Publishing segment
A summary of our Publishing segment results is presented below:
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| Three months ended | | Nine months ended |
| In thousands | September 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 | |
| Circulation | 336,152 | | | 146,254 | | | 189,898 | | | 1,053,517 | | | 449,246 | | | 604,271 | |
| Other | 66,566 | | | 41,514 | | | 25,052 | | | 207,355 | | | 123,003 | | | 84,352 | |
| Total operating revenues | 732,226 | | | 366,259 | | | 365,967 | | | 2,286,268 | | | 1,138,775 | | | 1,147,493 | |
| Operating expenses: | | | | | | | | | | | |
| Operating costs | 438,588 | | | 214,315 | | | 224,273 | | | 1,390,366 | | | 669,585 | | | 720,781 | |
| Selling, general and administrative expenses | 186,000 | | | 94,332 | | | 91,668 | | | 592,856 | | | 317,596 | | | 275,260 | |
| Depreciation and amortization | 52,481 | | | 23,840 | | | 28,641 | | | 175,990 | | | 64,439 | | | 111,551 | |
| Integration and reorganization costs | 5,120 | | | 2,608 | | | 2,512 | | | 39,049 | | | 9,067 | | | 29,982 | |
| Asset impairments | 868 | | | — | | | 868 | | | 7,727 | | | 2,469 | | | 5,258 | |
| Goodwill and intangible impairments | — | | | — | | | — | | | 352,947 | | | — | | | 352,947 | |
| Loss on sale or disposal of assets | 1,731 | | | 568 | | | 1,163 | | | 1,876 | | | 2,746 | | | (870) | |
| Total operating expenses | 684,788 | | | 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) | |
The following table provides the breakout of operating revenues by category:
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| Three months ended | | Nine months ended |
| In thousands | September 30, 2020 | | September 29, 2019 | | Change | | September 30, 2020 | | September 29, 2019 | | Change |
| Local and national print | $ | 132,012 | | | $ | 93,454 | | | $ | 38,558 | | | $ | 422,849 | | | $ | 304,023 | | | $ | 118,826 | |
| Classified print | 76,210 | | | 45,589 | | | 30,621 | | | 240,888 | | | 143,867 | | | 97,021 | |
| Total Print advertising | 208,222 | | | 139,043 | | | 69,179 | | | 663,737 | | | 447,890 | | | 215,847 | |
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| Digital media | 84,054 | | | 23,101 | | | 60,953 | | | 235,865 | | | 67,220 | | | 168,645 | |
| Digital marketing services | 25,499 | | | 10,219 | | | 15,280 | | | 79,677 | | | 32,021 | | | 47,656 | |
| Digital classified | 11,733 | | | 6,128 | | | 5,605 | | | 46,117 | | | 19,395 | | | 26,722 | |
| Total Digital advertising and marketing services | 121,286 | | | 39,448 | | | 81,838 | | | 361,659 | | | 118,636 | | | 243,023 | |
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| Advertising and marketing services | 329,508 | | | 178,491 | | | 151,017 | | | 1,025,396 | | | 566,526 | | | 458,870 | |
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| Print circulation | 312,644 | | | 140,877 | | | 171,767 | | | 989,482 | | | 433,636 | | | 555,846 | |
| Digital circulation | 23,508 | | | 5,377 | | | 18,131 | | | 64,035 | | | 15,610 | | | 48,425 | |
| Total Circulation | 336,152 | | | 146,254 | | | 189,898 | | | 1,053,517 | | | 449,246 | | | 604,271 | |
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| Other | 66,566 | | | 41,514 | | | 25,052 | | | 207,355 | | | 123,003 | | | 84,352 | |
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| Total operating revenues | $ | 732,226 | | | $ | 366,259 | | | $ | 365,967 | | | $ | 2,286,268 | | | $ | 1,138,775 | | | $ | 1,147,493 | |
The increase in Local and National print advertising revenues and Classified print advertising revenues was due to acquired revenues related to Legacy Gannett of $74.6 million and $41.7 million, respectively, for the three months ended September 30, 2020, and $232.9 million and $132.1 million, respectively, for the nine months ended September 30, 2020. Excluding the acquisition of Legacy Gannett, Local and National print advertising revenues and Classified print advertising revenues decreased $36.0 million and $11.1 million, respectively, for the three months ended September 30, 2020 and $116.9 million and $35.8 million, respectively, for the nine months ended September 30, 2020. The decline in print advertising was driven by the secular industry trends and the negative impact COVID-19 pandemic had on all categories. The decline in Local and National print advertising revenues was driven by fewer advertising spots sold and a decline in advertiser inserts. Classified print advertising revenues declined due to reduced legal, automotive and real estate listings.
For the three months ended September 30, 2020, the increase in Digital media, Digital marketing services and Digital classified revenues was due to acquired revenues related to Legacy Gannett of $66.5 million, $18.3 million and $6.9 million, respectively, and for the nine months ended September 30, 2020 was $179.8 million, $55.8 million and $30.9 million, respectively. Excluding the acquisition of Legacy Gannett, Digital media, Digital marketing services and Digital classified revenues decreased $5.5 million, $3.0 million and $1.3 million, respectively, for the three months ended September 30, 2020 and $11.4 million, $8.1 million and $4.2 million, respectively, for the nine months ended September 30, 2020 due to the negative impact of the COVID-19 pandemic, which contributed to lower local digital media spend, lower client counts for Digital Marketing Services and a reduction in the volume of automotive and employment classified advertisements.
The increase in Print circulation revenues and Digital circulation revenues, which contains digital only subscriptions, was due to acquired revenues related to Legacy Gannett of $189.4 million and $17.1 million, respectively, for the three months ended September 30, 2020, and $599.1 million and $45.8 million, respectively, for the nine months ended September 30, 2020. Excluding the acquisition of Legacy Gannett, for the three and nine months ended September 30, 2020, Print circulation revenues decreased $17.6 million $45.8 million, respectively, due to declines driven by a reduction in the volume of home delivery due to subscriber declines and single copy sales, reflecting secular industry trends and the impact of COVID-19 on businesses that buy and sell copies of our publications and Digital circulation revenues increased $1.0 million and $2.6 million, respectively, due to an increase in digital only subscribers of 31.1%.
For the three and nine months ended September 30, 2020, the increase in Other revenues was due to acquired revenues related to Legacy Gannett of $37.0 million and $112.7 million, respectively. Excluding the acquisition of Legacy Gannett, Other revenues decreased $12.0 million and $28.3 million due to declines in the commercial print and delivery business, as a result of the overall secular trends and the COVID-19 pandemic.
For the three and nine months ended September 30, 2020, operating costs increased $224.3 million and $720.8 million, respectively. The following table provides the breakout of the increases in operating costs:
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| Three months ended | | Nine months ended |
| In thousands | September 30, 2020 | | September 29, 2019 | | Change | | September 30, 2020 | | September 29, 2019 | | Change |
| Newsprint and ink | $ | 31,250 | | | $ | 20,179 | | | $ | 11,071 | | | $ | 101,097 | | | $ | 67,706 | | | $ | 33,391 | |
| Distribution | 99,189 | | | 37,053 | | | 62,136 | | | 306,768 | | | 114,208 | | | 192,560 | |
| Compensation and benefits | 153,643 | | | 70,936 | | | 82,707 | | | 478,996 | | | 222,728 | | | 256,268 | |
| Outside services | 74,207 | | | 42,515 | | | 31,692 | | | 252,046 | | | 129,825 | | | 122,221 | |
| Other | 80,299 | | | 43,632 | | | 36,667 | | | 251,459 | | | 135,118 | | | 116,341 | |
| Total operating costs | $ | 438,588 | | | $ | 214,315 | | | $ | 224,273 | | | $ | 1,390,366 | | | $ | 669,585 | | | $ | 720,781 | |
For the three and nine months ended September 30, 2020, Newsprint and ink costs increased $11.1 million and $33.4 million, respectively, as a result of acquired newsprint and ink costs related to Legacy Gannett operations. The Company’s newsprint and ink costs benefited $8.0 million and $26.1 million, respectively, from the declines in print circulation and lower print advertising volumes, lower paper prices, and page count reductions driven by efficiency initiatives in printing operations.
For the three and nine months ended September 30, 2020, Distribution costs increased $62.1 million and $192.6 million, respectively, due to higher acquired hauling and delivery costs. The Company’s Distribution costs benefited $3.7 million and $10.5 million, respectively, from declines in print circulation and print advertising volumes.
For the three and nine months ended September 30, 2020, Compensation and benefit costs increased $82.7 million and $256.3 million, respectively, due to costs related to Legacy Gannett operations. The Company’s Compensation and benefit costs benefited $17.6 million and $48.9 million, respectively, from cost containment initiatives implemented in connection with the COVID-19 pandemic and ongoing integration efforts, including headcount reductions.
For the three and nine months ended September 30, 2020, Outside services, which includes outside printing, professional services, paid search and ad serving and credit card fees increased $31.7 million and $122.2 million, respectively, due to acquired costs associated with the Legacy Gannett operations. Outside services benefited $23.4 million and $40.1 million, respectively, as a result of declines in activity driven by lower revenues and cost containment initiatives as well as a decline in third-party printing activity driven by lower volume.
For the three and nine months ended September 30, 2020, Selling, general, and administrative expenses increased by $91.7 million and $275.3 million, respectively. The following table provides the breakout of the increases in Selling, general and administrative expenses:
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| Three months ended | | Nine months ended |
| In thousands | September 30, 2020 | | September 29, 2019 | | Change | | September 30, 2020 | | September 29, 2019 | | Change |
| Compensation and benefits | $ | 96,377 | | | $ | 58,663 | | | $ | 37,714 | | | $ | 295,569 | | | $ | 181,514 | | | $ | 114,055 | |
| Outside services | 10,805 | | | 7,446 | | | 3,359 | | | 33,858 | | | 24,670 | | | 9,188 | |
| Other | 78,818 | | | 28,223 | | | 50,595 | | | 263,429 | | | 111,412 | | | 152,017 | |
| Total Selling, general and administrative expenses | $ | 186,000 | | | $ | 94,332 | | | $ | 91,668 | | | $ | 592,856 | | | $ | 317,596 | | | $ | 275,260 | |
For the three and nine months ended September 30, 2020, Compensation and benefits costs increased $37.7 million and $114.1 million, respectively, due to acquired costs associated with the acquisition of Legacy Gannett. Overall Compensation and benefits benefited $12.1 million and $40.9 million, respectively, from cost containment initiatives, including employee furloughs and headcount reductions as a result of ongoing integration efforts.
For the three and nine months ended September 30, 2020, Outside services costs, which include outside printing, professional and outside services and credit card fees, increased $3.4 million and $9.2 million, respectively, due to acquired costs. Outside services benefited $2.3 million and $8.1 million, respectively, from declines in activity and cost containment initiatives.
For the three and nine months ended September 30, 2020, Depreciation and amortization expenses increased due to the acquired property and intangibles and an increase in accelerated depreciation of $7.1 million and $40.2 million, respectively, due to the continued consolidation of operations resulting from ongoing cost reduction programs.
For the three and nine months ended September 30, 2020, Integration and reorganization costs increased due to the continued consolidation of operations resulting from the ongoing implementation of our plans to reduce costs and preserve cash flow and for the nine months ended an increase in severance costs of $29.3 million.
Publishing segment adjusted EBITDA:
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| Three months ended | | Nine months ended |
| In thousands | September 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 expense | 17 | | | 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 amortization | 52,481 | | | 23,840 | | | 28,641 | | | 175,990 | | | 64,439 | | | 111,551 | |
| Integration and reorganization costs | 5,120 | | | 2,608 | | | 2,512 | | | 39,049 | | | 9,067 | | | 29,982 | |
| Asset impairments | 868 | | | — | | | 868 | | | 7,727 | | | 2,469 | | | 5,258 | |
| Goodwill and intangible impairments | — | | | — | | | — | | | 352,947 | | | — | | | 352,947 | |
| Loss on sale or disposal of assets | 1,731 | | | 568 | | | 1,163 | | | 1,876 | | | 2,746 | | | (870) | |
| Other items | 926 | | | 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 | |
Adjusted EBITDA for our Publishing segment was $108.8 million for the three months ended September 30, 2020, an increase of $49.8 million compared to the three months ended September 30, 2019 and was $311.8 million for the nine months ended September 30, 2020, an increase of $155.9 million compared to the nine months ended September 29, 2019. The increase for both the three and nine months ended September 30, 2020 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.
