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gci:state
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
_______________________
FORM
10-Q
_______________________
|
|
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☒
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
|
For the quarterly
period ended September 30, 2020
|
|
|
☐
|
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)
___________________________
|
|
|
|
|
|
|
Delaware
|
|
38-3910250
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|
(State or Other Jurisdiction
of Incorporation or Organization)
|
|
(I.R.S. Employer
Identification No.)
|
|
|
|
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|
7950
Jones Branch Drive,
|
McLean,
|
Virginia
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22107-0910
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|
(Address of principal
executive offices)
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|
(Zip Code)
|
Registrant's
telephone number, including area code: (703) 854-6000.
Securities
registered pursuant to Section 12(b) of the Act:
|
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Title
of Each Class
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Trading
Symbol
|
|
Name
of Each Exchange on Which Registered
|
|
Common Stock, par value
$0.01 per share
|
|
GCI
|
|
The 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 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 definitions of "large
accelerated filer," "accelerated filer," "smaller reporting
company," and "emerging growth company" in Rule 12b-2 of the
Exchange Act.
|
|
|
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|
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 of shares of the registrant's Common Stock,
$0.01
par value,
outstanding was 137,959,262.
CAUTIONARY NOTE REGARDING FORWARD LOOKING INFORMATION
Certain
statements in this report on Form 10-Q may constitute
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 that reflect our current
views regarding, among other things, our future growth, results of
operations, performance, and business prospects and opportunities
as well as other statements that are other than historical fact.
Words such as “anticipate(s),” “expect(s),” “intend(s),” “plan(s),”
“target(s),” “project(s),” “believe(s),” “will,” “aim,” “would,”
“seek(s),” “estimate(s)” and similar expressions are intended to
identify such forward-looking statements.
Forward-looking
statements are based on management’s current expectations and
beliefs and are subject to a number of known and unknown risks,
uncertainties, and other factors that could lead to actual results
materially different from those described in the forward-looking
statements. We can give no assurance our expectations will be
attained. Our actual results, liquidity, and financial condition
may differ from the anticipated results, liquidity, and financial
condition indicated in these forward-looking statements. These
forward-looking statements are not a guarantee of future
performance and involve risks and uncertainties, and there are
certain important factors that could cause our actual results to
differ, possibly materially, from expectations or estimates
reflected in such forward-looking statements, including, among
others:
|
|
|
•
|
Risks and
uncertainties associated with the ongoing COVID-19
pandemic;
|
|
|
|
•
|
General economic
and market conditions;
|
|
|
|
•
|
Economic
conditions in the various regions of the United
States;
|
|
|
|
•
|
The growing shift
within the publishing industry from traditional print media to
digital forms of publication;
|
|
|
|
•
|
Risks and
uncertainties associated with our 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 ability to
pay dividends consistent with prior practice or at
all;
|
|
|
|
•
|
Our ability to
reduce costs and expenses;
|
|
|
|
•
|
The impact of any
material transactions with the Manager (as defined below) or one of
its affiliates, including the impact of any actual, potential, or
perceived conflicts of interest;
|
|
|
|
•
|
The competitive
environment in which we operate; and
|
|
|
|
•
|
Our ability to
recruit and retain key personnel.
|
Additional risk
factors that could cause actual results to differ materially from
our expectations include, but are not limited to, the risks
identified by us under the heading “Risk Factors” in Item 1A
of this report and the statements made in subsequent
filings. Such
forward-looking statements speak only as of the date they are made.
Except to the extent required by law, we expressly disclaim any
obligation to release publicly any updates or revisions to any
forward-looking statements contained herein to reflect any change
in our expectations with regard thereto or change in events,
conditions, or circumstances on which any statement is
based.
INDEX TO
GANNETT CO., INC.
Q3
2020
FORM
10-Q
|
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|
|
|
Item No.
|
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Page
|
|
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|
|
1
|
|
|
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2
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3
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4
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|
|
|
|
|
|
|
1
|
|
|
|
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|
|
1A
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
3
|
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4
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5
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6
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|
|
PART I.
FINANCIAL INFORMATION
Item 1.
Financial Statements
CONDENSED
CONSOLIDATED BALANCE SHEETS
Gannett Co.,
Inc. and Subsidiaries
|
|
|
|
|
|
|
|
|
|
in
thousands, except share data
|
September 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 $19,923
|
288,400
|
|
|
438,523
|
|
|
Inventories
|
33,776
|
|
|
55,090
|
|
|
Prepaid expenses and other
current assets
|
115,137
|
|
|
129,460
|
|
|
Total current
assets
|
626,273
|
|
|
779,115
|
|
|
Property, plant
and equipment, at cost net of accumulated depreciation of $377,072
and $277,291
|
704,931
|
|
|
815,807
|
|
|
Operating lease
assets
|
295,775
|
|
|
309,112
|
|
|
Goodwill
|
560,215
|
|
|
914,331
|
|
|
Intangible assets,
net
|
893,721
|
|
|
1,012,564
|
|
|
Deferred income tax
assets
|
97,369
|
|
|
76,297
|
|
|
Other assets
|
136,019
|
|
|
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 revenue
|
207,597
|
|
|
218,823
|
|
|
Current portion of long-term
debt
|
15,179
|
|
|
3,300
|
|
|
Other current
liabilities
|
46,558
|
|
|
42,702
|
|
|
Total current
liabilities
|
610,174
|
|
|
718,453
|
|
|
Long-term debt
|
1,615,984
|
|
|
1,636,335
|
|
|
Convertible debt
|
3,300
|
|
|
3,300
|
|
|
Deferred tax
liabilities
|
6,256
|
|
|
9,052
|
|
|
Pension and other
postretirement benefit obligations
|
198,220
|
|
|
235,906
|
|
|
Long-term operating lease
liabilities
|
280,556
|
|
|
297,662
|
|
|
Other long-term
liabilities
|
169,536
|
|
|
136,188
|
|
|
Total
noncurrent liabilities
|
2,273,852
|
|
|
2,318,443
|
|
|
Total
liabilities
|
2,884,026
|
|
|
3,036,896
|
|
|
Redeemable noncontrolling
interests
|
4,148
|
|
|
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, 2019
|
1,375
|
|
|
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
capital
|
1,100,269
|
|
|
1,090,694
|
|
|
Accumulated
deficit
|
(664,263
|
)
|
|
(115,958
|
)
|
|
Accumulated other
comprehensive income (loss)
|
(6,411
|
)
|
|
8,202
|
|
|
Total
equity
|
426,129
|
|
|
981,356
|
|
|
Total
liabilities and equity
|
$
|
3,314,303
|
|
|
$
|
4,020,102
|
|
The
accompanying notes are an integral part of these condensed
consolidated financial statements.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(LOSS)
Gannett Co.,
Inc. and Subsidiaries
Unaudited;
in thousands, except share data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
Nine months
ended
|
|
|
September 30,
2020
|
|
September 29,
2019
|
|
September 30,
2020
|
|
September 29,
2019
|
|
Operating
revenues:
|
|
|
|
|
|
|
|
|
Advertising and marketing
services
|
$
|
405,227
|
|
|
$
|
184,078
|
|
|
$
|
1,249,156
|
|
|
$
|
582,320
|
|
|
Circulation
|
336,158
|
|
|
146,254
|
|
|
1,053,528
|
|
|
449,269
|
|
|
Other
|
73,154
|
|
|
46,317
|
|
|
227,539
|
|
|
137,047
|
|
|
Total operating revenues
|
814,539
|
|
|
376,649
|
|
|
2,530,223
|
|
|
1,168,636
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Operating costs
|
492,342
|
|
|
218,369
|
|
|
1,535,539
|
|
|
681,271
|
|
|
Selling, general
and administrative expenses
|
241,652
|
|
|
119,821
|
|
|
767,275
|
|
|
375,497
|
|
|
Depreciation and
amortization
|
61,355
|
|
|
24,482
|
|
|
205,706
|
|
|
68,733
|
|
|
Integration and
reorganization costs
|
13,417
|
|
|
3,136
|
|
|
73,978
|
|
|
13,213
|
|
|
Acquisition
costs
|
1,913
|
|
|
12,181
|
|
|
10,261
|
|
|
15,318
|
|
|
Asset
impairments
|
1,585
|
|
|
—
|
|
|
8,444
|
|
|
2,469
|
|
|
Goodwill and intangible
impairments
|
—
|
|
|
—
|
|
|
393,446
|
|
|
—
|
|
|
Loss on sale or disposal of
assets
|
795
|
|
|
602
|
|
|
1,540
|
|
|
3,339
|
|
|
Total operating expenses
|
813,059
|
|
|
378,591
|
|
|
2,996,189
|
|
|
1,159,840
|
|
|
Operating income (loss)
|
1,480
|
|
|
(1,942
|
)
|
|
(465,966
|
)
|
|
8,796
|
|
|
Non-operating
(income) expenses:
|
|
|
|
|
|
|
|
|
Interest
expense
|
58,063
|
|
|
10,030
|
|
|
173,890
|
|
|
30,376
|
|
|
Loss on early extinguishment
of debt
|
476
|
|
|
—
|
|
|
1,650
|
|
|
—
|
|
|
Non-operating pension
income
|
(18,334
|
)
|
|
(208
|
)
|
|
(54,433
|
)
|
|
(625
|
)
|
|
Gain on sale of
investments
|
(7,800
|
)
|
|
—
|
|
|
(7,995
|
)
|
|
—
|
|
|
Other income,
net
|
(2,575
|
)
|
|
(22
|
)
|
|
(6,993
|
)
|
|
(176
|
)
|
|
Non-operating expenses
|
29,830
|
|
|
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
|
|
|
Net
loss
|
(31,448
|
)
|
|
(18,968
|
)
|
|
(549,885
|
)
|
|
(25,708
|
)
|
|
Net loss attributable to
redeemable noncontrolling interests
|
(188
|
)
|
|
(505
|
)
|
|
(1,580
|
)
|
|
(954
|
)
|
|
Net loss
attributable to Gannett
|
$
|
(31,260
|
)
|
|
$
|
(18,463
|
)
|
|
$
|
(548,305
|
)
|
|
$
|
(24,754
|
)
|
|
Loss per share attributable
to Gannett - basic
|
$
|
(0.24
|
)
|
|
$
|
(0.31
|
)
|
|
$
|
(4.17
|
)
|
|
$
|
(0.41
|
)
|
|
Loss per share attributable
to Gannett - diluted
|
$
|
(0.24
|
)
|
|
$
|
(0.31
|
)
|
|
$
|
(4.17
|
)
|
|
$
|
(0.41
|
)
|
|
Dividends declared per
share
|
$
|
0.00
|
|
|
$
|
0.38
|
|
|
$
|
0.00
|
|
|
$
|
1.14
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive
loss:
|
|
|
|
|
|
|
|
|
Foreign currency translation
adjustments
|
$
|
7,677
|
|
|
(3
|
)
|
|
$
|
(8,908
|
)
|
|
—
|
|
|
Pension and other
postretirement benefit items:
|
|
|
|
|
|
|
|
|
Net actuarial
loss
|
—
|
|
|
—
|
|
|
(8,078
|
)
|
|
—
|
|
|
Amortization of net
actuarial gain
|
(11
|
)
|
|
(30
|
)
|
|
(36
|
)
|
|
(90
|
)
|
|
Other
|
(714
|
)
|
|
—
|
|
|
347
|
|
|
—
|
|
|
Total pension and other
postretirement benefit items
|
(725
|
)
|
|
(30
|
)
|
|
(7,767
|
)
|
|
(90
|
)
|
|
Other comprehensive income
(loss) before tax
|
6,952
|
|
|
(33
|
)
|
|
(16,675
|
)
|
|
(90
|
)
|
|
Income tax expense (benefit)
related to components of other comprehensive income
|
1
|
|
|
—
|
|
|
(2,062
|
)
|
|
—
|
|
|
Other comprehensive income
(loss), net of tax
|
6,951
|
|
|
(33
|
)
|
|
(14,613
|
)
|
|
(90
|
)
|
|
Comprehensive
loss
|
(24,497
|
)
|
|
(19,001
|
)
|
|
(564,498
|
)
|
|
(25,798
|
)
|
|
Comprehensive loss
attributable to redeemable noncontrolling interests
|
(188
|
)
|
|
(505
|
)
|
|
(1,580
|
)
|
|
(954
|
)
|
|
Comprehensive
loss attributable to Gannett
|
$
|
(24,309
|
)
|
|
$
|
(18,496
|
)
|
|
$
|
(562,918
|
)
|
|
$
|
(24,844
|
)
|
The
accompanying notes are an integral part of these condensed
consolidated financial statements.
|
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
|
|
Amount
|
Shares
|
|
Amount
|
|
Total
|
|
Three months ended September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of
June 30, 2020
|
136,885,320
|
|
|
$
|
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 withholdings
|
564,406
|
|
|
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
stock
|
28,970
|
|
|
—
|
|
|
(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, 2020
|
137,478,696
|
|
|
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, 2019
|
60,806,451
|
|
|
$
|
608
|
|
|
$
|
677,574
|
|
|
$
|
(6,938
|
)
|
|
$
|
(2,409
|
)
|
|
324,777
|
|
|
$
|
(2,573
|
)
|
|
$
|
666,262
|
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(18,463
|
)
|
|
—
|
|
|
—
|
|
|
(18,463
|
)
|
|
Restricted share
grants
|
1,408
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
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, 2019
|
60,807,859
|
|
|
$
|
608
|
|
|
$
|
655,282
|
|
|
$
|
(6,971
|
)
|
|
$
|
(20,872
|
)
|
|
326,742
|
|
|
$
|
(2,589
|
)
|
|
$
|
625,458
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated
financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited;
in thousands, except share data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock
|
|
Additional
Paid-in
Capital
|
|
Accumulated
other comprehensive income (loss)
|
|
Retained
Earnings (Accumulated Deficit)
|
|
Treasury
stock
|
|
|
|
|
Shares
|
|
Amount
|
Shares
|
|
Amount
|
|
Total
|
|
Nine months ended September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of
December 30, 2019
|
129,386,258
|
|
|
$
|
1,294
|
|
|
$
|
1,090,694
|
|
|
$
|
8,202
|
|
|
$
|
(115,958
|
)
|
|
394,714
|
|
|
$
|
(2,876
|
)
|
|
$
|
981,356
|
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(548,305
|
)
|
|
—
|
|
|
—
|
|
|
(548,305
|
)
|
|
Restricted share
grants
|
4,346,313
|
|
|
44
|
|
|
(44
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Restricted stock awards
settled, net of withholdings
|
3,072,991
|
|
|
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
stock
|
673,134
|
|
|
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, 2020
|
137,478,696
|
|
|
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, 2018
|
60,508,249
|
|
|
$
|
605
|
|
|
$
|
721,605
|
|
|
$
|
(6,881
|
)
|
|
$
|
3,767
|
|
|
201,963
|
|
|
$
|
(1,873
|
)
|
|
$
|
717,223
|
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(24,754
|
)
|
|
—
|
|
|
—
|
|
|
(24,754
|
)
|
|
Restricted share
grants
|
299,610
|
|
|
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, 2019
|
60,807,859
|
|
|
608
|
|
|
655,282
|
|
|
(6,971
|
)
|
|
(20,872
|
)
|
|
326,742
|
|
|
(2,589
|
)
|
|
625,458
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated
financial statements.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
Gannett Co.,
Inc. and Subsidiaries
Unaudited;
in thousands
|
|
|
|
|
|
|
|
|
|
|
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
amortization
|
205,706
|
|
|
68,733
|
|
|
Equity-based compensation
expense
|
22,812
|
|
|
2,534
|
|
|
Non-cash interest
expense
|
17,813
|
|
|
1,034
|
|
|
Loss on sale or disposal of
assets
|
1,540
|
|
|
3,339
|
|
|
Loss on early extinguishment
of debt
|
1,650
|
|
|
—
|
|
|
Goodwill and intangible
impairments
|
393,446
|
|
|
—
|
|
|
Asset impairments
|
8,444
|
|
|
2,469
|
|
|
Pension and other
postretirement benefit obligations, net of
contributions
|
(77,274
|
)
|
|
(1,116
|
)
|
|
Change in other assets and
liabilities, net
|
50,028
|
|
|
47,245
|
|
|
Net cash
provided by operating activities
|
74,280
|
|
|
98,530
|
|
|
Cash flows
from investing activities:
|
|
|
|
|
Acquisitions, net of cash
acquired
|
—
|
|
|
(49,666
|
)
|
|
Purchase of property, plant
and equipment
|
(28,944
|
)
|
|
(7,281
|
)
|
|
Proceeds from sale of real
estate and other assets
|
26,186
|
|
|
10,314
|
|
|
Insurance proceeds received
for damage to property
|
1,643
|
|
|
—
|
|
|
Change in other investing
activities
|
(864
|
)
|
|
—
|
|
|
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 facility
|
—
|
|
|
136,400
|
|
|
Repayments under revolving
credit facility
|
—
|
|
|
(128,400
|
)
|
|
Deferred payments for
acquisitions
|
(7,544
|
)
|
|
—
|
|
|
Payments for employee taxes
withheld from stock awards
|
(1,960
|
)
|
|
(716
|
)
|
|
Issuance of common
stock
|
4
|
|
|
—
|
|
|
Payment of
dividends
|
—
|
|
|
(68,886
|
)
|
|
Changes in other financing
activities
|
(352
|
)
|
|
—
|
|
|
Net cash used
for financing activities
|
(37,471
|
)
|
|
(72,898
|
)
|
|
Effect of currency exchange
rate change on cash
|
439
|
|
|
—
|
|
|
Increase (decrease) in cash,
cash equivalents and restricted cash
|
35,269
|
|
|
(21,001
|
)
|
|
Balance of cash, cash
equivalents and restricted cash at beginning of period
|
188,664
|
|
|
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
|
|
The
accompanying notes are an integral part of these condensed
consolidated financial statements.
NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 —
Basis of presentation and summary of significant accounting
policies
Description of business: Gannett Co., Inc. ("Gannett",
"we", "us", "our", or the "Company") is an innovative, digitally
focused media and marketing solutions company committed to
fostering the communities in our network and helping them build
relationships with their local businesses. On November 19, 2019,
New Media Investment Group Inc. ("Legacy New Media") completed 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".
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 (the "U.K.") with more than
140
local media
brands). Gannett also owns the digital marketing services companies
ReachLocal, Inc. ("ReachLocal"), UpCurve, Inc. ("UpCurve"), and
WordStream, Inc. ("WordStream") and runs the largest media-owned
events business in the U.S., GateHouse Live.
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 two
segments:
Publishing
and
Marketing
Solutions.
A full description of our segments is included in
Note 14 — Segment
reporting of the notes to the
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 with
the COVID-19 global pandemic. More specifically, during March 2020,
the Company began to experience decreased demand for its
advertising and digital marketing services, commercial print and
distribution services, as well as reductions in the single copy and
commercial distribution of its newspapers. At this point, the
Company’s newspaper production operations have not been
significantly impacted and the vast majority of the Company’s
non-production employees are currently working remotely. However,
the COVID-19 global pandemic had a significant negative impact on
the Company’s business and results of operations during 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. As a result, the Company has
implemented, and continues to implement, measures to reduce costs
and preserve cash flow. These measures include suspension of the
quarterly dividend, employee furloughs and decreases in employee
compensation through the third quarter, as well as reductions in
discretionary spending. In addition, the Company has deferred
certain payroll tax remittance as permitted under the Coronavirus
Aid, Relief and Economic Security Act ("CARES Act") and negotiated
the deferral of pension contributions, as well as continuing with
its previously disclosed plan to monetize non-core assets. The
Company believes these initiatives, along with cash on hand and
cash provided by operating activities, will provide sufficient cash
flow to enable the Company to meet its commitments. However, these
measures are not expected to fully offset the negative impact of
the COVID-19 pandemic on the Company's business and results of
operations.
Basis of 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.
Use of 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 in estimates and assumptions affecting the reported
amounts of assets and liabilities as of the date of the condensed
consolidated financial statements.
Examples of
significant estimates include pension and postretirement benefit
obligation assumptions, income taxes, leases, self-insurance
liabilities, impairment analysis, stock-based compensation,
business combinations and valuation of property, plant and
equipment and intangible assets. Actual results could differ from
those estimates.
Fiscal period: Starting in
2019
and subsequent to
our acquisition of Legacy Gannett, our fiscal period end coincides
with the Gregorian calendar. In periods prior to the acquisition,
our fiscal periods ended on the last Sunday of the calendar month.
Our fiscal period end for the third quarter of 2019 was September 29,
2019.
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
thousands
|
September 30,
2020
|
|
September 29,
2019
|
|
Cash and cash
equivalents
|
$
|
188,960
|
|
|
$
|
28,641
|
|
|
Restricted cash included in
other current assets
|
10,796
|
|
|
3,128
|
|
|
Restricted cash included in
investments and other assets
|
24,177
|
|
|
—
|
|
|
Total cash, cash equivalents
and restricted cash
|
$
|
223,933
|
|
|
$
|
31,769
|
|
New accounting pronouncements adopted: The following are new
accounting pronouncements that we adopted in the
first nine
months of 2020:
Financial
Instruments—Credit Losses: In June 2016, the Financial
Accounting Standards Board ("FASB") issued new guidance which
amends the principles around the recognition of credit losses by
mandating entities incorporate an estimate of current expected
credit losses when determining the value of certain assets. The
guidance also amends reporting around allowances for credit losses
on available-for-sale marketable securities. This guidance is
effective for fiscal years beginning after December 15, 2019, with
early adoption permitted. Adopting this guidance did not have a
material impact on our consolidated financial statements, refer
to Note 4
— Accounts receivable, net for further
details.
Intangibles—Internal
Use Software: In August 2018, the FASB
issued new guidance which aligns the requirements for capitalizing
implementation costs incurred in a hosting arrangement that is a
service contract with the requirements for capitalizing
implementation costs incurred to develop or obtain internal-use
software and hosting arrangements that include an internal-use
software license. This guidance is effective for fiscal years
beginning after December 15, 2019. Early adoption is permitted,
including adoption in any interim period. The guidance can be
applied either retrospectively or prospectively to all
implementation costs incurred after the date of adoption. This
guidance was adopted prospectively and did not have a material
impact on our consolidated financial statements. Capitalized costs
are recognized within prepaid expenses and other current assets or
other assets within the consolidated balance sheet.
Fair Value
Measurement—Disclosure Framework: In August 2018, the FASB
issued new guidance that changes disclosure requirements related to
fair value measurements as part of the disclosure framework
project. The disclosure framework project aims to improve the
effectiveness of disclosures in the notes to the financial
statements by focusing on requirements that clearly communicate the
most important information to users of the financial statements.
This guidance is effective for fiscal years beginning after
December 15, 2019, with early adoption permitted. Adopting this
guidance did not have a material impact on our consolidated
financial statements.
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. We are evaluating the provisions of
the updated guidance and assessing the impact on our 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 Condensed consolidated
statements of operations and comprehensive income (loss)
presents 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
|
|
Nine months
ended
|
|
In
thousands
|
September 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 services
|
197,180
|
|
|
44,835
|
|
|
585,109
|
|
|
133,972
|
|
|
Total advertising and
marketing services
|
405,227
|
|
|
184,078
|
|
|
1,249,156
|
|
|
582,320
|
|
|
Circulation
|
336,158
|
|
|
146,254
|
|
|
1,053,528
|
|
|
449,269
|
|
|
Other
|
73,154
|
|
|
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, approximately
7%
of our revenues
were generated from international locations.
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 obligation is the delivery of publications to
subscription customers. The Company expects to recognize the
revenue related to unsatisfied performance obligations over the
next three to twelve
months in accordance with the terms
of the subscriptions.
The Company's
payment terms vary by the type and location of the customer and the
products or services offered. The period between invoicing and when
payment is due is not significant. For certain products or services
and customer types, the Company requires payment before the
products or services are delivered to the customer.
The following
table presents changes in the deferred revenues balance for
the nine
months ended September 30, 2020 by type of revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In
thousands
|
Advertising,
Marketing Services, and Other
|
|
Circulation
|
|
Total
|
|
Beginning balance
|
$
|
67,543
|
|
|
$
|
151,280
|
|
|
$
|
218,823
|
|
|
Cash receipts
|
215,050
|
|
|
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. The remaining deferred
revenue balance relates to Advertising and marketing services
revenues and Other revenues.
NOTE 3 —
Leases
We lease certain
real estate, vehicles, and equipment. Our leases have remaining
lease terms of 1
to
15
years, some of which may include
options to extend the leases, and some of which may include options
to terminate the leases. The exercise of lease renewal options is
at our sole discretion. The depreciable lives of assets and
leasehold improvements are limited by the expected lease term
unless there is a transfer of title or purchase option reasonably
certain of exercise.
As of
September 30,
2020,
our Condensed consolidated
balance sheets include $295.8
million of operating lease
right-to-use assets, $43.5
million of short-term operating lease
liabilities included in Other current liabilities, and
$280.6
million of long-term operating lease
liabilities.
The components of
lease expense were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
Nine months
ended
|
|
In
thousands
|
September 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 $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 ended
September 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)
|
|
2020 (excluding the nine
months ended September 30, 2020)
|
$
|
15,968
|
|
|
2021
|
82,679
|
|
|
2022
|
74,650
|
|
|
2023
|
62,115
|
|
|
2024
|
55,419
|
|
|
Thereafter
|
246,439
|
|
|
Total future minimum lease
payments
|
537,270
|
|
|
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.
|
Other information
related to leases were as follows:
|
|
|
|
|
|
|
|
|
|
|
Nine months
ended
|
|
In
thousands, except lease term and discount rate
|
September 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 obligations
|
25,562
|
|
|
18,642
|
|
|
|
|
|
|
|
|
As
of
|
|
|
September 30,
2020
|
|
September 29,
2019
|
|
Weighted-average remaining
lease term (in years)
|
7.7
|
|
|
8.6
|
|
|
Weighted-average discount
rate
|
12.66
|
%
|
|
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 nine
months ended September 30, 2020:
|
|
|
|
|
|
In
thousands
|
|
|
Beginning balance
|
$
|
19,923
|
|
|
Current
period provision
|
23,075
|
|
|
Write-offs
charged against the allowance
|
(21,139
|
)
|
|
Recoveries
of amounts previously written-off
|
2,230
|
|
|
Disposition
|
(351
|
)
|
|
Foreign
currency
|
11
|
|
|
Ending balance
|
$
|
23,749
|
|
Each category
considers current economic, industry and customer specific
conditions relative to their respective operating environments in
the incremental allowances recorded related to high-risk accounts,
bankruptcies, receivables in repayment plan and other aging
specific reserves. As a result of this analysis, the Company
adjusts specific reserves and the amount of allowable credit as
appropriate. The collectability of trade receivables related to
advertising, marketing services and other customers depends on a
variety of factors, including trends in the local and general
economic conditions that affect our customers' ability to pay. The
advertisers in our newspapers and other publications and related
websites are primarily retail businesses that can be significantly
affected by regional or national economic downturns and other
developments that may impact our ability to collect on the related
receivables. Similarly, while circulation revenues related to
individual subscribers are primarily prepaid, changes in economic
conditions may also affect our ability to collect on amounts owed
from single copy circulation customers.
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, 2020, the Company recorded
$5.7
million and $23.1
million in bad debt expense, included
in Selling, general and
administrative expenses on the Condensed consolidated
statements of operations and comprehensive income
(loss).
For the three and nine months ended September
29, 2019,
the Company recorded $1.5
million and $5.5
million in bad debt expense included
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 as a result of adopting the
new guidance on credit losses.
NOTE 5 —
Acquisitions
2019
Acquisitions
The Company
acquired substantially all the assets, properties, and business of
Legacy Gannett on November 19,
2019. The
acquisition, which included the USA TODAY NETWORK (made up of USA
TODAY 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, 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 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 no
consideration
payable to the former stockholders. The 2019 Acquisitions were
financed from cash on hand. The rationale for the 2019 Acquisitions
was primarily the attractive nature, as applicable, of the various
publications, businesses, and digital platforms as well as the
estimated cash flows and cost-saving and revenue-generating
opportunities available. The fair values of the assets and
liabilities for the 2019 Acquisitions were finalized during the
second quarter of 2020.
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; unaudited
|
September 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2020
|
|
In
thousands
|
Gross
carrying amount
|
|
Accumulated
amortization
|
|
Net carrying
amount
|
|
Amortized intangible
assets(a):
|
|
|
|
|
|
|
Advertiser
relationships
|
$
|
496,062
|
|
|
$
|
111,782
|
|
|
$
|
384,280
|
|
|
Other customer
relationships
|
112,704
|
|
|
24,561
|
|
|
88,143
|
|
|
Subscriber
relationships
|
265,218
|
|
|
67,469
|
|
|
197,749
|
|
|
Other intangible
assets
|
70,317
|
|
|
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
relationships
|
109,674
|
|
|
14,303
|
|
|
95,371
|
|
|
Subscriber
relationships
|
259,391
|
|
|
44,878
|
|
|
214,513
|
|
|
Other intangible
assets
|
76,552
|
|
|
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
adjustments
|
70,558
|
|
|
(58,788
|
)
|
|
11,770
|
|
|
Foreign currency exchange rate
changes
|
(3,536
|
)
|
|
—
|
|
|
(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 performed its annual
goodwill and indefinite-lived intangible (masthead) impairment
assessment in the second quarter of 2020 with the assistance of
third-party valuation specialists. Within
the impairment
analyses performed, the Company considered the current and expected
future economic and market conditions and the impact on the fair
value of each of the reporting units. The primary factor that
impacted the decrease in fair value was the impact of the COVID-19
pandemic on the Company’s operations. The most significant
assumptions utilized in the determination of the estimated fair
values include revenue and EBITDA projections, discount rates and
long-term growth rates. The long-term growth rates are dependent on
overall market growth rates, the competitive environment, inflation
and relative currency exchange rates and could be adversely
impacted by a sustained decrease in any of these measures, all of
which the Company considered in determining the long-term growth
rates used in the analysis, which ranged from negative
0.5%
to
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
additional impairment charges in the future.
As of
September 30,
2020, the
Company performed a review of potential impairment indicators
noting that its financial results and forecast have not changed
materially since the annual impairment assessment, and it was
determined that no indicators of impairment were
present.
NOTE 7 —
Integration and reorganization costs and 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: We recorded severance-related
expenses by segment as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
Nine months
ended
|
|
In
thousands
|
September 30,
2020
|
|
September 29,
2019
|
|
September 30,
2020
|
|
September 29,
2019
|
|
Publishing
|
$
|
3,983
|
|
|
$
|
1,489
|
|
|
$
|
35,401
|
|
|
$
|
6,145
|
|
|
Marketing
Solutions
|
1,196
|
|
|
431
|
|
|
5,333
|
|
|
1,167
|
|
|
Corporate and
Other
|
2,103
|
|
|
8
|
|
|
14,069
|
|
|
909
|
|
|
Total
|
$
|
7,282
|
|
|
$
|
1,928
|
|
|
$
|
54,803
|
|
|
$
|
8,221
|
|
A rollforward of
the accrued severance and related costs included in Accounts
payable and accrued expenses on the Condensed consolidated
balance sheets for the nine months ended September
30, 2020 are as follows:
|
|
|
|
|
|
In
thousands
|
|
|
Beginning balance
|
$
|
30,785
|
|
|
Restructuring provision
included in integration and reorganization costs
|
54,803
|
|
|
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: We recorded facility
consolidation charges and other restructuring-related costs by
segment as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
Nine months
ended
|
|
In
thousands
|
September 30,
2020
|
|
September 29,
2019
|
|
September 30,
2020
|
|
September 29,
2019
|
|
Publishing
|
$
|
1,137
|
|
|
$
|
1,119
|
|
|
$
|
3,648
|
|
|
$
|
2,922
|
|
|
Marketing
Solutions
|
41
|
|
|
70
|
|
|
254
|
|
|
70
|
|
|
Corporate and
Other
|
4,957
|
|
|
19
|
|
|
15,273
|
|
|
2,000
|
|
|
Total
|
$
|
6,135
|
|
|
$
|
1,208
|
|
|
$
|
19,175
|
|
|
$
|
4,992
|
|
Asset impairments and accelerated depreciation: As part of ongoing cost
efficiency programs, the Company has ceased a number of print
operations. There were $1.6
million of 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 no
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.
The Company
incurred accelerated depreciation of $9.3
million and $2.2
million for the three months ended September
30, 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 were related to the Publishing segment and are included
within Depreciation and amortization expense on the
Condensed
consolidated statements of operations and comprehensive income
(loss).
NOTE 8 —
Debt
Apollo Term
Loan
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 "Apollo Term Loan"). The
Apollo Term Loan which matures on November 19,
2024,
generally bears interest at the rate of 11.5%
per annum.
Origination fees totaled 6.5%
of the total
principal amount of the financing at closing. Pursuant to the
agreement, Apollo has the right to designate two
individuals to
attend Board of Directors meetings as non-fiduciary and non-voting
observers and participants. In addition, if the total gross
leverage ratio exceeds certain thresholds, Apollo has the right 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
Default (as defined in the Apollo Term Loan), the interest rate
increases by 2.0%.
The Apollo Term
Loan contains customary covenants and events of default, including
a covenant that the Company have at least $20
million of unrestricted cash on the
last day of each fiscal quarter. The Apollo Term Loan is required
to be prepaid with (i) any unrestricted cash in excess of
$40
million at the end of fiscal year
2020 and fiscal year 2021, (ii) 50%
of excess cash
flow (as such term is defined in the Apollo Term Loan) measured at
the end of each fiscal quarter (beginning with the third quarter of
2020), subject to a step-up to 90%
of excess cash
flow for each period in fiscal year 2021 or later if 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) does not exceed a specified threshold. As of
September 30,
2020, the
Company is in compliance with all of the covenants and obligations
under the Apollo Term Loan.
In connection
with the Apollo Term Loan, the Company incurred
approximately $4.9
million of fees and expenses
and $116.6
million of lender fees which were
capitalized and will be amortized over the term of the Apollo Term
Loan using the effective interest method.
The Company used
the proceeds of the Apollo Term Loan to (i) partially fund the
acquisition of Legacy Gannett, (ii) repay, prepay, repurchase,
redeem, or otherwise discharge in full each of the existing
financing facilities (as defined in the agreement and discussed in
part below), and (iii) pay fees and expenses incurred to obtain the
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, $4.1
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. 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 debt on the Condensed consolidated
balance sheets, which represents
50%
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.
Convertible
debt
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 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 notes outstanding is reported as convertible debt in
the Condensed consolidated
balance sheets. The effective interest rate
on the notes was 6.05%
as of
September 30,
2020.
NOTE 9 —
Pensions and other postretirement benefit plans
We, along with
our subsidiaries, have various defined benefit retirement plans,
including plans established under collective bargaining agreements.
Our retirement plans include the Gannett Retirement Plan ("GRP"),
Newsquest and Romanes Pension Schemes in the U.K. ("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.
Retirement plan
costs include the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
|
September 30,
2020
|
|
September 29,
2019
|
|
In
thousands
|
Pension
|
|
OPEB
|
|
Pension
|
|
OPEB
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Service cost - Benefits earned
during the period
|
$
|
693
|
|
|
$
|
27
|
|
|
$
|
159
|
|
|
$
|
—
|
|
|
Non-operating
expenses (Other income):
|
|
|
|
|
|
|
|
|
Interest cost on benefit
obligation
|
20,670
|
|
|
580
|
|
|
737
|
|
|
22
|
|
|
Expected return on plan
assets
|
(39,573
|
)
|
|
—
|
|
|
(937
|
)
|
|
—
|
|
|
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
thousands
|
Pension
|
|
OPEB
|
|
Pension
|
|
OPEB
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Service cost - Benefits earned
during the period
|
$
|
2,078
|
|
|
$
|
79
|
|
|
$
|
476
|
|
|
$
|
—
|
|
|
Non-operating
expenses (Other income):
|
|
|
|
|
|
|
|
|
Interest cost on benefit
obligation
|
61,803
|
|
|
1,740
|
|
|
2,210
|
|
|
67
|
|
|
Expected return on plan
assets
|
(117,940
|
)
|
|
—
|
|
|
(2,812
|
)
|
|
—
|
|
|
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
nine months ended
September 30, 2020, we contributed
$19.6
million and $5.7
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, $11
million in minimum required
contributions for the 2019 plan year, as required by the Employee
Retirement Income Security Act of 1974 ("ERISA"), have been
deferred until January 1, 2021.
NOTE 10 —
Income taxes
The following
table outlines our pre-tax net income
(loss) and
income tax amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
Nine months
ended
|
|
In
thousands
|
September 30,
2020
|
|
September 29,
2019
|
|
September 30,
2020
|
|
September 29,
2019
|
|
Pre-tax net income
(loss)
|
$
|
(28,350
|
)
|
|
$
|