instruments—Credit Losses:
In June 2016,December 2019, the Financial Accounting Standards Board ("FASB"(the "FASB") issued new guidance which amends the principles around the recognition of credit losses by mandating entities incorporate an estimate of current expected credit losses when determining the value of certain assets. The guidance also amends reporting around allowances for credit losses on available-for-sale marketable securities. This guidance is effective for fiscal years beginning after December 15, 2019, with early adoption permitted. Adopting this guidance did not have a material impact on our consolidated financial statements, refer to Note 4 — Accounts receivable, net for further details.

Intangibles—Internal Use Software: In August 2018, the FASB issued new guidance which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software and hosting arrangements that include an internal-use software license. This guidance is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in any interim period. The guidance can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. This guidance was adopted prospectively and did not have a material impact on our consolidated financial statements. Capitalized costs are recognized within prepaid expenses and other current assets or other assets within the consolidated balance sheet.



Fair Value Measurement—Disclosure Framework: In August 2018, the FASB issued new guidance that changes disclosure requirements related to fair value measurements as part of the disclosure framework project. The disclosure framework project aims to improve the effectiveness of disclosures in the notes to the financial statements by focusing on requirements that clearly communicate the most important information to users of the financial statements. This guidance is effective for fiscal years beginning after December 15, 2019, with early adoption permitted. Adopting this guidance did not have a material impact on our consolidated financial statements.

New accounting pronouncements not yet adopted: The following are new accounting pronouncements that we are evaluating for future impacts on our financial statements:

Compensation—Retirement Plans: In August 2018, the FASB issued new guidance that changes disclosures related to defined benefit pension and other postretirement benefit plans as part of the disclosure framework project. This guidance is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. We are evaluating the provisions of the updated guidance and assessing the impact on our consolidated financial statements.

Simplifying the Accounting for Income Taxes: In December 2019, the FASB issued new guidance that simplifies the accounting for income taxes. The guidance amends the rules for recognizing deferred taxes for investments, performing intraperiod tax allocations and calculating income taxes in interim periods. It also reduces complexity in certain areas, including accounting for transactions that result in a step-up in the tax basis of goodwill and allocating taxes to members of a consolidated group. This guidance is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. WeAdopting this guidance allowed us to record a tax benefit for the quarter because year-to-date losses on interim periods are no longer limited to losses annually forecasted.

Recent accounting pronouncements not yet adopted

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity

In August 2020, the FASB issued new guidance ("ASU 2020-06") that simplifies the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock. In addition to eliminating certain accounting models, the guidance amends the disclosures for convertible instruments and earnings-per-share guidance. It also amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. This guidance is effective for fiscal years beginning after December 15, 2023, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is evaluating the provisionsimpacts that the adoption of ASU 2020-06 will have on our accounting for the updated guidance6.0% Senior Secured Convertible Notes due 2027 (the "2027 Notes"), and assessing the impact on our condensed consolidated financial statements.


NOTE 2 — Revenues

Revenue Recognition

Revenues are recognized when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Revenues recognized as performance obligations are satisfied either at a point in time, such as when an advertisement is published, or over time, such as customer subscriptions.

The Company’s Condensedcondensed consolidated statements of operations and comprehensive income (loss) presentspresent revenues disaggregated by revenue type. Sales taxes and other usage-based taxes are excluded from revenues. The following table presents our revenues disaggregated by source:
Three months ended March 31,
In thousands20212020
Print advertising$193,196 $267,842 
Digital advertising and marketing services195,161 219,168 
Total advertising and marketing services388,357 487,010 
Circulation325,437 374,723 
Other63,290 86,949 
Total revenues$777,084 $948,682 
 Three months ended Nine months ended
In thousandsSeptember 30, 2020
September 29, 2019 September 30, 2020 September 29, 2019
Print advertising$208,047
 $139,243
 $664,047
 $448,348
Digital advertising and marketing services197,180
 44,835
 585,109
 133,972
Total advertising and marketing services405,227
 184,078
 1,249,156
 582,320
Circulation336,158
 146,254
 1,053,528
 449,269
Other73,154
 46,317
 227,539
 137,047
Total revenues$814,539
 $376,649
 $2,530,223
 $1,168,636

For the three and nine months ended September 30, 2020,March 31, 2021, approximately 7%7.5% of our revenues were generated from international locations.

Deferred revenues
Deferred revenues:
The Company records deferred revenues when cash payments are received in advance of the Company’s performance obligation. The most significant unsatisfied performance obligationCompany's primary source of deferred revenues is from circulation subscriptions paid in advance of the service provided, which represents future delivery of publications (the performance obligation) to subscription customers. The Company expects to recognize the revenue related to unsatisfied performance obligations over the next threeone to twelve months in accordance with the terms of the subscriptions.



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The Company's payment terms vary by the type and location of the customer and the products or services offered. The period between invoicing and when payment is due is not significant. For certain products or services and customer types, the Company requires payment before the products or services are delivered to the customer.



The following table presents changes in the deferred revenues balance for the nine months ended September 30, 2020 by type of revenues:
In thousandsAdvertising, Marketing Services, and Other Circulation Total
Beginning balance$67,543
 $151,280
 $218,823
Cash receipts215,050
 878,856
 1,093,906
Revenue recognized(221,052) (884,080) (1,105,132)
Ending balance$61,541
 $146,056
 $207,597


The Company’s primary source of deferred revenues is from circulation subscriptions paid in advance of the service provided. The majority of our subscription customers are billed and pay on monthly terms, but subscription periods can last between one and twelve months. terms.

The remainingfollowing table presents changes in the deferred revenuerevenues balance relates to Advertising and marketing services revenues and Other revenues.by type of revenues:
Three months ended March 31, 2021Three months ended March 31, 2020
In thousandsAdvertising, Marketing Services, and OtherCirculationTotalAdvertising, Marketing Services, and OtherCirculationTotal
Beginning balance$51,686 $134,321 $186,007 $67,543 $151,280 $218,823 
Cash receipts60,117 284,175 344,292 86,918 307,502 394,420 
Revenue recognized(58,953)(280,647)(339,600)(79,467)(308,167)(387,634)
Ending balance$52,850 $137,849 $190,699 $74,994 $150,615 $225,609 

NOTE 3 — Leases

We lease certain real estate, vehicles, and equipment. Our leases have remaining lease terms of 1one to 15fifteen years, some of which may include options to extend the leases, and some of which may include options to terminate the leases. The exercise of lease renewal options is at our sole discretion. The depreciable lives of assets and leasehold improvements are limited by the expected lease term unless there is a transfer of title or purchase option reasonably certain of exercise.

As of September 30, 2020,March 31, 2021, our Condensedcondensed consolidated balance sheets include $295.8included $286.4 million of operating lease right-to-use assets, $43.5$42.6 million of short-term operating lease liabilities included in Other current liabilities, and $280.6$271.5 million of long-term operating lease liabilities.

The components of lease expense wereare as follows:
Three months ended March 31,
In thousands20212020
Operating lease cost (a)
$23,755 $23,884 
Short-term lease cost (b)
142 3,142 
Net lease cost$23,897 $27,026 
 Three months ended Nine months ended
In thousandsSeptember 30, 2020 September 29, 2019 September 30, 2020 September 29, 2019
Operating lease cost (a)
$23,821
 $7,841
 $72,142
 $23,810
Short-term lease cost (b)
828
 1,124
 5,315
 2,756
Net lease cost$24,649
 $8,965
 $77,457
 $26,566
(a)Includes variable lease costs of $3.1 million and $4.3 million, respectively, and sublease income of $1.2 million and $1.1 million, respectively, for the three months ended March 31, 2021 and 2020.
(a)
(b)Excluding expenses relating to leases with a lease term of one month or less.

Includes variable lease costs of $2.9 million and $4.8 million, respectively, and sublease income of $0.9 million and $0.6 million, respectively, for the three months ended September 30, 2020 and September 29, 2019 and variable lease costs of $9.7 million and $5.6 million, respectively, and sublease income of $2.9 million and $1.7 million, respectively, for the nine months endedSeptember 30, 2020 and September 29, 2019.
(b)
Excluding expenses relating to leases with a lease term of one month or less.

Future minimum lease payments under non-cancellable leases as of September 30, 2020 are as follows:
In thousands
Year ended
December 31, (a)
2021 (excluding the three months ended March 31, 2021)$55,719 
202277,522 
202364,681 
202457,723 
202550,584 
Thereafter216,335 
Total future minimum lease payments522,564 
Less: Imputed interest(208,452)
Total$314,112 
(a)Operating lease payments exclude $14.9 million of legally binding minimum lease payments for leases signed but not yet commenced.


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In thousands
Year ended
December 31, (a)
2020 (excluding the nine months ended September 30, 2020)$15,968
202182,679
202274,650
202362,115
202455,419
Thereafter246,439
Total future minimum lease payments537,270
Less: Imputed interest(213,143)
Total$324,127
(a)
Operating lease payments exclude $12.7 million of legally binding minimum lease payments for leases signed but not yet commenced.



OtherSupplemental information related to leases wereis as follows:
Three months ended March 31,
In thousands, except lease term and discount rate20212020
Cash paid for amounts included in the measurement of operating lease liabilities$21,935 $16,771 
Right-of-use assets obtained in exchange for operating lease obligations9,053 1,238 
Loss on sale and leaseback transactions, net406 0 
As of March 31,
20212020
Weighted-average remaining lease term (in years)7.68.1
Weighted-average discount rate12.90 %12.45 %
 Nine months ended
In thousands, except lease term and discount rateSeptember 30, 2020
September 29, 2019
Supplemental information   
Cash paid for amounts included in the measurement of operating lease liabilities$61,508
 $18,899
Right-of-use assets obtained in exchange for operating lease obligations25,562
 18,642
    
 As of
 September 30, 2020 September 29, 2019
Weighted-average remaining lease term (in years)7.7
 8.6
Weighted-average discount rate12.66% 10.54%


NOTE 4 — Accounts receivable, net

The Company performs its evaluation of the collectability of trade receivables based on customer category. For example, trade receivables from individual subscribers to our publications are evaluated separately from trade receivables related to advertising customers. For advertising trade receivables, the Company applies a "black motor formula" methodology as the baseline to calculate the allowance for doubtful accounts. The reserve percentage is calculated as a ratio of total net bad debts (less write-offs and recoveries) for the prior three-year period to total outstanding trade accounts receivable for the same three-year period. The calculated reserve percentage by customer category is applied to the consolidated gross advertising receivable balance, irrespective of aging. In addition, each category has specific reserves for at risk accounts that vary based on the nature of the underlying trade receivables. Due to the short-term nature of our circulation receivables, the Company reserves all receivables aged over 90 days.

The following table presents changes in the allowance for doubtful accounts for the ninethree months ended September 30,March 31, 2021 and 2020:
Three months ended March 31,
In thousands20212020
Beginning balance$20,843 $19,923 
Current period provision(2,171)5,143 
Write-offs charged against the allowance(2,805)(5,347)
Recoveries of amounts previously written-off1,206 918 
Foreign currency51 (151)
Ending balance$17,124 $20,486 
In thousands 
Beginning balance$19,923
     Current period provision23,075
     Write-offs charged against the allowance(21,139)
     Recoveries of amounts previously written-off2,230
     Disposition(351)
     Foreign currency11
Ending balance$23,749


Each categoryThe calculation of the allowance considers current economic, industry and customer specificcustomer-specific conditions relative to their respective operating environments in the incremental allowances recorded related to high-risk accounts, bankruptcies, receivables in repayment plan and other aging specific reserves. As a result of this analysis, the Company adjusts specific reserves and the amount of allowable credit as appropriate. The collectability of trade receivables related to advertising, marketing services and other customers depends on a variety of factors, including trends in the local and general economic conditions that affect our customers' ability to pay. The advertisers in our newspapers and other publications and related websites are primarily retail businesses that can be significantly affected by regional or national economic downturns and other developments that may impact our ability to collect on the related receivables. Similarly, while circulation revenues related to individual subscribers are primarily prepaid, changes in economic conditions may also affect our ability to collect on amounts owed from single copy circulation customers.

As of September 30, 2020, the Company estimated future credit losses for trade receivables of $4.5 million due to the potential impacts of the COVID-19 pandemic. This reserve is based on the analysis of higher risk accounts, which include receivables with significant changes in payment timing and aged balances. While the Company continues to collect on the majority of its trade receivables, the amounts and timing have been impacted as a result of the pandemic. The Company will continue to monitor the impact of the COVID-19 pandemic and the related impact on its receivables.



For the three and nine months ended September 30,March 31, 2021 and 2020, the Company recorded $5.7a $2.2 million reversal and $23.1$5.1 million of expense, respectively, in bad debt expense, which is included in Selling, general and administrative expenses on the Condensedcondensed consolidated statements of operations and comprehensive income (loss). For the three and nine months ended September 29, 2019,March 31, 2021, the Company recorded $1.5 million and $5.5 million ina reduction to bad debt expense includeddue to a decrease in Selling, general and administrative expenses on the Condensed consolidated statements of operations and comprehensive income (loss). We did not record any one-time adjustments asrequired reserves. The reduction in required reserves is a result of adoptinglower volume of accounts receivable due to seasonality, higher recoveries, and lower write-offs during the new guidance on credit losses.three months ended March 31, 2021 compared to the corresponding prior year period.


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NOTE 5 — Acquisitions

2019 Acquisitions

The Company acquired substantially all theGoodwill and intangible assets properties, and business of Legacy Gannett on November 19, 2019. The acquisition, which included the USA TODAY NETWORK (made up of USA TODAY and 109 local media organizations in 34 states in the U.S. and Guam, including digital sites and affiliates), ReachLocal, a marketing solutions company, and Newsquest (a wholly owned subsidiary of Legacy Gannett operating in the U.K. with more than 140 local media brands), was completed for an aggregate purchase price of $1.3 billion. The acquisition was financed from the Apollo Term Loan, as described in Note 8 — Debt, and the issuance of common stock to Legacy Gannett stockholders. The rationale for the acquisition was primarily the attractive nature of the various publications, businesses, and digital platforms as well as the estimated cash flows and cost-saving and revenue-generating opportunities. The fair values of the assets and liabilities for the Legacy Gannett acquisition were finalized during the second quarter of 2020.

Outside of the Legacy Gannett acquisition, the Company also acquired substantially all the assets, properties and business of certain publications and businesses in 2019 (the "2019 Acquisitions"), which included 11 daily newspapers, 11 weekly publications, 9 shoppers, a remnant advertising agency, 5 events production businesses, and a business community and networking platform for an aggregate purchase price of $53.4 million, including working capital. As part of one of the 2019 Acquisitions, the Company also acquired a 58% equity interest in the acquiree, and the minority equity owners retained a 42% interest, which has been classified as a redeemable non-controlling interest on the Condensed consolidated statements of operations and comprehensive income (loss).  Additionally, for specified 2019 Acquisitions, additional consideration is earned based on the achievement of EBITDA targets outlined in the asset purchase agreement. As of September 30, 2020, there is 0 consideration payable to the former stockholders. The 2019 Acquisitions were financed from cash on hand. The rationale for the 2019 Acquisitions was primarily the attractive nature, as applicable, of the various publications, businesses, and digital platforms as well as the estimated cash flows and cost-saving and revenue-generating opportunities available. The fair values of the assets and liabilities for the 2019 Acquisitions were finalized during the second quarter of 2020.

Pro forma information: The following table sets forth unaudited pro forma results of operations assuming the Legacy Gannett acquisition, along with transactions necessary to finance the acquisition, occurred at the beginning of 2019:
 Three months ended Nine months ended
In thousands; unauditedSeptember 29, 2019 September 29, 2019
Total revenues$1,010,508
 $3,124,186
Net income (loss)(58,857) (110,938)
Earnings (loss) per share - diluted$(0.48) $(0.90)


This pro forma financial information is based on historical results of operations, adjusted for the allocation of the purchase price and other acquisition accounting adjustments, and is not necessarily indicative of what our results would have been had we operated the businesses from the beginning of the periods presented. The pro forma adjustments reflect depreciation expense and amortization of intangibles related to the fair value adjustments of the assets acquired, additional interest expense related to the financing of the transactions, the elimination of acquisition-related costs, and the related tax effects of the adjustments.



NOTE 6 — Goodwill & Intangible Assets

Goodwill and intangible assets consisted of the following:
March 31, 2021December 31, 2020
 In thousandsGross carrying amountAccumulated
amortization		Net carrying
amount		Gross carrying amountAccumulated
amortization		Net carrying
amount
Finite-lived intangible assets:
Advertiser relationships$459,570 $123,338 $336,232 $460,331 $112,468 $347,863 
Other customer relationships102,946 26,642 76,304 102,925 23,682 79,243 
Subscriber relationships255,598 78,558 177,040 255,702 71,271 184,431 
Other intangible assets68,687 31,688 36,999 68,687 26,982 41,705 
Sub-total$886,801 $260,226 $626,575 $887,645 $234,403 $653,242 
Indefinite-lived intangible assets:
Mastheads171,287 171,408 
Total intangible assets$797,862 $824,650 
Goodwill$534,211 $534,088 
 September 30, 2020
 In thousandsGross carrying amount 
Accumulated
amortization
 
Net carrying
amount
Amortized intangible assets(a):
     
Advertiser relationships$496,062
 $111,782
 $384,280
Other customer relationships112,704
 24,561
 88,143
Subscriber relationships265,218
 67,469
 197,749
Other intangible assets70,317
 23,141
 47,176
Total$944,301
 $226,953
 $717,348
Non-amortized intangible assets:
  
Goodwill$560,215
 
Mastheads(a)
176,373
 
Total$736,588
 
  
 December 31, 2019
 Gross carrying amount Accumulated
amortization		 
Net carrying
amount
Amortized intangible assets:     
Advertiser relationships$534,161
 $75,363
 $458,798
Other customer relationships109,674
 14,303
 95,371
Subscriber relationships259,391
 44,878
 214,513
Other intangible assets76,552
 11,229
 65,323
Total$979,778
 $145,773
 $834,005
Non-amortized intangible assets:   
Goodwill$914,331
 
Mastheads$178,559
 
Total$1,092,890
 

(a)
Includes measurement period adjustments for the Legacy Gannett and other 2019 acquisitions.

The balances and changes in the carrying amount of goodwill by segment are as follows:

In thousands
Publishing(a)
 Marketing Solutions Consolidated
Gross balance at December 31, 2019$800,606
 $201,646
 $1,002,252
Accumulated impairments(84,272) (3,649) (87,921)
Net balance at December 31, 2019$716,334
 $197,997
 $914,331
      
Activity during the nine months ended September 30, 2020:     
Goodwill impairment$(321,851) $(40,499) $(362,350)
Measurement period adjustments70,558
 (58,788) 11,770
Foreign currency exchange rate changes(3,536) 0
 (3,536)
Total$(254,829) $(99,287) $(354,116)
      
Gross balance at September 30, 2020$869,439
 $142,858
 $1,012,297
Accumulated impairments(407,934) (44,148) (452,082)
Net balance at September 30, 2020$461,505
 $98,710
 $560,215
(a)
The Publishing segment includes the Domestic Publishing and Newsquest reporting units.

Consistent with the Company’s past practice, the Company performedperforms its annual goodwill and indefinite-lived intangible (masthead) impairment assessment inon the last day of its fiscal second quarter of 2020 withquarter. In addition to the assistance of third-party valuation specialists. Within


theannual impairment analyses performed,test, the Company considered the current and expected future economic and market conditions and the impact on the fair value of each of the reporting units. The primary factor that impacted the decrease in fair value was the impact of the COVID-19 pandemic on the Company’s operations. The most significant assumptions utilized in the determination of the estimated fair values include revenue and EBITDA projections, discount rates and long-term growth rates. The long-term growth rates are dependent on overall market growth rates, the competitive environment, inflation and relative currency exchange rates and could be adversely impacted by a sustained decrease in any of these measures, all of which the Company considered in determining the long-term growth rates used in the analysis, which ranged from negative 0.5% to 3%. The discount rate, which is consistent with a weighted average cost of capital that is likely to be expected by a market participant, is based upon industry required rates of return, including consideration of both debt and equity components of the capital structure. The discount rate may be impacted by adverse changes in the macroeconomic environment and volatility in the equity and debt markets. The Company considered these factors in determining the discount rates used in the analysis, which ranged from 10.0% to 15.5%.

For mastheads, the Company applied a “relief from royalty” approach, a discounted cash flow model, reflecting current assumptions, to fair value the indefinite-lived intangible assets. We compared the fair value of each indefinite-lived asset to its carrying amount, and accordingly, the Company recorded impairments of $4.0 million in both our Domestic Publishing and Newsquest reporting units during the second quarter of 2020.

During the second quarter of 2020, the Company considered the impact of the COVID-19 pandemic on the Company’s operations to be an indicator of impairment under ASC 360. As such, during the second quarter the Company performed a recoverability test for the long-lived asset groups, reflecting current assumptions, to determine whether an impairment loss should be measured. The undiscounted cash flows used in the recoverability test for the Newsquest long-lived asset group were less than the long-lived asset group carrying amount. The Company calculated the fair value of the long-lived asset group and recorded a $23.0 million impairment to advertiser and other customer relationships intangible assets during the second quarter of 2020. The discount rate and long-term growth rate assumptions were consistent with the Goodwill assumptions discussed above. Refer Note 7 — Integration and reorganization costs and impairments of property, plant and equipment, for further details on the impairment of property, plant and equipment.

For goodwill, the Company primarily utilized a discounted cash flow method to calculate the fair value of each reporting unit. Market-based metrics were reviewed to evaluate the reasonableness of the Company’s calculation. The Company compared the fair value of each reporting unit to its carrying amount, which resulted in the carrying value of all the reporting groups being in excess of the fair value. As a result, during the second quarter of 2020, we recorded goodwill impairment charges of $256.5 million, $65.4 million and $40.5 million in our Domestic Publishing, Newsquest and Marketing Solutions reporting units, respectively.

The severity and length of the COVID-19 pandemic, the duration and extent of the mitigation measures and governmental actions designed to combat the pandemic, as well as the changes in customer behavior as a result of the pandemic, all of which are highly uncertain and difficult to predict at the current time, could negatively impact the Company’s future assessment of its results of operations and the underlying assumptions utilized in the determination of the estimated fair values of the reporting units and related mastheads.

The newspaper industry and the Company have experienced declining same-store revenue and profitability over the past several years. Should general economic, market or business conditions continue to decline and have a negative impact on estimates of future cash flow and market transaction multiples, the Company may be required to record additionalregularly assess whether a triggering event has occurred which would require interim impairment charges in the future.testing.

As of September 30, 2020,March 31, 2021, the Company performed a review of potential impairment indicators noting that its financial results andoutperformed the forecast have not changed materially sinceused for the annual impairment assessment in 2020, and it was determined that no indicators of impairment were present.

NOTE 76 — Integration and reorganization costs and asset impairments of property, plant and equipment

Over the past several years, the Company has engaged in a series of individual restructuring programs, designed primarily to right-size the Company’s employee base, consolidate facilities and improve operations, including those of recently acquired entities. These initiatives impact all the Company’s operations and can be influenced by the terms of union contracts. Costs related to these programs, which primarily include severance expense, are accrued when probable and reasonably estimable or at the time of program announcement.



Severance-related expenses
Severance-related expenses:
We recorded severance-related expenses by segment as follows:
Three months ended March 31,
In thousands20212020
Publishing$6,779 $11,917 
Digital Marketing Solutions(57)1,384 
Corporate and other375 7,873 
Total$7,097 $21,174 



10
 Three months ended Nine months ended
In thousandsSeptember 30, 2020 September 29, 2019 September 30, 2020 September 29, 2019
Publishing$3,983
 $1,489
 $35,401
 $6,145
Marketing Solutions1,196
 431
 5,333
 1,167
Corporate and Other2,103
 8
 14,069
 909
Total$7,282
 $1,928
 $54,803
 $8,221
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A rollforward of the accrued severance and related costs included in Accounts payable and accrued expenses on the Condensedcondensed consolidated balance sheets for the ninethree months ended September 30, 2020 areMarch 31, 2021 is as follows:
In thousandsSeverance and
Related Costs
Beginning balance$30,943 
Restructuring provision included in integration and reorganization costs7,097 
Cash payments(15,702)
Ending balance$22,338 
In thousands 
Beginning balance$30,785
Restructuring provision included in integration and reorganization costs54,803
Cash payments(71,962)
Ending balance$13,626


The restructuring reserve balance is expected to be paid out over the next twelve months.

Facility consolidation and other restructuring-related expenses: expenses

We recorded facility consolidation charges and other restructuring-related costs by segment as follows:
Three months ended March 31,
In thousands20212020
Publishing$547 $839 
Digital Marketing Solutions223 4 
Corporate and other5,537 247 
Total$6,307 $1,090 
 Three months ended Nine months ended
In thousandsSeptember 30, 2020 September 29, 2019 September 30, 2020 September 29, 2019
Publishing$1,137
 $1,119
 $3,648
 $2,922
Marketing Solutions41
 70
 254
 70
Corporate and Other4,957
 19
 15,273
 2,000
Total$6,135
 $1,208
 $19,175
 $4,992


Asset impairments
Asset impairments and accelerated depreciation:
As part of ongoing cost efficiency programs, during the three months ended March 31, 2021, the Company has ceased a numberrecorded Asset impairment charges of print operations.$0.8 million related to various real estate sales. There were $1.6 million of asset0 Asset impairment charges recorded for the three months ended September 30, 2020 by the Publishing and Marketing Solutions segments as a result of these programs compared to 0 asset impairment charges recorded for the three months ended September 29, 2019. For the nine months ended September 30, 2020, there were $8.4 million asset impairment charges recorded by the Publishing and Marketing Solutions segments. There were $2.5 million asset impairment charges recorded for the nine months ended September 29, 2019 by the Publishing segment.March 31, 2020.

Accelerated depreciation

The Company incurred accelerated depreciation of $9.3$9.2 million and $2.2$24.7 million for the three months ended September 30,March 31, 2021 and 2020, and September 29, 2019, respectively. For the nine months ended September 30, 2020 and September 29, 2019, the Company incurred accelerated depreciation of $45.0 million and $4.8 million, respectively. For the three and nine months ended September 30, 2020 and the three and nine months ended September 29, 2019, accelerated depreciation expenses wererespectively, related to the shortened useful life of assets due to the sale of property at the Publishing segment and are included within Depreciation and amortization expense on the Condensedcondensed consolidated statements of operations and comprehensive income (loss).



NOTE 87 — Debt

ApolloSenior Secured 5-Year Term Loan

In November 2019, pursuant to the acquisition of Legacy Gannett,On February 9, 2021, the Company entered into a five-year, senior-secured term loan facility with Apollo Capital Management, L.P. ("Apollo")the lenders from time to time party thereto and Citibank, N.A., as collateral agent and administrative agent for the lenders, in an aggregate principal amount of approximately $1.8$1.045 billion (the "Apollo"5-Year Term Loan"). The Apollo5-Year Term Loan which matures on November 19, 2024, generallyFebruary 9, 2026 and, at the Company's option, bears interest at the rate of 11.5%the London Interbank Offered Rate plus a margin equal to 7.00% per annum or an alternate base rate plus a margin equal to 6.00% per annum. OriginationAccordingly, we are required to dedicate a substantial portion of cash flow from operations to fund interest payments.

The proceeds from the 5-Year Term Loan were used to repay the remaining principal balance and accrued interest of $1.043 billion and $13.3 million, respectively, (the "Payoff") on the Company's five-year, senior-secured 11.5% term loan facility with Apollo Capital Management, L.P. (the "Acquisition Term Loan") and to pay fees totaled 6.5%and expenses incurred to obtain the 5-Year Term Loan.

There were certain lenders that participated in both the Acquisition Term Loan and the new 5-Year Term Loan and their balances in the Acquisition Term Loan were deemed to be modified. The Company will continue to defer, over the new term, the deferred financing fees and original issue discount from the Acquisition Term Loan of $1.5 million and $34.7 million, respectively, related to those lenders. Further, certain lenders in the Acquisition Term Loan did not participate in the new 5-Year Term Loan and their balances in the Acquisition Term Loan were deemed to be extinguished. As a result, the Company


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recognized a Loss on early extinguishment of debt of $17.2 million as a result of the total principal amountwrite-off of the remaining original issue discount and deferred financing at closing. Pursuantfees related to those lenders. Third party fees of approximately $13.0 million were allocated to the agreement, Apollo hasnew lenders in the right5-Year Term Loan on a pro-rata basis, and $20.9 million of original issue discount were capitalized and will be amortized over the term of the 5-Year Term Loan using the effective interest method. Third party fees of $10.2 million, that were allocated to designate 2 individualsthe lenders whose balances were deemed to attend Boardbe modified, were expensed and recorded in Other operating expenses in the condensed consolidated statements of Directors meetings as non-fiduciaryoperations and non-voting observers and participants. In addition,comprehensive income (loss) for the three months ended March 31, 2021.

The 5-Year Term Loan will amortize in equal quarterly installments at a rate of 10% per annum (or, if the total gross leverage ratio exceeds certain thresholds, Apollo hasof Total Indebtedness secured on an equal priority basis with the right5-Year Term Loan (net of Unrestricted Cash) to appoint up to 2 voting directors. As of September 30, 2020, the total gross leverage ratio exceeded certain thresholds, whereby Apollo has the right to appoint 1 voting director. Upon the occurrence and during the continuance of an Event of DefaultConsolidated EBITDA (as such terms are defined in the Apollo5-Year Term Loan) is equal to or less than a specified ratio, 5% per annum) (the "Quarterly Amortization Installment"), beginning September 30, 2021. In addition, we will be required to repay the interest rate increases by 2.0%.

The Apollo5-Year Term Loan contains customary covenantsfrom time to time with (i) the proceeds of non-ordinary course asset sales and casualty and condemnation events, (ii) the proceeds of default, includingindebtedness that is not otherwise permitted under the 5-Year Term Loan and (iii) the aggregate amount of cash and cash equivalents on hand in excess of $100 million at the end of each fiscal year. The 5-Year Term Loan is subject to a covenant that the Companyrequirement to have at least $20 million ofminimum unrestricted cash onof $30 million as of the last day of each fiscal quarter. The ApolloAs of March 31, 2021, the Company is in compliance with all of the covenants and obligations under the 5-Year Term Loan.

As of March 31, 2021, the Company had $1,036.4 million in aggregate principal outstanding under the 5-Year Term Loan, $14.0 million of unamortized deferred financing costs, and $53.3 million of unamortized original issue discount and an effective interest rate of 9.4%. During the three months ended March 31, 2021, the Company recorded $11.2 million and $13.4 million of interest expense and paid 0 interest and $13.4 million of interest for the 5-Year Term Loan and Acquisition Term Loan, respectively. Additionally, during the three months ended March 31, 2021, the Company had $19.4 million related to Loss on early extinguishment of debt, of which $17.2 million related to the write-off of the remaining original issue discount and deferred financing fees from the Acquisition Term Loan and approximately $2.2 million of the Loss on early extinguishment of debt related to the write-off of original issue discount and deferred financing fees as a result of early prepayments on the Acquisition Term Loan prior to the Payoff. For the three months ended March 31, 2021, the Company recorded $0.5 million and an immaterial amount of amortization of deferred financing costs and $1.9 million and $1.2 million in amortization of original issue discount for the 5-Year Term Loan and Acquisition Term Loan, respectively.

Senior Secured Convertible Notes due 2027

On November 17, 2020, the Company entered into an Exchange Agreement with certain of the lenders (the "Exchanging Lenders") under the Acquisition Term Loan pursuant to which the Company and the Exchanging Lenders agreed to exchange $497.1 million in aggregate principal amount of the Company’s newly issued 2027 Notes for the retirement of an equal amount of term loans under the Acquisition Term Loan (the "Exchange"). The 2027 Notes were issued pursuant to an Indenture (the "Indenture") dated as of November 17, 2020, between the Company and U.S. Bank National Association, as trustee. The Indenture, as supplemented by the Second Supplemental Indenture, includes affirmative and negative covenants that are substantially consistent with the 5-Year Term Loan, as well as customary events of default.

In connection with the Exchange, the Company entered into an Investor Agreement with the holders of the 2027 Notes (the "Holders") establishing certain terms and conditions concerning the rights and restrictions on the Holders with respect to the Holders' ownership of the 2027 Notes.

Interest on the 2027 Notes is required topayable semi-annually in arrears. The 2027 Notes mature on December 1, 2027, unless earlier repurchased or converted. The 2027 Notes may be prepaid with (i)converted at any unrestrictedtime by the holders into cash, in excessshares of $40 millionthe Company’s Common Stock or any combination of cash and Common Stock, at the endCompany's election. The initial conversion rate is 200 shares of fiscal year 2020 and fiscal year 2021, (ii) 50%Common Stock per $1,000 principal amount of excess cash flowthe 2027 Notes, which is equal to a conversion price of $5.00 per share of Common Stock (the "Conversion Price").

The conversion rate is subject to customary adjustment provisions as provided in the Indenture. In addition, the conversion rate will be subject to adjustment in the event of any issuance or sale of Common Stock (or securities convertible into Common Stock) at a price equal to or less than the Conversion Price in order to ensure that following such issuance or sale, the 2027 Notes would be convertible into approximately 42% of the Common Stock after giving effect to such issuance or sale assuming the initial principal amount of the 2027 Notes remains outstanding.

Upon the occurrence of a "Make-Whole Fundamental Change" (as such term is defined in the ApolloIndenture), the Company will in certain circumstances increase the conversion rate for a specified period of time. If a "Fundamental Change" (as defined in the


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Indenture) occurs, the Company will be required to offer to repurchase the 2027 Notes at a repurchase price of 110% of the principal amount thereof.

Holders of the 2027 Notes will have the right to put up to approximately $100 million of the 2027 Notes at par on or after the date that is 91 days after the maturity date of the 5-Year Term Loan) measured atLoan.

Under the end of each fiscal quarter (beginning withIndenture, the third quarter of 2020), subjectCompany can only pay cash dividends up to a step-up to 90% of excess cash flow for each period in fiscal year 2021 or later ifan agreed-upon amount, provided the ratio of consolidated debt to EBITDA (as such terms are defined in the Apollo Term Loan) is greater than or equal to 1.00 to 1.00, and (iii) 100% of the net proceeds of any non-ordinary course asset sales. The Apollo Term Loan prohibits the payment of cash dividends prior to the thirtieth day of the second quarter of 2020, and thereafter permits payment of cash dividends up to an agreed-upon amount, provided that the ratio of consolidated debt to EBITDA (as such terms are defined therein)Indenture) does not exceed a specified threshold. As of September 30, 2020,ratio. In addition, the Indenture provides that, at any time that the Company’s Total Gross Leverage Ratio (as defined in the Indenture) exceeds 1.5 and the Company is in compliance with allapproves the declaration of a dividend, the Company must offer to purchase a principal amount of 2027 Notes equal to the proposed amount of the covenantsdividend.

Until the four-year anniversary of the issuance date, the Company will have the right to redeem for cash up to approximately $99.4 million of the 2027 Notes at a redemption price of 130% of the principal amount thereof, with such amount reduced ratably by any principal amount of 2027 Notes that has been converted by the holders or redeemed or purchased by the Company.

The 2027 Notes are guaranteed by Gannett Holdings LLC and obligations underany subsidiaries of the ApolloCompany (collectively, the "Guarantors") that guarantee the 5-Year Term Loan.

In The Notes are secured by the same collateral securing the 5-Year Term Loan. The 2027 Notes rank as senior secured debt of the Company and are secured by a second priority lien on the same collateral package securing the indebtedness incurred in connection with the Apollo5-Year Term Loan,Loan.

Upon issuance, the $497.1 million principal value of the 2027 Notes was separated into two components: (i) a debt component and (ii) a derivative component. At that time, we determined that the conversion option was not clearly and closely related to the economic characteristics of the 2027 Notes, nor did the conversion option meet the scope exception related to contracts in an entity’s own equity as we did not have the ability to control whether the settlement of the conversion feature, if settled in full, would be in cash or shares due to the approval requirement to issue those shares. As a result, we concluded that the embedded conversion option must be separated from the debt liability, separately valued, and accounted for as a derivative liability. The initial value allocated to the derivative liability was $115.3 million, with a corresponding reduction in the carrying value of the 2027 Notes. The derivative liability was reported within Convertible debt in the condensed consolidated balance sheets at December 31, 2020 and was marked to fair value through earnings.

The $389.1 million debt liability component of the 2027 Notes was initially measured at fair value using the present value of its cash flows at a discount rate of 10.7% and is reported as Convertible debt in the condensed consolidated balance sheets. The debt liability component of the 2027 Notes is classified as Level 2 because it is measured at fair value using commonly accepted valuation methodologies and indirectly observable, market-based risk measurements and historical data, and a review of prices and terms available for similar debt instruments that do not contain a conversion feature.

At the Special Meeting of stockholders of the Company, incurred approximately $4.9held on February 26, 2021 (the "Special Meeting"), our stockholders approved the issuance of the maximum number of shares of Common Stock issuable upon conversion of the 2027 Notes. As a result, the conversion option can be share-settled in full. The Company concluded that as of February 26, 2021, the conversion option qualified for equity classification and the bifurcated derivative liability no longer needed to be accounted for as a separate derivative on a prospective basis from the date of reassessment. As of February 26, 2021, the fair value of the conversion option of $316.2 million was reclassified to Equity as Additional paid-in capital. Any remaining debt discount that arose at the date of feesdebt issuance from the original bifurcation will continue to be amortized through interest expense.

As of February 26, 2021, the date of reassessment, and expensesDecember 31, 2020, the estimated fair value of the derivative liability for the embedded conversion feature was $316.2 million and $116.6$189.6 million, respectively. At December 31, 2020, the derivative liability was reported within Convertible debt in the condensed consolidated balance sheets. The derivative liability was classified as Level 3 because it is measured at fair value on a recurring basis using a binomial lattice model using assumptions based on market information and historical data, and significant unobservable inputs. The increase in the fair value of lender fees which were capitalizedthe derivative liability of $126.6 million at the date of reassessment and reclassification to Equity was due to the increase in our stock price, partially offset by the increase in the discount rate, and was recorded in Non-Operating Other (income) expense, net in the condensed consolidated statements of operations and comprehensive income (loss) for the three months ended March 31, 2021. The loss due to the revaluation of the derivative is not deductible for tax purposes. The assumptions used to determine the fair value as of February 26, 2021 and December 31, 2020 were:



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February 26, 2021December 31, 2020
Annual volatility70.0 %70.0 %
Discount rate12.2 %9.3 %
Stock price$4.95 $3.36 

Increases or decreases in the discount rate would have inverse impacts on the fair value of the derivative liability, while changes in the volatility would have corresponding increases or decreases in the fair value of the derivative liability. Increases or decreases in the Company’s stock price would have corresponding increases or decreases in the fair value of the derivative liability. Total debt issuance costs of $2.3 million will be amortized over the term7-year contractual life of the Apollo Term Loan using2027 Notes. The total unamortized discount of $106.3 million as of March 31, 2021 will be amortized over the effective interest method. 

The Company used the proceedsremaining contractual life of the Apollo Term Loan to (i) partially fund2027 Notes. For the acquisition of Legacy Gannett, (ii) repay, prepay, repurchase, redeem, or otherwise discharge in full eachthree months ended March 31, 2021, interest expense on the 2027 Notes totaled $7.5 million. Amortization of the existing financing facilities (as defined in the agreement and discussed in part below), and (iii) pay fees and expenses incurred to obtain the Apollo Term Loan. The Company is permitted to prepay the principal of the Apollo Term Loan, in whole or in part, at par plus accrued and unpaid interest, without any prepayment premium or penalty. The Apollo Term Loan is guaranteed by the material wholly-owned subsidiaries of the Company, and all obligations of the Company and its subsidiary guarantors are or will be secured by first priority liens on certain material real property, equity interests, land, buildings, and fixtures. The Apollo Term Loan contains customary representations and warranties, affirmative covenants, and negative covenants applicable to the Company and its subsidiaries, including, among other things, restrictions on indebtedness, liens, investments, fundamental changes, dispositions, dividends and other distributions, capital expenditures, and events of default.

As of September 30, 2020, the Company had $1.729 billion in aggregate principal outstanding under the Apollo Term Loan, $4.1discount was $2.3 million of deferred financing costs, and $93.3 million of capitalized lender fees. Duringfor the three and nine months ended September 30, 2020, the Company recorded $51.0 million and $152.4 million in interest expense, respectively, $5.9 million and $17.7 million in amortization of deferred financing costs, respectively, and $0.5 million and $1.7 million for loss on early extinguishmentMarch 31, 2021. Amortization of debt respectively. Duringissuance costs were immaterial for the three and nine months ended September 30, 2020, the Company paid interest of $51.0 million and $176.0 million, respectively.March 31, 2021. The effective interest rate is 12.9%. As of September 30, 2020,on the Company reclassified $15.2 millionliability component of the Apollo Term Loan2027 Notes was 10.5% as of March 31, 2021.

For the three months ended March 31, 2021, no shares were issued upon conversion, exercise, or satisfaction of the required conditions. Refer to the Current portion of long-term debtNote 10 — Supplemental equity information for details on the Condensed consolidated balance sheets, which represents 50% ofconvertible debt's impact to diluted earnings per share under the Company's excess cash flow (as such termif-converted method.

Senior Convertible Notes due 2024

On November 19, 2019, we acquired Gannett Co., Inc. (which was renamed Gannett Media Corp. and is defined in the Apollo Term Loan) measured at the end of the third quarter of 2020.

Convertible debt

referred to as “Legacy Gannett”) and we changed our name to Gannett Co., Inc. On April 9, 2018, Legacy Gannett completed an offering of 4.75% convertible senior notes (the "2024 Notes"), resulting in total aggregate principal of $201.3 million and net proceeds of approximately $195.3 million. Interest on the notes is payable semi-annually in arrears. The notes mature on April 15, 2024 with our earliest redemption date being April 15, 2022. The stated conversion rate of the notes is 82.4572 shares per $1,000 in principal or approximately $12.13 per share.



The Company's acquisition of Legacy Gannett constituted a Fundamental Change and Make-Whole Fundamental Change under the terms of the indenture governing the notes. At the acquisition date, the Company delivered to noteholders a notice offering the right to surrender all or a portion of their notes for cash on December 31, 2019. On December 31, 2019, we completed the redemption of $198.0 million in aggregate principal in exchange for cash.

The $3.3 million principal value of the remaining notes2024 Notes outstanding is reported as convertible debt in the Condensedcondensed consolidated balance sheets. The effective interest rate on the notes was 6.05% as of September 30, 2020.March 31, 2021.

NOTE 98 — Pensions and other postretirement benefit plans

We, along with our subsidiaries, havesponsor various defined benefit retirement plans, including plans established under collective bargaining agreements. Our retirement plans include the Gannett Retirement Plan ("GRP"(the "GR Plan"), the Newsquest and Romanes Pension Schemes in the U.K. ("U.K.(the "U.K. Pension Plans"), and other defined benefit and defined contribution plans. We also provide health care and life insurance benefits to certain retired employees who meet age and service requirements.



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Retirement plan costs include the following components:

Pension BenefitsPostretirement Benefits
Three months ended March 31,Three months ended March 31,
In thousands2021202020212020
Operating expenses:
Service cost - benefits earned during the period$511 $681 $31 $33 
Non-operating expenses (Other income):
Interest cost on benefit obligation17,031 20,717 501 567 
Expected return on plan assets(41,430)(39,759)0 0 
Amortization of actuarial loss (gain)35 (27)(15)13 
Total non-operating (benefit) expenses$(24,364)$(19,069)$486 $580 
Total expense (benefit) for retirement plans$(23,853)$(18,388)$517 $613 
 Three months ended
 September 30, 2020 September 29, 2019
In thousandsPension OPEB Pension OPEB
Operating expenses:       
Service cost - Benefits earned during the period$693
 $27
 $159
 $0
Non-operating expenses (Other income):       
Interest cost on benefit obligation20,670
 580
 737
 22
Expected return on plan assets(39,573) 0
 (937) 0
Amortization of actuarial loss (gain)(26) 15
 (39) 9
Total non-operating expenses (benefit)$(18,929) $595
 $(239) $31
Total expense (benefit) for retirement plans$(18,236) $622
 $(80) $31


 Nine months ended
 September 30, 2020 September 29, 2019
In thousandsPension OPEB Pension OPEB
Operating expenses:       
Service cost - Benefits earned during the period$2,078
 $79
 $476
 $0
Non-operating expenses (Other income):       
Interest cost on benefit obligation61,803
 1,740
 2,210
 67
Expected return on plan assets(117,940) 0
 (2,812) 0
Amortization of actuarial loss (gain)(80) 44
 (117) 27
Total non-operating expenses (benefit)$(56,217) $1,784
 $(719) $94
Total expense (benefit) for retirement plans$(54,139) $1,863
 $(243) $94

During the ninethree months ended September 30, 2020,March 31, 2021, we contributed $19.6$22.7 million and $5.7$2.5 million to our pension and other postretirement plans, respectively. In response to the COVID-19 pandemic our GRP in the U.S. has deferred certain contractual contributions and negotiated a contribution payment plan of $5 million per quarter starting December 31, 2020 through the end of the September 30, 2022. Additionally,respectively, including $11 million in minimum required contributions for the GR Plan attributable to the 2019 plan year, as required by the Employee Retirement Income Security Act of 1974 ("ERISA"), have beenwhich were deferred until January 1,4, 2021. Additionally, in response to the COVID-19 pandemic our GR Plan in the U.S. has deferred certain contractual contributions and negotiated a contribution payment plan of $5.0 million per quarter starting December 31, 2020 through the end of September 30, 2022.

NOTE 109 — Income taxes

The following table outlines our pre-tax net income (loss) and income tax amounts:



Three months ended Nine months ended
In thousandsSeptember 30, 2020 September 29, 2019 September 30, 2020 September 29, 2019
Pre-tax net income (loss)$(28,350) $(11,742) $(572,085) $(20,779)
Income tax expense (benefit)3,098
 7,226
 (22,200) 4,929
Effective tax rate***
 ***
 3.9% ***

Three months ended March 31,
In thousands20212020
Loss before income taxes$(151,810)$(71,627)
(Benefit) provision for income taxes(9,109)8,979 
Effective tax rate6.0 %***
*** Indicates a percentage that isOur effective tax rate for the period was not meaningful.

For the three months ended September 30, 2020 and September 29, 2019March 31, 2021, our effective income tax rate on Pre-taxpre-tax net loss was not meaningful.6.0%. For the ninethree months ended September 30,March 31, 2020 our effective income tax rate on Pre-taxpre-tax net loss was 3.9% and was not meaningful for the nine months ended September 29, 2019.meaningful.

The provisionbenefit for income taxes for the three months ended September 30, 2020March 31, 2021 was mainly impacteddriven by a reduction in the year to date tax benefit as a result of a lower projected annualized effective tax rate. The provision for income taxes forpre-tax net loss generated during the three months ended September 30, 2020quarter and was calculated using the estimated annual effective tax rate of 6.2%43.4%. The estimated annual effective tax rate is based on a projected tax benefitexpense for the full year. The tax benefit for the ninethree months ended September 30, 2020March 31, 2021 is lower than the 21% statutory Federalfederal rate due to the impact of non-deductible asset impairments, non-deductible officers’ compensation andthe derivative revaluation, which is nondeductible for tax purposes, partially offset by the creation of valuation allowances on non-deductible interest expense carryforwards as well as state income tax and capital losses.foreign tax expense.

The CARESCoronavirus Aid, Relief, and Economic Securities ("CARES") Act was enacted on March 27, 2020. The Company will realize a tax benefit attributable to the legislation which permits a refund of tax benefits from earlier years. The legislation also allowsallowed the Company to defer certain employer payroll tax payments in 2020 to the end of 2021 and 2022. In addition, the Company is pursuing Employee Retention Tax Credits as provided under the CARES Act. The Company continually monitors guidance from the U.S. Department of the Treasury (the "Treasury") and the Internal Revenue Service to determine whether additional tax benefits are available from this legislation and similar stimulus efforts.

The Tax Cuts and Jobs Act of 2017 (“TCJA”) revised business interest expense limitations under I.R.C. Section 163(j) such that business interest deductions are not allowed in amounts exceeding prescribed percentages of EBITDA for tax years beginning before January 1, 2022. For tax years beginning after January 1, 2022, deductible interest cannot exceed prescribed percentages of EBIT. Unused business interest deductions are carried forward and recorded as deferred tax assets. The Company has evaluated the potential utilization of such carryforward deferred tax assets and determined full valuation allowances are appropriate as future utilization is uncertain.

The total amount of unrecognized tax benefits that, if recognized, may impact the effective tax rate was approximately $32.9$39.7 million as of September 30, 2020March 31, 2021 and $32.4$39.5 million as of December 31, 2019.2020. The amount of accrued interest and penalties payable related to unrecognized tax benefits was $2.5$2.8 million as of September 30, 2020March 31, 2021 and $1.9$2.6 million as of December 31, 2019.2020.

It is reasonably possible that further adjustments to our unrecognized tax benefits may be made within the next twelve months due to audit settlements and regulatory interpretations of existing tax laws. At this time, an estimate of potential change to the amount of unrecognized tax benefits cannot be made.


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NOTE 1110 — Supplemental equity information

Loss per share

The following table sets forth the computation ofinformation used to compute basic and diluted loss per share:
Three months ended March 31,
In thousands20212020
Net loss attributable to Gannett$(142,316)$(80,152)
Basic weighted average shares outstanding134,075 130,568 
Diluted weighted average shares outstanding134,075 130,568 
 Three months ended Nine months ended
In thousandsSeptember 30, 2020 September 29, 2019 September 30, 2020 September 29, 2019
Net loss attributable to Gannett$(31,260) $(18,463) $(548,305) $(24,754)
        
Basic weighted average shares outstanding132,223
 60,034
 131,425
 60,010
Diluted weighted average shares outstanding132,223
 60,034
 131,425
 60,010




The Company excluded the following securities from the computation of diluted income per share because their effect would have been antidilutive:
Three months ended March 31,
In thousands20212020
Warrants845 1,362 
Stock options6,068 6,068 
Restricted stock grants (a)
10,811 9,494 
2027 Notes (b)
99,419 0 
 Three months ended Nine months ended
In thousandsSeptember 30, 2020 September 29, 2019 September 30, 2020 September 29, 2019
Stock warrants1,362
 1,362
 1,362
 1,362
Stock options6,068
 2,905
 6,068
 2,905
Restricted stock awards7,130
 446
 7,130
 446
(a)Includes Restricted stock awards ("RSA"), Restricted stock units ("RSU") and Performance stock units ("PSU").
(b)Represents the total number of shares that would be convertible at March 31, 2021 as stipulated in the Indenture.


Share repurchase program

On May 17, 2017,The 2027 Notes may be converted at any time by the Board of Directors authorized the repurchase of up to $100.0 millionholders into cash, shares of the Company's common stock, par value $0.01 per share ("Company’s Common Stock") overStock or any combination of cash and Common Stock, at the next twelve months ("Share Repurchase Program"). The BoardCompany’s election. Conversion of Directors had authorized extensionsall of the Share Repurchase Program through May 19, 2020. The plan expired on May 19, 2020 with no extension or replacement plan2027 Notes into Common Stock (assuming the maximum increase in place. NaN shares were repurchased under the program during 2020.

Manager stock options

Pursuant to the anti-dilution provisions of the Incentive Plan, the exercise price on the 652,311 remaining options granted to the Company's manager, FIG LLC (the "Manager") in 2014 were equitably adjusted during the nine months ended September 29, 2019 from $12.95 to $11.46Conversion Rate as a result of return of capital distributions. Also, these options were equitably adjusted during the nine months ended September 30, 2020 from $11.46 to $9.94 as a result of return of capital distributions.

PursuantMake-Whole Fundamental Change but no other adjustments to the anti-dilution provisionsConversion Rate), would result in the issuance of an aggregate of 294.2 million shares of Common Stock. The Company has excluded approximately 194.7 million shares from the Incentive Plan,loss per share calculation, representing the exercise price ondifference between the 700,000 options granted tototal number of shares that would be convertible at March 31, 2021 and the Managertotal number of shares issuable assuming the maximum increase in 2015 were equitably adjusted during the nine months ended September 29, 2019 from $18.94 to $17.45 as a result of return of capital distributions.  Also, these options were equitably adjusted during the nine months ended September 30, 2020 from $17.45 to $15.93 as a result of return of capital distributions.Conversion Rate.

Pursuant to the anti-dilution provisions of the Incentive Plan, the exercise price on the 862,500 options granted to the Manager in 2016 were equitably adjusted during the nine months ended September 29, 2019 from $13.24 to $11.75 as a result of return of capital distributions.  Also, these options were equitably adjusted during the nine months ended September 30, 2020 from $11.75 to $10.23 as a result of return of capital distributions.

Pursuant to the anti-dilution provisions of the Incentive Plan, the exercise price on the 690,000 options granted to the Manager in 2018 were equitably adjusted during the nine months ended September 29, 2019 from $16.45 to $14.96 as a result of return of capital distributions. Also, these options were equitably adjusted during the nine months ended September 30, 2020 from $14.96 to $13.44 as a result of return of capital distributions.

The following table includes additional information regarding the Manager stock options:
 
Number of Options
(In thousands)
 Weighted-Average Grant Date Fair Value Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term (Years) Aggregate Intrinsic Value ($000)
Outstanding at December 31, 20196,068
 $1.78
 $14.70
 8.2 $0
Granted0
 $0
 $0
    
Outstanding at September 30, 20206,068
 $1.78
 $13.97
 7.4 $0
          
Exercisable at September 30, 20203,936
 $1.78
 $13.15
 6.5 $0


StockShare-based compensation

The Company recognized compensation cost for share-based payments of $3.8$3.4 million and $22.8$11.6 million for the three and nine months ended September 30,March 31, 2021 and 2020, respectively, and $0.7 million and $2.5 million for the three and nine months ended September 29, 2019, respectively.

The total compensation cost not yet recognized related to non-vested awards as of September 30, 2020March 31, 2021 was $20.7$39.8 million, which is expected to be recognized over a weighted-average period of 2.02.5 years through September 2022.2023.



Restricted stock awards

The following table outlines restricted stock unit ("RSU") and performance stock unit ("PSU") award activity specific to Legacy Gannett forDuring the ninethree months ended September 30, 2020:
 Nine months ended September 30, 2020
 
Number
of 
RSUs & PSUs
(In thousands)
 Weighted-
Average
Grant Date
Fair Value
Unvested at beginning of period7,368
 $6.28
Granted282
 0.90
Vested(4,100) 6.27
Forfeited(401) 2.61
Unvested at end of period3,149

$6.28

March 31, 2021, a total of 3.9 million shares of RSAs were granted. RSAs generally vest in equal annual installments over a three-year period subject to the participants' continued employment with the Company. The following table outlines restricted stockweighted average grant ("RSGs") activity fordate fair value of RSAs granted during the Company for the ninethree months ended September 30, 2020:March 31, 2021 was $5.29.
 Nine months ended
 September 30, 2020 September 29, 2019
 
Number
of RSGs
(In thousands)
 
Weighted-
Average
Grant Date
Fair Value
 
Number
of RSGs
(In thousands)
 Weighted-
Average
Grant Date
Fair Value
Unvested at beginning of period317
 $14.61
 384
 $16.11
Granted5,277
 3.89
 300
 13.64
Vested(1,157) 5.86
 (167) 15.95
Forfeited(456) 3.36
 (71) 15.26
Unvested at end of period3,981
 $4.24
 446
 $14.65


As of September 30, 2020, the consolidated aggregate intrinsic value of unvested RSGs was $9.3 million.

Rights Agreement

On April 6, 2020, the Company's Boardboard of Directorsdirectors (the "Board") adopted a stockholder rights plan in the form of a Section 382 Rights Agreement ("Rights Agreement") to preserve and protect the Company's income tax net operating loss carryforwards ("NOLs") and other tax assets. As of December 31, 2019, the Company had approximately $435 million of NOLs available which could be used in certain circumstancecircumstances to offset future federal taxable income.

Under the Rights Agreement, the Board declared a non-taxable dividend of 1 preferred share purchase right for each outstanding share of Common Stock. The rights will be exercisable only if a person or group acquires 4.99% or more of


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Gannett’s Common Stock. Gannett’s existing shareholdersstockholders that beneficially own in excess of 4.99% of the Common Stock are "grandfathered in" at their current ownership level and the rights then become exercisable if any of those shareholdersstockholders acquire an additional 0.5% or more of Common Stock of the Company. If the rights become exercisable, all holders of rights, other than the person or group triggering the rights, will be entitled to purchase Gannett Common Stock at a 50% discount or Gannett may exchange each right held by such holders for 1 share of Common Stock. Rights held by the person or group triggering the rights will become void and will not be exercisable. The Board of Directors has the discretion to exempt any person or group from the provisions of the Rights Agreement.

The rights issued under the Rights Agreement will expire on the day following the certification of the voting results for Gannett’s 2021 annual meeting of shareholders,stockholders, unless Gannett’s shareholdersstockholders ratify the Rights Agreement at or prior to such meeting, in which case the Rights Agreement will continue in effect until April 5, 2023. The Board of Directors also has the ability to terminate the plan if it determines that doing so would be in the best interest of Gannett’s stockholders. The rights may also expire at an earlier date if certain events occur, as described more fully in the Rights Agreement filed by the Company with the Securities and Exchange Commission.

Preferred stock

The Apollo Term Loan was amended on April 6, 2020, to allow forCompany has authorized 300,000 shares of preferred stock, par value $0.01 per share, issuable in one or more series designated by the Rights Agreement.



Board, of which 150,000 shares have been designated as Series A Junior Participating Preferred Stock, none of which are outstanding. There were no0 issuances of preferred stock during the ninethree months ended September 30, 2020.March 31, 2021.

Accumulated other comprehensive lossincome (loss)

The following tables summarize the components of, and the changes in, Accumulated other comprehensive loss (netincome (loss), net of tax)tax for the ninethree months ended September 30, 2020March 31, 2021 and the nine months ended September 29, 2019:2020:
Three months ended March 31, 2021Three months ended March 31, 2020
In thousandsPension and Postretirement PlansForeign Currency Translation



TotalPension and Postretirement PlansForeign Currency TranslationTotal
Beginning balance$40,441 $9,732 $50,173 $936 $7,266 $8,202 
Other comprehensive income (loss) before reclassifications371 3,037 3,408 966 (14,033)(13,067)
Amounts reclassified from accumulated other comprehensive income (loss)(a)(b)
15 0 15 (10)0 (10)
Net current period other comprehensive income (loss), net of taxes386 3,037 3,423 956 (14,033)(13,077)
Ending balance$40,827 $12,769 $53,596 $1,892 $(6,767)$(4,875)
 Nine months ended September 30, 2020
In thousandsRetirement Plans Foreign Currency Translation



Total
Beginning balance$936
 $7,266
 $8,202
Other comprehensive income (loss) before reclassifications(5,675) (8,908) (14,583)
Amounts reclassified from accumulated other comprehensive loss(a)
(30) 0
 (30)
Net current period other comprehensive income (loss), net of taxes(5,705) (8,908) (14,613)
Ending balance$(4,769) $(1,642) $(6,411)
(a)(a)
This accumulated other comprehensive income (loss) component is included in the computation of net periodic benefit cost. See Note 9 — Pensions and other postretirement benefit plans.
 Nine months ended September 29, 2019
In thousandsRetirement Plans Foreign Currency Translation Total
Beginning balance$(6,881) $0
 $(6,881)
Other comprehensive income (loss) before reclassifications0
 0
 0
Amounts reclassified from accumulated other comprehensive loss(a)
(90) 0
 (90)
Net current period other comprehensive income (loss), net of taxes(90) 0
 (90)
Ending balance$(6,971) $0
 $(6,971)

(a)
This accumulated other comprehensive income (loss) component is included in the computation of net periodic benefit cost. See Note 9 — Pensions and other postretirement benefit plans.

Accumulated other comprehensive loss components areincome (loss) component is included in computingthe computation of net periodic postretirement costs as outlined in NOTE 9benefit cost. See Note 8 — Pensions and other postretirement benefit plans. Reclassifications out of
(b)Amounts reclassified from accumulated other comprehensive loss related to these postretirement plans includeare recorded net of tax impacts of $5 thousand and $4 thousand for the following:three months ended March 31, 2021 and 2020, respectively.
 Three months ended Nine months ended
In thousandsSeptember 30, 2020 September 29, 2019 September 30, 2020 September 29, 2019
Amortization of prior service credit, net$0
 $0
 $0
 $0
Amortization of actuarial gain(11) (30) (36) (90)
Total reclassifications, before tax(11) (30) (36) (90)
Income tax expense (benefit)1
 0
 (6) 0
Total reclassifications, net of tax$(12) $(30) $(30) $(90)


Dividends

The Company did 0t pay dividends during the nine months ended September 30, 2020 and paid dividends of $68.9 million for the nine months ended September 29, 2019.

On April 1, 2020, the Company announced that in light of the unprecedented economic disruption and uncertainty caused by the COVID-19 pandemic, the Board of Directors had determined that it is in the best interests of shareholders for the Company to preserve liquidity by suspending the Company's quarterly dividend.



NOTE 1211 — Fair value measurement


We measure and record certain assets and liabilities at fair value. AIn accordance with ASC 820, "Fair Value Measurement," fair value measurement is determinedmeasurements are required to be disclosed using a three-tiered fair value hierarchy which distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions that a market participant would use in pricing an asset or liability. A three-tiered hierarchy draws distinctions between market participant assumptions(unobservable inputs). Level 1 refers to fair values determined based on (i) observable inputs such as quoted prices in active markets (Level 1), (ii)for identical assets or liabilities, Level 2 refers to fair values estimated using significant other observable inputs other than quoted active markets that are observable either directly or indirectly (Level 2), and (iii)Level 3 includes fair values estimated using significant unobservable inputs that require use of our own estimates and assumptions through present value and other valuation techniques in determination of fair value (Level 3).inputs.

As of September 30, 2020March 31, 2021 and December 31, 2019,2020, assets and liabilities recorded at fair value and measured on a recurring basis primarily consist of pension plan assets. As permitted by U.S. GAAP, we use net asset values ("NAV") as a practical expedient to determine the fair value of certain investments. These investments measured at net asset valueNAV have not been classified in the fair value hierarchy.



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The Apollo5-Year Term Loan is recorded at carrying value, which approximates fair value in the Condensedcondensed consolidated balance sheets and is classified as Level 3.

We also have certain assets requiring2. Refer to additional discussion regarding fair value measurementof the 2027 Notes in Note 7 — Debt.

Certain assets are measured at fair value on a non-recurring basis. Our assetsnonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances (for example, when there is evidence of impairment). Assets held for sale (Level 3) are measured on a non-recurringnonrecurring basis and are assets held for sale, which are classified as Level 3 assets and evaluated using executed purchase agreements, letters of intent or third-party valuation analyses when certain circumstances arise. Assets held for sale totaled $3.2$14.1 million as of September 30, 2020March 31, 2021 and $25.5$14.7 million as of December 31, 2019.

2020.

NOTE 1312 — Commitments, contingencies and other matters

Legal Proceedings

The Company is and may become involved from time to time in legal proceedings in the ordinary course of its business, including but not limited to with respect tomatters such matters as libel, invasion of privacy, intellectual property infringement, wrongful termination actions, complaints alleging employment discrimination, and regulatory investigations and inquiries. In addition, the Company is involved from time to time in governmental and administrative proceedings concerning employment, labor, environmental, and other claims. Insurance coverage mitigates potential loss for certain of these matters. Historically, such claims and proceedings have not had a material adverse effect on the Company’s consolidated results of operations or financial position.

Equity purchase arrangements that are exercisable by the counterparty to the agreement and that are outside the sole control of the Company are accounted for in accordance with ASC 480-10-S99-3A and are classified as Redeemable noncontrolling interests in the Condensed consolidated balance sheets.

Environmental contingency:contingency

We assumed responsibility for certain environmental contingencies in connection with our acquisition of Legacy Gannett. More specifically, in March 2011, the Advertiser Company ("Advertiser"), a subsidiary that publishes the Montgomery Advertiser, was notified by the U.S. Environmental Protection Agency ("EPA") that it had been identified as a potentially responsible party ("PRP") for the investigation and remediation of groundwater contamination in downtown Montgomery, Alabama. The Advertiser is a member of the Downtown Environmental Alliance, which has agreed to jointly fund and conduct all required investigation and remediation. In 2016, the Advertiser and other members of the Downtown Environmental Alliance reached a settlement with the EPA regarding the costs the EPA spent to investigate the site. The EPA has transferred responsibility for oversight of the site to the Alabama Department of Environmental Management, which has approved the work plan for the additional site investigation that is currently underway. The Advertiser's final costs cannot be determined until the investigation is complete, a determination is made on whether any remediation is necessary, and contributions from other PRPs are finalized. In addition, neither our potential loss nor a range of potential loss in connection with the Advertiser's final costs can be estimated until such time as we can reasonably make such estimate based on the foregoing factors.

Other litigation:litigation

We are defendants in judicial and administrative proceedings involving matters incidental to our business. Although the Company is unable to predict with certainty the eventual outcome of any litigation, regulatory investigation or inquiry, in the opinion of management, the Company does not expect its current and any threatened legal proceedings to have a material adverse effect on the Company’s business, financial position or consolidated results of operations. Given the inherent unpredictability of these types of proceedings, however, it is possible that future adverse outcomes could have a material effect on the Company’s financial results.


Other

Redeemable noncontrolling interests

Equity purchase arrangements that are exercisable by the counterparty to the agreement and that are outside the sole control of the Company are accounted for in accordance with ASC 480-10-S99-3A and are classified as Redeemable noncontrolling interests in the condensed consolidated balance sheets.



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NOTE 1413 — Segment reporting
We define our reportable segments based on the way the Chief Operating Decision Maker ("CODM"), which for the third quarter of 2020 is theour Chief Executive Officer, manages the operations for purposes of allocating resources and assessing performance. Our reportable segments include the following:

•Publishing is comprised of our portfolio of local, regional, national, and international newspaper publishers. The results of this segment include Advertising and marketing services revenues from local, classified, and national advertising across multiple platforms, including print, online, mobile, and tablet as well as niche publications, Circulation revenues from home delivery and single copy sales of our publications and distributing our publications on our digital platforms, and Other revenues, mainly from commercial printing, events, and distribution arrangements. The Publishing reportable segment is an aggregation of 2 operating segments: Domestic Publishing and the U.K. Publishing.
•Digital Marketing Solutions is comprised of our digital marketing solutions subsidiary, ReachLocal. The results of this segment include Advertising and marketing services revenues through multiple services, including search advertising, display advertising, search optimization, social media, website development, web presence products, customer relationship management, Google-suite offerings, and software-as-a-service solutions. Other revenues in our Digital Marketing Solutions segment are derived from system integration services, cloud offerings and software licensing.

In addition to the above operating segments, we have a Corporate and other category that includes activities not directly attributable to a specific segment. This category primarily consists of broad corporate functions, including legal, human resources, accounting, finance and marketing as well as other general business costs.

In the ordinary course of business, our reportable segments enter into transactions with one another. While intersegment transactions are treated like third-party transactions to determine segment performance, the revenues and expenses recognized by the segment that is the counterparty to the transaction are eliminated in consolidation and do not affect consolidated results.

The CODM uses adjustedAdjusted EBITDA and Adjusted EBITDA margin to evaluate the performance of the segments and allocate resources. Adjusted EBITDA is aand Adjusted EBITDA margin are non-GAAP financial performance measuremeasures we believe offersoffer a useful view of the overall operation of our businesses and may be different than similarly-titled measures used by other companies. We define Adjusted EBITDA as Net income (loss) attributable to Gannett before (1) Income tax expense (benefit), (2) Interest expense, (3) Gains or losses on the early extinguishment of debt, (4) Non-operating pension income (expense), (5) Loss on Convertible notes derivative, (6) Other non-operating items, primarily pension costs, (5)including equity income, (7) Depreciation and amortization, (6)(8) Integration and reorganization costs, (7)(9) Asset impairments, (8)(10) Goodwill and intangible impairments, (9)(11) Gains or losses on the sale or disposal of assets, (10) Equity-based(12) Share-based compensation, (11) Acquisition(13) Other operating expenses, including third-party debt expenses and acquisition costs, (12)(14) Gains or losses on the sale of investments and (13)(15) certain other non-recurring charges. We define Adjusted EBITDA margin as Adjusted EBITDA divided by total Operating revenues.

Management considers adjustedAdjusted EBITDA and Adjusted EBITDA margin to be the appropriate metricmetrics to evaluate and compare the ongoing operating performance of our segments on a consistent basis across reporting periods as it eliminates the effect of items which we do not believe are indicative of each segment's core operating performance.



The following tables present our segment information:
Three months ended March 31, 2021
In thousandsPublishingDigital Marketing SolutionsCorporate and otherIntersegment EliminationsConsolidated
Advertising and marketing services - external sales$286,454 $101,376 $527 $— $388,357 
Advertising and marketing services - intersegment sales27,856 — — (27,856)— 
Circulation325,436 0 1 — 325,437 
Other59,839 905 2,546 — 63,290 
Total operating revenues$699,585 $102,281 $3,074 $(27,856)$777,084 
Adjusted EBITDA (non-GAAP basis)$102,208 $9,172 $(10,915)$— $100,465 


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Three months ended September 30, 2020Three months ended March 31, 2020
In thousandsPublishing Marketing Solutions Corporate and other Intersegment Eliminations ConsolidatedIn thousandsPublishingDigital Marketing SolutionsCorporate and otherIntersegment EliminationsConsolidated
Advertising and marketing services - external sales$303,646
 $100,807
 $774
 $—
 $405,227
Advertising and marketing services - external sales$369,878 $116,283 $849 $— $487,010 
Advertising and marketing services - intersegment sales25,862
 0
 —
 (25,862) —
Advertising and marketing services - intersegment sales33,758 — — (33,758)— 
Circulation336,152
 0
 6
 —
 336,158
Circulation374,720 0 3 — 374,723 
Other66,566
 4,636
 1,952
 —
 73,154
Other79,794 4,998 2,157 — 86,949 
Total revenues$732,226
 $105,443
 $2,732
 $(25,862) $814,539
Total operating revenuesTotal operating revenues$858,150 $121,281 $3,009 $(33,758)$948,682 
         
Adjusted EBITDA (non-GAAP basis)$108,752
 $4,177
 $(24,949) $—
 $87,980
Adjusted EBITDA (non-GAAP basis)$110,928 $7,887 $(19,746)$— $99,069 

 Three months ended September 29, 2019
In thousandsPublishing Marketing Solutions Corporate and other Intersegment Eliminations Consolidated
Advertising and marketing services - external sales$161,237
 $22,110
 $731
 $—
 $184,078
Advertising and marketing services - intersegment sales17,254
 0
 —
 (17,254) —
Circulation146,254
 0
 0
 —
 146,254
Other41,514
 4,564
 239
 —
 46,317
Total revenues$366,259
 $26,674
 $970
 $(17,254) $376,649
          
Adjusted EBITDA (non-GAAP basis)$58,955
 $(1,697) $(12,352) $—
 $44,906

 Nine months ended September 30, 2020
In thousandsPublishing Marketing Solutions Corporate and other Intersegment Eliminations Consolidated
Advertising and marketing services - external sales$939,923
 $306,899
 $2,334
 $—
 $1,249,156
Advertising and marketing services - intersegment sales85,472
 0
 —
 (85,472) —
Circulation1,053,518
 0
 10
 —
 1,053,528
Other207,355
 14,388
 5,796
 —
 227,539
Total revenues$2,286,268
 $321,287
 $8,140
 $(85,472) $2,530,223
          
Adjusted EBITDA (non-GAAP basis)$311,767
 $14,847
 $(61,548) $—
 $265,066



 Nine months ended September 29, 2019
In thousandsPublishing Marketing Solutions Corporate and other Intersegment Eliminations Consolidated
Advertising and marketing services - external sales$513,944
 $66,658
 $1,718
 $—
 $582,320
Advertising and marketing services - intersegment sales52,582
 0
 —
 (52,582) —
Circulation449,246
 0
 23
 —
 449,269
Other123,003
 13,248
 796
 —
 137,047
Total revenues$1,138,775
 $79,906
 $2,537
 $(52,582) $1,168,636
          
Adjusted EBITDA (non-GAAP basis)$155,887
 $(7,393) $(23,441) $—
 $125,053

The table below shows the reconciliation of Net loss attributable to Gannett to Adjusted EBITDA for the periods presented:EBITDA:
Three months ended March 31,
In thousands20212020
Net loss attributable to Gannett$(142,316)$(80,152)
(Benefit) provision for income taxes(9,109)8,979 
Interest expense39,503 57,899 
Loss on early extinguishment of debt19,401 805 
Non-operating pension income(23,878)(18,489)
Loss on Convertible notes derivative126,600 0 
Other non-operating (income) expense, net(1,875)1,590 
Depreciation and amortization58,103 78,024 
Integration and reorganization costs13,404 28,254 
Other operating expenses10,576 5,969 
Asset impairments833 0 
Net loss on sale or disposal of assets4,745 657 
Share-based compensation expense3,423 11,577 
Other items1,055 3,956 
Adjusted EBITDA (non-GAAP basis)$100,465 $99,069 
Net loss attributable to Gannett margin(18.3)%(8.4)%
Adjusted EBITDA margin (non-GAAP basis)12.9 %10.4 %

Three months ended Nine months ended
In thousandsSeptember 30, 2020 September 29, 2019 September 30, 2020 September 29, 2019
Net loss attributable to Gannett$(31,260) $(18,463) $(548,305) $(24,754)
Income tax expense (benefit)3,098
 7,226
 (22,200) 4,929
Interest expense58,063
 10,030
 173,890
 30,376
Loss on early extinguishment of debt476
 0
 1,650
 0
Non-operating pension income(18,334) (208) (54,433) (625)
Gain on sale of investments(7,800) 0
 (7,995) 0
Other non-operating income, net(2,575) (22) (6,993) (176)
Depreciation and amortization61,355
 24,482
 205,706
 68,733
Integration and reorganization costs13,417
 3,136
 73,978
 13,213
Acquisition costs1,913
 12,181
 10,261
 15,318
Asset impairments1,585
 0
 8,444
 2,469
Goodwill and intangible impairments0
 0
 393,446
 0
Loss on sale or disposal of assets795
 602
 1,540
 3,339
Equity-based compensation expense3,844
 691
 22,812
 2,534
Other items3,403
 5,251
 13,265
 9,697
Adjusted EBITDA (non-GAAP basis)$87,980
 $44,906
 $265,066
 $125,053


Asset information by segment is not a key measure of performance used by the CODM function. Accordingly, we have not disclosed asset information by segment. Additionally, equity income in unconsolidated investees, net, interest expense, other non-operating items, net, and benefit for income taxes, as reported in the Condensedcondensed consolidated financial statements, are not part of operating income and are primarily recorded at the corporate level.

NOTE 14 — Other supplemental information
NOTE 15 — Related party transactions

Cash and cash equivalents, including restricted cash
As
Cash equivalents represent highly liquid certificates of September 30, 2020, the Manager,deposit which have original maturities of three months or less. Restricted cash is held as cash collateral for certain business operations. Restricted cash primarily consists of funding for letters of credit and cash held in an affiliate of Fortress Investment Group LLC ("Fortress"), and its affiliates owned approximately 3% of the Company’s outstanding stock and approximately 40% of the Company’s outstanding warrants. irrevocable grantor trust for our deferred compensation plans.The Manager or its affiliates held 6,068,075 stock options of the Company’s stock as of September 30, 2020. During the three and nine months ended September 30, 2020, 0 dividends wererestrictions will lapse when benefits are paid to Fortressplan participants and its affiliates. During the three and nine months ended September 29, 2019, Fortress and its affiliates were paid $0.2 million and $0.7 million in dividends, respectively.

The Company's Chief Executive Officer is an employee of Fortress (or one of its affiliates), and his salary is paid by Fortress (or one of its affiliates). The management fee paid is reduced by the compensation paid to the Chief Financial Officer.



Amended and Restated Management Agreement

On November 26, 2013, New Media entered into a management agreement (as amended and restated, "the Management Agreement") with the Manager, an affiliate of Fortress, pursuant to which the Manager managed the operations of New Media. New Media paid the Manager an annual management fee equal to 1.50% of the Company's Total Equity (as definedtheir beneficiaries as specified in the Management Agreement), and the Manager was eligible to receive incentive compensation.plans.

On August 5, 2019, in connection with the execution


20
Table of the Legacy Gannett acquisition agreement, the Company and the Manager entered into the Amended and Restated Management and Advisory Agreement (the “Amended Management Agreement”). Effective upon the consummation of the acquisition on November 19, 2019, the Amended Management Agreement replaced the Management Agreement. The Amended Management Agreement (i) establishes a termination date for the Manager’s services of December 31, 2021, in lieu of annual renewals of the term; (ii) reduces the “incentive fee” payable under the Amended Management Agreement from 25% to 17.5% for the remainder of the term; (iii) reduces by 50% the number of options that would otherwise be issuable in connection with the issuance of shares as consideration for the acquisition, and imposes a premium on the exercise price; (iv) eliminates the Manager’s right to receive options in connection with future equity raises by the Company; and (v) eliminates certain payments otherwise due at or after the end of the term of the prior management agreement.Contents

In connection with entering into the Amended Management Agreement and the occurrence of the consummation of the acquisition, the Company issued to the Manager 4,205,607 shares of Company Common Stock and granted to the Manager options to acquire 3,163,264 shares of Company Common Stock. The Manager is restricted from selling the issued shares until the expiration of the Amended Management Agreement, or otherwise upon a change in control and certain other extraordinary events. The options have an exercise price of $15.50 and become exercisable upon the first trading day immediately following the first 20 consecutive trading day period in which the closing price of the Company Common Stock (on its principal U.S. national securities exchange) is at or above $20 per share (subject to adjustment). The options also become exercisable upon a change in control and certain other extraordinary events.

Upon expiration of the term of the Amended Management Agreement, the Manager will cease providing external management services to the Company, and the Manager will no longer be the employer of the person serving in the role of Chief Executive Officer of the consolidated company.

The following table provides the managementpresents a reconciliation of cash, cash equivalents and incentive fees recognized and paid to the Manager:restricted cash:

 Three months ended Nine Months Ended
In thousandsSeptember 30, 2020
September 29, 2019 September 30, 2020 September 29, 2019
Management fee expense$4,269
 $2,456
 $12,702
 $7,368
Incentive fee expense0
 0
 0
 1,455
Management fees paid8,943
 2,456
 16,326
 8,623
Incentive fees paid0
 1,455
 2,602
 6,675
Reimbursement for expenses591
 774
 1,916
 2,000

Three months ended March 31,
In thousands20212020
Cash and cash equivalents$163,505 $199,651 
Restricted cash included in other current assets8,999 11,028 
Restricted cash included in investments and other assets23,669 21,930 
Total cash, cash equivalents and restricted cash$196,173 $232,609 

Supplemental cash flow information

The Company had 0 outstanding liability for all Management Agreement related fees at September 30, 2020following table presents supplemental cash flow information, including non-cash investing and a liabilityfinancing activities:

Three months ended March 31,
In thousands20212020
Net cash refund for taxes$(997)$(2,036)
Cash paid for interest13,528 551 
Non-cash investing and financing activities:
Accrued capital expenditures$627 $1,292 

Accounts payable and accrued liabilities

A breakout of $6.5 million at December 31, 2019, included inAccounts payable and accrued expenses.liabilities is presented below:

In thousandsMarch 31, 2021December 31, 2020
Accounts payable$137,571 $131,797 
Compensation109,173 115,061 
Taxes (primarily property and sales taxes)28,786 30,834 
Benefits22,120 22,821 
Interest22,327 3,676 
Other57,393 74,057 
Accounts payable and accrued liabilities$377,370 $378,246 

NOTE 1615 — Subsequent events

Subsequent Dispositions

SubsequentIn connection with the CARES Act, subsequent to March 31, 2021, the endCompany has received approval for approximately $16.2 million in PPP funding in support of certain of our locations that were meaningfully affected by the COVID-19 pandemic. Management intends to apply for forgiveness of the third quarter of 2020, the Company closed on the sale of various non-core and real estate assets, including BridgeTower Media LLC, the Nantucket Inquirer & Mirror, as well as a minority investment, for proceeds of approximately $100 million.PPP loans in accordance with applicable guidelines.

ItemITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsMANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations and quantitative and qualitative disclosures should be read in conjunction with our unaudited Condensedcondensed consolidated financial statements and related notes.


notesand with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the Securities and Exchange Commission. Management's Discussion and Analysis of Financial Condition and Results of Operations contains a number of forward-looking statementsthat reflect our plans, estimates, and beliefs, all of which are based on our current expectations and could be affected by thecertain uncertainties, risks, and other factors described under Cautionary Note Regarding Forward-Looking Statements and elsewhere throughout this Quarterly Report, as well as the factors described in our 2019 Annual Report on Form 10-K this report,for the year ended December 31, 2020, and subsequent periodic reports filed with the Securities and Exchange Commission, particularly under "Risk Factors."Our actual results could differ materially from those discussed in the forward-looking statements.

Overview

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Gannett Co., Inc. ("Gannett", "we", "us", "our", or "the Company") is an innovative,
OVERVIEW

We are a subscription-led and digitally focused media and marketing solutions company committed to fosteringempowering communities to thrive. We aim to be the communities inpremiere source for clarity, connections and solutions within our networkcommunities. Our strategy is focused on driving audience growth and helping them build relationships with their local businesses. Until November 19, 2019,engagement by delivering deeper content experiences to our corporate name was New Media Investment Group Inc. ("New Media")consumers, while offering the products and Gannett Co., Inc. wasmarketing expertise our advertisers desire. The execution of this strategy is expected to allow us to continue our evolution from a separate publicly traded company. On November 19, 2019, New Media completed its acquisition of Gannett Co., Inc. (which was renamed Gannett Media Corp. and is referredmore traditional print media business to herein as “Legacy Gannett”). In connection with the acquisition, New Media changed its name to Gannett Co., Inc. and assumed Legacy Gannett's ticker symbol "GCI" (having previously traded under "NEWM").a digitally focused content platform.

As a result of the acquisition, historical results for fiscal years 2019 and prior are those of legacy New Media up to and through the date of the acquisition.

Our current portfolio of media assets includes USA TODAY, local media organizations in 46 states in the U.S. and Guam,, and Newsquest, a wholly owned subsidiary operating in the United Kingdom ("U.K.") with more than 140120 local media brands. GannettWe also ownsown the digital marketing services companies ReachLocal, Inc. ("ReachLocal"), UpCurve, Inc. ("UpCurve"), and WordStream, Inc. ("WordStream") which are marketed under the LOCALiQ brand, and runsrun the largest media-owned events business in the U.S., GateHouse Live.USA TODAY NETWORK Ventures.

Through USA TODAY, our local property network, and Newsquest, Gannett deliverswe deliver high-quality, trusted content where and when consumers want to engage with it on virtually any device or platform. Additionally, the Company haswe have strong relationships with hundreds of thousands of local and national businesses in both our U.S. and U.K. markets due to our large local and national sales forces and a robust advertising and digital marketing solutions product suite. The Company reports in two operating segments, Publishing

Business Trends

We have considered several industry trends when assessing our business strategy:

•Print advertising continues to decline as the audience increasingly moves to digital platforms. We look to optimize our print operations to efficiently manage for this declining print audience. We are focused on converting the growing digital audience into digital-only subscribers to our publications.
•Small and Marketing Solutions.medium-sized businesses ("SMBs") are facing an increasingly complex marketing environment and need to create digital presence to capture audience online. We also haveoffer a Corporatebroad suite of DMS products that offer a single, unified solution to meet their digital marketing needs.
•Consumers are looking for experience-based, emotional connections and other category that includes activities not directly attributablecommunities. USA TODAY NETWORK Ventures was designed to a specific segment. A full description of our segments is included in Note 14 — Segment reporting of the notes to the Condensed consolidated financial statements.celebrate local communities and create opportunities for meaningful in-person and virtual experiences.

Certain matters affecting current and future operating resultscomparability

The following items affect period-over-period comparisons from 20192020 and will continue to affect period-over-period comparisons for future results:

AcquisitionsReclassifications

Certain amounts in the prior period condensed consolidated financial statements have been reclassified to conform to the current year presentation. In November 2019,the fourth quarter of 2020, we acquired substantially allre-aligned the breakout of the assets, properties,Publishing segment's Circulation revenues related to Digital-only circulation. As a result of this updated presentation, Print circulation revenues increased and businessDigital-only circulation revenues decreased $3.9 million for the three months ended March 31, 2020. There was no impact on reported total Publishing segment or consolidated Circulation revenues.

2027 Notes

At the Special Meeting of Legacy Gannett for an aggregate purchase price of $1.315 billion. The acquisition was funded by a five-year, senior-secured term loan facility with Apollo Capital Management, L.P. ("Apollo") in an aggregate principal amount of approximately $1.756 billion (the "Apollo Term Loan") and available cash on hand.

During 2019 prior to the acquisition of Legacy Gannett, we acquired substantially all the assets, properties, and business of certain publications and businesses (the "2019 Acquisitions"), including 11 daily newspapers, 11 weekly publications, nine shoppers, a remnant advertising agency, five events production businesses, and a business community and networking platform for an aggregate purchase price of $53.4 million, including estimated working capital. As part of onestockholders of the 2019 Acquisitions,Company held on February 26, 2021 (the "Special Meeting"), our stockholders approved the Company also acquiredissuance of the maximum number of shares of Common Stock issuable upon conversion of the 6.0% Senior Secured Convertible Notes due 2027 (the "2027 Notes"). As a 58%result, the conversion option can be share-settled in full and qualified for equity interestclassification. Upon reclassification, the conversion feature was adjusted to fair value as of the stockholder approval date and the increase in the acquiree, andfair value resulted in a non-cash loss of $126.6 million due primarily to an increase in our stock price from December 31, 2020. The non-cash loss was recorded in Non-operating expense in the minority equity owners retained a 42% interest, which has been classified as a redeemable non-controlling interest on the Condensedcondensed consolidated statements of operations and comprehensive income (loss). The 2019 Acquisitions were financed from available cash on hand. for the three months ended March 31, 2021.



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Integration and reorganization costs

For the three months ended September 30, 2020, the CompanyMarch 31, 2021, we incurred Integration and reorganization costs of $13.4 million. Of the total costs incurred, $7.3 million, were$7.1 million related to severance activities and $6.1$6.3 million were related to other costs, including those for the purpose of consolidating operations. For the nine months ended September 30, 2020, the Company incurred Integration and reorganization costs of $74.0 million. Of the total costs incurred, $54.8 million were


related to severance activities and $19.2 million were related to other costs, including those for the purpose of consolidating operations.

For the three months ended September 30, 2020, the CompanyMarch 31, 2021, we ceased operations of 11eight printing facilitiesoperations as part of the synergy and ongoing cost reduction programs. As a result, the Companywe recognized accelerated depreciation of $9.3$9.2 million during the three months ended September 30, 2020. For the nine months ended September 30, 2020, the Company ceased operations of 35 printing facilities as part of the synergy and ongoing cost reduction programs. As a result, the Company recognized accelerated depreciation of $45.0 million during the nine months ended September 30, 2020.March 31, 2021.

For the three months ended September 29, 2019, the CompanyMarch 31, 2020, we incurred Integration and reorganization costs of $3.1 million. Of the total costs incurred, $1.9$28.3 million, were related to severance activities while $1.2including $21.2 million were related to other costs, including those for the purpose of consolidating operations. For the nine months ended September 29, 2019, the Company incurred Integration and reorganization costs of $13.2 million. Of the total costs incurred, $8.2 million were related to severance activities and $5.0$7.1 million were related to other costs, including those for the purpose of consolidating operations.

ForIn the three months ended September 29, 2019, the Company ceased three printing operations. As a result, the Company recognized accelerated depreciation of $2.2 million during the three months ended September 29, 2019. In the nine months ended September 29, 2019, the CompanyMarch 31, 2020, we ceased operations of three print publications and twelve14 printing operations as part of the ongoing cost reduction programs. As a result, the Companywe recognized accelerated depreciation of $4.8$24.7 million during the nine months ended September 29, 2019.

Asset impairments

For the three months ended September 30, 2020, there were Asset impairments of $1.6 million at the Publishing and Marketing Solutions segments as a result of fixed asset disposals related to the continued consolidation of operations. For the nine months ended September 30, 2020, there were Asset impairments of $8.4 million, primarily related to the Publishing segment as a result of fixed asset disposals related to the continued consolidation of operations and as a result of the Company's recoverability test for long-lived asset groups performed as of June 30,March 31, 2020.

For the three months ended September 29, 2019 there were no Asset impairments. For the nine months ended September 29, 2019, there were Asset impairments of $2.5 million recorded by the Publishing segment.

Goodwill and intangible impairments

There were no Goodwill and intangible impairments recognized for the three months ended September 30, 2020. There were $393.4 million of Goodwill and intangible impairments recognized for the nine months ended September 30, 2020, primarily due to the impact of the COVID-19 pandemic on the Company’s operations.
There were no Goodwill and intangible impairments recognized during the three and nine months ended September 29, 2019.

Foreign currency

The Company'sOur U.K. publishing operations are conducted through its Newsquest subsidiary. In addition, the Company'sour ReachLocal subsidiary has foreign operations in regions such as Canada, Australia / Australia/New Zealand and India. Earnings from operations in foreign regions are translated into U.S. dollars at average exchange rates prevailing during the period, and assets and liabilities are translated at exchange rates in effect at the balance sheet date. Translation fluctuations impact revenues, expenses,revenue, expense, and operating income results for international operations.

Newsprint supply

Outlook for 2021
Newsprint expense
Strategy

Our areas of strategic focus for 2021 include:

Accelerating digital subscriber growth

The broad reach of our newsroom network, linking leading national journalism at USA TODAY, our Publishing segment was $12.4 million higherlocal property network in 46 states in the third quarterU.S., and Newsquest in the U.K. with more than 120 local media brands, gives us the ability to deepen our relationships with consumers at both the national and local levels. We bring consumers local news and information that impacts their day-to-day lives while keeping them informed of 2020 comparedthe national events that impact their country. We believe this local content is not readily obtainable elsewhere, and we are able to deliver that content to our customers across multiple print and digital platforms. As such, a key element of our consumer strategy is growing our paid digital-only subscriber base to 10 million subscribers over the third quarternext five years. We expect to do this through expansion of 2019 primarily due to acquired expenses of $18.2 million, partially offset by declines in circulation and print advertising volumes and lower prices, in addition to page count reductions and press configuration efficiencies, when compared to the same period in 2019. Newsprint expense at our Publishing segment was $22.0 million higher for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019, primarily due to acquired expenses of $38.6


million, partially offset by declines in circulation and print advertising volumes, lower prices, page count reductions and press configuration efficiencies, when compared to the same period in 2019.

Outlook for the remainder of 2020

Strategy

The Company's areas of focus for 2020 continue to include (1) integrating the Legacy Gannett and New Media organizations and achieving synergy targets, (2) deleveraging the balance sheet via cash flow from operations and real estate monetization and (3) driving improved revenue trends by focusing on complementary growth businesses. Key integration and synergy workstreams include consolidating production and distribution facilities, integrating and centralizing back office functions, centralizing and regionalizing our publishing sales, content, and circulation marketing organizations and consolidating our marketing solutions organizations. The Company intends to continue investing in our current growth businesses, suchsubscription products as well as through the launch of new digital subscription offerings tailored to specific users.

Driving digital marketing services growth by engaging more clients in a subscriber relationship

We are now of significant digital subscriptionsscale, with unique reach at both the national and eventslocal community levels. We expect to help offset the revenue declines fromleverage our integrated sales structure and lead generation strategy to continue to aggressively expand our digital marketing services business into our local markets, both domestically and internationally. Given our extensive client base and volume of digital campaigns, we will also use data and insights to inform new and dynamic advertising products that we believe will deliver superior results.

Optimizing our traditional businesses across print and advertising

We will continue to enabledrive the Companyprofitability of our traditional print operations through economies of scale, process improvements, and optimizations. We are focused on optimizing our pricing and improving customer service for our print subscribers. Print advertising continues to returnoffer a compelling branding opportunity across our network due to revenueour scale and unique reach at both the national and local community levels.


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Prioritizing investments into growth businesses that have significant potential and support our vision

By leveraging our unique footprint, trusted brands, and media reach, we identify, experiment, and invest in potential growth businesses. USA TODAY NETWORK Ventures is a strong example of one such experiment that has grown significantly since its founding in 2015. During 2020, USA TODAY NETWORK Ventures was able to successfully pivot to holding its events virtually, hosting over the next three250 events. In addition, we consider it a company-wide priority to five years.explore online gaming and we expect to invest in advertising, marketing, promotions, events, and services in this area.

Impacts of COVID-19

The ongoingthe COVID-19 pandemic and related measures to contain its spread have resulted in significant volatility and economic uncertainty, which is expected to continue in

As a result of the near term. WhileCOVID-19 pandemic, we have generally been exempt from mandates requiring closures of non-essential business and have been able to continue operations, these circumstances are expected to continue to create volatility and unfavorable trends in our financial results as individuals and businesses rationalize expenditures during this time of uncertainty.

During the nine months ended September 30, 2020, the Company experiencedexperience decreased demand for itsour advertising and digital marketing services, commercial print and distribution services, as well as reductions in and constraints on in-person events and the sales of single copy and commercial distributionnewspapers. While we have seen operating trends improve since the second quarter of its newspapers. The Company currently expects2020, which represents the quarter that was most significantly impacted by the pandemic, we expect that the COVID-19 global pandemic will continue to have a negative impact on the Company’sour business and results of operations in the near-term. Longer-term, the ultimate impact of the COVID-19 pandemic on the Company’s business and results of operations will depend on the severity and length of the pandemic, the duration and extent of the mitigation measures and governmental actions designed to combat the pandemic, as well as the changes in customer behavior as a result of the pandemic, all of which remain highly uncertain.

As a result, the Company haswe have implemented, and continuescontinue to implement, measures to reduce costs and preserve cash flow. These measures include, evaluating and applying for all governmental relief programs for which we are eligible, including the Paycheck Protection Program, suspension of the quarterly dividend employee furloughs, decreases in employee compensation,and refinancing of our debt, as well as reductions in discretionary spending. In addition, the Company has deferred certain payroll tax remittance as permitted under the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") and negotiated the deferral of pension contributions, as well aswe are continuing with itsour previously disclosed plan to monetize non-core assets. The Company continues
Seasonality

Our revenues are subject to believe these initiatives, along with cash on hand, cash provided by operating activities,moderate seasonality, due primarily to fluctuations in advertising volumes. Advertising and relief from the CARES Act will provide sufficient cash flow to enable the Company to meet its commitments. However, these measuresmarketing services revenues for our Publishing segment are not expected to fully offset the impact of the COVID-19 pandemic on the Company’s business and results of operations and, as such, the negative impact on the Company’s results of operations could be material.

Voluntary Severance Offer

As part of our ongoing integration and cost reduction efforts, during the fourth quarter of 2020, we provided a Voluntary Severance Offer ("VSO") to certain employees. A VSO is an offer to pay severance to an employee in exchange for their voluntary resignation and execution of a separation and release agreement. We anticipate recording severance costs related to the VSOtypically highest in the fourth quarter, due to holiday and seasonal advertising, and lowest in the first quarter, following the holiday season. The volume of 2020.advertising sales in any period is also impacted by other external factors such as competitors' pricing, advertisers' decisions to increase or decrease their advertising expenditures in response to anticipated consumer demand, and general economic conditions.


RESULTS OF OPERATIONS



Results
24
Table of OperationsContents

Consolidated Summary

A summary of our segment results is presented below:
Three months ended March 31,
In thousands, except per share amounts20212020Change% Change
Operating revenues:
Publishing$699,585 $858,150 $(158,565)(18)%
Digital Marketing Solutions102,281 121,281 (19,000)(16)%
Corporate and other3,074 3,009 65 2 %
Intersegment eliminations(27,856)(33,758)5,902 (17)%
Total operating revenues777,084 948,682 (171,598)(18)%
Operating expenses:
Publishing$657,230 $830,530 $(173,300)(21)%
Digital Marketing Solutions101,104 122,730 (21,626)(18)%
Corporate and other38,665 59,002 (20,337)(34)%
Intersegment eliminations(27,856)(33,758)5,902 (17)%
Total operating expenses769,143 978,504 (209,361)(21)%
Operating income (loss)7,941 (29,822)37,763 ***
Non-operating expenses159,751 41,805 117,946 ***
Loss before income taxes(151,810)(71,627)(80,183)***
(Benefit) provision for income taxes(9,109)8,979 (18,088)***
Net loss$(142,701)$(80,606)$(62,095)77 %
Net loss attributable to redeemable noncontrolling interests(385)(454)69 (15)%
Net loss attributable to Gannett$(142,316)$(80,152)$(62,164)78 %
Loss per share attributable to Gannett - basic$(1.06)$(0.61)$(0.45)74 %
Loss per share attributable to Gannett - diluted$(1.06)$(0.61)$(0.45)74 %
 Three months ended Nine months ended
In thousandsSeptember 30, 2020 September 29, 2019 Change September 30, 2020 September 29, 2019 Change
Operating revenues:           
Publishing$732,226
 $366,259
 $365,967
 $2,286,268
 $1,138,775
 $1,147,493
Marketing Solutions105,443
 26,674
 78,769
 321,287
 79,906
 241,381
Corporate and other2,732
 970
 1,762
 8,140
 2,537
 5,603
Intersegment eliminations(25,862) (17,254) (8,608) (85,472) (52,582) (32,890)
Total operating revenues814,539
 376,649
 437,890
 2,530,223
 1,168,636
 1,361,587
Operating expenses:           
Publishing$684,788
 $335,663
 $349,125
 $2,560,811
 $1,065,902
 $1,494,909
Marketing Solutions109,209
 30,026
 79,183
 372,341
 92,700
 279,641
Corporate and other44,924
 30,156
 14,768
 148,509
 53,820
 94,689
Intersegment eliminations(25,862) (17,254) (8,608) (85,472) (52,582) (32,890)
Total operating expenses813,059
 378,591
 434,468
 2,996,189
 1,159,840
 1,836,349
Operating income (loss)1,480
 (1,942) 3,422
 (465,966) 8,796
 (474,762)
Non-operating expenses29,830
 9,800
 20,030
 106,119
 29,575
 76,544
Loss before income taxes(28,350) (11,742) (16,608) (572,085) (20,779) (551,306)
Income tax expense (benefit)3,098
 7,226
 (4,128) (22,200) 4,929
 (27,129)
Net loss$(31,448) $(18,968) $(12,480) $(549,885) $(25,708) $(524,177)
            
Loss per share attributable to Gannett - diluted$(0.24) $(0.31) $0.07
 $(4.17) $(0.41) $(3.76)
*** Indicates an absolute value percentage change greater than 100.

Intersegment eliminations in the preceding table represent digital advertising marketing services revenues and expenses associated with products sold by our U.S. local publishing sales teams but which are fulfilled by our Marketing SolutionsDMS segment. When discussing segment results, these revenues and expenses are presented gross but are eliminated in consolidation.

Operating revenues

Total Operating revenues were $777.1 million for three months ended March 31, 2021, a decrease of $171.6 million compared to the three months ended March 31, 2020.
:

OurFor the Publishing segment, generates revenue primarily through advertisingOperating revenues decreased $158.6 million compared to the three months ended March 31, 2020, driven by lower Advertising and subscriptions for ourmarketing services revenues of $89.3 million, including both print and digital, publications. Our advertising teams selllower Circulation revenues of $49.3 million and lower Other revenues of $20.0 million. Advertising and marketing services revenues are generated by the sale of local, national, and classified print advertising across multipleproducts, digital advertising offerings such as digital classified advertisements, digital media such as display advertisements run on our platforms including print, online, mobile, and tablet as well as niche publications. In addition, our Publishing segment advertising teams sellthird-party sites, and digital marketing services which are primarily fulfilledsuch as search advertising offered through and delivered by teams within our Marketing SolutionsDMS segment. Circulation revenues are derived principally from home delivery and single copy sales of our publications and distributingdistribution of our publications on our digital platforms. Other revenues are derived mainly from commercial printing, distribution arrangements, revenues from our events business and distribution arrangements.digital syndication and affiliate revenues.

For the DMS segment, Operating revenues decreased $19.0 million compared to the three months ended March 31, 2020, driven by lower Advertising and marketing services revenues of $14.9 million and lower Other revenues of $4.1 million. Our Marketing SolutionsDMS segment generates advertisingAdvertising and marketing services revenues through multiple services, including search advertising, display advertising, search optimization, social media, website development, web presence products, customer relationship management, Google-suite offerings, and software-as-a-service solutions. Other revenues in our Marketing SolutionsDMS segment are derived from system integration services, cloud offerings and software licensing.


Quarter
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For the Corporate and Other category, Operating revenues were relatively flat compared to the three months ended September 30, 2020 versus quarter ended September 29, 2019March 31, 2020. Revenues at our Corporate and Other category are primarily driven by third party newsprint sales.

Operating expenses

Total operating revenuesOperating expenses were $814.5$769.1 million for the third quarter of 2020. The increase in total revenue was comprised of a $221.1 million increase in advertising and marketing services revenues, a $189.9 million increase in circulation revenues, and a $26.8 million increase in other revenues. Revenue at the Publishing and Marketing Solutions segments increased by $366.0 million and $78.8 million, respectively, primarily due to acquisition-related revenues, including revenue contributed by Legacy Gannett, partially offset by the impacts of COVID-19.



Ninethree months ended September 30, 2020 versus nineMarch 31, 2021, a decrease of $209.4 million compared to the three months ended September 29, 2019

Total operating revenues were $2.530 billion for the nine months ended September 30,March 31, 2020. The increase in total revenue was comprised of a $666.8 million increase in advertising and marketing services revenues, a $604.3 million increase in circulation revenues, and a $90.5 million increase in other revenues. Revenue at the Publishing and Marketing Solutions segments increased by $1.147 billion and $241.4 million, respectively, primarily due to acquisition-related revenues, including revenue contributed by Legacy Gannett, partially offset by the impacts of COVID-19.

Operating expenses:

Operating expenses consist primarily of the following:

•Operating costs such asat the Publishing segment include labor, newsprint and delivery costs in our Publishingand at the DMS segment orinclude the cost of online media acquired from third parties such as Google, and costs to manage and operate our marketing solutions and technology infrastructure in our Marketing Solutions segment;infrastructure;
•Selling, general and administrative expenses such asinclude labor, payroll, outside services, and benefits costs;
•Depreciation and amortization;
•Integration and reorganization costs such asinclude severance charges and other costs, including those for the purpose of consolidating our operations (i.e., facility consolidation charges,expenses and acquisition or integration-related costs;costs);
Costs incurred pursuant to acquisitions or mergers;•Other operating expenses include third-party debt expenses as well as acquisition-related costs;
Impairment charges such as those for property, plant and equipment, goodwill, or other intangible assets; and
Net gains•Gains or losses on the sale or disposal of assets; and
•Impairment charges, including costs incurred related to goodwill, intangible assets such asand property, plant and equipment.

Quarter
For the three months ended September 30, 2020 versus quarter ended September 29, 2019

Total operatingMarch 31, 2021, Operating expenses were $813.1at our Publishing segment decreased $173.3 million for the third quarter of 2020, an increase of $434.5 million compared to the third quarter of 2019. Total operating expenses increased across all segments primarily due to higher operating costs and selling, general and administrative expenses due to the acquisition of Legacy Gannett, increased integration and reorganization costs incurred related to the Legacy Gannett acquisition and asset impairment charges, primarily related to property, plant and equipment at the Publishing and Marketing Solutions segments. These increases in operating expenses were partially offset by cost synergies realized as a result of integration and consolidation, as well as measures implemented to reduce costs and preserve cash flow as a result of the COVID-19 pandemic, which began impacting the Company toward the end of the first quarter of 2020.

Operating costs were $492.3 million in the third quarter of 2020, an increase of $274.0 million compared to the third quarter of 2019, including an increase of $224.3 million and $52.5 million at the Publishing and Marketing Solutions segments, respectively. Operating costs increased primarily due to costs associated with the operations of Legacy Gannett, partially offset by a reduction in costs associated with declines in demand, in part, as a result of the pandemic and continued cost efficiency efforts resulting from the consolidation and centralization of operations.

Selling, general, and administrative expenses were $241.7 million in the third quarter of 2020, an increase of $121.8 million compared to the third quarter of 2019, including an increase of $91.7 million and $20.2 million at the Publishing and Marketing Solutions segments, respectively. Selling, general, and administrative expenses increased primarily due to costs incurred related to the operations of Legacy Gannett, partially offset by continued cost efficiency efforts as well as cost containment initiatives implemented as a result of the COVID-19 pandemic.

Integration and reorganization costs were $13.4 million in the third quarter of 2020, an increase of $10.3 million compared to the third quarter of 2019, including an increase at the Publishing and Marketing Solutions segments of $2.5 million and $0.7 million, respectively, as well as an increase of $7.0 million for the Corporate and other category. Integration and reorganization costs increased primarily due to additional severance costs stemming from acquisition-related synergies, the continued consolidation of operations resulting from the ongoing implementation of our plans to reduce costs and preserve cash flow and the integration of acquired businesses.

Acquisitions costs were $1.9 million in the third quarter of 2020, a decrease of $10.3 million compared to the third quarter of 2019 and were attributable to the Corporate and other category. The decrease in acquisition costs was primarily due to lower acquisition activity in the third quarter of 2020 when compared to the three months ended September 29, 2019.



Asset impairments were $1.6March 31, 2020, reflecting a decrease in Operating costs of $87.1 million, a decrease in the third quarter of 2020, compared to none in the third quarter of 2019. The Company incurred asset impairments primarily related to fixed asset disposals related to the continued consolidation of operations in the third quarter of 2020.

Nine months ended September 30, 2020 versus nine months ended September 29, 2019

Total operating expenses were $2.996 billion for the nine months ended September 30, 2020, an increase of $1.836 billion compared to the nine months ended September 29, 2019. Total operating expenses increased across all segments primarily due to higher operating costs and selling,Selling, general and administrative expenses of $64.6 million, a decrease in Depreciation and amortization of $20.6 million, and a decrease in Integration and reorganization costs of $6.0 million, partially offset by an increase in Loss on the sale or disposal of assets of $4.1 million and an increase in Asset impairments of $0.8 million.

For the three months ended March 31, 2021, Operating expenses at our DMS segment decreased $21.6 million compared to the three months ended March 31, 2020, reflecting a decrease in Selling, general and administrative expenses of $16.9 million, a decrease in Operating costs of $4.0 million, and a decrease in Integration and reorganization costs of $1.2 million, partially offset by an increase in Depreciation and amortization of $0.5 million.

For the three months ended March 31, 2021, Operating expenses at Corporate and other decreased $20.3 million compared to the three months ended March 31, 2020, due to a decrease in Selling, general and administrative expenses of $15.7 million, a decrease in Integration and reorganization costs of $7.6 million, and a decrease in Operating costs of $1.8 million, partially offset by an increase in Other operating expenses of $4.6 million.

Refer to the discussion of segment results below for further information.

Non-operating (income) expense

Interest expense: For the three months ended March 31, 2021, Interest expense was $39.5 million compared to $57.9 million for the three months ended March 31, 2020. The decrease in interest expense was mainly due to a lower effective interest rate driven by the refinancing of the Company's five-year, senior-secured 11.5% term loan facility with Apollo Capital Management, L.P. (the "Acquisition Term Loan") in the first quarter of 2021 and a lower debt balance compared to the same period in 2020.

Loss on early extinguishment of debt: For the three months ended March 31, 2021, Loss on early extinguishment of debt was $19.4 million compared to $0.8 million for the three months ended March 31, 2020. The loss for the three months ended March 31, 2021 was mainly due to the acquisitionpayoff of Legacy Gannett; asset impairments,the Acquisition Term Loan in the first quarter of 2021.

Non-operating pension income: For the three months ended March 31, 2021, Non-operating pension income was $23.9 million compared to $18.5 million for the three months ended March 31, 2020. The increase in non-operating pension income was primarily relateddue to property, plantan increase in the expected return on plan assets held by the Gannett Retirement Plan and equipment, mainly atlower interest costs on benefit obligations.

Loss on Convertible notes derivative: For the Publishing segment; impairment recognized for goodwill and intangibles; and higher integration and reorganization costs incurred relatedthree months ended March 31, 2021, Loss on Convertible notes derivative was $126.6 million, due to the Legacy Gannett acquisition. These increases were partially offset by cost synergies realized as a resultincrease in the fair value of integration and consolidation, as well as measures implemented to reduce costs and preserve cash flowthe derivative liability as a result of the COVID-19 pandemic, which began impacting the Company toward the end of the first quarter of 2020.

Operating costs were $1.536 billionincrease in the nineCompany's stock price.



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Other non-operating items, net: Non-operating items, net, are driven by certain items that fall outside of our normal business operations. For the three months ended September 30, 2020, an increaseMarch 31, 2021, Non-operating items, net was expense of $854.3$1.9 million compared to the nine months ended September 29, 2019, including an increase of $720.8$1.6 million and $151.4 million at the Publishing and Marketing Solutions segments, respectively. Operating costs increased primarily due to costs associated with the operations of Legacy Gannett, partially offset by a reductionincome in costs associated with declines in demand, in part, as a result of the pandemic and continued cost efficiency efforts resulting from the consolidation and centralization of operations.

Selling, general, and administrative expenses were $767.3 million in the nine months ended September 30, 2020, an increase of $391.8 million compared to the nine months ended September 29, 2019, including an increase of $275.3 million and $67.8 million at the Publishing and Marketing Solutions segments, respectively. Selling, general, and administrative expenses increased primarily due to costs incurred relating to the operations of Legacy Gannett, partially offset by continued cost efficiency efforts as well as cost containment initiatives implemented as a result of the COVID-19 pandemic.

Integration and reorganization costs were $74.0 million for the nine months ended September 30, 2020, an increase of $60.8 million compared to the nine months ended September 29, 2019, including an increase at the Publishing and Marketing Solutions segments of $30.0 million and $4.4 million, respectively, as well as an increase of $26.4 million for the Corporate and other category. Integration and reorganization costs increased primarily due to additional severance costs stemming from acquisition-related synergies, the continued consolidation of operations resulting from the ongoing implementation of our plans to reduce costs and preserve cash flow and the integration of acquired businesses.

Acquisitions costs were $10.3 million for the nine months ended September 30, 2020, a decrease of $5.1 million compared to the nine months ended September 29, 2019 and were attributable to the Corporate and other category. The decrease in acquisition costs was primarily due to lower costs incurred in conjunction with the acquisition of Legacy Gannett.

The Company incurred goodwill and intangible impairments of $393.4 million for the nine months ended September 30, 2020 compared to no goodwill and intangible impairments recognized during the same period in 2019.2020.

Asset impairments were $8.4 million
Provision (benefit) for income taxes

The following table summarizes our Loss before income taxes and income tax accounts:

Three months ended March 31,
In thousands20212020
Loss before income taxes$(151,810)$(71,627)
(Benefit) provision for income taxes(9,109)8,979 
Effective tax rate6.0 %***
*** Our effective tax rate for the nineperiod was not meaningful.

The benefit for income taxes for the three months ended September 30,March 31, 2021 was mainly impacted by the pre-tax net loss generated during the quarter. The benefit for income taxes for the three months ended March 31, 2021 was calculated using the estimated annual effective tax rate of 43.4%. The estimated annual effective tax rate is based on a projected tax expense for the full year. The tax benefit for the three months ended March 31, 2021 is lower than the 21% statutory Federal rate due to the impact of the derivative revaluation, partially offset by the creation of valuation allowances on non-deductible interest expense carryforwards as well as state income tax and foreign tax expense.

Our effective tax rate for the three months ended March 31, 2020, an increase of $6.0was not meaningful. The rate was primarily impacted by non-deductible officers' compensation, state income tax expense and foreign income tax expense.

Net loss attributable to Gannett and diluted loss per share attributable to Gannett

For the three months ended March 31, 2021, Net loss attributable to Gannett and diluted loss per share attributable to Gannett were $142.3 million and $1.06, respectively, compared to $80.2 million and $0.61 for the ninethree months ended September 29, 2019.March 31, 2020, respectively. The Company incurred asset impairments inchange reflects the nine months ended September 30, 2020 related to fixed asset disposals related to the continued consolidation of our operations compared to the nine months ended September 29, 2019.various items discussed above.



Publishing segment

A summary of our Publishing segment results is presented below:
Three months ended March 31,
In thousands20212020Change% Change
Operating revenues:
Advertising and marketing services$314,310 $403,636 $(89,326)(22)%
Circulation325,436 374,720 (49,284)(13)%
Other59,839 79,794 (19,955)(25)%
Total operating revenues699,585 858,150 (158,565)(18)%
Operating expenses:
Operating costs431,801 518,859 (87,058)(17)%
Selling, general and administrative expenses166,203 230,813 (64,610)(28)%
Depreciation and amortization46,387 66,957 (20,570)(31)%
Integration and reorganization costs7,326 13,309 (5,983)(45)%
Asset impairments833 — 833 ***
Net loss on sale or disposal of assets4,680 592 4,088 ***
Total operating expenses657,230 830,530 (173,300)(21)%
Operating income$42,355 $27,620 $14,735 53 %
*** Indicates an absolute value percentage change greater than 100.



27
 Three months ended Nine months ended
In thousandsSeptember 30, 2020 September 29, 2019 Change September 30, 2020 September 29, 2019 Change
Operating revenues:           
Advertising and marketing services$329,508
 $178,491
 $151,017
 $1,025,396
 $566,526
 $458,870
Circulation336,152
 146,254
 189,898
 1,053,517
 449,246
 604,271
Other66,566
 41,514
 25,052
 207,355
 123,003
 84,352
Total operating revenues732,226
 366,259
 365,967
 2,286,268
 1,138,775
 1,147,493
Operating expenses:    

      
Operating costs438,588
 214,315
 224,273
 1,390,366
 669,585
 720,781
Selling, general and administrative expenses186,000
 94,332
 91,668
 592,856
 317,596
 275,260
Depreciation and amortization52,481
 23,840
 28,641
 175,990
 64,439
 111,551
Integration and reorganization costs5,120
 2,608
 2,512
 39,049
 9,067
 29,982
Asset impairments868
 —
 868
 7,727
 2,469
 5,258
Goodwill and intangible impairments—
 —
 —
 352,947
 —
 352,947
Loss on sale or disposal of assets1,731
 568
 1,163
 1,876
 2,746
 (870)
Total operating expenses684,788

335,663
 349,125
 2,560,811
 1,065,902
 1,494,909
Operating income (loss)$47,438
 $30,596
 $16,842
 $(274,543) $72,873
 $(347,416)
Table of Contents

Operating revenues:

QuarterThe following table provides the breakout of Operating revenues by category:
Three months ended March 31,
In thousands20212020Change% Change
Local and national print$117,399 $173,170 $(55,771)(32)%
Classified print75,797 94,449 (18,652)(20)%
Print advertising193,196 267,619 (74,423)(28)%
Digital media79,557 86,497 (6,940)(8)%
Digital marketing services28,353 30,539 (2,186)(7)%
Digital classified13,204 18,981 (5,777)(30)%
Digital advertising and marketing services121,114 136,017 (14,903)(11)%
Advertising and marketing services314,310 403,636 (89,326)(22)%
Print circulation302,257 358,918 (56,661)(16)%
Digital-only circulation23,179 15,802 7,377 47 %
Circulation325,436 374,720 (49,284)(13)%
Other59,839 79,794 (19,955)(25)%
Total operating revenues$699,585 $858,150 $(158,565)(18)%

For the three months ended September 30, 2020 versus quarter ended September 29, 2019

Advertising and marketing services revenues, which includes print advertising, as well as digital advertising and marketing services, were $329.5 million for the third quarter of 2020, including $25.9 million from international operations, an increase of $151.0 million compared to the third quarter of 2020. The increase was primarily attributable to $208.0 million in acquired advertising and marketing services revenues related to Legacy Gannett.

Print advertising revenues were $208.2 million for the third quarter of 2020, an increase of $69.2 million compared to the third quarter of 2019.March 31, 2021, Local and national print advertising revenues were $103.4and Classified print advertising revenues decreased $55.8 million and $28.6 million, respectively, for the third quarter of 2020, an increase of $15.5 million and $23.0$18.7 million, respectively, compared to the third quarter of 2019.three months ended March 31, 2020. The increasesoverall decline in localPrint advertising was driven by secular industry trends impacting all categories and impacts from the COVID-19 pandemic. The decline in Local and national print advertising revenues were attributable to $74.6 millionwas driven by lower advertising volume and a decline in acquired revenues related to Legacy Gannett.advertiser inserts. Classified print advertising revenues were $76.2declined due to reduced spend in legal, real estate, automotive and employment classified advertisements.

For the three months ended March 31, 2021, Digital media, Digital marketing services and Digital classified revenues decreased $6.9 million, for $2.2 million, and $5.8 million, respectively, compared to the third quarter 2020, an increasethree months ended March 31, 2020. The decrease in Digital media revenues was driven by lower local digital media spend and lower page views compared to the prior year which reflected coverage of $30.6the COVID-19 pandemic and lower digital classified revenue.

For the three months ended March 31, 2021, Print circulation revenues decreased $56.7 million and Digital-only circulation revenues increased $7.4 million, compared to the third quarter of 2019, primarily attributable to $41.7 millionthree months ended March 31, 2020. The decline in acquired revenues related to Legacy Gannett. The increases across all categories of print advertising revenues were partially offset by reduced demand consistent with general trends adversely impacting the publishing industry and unfavorable impacts resulting from the COVID-19 pandemic.

Digital advertising and marketing services revenues were $121.3 million for the third quarter of 2020, an increase of $81.8 million compared to the third quarter of 2019. Digital media revenues were $84.1 million for the third quarter of 2020, an increase of $61.0 million compared to the third quarter of 2019, primarily due to $66.5 million in acquired revenues related to Legacy Gannett. Digital marketing services revenues were $25.5 million for the third quarter of 2020, an increase of $15.3 million compared to the third quarter of 2019. This increase was attributable to $18.3 million in acquired revenues related to Legacy Gannett. Digital classified revenues were $11.7 million for the third quarter of 2020, an increase of $5.6 million compared to the third quarter of 2019 due to $6.9 million in acquired revenues related to Legacy Gannett. The impacts from the COVID-19 pandemic, which began in the latter part of the first quarter of 2020, negatively affected digital revenues across each category.

Circulation revenues, which include print circulation and digital circulation, were $336.2 million for the third quarter of 2020. Print circulation revenues were $312.6 million for the third quarter of 2020, an increase of $171.8 million compared to the third quarter of 2019, due to $189.4 million in acquired revenues related to Legacy Gannett, partially offsetwas driven by declines stemming from a reduction in the volume of ourhome delivery subscribers and a decline in single copy and home delivery sales reflecting the overall secular trends impacting the industry as well as the impact of the COVID-19 pandemic on businesses that buy and sell copies of our publicationspublications. The increase in Digital-only circulation revenues was driven by an increase of 37% in digital-only subscribers to approximately 1.2 million as of March 31, 2021, as well as general industry trends. Digital circulation revenues were $23.5 million for the third


quarter of 2020, an increase of $18.1in average revenue per customer due to mix in subscribers with introductory trial periods during the three months ended March 31, 2021 compared to the three months ended March 31, 2020.

For the three months ended March 31, 2021, Other revenues decreased $20.0 million compared to the thirdthree months ended March 31, 2020, due to declines in the commercial print and delivery business, driven by overall secular trends impacting the industry and a decline in event revenues due to the absence of in-person events in the first quarter of 2019, primarily due2021 compared to $17.1 million in acquired revenues and a 31.1% increase in digital only subscribers.

Other revenues were $66.6 millionthe same period in the third quarterprior year as a result of 2020, an increasethe COVID-19 pandemic. In addition, the Company continues to experience decreased demand for commercial print.



28
Table of $25.1Contents
Operating expenses

For the three months ended March 31, 2021, Operating costs decreased $87.1 million compared to the third quarter of 2019.

Ninethree months ended September 30, 2020 versus nineMarch 31, 2020. The following table provides the breakout of the decrease in Operating costs:
Three months ended March 31,
In thousands20212020Change% Change
Newsprint and ink$28,271 $40,305 $(12,034)(30)%
Distribution96,105 106,952 (10,847)(10)%
Compensation and benefits147,118 181,108 (33,990)(19)%
Outside services68,764 85,832 (17,068)(20)%
Other91,543 104,662 (13,119)(13)%
Total operating costs$431,801 $518,859 $(87,058)(17)%

For the three months ended September 29, 2019

AdvertisingMarch 31, 2021, Newsprint and marketing services revenues, which includes print advertising, as well as digital advertising and marketing services, were $1.025 billion for the nine months ended September 30, 2020, including $80.1 million from international operations, an increase of $458.9ink costs decreased $12.0 million compared to the ninethree months ended September 30, 2020. The increase was primarily attributable to $635.4 million in acquired advertising and marketing services revenues, including $631.4 million related to Legacy Gannett.

Print advertising revenues were $663.7 million for the nine months ended September 30,March 31, 2020 an increase of $215.8 million compared to the nine months ended September 29, 2019. Local and national print advertising revenues were $332.2 million and $90.7 million, respectively, for the nine months ended September 30, 2020, an increase of $46.7 million and $72.1 million, respectively, compared to the nine months ended September 29, 2019. The increases in local and national print advertising revenues were attributable to $235.8 million in acquired revenues, including $232.9 million in acquired revenues related to Legacy Gannett. Classified print advertising revenues of $240.9 million for the nine months ended September 30, 2020 increased $97.0 million compared to the nine months ended September 29, 2019, primarily attributable to acquired revenues of $132.9 million, including $132.1 million in acquired revenues related to Legacy Gannett. The increases across all categories of print advertising revenues were partially offset by reduced demand consistent with general trends adversely impacting the publishing industry and unfavorable impacts resulting from the COVID-19 pandemic, which began in the latter part of the first quarter of 2020.

Digital advertising and marketing services revenues were $361.7 million for the nine months ended September 30, 2020, an increase of $243.0 million compared to the nine months ended September 29, 2019. Digital media revenues were $235.9 million for the nine months ended September 30, 2020, an increase of $168.6 million compared to the nine months ended September 29, 2019, primarily due to $180.0 million in acquired revenues, including $179.8 million in acquired revenues related to Legacy Gannett. Digital marketing services revenues were $79.7 million for the nine months ended September 30, 2020, an increase of $47.7 million compared to the nine months ended September 29, 2019. This increase was attributable to $55.8 million in acquired revenues related to Legacy Gannett. Digital classified revenues were $46.1 million for the nine months ended September 30, 2020, an increase of $26.7 million compared to the nine months ended September 29, 2019 due to $31.0 million in acquired revenues, including $30.9 million in acquired revenues related to Legacy Gannett. The impacts from the COVID-19 pandemic, which began in the latter part of the second quarter 2020 negatively affected digital revenues across each category.

Circulation revenues, which include print circulation and digital circulation, were $1,054 million for the nine months ended September 30, 2020. Print circulation revenues were $989.5 million for the nine months ended September 30, 2020, an increase of $555.8 million from the nine months ended September 29, 2019 due to $601.7 million in acquired revenues, including $599.1 million in acquired revenues related to Legacy Gannett and increases from our strategic pricing programs, partially offsetdriven by declines stemming from a reduction in volume of our single copy and home delivery sales, reflecting the impact of COVID-19 on businesses that buy and sell copies of our publications as well as general industry trends. Digital circulation revenues were $64.0 million for the nine months ended September 30, 2020, an increase of $48.4 million from the nine months ended September 29, 2019, primarily due to $45.8 million in acquired revenues.

Other revenues were $207.4 million for the nine months ended September 30, 2020, an increase of $84.4 million compared to the nine months ended September 29, 2019.

Operating expenses:

Quarter ended September 30, 2020 versus quarter ended September 29, 2019

Operating costs were $438.6 million for the third quarter of 2020, an increase of $224.3 million from the third quarter of 2019. Newsprint and ink costs were $31.3 million in the third quarter, an increase of $11.1 million compared to 2019, primarily as a result of acquired newsprint and ink costs related to Legacy Gannett, partially offset by declines inprint circulation and print advertising volumes, lower paper prices, and page count reductions and press configuration efficiencies whendriven by efficiency initiatives in printing operations.

For the three months ended March 31, 2021, Distribution costs decreased $10.8 million compared to the third quarter of 2019. Newsthree months ended March 31, 2020 due to declines in print circulation and editorial expenses were $9.9 millionprint advertising volumes as well as the decline in commercial print and delivery.

For the third quarter of 2020, an increase of $2.8three months ended March 31, 2021, Compensation and benefits costs decreased $34.0 million compared to 2019, primarily as a result of acquired news and editorial expenses relatedthe three months ended March 31, 2020 due to Legacy Gannett, partially offset by synergy savings. Distribution costs were $99.2 millionthe benefit in the thirdfirst quarter of 2020, an increase2021 of $62.1 million, primarily due to acquired hauling and delivery


costs related to Legacy Gannett, partially offset by synergy savings and lower production volumes. Other costs contributing to the overall increase in operating costs included an increase of $82.7 million in compensation and benefit costs, primarily due to costs related to Legacy Gannett operations, partially offset by decreases from cost containment initiatives implemented in the second half of 2020 in connection with the COVID-19 pandemic, andincluding headcount reductions, as well as a reduction in costs associated with ongoing integration efforts and an increase of $28.9 million in outsideefforts.

For the three months ended March 31, 2021, Outside services costs, which include portions ofincludes outside printing, professional and outside services, paid search and ad serving, feature services, and credit card fees, decreased $17.1 million compared to the three months ended March 31, 2020 due to the declines in Advertising and marketing services revenues and Print circulation revenues, the benefit in the first quarter of 2021 of cost containment initiatives implemented in the second half of 2020 in connection with the COVID-19 pandemic, and a reduction in costs associated with ongoing integration efforts.

For the three months ended March 31, 2021, Other costs, which primarily includes travel, and facility and equipment costs, decreased $13.1 million compared to the three months ended March 31, 2020, due to a reduction in costs associated with ongoing integration efforts and cost containment initiatives.

For the three months ended March 31, 2021, Selling, general and administrative expenses decreased by $64.6 million compared to the three months ended March 31, 2020. The following table provides the breakout of the decrease in Selling, general and administrative expenses:
Three months ended March 31,
In thousands20212020Change% Change
Compensation and benefits$89,710 $113,527 $(23,817)(21)%
Outside services10,718 13,123 (2,405)(18)%
Other65,775 104,163 (38,388)(37)%
Total Selling, general and administrative expenses$166,203 $230,813 $(64,610)(28)%


For the three months ended March 31, 2021, Compensation and benefits costs decreased $23.8 million compared to the three months ended March 31, 2020 due to the benefit in the first quarter of 2021 of cost containment initiatives implemented in the second half of 2020 in connection with the COVID-19 pandemic, including headcount reductions, as well as a reduction in costs associated with ongoing integration efforts.

For the three months ended March 31, 2021, Outside services costs, which includes professional and outside services, decreased $2.4 million compared to the three months ended March 31, 2020 due to declines in activity and cost containment initiatives.


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For the three months ended March 31, 2021, Other costs decreased $38.4 million compared to the three months ended March 31, 2020 due to lower facility related costs, lower bad debt expense and the benefit in the first quarter of 2021 of cost containment initiatives implemented in the second half of 2020 in connection with the COVID-19 pandemic.

For the three months ended March 31, 2021, Depreciation and amortization expenses decreased $20.6 million compared to the three months ended March 31, 2020 due to a decrease in accelerated depreciation of $15.4 million as a result of fewer print facility shutdowns and strategic dispositions of real estate during the period related to ongoing cost reduction programs.

For the three months ended March 31, 2021, Integration and reorganization costs decreased $6.0 million compared to the three months ended March 31, 2020 due to a decrease in severance costs of $5.1 million. For the three months ended March 31, 2021, severance costs were primarily related to facility consolidation activities. For the three months ended March 31, 2020, severance costs were related to acquisition-related synergies and the consolidation of the business due to our acquisition of Gannett Co., Inc. (which was renamed Gannett Media Corp. and is referred to as "Legacy Gannett") in the fourth quarter of 2019.

For the three months ended March 31, 2021, Loss on the sale or disposal of assets increased $4.1 million compared to the three months ended March 31, 2020 driven by the sale of assets in the first quarter of 2021 as part of the Company’s plan to monetize non-core assets.

Publishing segment Adjusted EBITDA
Three months ended March 31,
In thousands20212020Change% Change
Net income attributable to Gannett$66,213 $33,840 $32,373 96 %
Interest expense11 18 (7)(39)%
Non-operating pension income(23,878)(5,321)(18,557)***
Other non-operating expense (income), net394 (463)857 ***
Depreciation and amortization46,387 66,957 (20,570)(31)%
Integration and reorganization costs7,326 13,309 (5,983)(45)%
Asset impairments833 — 833 ***
Net loss on sale or disposal of assets4,680 592 4,088 ***
Other items242 1,996 (1,754)(88)%
Adjusted EBITDA (non-GAAP basis)$102,208 $110,928 $(8,720)(8)%
Net income attributable to Gannett margin9.5 %3.9 %
Adjusted EBITDA margin (non-GAAP basis)(a)
14.6 %12.9 %
*** Indicates an absolute value percentage change greater than 100.
(a)We define Adjusted EBITDA margin as Adjusted EBITDA divided by total Operating revenues.

Adjusted EBITDA for our Publishing segment was $102.2 million for the three months ended March 31, 2021, a decrease of $8.7 million compared to the three months ended March 31, 2020. The decrease was primarily attributable to the changes discussed above.



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Digital Marketing Solutions segment

A summary of our Digital Marketing Solutions segment results is presented below:
Three months ended March 31,
In thousands20212020Change% Change
Operating revenues:
Advertising and marketing services$101,376 $116,283 $(14,907)(13)%
Other905 4,998 (4,093)(82)%
Total operating revenues102,281 121,281 (19,000)(16)%
Operating expenses:
Operating costs69,278 73,254 (3,976)(5)%
Selling, general and administrative expenses23,831 40,734 (16,903)(41)%
Depreciation and amortization7,829 7,331 498 7 %
Integration and reorganization costs166 1,388 (1,222)(88)%
Net loss on sale or disposal of assets— 23 (23)(100)%
Total operating expenses101,104 122,730 (21,626)(18)%
Operating income (loss)$1,177 $(1,449)$2,626 ***
*** Indicates an absolute value percentage change greater than 100.

Operating revenues

For the three months ended March 31, 2021, Advertising and marketing services revenues decreased $14.9 million compared to the three months ended March 31, 2020, primarily due to Legacy Gannett operations, partially offset by declinesthe absence of $9.2 million in activitythe first quarter of 2021 as a result of the COVID-19 pandemic and cost containment initiatives.change in media rebate programs as well as declines in the international business, offset by growth in the core ReachLocal business.

Selling, general, and administrative expenses were $186.0 million forFor the third quarter of 2020, an increase of $91.7three months ended March 31, 2021, Other revenues decreased $4.1 million compared to the thirdthree months ended March 31, 2020 due to the absence of revenues related to systems integration services associated with a business we divested in the fourth quarter of 2019.2020.

Operating expenses

For the three months ended March 31, 2021, Operating costs decreased $4.0 million compared to the three months ended March 31, 2020. The following table provides the breakout of the decrease in Operating costs:
Three months ended March 31,
In thousands20212020Change% Change
Compensation and benefits8,135 13,629 (5,494)(40)%
Outside services58,691 55,007 3,684 7 %
Other2,452 4,618 (2,166)(47)%
Total operating costs$69,278 $73,254 $(3,976)(5)%

For the three months ended March 31, 2021, Compensation and benefits costs decreased $5.5 million compared to the three months ended March 31, 2020 due to the benefit in the first quarter of 2021 of cost containment initiatives implemented in the second half of 2020, including headcount reductions, as well as a reduction in costs associated with ongoing integration efforts.

For the three months ended March 31, 2021, Outside services costs, which include portions of outside printing,includes professional and outside services, paid search and ad serving and feature services, and credit card fees, were $10.8 million in the third quarter, an increase of $3.4increased $3.7 million compared to the third quarter of 2019, primarily as a result of outside services costs relatedthree months ended March 31, 2020 due to Legacy Gannett, partially offset by reductions resulting from reduced activity as a result of the COVID-19 pandemic as well as cost containment initiatives. Other costs contributing to the overallan increase in selling,expenses associated with third-party media fees.

For the three months ended March 31, 2021, Selling, general and administrative expenses included $37.7decreased $16.9 million in compensationcompared to the three months ended March 31, 2020. The following table provides the breakout of Selling, general and administrative expenses by category:


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Three months ended March 31,
In thousands20212020Change% Change
Compensation and benefits$18,062 $35,773 $(17,711)(50)%
Outside services1,443 2,284 (841)(37)%
Other4,326 2,677 1,649 62 %
Total Selling, general and administrative expenses$23,831 $40,734 $(16,903)(41)%

For the three months ended March 31, 2021, Compensation and benefits costs primarily relateddecreased $17.7 million compared to Legacy Gannett operations, partially offset by decreases fromthe three months ended March 31, 2020, due to the benefit in the first quarter of 2021 of cost containment initiatives implemented in connectionthe second half of 2020, including headcount reductions associated with the COVID-19 pandemic and ongoing integration efforts and $36.1 million in other general and administrative costs due to costs related to Legacy Gannett operations.efforts.

Depreciation and amortization expenses were $52.5 million forFor the third quarter of 2020, a $28.6 million increase compared to the third quarter of 2019, primarily attributable to the acquired property and intangibles from the Legacy Gannett acquisition and an increase in accelerated depreciation of $7.1 million as a result of ongoing cost reduction programs compared to the third quarter of 2019.

three months ended March 31, 2021, Integration and reorganization costs were $5.1 million in the third quarter of 2020, an increase of $2.5decreased $1.2 million compared to the third quarter of 2019, primarily attributable to acquisition-related synergies and the continued consolidation of operations resulting from the ongoing implementation of our plans to reduce costs and preserve cash flow.

Ninethree months ended September 30,March 31, 2020 versus ninedue to lower severance costs of $1.4 million. For the three months ended September 29, 2019

OperatingMarch 31, 2020, severance costs were $1.390 billion for the nine months ended September 30, 2020, an increase of $720.8 million compared to the nine months ended September 29, 2019. Newsprint and ink costs were $101.1 million for the nine months ended September 30, 2020, an increase of $33.4 million compared to the nine months ended September 29, 2019, primarily as a result of acquired newsprint and ink costs related to Legacy Gannett, offset by declines in circulation and print advertising volumes, lower prices, page count reductions and press configuration efficiencies compared to the nine months ended September 29, 2019. News and editorial expenses were $31.1 million for the nine months ended September 30, 2020, an increase of $9.2 million compared to the nine months ended September 29, 2019, primarily as a result of acquired news and editorial expenses related to Legacy Gannett, partially offset by synergy savings. Distribution costs were $306.8 million for the nine months ended September 30, 2020, an increase of $192.6 million compared to the nine months ended September 29, 2019, primarily due to acquired hauling and delivery costs related to Legacy Gannett, partially offset by synergy savings and lower production volumes. Other costs contributing to the overall increase in operating costs included an increase of $256.3 million in compensation and benefit costs, primarily due to costs related to Legacy Gannett operations, partially offset by decreases from cost containment initiatives implemented in connection with the COVID-19 pandemic and ongoing integration efforts and an increase of $113.0 million in outside services, which include portions of outside printing, professional and outside services, paid search and ad serving, feature services, and credit card fees due to increases in outside service costs, partially offset by declines in activity as a result of the COVID-19 pandemic and cost containment initiatives.

Selling, general, and administrative expenses were $592.9 million for the nine months ended September 30, 2020, an increase of $275.3 million compared to the nine months ended September 29, 2019. Outside services costs, which include portions of outside printing, professional and outside services, paid search and ad serving, feature services, and credit card fees, were $33.9 million for the nine months ended September 30, 2020, an increase of $9.2 million compared to the nine months ended September 29, 2019, primarily as a result of acquired outside services costs related to Legacy Gannett offset by reductions resulting from reduced activity as a result of the COVID-19 pandemic as well as cost containment initiatives. Other costs contributing to the overall increase in selling, general, and administrative expenses included $114.1 million in compensation and benefits costs, primarily due to costs related to Legacy Gannett operations, partially offset by decreases from cost containment initiatives implemented in connection with the COVID-19 pandemic and ongoing integration efforts and $117.2 million in other general and administrative costs due to costs related to Legacy Gannett operations.



Depreciation and amortization expense were $176.0 million for the nine months ended September 30, 2020, a $111.6 million increase compared to the nine months ended September 29, 2019, primarily attributable to the acquired property and intangibles from the Legacy Gannett acquisition and an increase in accelerated depreciation of $40.2 million as a result of ongoing cost reduction programs compared to the nine months ended September 29, 2019.

Integration and reorganization costs were $39.0 million for the nine months ended September 30, 2020, an increase of $30.0 million compared to the nine months ended September 29, 2019, primarily attributable to integration and reorganization costs related to Legacy Gannett driven by severance costs related to acquisition-related synergies and the continued consolidation of operations resulting from the ongoing implementationbusiness due to the acquisition of our plans to reduce costs and preserve cash flow.Legacy Gannett in the fourth quarter of 2019.

PublishingDigital Marketing Solutions segment adjusted EBITDA:Adjusted EBITDA
Three months ended March 31,
In thousands20212020Change% Change
Net income (loss) attributable to Gannett$1,081 $(5,073)$6,154 ***
Other non-operating income, net96 3,624 (3,528)(97)%
Depreciation and amortization7,829 7,331 498 7 %
Integration and reorganization costs166 1,388 (1,222)(88)%
Net loss on sale or disposal of assets— 23 (23)(100)%
Other items— 594 (594)(100)%
Adjusted EBITDA (non-GAAP basis)$9,172 $7,887 $1,285 16 %
Net income (loss) attributable to Gannett margin1.1 %(4.2)%
Adjusted EBITDA margin (non-GAAP basis)(a)
9.0 %6.5 %
 Three months ended Nine months ended
In thousandsSeptember 30, 2020 September 29, 2019 Change September 30, 2020 September 29, 2019 Change
Net income (loss) attributable to Gannett$67,726
 $31,362
 $36,364
 $(213,490) $74,690
 $(288,180)
Interest expense17
 21
 (4) 127
 99
 28
Non-operating pension income(18,262) (208) (18,054) (54,215) (625) (53,590)
Gain on sale of investments—
 —
 —
 (195) —
 (195)
Other non-operating income, net(1,855) (74) (1,781) (5,190) (337) (4,853)
Depreciation and amortization52,481
 23,840
 28,641
 175,990
 64,439
 111,551
Integration and reorganization costs5,120
 2,608
 2,512
 39,049
 9,067
 29,982
Asset impairments868
 —
 868
 7,727
 2,469
 5,258
Goodwill and intangible impairments—
 —
 —
 352,947
 —
 352,947
Loss on sale or disposal of assets1,731
 568
 1,163
 1,876
 2,746
 (870)
Other items926
 838
 88
 7,141
 3,339
 3,802
Adjusted EBITDA (non-GAAP basis)$108,752
 $58,955
 $49,797
 $311,767
 $155,887
 $155,880
*** Indicates an absolute value percentage change greater than 100.
(a)We define Adjusted EBITDA margin as Adjusted EBITDA divided by total Operating revenues.

Adjusted EBITDA for our PublishingDigital Marketing Solutions segment was $108.8$9.2 million for the third quarter of 2020, an increase of $49.8 millionthree months ended March 31, 2021, compared to the third quarter of 2019. The increase was primarily attributable to acquired Adjusted EBITDA for Legacy Gannett and ongoing operating efficiencies, offset by lower demand during the third quarter of 2020, which was impacted by the ongoing economic effects of COVID-19.

Adjusted EBITDA for our Publishing segment was $311.8$7.9 million for the ninein three months ended September 30,March 31, 2020, an increase of $155.9 million compared to the nine months ended September 29, 2019. The increase was primarily attributable to acquired Adjusted EBITDA for Legacy Gannett and ongoing operating efficiencies, offset by lower demand beginning near the end of the first quarter of 2020, which was impacted by the ongoing economic effects of COVID-19.



Marketing Solutions segment

A summary of our Marketing Solutions segment results is presented below:
 Three months ended Nine months ended
In thousandsSeptember 30, 2020 September 29, 2019 Change September 30, 2020 September 29, 2019 Change
Operating revenues:           
Advertising and marketing services$100,807
 $22,110
 $78,697
 $306,899
 $66,658
 $240,241
Other4,636
 4,564
 72
 14,388
 13,248
 1,140
Total operating revenues105,443
 26,674
 78,769
 321,287
 79,906
 241,381
Operating expenses:    
      
Operating costs71,223
 18,716
 52,507
 207,741
 56,364
 151,377
Selling, general and administrative expenses30,228
 10,045
 20,183
 100,120
 32,276
 67,844
Depreciation and amortization6,768
 764
 6,004
 18,103
 2,820
 15,283
Integration and reorganization costs1,237
 501
 736
 5,587
 1,237
 4,350
Asset impairments717
 —
 717
 717
 —
 717
Goodwill and intangible impairments—
 —
 —
 40,499
 —
 40,499
(Gain) loss on sale or disposal of assets(964) —
 (964) (426) 3
 (429)
Total operating expenses109,209
 30,026
 79,183
 372,341
 92,700
 279,641
Operating loss$(3,766) $(3,352) $(414) $(51,054) $(12,794) $(38,260)

Operating revenues:

Quarter ended September 30, 2020 versus quarter ended September 29, 2019

Advertising and marketing services revenues were $100.8 million for the third quarter of 2020, including $10.9 million from international entities, an increase of $78.7 million compared to the third quarter of 2019. This increase was primarily attributable to $91.2 million in acquired advertising and marketing services revenues related to Legacy Gannett, partially offset by the impacts of the COVID-19 pandemic which has resulted in lower demand for digital advertising and subscription services in the third quarter of 2020.

Other revenues were $4.6 million for the third quarter of 2020, a slight increase compared to the third quarter of 2019, primarily resulting from an increase in license revenue for cloud software products, partially offset by decreases driven by the impacts of the COVID-19 pandemic.

Nine months ended September 30, 2020 versus nine months ended September 29, 2019

Advertising and marketing services revenues were $306.9 million for the nine months ended September 30, 2020, including $29.9 million from international entities, an increase of $240.2 million compared to the nine months ended September 29, 2019. This increase was primarily attributable to $262.3 million in acquired advertising and marketing services revenues related to Legacy Gannett, partially offset by the impacts of the COVID-19 pandemic which has resulted in lower demand for digital advertising and subscription services.

Other revenues were $14.4 million for the nine months ended September 30, 2020, an increase of $1.1 million compared to the nine months ended September 29, 2019, primarily due to an increase in license revenue for cloud software products, partially offset by decreases driven by the impacts of the COVID-19 pandemic, which began in the latter part of the first quarter of 2020.

Operating expenses:

Quarter ended September 30, 2020 versus quarter ended September 29, 2019



Operating costs were $71.2 million for the third quarter of 2020, an increase of $52.5 million compared to the third quarter of 2019 primarily attributable to acquired operating costs related to Legacy Gannett. Included in operating costs are outside service costs, which include costs of online media acquired from third-party publishers, costs to manage and operate the segment's solutions and technology infrastructure, and other third-party direct costs. Outside service costs totaled $56.8 million for the third quarter of 2020, an increase of $44.6 million, primarily the result of acquired outside service costs related to Legacy Gannett and increased costs of media associated with lower rebates and margin pressure experienced during the third quarter of 2020, partially offset by reductions associated with cost containment initiatives in connection with the COVID-19 pandemic. Also contributing to the overall increase in operating costs was a $5.2 million increase in compensation and benefit costs, primarily attributable to acquired operating costs related to Legacy Gannett, partially offset by reductions associated with cost containment initiatives in connection with the COVID-19 pandemic.

Selling, general, and administrative expenses were $30.2 million for the third quarter of 2020, an increase of $20.2 million compared to the third quarter of 2019. The increase was primarily attributable to acquired selling, general, and administrative expenses related to Legacy Gannett compensation and benefits costs, partially offset by decreases related to cost containment initiatives in connection with the COVID-19 pandemic and ongoing integration efforts.

Depreciation and amortization were $6.8 million for the third quarter of 2020, an increase of $6.0 million compared to the third quarter of 2019, primarily attributable to the acquired property and intangibles from the Legacy Gannett acquisition and an increase in amortization expense due to new product and development initiatives.

changes discussed above.
Nine months ended September 30, 2020 versus nine months ended September 29, 2019

Operating costs were $207.7 million for the nine months ended September 30, 2020, an increase of $151.4 million compared to the nine months ended September 29, 2019, primarily attributable to acquired operating costs related to Legacy Gannett. Included in operating costs are outside service costs, which include costs of online media acquired from third-party publishers, costs to manage and operate the segment's solutions and technology infrastructure and other third-party direct costs. Outside service costs totaled $160.7 million for the nine months ended September 30, 2020, an increase of $125.2 million compared to the same period in 2019. The increase was primarily due to acquired outside service costs related to Legacy Gannett and increased costs of media associated with lower rebates and margin pressure experienced in the second quarter and third quarter of 2020, partially offset by reductions associated with cost containment initiatives in connection with the COVID-19 pandemic. Also contributing to the overall increase in operating costs was a $17.1 million increase in compensation and benefit costs primarily attributable to acquired operating costs related to Legacy Gannett, partially offset by reductions associated with cost containment initiatives in connection with the COVID-19 pandemic.

Selling, general, and administrative expenses were $100.1 million for the nine months ended September 30, 2020, an increase of $67.8 million compared to the nine months ended September 29, 2019. The increase was primarily attributable to acquired selling, general, and administrative expenses related to Legacy Gannett compensation and benefits costs, partially offset by decreases related to cost containment initiatives as a result of the COVID-19 pandemic and ongoing integration activities.

Depreciation and amortization were $18.1 million for the nine months ended September 30, 2020, an increase of $15.3 million compared to the nine months ended September 29, 2019, primarily attributable to the acquired property and intangibles from the Legacy Gannett acquisition and an increase in amortization expense due to new product and development initiatives.



Marketing Solutions segment adjusted EBITDA:
 Three months ended Nine months ended
In thousandsSeptember 30, 2020 September 29, 2019 Change September 30, 2020 September 29, 2019 Change
Net income (loss) attributable to Gannett$5,223
 $(3,352) $8,575
 $(43,076) $(12,794) $(30,282)
Gain on sale of investments(7,800) —
 (7,800) (7,800) —
 (7,800)
Other non-operating income, net(1,189) —
 (1,189) (178) —
 (178)
Depreciation and amortization6,768
 764
 6,004
 18,103
 2,820
 15,283
Integration and reorganization costs1,237
 501
 736
 5,587
 1,237
 4,350
Asset impairments717
 —
 717
 717
 —
 717
Goodwill and intangible impairments—
 —
 —
 40,499
 —
 40,499
(Gain) loss on sale or disposal of assets(964) —
 (964) (426) 3
 (429)
Other items185
 390
 (205) 1,421
 1,341
 80
Adjusted EBITDA (non-GAAP basis)$4,177
 $(1,697) $5,874
 $14,847
 $(7,393) $22,240

Adjusted EBITDA for our Marketing Solutions segment was $4.2 million for the third quarter of 2020, an increase of $5.9 million compared to the third quarter of 2019, primarily due to additional Adjusted EBITDA from Legacy Gannett.

Adjusted EBITDA for our Marketing Solutions segment was $14.8 million for the nine months ended September 30, 2020, an increase of $22.2 million compared to the nine months ended September 29, 2019, primarily due to additional Adjusted EBITDA from Legacy Gannett.

Corporate and other category

Corporate and other operating expenses were $44.9 million for the third quarter of 2020, an increase of $14.8 million compared to the third quarter of 2019, primarily attributable to acquired operating costs and selling, general and administrative expenses related to Legacy Gannett, an increase in integration and reorganization costs of $7.0 million and an increase in depreciation and amortization expenses of $2.2 million, partially offset by a decrease in acquisition costs of $10.3 million.

Corporate and other operating expenses were $148.5 million for the nine months ended September 30, 2020, an increase of $94.7 million compared to the nine months ended September 29, 2019, primarily attributable to acquired operating costs and selling, general and administrative expenses related to Legacy Gannett, an increase in integration and reorganization costs of $26.4 million and an increase in depreciation and amortization expenses of $10.1 million, partially offset by a decrease in acquisition costs of $5.1 million.

Non-operating expenses

Interest expense: Interest expense for the third quarter of 2020 was $58.1 million compared to $10.0 million in the third quarter of 2019. Interest expense for the nine months ended September 30, 2020 was $173.9 million compared to $30.4 million for the nine months ended September 29, 2019. The increase in interest expense for the three and nine months ended September 30, 2020 is mainly due to a higher effective interest rate and a larger debt balance compared to the same periods in the prior year.

Non-operating pension income: Non-operating pension income for the third quarter of 2020 was $18.3 million compared to $0.2 million in the third quarter of 2019. Non-operating pension income for the nine months ended September 30, 2020 was $54.4 million compared to $0.6 million for the nine months ended September 29, 2019. The increase in non-operating pension income during the three and nine months ended September 30, 2020 was due primarily to the increased expected return on plan assets held by the GRP in excess of interest costs on benefit obligations compared to the three and nine months ended September 29, 2019.

Gain on sale of investments: Gain on sale of investments was $7.8 million and $8.0 million for the three and nine months ended September 30, 2020, respectively, compared to none for the same periods in the prior year. The increase during the three and nine months ended September 30, 2020 was primarily attributable to the disposal of a cost method investment held by the Marketing Solutions segment.



Other non-operating items, net: Our non-operating items, net, are driven by certain items that fall outside of our normal business operations. Non-operating items, net, consisted of $2.6 million in income for the third quarter of 2020 compared to none for the third quarter of 2019. Non-operating items, net, consisted of $7.0 million in income for the nine months ended September 30, 2020 compared to $0.2 million in income for the nine months ended September 29, 2019.

Income tax expense (benefit)

The following table outlines our pre-tax net income (loss) and income tax amounts:
 Three months ended Nine months ended
In thousandsSeptember 30, 2020 September 29, 2019 September 30, 2020 September 29, 2019
Pre-tax net income (loss)$(28,350) $(11,742) $(572,085) $(20,779)
Income tax expense (benefit)3,098
 7,226
 (22,200) 4,929
Effective tax rate***
 ***
 3.9% ***
*** Indicates a percentage that is not meaningful.

For the three months ended September 30, 2020March 31, 2021, Corporate and September 29, 2019 our effective income tax rate on the Pre-tax net loss was not meaningful. For the nine months ended September 30, 2020, our effective income tax rate on Pre-tax net loss was 3.9% and was not meaningful for the nine months ended September 29, 2019.

The provision for income taxes forother operating revenues were $3.1 million compared to $3.0 million in the three months ended September 30, 2020 was mainly impacted by a reduction in the year to date tax benefit as a resultMarch 31, 2020.


32
Table of a lower projected annualized effective tax rate. The provision for income taxes forContents

For the three months ended September 30, 2020 was calculated usingMarch 31, 2021, Corporate and other operating expenses decreased $20.3 million compared to the estimated annual effective tax rate of 6.2%. The estimated annual effective tax rate is based on a projected tax benefit for the full year. The tax benefit for the ninethree months ended September 30, 2020 is lower thanMarch 31, 2020. The following table provides the 21% statutory Federal ratebreakout of the decrease in Corporate and Other operating expenses:

Three months ended March 31,
In thousands20212020Change% Change
Operating expenses:
Operating costs$3,956 $5,749 $(1,793)(31)%
Selling, general and administrative expenses14,269 29,949 (15,680)(52)%
Depreciation and amortization3,887 3,736 151 4 %
Integration and reorganization costs5,912 13,557 (7,645)(56)%
Other operating expenses10,576 5,969 4,607 77 %
Net loss on sale or disposal of assets65 42 23 55 %
Total operating expenses$38,665 $59,002 $(20,337)(34)%

For the three months ended March 31, 2021, Corporate and other operating expenses decreased $20.3 million due to a decrease in Selling, general and administrative expenses of $15.7 million, mainly consisting of cost containment initiatives, a decrease in Integration and reorganization costs of $7.6 million, driven by a decrease in severance of $7.5 million due to the impactabsence of non-deductible asset impairments, non-deductible officers’ compensation andcosts that were incurred in the creation of valuation allowances on non-deductible interest expense carryforwards and capital losses.

Our effective tax rate for the three and nine months ended September 30, 2020 was higher than the effective tax rate for the three and nine months ended September 29, 2019, due to non-deductible asset impairments, non-deductible officers’ compensation and the creation of valuation allowances on non-deductible interest carryforwards and capital losses.

The CARES Act was enacted on March 27, 2020. The Company will realize a tax benefit attributable to the legislation which permits a refund of tax benefits from earlier years. The legislation also allows the Company to defer certain employer payroll tax payments in 2020 to the end of 2021 and 2022. Finally, the Company is pursuing Employee Retention Tax Credits as provided under the CARES Act. The Company continually monitors guidance from the U.S. Department of the Treasury (the "Treasury") and the Internal Revenue Service to determine whether additional tax benefits are available from this legislation and similar stimulus efforts.

The Tax Cuts and Jobs Act of 2017 (“TCJA”) revised business interest expense limitations under I.R.C. Section 163(j) such that business interest deductions are not allowed in amounts exceeding prescribed percentages of EBITDA for tax years beginning before January 1, 2022. For tax years beginning after January 1, 2022, deductible interest cannot exceed prescribed percentages of EBIT. Unused business interest deductions are carried forward and recorded as deferred tax assets. The Company has evaluated the potential utilization of such carryforward deferred tax assets and determined full valuation allowances are appropriate as future utilization is uncertain.

Net loss attributable to Gannett and diluted loss per share attributable to Gannett

Net loss attributable to Gannett was $31.3 million and diluted loss per share attributable to Gannett per share was $0.24 for the thirdfirst quarter of 2020 comparedrelated to net loss attributableacquisition-related synergies and the consolidation of the business due to the acquisition of Legacy Gannett of $18.5 million and diluted loss per share attributable to Gannett per share of $0.31 forin the thirdfourth quarter of 2019. The change reflectsThese decreases were offset by an increase in Other operating expenses of $4.6 million, which included $10.2 million of third-party fees related to the various items discussed above. Net loss attributable to Gannett was $548.3 million and diluted loss per share attributable to Gannett per share was $4.17 for the nine5-Year Term Loan (defined below) expensed during three months ended September 30, 2020March 31, 2021 compared to net loss attributable to Gannett$6.0 million of $24.8 million and diluted loss per share attributable to Gannett per share of $0.41 forAcquisition costs incurred during the ninethree months ended September 29, 2019. The change reflects the various items discussed above.March 31, 2020.


LIQUIDITY AND CAPITAL RESOURCES

LiquidityOur primary cash requirements are for working capital, debt obligations, and capital resourcesexpenditures.

OurWe expect to fund our operations whichthrough cash provided by operating activities. We expect we will have historically generated strong positive cash flow, are expected to provide sufficientadequate capital resources and liquidity together with cash on hand, to meet our ongoing liquidity requirements, primarily operating expenses, interest expenseworking capital needs, borrowing obligations, and all required capital expenditures.

Details of our cash flows are included in the table below:
Three months ended March 31,
In thousands20212020
Net cash provided by operating activities$61,316 $60,489 
Net cash provided by (used for) investing activities2,516 (3,419)
Net cash used for financing activities(74,699)(14,679)
Effect of currency exchange rate change on cash314 1,554 
(Decrease) increase in cash, cash equivalents and restricted cash$(10,553)$43,945 
 Nine months ended
In thousandsSeptember 30, 2020 September 29, 2019
Net cash provided by operating activities$74,280
 $98,530
Net cash used for investing activities(1,979) (46,633)
Net cash used for financing activities(37,471) (72,898)
Effect of currency exchange rate change on cash439
 —
Increase (decrease) in cash, cash equivalents and restricted cash$35,269
 $(21,001)


Operating cashCash flows

provided by operating activities: Our largest source of cash provided by our operations is Advertising revenues primarily generated from Local and national advertising and marketing services revenues generated primarily from local and national Print advertising revenues, including retail,(retail, classified, and online and Digital advertising and marketing services revenues.online). Additionally, we generate cash through circulation subscribers, commercial printing and delivery services to third parties, and events. Our primary uses of cash from our operating activities include compensation, newsprint, delivery, and outside services.

Our net cash flow provided by operating activities was $74.3$61.3 million for the first ninethree months of 2020, a decrease of $24.3 millionended March 31, 2021, compared to net cash provided by operating activities of $60.5 million for the first ninethree months of 2019.ended March 31, 2020. The decreaseincrease in net cash flow fromprovided by operating activities was primarily due to an increase in working capital of $15.1 million due to the overall timing of payments and receipts and a decrease in severance payments of $9.9 million, partially offset by an increase in interest paid on the ApolloAcquisition Term Loan of $153.5$13.0 million, an increase in severance payments of $62.5 million and an increase in contributions to our pension and other postretirement benefit plans of $18.9$12.4 million partially offset by an increaseand a decrease in tax refunds of $5.6$1.0 million.


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Cash flows provided by (used for) investing activities: Cash flows provided by investing activities totaled $2.5 million and an increase in working capital attributablefor the three months ended March 31, 2021 compared to the merger with Legacy Gannett in November 2019.

Investing cash flows

Cash flows$3.4 million used for investing activities totaled $2.0 million forin the first ninethree months of 2020,ended March 31, 2020. This increase was primarily consisting ofdue to a decrease in purchases of property, plant and equipment of $28.9 million, partially offset by proceeds from sale of real estate and other assets of $26.2$6.2 million.

Cash flows used for investing activities totaled $46.6 million for the first nine months of 2019, primarily consisting of payments for acquisitions, net of cash acquired, of $49.7 million and capital expenditures of $7.3 million, partially offset by proceeds from sales of real estate and other assets of $10.3 million.

Financing cash flows

financing activities:Cash flows used for financing activities totaled $37.5$74.7 million for the first ninethree months of 2020, primarily consisting of repayments of borrowings under the Apollo Term Loan of $27.6 million, deferred payments for acquisitions of $7.5 million and $2.0 million in payments for employee taxes withheld from stock awards.

Cash flows used for financing activities totaled $72.9ended March 31, 2021 compared to $14.7 million for the first ninethree months ended March 31, 2020. This increase was primarily due to an increase in net repayments under term loans of 2019, primarily consisting of the$26.1 million and payments of dividendsdebt issuance costs of $68.9 million and repayments of borrowings under the term loans $11.3 million and $0.7 million in payments for employee taxes withheld from stock awards, partially offset by net borrowings under the revolving credit facility of $8.0$33.9 million.

ApolloSenior Secured 5-Year Term Loan

In November 2019, pursuant to the acquisition of Legacy Gannett, the CompanyOn February 9, 2021, we entered into a five-year, senior-secured term loan facility with Apollo Capital Management, L.P. ("Apollo")the lenders from time to time party thereto and Citibank, N.A., as collateral agent and administrative agent for the lenders, in an aggregate principal amount of approximately $1.8$1.045 billion (the "Apollo"5-Year Term Loan"). The Apollo5-Year Term Loan which matures on November 19, 2024, generallyFebruary 9, 2026 and, at the Company's option, bears interest at the rate of 11.5%the London Interbank Offered Rate plus a margin equal to 7.00% per annum or an alternate base rate plus a margin equal to 6.00% per annum. OriginationAccordingly, we are required to dedicate a substantial portion of cash flow from operations to fund interest payments.

The proceeds from the 5-Year Term Loan were used to repay the remaining principal balance and accrued interest of $1.043 billion and $13.3 million, respectively, on the Acquisition Term Loan (the "Payoff") and to pay fees totaled 6.5%and expenses incurred to obtain the 5-Year Term Loan.

There were certain lenders that participated in both the Acquisition Term Loan and the new 5-Year Term Loan and their balances in the Acquisition Term Loan were deemed to be modified. The Company will continue to defer, over the new term, the deferred financing fees and original issue discount from the Acquisition Term Loan of $1.5 million and $34.7 million, respectively, related to those lenders. Further, certain lenders in the Acquisition Term Loan did not participate in the new 5-Year Term Loan and their balances in the Acquisition Term Loan were deemed to be extinguished. As a result, the Company recognized a Loss on early extinguishment of debt of $17.2 million as a result of the total principal amountwrite-off of the remaining original issue discount and deferred financing at closing. Pursuantfees related to those lenders. Third party fees of approximately $13.0 million were allocated to the new lenders in the 5-Year Term Loan on a pro-rata basis, and $20.9 million of original issue discount were capitalized and will be amortized over the term of the 5-Year Term Loan using the effective interest method. Third party fees of $10.2 million, that were allocated to the lenders whose balances were deemed to be modified, were expensed and recorded in Other operating expenses in the condensed consolidated statements of operations and comprehensive income (loss) for the three months ended March 31, 2021.



agreement, Apollo has the right to designate two individuals to attend BoardThe 5-Year Term Loan will amortize in equal quarterly installments at a rate of Directors meetings as non-fiduciary and non-voting observers and participants. In addition,10% per annum (or, if the total gross leverage ratio exceeds certain thresholds, Apollo hasof Total Indebtedness secured on an equal priority basis with the right5-Year Term Loan (net of Unrestricted Cash) to appoint up to two voting directors. As of September 30, 2020, the total gross leverage ratio exceeded certain thresholds, whereby Apollo has the right to appoint one voting director. Upon the occurrence and during the continuance of an Event of DefaultConsolidated EBITDA (as such terms are defined in the Apollo5-Year Term Loan) is equal to or less than a specified ratio, 5% per annum) (the "Quarterly Amortization Installment"), beginning September 30, 2021. In addition, we will be required to repay the interest rate increases by 2.0%.

The Apollo5-Year Term Loan contains customary covenantsfrom time to time with (i) the proceeds of non-ordinary course asset sales and casualty and condemnation events, (ii) the proceeds of default, includingindebtedness that is not otherwise permitted under the 5-Year Term Loan and (iii) the aggregate amount of cash and cash equivalents on hand in excess of $100 million at the end of each fiscal year. The 5-Year Term Loan is subject to a covenant that the Companyrequirement to have at least $20 million ofminimum unrestricted cash onof $30 million as of the last day of each fiscal quarter. The ApolloAs of March 31, 2021, we were in compliance with all of the covenants and obligations under the 5-Year Term Loan.

As of March 31, 2021, we had $1.036 billion in aggregate principal outstanding under the 5-Year Term Loan with an effective interest rate of 9.4%.

Senior Secured Convertible Notes due 2027

On November 17, 2020, the Company entered into an Exchange Agreement with certain of the lenders (the "Exchanging Lenders") under the Acquisition Term Loan pursuant to which the Company and the Exchanging Lenders agreed to exchange $497.1 million in aggregate principal amount of the Company’s newly issued 6.0% Senior Secured Convertible Notes due 2027 (the "2027 Notes") for the retirement of an equal amount of term loans under the Acquisition Term Loan (the "Exchange"). The 2027 Notes were issued pursuant to an Indenture (the "Indenture") dated as of November 17, 2020, between the Company and U.S. Bank National Association, as trustee. The Indenture, as supplemented by the Second Supplemental Indenture, includes affirmative and negative covenants that are substantially consistent with the 5-Year Term Loan, as well as customary events of default.


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In connection with the Exchange, the Company entered into an Investor Agreement with the holders of the 2027 Notes (the "Holders") establishing certain terms and conditions concerning the rights and restrictions on the Holders with respect to the Holders' ownership of the 2027 Notes.

Interest on the 2027 Notes is required topayable semi-annually in arrears. The 2027 Notes mature on December 1, 2027, unless earlier repurchased or converted. The 2027 Notes may be prepaid with (i)converted at any unrestrictedtime by the holders into cash, in excessshares of $40 millionthe Company’s Common Stock or any combination of cash and Common Stock, at the endCompany's election. The initial conversion rate is 200 shares of fiscal year 2020 and fiscal year 2021, (ii) 50%Common Stock per $1,000 principal amount of excess cash flowthe 2027 Notes, which is equal to a conversion price of $5.00 per share of Common Stock (the "Conversion Price").

The conversion rate is subject to customary adjustment provisions as provided in the Indenture. In addition, the conversion rate will be subject to adjustment in the event of any issuance or sale of Common Stock (or securities convertible into Common Stock) at a price equal to or less than the Conversion Price in order to ensure that following such issuance or sale, the 2027 Notes would be convertible into approximately 42% of the Common Stock after giving effect to such issuance or sale assuming the initial principal amount of the 2027 Notes remains outstanding.

Upon the occurrence of a "Make-Whole Fundamental Change" (as such term is defined in the ApolloIndenture), the Company will in certain circumstances increase the conversion rate for a specified period of time. If a "Fundamental Change" (as defined in the Indenture) occurs, the Company will be required to offer to repurchase the 2027 Notes at a repurchase price of 110% of the principal amount thereof.

Holders of the 2027 Notes will have the right to put up to approximately $100 million of the 2027 Notes at par on or after the date that is 91 days after the maturity date of the 5-Year Term Loan) measured atLoan.

Under the end of each fiscal quarter (beginning withIndenture, the third quarter of 2020), subjectCompany can only pay cash dividends up to a step-up to 90% of excess cash flow for each period in fiscal year 2021 or later ifan agreed-upon amount, provided the ratio of consolidated debt to EBITDA (as such terms are defined in the Apollo Term Loan) is greater than or equal to 1.00 to 1.00, and (iii) 100% of the net proceeds of any non-ordinary course asset sales. The Apollo Term Loan prohibits the payment of cash dividends prior to the thirtieth day of the second quarter of 2020, and thereafter permits payment of cash dividends up to an agreed-upon amount, provided that the ratio of consolidated debt to EBITDA (as such terms are defined therein)Indenture) does not exceed a specified threshold. As of September 30, 2020,ratio. In addition, the Indenture provides that, at any time that the Company’s Total Gross Leverage Ratio (as defined in the Indenture) exceeds 1.5 and the Company is in compliance with allapproves the declaration of a dividend, the Company must offer to purchase a principal amount of 2027 Notes equal to the proposed amount of the covenants and obligations underdividend.

Until the Apollo Term Loan.

In connection withfour-year anniversary of the Apollo Term Loan,issuance date, the Company incurredwill have the right to redeem for cash up to approximately $4.9$99.4 million of fees and expenses and $116.6 millionthe 2027 Notes at a redemption price of lender fees which were capitalized and will be amortized over the term130% of the Apollo Term Loan usingprincipal amount thereof, with such amount reduced ratably by any principal amount of 2027 Notes that has been converted by the effective interest method. holders or redeemed or purchased by the Company.

The Company is permitted to prepay the principal of the Apollo Term Loan, in whole or in part, at par plus accrued and unpaid interest, without any prepayment premium or penalty. The Apollo Term Loan is2027 Notes are guaranteed by the material wholly-ownedGannett Holdings LLC and any subsidiaries of the Company and all obligations(collectively, the "Guarantors") that guarantee the 5-Year Term Loan. The Notes are secured by the same collateral securing the 5-Year Term Loan. The 2027 Notes rank as senior secured debt of the Company and its subsidiary guarantors are or will be secured by firsta second priority lienslien on certain material real property,the same collateral package securing the indebtedness incurred in connection with the 5-Year Term Loan.

For the three months ended March 31, 2021, no shares were issued upon conversion, exercise, or satisfaction of the required conditions. Refer to Note 10 — Supplemental equity interests, land, buildings, and fixtures. The Apollo Term Loan contains customary representations and warranties, affirmative covenants, and negative covenants applicableinformation to the Companycondensed consolidated financial statements for details on the convertible debt's impact to diluted earnings per share under the if-converted method.

Senior Convertible Notes due 2024

On April 9, 2018, Legacy Gannett completed an offering of 4.75% convertible senior notes, resulting in total aggregate principal of $201.3 million and its subsidiaries, including, among other things, restrictions on indebtedness, liens, investments, fundamental changes, dispositions, dividends and other distributions, capital expenditures, and events of default. The Company used thenet proceeds of approximately $195.3 million. Interest on the Apollo Term Loan to (i) partially fundnotes is payable semi-annually in arrears. The notes mature on April 15, 2024 with our earliest redemption date being April 15, 2022. The stated conversion rate of the notes is 82.4572 shares per $1,000 in principal or approximately $12.13 per share.

The Company's acquisition of Legacy Gannett (ii) repay, prepay, repurchase, redeem, or otherwise discharge in full eachconstituted a Fundamental Change and Make-Whole Fundamental Change under the terms of the existing financing facilities (as defined inindenture governing the agreement and discussed in part below), and (iii) pay fees and expenses incurred to obtainnotes. At the Apollo Term Loan.

As of September 30, 2020,acquisition date, the Company had $1.7 billiondelivered to noteholders a notice offering the right to surrender all or a portion of their notes for cash on December 31, 2019. On December 31, 2019, we completed the redemption of $198.0 million in aggregate principal in exchange for cash.



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The $3.3 million principal value of the remaining notes outstanding underis reported as convertible debt in the Apollo Term Loan, $4.1 million of deferred financing costs, and $93.3 million of capitalized lender fees. During the three and nine months ended September 30, 2020, the Company recorded $51.0 million and $152.4 million in interest expense, respectively, $5.9 million and $17.7 million in amortization of deferred financing costs, respectively, and $0.5 million and $1.7 million for loss on early extinguishment of debt, respectively. During the three and nine months ended September 30, 2020, the Company paid interest of $51.0 million and $176.0 million, respectively.condensed consolidated balance sheets. The effective interest rate is 12.9%. As of September 30, 2020, the Company reclassified $15.2 million of the Apollo Term Loan to the Current portion of long-term debton the Condensed consolidated balance sheets, which represents 50%notes was 6.05% as of the Company's excess cash flow (as such term is defined in the Apollo Term Loan) measured at the end of the third quarter of 2020.March 31, 2021.

Additional information

We continue to evaluate the impacts of the COVID-19 pandemic on our results of operations and cash flows. As part of these measures, we have taken steps to manage cash outflow by rationalizing expenses and implementing various cost containment initiatives. These initiatives include, but are not limited to, strategic reductions in force, furloughs, and the cancellation of certain non-essential expenditures. We continue to evaluate opportunities to manage the amount and timing of significant expenditures associated with vendors, creditors, and pension regulators.

In connection with these measures, we previously announced that the Board of Directors had determined it is in the best interest of the Company to preserve liquidity by suspending the quarterly dividend until economic conditions improve.dividend. We expectpresently have no intention to reinstate the dividend, when appropriate but cannot provideand there can be no assurance if or when we will resume paying dividends on a regular basis. In addition, the terms of our indebtedness, including our credit facility, the 5-Year Term Loan, and the Indenture for the 2027 Notes have terms that restrict our ability to pay dividends.



The CARES Act, enacted March 27, 2020, provides various forms of relief to companies impacted by the COVID-19 pandemic. As part of the relief available under the CARES Act, we have enacted a plan to deferdeferred remittance of our 2020 Federal Insurance Contributions Act taxes as allowed by the legislation. The Company was able to defer $41.6 million of the employer portion of FICA taxes for payroll paid between March 27, 2020 and December 31, 2020. The Company will have until December 31, 2021, to pay 50% of the FICA deferral with the remaining 50% to be remitted on or before December 31, 2022.

For the Gannett Retirement Plan in the U.S., we have deferred our contractual contribution and negotiated a contribution payment plan of $5$5.0 million per quarter starting December 31, 2020 through the end of the September 30, 2022. Additionally, $11 million in minimum required contributions

We expect our capital expenditures for the 2019 plan year,remainder of 2021 to total approximately $37.5 million. These capital expenditures are anticipated to be primarily comprised of projects related to digital product development, maintenance of our print and technology systems, and system upgrades.

Our leverage may adversely affect our business and financial performance and restricts our operating flexibility. The level of our indebtedness and our ongoing cash flow requirements may expose us to a risk that a substantial decrease in operating cash flows due to, among other things, continued or additional adverse economic developments or adverse developments in our business, could make it difficult for us to meet the financial and operating covenants contained in our term loan. In addition, our leverage may limit cash flow available for general corporate purposes such as required by ERISA, have been deferred until January 1, 2021.capital expenditures and our flexibility to react to competitive, technological, and other changes in our industry and economic conditions generally.

Although we currently forecast sufficient liquidity, the ultimate impact of the COVID-19 pandemic remains uncertain and could have a material negative impact on the Company's liquidity and its ability to meet its ongoing obligations, including its obligations under the Apollo5-Year Term Loan. As the implications of the COVID-19 pandemic continue to evolve, we will continue to closely monitor and explore additional opportunities to appropriately manage liquidity.

Non-GAAP Financial MeasuresNON-GAAP FINANCIAL MEASURES

A non-GAAP financial measure is generally defined as one that purports to measure historical or future financial performance, financial position, or cash flows, but excludes or includes amounts that would not be so adjusted in the most comparable GAAP measure. We define

Adjusted EBITDA and use Adjusted EBITDA margin are a non-GAAP financial measure, as set forth below.

Adjusted EBITDA

measures we believe offer a useful view of the overall operation of our businesses and may be different than similarly-titled measures used by other companies. We define Adjusted EBITDA as Net income (loss) attributable to Gannett before:

(1) Income tax expense (benefit);
, (2) Interest expense;
expense, (3) Gains or losses on the early extinguishment of debt;
debt, (4) Non-operating pension income (expense), (5) Loss on Convertible notes derivative, (6) Other non-operating items, primarily pension costs;
including equity income, (7) Depreciation and amortization;
amortization, (8) Integration and reorganization costs;
costs, (9) Asset impairments;
impairments, (10) Goodwill and intangible impairments;
impairments, (11) Gains or losses on the on sale or disposal of assets;
Equity-based compensation;
Acquisition costs;
assets, (12) Share-based compensation, (13) Other operating expenses, including third-party debt expenses and acquisition costs, (14) Gains or losses on the sale of investments;investments and
Certain (15) certain other non-recurring charges. We define Adjusted EBITDA margin as Adjusted EBITDA divided by total Operating revenues.



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Management’s Useuse of Adjusted EBITDA and Adjusted EBITDA margin

Adjusted EBITDA isand Adjusted EBITDA margin are not a measurementmeasurements of financial performance under GAAP and should not be considered in isolation or as an alternative to income from operations, net income (loss), cash flow from operating activities, or any other measure of performance or liquidity derived in accordance with GAAP. We believe thisthese non-GAAP measurefinancial measures, as we have defined it isthem, are helpful in identifying trends in our day-to-day performance because the items excluded have little or no significance on our day-to-day operations. This measure providesThese measures provide an assessment of controllable expenses and affords management the ability to make decisions which are expected to facilitate meeting current financial goals as well as to achieve optimal financial performance.

Adjusted EBITDA providesand Adjusted EBITDA margin provide us with a measuremeasures of financial performance, independent of items that are beyond the control of management in the short-term, such as depreciation and amortization, taxation, non-cash impairments, and interest expense associated with our capital structure. This metric measuresThese metrics measure our financial performance based on operational factors that management can impact in the short-term, namely the cost structure or expenses of the organization. Adjusted EBITDA is one of theand Adjusted EBITDA margin are metrics we use to review the financial performance of our business on a monthly basis.

We use Adjusted EBITDA and Adjusted EBITDA margin as measures of our day-to-day operating performance, which is evidenced by the publishing and delivery of news and other media and excludes certain expenses that may not be indicative of our day-to-day business operating results.

Limitations of Adjusted EBITDA and Adjusted EBITDA margin

Adjusted EBITDA hasand Adjusted EBITDA margin have limitations as an analytical tool. ItThey should not be viewed in isolation or as a substitute for GAAP measures of earnings or cash flows. Material limitations in making the adjustments to our earnings to calculate Adjusted


EBITDA and Adjusted EBITDA margin and using thisthese non-GAAP financial measuremeasures as compared to GAAP net income (loss) include: the cash portion of interest/financing expense, income tax (benefit) provision, and charges related to impairment of property, plant and equipment,asset impairments, which may significantly affect our financial results.

A reader of our financial statements may find this itemManagement believes these items are important in evaluating our performance, results of operations, and financial position. We use non-GAAP financial measures to supplement our GAAP results in order to provide a more complete understanding of the factors and trends affecting our business.

Adjusted EBITDA isand Adjusted EBITDA margin are not an alternativealternatives to net income income from operations, or cash flows provided by or used in operationsand margin as calculated and presented in accordance with GAAP. Readers of our financial statementsAs such, they should not rely on Adjusted EBITDAbe considered or relied upon as a substitute or alternative for any such GAAP financial measure.measures. We strongly urge readers of our financial statementsyou to review the reconciliation of Net loss attributable to Gannett to Adjusted EBITDA and Adjusted EBITDA margin along with our condensed consolidated financial statements included elsewhere in this report.Quarterly Report on Form 10-Q. We also strongly urge readers of our financial statementsyou to not rely on any single financial measure to evaluate our business. In addition, because Adjusted EBITDA isand Adjusted EBITDA margin are not a measuremeasures of financial performance under GAAP and isare susceptible to varying calculations, the Adjusted EBITDA measureand Adjusted EBITDA margin measures as presented in this report may differ from and may not be comparable to similarly titled measures used by other companies.

We use Adjusted EBITDA as a measure


37
Table of our day-to-day operating performance, which is evidenced by the publishing and delivery of news and other media and excludes certain expenses that may not be indicative of our day-to-day business operating results. We consider the Gain or loss on the early extinguishment of debt to be financing related costs associated with interest expense or amortization of financing fees. Accordingly, we exclude financing related costs such as the early extinguishment of debt because they represent the write-off of deferred financing costs, and we believe these non-cash write-offs are similar to interest expense and amortization of financing fees, which by definition are excluded from Adjusted EBITDA. Such charges are incidental to, but not reflective of, our day-to-day operating performance and it is appropriate to exclude charges related to these financing activities which, depending on the nature of the financing arrangement, would have otherwise been amortized over the period of the related agreement and does not require a current cash settlement. Such charges are incidental to, but not reflective of our day-to-day operating performance of the business that management can impact in the short term.Contents

The table below shows the reconciliation of Net loss attributable to Gannett to Adjusted EBITDA for the periods presented:
Three months ended March 31,
In thousands20212020
Net loss attributable to Gannett$(142,316)$(80,152)
(Benefit) provision for income taxes(9,109)8,979 
Interest expense39,503 57,899 
Loss on early extinguishment of debt19,401 805 
Non-operating pension income(23,878)(18,489)
Loss on Convertible notes derivative126,600 — 
Other non-operating (income) expense, net(1,875)1,590 
Depreciation and amortization58,103 78,024 
Integration and reorganization costs13,404 28,254 
Other operating expenses10,576 5,969 
Asset impairments833 — 
Net loss on sale or disposal of assets4,745 657 
Share-based compensation expense3,423 11,577 
Other items1,055 3,956 
Adjusted EBITDA (non-GAAP basis)$100,465 $99,069 
Net loss attributable to Gannett margin(18.3)%(8.4)%
Adjusted EBITDA margin (non-GAAP basis)12.9 %10.4 %

 Three months ended Nine months ended
In thousandsSeptember 30, 2020 September 29, 2019 Change September 30, 2020 September 29, 2019 Change
Net loss attributable to Gannett$(31,260) $(18,463) $(12,797) $(548,305) $(24,754) $(523,551)
Income tax expense (benefit)3,098
 7,226
 (4,128) (22,200) 4,929
 (27,129)
Interest expense58,063
 10,030
 48,033
 173,890
 30,376
 143,514
Loss on early extinguishment of debt476
 —
 476
 1,650
 —
 1,650
Non-operating pension income(18,334) (208) (18,126) (54,433) (625) (53,808)
Gain on sale of investments(7,800) —
 (7,800) (7,995) —
 (7,995)
Other non-operating income, net(2,575) (22) (2,553) (6,993) (176) (6,817)
Depreciation and amortization61,355
 24,482
 36,873
 205,706
 68,733
 136,973
Integration and reorganization costs13,417
 3,136
 10,281
 73,978
 13,213
 60,765
Acquisition costs1,913
 12,181
 (10,268) 10,261
 15,318
 (5,057)
Asset impairments1,585
 —
 1,585
 8,444
 2,469
 5,975
Goodwill and intangible impairments—
 —
 —
 393,446
 —
 393,446
Loss on sale or disposal of assets795
 602
 193
 1,540
 3,339
 (1,799)
Equity-based compensation expense3,844
 691
 3,153
 22,812
 2,534
 20,278
Other items3,403
 5,251
 (1,848) 13,265
 9,697
 3,568
Adjusted EBITDA (non-GAAP basis)$87,980
 $44,906
 $43,074
 $265,066
 $125,053
 $140,013

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes during the period covered by this Quarterly Report on Form 10-Q to the information disclosed in Part II, Item 3. 7A,Quantitative and Qualitative Disclosures About Market Risk

We believe our market risk from financial instruments, such as accounts receivable and accounts payable, is not material.



We are exposed to foreign exchange rate risk due to our operations in the U.K., for which the British pound sterling is the functional currency. We are also exposed to foreign exchange rate risk due to our Marketing Solutions segment which has operating activities denominated in currencies other than the U.S. dollar, including the Australian dollar, Canadian dollar, Indian rupee, and New Zealand dollar.

Translation gains or losses affecting the Condensed consolidated statements of operations and comprehensive income (loss) have not been significant in the past.

Our cumulative foreign currency translation adjustment reported as partRisks of our equity totaled $1.6 million at September 30, 2020. No such amounts were reportedForm 10-K for the three monthsfiscal year ended September 29, 2019.December 31, 2020 (the "2020 Form 10-K").

Newsquest's assets and liabilities were translated from British pounds sterling to U.S. dollars at the September 30, 2020 exchange rate of 1.29. Newsquest's financial results were translated at an average rate of 1.27 for the first nine months of 2020.

If the price of the British pound sterling against the U.S. dollar had been 10% more or less than the actual price, operating income would have increased or decreased approximately $10.9 million for the first nine months of 2020. In addition, a 10% fluctuation in each of ReachLocal's currencies relative to the U.S. dollar would have increased or decreased operating income by approximately $0.4 million for the first nine months of 2020.

ItemITEM 4. Controls and ProceduresCONTROLS AND PROCEDURES

Based on their evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) were not effective because of the previously reported material weakness in internal control over financial reporting, which we describe in partPart II, Item 9A,Controls and Procedures of our Annual Report on2020 Form 10-K for the year ended December 31, 2019 ("2019 Form 10-K").

Remediation of Material Weakness

We continue to implement our remediation plan for the previously reported material weakness in internal control over financial reporting, described in Part II, Item 9A of our 20192020 Form 10-K, which includes steps to prioritize dedicated personnel, improve reporting processes,organizational enhancements, design enhancements, training, utilizing external resources and enhanceintegration of related supporting technology. We are committed to maintaining a strong internal control environment and implementing measures designed to help ensure that control deficiencies contributing to the material weakness are remediated as soon as possible. We will consider the material weakness remediated after the applicable controls operate for a sufficient period of time, and management has concluded, through testing, that the controls are operating effectively.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting or in other factors during the fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

As a result of the COVID-19 pandemic, most of our workforce has shifted to a primarily work-from-home environment since March 2020. The change to remote working was rapid and while pre-existing controls were not specifically designed to operate in our current work-from-home operating environment, we believe that our internal control over financial reporting was not materially impacted. We are continually monitoring and assessing the COVID-19 pandemic's effect on our internal controls to minimize the impact on their design and effectiveness.


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Table of Contents

PART II. OTHER INFORMATION

ItemITEM 1. Legal ProceedingsLEGAL PROCEEDINGS

Except as disclosed in Note 1312 — Commitments, contingencies and other matters, there have been no material developments with respect to our potential liability for legal and environmental matters previously reported in our 2019 Form 10-K.10-K for the fiscal year ended December 31, 2020.

ItemITEM 1A. Risk FactorsRISK FACTORS



You should carefully consider the following risks and other information in this Quarterly Report on Form 10-Q in evaluating us and our Common Stock. Any of the following risks could materially and adversely affect our results of operations, financial condition, our abilityThere have been no material changes to make distributions on our Common Stock and the market price of our Common Stock. For ease of review, the risk factors generally have been grouped into categories, but many of the risks described in a given category relate to multiple categories.

Risks Related to Our Acquisition and Integration of Legacy Gannett

We may not achieve the intended benefits of the acquisition of Legacy Gannett.

We completed the acquisition of Legacy Gannett in November 2019, and there can be no assurance that we will be able to realize the expected benefits of the transaction.

There are many challenges associated with integrating a material acquisition, such as our acquisition of Legacy Gannett, including the integration of executive and other employee teams with historically different cultures and priorities; the coordination of personnel located across multiple geographic locations; retaining key management and other employees; consolidating corporate and administrative infrastructures and eliminating duplicative operations; the diversion of management’s attention from ongoing business concerns; retaining existing business and operational relationships, including customers, suppliers and other counterparties, and attracting new business and operational relationships; unanticipated issues in integrating information technology, communications and other systems; as well as unforeseen expenses associated with the acquisition. These and other challenges could result in unanticipated operational challenges and the failure to realize anticipated synergies in the expected timeframe or at all.

If we fail to realize anticipated synergies in the amount and within the timeframe expected, our actual financial condition and results of operations may differ materially from the illustrative financial information disclosed in connection with the acquisition, which was based on various assumptions and estimates that may prove to be incorrect. Such illustrative financial information did not constitute management’s projections of future financial performance or results of operations; however, any material variance from such illustrative financial information could result in negative investor reactions that materially and adversely affect the market pricePart I, Item 1A, Risk Factors of our Common Stock.

Our actual financial condition and results of operations may differ materially even if synergies are realized, due to macroeconomic and other external factors or a variety of other risks to our business that are independent of the acquisition.

Our future results will suffer if we do not effectively manage our expanded operations.

With completion of the Legacy Gannett acquisition, the size of our business has increased significantly. Our continued success depends, in part, upon our ability to manage this expanded business, which poses substantial challenges for management, including challenges related to the management and monitoring of new operations and associated increased costs and complexity. We cannot assure you that we will be successful or that we will realize the expected operating efficiencies, cost savings, and other benefits from the combined business that we currently anticipate.

The diversion of resources and management’s attention to the integration of Legacy Gannett could adversely affect our day-to-day business.

The integration of Legacy Gannett places a significant burden on our management and internal resources. The diversion of management’s attention away from day-to-day business concerns and any difficulties encountered in the transition and integration process could adversely affect our financial results.

We incurred a substantial amount of indebtedness in connection with the Legacy Gannett acquisition, which could materially and adversely affect our business.

In November 2019, pursuant to the acquisition of Legacy Gannett, the Company entered into a five-year, senior-secured term loan facility with Apollo Capital Management, L.P. ("Apollo") in an aggregate principal amount of approximately $1.8 billion. The term loan facility matures on November 19, 2024 and generally bears interest at the rate of 11.5% per annum. Accordingly, we are required to dedicate a substantial portion of cash flow from operations to fund interest payments. In addition, we are required to repay our credit facility from time to time with (i) the proceeds of non-ordinary course asset sales and casualty and condemnation events, (ii) a percentage of excess cash flow (ranging from 50% to 90%, depending on the current leverage ratio), and (iii) any unrestricted cash at the end of the 2020 and 2021 fiscal years in excess of $40 million. Our


debt service obligations reduce the amount of cash flow available to fund our working capital, capital expenditures, investments and potential distributions to stockholders. Moreover, there can be no assurance that we will be able to generate sufficient cash flow to satisfy our debt service obligations. Our ability to satisfy our debt service obligations depends on our ability to generate cash flow from operations, which is subject to a variety of risks, including general economic conditions and the strength of our competitors, which are outside our control.

We have stated our intention to refinance our indebtedness prior to maturity on more favorable terms, but there can be no assurance that we will be able to do so. Our ability to achieve more favorable terms would likely require us to substantially reduce our total outstanding indebtedness relative to current levels. Our ability to prepay our existing indebtedness is highly dependent on both the strength of our cash flow from operations as well as our ability to generate significant proceeds from sales of real estate, the timing and amount of which is highly uncertain. In addition, any refinancing would depend upon the condition of the finance and credit markets.

The terms of our indebtedness impose significant operating and financial restrictions on us. Our credit facility requires us to comply with numerous affirmative and negative covenants, including a requirement to maintain minimum liquidity of $20 million, and restrictions limiting our ability to, among other things, incur additional indebtedness, make investments and acquisitions, pay certain dividends, sell assets, merge, incur certain liens, enter into agreements with its affiliates, make capital expenditures, change our business, engage in sale/leaseback transactions, and modify our organizational documents. With respect to dividends, we can only pay cash dividends up to an agreed-upon amount, provided the ratio of consolidated debt to EBITDA (as such terms are defined in the credit facility) does not exceed a specified ratio. Stockholders also should be aware that they have no contractual or other legal right to dividends that have not been declared.

A failure to satisfy our debt service obligations, a breach of a covenant in our credit facility, or a material breach of a representation or warranty in our credit facility, among other events specified in the credit facility, could give rise to a default, which could give rise to the right of our lenders to declare our indebtedness, together with accrued interest and other fees, to be immediately due and payable. An acceleration of our indebtedness would have a material adverse effect on our business, financial condition, results of operations, cash flows and stock price.

One of our lenders, Apollo, has the right to appoint representatives to our Board, and Apollo’s interests may conflict with those of our stockholders.

Our credit facility grants Apollo the right to appoint two board observers to our Board. In the event that the ratio of consolidated debt to EBITDA (as such terms are defined in the term loan facility) drops below certain specified thresholds, Apollo will have the right to appoint up to two voting directors (who must be reasonably acceptable to us) in lieu of such board observer(s). The interests of Apollo, as a lender under our credit facility, may conflict with those of our stockholders.

Risks Related to Competition from Digital Media

Our business currently relies on sources of revenue that have been, and likely will continue to be, negatively affected by digital commerce and media.

In recent years, we have experienced declining revenue (on a same-store basis). The majority of our revenue is from (i) advertising and marketing services and (ii) paid circulation (in each case, both in print and digital mediums). Print advertising alone accounted for approximately 26% of our total revenue for the three and nine months ended September 30, 2020.

To date, our revenue declines have been driven primarily by a pronounced decline across all categories of print advertising revenue (national, local and classified) related to the rise of digital media and commerce. Media companies generally charge much lower rates for digital advertising than for print advertising due to the range of advertising choices across digital products and platforms and the large inventory of available digital advertising space, and mobile advertising rates typically are even lower than desktop digital rates. Additionally, brick-and-mortar businesses are significant consumers of print advertising and with the rise of digital commerce many of these types of businesses have, and continue to, close retail outlets, which adversely affects the demand for print advertising.

Circulation revenue has been affected to a lesser extent, but more marked future declines in circulation revenue are possible. Revenue from paid circulation is a function of the volume of subscribers and the price of subscriptions. In recent years, we have experienced significant declines in the number of subscribers to our newspapers, as a result of competition from digital media and the demographic shift of traditional print newspaper readers getting older while younger generations tend to consume media through digital platforms. We have also focused on growing the volume of digital subscribers, but there can be no assurance that


we will be able to grow, or even retain, our current digital subscriber volume, especially at rates similar to the rates we are able to charge for our print products.

Declining subscriber volume can also lead to more marked declines in advertising revenue. Print subscriber volume declines directly impact preprint and other print revenues that are linked to number of subscribers. In terms of digital advertising revenues, news aggregation websites and customized news feeds (often free to users) reduce traffic on our websites and related digital advertising revenues. These types of websites also compete with us in selling digital only subscriptions to our websites which reduces our ability to monetize our content digitally. If traffic levels stagnate or decline, and/or print subscriber volume continues to decline, we may not be able to maintain or increase the advertising rates or attract new advertising customers.

We also generate revenue from a commercial printing and distribution business that manage printing and distribution of publications for third parties, which generated approximately 2% of our revenue in the third quarter 2020, or approximately 2% of our revenue in the nine months ended September 30, 2020. Our commercial and/or printing businesses could also be adversely affected by the same secular trends that are affecting our core advertising and circulation revenues. These third parties are experiencing the same print volume declines our business experiences and as such our commercial printing and distribution revenues could experience declines in the future. In addition, our relationships with these third parties are generally pursuant to short-term contracts, and a decision by any of the three largest national publications or the major local publications to cease publishing in those markets or seek alternatives to their current business practice of partnering with us could have an additional adverse effect on our revenue trends.

For all of the foregoing reasons, we may experience persistent declines in revenue, which could adversely affect our results of operations and financial condition, our ability to make distributions on our Common Stock and the market price of our Common Stock.

We may be unsuccessful in our efforts to stabilize revenue trends.

We have focused on offsetting traditional print advertising and circulation revenue declines in part by diversifying our sources of revenue through the development and acquisition of complementary businesses with growth potential. For example, our business UpCurve offers a suite of technology solutions to small- and medium-sized businesses (SMBs) and GateHouse Live produces local events. With the acquisition of Legacy Gannett, we expanded our digital marketing solutions businesses to include ReachLocal and WordStream.

There can be no assurance that we will be able to grow revenue from these or other complementary businesses we may develop internally or acquire, or that any revenue generated by new business lines will be adequate to offset revenue declines from our legacy businesses. For example, technological developments could adversely affect the availability, applicability, marketability and profitability of the suite of SMB services we offer. Technological developments and any changes we make to our business strategy may require significant capital investments, and such investments may be restricted by our current credit facility.

These complementary businesses also face competition from various digital media providers, such as Google and Yahoo!, who may have more resources to invest in product development and marketing. Our salesforce may not be able to utilize the relationships we have throughout our local property network to effectively sell these products. If we are unable to diversify our traditional revenues with revenues from complementary businesses, we may experience persistent declines in revenue which could adversely affect our results of operations and financial condition, our ability to make distributions on our Common Stock and the market price of our Common Stock.

Our ReachLocal business purchases most of its media from Google, and its business could be adversely affected if Google takes actions that are adverse to our interests or if we fail to meet advertiser or spend targets necessary for receiving rebates from Google. WordStream also derives significant revenue from customer spend on Google media. Similar actions from Yahoo!, Microsoft, Facebook and other media providers also could adversely affect these businesses.

Most of ReachLocal and WordStream's cost of sales relates to the purchase of media, and a substantial majority of the media it purchases is from Google. In addition, a substantial portion of WordStream's revenue consists of rebates from Google for achieving certain advertiser or spend targets. Google accounts for a large majority of all U.S. searches, and Google's share in certain foreign markets is often even greater. As a result, we expect our ReachLocal and WordStream businesses will depend upon media purchases and rebates from Google for the foreseeable future. This dependence makes that business vulnerable to actions Google may take to change the manner in which it sells AdWords, provides rebates to us, or conducts its business. In addition, any new developments or rumors of developments regarding Google's business practices that affect the local online advertising industry may adversely affect our products or create perceptions with clients that our ability to compete in the online


marketing industry has been impaired. These risks also apply to other publishers with whom we do business, including Yahoo!, Facebook and Microsoft, though to a lesser degree.

Risks Related to Macroeconomic Factors

Our ability to generate revenue is highly sensitive to the strength of the economies in which we operate and the demographics of the local communities that we serve.

Our advertising revenues and, to a lesser extent, circulation revenues, depend upon a variety of factors specific to the communities that our publications serve. These factors include, among others, the size and demographic characteristics of the local population, local economic conditions in general and the economic condition of the retail segments of the communities that our publications serve. The effects of the COVID-19 pandemic, including mandatory business closures, have generally worsened the economic condition of many retail segments. If the local economy, population or prevailing retail environment of a community we serve experiences a downturn, our publications, revenues and profitability in that market could be adversely affected. Our advertising revenues are also susceptible to negative trends in the general economy that affect customer spending. The advertisers in our newspapers and other publications and related websites are primarily retail businesses that can be significantly affected by regional or national economic downturns and other developments. For example, many traditional retail companies continue to face greater competition from online retailers and face uncertainty in their businesses, which has reduced and may continue to reduce their advertising spending. Declines in the U.S. economy could also significantly affect key advertising revenue categories, such as help wanted, real estate, and automotive. The effects of the COVID-19 pandemic have generally exacerbated these circumstances.

We expect the COVID-19 pandemic to have a material negative impact on our business and results of operations in the near term, and possibly longer.

While we are generally exempt from governmental mandates requiring closures of non-essential businesses in response to the COVID-19 pandemic, actions taken to mitigate the pandemic could materially and adversely affect our business. Our ability to generate revenue is highly sensitive to the strength of the economies in which we operate, and actions taken to mitigate the COVID-19 pandemic, including widespread business closures and social distancing measures, could lead to an economic recession. During the first nine months of 2020, we experienced revenue and profitability declines in connection with the COVID-19 global pandemic. Since March 2020, we have experienced decreasing demand for our advertising and digital marketing services as well as reductions in the single copy and commercial distribution of our newspapers. Declining revenue may impair our ability to generate sufficient cash flows to service our term loan facility with Apollo. Accordingly, the COVID-19 pandemic has had the effect of heightening various risks described in this Form 10-Q.

While we have implemented, and continue to implement, measures intended to reduce costs and preserve cash flow in response to COVID-19 pandemic (including, but not limited to, employee furloughs, decreases in employee compensation and reductions in discretionary spending), there can be no assurance that we will be able to offset the negative impacts of the pandemic and that we will have sufficient cash flow to satisfy our commitments. Moreover, such measures, and further measures we may implement in the future in response to the COVID-19 pandemic, may negatively impact our reputation and our ability to attract and retain employees. See "Risks Related to Pension Obligations and Employees" below.

In the long-term, the ultimate impact of the COVID-19 pandemic on our business and results of operations will depend on the severity and length of the pandemic, the duration, effectiveness, and extent of the mitigation measures and governmental actions designed to combat the pandemic, as well as changes in customer behavior as a result of the pandemic, all of which are highly uncertain. A prolonged duration of the COVID-19 pandemic and mitigation measures could have a material negative impact on our business and results of operations.

Uncertainty and adverse changes in the general economic conditions of markets in which we participate, including due to the recent COVID-19 pandemic, may continue to negatively affect our business.

Current and future conditions in the economy have an inherent degree of uncertainty, which has been magnified by the recent COVID-19 pandemic. As a result, it is difficult to estimate the level of growth or contraction for the economy as a whole. It is even more difficult to estimate growth or contraction in various parts, sectors and regions of the economy, including the markets in which we participate. In particular, the COVID-19 pandemic and related measures to contain its spread have created significant volatility and economic uncertainty, which is expected to continue in the near term. In addition, advertisers may respond to such uncertainty by reducing their budgets or shifting priorities or spending patterns, which could have a material adverse impact on our business.



Adverse changes may also occur as a result of weak global economic conditions, declining oil prices, wavering customer confidence, increasing unemployment, volatility in stock markets, contraction of credit availability, declines in real estate values, natural disasters, or other factors affecting economic conditions in general. These changes may negatively affect the sales of our products, increase exposure to losses from bad debts, increase the cost and decrease the availability of financing, or increase costs associated with publishing and distributing our publications.

The collectability of accounts receivable under adverse economic conditions could deteriorate to a greater extent than provided for in our financial statements and in our projections of future results.

Adverse economic conditions in the U.S. may increase our exposure to losses resulting from financial distress, insolvency and the potential bankruptcy of our advertising customers. We recorded write-offs of accounts receivable relating to recent bankruptcies of national retailers. Our accounts receivable is stated at net estimated realizable value, and our allowance for doubtful accounts has been determined based on several factors, including receivable agings, significant individual credit risk accounts and historical experience. If such collectability estimates prove inaccurate, adjustments to future operating results could occur.

Risks Related to International Operations

We may be unsuccessful in managing our international operations.

Newsquest operates in the U.K., and ReachLocal has international sales operations in Australia, New Zealand and Canada, as well as campaign support services in India. Revenue from Newsquest accounted for 6% of our Publishing segment's total revenue for the three months ended September 30, 2020 and 6% of our Publishing segment's total revenue for the nine months ended September 30, 2020. Revenue from international operations outside North America accounted for 10% of our Marketing Solutions segment's total revenue for the three months ended September 30, 2020 and 9% of our Marketing Solutions segment's total revenue for the nine months ended September 30, 2020. Our ability to manage these international operations successfully is subject to numerous risks inherent in foreign operations, including:

Challenges or uncertainties arising from unexpected legal, political, or systemic events, including the global COVID-19 pandemic;
Difficulties or delays in developing a network of clients in international markets;
Restrictions on the ability of U.S. companies to do business in foreign countries;
Different legal or regulatory requirements, including with respect to internet services, privacy and data protection, censorship, banking and money transmitting, and selling, which may limit or prevent the offering of our products in some jurisdictions or otherwise harm our business;
International intellectual property laws that may be insufficient to protect our intellectual property or permit us to successfully defend our intellectual property in international lawsuits;
Different employee/employer relationships and the existence of workers' councils and labor unions, which could make it more difficult to terminate underperforming salespeople;
Difficulties in staffing and managing foreign operations;
Difficulties in accounts receivable collection;
Currency fluctuations and price controls or other restrictions on foreign currency;
Potential adverse tax consequences including difficulties in repatriating earnings generated abroad; and
Lack of infrastructure to adequately conduct electronic commerce transactions.

Any of the foregoing factors could adversely impact our international operations, which could harm our overall business, operating results, and financial condition.

Foreign exchange variability could materially and adversely affect our consolidated operating results.

Our financial statements are denominated in U.S. dollars. Newsquest operates in the U.K., and its operations are conducted in foreign currency, primarily the British pound sterling. Weakening in the British pound sterling to U.S. dollar exchange rate has in the past, and could in the future, diminish Newsquest's contributions to our results of operations. In addition, ReachLocal conducts operations in several foreign jurisdictions. If the value of currency in any of those jurisdictions weakens as compared with the U.S. dollar, ReachLocal’s operations in those jurisdictions similarly will contribute less to our results.

The U.K. vote to leave the European Union could adversely impact our business, results of operations, and financial condition.



The U.K. left the European Union on January 31, 2020 (“Brexit”) and is now in a transition period through December 31, 2020. Although the U.K. will remain in the European Union single market and customs union during the transition period, the nature of the future relationship between the U.K. and the remaining European Union countries following the transition period has yet to be agreed, and negotiations with the European Union on the terms of Brexit have demonstrated the difficulties that exist in reaching such an agreement. Depending on the terms of the negotiations, the U.K. could also lose access to the single European Union market and to the global trade deals negotiated by the European Union on behalf of its members. Such a decline in trade could affect the attractiveness of the U.K. as a global investment center and, as a result, could have a detrimental impact on economic growth in the country. Furthermore, regardless of the form of any withdrawal agreement, there are likely to be changes in the legal rights and obligations of commercial parties across all industries following Brexit, and British regulatory requirements once outside the European Union could be subject to significant change. Any of the foregoing could result in an economic downturn in Newsquest’s markets, which could depress the demand for our products and services.

The enactment of a Digital Services Tax in the U.K. may impact future results.

On July 22, 2020, a Digital Services Tax ("DST") was enacted in the United Kingdom. This 2% tax is effective April 1, 2020. The DST applies to gross revenue of specified digital business models deriving value from participation of their U.K.-based users. While the tax is intended to apply to search engines, social media platforms, and online marketplaces, it may be applied to online advertising when users of our publications receive advertising based on their participation with the publications. If that is the case, we may have to pay additional cash taxes, which could adversely affect our results of operations, financial condition, and cash flows.


Additional Risks Related to Our Business

Our business is subject to seasonal and other fluctuations, which affects our revenues and operating results.

Our business is subject to seasonal fluctuations that we expect to continue to be reflected in our operating results in future periods. Our first fiscal quarter of the year tends to be our weakest quarter because advertising volume is at its lowest levels following the December holiday season. Correspondingly, our second and fourth fiscal quarters tend to be our strongest because they include heavy holiday and seasonal advertising. Other factors that affect our quarterly revenues and operating results may be beyond our control, including changes in the pricing policies of our competitors, the hiring and retention of key personnel, wage and cost pressures, distribution costs, changes in newsprint prices and general economic factors.

The value of our intangible assets may become impaired, which could adversely affect future reported results of operations and stockholders’ equity

Our goodwill and indefinite-lived assets (mastheads) are subject to annual impairment testing, and more frequent testing upon the occurrence of certain events or significant changes in our circumstances, to determine whether the fair value of such assets is less than their carrying value. In such case, a non-cash charge to earnings may be necessary in the relevant period, which could adversely affect future reported results of operations and stockholders’ equity. At September 30, 2020, the carrying value of our goodwill was $560.2 million, the carrying value of mastheads was $176.4 million, and the carrying value of our amortizable intangible assets was $717.3 million.

We performed assessments for possible impairment of the carrying value of goodwill and indefinite-lived intangibles in connection with the Legacy Gannett acquisition and as of December 31, 2019. The footnotes to the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31 2019 describe the key assumptions used in the 2019 goodwill impairment analysis., 2020.

As of September 30, 2020, we performed our annual impairment test. In connection with our review, we noted that the market capitalization of the Company declined significantly during the three months ended September 30, 2020 and there was widespread stock-market volatility, resulting from the COVID-19 pandemic. As a result, we recognized impairments on goodwill as well as certain mastheads and definite lived intangibles.

Management assumptions used to calculate fair value are highly subjective and involve forecasts of future economic and market conditions and their impact on operating performance. Changes in key assumptions impacting the analyses could result in the recognition of impairment. The severity and length of the COVID-19 pandemic, the duration and extent of the mitigation measures and governmental actions designed to combat the pandemic, as well as the changes in customers behavior as a result of the pandemic, all of which are highly uncertain and difficult to predict at the current time, could negatively impact our future


assessment of projected results of operations and the underlying assumptions utilized in the determination of the estimated fair values of the reporting units and related mastheads.

For further information on goodwill and intangible assets, see Note 6 — Goodwill & Intangible Assets.

Failure to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and stock price.

As a public company, we are required to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002. Internal control over financial reporting is complex and may be revised over time to adapt to changes in our business, or changes in applicable accounting rules. We cannot assure you that our internal control over financial reporting will be effective in the future. In fiscal year 2019, we identified a material weakness in our internal control over financial reporting. See “Our management and independent auditors have identified a material weakness in our internal control over financial reporting, and we may be unable to develop, implement and maintain appropriate controls in future periods, which may lead to errors or omissions in our financial statements” below. If we are not able to maintain or document effective internal control over financial reporting, our management and our independent registered public accounting firm will not be able to certify as to the effectiveness of our internal control over financial reporting. Matters impacting our internal controls may cause us to be unable to report our financial information on a timely basis or may cause us to restate previously issued financial information and thereby subject us to adverse regulatory consequences, including sanctions or investigations by the SEC, or violations of applicable stock exchange listing rules. There could also be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our financial statements. Confidence in the reliability of our financial statements is also likely to suffer if we or our independent registered public accounting firm reports a material weakness in our internal control over financial reporting. This could materially adversely affect us by, for example, a decline in our share price and impairing our ability to raise capital, if and when desirable.

As a result of the COVID-19 pandemic, our workforce has shifted to primarily working from home beginning in March 2020. Our pre-existing controls were not specifically designed to operate in our current work-from-home operating environment, and there can be no assurance that they will be effective in the current environment.

Our management and independent auditors have identified a material weakness in our internal control over financial reporting, and we may be unable to develop, implement and maintain appropriate controls in future periods, which may lead to errors or omissions in our financial statements.

The Sarbanes-Oxley Act and related rules and regulations require that management report annually on the effectiveness of our internal control over financial reporting and assess the effectiveness of our disclosure controls and procedures on a quarterly basis. Maintaining and adapting our internal controls is expensive and requires significant management attention. Moreover, as we continue to grow, our internal controls may become more complex and require additional resources to ensure they remain effective amid dynamic regulatory and other guidance.

As described in Item 9A, “Controls and Procedures” of this 2019 Form 10-K, we concluded that our disclosure controls and procedures were not effective as of December 31, 2019 and that we had, as of such date, a material weakness in our internal control over financial reporting related to internal control deficiencies over the revenue recognition process; specifically, the Company did not maintain effective controls due to the aggregation of control deficiencies related to inadequate manual preventative and detective controls and information technology general controls. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements would not be prevented or detected on a timely basis. This material weakness identified did not result in any adjustments or restatements of our audited and unaudited consolidated financial statements or disclosures for any prior period previously reported by the Company. However, until the material weakness is remediated, and our associated disclosure controls and procedures improved, or if additional material weaknesses or significant deficiencies in our internal control over financial reporting occur in the future, our future consolidated financial statements or other information filed with the SEC may contain material misstatements.

We are in the process of remediating the material weakness, but our efforts may not be successful. If we are unable to remediate the material weakness in an appropriate and timely manner, or if we identify additional control deficiencies that individually or together constitute significant deficiencies or material weaknesses, our ability to accurately record, process, and report financial information and consequently, our ability to prepare financial statements within required time periods, could be adversely affected. Failure to maintain effective internal control over financial reporting could result in violations of applicable securities laws, stock exchange listing requirements, and the covenants under our debt agreements, subject us to litigation and


investigations, negatively affect investor confidence in our financial statements, and adversely impact our stock price and ability to access capital markets.

We are evaluating and developing a plan, which will include the implementation of appropriate processes and controls to remediate the material weakness described above. While we work toward the design and implementation of these processes and controls, we may rely significantly on manual procedures to assist us with meeting the objectives otherwise fulfilled by an effective control environment. The implementation of new procedures and controls could be costly and distract management from other activities.

We may not be able to protect intellectual property rights upon which our business relies and, if we lose intellectual property protection, our assets may lose value.

Our business depends on our intellectual property, including, but not limited to, our titles, mastheads, content and proprietary software, which we may attempt to protect through patents, copyrights, trade laws and contractual restrictions, such as confidentiality agreements. We believe our proprietary and other intellectual property rights are important to our success and our competitive position.

Despite our efforts to protect our proprietary rights, unauthorized third parties may attempt to copy or otherwise obtain and use our content, services and other intellectual property, and we cannot be certain that the steps we have taken will prevent any misappropriation or confusion among consumers and merchants, or unauthorized use of these rights. If we are unable to procure, protect and enforce our intellectual property rights, we may not realize the full value of these assets, and our business may suffer. If we must litigate to enforce our intellectual property rights or determine the validity and scope of the proprietary rights of third parties, such litigation may be costly and divert the attention of our management from day-to-day operations.

We are subject to environmental and employee safety and health laws and regulations that could cause us to incur significant compliance expenditures and liabilities.

Our operations are subject to federal, state and local laws and regulations pertaining to the environment, storage tanks and the management and disposal of wastes at our facilities. Under various environmental laws, a current or previous owner or operator of real property may be liable for contamination resulting from the release or threatened release of hazardous or toxic substances or petroleum at that property. Such laws often impose liability on the owner or operator without regard to fault, and the costs of any required investigation or cleanup can be substantial. Although in connection with certain of our acquisitions we have rights to indemnification for certain environmental liabilities, these rights may not be sufficient to reimburse us for all losses that we might incur if a property acquired by us has environmental contamination. In addition, although in connection with certain of our acquisitions we have obtained insurance policies for coverage for certain potential environmental liabilities, these policies have express exclusions to coverage as well as express limits on amounts of coverage and length of term. Accordingly, these insurance policies may not be sufficient to provide coverage for us for all losses that we might incur if a property acquired by us has environmental contamination.

Our operations are also subject to various employee safety and health laws and regulations, including those pertaining to occupational injury and illness, employee exposure to hazardous materials and employee complaints. Environmental and employee safety and health laws tend to be complex, comprehensive and frequently changing. As a result, we may be involved from time to time in administrative and judicial proceedings and investigations related to environmental and employee safety and health issues. These proceedings and investigations could result in substantial costs to us, divert our management’s attention and adversely affect our ability to sell, lease or develop our real property. Furthermore, if it is determined that we are not in compliance with applicable laws and regulations, or if our properties are contaminated, it could result in significant liabilities, fines or the suspension or interruption of the operations of specific printing facilities.

Future events, such as changes in existing laws and regulations, new laws or regulations or the discovery of conditions not currently known to us, may give rise to additional compliance or remedial costs that could be material.

Our possession and use of personal information and the use of payment cards by our customers present risks and expenses that could harm our business. Unauthorized access to or disclosure or manipulation of such data, whether through breach of our network security or otherwise, could expose us to liabilities and costly litigation and damage our reputation.

Our online systems store and process confidential subscriber and other sensitive data, such as names, email addresses, addresses, and other personal information. Therefore, maintaining our network security is critical. Additionally, we depend on the security of our third-party service providers. Unauthorized use of or inappropriate access to our, or our third-party service providers’ networks, computer systems and services could potentially jeopardize the security of confidential information,


including payment card (credit or debit) information, of our customers. Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and often are not recognized until launched against a target, we or our third-party service providers may be unable to anticipate these techniques or to implement adequate preventative measures. Non-technical means, for example, actions by an employee, can also result in a data breach. A party that is able to circumvent our security measures could misappropriate our proprietary information or the information of our customers or users, cause interruption in our operations, or damage our computers or those of our customers or users. As a result of any such breaches, customers or users may assert claims of liability against us and these activities may subject us to legal claims, adversely impact our reputation, and interfere with our ability to provide our products and services, all of which may have an adverse effect on our business, financial condition and results of operations. The coverage and limits of our insurance policies may not be adequate to reimburse us for losses caused by security breaches.

A significant number of our customers authorize us to bill their payment card accounts directly for all amounts charged by us. These customers provide payment card information and other personally identifiable information which, depending on the particular payment plan, may be maintained to facilitate future payment card transactions. Under payment card rules and our contracts with our card processors, if there is a breach of payment card information that we store, we could be liable to the banks that issue the payment cards for their related expenses and penalties. In addition, if we fail to follow payment card industry data security standards, even if there is no compromise of customer information, we could incur significant fines or lose our ability to give our customers the option of using payment cards. If we were unable to accept payment cards, our business would be seriously harmed.

There can be no assurance that any security measures we, or our third-party service providers, take will be effective in preventing a data breach. We may need to expend significant resources to protect against security breaches or to address problems caused by breaches. If an actual or perceived breach of our security occurs, the perception of the effectiveness of our security measures could be harmed and we could lose customers or users. Failure to protect confidential customer data or to provide customers with adequate notice of our privacy policies could also subject us to liabilities imposed by United States federal and state regulatory agencies or courts. We could also be subject to evolving state laws that impose data breach notification requirements, specific data security obligations, or other customer privacy-related requirements. Our failure to comply with any of these laws or regulations may have an adverse effect on our business, financial condition and results of operations.

We could incur significant liability if the separation of Legacy Gannett from its former parent were determined to be a taxable transaction.

In connection with the separation of Legacy Gannett from its former parent, Legacy Gannett’s former parent received an opinion from outside tax counsel to the effect that the requirements for tax-free treatment under Section 355 of the Code would be satisfied. The opinion relied on certain facts, assumptions, representations, and undertakings from Legacy Gannett's former parent and Legacy Gannett regarding the past and future conduct of the companies' respective businesses and other matters. If any of these facts, assumptions, representations, or undertakings were incorrect or not satisfied, we and our stockholders may not be able to rely on the opinion of tax counsel and could be subject to significant tax liabilities. Further, notwithstanding the opinion of tax counsel, the IRS could determine upon audit that the separation is taxable if it determines that any of these facts, assumptions, representations, or undertakings were incorrect or violated, if it disagrees with the conclusions in the opinion, or for other reasons, including as a result of certain significant changes in the share ownership of Legacy Gannett or its former parent after the separation. If the separation were determined to be taxable for U.S. federal income tax purposes, Legacy Gannett’s former parent and its stockholders that are subject to U.S. federal income tax could incur significant U.S. federal income tax liabilities, and we could incur significant liabilities.

The Internal Revenue Service may disallow all or part of a worthless stock loss and bad debt deduction.

The IRS could challenge an election made in 2017 to treat one of our ReachLocal international subsidiaries as a disregarded entity for U.S. federal income tax purposes, which resulted in worthless stock and bad debt deductions of $101.0 million, yielding a tax benefit of $32.0 million. These tax deductions are subject to audit and possible adjustment by the IRS, which could result in the reversal of all or part of the income tax benefit. To account for this uncertainty, a reserve of $11.0 million has been established to reduce the benefit to an estimated realizable value of $21.0 million. While we believe this represents our best estimate of the benefit to be realized upon final acceptance of our tax return, the IRS could reject or reduce the amount of tax benefit related to these deductions. If the IRS rejects or reduces the amount of this income tax benefit, we may have to pay additional cash income taxes, which could adversely affect our results of operations, financial condition, and cash flows. We cannot guarantee what the ultimate outcome or amount of the benefit we receive, if any, will be.

We may not be able to generate future taxable income which may prevent our realization of deferred tax assets.



We have substantial deferred tax assets reported on our balance sheet. If we do not have taxable income in future years, we may be required to reestablish a valuation allowance against our federal deferred tax assets.


Risks Related to Pension Obligations and Employees

We are required to use a portion of our cash flows to make contributions to our pension plans, which diverts cash flow from operations, and the amount of required future contributions may be difficult to estimate.

We, along with our subsidiaries, sponsor various defined benefit retirement plans, including plans established under collective bargaining agreements. Our retirement plans include (i) the Gannett Retirement Plan (GRP), (ii) the Gannett 2015 Supplemental Retirement Plan, (iii) the Newsquest Pension Scheme in the U.K., (iv) the Newspaper Guild of Detroit Pension Plan, (v) a supplemental retirement plan we assumed pursuant to our acquisition of JMG, (vi) the George W. Prescott pension plan, and (vii) The Times Publishing Company pension plan.

Our pension plans invest in a variety of equity and debt securities. Future volatility and disruption in the equity and bond markets could cause declines in the asset values of our pension plans. For many of our retirement plans, our pension benefit obligations exceed the value of pension assets. As of December 31, 2019, our retirement plans were underfunded by a total of $116.9 million on a U.S. GAAP basis.

The excess of pension benefit obligations over assets is expected to give rise to required pension contributions over the next several years. We have committed to make quarterly contributions of $5.0 million to the GRP beginning in December 2020 through September 2022. Our ability to make contribution payments will depend on our future cash flows, which are subject to general economic, financial, competitive, business, legislative, regulatory, and other factors beyond our control. Various factors, including future investment returns, interest rates, and potential pension legislative changes, may impact the timing and amount of future pension contributions. In addition, decreases in the discount rate used to determine minimum funding requirements could result in increased future contributions. As a result, we may need to make additional pension contributions above what is currently estimated, which could reduce the cash available for our businesses.

We depend on key personnel and we may not be able to operate or grow our business effectively if we lose the services of any of our key personnel or are unable to attract qualified personnel in the future.

The success of our business is heavily dependent on our ability to retain our management and other key personnel and to attract and retain qualified personnel in the future. Competition for senior management personnel is intense, and we may not be able to retain our key personnel. Although we have entered into employment agreements with certain of our key personnel, these agreements do not ensure that our key personnel will continue in their present capacity with us for any particular period of time. We do not have key man insurance for any of our current management or other key personnel. The loss of any key personnel would require our remaining key personnel to divert immediate and substantial attention to seeking a replacement. An inability to find a suitable replacement for any departing executive officer on a timely basis could adversely affect our ability to operate or grow our business.

A shortage of skilled or experienced employees in the media industry, or our inability to retain such employees, could pose a risk to achieving improved productivity and reducing costs, which could adversely affect our profitability.

Production and distribution of our various publications requires skilled and experienced employees. A shortage of such employees, or our inability to retain such employees, could have an adverse impact on our productivity and costs, our ability to expand, develop and distribute new products and our entry into new markets. The cost of retaining or hiring such employees could exceed our expectations which could adversely affect our results of operations.

A number of our employees are unionized, and our business and results of operations could be adversely affected if current or additional labor negotiations or contracts were to further restrict our ability to maximize the efficiency of our operations.

As of December 31, 2019, we employed 21,255 employees, of whom 2,807 (or approximately 13%) were represented by seven unions. 51% of the unionized employees are in four states: Michigan, Ohio, Wisconsin and Indiana and represent 15%, 12%, 13% and 11% of all our union employees, respectively.



Although our newspapers have not experienced a union strike in the recent past nor do we anticipate a union strike to occur, we cannot preclude the possibility that a strike may occur at one or more of our newspapers at some point in the future. We believe that, in the event of a newspaper strike, we would be able to continue to publish and deliver to subscribers, which is critical to retaining advertising and circulation revenues, although there can be no assurance of this. Further, settlement of actual or threatened labor disputes or an increase in the number of our employees covered by collective bargaining agreements can have unknown effects on our labor costs, productivity and flexibility.

Sustained increases in costs of employee health and welfare benefits may reduce our profitability.

In recent years, we have experienced significant increases in the cost of employee benefits because of economic factors beyond our control, including increases in health care costs. At least some of these factors may continue to put upward pressure on the cost of providing medical benefits. Although we have actively sought to control increases in these costs, there can be no assurance that we will succeed in limiting cost increases and continued upward pressure could reduce the profitability of our businesses.

Risks Related to Our Manager

The inability of our Manager to retain or obtain key personnel could delay or hinder implementation of our investment strategies, which could impair our ability to make distributions and could reduce the value of your investment.

Our Chief Executive Officer and certain other individuals who perform services for us are employees of our Manager. We are reliant on our Manager, which has significant discretion as to the implementation of our operating policies and strategies, to conduct our business. We are dependent on the services of certain key employees of our Manager whose compensation may be partially or entirely dependent upon the amount of incentive or management compensation earned by our Manager and whose continued service is not guaranteed, and the loss of such services could adversely affect our operations. If any of these people were to cease their affiliation with us or our Manager, either we or our Manager may be unable to find suitable replacements, and our operating results could suffer.

Because we are dependent upon our Manager and its affiliates to conduct our operations, any adverse changes in the financial health of our Manager or its affiliates, or in our relationship with them, could hinder our Manager’s ability to successfully manage our operations.

We are dependent on our Manager and its affiliates to manage our operations and acquire and manage our investments. Under the direction of our Board of Directors, our Manager makes decisions with respect to the management of our company. To conduct its operations, our Manager depends upon the fees and other compensation that it receives from us in connection with managing our company and from other entities and investors with respect to investment management services it provides. Any adverse changes in the financial condition of our Manager or its affiliates, or our relationship with our Manager, could hinder our Manager’s ability to successfully manage our operations, which could materially adversely affect our business, results of operations, financial condition and ability to make distributions to our stockholders. For example, adverse changes in the financial condition of our Manager could limit its ability to attract key personnel.

There are conflicts of interest in our relationship with our Manager.

Our Management Agreement with our Manager was not negotiated between unaffiliated parties, and its terms, including fees payable, may not be as favorable to us as if they had been negotiated with an unaffiliated third party.

There are conflicts of interest inherent in our relationship with our Manager insofar as our Manager and its affiliates-including investment funds, private investment funds, or businesses managed by our Manager-invest in media assets and whose investment objectives may overlap with our investment objectives. Certain investments appropriate for us may also be appropriate for one or more of these other investment vehicles. Certain members of our Board of Directors and employees of our Manager, who may also be our officers, also serve as officers and/or directors of these other entities. Although we have the same Manager, we may compete with entities affiliated with our Manager or Fortress for certain target assets. From time to time, affiliates of Fortress may focus on investments in assets with a similar profile as our target assets that we may seek to acquire. These affiliates may have meaningful purchasing capacity, which may change over time depending upon a variety of factors, including, but not limited to, available equity capital and debt financing, market conditions and cash on hand. In addition, with respect to Fortress funds in the process of selling investments, our Manager may be incentivized to regard the sale of such assets to us positively, particularly if a sale to an unrelated third party would result in a loss of fees to our Manager.



Our Management Agreement with our Manager does not prevent our Manager or any of its affiliates, or any of their officers and employees, from engaging in other businesses or from rendering services of any kind to any other person or entity, including investment in, or advisory service to others investing in, any type of media or media related investment, including investments that meet our principal investment objectives. Our Manager may engage in additional investment opportunities related to media assets in the future, which may cause our Manager to compete with us for investments or result in a change in our current investment strategy. In addition, our certificate of incorporation provides that if Fortress or an affiliate or any of their officers, directors or employees acquire knowledge of a potential transaction or matter that may be a corporate opportunity, they have no duty, to the fullest extent permitted by law, to offer such corporate opportunity to us, our stockholders or our affiliates. In the event that any of our directors and officers who is also a director, officer or employee of Fortress or its affiliates acquires knowledge of a corporate opportunity or is offered a corporate opportunity, provided that this knowledge was not acquired solely in such person’s capacity as a director or officer of ours and such person acts in good faith, then to the fullest extent permitted by law such person is deemed to have fully satisfied such person’s fiduciary duties owed to us and is not liable to us if Fortress or its affiliates pursues or acquires the corporate opportunity or if such person did not present the corporate opportunity to us.

The ability of our Manager and its officers and employees to engage in other business activities, subject to the terms of our Management Agreement with our Manager, may reduce the amount of time that our Manager, its officers or other employees spend managing us. In addition, we may engage in material transactions with our Manager or another entity managed by our Manager or one of its affiliates, which may present an actual, potential or perceived conflict of interest. It is possible that actual, potential or perceived conflicts could give rise to investor dissatisfaction, litigation or regulatory enforcement actions. Appropriately dealing with conflicts of interest is complex and difficult, and our reputation could be damaged if we fail, or appear to fail, to deal appropriately with one or more potential, actual or perceived conflicts of interest. Regulatory scrutiny of, or litigation in connection with, conflicts of interest could have a material adverse effect on our reputation, which could materially adversely affect our business in a number of ways, including causing an inability to raise additional funds, a reluctance of counterparties to do business with us, a decrease in the prices of our equity securities and a resulting increased risk of litigation and regulatory enforcement actions.

The management compensation structure that we have agreed to with our Manager, as well as compensation arrangements that we may enter into with our Manager in the future (in connection with new lines of business or other activities), may incentivize our Manager to invest in high risk investments. In addition to its management fee, our Manager is currently entitled to receive incentive compensation. In evaluating investments and other management strategies, the opportunity to earn incentive compensation may lead our Manager to place undue emphasis on the maximization of such measures at the expense of other criteria, such as preservation of capital, in order to achieve higher incentive compensation. Investments with higher yield potential are generally riskier or more speculative than lower-yielding investments.

Our Board of Directors does not approve each investment decision made by our Manager. In addition, we may change our investment strategy without a stockholder vote, which may result in our making investments that are different, riskier or less profitable than our current investments.

Our Manager has great latitude in determining the types and categories of assets it may decide are proper investments for us, including the latitude to invest in types and categories of assets that may differ from those in which we currently invest. Our Board of Directors periodically reviews our investment portfolio. However, our Board of Directors does not review or pre-approve each proposed investment or our related financing arrangements. In addition, in conducting periodic reviews, our Board of Directors relies primarily on information provided to them by our Manager. Furthermore, transactions entered into by our Manager may be difficult or impossible to unwind by the time they are reviewed by our Board of Directors even if the transactions contravene the terms of the Management Agreement. In addition, we may change our investment strategy, including our target asset classes, without a stockholder vote.

Our investment strategy may evolve in light of existing market conditions and investment opportunities, and this evolution may involve additional risks depending upon the nature of the assets in which we invest and our ability to finance such assets on a short- or long-term basis. Investment opportunities that present unattractive risk-return profiles relative to other available investment opportunities under particular market conditions may become relatively attractive under changed market conditions, and changes in market conditions may therefore result in changes in the investments we target. Decisions to make investments in new asset categories present risks that may be difficult for us to adequately assess and could therefore reduce our ability to pay dividends on our Common Stock or have adverse effects on our liquidity or financial condition. A change in our investment strategy may also increase our exposure to interest rate, real estate market or credit market fluctuations. In addition, a change in our investment strategy may increase the guarantee obligations we agree to incur or increase the number of transactions we enter into with affiliates. Our failure to accurately assess the risks inherent in new asset categories or the financing risks associated with such assets could adversely affect our results of operations and our financial condition.



Our Manager will not be liable to us for any acts or omissions performed in accordance with the Management Agreement, including with respect to the performance of our investments.

Pursuant to our Management Agreement, our Manager assumes no responsibility other than to render the services called for thereunder in good faith and shall not be responsible for any action of our Board of Directors in following or declining to follow its advice or recommendations. Our Manager, its members, managers, officers and employees will not be liable to us or any of our subsidiaries, to our Board of Directors, or our or any subsidiary’s stockholders or partners for any acts or omissions by our Manager, its members, managers, officers or employees, except by reason of acts constituting bad faith, willful misconduct, gross negligence or reckless disregard of our Manager’s duties under our Management Agreement. We shall, to the full extent lawful, reimburse, indemnify and hold our Manager, its members, managers, officers and employees, and each other person, if any, controlling our Manager, harmless of and from any and all expenses, losses, damages, liabilities, demands, charges and claims of any nature whatsoever (including attorneys’ fees) in respect of or arising from any acts or omissions of an indemnified party made in good faith in the performance of our Manager’s duties under our Management Agreement and not constituting such indemnified party’s bad faith, willful misconduct, gross negligence or reckless disregard of our Manager’s duties under our Management Agreement.

Our Manager’s due diligence of investment opportunities or other transactions may not identify all pertinent risks, which could materially affect our business, financial condition, liquidity and results of operations.

Our Manager intends to conduct due diligence with respect to each investment opportunity or other transaction it pursues. It is possible, however, that our Manager’s due diligence processes will not uncover all relevant facts, particularly with respect to any assets we acquire from third parties. In these cases, our Manager may be given limited access to information about the investment and will rely on information provided by the target of the investment. In addition, if investment opportunities are scarce, the process for selecting bidders is competitive, or the timeframe in which we are required to complete diligence is short, our ability to conduct a due diligence investigation may be limited, and we would be required to make investment decisions based upon a less thorough diligence process than would otherwise be the case. Accordingly, investments and other transactions that initially appear to be viable may prove not to be over time, due to the limitations of the due diligence process or other factors.

Risks Related to our Common Stock

There can be no assurance that the market for our stock will provide adequate liquidity.

The market price of our Common Stock may fluctuate widely, depending upon many factors, some of which may be beyond our control. These factors include, without limitation:

Risks and uncertainties associated with the ongoing COVID-19 pandemic;
Our business profile and market capitalization may not fit the investment objectives of any stockholder;
A shift in our investor base;
Our quarterly or annual earnings, or those of other comparable companies;
Actual or anticipated fluctuations in our operating results;
Changes in accounting standards, policies, guidance, interpretations or principles;
Risks relating to our ability to meet long-term forecasts;
Announcements by us or our competitors of significant investments, acquisitions or dispositions;
The failure of securities analysts to cover our Common Stock;
Changes in earnings estimates by securities analysts or our ability to meet those estimates;
The operating and stock price performance of other comparable companies;
Negative public perception of us, our competitors, or industry;
Overall market fluctuations; and
General economic conditions.

Stock markets in general and recently have experienced volatility that has often been unrelated to the operating performance of a particular company. These broad market fluctuations may adversely affect the trading price of our Common Stock. Additionally, these and other external factors have caused and may continue to cause the market price and demand for our Common Stock to fluctuate, which may limit or prevent investors from readily selling their shares of Common Stock and may otherwise negatively affect the liquidity of our Common Stock.

Our Common Stock may be delisted from the NYSE if we fail to comply with continued listing standards.



Our Common Stock currently trades on the New York Stock Exchange (“NYSE”), and the continued listing of our Common Stock on the NYSE is subject to our compliance with a number of listing standards, including minimum share price requirements. If we fall out of compliance with NYSE’s listing standards and fail to regain compliance within the applicable cure periods, our Common Stock may be delisted from the NYSE. Failure to maintain our NYSE listing could negatively impact us and our stockholders by reducing the willingness of investors to hold our Common Stock because of the resulting decreased price, liquidity and trading of our Common Stock, and analyst coverage, among others.

Sales or issuances of shares of our Common Stock could adversely affect the market price of our Common Stock.

Sales or issuances of substantial amounts of shares of our Common Stock in the public market, or the perception that such sales or issuances might occur, could adversely affect the market price of our Common Stock. The issuance of our Common Stock in connection with property, portfolio or business acquisitions or the settlement of awards that may be granted under our Incentive Plans (as defined below) or otherwise could also have an adverse effect on the market price of our Common Stock.

We have suspended our quarterly dividend and may not be able to pay dividends in the future or at all.

On April 1, 2020, we announced that our Board of Directors determined that it is in the best interests of our stockholders for the Company to preserve liquidity by suspending our quarterly dividend. Although we expect to reinstate the dividend when appropriate, subject to approval by our Board of Directors and restrictions in our credit facility, there can be no assurance if or when we will resume paying dividends on a regular basis.

Under our credit facility, we can only pay cash dividends up to an agreed-upon amount and provided that the ratio of consolidated debt to EBITDA (as such terms are defined in the credit facility) does not exceed a specified ratio. Stockholders also should be aware that they have no contractual or other legal right to dividends that have not been declared.

Our Board of Directors’ determinations regarding dividends will depend on a variety of factors, including the Company’s GAAP net income, free cash flow generated from operations or other sources, liquidity position and potential alternative uses of cash, such as acquisitions, as well as economic conditions and expected future financial results. There can be no guarantee regarding the timing and amount of any dividends. Our ability to resume payment of dividends in the future will depend on our future financial performance, which in turn depends on the successful implementation of our strategy and on financial, competitive, regulatory, technical and other factors, general economic conditions, demand and selling prices for our products and other factors specific to our industry or specific projects, many of which are beyond our control. Therefore, our ability to generate free cash flow depends on the performance of our operations and could be limited by decreases in our profitability or increases in costs, capital expenditures, or debt servicing requirements.

The percentage ownership of our existing stockholders may be diluted in the future.

We have issued and may continue to issue equity in order to raise capital or in connection with future acquisitions and strategic investments, which would dilute investors’ percentage ownership in Gannett. In addition, your percentage ownership may be diluted if we issue equity instruments such as debt and equity financing.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest in our company may be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a stockholder. Debt and equity financings, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as redeeming our shares, making investments, incurring additional debt, making capital expenditures, declaring dividends or placing limitations on our ability to acquire, sell or license intellectual property rights.

The percentage ownership of our existing stockholders may also be diluted in the future as result of the issuance of ordinary shares in Gannett upon the exercise of 10-year warrants (the “Gannett Warrants”). The Gannett Warrants collectively represent the right to acquire our Common Stock, which in the aggregate are equal to 5% of our Common Stock outstanding as of November 26, 2013 (calculated prior to dilution from shares of our Common Stock issued pursuant to Drive Shack Inc.'s (formerly known as Newcastle Investment Corp.) contribution of Local Media Group Holdings LLC and assignment of related stock purchase agreement to Gannett (the “Local Media Contribution”)) at a strike price of 46.35 calculated based on a total equity value of Gannett prior to the Local Media Contribution of $1.2 billion as of November 26, 2013. As a result, our Common Stock may be subject to dilution upon the exercise of such Gannett Warrants. As of December 31, 2019, the Gannett Warrants were equal to 1% of our Common Stock outstanding as of December 31, 2019 at a strike price of 46.35.



Furthermore, the percentage ownership in Gannett may be diluted in the future because of options issued to our Manager. As of September 30, 2020, there were 6,068,075 options outstanding at a weighted average exercise price of $13.97 held by our Manager and/or its affiliates.

Dilution may also result from the issuances of shares under our equity compensation plans (our "Incentive Plans"), which provide for the grant of equity and equity-based awards, including restricted stock, stock options, stock appreciation rights, performance awards, and other equity-based and non-equity based awards, in each case to our directors, officers, employees, among others. As of December 31, 2019, the number of shares remaining available for future issuance under our Incentive Plans, excluding shares to be issued upon exercise of outstanding options, warrants and rights, was 15.7 million.

Provisions in our amended and restated certificate of incorporation and amended and restated bylaws and of Delaware law may prevent or delay an acquisition of our company, which could decrease the trading price of our Common Stock.

Our amended and restated certificate of incorporation, amended and restated bylaws and Delaware law contain provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids unacceptably expensive to the raider and to encourage prospective acquirers to negotiate with our Board rather than to attempt a hostile takeover. These provisions provide for:

Amendment of provisions in our amended and restated certificate of incorporation and amended and restated bylaws regarding the election of directors, the term of office of directors, the filling of director vacancies and the resignation and removal of directors only upon the affirmative vote of at least 80% of the then issued and outstanding shares of our capital stock entitled to vote thereon;
Amendment of provisions in our amended and restated certificate of incorporation regarding corporate opportunity only upon the affirmative vote of at least 80% of the then issued and outstanding shares of our capital stock entitled to vote thereon;
Removal of directors only for cause and only with the affirmative vote of at least 80% of the voting interest of stockholders entitled to vote in the election of directors;
Our Board to determine the powers, preferences and rights of our preferred stock and to issue such preferred stock without stockholder approval;
Provisions in our amended and restated certificate of incorporation and amended and restated bylaws prevent stockholders from calling special meetings of our stockholders;
Advance notice requirements applicable to stockholders for director nominations and actions to be taken at annual meetings;
A prohibition, in our amended and restated certificate of incorporation, stating that no holder of shares of our Common Stock will have cumulative voting rights in the election of directors, which means that the holders of majority of the issued and outstanding shares of our Common Stock can elect all the directors standing for election; and
Action by our stockholders outside a meeting, in our amended and restated certificate of incorporation and our amended and restated bylaws, only by unanimous written consent.

Public stockholders who might desire to participate in these types of transactions may not have an opportunity to do so, even if the transaction is considered favorable to stockholders. These anti-takeover provisions could substantially impede the ability of public stockholders to benefit from a change in control or a change in our management and Board and, as a result, may adversely affect the market price of our Common Stock and your ability to realize any potential change of control premium.

Future offerings of debt securities, which would rank senior to our common stock upon our liquidation, and future offerings of equity securities, may be senior to our common stock for the purposes of dividend and liquidating distributions, may adversely affect the market price of our common stock.

We may raise additional capital through the issuance of debt or equity securities (including preferred stock) from time to time. Upon liquidation, holders of our debt securities and preferred stock and lenders with respect to other borrowings (including the lenders under our existing senior secured credit facility) will be entitled to our available assets prior to the holders of our common stock. Preferred stock could have a preference on liquidating distributions or a preference on dividend payments that could limit our ability to pay dividends to the holders of our common stock. Because our decision to issue debt or equity securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, holders of our common stock bear the risk of our future offerings reducing the market price of our common stock and diluting the value of their stock holdings in us.

ItemITEM 2. Unregistered Sales of Equity Securities and Use of ProceedsUNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS



This item is not applicable.

ItemITEM 3. Defaults Upon Senior SecuritiesDEFAULTS UPON SENIOR SECURITIES

This item is not applicable.

ItemITEM 4. Mine Safety DisclosuresMINE SAFETY DISCLOSURES

This item is not applicable.

ItemITEM 5. Other InformationOTHER INFORMATION

This item is not applicable.




ItemITEM 6. Exhibits

EXHIBITS
4.1Second Supplemental Indenture, dated as of February 9, 2021, by and between the Company, the Subsidiary Guarantors from time to time party thereto and U.S. Bank National Associations, as trustee.
31.110.1Credit Agreement dated as of February 9, 2021, among the Company, Gannett Holdings LLC, each Guarantor party thereto, the Lenders from time to time party thereto and Citibank, N.A., as collateral and administrative agent.
10.2Amended and Restated Performance Restricted Stock Unit Grant Agreement between the Company and Michael Reed, effective as of January 8, 2021.*
10.3Employee Performance Restricted Stock Unit Grant Agreement between the Company and Michael Reed, effective as of January 8, 2021.*
10.4Gannett Co., Inc. 2021 Annual Bonus Plan*
31.1Rule 13a-14(a) Certification of CEO
31.2
31.2Rule 13a-14(a) Certification of CFO
32.1
32.1Section 1350 Certification of CEO
32.2
32.2Section 1350 Certification of CFO
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101
The following financial information from Gannett Co., Inc. Quarterly Report on Form 10-Q for the quarter ended September 30, 2020,March 31, 2021, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets; (ii) Condensed Consolidated Statements of Operations and Comprehensive Income; (iii) Condensed Consolidated Statements of Cash Flow; (iv) Condensed Consolidated Statements of Equity; and (v) Notes to Condensed Consolidated Financial Statements
Attached.
104
104Cover Page Interactive Data File (formatted as Inline XBRL and embedded within the Inline XBRL document)Attached.


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* Asterisks identify management contracts and compensatory plans or arrangements.


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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: May 7, 2021GANNETT CO., INC.
Date: November 3, 2020GANNETT CO., INC.
/s/ Douglas E. Horne
Douglas E. Horne
Chief Financial Officer and
(on behalf of RegistrantChief Accounting Officer (principal financial and as Principal Financial Officer)principal accounting officer)


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