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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
For the quarterly period ended September 30, 2021

☐    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
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)
7950 Jones Branch Drive, McLean, Virginia 22107-0910
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (703) 854-6000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class 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 (§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, 2021, 142,327,552 shares of the registrant's Common Stock were outstanding.



CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this Quarterly Report on Form 10-Q may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect our current views regarding, among other things, our future growth, results of operations, performance, and business prospects and opportunities, and are not statements of historical fact. Words such as "anticipate(s)," "expect(s)," "intend(s)," "plan(s)," "target(s)," "project(s)," "believe(s)," "forecast," "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:

•General economic and market conditions;
•The competitive environment in which we operate;
•Risks and uncertainties associated with the ongoing COVID-19 pandemic;
•Economic conditions in the various regions of the United States, the United Kingdom, and other regions in which we operate our business;
•The shift within the publishing industry from traditional print media to digital forms of publication;
•Risks and uncertainties associated with our Digital Marketing Solutions segment, including its significant reliance on Google for media purchases, its international operations, and its ability to develop and gain market acceptance for new products or services;
•Declining print advertising revenue and circulation subscribers;
•Our ability to grow our digital marketing services initiatives, digital audience, and advertiser base;
•Our ability to grow our business organically;
•Variability in the exchange rate relative to the U.S. dollar of currencies in foreign jurisdictions in which we operate;
•The risk that we may not realize the anticipated benefits of our acquisitions;
•The availability and cost of capital for future investments;
•Our indebtedness may restrict our operations and/or require us to dedicate a portion of cash flow from operations to payments associated with our debt;
•Our current intention not to pay dividends and our ability to pay dividends consistent with prior practice or at all;
•Our ability to reduce costs and expenses;
•Our ability to remediate a material weakness in our internal control over financial reporting; and
•Our ability to recruit and retain key personnel, as well as any shortage of skilled or experienced employees, including journalists.

Additional risk factors that could cause actual results to differ materially from our expectations include, but are not limited to, the risks identified by us under the heading "Risk Factors" in this Quarterly Report on Form 10-Q, under the heading "Risk Factors" in Item 1A of our 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 2021 FORM 10-Q
 


PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

GANNETT CO., INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
In thousands, except share data September 30, 2021 December 31, 2020
Assets (Unaudited)
Current assets:
Cash and cash equivalents $ 141,302  $ 170,725 
Accounts receivable, net of allowance for doubtful accounts of $16,411 and $20,843 as of September 30, 2021 and December 31, 2020, respectively
301,016  314,305 
Inventories 33,492  35,075 
Prepaid expenses and other current assets 111,689  116,581 
Total current assets 587,499  636,686 
Property, plant and equipment, net of accumulated depreciation of $363,200 and $362,029 as of September 30, 2021 and December 31, 2020, respectively
461,923  590,272 
Operating lease assets 279,353  289,504 
Goodwill 533,797  534,088 
Intangible assets, net 741,591  824,650 
Deferred tax assets 63,136  90,240 
Other assets 242,704  143,474 
Total assets $ 2,910,003  $ 3,108,914 
Liabilities and equity
Current liabilities:
Accounts payable and accrued liabilities $ 357,324  $ 378,246 
Deferred revenue 196,259  186,007 
Current portion of long-term debt 104,948  128,445 
Other current liabilities 54,753  48,602 
Total current liabilities 713,284  741,300 
Long-term debt 741,636  890,323 
Convertible debt 399,875  581,405 
Deferred tax liabilities 21,419  6,855 
Pension and other postretirement benefit obligations 88,149  99,765 
Long-term operating lease liabilities 261,429  274,460 
Other long-term liabilities 141,577  151,847 
Total noncurrent liabilities 1,654,085  2,004,655 
Total liabilities 2,367,369  2,745,955 
Redeemable noncontrolling interests (2,209) (1,150)
Commitments and contingent liabilities (See Note 12)
Equity
Preferred stock, $0.01 par value, 300,000 shares authorized, of which 150,000 shares are designated as Series A Junior Participating Preferred Stock, none of which were issued and outstanding at September 30, 2021 and December 31, 2020
—  — 
Common stock of $0.01 par value per share, 2,000,000,000 shares authorized, 144,653,850 shares issued and 142,519,768 shares outstanding at September 30, 2021; 139,494,741 shares issued and 138,102,993 shares outstanding at December 31, 2020
1,446  1,395 
Treasury stock at cost, 2,134,082 shares and 1,391,748 shares at September 30, 2021 and December 31, 2020, respectively
(6,940) (4,903)
Additional paid-in capital 1,399,693  1,103,881 
Accumulated deficit (898,951) (786,437)
Accumulated other comprehensive income 49,595  50,173 
Total equity 544,843  364,109 
Total liabilities and equity $ 2,910,003  $ 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)
(Unaudited)
Three months ended September 30, Nine months ended September 30,
In thousands, except per share amounts 2021 2020 2021 2020
Advertising and marketing services $ 412,020  $ 405,227  $ 1,220,487  $ 1,249,156 
Circulation 306,702  336,158  942,398  1,053,528 
Other 81,463  73,154  218,659  227,539 
Total operating revenues 800,185  814,539  2,381,544  2,530,223 
Operating costs 480,289  492,342  1,431,259  1,535,539 
Selling, general and administrative expenses 225,596  241,652  652,184  767,275 
Depreciation and amortization 48,107  61,355  154,452  205,706 
Integration and reorganization costs 13,619  13,417  35,467  73,978 
Asset impairments 2,301  1,585  3,134  8,444 
Goodwill and intangible impairments —  —  —  393,446 
(Gain) loss on sale or disposal of assets, net (833) 795  9,206  1,540 
Other operating expenses 4  1,913  11,354  10,261 
Total operating expenses 769,083  813,059  2,297,056  2,996,189 
Operating income (loss) 31,102  1,480  84,488  (465,966)
Interest expense 34,603  58,063  109,370  173,890 
Loss on early extinguishment of debt 3,761  476  25,996  1,650 
Non-operating pension income (23,860) (18,334) (71,644) (54,433)
Loss on convertible notes derivative —  —  126,600  — 
Other income, net (931) (10,375) (3,954) (14,988)
Non-operating expense 13,573  29,830  186,368  106,119 
Income (loss) before income taxes 17,529  (28,350) (101,880) (572,085)
Provision (benefit) for income taxes 2,984  3,098  11,567  (22,200)
Net income (loss) 14,545  (31,448) (113,447) (549,885)
Net loss attributable to redeemable noncontrolling interests (142) (188) (933) (1,580)
Net income (loss) attributable to Gannett $ 14,687  $ (31,260) $ (112,514) $ (548,305)
Income (loss) per share attributable to Gannett - basic $ 0.11  $ (0.24) $ (0.84) $ (4.17)
Income (loss) per share attributable to Gannett - diluted $ 0.09  $ (0.24) $ (0.84) $ (4.17)
Other comprehensive income (loss):
Foreign currency translation adjustments $ (5,487) $ 7,677  $ (700) $ (8,908)
Pension and other postretirement benefit items:
Net actuarial loss —  —  (300) (8,078)
Amortization of net actuarial loss (gain) 25  (11) 40  (36)
Other 1,051  (714) 205  347 
Total pension and other postretirement benefit items 1,076  (725) (55) (7,767)
Other comprehensive income (loss) before tax (4,411) 6,952  (755) (16,675)
Income tax expense (benefit) related to components of other comprehensive income (loss) 7  1  (177) (2,062)
Other comprehensive income (loss), net of tax (4,418) 6,951  (578) (14,613)
Comprehensive income (loss) 10,127  (24,497) (114,025) (564,498)
Comprehensive loss attributable to redeemable noncontrolling interests (142) (188) (933) (1,580)
Comprehensive income (loss) attributable to Gannett $ 10,269  $ (24,309) $ (113,092) $ (562,918)
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
GANNETT CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended September 30,
In thousands 2021 2020
Operating activities
Net loss $ (113,447) $ (549,885)
Adjustments to reconcile net loss to operating cash flows:
Depreciation and amortization 154,452  205,706 
Share-based compensation expense 13,804  22,812 
Non-cash interest expense 18,719  17,813 
Loss on sale or disposal of assets, net 9,206  1,540 
Loss on convertible notes derivative 126,600  — 
Loss on early extinguishment of debt 25,996  1,650 
Goodwill and intangible impairments —  393,446 
Asset impairments 3,134  8,444 
Pension and other postretirement benefit obligations (114,663) (77,274)
Change in other assets and liabilities, net 9,546  50,028 
Net cash provided by operating activities 133,347  74,280 
Investing activities
Purchase of property, plant and equipment (27,265) (28,944)
Proceeds from sale of real estate and other assets 67,434  26,186 
Change in other investing activities (933) 779 
Net cash provided by (used for) investing activities 39,236  (1,979)
Financing activities
Payments of debt issuance costs (33,921) — 
Borrowings under term loans 1,045,000  — 
Repayments under term loans (1,220,751) (27,619)
Deferred payments for acquisitions —  (7,544)
Payments for employee taxes withheld from stock awards (2,034) (1,960)
Changes in other financing activities (578) (348)
Net cash used for financing activities (212,284) (37,471)
Effect of currency exchange rate change on cash 389  439 
(Decrease) increase in cash, cash equivalents and restricted cash (39,312) 35,269 
Balance of cash, cash equivalents and restricted cash at beginning of period 206,726  188,664 
Balance of cash, cash equivalents and restricted cash at end of period $ 167,414  $ 223,933 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
GANNETT CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
Three months ended September 30, 2021
Common stock Additional
paid-in
capital 		Accumulated other comprehensive income (loss) Accumulated deficit Treasury stock
In thousands, except share data Shares Amount Shares Amount Total
Balance at June 30, 2021 144,638,938  $ 1,446  $ 1,395,191  $ 54,013  $ (913,638) 2,014,664  $ (6,935) $ 530,077 
Net income attributable to Gannett —  —  —  —  14,687  —  —  14,687 
Restricted stock awards settled, net of withholdings 2,857  —  (6) —  —  —  —  (6)
Restricted share grants 5,226  —  —  —  —  —  —  — 
Other comprehensive loss, net of income tax expense
    of $7
—  —  —  (4,418) —  —  (4,418)
Share-based compensation expense —  —  4,602  —  —  —  —  4,602 
Issuance of common stock 6,829  —  38  —  —  —  —  38 
Treasury stock —  —  —  —  —  118,675  (4) (4)
Restricted share forfeiture —  —  —  —  —  743  (1) (1)
Other activity —  —  (132) —  —  —  —  (132)
Balance at September 30, 2021 144,653,850  $ 1,446  $ 1,399,693  $ 49,595  $ (898,951) 2,134,082  $ (6,940) $ 544,843 
Three months ended September 30, 2020
Common stock Additional
paid-in
capital 		Accumulated other comprehensive income (loss) Accumulated deficit Treasury stock
In thousands, except share data Shares Amount Shares Amount Total
Balance at June 30, 2020 136,885,320  $ 1,369  $ 1,101,899  $ (13,362) $ (633,003) 770,973  $ (4,818) $ 452,085 
Net loss attributable to Gannett —  —  —  —  (31,260) —  —  (31,260)
Restricted stock awards settled, net of withholdings 564,406  6  (866) —  —  —  —  (860)
Other comprehensive income, net of income tax expense of $1
—  —  —  6,951  —  —  —  6,951 
Share-based compensation expense —  —  3,844  —  —  —  —  3,844 
Issuance of common stock 28,970  —  (961) —  —  —  —  (961)
Remeasurement of redeemable noncontrolling interests —  —  (3,878) —  —  —  —  (3,878)
Treasury stock —  —  —  —  —  4,837  (19) (19)
Restricted share forfeiture —  —  —  —  —  397,166  (4) (4)
Other activity —  —  231  —  —  —  —  231 
Balance at September 30, 2020 137,478,696  $ 1,375  $ 1,100,269  $ (6,411) $ (664,263) 1,172,976  $ (4,841) $ 426,129 
5
GANNETT CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY [CONTINUED]
(Unaudited)
Nine months ended September 30, 2021
Common stock Additional
paid-in
capital 		Accumulated other comprehensive income (loss) Accumulated deficit Treasury stock
In thousands, except share data Shares Amount Shares Amount Total
Balance as of December 31, 2020 139,494,741  $ 1,395  $ 1,103,881  $ 50,173  $ (786,437) 1,391,748  $ (4,903) $ 364,109 
Net loss attributable to Gannett —  —  —  —  (112,514) —  —  (112,514)
Restricted stock awards settled, net of withholdings 1,064,697  10  (1,912) —  —  —  —  (1,902)
Restricted share grants 3,883,062  39  (39) —  —  —  —  — 
Equity component of the 2027 Notes —  —  283,718  —  —  —  —  283,718 
Other comprehensive loss, net of income tax benefit of $177
—  —  —  (578) —  —  —  (578)
Share-based compensation expense —  —  13,804  —  —  —  —  13,804 
Issuance of common stock 211,350  2  99  —  —  —  —  101 
Remeasurement of redeemable noncontrolling interests —  —  126  —  —  —  —  126 
Treasury stock —  —  —  —  —  511,828  (2,034) (2,034)
Restricted share forfeiture —  —  —  —  —  230,506  (3) (3)
Other activity —  —  16  —  —  —  —  16 
Balance at September 30, 2021 144,653,850  $ 1,446  $ 1,399,693  $ 49,595  $ (898,951) 2,134,082  $ (6,940) $ 544,843 
Nine months ended September 30, 2020
Common stock Additional
paid-in
capital 		Accumulated other comprehensive income (loss) Accumulated deficit Treasury stock
In thousands, except share data Shares Amount Shares Amount Total
Balance as of December 31, 2019 129,386,258  $ 1,294  $ 1,090,694  $ 8,202  $ (115,958) 394,714  $ (2,876) $ 981,356 
Net loss attributable to Gannett —  —  —  —  (548,305) —  —  (548,305)
Restricted stock awards settled, net of withholdings 3,072,991  31  (10,819) —  —  —  —  (10,788)
Restricted share grants 4,346,313  44  (44) —  —  —  —  — 
Other comprehensive loss, net of income tax benefit of $2,062
—  —  —  (14,613) —  —  —  (14,613)
Share-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)
Treasury stock —  —  —  —  —  322,524  (1,960) (1,960)
Restricted share forfeiture —  —  —  —  —  455,738  (5) (5)
Other activity —  —  (105) —  —  —  —  (105)
Balance at September 30, 2020 137,478,696  $ 1,375  $ 1,100,269  $ (6,411) $ (664,263) 1,172,976  $ (4,841) $ 426,129 
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — Description of Business and basis of presentation

Description of Business
Gannett Co., Inc. ("Gannett", "we", "us", "our", or the "Company") is a subscription-led and digitally-focused media and marketing solutions company committed to empowering communities to thrive. We aim to be the premier source for clarity, connections and solutions within our communities. Our strategy is focused on driving audience growth and engagement by delivering deeper content experiences to our consumers, while offering the products and marketing expertise our advertisers desire. The execution of this strategy is expected to allow the Company to continue its evolution from a more traditional print media business to a digitally-focused content platform.

Our current portfolio of media assets includes USA TODAY, local media organizations in 46 states in the U.S., and Newsquest, a wholly-owned subsidiary operating in the United Kingdom (the "U.K.") with more than 120 local media brands. Gannett also owns the digital marketing services companies ReachLocal, Inc. ("ReachLocal"), UpCurve, Inc. ("UpCurve"), and WordStream, Inc. ("WordStream"), which are marketed under the LOCALiQ brand, and runs the largest media-owned events business in the U.S., USA TODAY NETWORK Ventures.

Through USA TODAY, our local property network, and Newsquest, Gannett delivers high-quality, trusted content where and when consumers want to engage on virtually any device or platform. Additionally, the Company has strong relationships with thousands of local and national businesses in both our U.S. and U.K. markets due to our large local and national sales forces and a robust advertising and marketing solutions product suite. The Company reports in two segments: Publishing and Digital Marketing Solutions ("DMS"). A full description of our segments is included in Note 13 — Segment reporting in the notes to the condensed consolidated financial statements.

Impacts of the COVID-19 pandemic

As a result of the COVID-19 pandemic, we experienced a significant decline in Advertising and marketing services revenues, which accelerated the secular declines that we continue to experience. In addition, we continue to experience constraints on the sales of single copy newspapers, largely tied to business travel and in-person events. While we have seen operating trends improve since the second quarter of 2020, which represents the quarter that was most significantly impacted by the pandemic, we expect that the COVID-19 pandemic will continue to have a negative impact on our business and results of operations in the near-term, including lower revenues associated with events and lower sales of single copy newspapers, largely as a result of reduced business travel. If the COVID-19 pandemic were to revert to conditions that existed during 2020, including measures to help mitigate and control the spread of the virus, we would expect to experience further negative impacts in Advertising and marketing services and Circulation revenues.

We have implemented, and continue 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"), suspending our quarterly dividend, and debt refinancing, as well as reducing discretionary spending. In addition, we are continuing with our previously-disclosed plan to monetize non-core assets.

In connection with the CARES Act, the Company received PPP funding in support of certain of our locations that were meaningfully affected by the COVID-19 pandemic totaling $16.4 million, which was included in Operating activities in the condensed consolidated statements of cash flows for the nine months ended September 30, 2021. As permitted under the CARES Act, during the third quarter of 2021, the Company received forgiveness of such loans totaling $15.1 million, which was recognized in earnings in the condensed consolidated statements of operations and comprehensive income (loss) as an offset to Operating costs of $11.1 million and Selling, general, and administrative expenses of $4.0 million. As of September 30, 2021, the remaining PPP loans of $1.3 million were included in Other long-term liabilities in the condensed consolidated balance sheets. Management has applied for forgiveness of the remaining PPP loans in accordance with applicable guidelines. Interest expense related to PPP funding was immaterial for the three and nine months ended September 30, 2021.

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
7
("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, 2020.

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 materially from those estimates.

Significant estimates inherent in the preparation of the condensed consolidated financial statements include pension and postretirement benefit obligation assumptions, income taxes, goodwill and intangible asset impairment analysis, valuation of property, plant and equipment and intangible assets and the mark to market of the conversion feature associated with the convertible debt.

Recent accounting pronouncements adopted

Simplifying the Accounting for Income Taxes

In December 2019, the Financial Accounting Standards Board (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. Adopting this guidance allowed the Company to record a tax benefit for the first quarter of 2021 because year-to-date losses on interim periods are no longer limited to losses annually forecasted, but did not have a material impact on the Company's condensed consolidated financial statements in subsequent quarters.

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 does not expect the adoption of this guidance to have a material impact on the condensed consolidated financial statements.

NOTE 2 — Revenues

Revenues are recognized when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.

The Company’s condensed consolidated statements of operations and comprehensive income (loss) present 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:

8
Three months ended September 30, Nine months ended September 30,
In thousands 2021 2020 2021 2020
Print advertising $ 190,044  $ 208,047  $ 584,165  $ 664,047 
Digital advertising and marketing services 221,976  197,180  636,322  585,109 
Total advertising and marketing services 412,020  405,227  1,220,487  1,249,156 
Circulation 306,702  336,158  942,398  1,053,528 
Other 81,463  73,154  218,659  227,539 
Total revenues $ 800,185  $ 814,539  $ 2,381,544  $ 2,530,223 

Revenues generated from international locations were approximately 8% for both the three and nine months ended September 30, 2021 and approximately 7% for both the three and nine months ended September 30, 2020.

Deferred revenues

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

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

The following table presents changes in the deferred revenues balance by type of revenues:

Nine months ended September 30, 2021 Nine months ended September 30, 2020
In thousands Advertising, Marketing Services, and Other Circulation Total Advertising, Marketing Services, and Other Circulation Total
Beginning balance $ 51,686  $ 134,321  $ 186,007  $ 67,543  $ 151,280  $ 218,823 
Cash receipts 226,214  738,366  964,580  215,050  878,856  1,093,906 
Revenue recognized (206,203) (748,125) (954,328) (221,052) (884,080) (1,105,132)
Ending balance $ 71,697  $ 124,562  $ 196,259  $ 61,541  $ 146,056  $ 207,597 

NOTE 3 — Leases

We lease certain real estate, vehicles, and equipment. Our leases have remaining lease terms of one to fifteen 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, 2021, our condensed consolidated balance sheets included $279.4 million of operating lease right-to-use assets, $48.3 million of short-term operating lease liabilities included in Other current liabilities, and $261.4 million of long-term operating lease liabilities.
9

The components of lease expense are as follows:
Three months ended September 30, Nine months ended September 30,
In thousands 2021 2020 2021 2020
Operating lease cost (a)
$ 19,977  $ 20,924  $ 60,626  $ 62,429 
Short-term lease cost (b)
133  828  698  5,315 
Variable lease cost 2,963  2,897  8,685  9,713 
Net lease cost $ 23,073  $ 24,649  $ 70,009  $ 77,457 
(a)Includes sublease income of $1.7 million and $0.9 million for the three months ended September 30, 2021 and 2020, respectively, and $4.7 million and $2.9 million for the nine months ended September 30, 2021 and 2020, respectively.
(b)Excluding expenses relating to leases with a lease term of 12 months or less.

Future minimum lease payments under non-cancellable leases are as follows:
In thousands
Year ended
December 31, (a)
2021 (excluding the nine months ended September 30, 2021) $ 18,625 
2022 81,364 
2023 68,607 
2024 60,380 
2025 51,315 
Thereafter 213,647 
Total future minimum lease payments 493,938 
Less: Imputed interest (184,245)
Total $ 309,693 
(a)Operating lease payments exclude $0.9 million of legally binding minimum lease payments for leases signed but not yet commenced.

Supplemental information related to leases is as follows:
Nine months ended September 30,
In thousands, except lease term and discount rate 2021 2020
Cash paid for amounts included in the measurement of operating lease liabilities $ 59,989  $ 61,508 
Right-of-use assets obtained in exchange for operating lease obligations 31,014  25,562 
Gain on sale and leaseback transactions, net (1,568) — 
As of September 30,
2021 2020
Weighted-average remaining lease term (in years) 7.3 7.7
Weighted-average discount rate 12.81  % 12.66  %

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.

10
The following table presents changes in the allowance for doubtful accounts for the nine months ended September 30, 2021 and 2020:
Nine months ended September 30,
In thousands 2021 2020
Beginning balance $ 20,843  $ 19,923 
Current period provision 3,478  23,075 
Write-offs charged against the allowance (10,998) (21,139)
Recoveries of amounts previously written-off 3,076  2,230 
Disposition —  (351)
Foreign currency 12  11 
Ending balance $ 16,411  $ 23,749 

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

For the three and nine months ended September 30, 2021, the Company recorded $2.8 million and $3.5 million in bad debt expense, respectively. For the three and nine months ended September 30, 2020, the Company recorded $5.7 million and $23.1 million in bad debt expense, respectively. Bad debt expense is included in Selling, general and administrative expenses on the condensed consolidated statements of operations and comprehensive income (loss). For the three months ended September 30, 2021, the decrease compared to the prior year period was driven by lower write-offs, as the prior year reflected the impact of the COVID-19 pandemic which resulted in higher bad debt expense and allowance for doubtful accounts. For the nine months ended September 30, 2021, the decrease compared to the prior year period was due to lower write-offs compared to the same period in the prior year, as the prior year reflected the impact of the COVID-19 pandemic.

NOTE 5 — Goodwill and intangible assets

Goodwill and intangible assets consisted of the following:
September 30, 2021 December 31, 2020
 In thousands Gross carrying amount Accumulated
amortization 		Net carrying
amount 		Gross carrying amount Accumulated
amortization 		Net carrying
amount
Finite-lived intangible assets:
Advertiser relationships $ 456,141  $ 144,326  $ 311,815  $ 460,331  $ 112,468  $ 347,863 
Other customer relationships 102,685  32,439  70,246  102,925  23,682  79,243 
Subscriber relationships 254,972  92,953  162,019  255,702  71,271  184,431 
Other intangible assets 68,590  41,021  27,569  68,687  26,982  41,705 
Sub-total $ 882,388  $ 310,739  $ 571,649  $ 887,645  $ 234,403  $ 653,242 
Indefinite-lived intangible assets:
Mastheads 169,942  171,408 
Total intangible assets $ 741,591  $ 824,650 
Goodwill $ 533,797  $ 534,088 

11
Consistent with the Company’s past practice, the Company performed its annual goodwill and indefinite-lived intangible impairment assessment in the second quarter of 2021 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 most significant assumptions utilized in the determination of the estimated fair values include revenue and cash flow projections, discount rates and long-term growth rates. The long-term growth rates are dependent on overall market growth rates, the competitive environment, inflation and relative currency exchange rates, and could be adversely impacted by a sustained decrease in any of these measures, all of which the Company considered in determining the long-term growth rates used in the analysis, which ranged from negative 0.5% to positive 3.0%. 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 11.0% to 15.0%.

For goodwill, the Company determined the fair value of each reporting unit using a combination of a discounted cash flow analysis and a market-based approach. During the second quarter of 2021, the Company compared the fair value of each reporting unit to its carrying amount, which resulted in the fair value of all the reporting groups being in excess of their carrying values.

For mastheads, the Company applied a "relief from royalty" approach, a discounted cash flow model, reflecting current assumptions, to fair value of the indefinite-lived intangible assets. During the second quarter of 2021, the Company compared the fair value of each indefinite-lived intangible asset to its carrying amount, which resulted in the fair value of each indefinite-lived intangible asset being in excess of its carrying value.

In addition to the annual impairment test, the Company is required to regularly assess whether a triggering event has occurred under ASC 360, which would require interim impairment testing. As of September 30, 2021, the Company performed a review of potential impairment indicators and it was determined that no indicators of impairment were present.

During the second quarter of 2020, the Company 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, and recorded indefinite-lived asset impairments of $4.0 million in both our Domestic Publishing and Newsquest reporting units, as a result of the annual impairment assessment. 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, and as such, the Company recorded an intangible asset impairment of $23.0 million related to advertiser and other customer relationships.

NOTE 6 — Integration and reorganization costs and asset impairments

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 September 30, Nine months ended September 30,
In thousands 2021 2020 2021 2020
Publishing $ 1,941  $ 3,983  $ 10,125  $ 35,401 
Digital Marketing Solutions 402  1,196  321  5,333 
Corporate and other 317  2,103  440  14,069 
Total $ 2,660  $ 7,282  $ 10,886  $ 54,803 

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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, 2021 is as follows:
In thousands Severance and
Related Costs
Beginning balance $ 30,943 
Restructuring provision included in integration and reorganization costs 10,886 
Cash payments (31,869)
Ending balance $ 9,960 

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

Facility consolidation and other restructuring-related expenses

Facility consolidation and other restructuring-related expenses represent costs for consolidating operations, systems implementation, and outsourcing of corporate functions. We recorded facility consolidation charges and other restructuring-related costs by segment as follows:
Three months ended September 30, Nine months ended September 30,
In thousands 2021 2020 2021 2020
Publishing $ 1,571  $ 1,137  $ 516  $ 3,648 
Digital Marketing Solutions 529  41  980  254 
Corporate and other 8,859  4,957  23,085  15,273 
Total $ 10,959  $ 6,135  $ 24,581  $ 19,175 

Asset impairments

For the three and nine months ended September 30, 2021, the Company recorded Asset impairment charges of $2.3 million and $3.1 million, respectively, at the Publishing segment primarily due to the impairment of real estate held for sale. For the three months ended September 30, 2020, the Company recorded Asset impairment charges at the Publishing segment of $0.9 million as a result of the Company's fixed asset disposals related to the continued consolidation of operations and recorded $7.7 million for the nine months ended September 30, 2020 as a result of a recoverability test for long-lived assets and fixed asset disposals during the period. For both the three and nine months ended September 30, 2020, the Company recorded $0.7 million of Asset impairment charges at the DMS segment as a result of fixed asset disposals related to the continued consolidation of operations.

Accelerated depreciation

The Company incurred accelerated depreciation of $1.1 million and $9.3 million for the three months ended September 30, 2021 and 2020, respectively, and $11.4 million and $45.0 million for the nine months ended September 30, 2021 and 2020, respectively, related to the shortened useful life of assets due to the sale of property at the Publishing segment and included within Depreciation and amortization expense on the condensed consolidated statements of operations and comprehensive income (loss).

NOTE 7 — Debt

5-Year Term Loan

On February 9, 2021, the Company entered into a five-year, senior-secured term loan facility with 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 $1.045 billion (the "5-Year Term Loan"). The 5-Year Term Loan was to mature on February 9, 2026 and, at the Company's option, bore interest at a rate equal to LIBOR plus a margin equal to 7.00% per annum or an alternate base rate plus a margin equal to 6.00% per annum. Interest on the 5-Year Term Loan was payable at least every three months in arrears, beginning in May 2021.

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
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facility with Apollo Capital Management, L.P. (the "Acquisition Term Loan") and to pay fees and expenses incurred to obtain the 5-Year Term Loan.

There were certain lenders that participated in both the Acquisition Term Loan and the 5-Year Term Loan and their balances in the Acquisition Term Loan were deemed to be modified. The Company continued to defer, over the 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 5-Year Term Loan and their balances in the Acquisition Term Loan were deemed to be extinguished. The Company recognized a Loss on early extinguishment of debt of $17.2 million in the first quarter of 2021 as a result of the write-off of the remaining original issue discount and deferred financing fees 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 amortized over the term of the 5-Year Term Loan using the effective interest method. For the nine months ended September 30, 2021, third-party fees of $10.9 million, which 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). No third-party fees were incurred during the three months ended September 30, 2021.

The 5-Year Term Loan amortized in equal quarterly installments at a rate of 10% per annum (or, if the ratio of Total Indebtedness secured on an equal priority basis with the 5-Year Term Loan (net of Unrestricted Cash) to Consolidated EBITDA (as such terms are defined in the 5-Year Term Loan) was equal to or less than a specified ratio, 5% per annum) (the "Quarterly Amortization Installment"), beginning September 30, 2021. In addition, we were required to repay the 5-Year Term Loan from time to time with (i) the proceeds of non-ordinary course asset sales and casualty and condemnation events, (ii) the proceeds of indebtedness that was 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 was subject to a requirement to have minimum unrestricted cash of $30 million as of the last day of each fiscal quarter. As of September 30, 2021, the Company was in compliance with all of the covenants and obligations under the 5-Year Term Loan.

As of September 30, 2021, the Company had $899.4 million in aggregate principal outstanding under the 5-Year Term Loan, $11.5 million of unamortized deferred financing costs, and $41.4 million of unamortized original issue discount and an effective interest rate of 9.5%. During the three months ended September 30, 2021, the Company recorded interest expense of $19.2 million and paid $30.3 million for interest expense related to the 5-Year Term Loan. During the nine months ended September 30, 2021, the Company recorded interest expense of $50.5 million and $13.4 million for the 5-Year Term Loan and the Acquisition Term Loan, respectively, and paid interest expense of $50.5 million and $13.4 million for the 5-Year Term Loan and the Acquisition Term Loan, respectively. Additionally, during the three and nine months ended September 30, 2021, the Company had $3.8 million and $26.0 million, respectively, related to Loss on early extinguishment of debt, which related to the write-off of original issue discount and deferred financing fees as a result of early prepayments on the 5-Year Term Loan and Acquisition Term Loan. Included in the Loss on early extinguishment of debt for the nine months ended September 30, 2021, was $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 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 and nine months ended September 30, 2021, the Company recorded $0.9 million and $2.4 million, respectively, of amortization of deferred financing costs, and $3.4 million and $8.7 million, respectively, of amortization of original issue discount, for the 5-Year Term Loan. For the three and nine months ended September 30, 2020, the Company recorded $0.2 million and $0.7 million, respectively, of amortization of deferred financing costs, and $5.6 million and $17.0 million, respectively, of amortization of original issue discount for the Acquisition Term Loan.

Under the 5-Year Term Loan, the Company was contractually obligated to make prepayments with the proceeds from asset sales and could have elected to make optional payments with excess free cash flow from operations. For the three and nine months ended September 30, 2021, we made prepayments totaling $91.1 million and $145.6 million, respectively, which were classified as financing activities in the condensed consolidated statements of cash flows. These amounts are inclusive of both mandatory and optional prepayments. The 5-Year Term Loan was repaid in full on October 15, 2021. Refer to Note 15 — Subsequent events for further information regarding the debt refinancing.

Senior Secured Convertible Notes due 2027

On November 17, 2020, the Company issued $497.1 million in aggregate principal amount of the Company’s 6.0% Senior Secured Convertible Notes due 2027 (the "2027 Notes"). The 2027 Notes were issued pursuant to an Indenture dated as of November 17, 2020, as amended by the First Supplemental Indenture dated as of December 21, 2020 and the Second
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Supplemental Indenture dated as of February 9, 2021 (collectively, the "2027 Notes Indenture"), between the Company and U.S. Bank National Association, as trustee.

In connection with the issuance of the 2027 Notes, the Company entered into an Investor Agreement (the "Investor Agreement") with the holders of the 2027 Notes (the "Holders") establishing certain terms and conditions concerning the rights and restrictions on the Holders with respect to the Holders' ownership of the 2027 Notes. The Company also entered into an amendment to the Registration Rights Agreement dated November 19, 2019, between the Company and FIG LLC.

Interest on the 2027 Notes is payable semi-annually in arrears. The 2027 Notes mature on December 1, 2027, unless earlier repurchased or converted. The 2027 Notes may be converted at any time by the holders into cash, shares of the Company’s common stock, par value $0.01 per share (“Common Stock”) or any combination of cash and Common Stock, at the Company's election. The initial conversion rate is 200 shares of Common Stock per $1,000 principal amount of the 2027 Notes, which is equal to a conversion price of $5.00 per share of Common Stock (the "Conversion Price").

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

Upon the occurrence of a "Make-Whole Fundamental Change" (as defined in the 2027 Notes Indenture), the Company will in certain circumstances increase the conversion rate for a specified period of time. If a "Fundamental Change" (as defined in the 2027 Notes 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 or any Refinancing Facilities (as defined in the 2027 Notes Indenture) in respect thereof.

Under the 2027 Notes Indenture, the Company can only pay cash dividends up to an agreed-upon amount, provided the ratio of consolidated debt to EBITDA (as such terms are defined in the 2027 Notes Indenture) does not exceed a specified ratio. In addition, the 2027 Notes Indenture provides that, at any time that the Company’s Total Gross Leverage Ratio (as defined in the 2027 Notes Indenture) exceeds 1.5 and the Company approves the declaration of a dividend, the Company must offer to purchase a principal amount of 2027 Notes equal to the proposed amount of the dividend.

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

The 2027 Notes are guaranteed by Gannett Holdings LLC ("Gannett Holdings") and any subsidiaries of the Company that guaranteed the 5-Year Term Loan. The 2027 Notes are secured by the same collateral that secured 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 that secured the indebtedness incurred in connection with the 5-Year Term Loan.

The 2027 Notes Indenture includes affirmative and negative covenants, including limitations on liens, indebtedness, dispositions, loan, advances and investors, sale and leaseback transactions, restricted payments, transactions with affiliates, restrictions on dividends and other payment restrictions affecting restricted subsidiaries, negative pledges and modifications to certain agreements. The 2027 Notes Indenture also requires that the Company maintain, as of the last day of each fiscal quarter, at least $30.0 million of Qualified Cash (as defined in the 2027 Notes Indenture). The 2027 Notes Indenture includes customary events of default.

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
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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, held on February 26, 2021 (the "Special Meeting"), our stockholders approved the issuance of the maximum number of shares of Common Stock issuable upon conversion of the 2027 Notes. As a result, the conversion option can be share-settled in full. 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 debt issuance from the original bifurcation will continue to be amortized through interest expense. During the nine months ended September 30, 2021, the deferred tax asset related to the embedded conversion feature of the 2027 Notes was reclassified to Equity as a reduction to Additional paid-in-capital and reduced the carrying amount of the equity component of the 2027 Notes to $283.7 million.

As of February 26, 2021, the date of reassessment, and December 31, 2020, the estimated fair value of the derivative liability for the embedded conversion feature was $316.2 million and $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 the 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 nine months ended September 30, 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:

February 26, 2021 December 31, 2020
Annual volatility 70.0  % 70.0  %
Discount rate 12.2  % 9.3  %
Stock price $ 4.95  $ 3.36 

Total debt issuance costs of $2.3 million will be amortized over the 7-year contractual life of the 2027 Notes. The unamortized discount will be amortized over the remaining contractual life of the 2027 Notes. For the three and nine months ended September 30, 2021, interest expense on the 2027 Notes totaled $7.5 million and $22.4 million, respectively. Amortization of the discount was $2.9 million and $7.9 million for the three and nine months ended September 30, 2021, respectively. Amortization of debt issuance costs were immaterial and $0.2 million for the three and nine months ended September 30, 2021, respectively. The effective interest rate on the liability component of the 2027 Notes was 10.5% as of September 30, 2021. Additional information related to the liability component of the 2027 Notes includes the following:

In thousands September 30, 2021 December 31, 2020
Net carrying value of liability component $ 396.6  $ 388.4 
Unamortized discount of liability component $ 100.5  $ 108.7 

For the nine months ended September 30, 2021, no shares were issued upon conversion, exercise, or satisfaction of the required conditions. Refer to Note 10 — Supplemental equity information for details on the convertible debt's impact to diluted earnings per share under the if-converted method.
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Senior Convertible Notes due 2024

The $3.3 million principal value of the remaining 4.75% convertible senior notes due 2024 (the "2024 Notes") outstanding is reported as convertible debt in the condensed consolidated balance sheets. The effective interest rate on the 2024 Notes was 6.05% as of September 30, 2021.

NOTE 8 — Pensions and other postretirement benefit plans

We, along with our subsidiaries, sponsor various defined benefit retirement plans, including plans established under collective bargaining agreements. Our retirement plans include the Gannett Retirement Plan (the "GR Plan"), the Newsquest and Romanes Pension Schemes in the 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.

Retirement plan costs include the following components:
Pension Benefits
Postretirement Benefits
Three months ended September 30, Three months ended September 30,
In thousands 2021 2020 2021 2020
Operating expenses:
Service cost - benefits earned during the period $ 490  $ 693  $ 23  $ 27 
Non-operating expenses:
Interest cost on benefit obligation 17,042  20,670  428  580 
Expected return on plan assets (41,355) (39,573) —  — 
Amortization of actuarial loss (gain) 38  (26) (13) 15 
Total non-operating (benefit) expenses $ (24,275) $ (18,929) $ 415  $ 595 
Total expense (benefit) for retirement plans $ (23,785) $ (18,236) $ 438  $ 622 

Pension Benefits
Postretirement Benefits
Nine months ended September 30, Nine months ended September 30,
In thousands 2021 2020 2021 2020
Operating expenses:
Service cost - benefits earned during the period $ 1,470  $ 2,078  $ 67  $ 79 
Non-operating expenses:
Interest cost on benefit obligation 51,179  61,803  1,330  1,740 
Expected return on plan assets (124,193) (117,940) —  — 
Amortization of actuarial loss (gain) 115  (80) (75) 44 
Total non-operating (benefit) expenses $ (72,899) $ (56,217) $ 1,255  $ 1,784 
Total expense (benefit) for retirement plans $ (71,429) $ (54,139) $ 1,322  $ 1,863 

During the nine months ended September 30, 2021, we contributed $40.2 million and $4.4 million to our pension and other postretirement plans, 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"), which were deferred until January 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.

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NOTE 9 — Income taxes

The following table outlines our pre-tax net income (loss) and income tax amounts:
Three months ended September 30, Nine months ended September 30,
In thousands 2021 2020 2021 2020
Income (loss) before income taxes $ 17,529  $ (28,350) $ (101,880) $ (572,085)
Provision (benefit) for income taxes 2,984  3,098  11,567  (22,200)
Effective tax rate 17.0  % *** (11.4) % 3.9  %
*** Indicates an absolute value percentage change greater than 100.

The provision for income taxes for the three months ended September 30, 2021 was mainly driven by pre-tax income and is impacted by forgiveness of PPP loans during the quarter. For federal tax purposes, book income from forgiven loans is not included in taxable income, and expenses paid utilizing the loan proceeds can be deducted. The impact of PPP loan forgiveness is partially offset by the creation of valuation allowances on non-deductible interest expense carryforwards. The provision was calculated using the estimated annual effective tax rate of 77.7%. The annual effective tax rate is principally impacted by the derivative revaluation, which is non-deductible for federal tax purposes, and the creation of valuation allowances on non-deductible interest expense carryforwards. The estimated annual effective tax rate is based on a projected tax expense for the full year.

The tax provision for the nine months ended September 30, 2021 was mainly driven by the pre-tax net loss generated during the first quarter of 2021. The tax provision is impacted by the derivative revaluation, which is nondeductible for federal tax purposes, the creation of valuation allowances on non-deductible interest expense carryforwards, and PPP loan forgiveness, in combination with state income tax and foreign tax expense.

During the nine months ended September 30, 2021, we reclassified $32.5 million (tax effected) in connection with the retirement of the deferred tax asset related to the embedded conversion feature associated with the Company’s 2027 Notes. The retirement of the deferred tax asset resulted from the reclassification of the embedded conversion feature from a derivative liability to Equity as a reduction to Additional paid-in-capital during the first quarter of 2021. See Note 7 - Debt for additional information about the Company's 2027 Notes.

The total amount of unrecognized tax benefits that, if recognized, may impact the effective tax rate was approximately $42.8 million as of September 30, 2021 and $39.5 million as of December 31, 2020. The amount of accrued interest and penalties payable related to unrecognized tax benefits was $3.4 million as of September 30, 2021 and $2.6 million as of December 31, 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.

The provision for income taxes for the three months ended September 30, 2020 was mainly impacted 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 for the three months ended September 30, 2020 was calculated using 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 nine months ended September 30, 2020 is lower than the 21% statutory federal rate due to the impact of non-deductible asset impairments, non-deductible officers’ compensation and the creation of valuation allowances on non-deductible interest expense carryforwards and capital losses.

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NOTE 10 — Supplemental equity information

Income (loss) per share

The following table sets forth the information used to compute basic and diluted income (loss) per share:
Three months ended September 30, Nine months ended September 30,
In thousands, except per share data 2021 2020 2021 2020
Net income (loss) attributable to Gannett $ 14,687  $ (31,260) $ (112,514) $ (548,305)
Interest adjustment to Net income (loss) attributable to Gannett related to assumed conversions of the 2027 Notes, net of taxes
7,598  —  —  — 
Net income (loss) attributable to Gannett for diluted earnings per share $ 22,285  $ (31,260) $ (112,514) $ (548,305)
Basic weighted average shares outstanding 135,002  132,223  134,610  131,425 
Effect of dilutive securities:
Restricted stock grants 5,032  —  —  — 
2027 Notes 99,419  —  —  — 
Diluted weighted average shares outstanding 239,453  132,223  134,610  131,425 
Income (loss) per share attributable to Gannett - basic $ 0.11  $ (0.24) $ (0.84) $ (4.17)
Income (loss) per share attributable to Gannett - diluted $ 0.09  $ (0.24) $ (0.84) $ (4.17)

The Company excluded the following securities from the computation of diluted income per share because their effect would have been antidilutive:
Three months ended September 30, Nine months ended September 30,
In thousands 2021 2020 2021 2020
Warrants 845  1,362  845  1,362 
Stock options 6,068  6,068  6,068  6,068 
Restricted stock grants (a)
42  7,130  10,442  7,130 
2027 Notes (b)
—  —  99,419  — 
(a)Includes Restricted stock awards ("RSAs"), Restricted stock units ("RSUs") and Performance stock units ("PSUs").
(b)Represents the total number of shares that would be convertible at September 30, 2021 as stipulated in the 2027 Notes Indenture.

The 2027 Notes may be converted at any time by the holders into cash, shares of the Company’s Common Stock or any combination of cash and Common Stock, at the Company’s election. Conversion of all of the 2027 Notes into Common Stock (assuming the maximum increase in the conversion rate as a result of a Make-Whole Fundamental Change but no other adjustments to the conversion rate), would result in the issuance of an aggregate of 294.2 million shares of Common Stock. The Company has excluded approximately 194.8 million shares from the loss per share calculation, representing the difference between the total number of shares that would be convertible at September 30, 2021 and the total number of shares issuable assuming the maximum increase in the conversion rate.

Share-based compensation

The Company recognized compensation cost for share-based payments of $4.6 million and $13.8 million for the three and nine months ended September 30, 2021, respectively, and $3.8 million and $22.8 million for the three and nine months ended September 30, 2020, respectively.

The total compensation cost not yet recognized related to non-vested awards as of September 30, 2021 was $29.6 million, which is expected to be recognized over a weighted-average period of 2.1 years through October 2023.
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Restricted stock awards

During the nine months ended September 30, 2021, a total of 4.1 million 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 weighted average grant date fair value of RSAs granted during the nine months ended September 30, 2021 was $5.29.

Rights Agreement

On April 6, 2020, the Company's board of directors (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. The Rights Agreement was approved by the Company's stockholders on June 7, 2021 at the 2021 annual meeting of stockholders. As of December 31, 2020, the Company had approximately $543.5 million of NOLs available which could be used in certain circumstances to offset future federal taxable income.

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

The Rights Agreement will continue in effect until April 5, 2023. The Board has the ability to terminate the plan if it determines that doing so would be in the best interest of the Company’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 Company has authorized 300,000 shares of preferred stock, par value $0.01 per share, issuable in one or more series designated by the Board, of which 150,000 shares have been designated as Series A Junior Participating Preferred Stock, none of which are outstanding. There were no issuances of preferred stock during the nine months ended September 30, 2021.

Accumulated other comprehensive income (loss)

The following tables summarize the components of, and the changes in, Accumulated other comprehensive income (loss), net of tax for the nine months ended September 30, 2021 and 2020:
Nine months ended September 30, 2021 Nine months ended September 30, 2020
In thousands Pension and Postretirement Plans Foreign Currency Translation



Total Pension and Postretirement Plans Foreign Currency Translation Total
Beginning balance $ 40,441  $ 9,732  $ 50,173  $ 936  $ 7,266  $ 8,202 
Other comprehensive income (loss) before reclassifications 93  (700) (607) (5,675) (8,908) (14,583)
Amounts reclassified from accumulated other comprehensive income (loss)(a)(b)
29  —  29  (30) —  (30)
Net current period other comprehensive income (loss), net of taxes 122  (700) (578) (5,705) (8,908) (14,613)
Ending balance $ 40,563  $ 9,032  $ 49,595  $ (4,769) $ (1,642) $ (6,411)
(a)This accumulated other comprehensive income (loss) component is included in the computation of net periodic benefit cost. See Note 8 — Pensions and other postretirement benefit plans.
(b)Amounts reclassified from accumulated other comprehensive loss are recorded net of tax impacts of $11 thousand and $6 thousand for the nine months ended September 30, 2021 and 2020, respectively.

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NOTE 11 — Fair value measurement

In accordance with ASC 820, "Fair Value Measurement," fair value measurements are required to be disclosed using a three-tiered fair value hierarchy which distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Level 1 refers to fair values determined based on quoted prices in active markets for identical assets or liabilities, Level 2 refers to fair values estimated using significant other observable inputs and Level 3 includes fair values estimated using significant unobservable inputs.

As of September 30, 2021 and December 31, 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 NAV have not been classified in the fair value hierarchy.

The 5-Year Term Loan was recorded at carrying value, which approximates fair value in the condensed consolidated balance sheets and was classified as Level 2. Refer to additional discussion regarding fair value of the 2027 Notes in Note 7 — Debt.

Certain assets are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances (for example, when there is evidence of impairment). Assets held for sale (Level 3) are measured on a nonrecurring basis and are evaluated using executed purchase agreements, letters of intent or third-party valuation analyses when certain circumstances arise. Assets held for sale totaled $21.7 million as of September 30, 2021 and $14.7 million as of December 31, 2020. The Company performs its annual goodwill and indefinite-lived intangible impairment assessment during the second quarter of the year. Any resulting asset impairment would require that the asset be recorded at its fair value. The resulting fair value measurements of the assets are considered to be Level 3 measurements. Refer to Note 5 — Goodwill and intangible assets for additional discussion regarding the annual impairment assessment.

NOTE 12 — 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 matters such 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.

We are also 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 13 — Segment reporting

We define our reportable segments based on the way the Chief Operating Decision Maker ("CODM"), which is our 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, digital distribution and single copy sales of our publications, and Other revenues, mainly from commercial printing, distribution arrangements, revenues from our events business, digital content syndication and affiliate revenues, and third-party newsprint sales. The Publishing reportable segment is an aggregation of two operating segments: Domestic Publishing and 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, and software-as-a-service solutions.

In addition to the above operating segments, we have a Corporate and other category that includes activities not directly attributable to a specific segment. This category primarily consists of broad corporate functions, 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 Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted Net income (loss) attributable to Gannett to evaluate the performance of the segments and allocate resources. Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted Net income (loss) attributable to Gannett are non-GAAP financial performance 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, (3) Gains or losses on the early extinguishment of debt, (4) Non-operating pension income (expense), (5) Loss on convertible notes derivative, (6) Depreciation and amortization, (7) Integration and reorganization costs, (8) Other operating expenses, including third-party debt expenses and acquisition costs, (9) Asset impairments, (10) Goodwill and intangible impairments, (11) Gains or losses on the sale or disposal of assets, (12) Share-based compensation, and (13) certain other non-recurring charges, including gains or losses on the sale of investments. We define Adjusted EBITDA margin as Adjusted EBITDA divided by total Operating revenues. We define Adjusted Net income (loss) attributable to Gannett before (1) Gains or losses on the early extinguishment of debt, (2) Loss on convertible notes derivative, (3) Integration and reorganization costs, (4) Other operating expenses, including third-party debt expenses and acquisition costs, (5) Asset impairments, (6) Goodwill and intangibles impairments, (7) Gains or losses on the sale or disposal of assets, (8) Gains or losses on the sale of investments, and (9) the tax impact of the above items.

Management considers Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted Net income (loss) attributable to Gannett to be the appropriate metrics 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.

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The following tables present our segment information:

Three months ended September 30, 2021
In thousands Publishing Digital Marketing Solutions Corporate and other Intersegment Eliminations Consolidated
Advertising and marketing services - external sales $ 294,742  $ 116,771  $ 507  $ —  $ 412,020 
Advertising and marketing services - intersegment sales 34,042  —  —  (34,042) — 
Circulation 306,698  —  4  —  306,702 
Other 80,325  —  1,138  —  81,463 
Total operating revenues $ 715,807  $ 116,771  $ 1,649  $ (34,042) $ 800,185 
Adjusted EBITDA (non-GAAP basis) $ 101,001  $ 15,024  $ (13,958) $ —  $ 102,067 

Three months ended September 30, 2020
In thousands Publishing Digital Marketing Solutions Corporate and other Intersegment Eliminations Consolidated
Advertising and marketing services - external sales $ 303,646  $ 100,807  $ 774  $ —  $ 405,227 
Advertising and marketing services - intersegment sales 25,862  —  —  (25,862) — 
Circulation 336,152  —  6  —  336,158 
Other 66,566  4,636  1,952  —  73,154 
Total operating revenues $ 732,226  $ 105,443  $ 2,732  $ (25,862) $ 814,539 
Adjusted EBITDA (non-GAAP basis) $ 108,752  $ 4,177  $ (24,949) $ —  $ 87,980 

Nine months ended September 30, 2021
In thousands Publishing Digital Marketing Solutions Corporate and other Intersegment Eliminations Consolidated
Advertising and marketing services - external sales $ 890,665  $ 328,184  $ 1,638  $ —  $ 1,220,487 
Advertising and marketing services - intersegment sales 93,910  —  —  (93,910) — 
Circulation 942,392  —  6  —  942,398 
Other 212,970  905  4,784  —  218,659 
Total operating revenues $ 2,139,937  $ 329,089  $ 6,428  $ (93,910) $ 2,381,544 
Adjusted EBITDA (non-GAAP basis) $ 317,398  $ 36,725  $ (35,822) $ —  $ 318,301 
Nine months ended September 30, 2020
In thousands Publishing Digital 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 sales 85,472  —  —  (85,472) — 
Circulation 1,053,518  —  10  —  1,053,528 
Other 207,355  14,388  5,796  —  227,539 
Total operating 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 
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The table below shows the reconciliation of Net income (loss) attributable to Gannett to Adjusted EBITDA and Net income (loss) attributable to Gannett margin to Adjusted EBITDA margin:
Three months ended September 30, Nine months ended September 30,
In thousands 2021 2020 2021 2020
Net income (loss) attributable to Gannett $ 14,687  $ (31,260) $ (112,514) $ (548,305)
Provision (benefit) for income taxes 2,984  3,098  11,567  (22,200)
Interest expense 34,603  58,063  109,370  173,890 
Loss on early extinguishment of debt 3,761  476  25,996  1,650 
Non-operating pension income (23,860) (18,334) (71,644) (54,433)
Loss on convertible notes derivative —  —  126,600  — 
Depreciation and amortization 48,107  61,355  154,452  205,706 
Integration and reorganization costs 13,619  13,417  35,467  73,978 
Other operating expenses 4  1,913  11,354  10,261 
Asset impairments 2,301  1,585  3,134  8,444 
Goodwill and intangible impairments —  —  —  393,446 
(Gain) loss on sale or disposal of assets, net (833) 795  9,206  1,540 
Share-based compensation expense 4,602  3,844  13,804  22,812 
Other items 2,092  (6,972) 1,509  (1,723)
Adjusted EBITDA (non-GAAP basis) $ 102,067  $ 87,980  $ 318,301  $ 265,066 
Net income (loss) attributable to Gannett margin 1.8  % (3.8) % (4.7) % (21.7) %
Adjusted EBITDA margin (non-GAAP basis) 12.8  % 10.8  % 13.4  % 10.5  %

The table below shows the reconciliation of Net income (loss) attributable to Gannett to Adjusted Net income (loss) attributable to Gannett:
Three months ended September 30, Nine months ended September 30,
In thousands 2021 2020 2021 2020
Net income (loss) attributable to Gannett $ 14,687  $ (31,260) $ (112,514) $ (548,305)
Loss on early extinguishment of debt 3,761  476  25,996  1,650 
Loss on convertible notes derivative —  —  126,600  — 
Integration and reorganization costs 13,619  13,417  35,467  73,978 
Other operating expenses 4  1,913  11,354  10,261 
Asset impairments 2,301  1,585  3,134  8,444 
Goodwill and intangible impairments —  —  —  393,446 
(Gain) loss on sale or disposal of assets, net (833) 795  9,206  1,540 
Gain on sale of investments —  (7,800) —  (7,995)
Subtotal 33,539  (20,874) 99,243  (66,981)
Tax impact of above items (7,033) (25,449) (28,042) (61,364)
Adjusted Net income (loss) attributable to
Gannett (non-GAAP basis) 		$ 26,506  $ (46,323) $ 71,201  $ (128,345)

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 condensed consolidated financial statements, are not part of operating income and are primarily recorded at the corporate level.

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NOTE 14 — Other supplemental information

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:

September 30,
In thousands 2021 2020
Cash and cash equivalents $ 141,302  $ 188,960 
Restricted cash included in other current assets 4,845  10,796 
Restricted cash included in investments and other assets 21,267  24,177 
Total cash, cash equivalents and restricted cash $ 167,414  $ 223,933 

Supplemental cash flow information

The following table presents supplemental cash flow information, including non-cash investing and financing activities:

Nine months ended September 30,
In thousands 2021 2020
Net cash refund for taxes $ (9,031) $ (4,510)
Cash paid for interest 80,280  176,402 
Non-cash investing and financing activities:
Accrued capital expenditures $ 2,836  $ 758 

Accounts payable and accrued liabilities

A breakout of Accounts payable and accrued liabilities is presented below:

In thousands September 30, 2021 December 31, 2020
Accounts payable $ 134,805  $ 131,797 
Compensation 108,444  115,061 
Taxes (primarily property and sales taxes) 29,104  30,834 
Benefits 23,031  22,821 
Interest 10,012  3,676 
Other 51,928  74,057 
Accounts payable and accrued liabilities $ 357,324  $ 378,246 

NOTE 15 — Subsequent events

Debt Refinancing

On October 15, 2021, Gannett Holdings, a wholly-owned subsidiary of the Company, entered into a five-year senior secured term loan facility in an aggregate principal amount of $516 million (the "New Senior Secured Term Loan"). Also, on October 15, 2021, Gannett Holdings completed a private offering of $400 million aggregate principal amount of 6.00% first
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lien notes due November 1, 2026 (the "2026 Senior Notes"). The proceeds of the New Senior Secured Term Loan, together with the net proceeds from the 2026 Senior Notes were applied towards the full repayment of the 5-Year Term Loan.

The 2026 Senior Notes were issued pursuant to an Indenture, dated October 15, 2021 (the "2026 Senior Notes Indenture"), among Gannett Holdings, the Company, the guarantors party thereto, U.S. Bank National Association, as trustee, U.S. Bank National Association, as collateral agent, and U.S. Bank National Association, as registrar, paying agent and authenticating agent. Interest on the 2026 Senior Notes is payable semi-annually.

Loans under the New Senior Secured Term Loan bear interest at a per annum rate equal to LIBOR (which shall not be less than 0.50% per annum) plus a margin of 5.00% or an alternate base rate plus a margin equal to 4.00% per annum (which shall not be less than 1.50% per annum). The New Senior Secured Term Loan contains usual and customary covenants for credit facilities of this type that restrict, among other things, our ability to incur debt, grant liens, sell assets, and make investments and pay dividends, in each case with customary exceptions, including an exception that permits dividends and repurchases of outstanding junior debt or equity in (i) an amount of up to $25 million per fiscal quarter if the ratio of debt secured on an equal basis with the New Senior Secured Term Loan to EBITDA (as defined in the New Senior Secured Term Loan) of the Company and its restricted subsidiaries (the "First Lien Net Leverage Ratio") for such fiscal quarter is equal to or less than 2.00 to 1.00, (ii) an amount of up to $50 million per fiscal quarter if the First Lien Net Leverage Ratio for such fiscal quarter is equal to or less than 1.50 to 1.00 and (iii) an unlimited amount if First Lien Net Leverage Ratio for such fiscal quarter is equal to or less than 1.00 to 1.00. All obligations under the New Senior Secured Term Loan are secured by all or substantially all of the assets of the Company and the wholly-owned domestic subsidiaries of the Company (the "Guarantors"). The obligations of Gannett Holdings under the New Senior Secured Term Loan are guaranteed on a senior secured basis by the Company and the Guarantors.

As of the closing of these transactions on October 15, 2021, total debt outstanding was $1.416 billion, which included the (i) $516 million New Senior Secured Term Loan, (ii) $400 million of 2026 Senior Notes, (iii) $497.1 million of 2027 Notes and (iv) $3.3 million of 2024 Notes.

The 5-Year Term Loan was repaid using the proceeds from the 2026 Senior Notes and the New Senior Secured Term Loan. As a result of the debt refinancing in October 2021, we estimate that we will recognize a loss on the early extinguishment of the 5-Year Term Loan and other fees of approximately $31.2 million during the fourth quarter of 2021.

ITEM 2. MANAGEMENT'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 condensed consolidated financial statements and related notes and with our audited consolidated financial statements and related notes 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 statements that reflect our plans, estimates, and beliefs, all of which are based on our current expectations and could be affected by certain uncertainties, risks, and other factors described under Cautionary Note Regarding Forward-Looking Statements, Risk Factors, and elsewhere throughout this Quarterly Report, as well as the factors described in our Annual Report on Form 10-K 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

We are a subscription-led and digitally-focused media and marketing solutions company committed to empowering communities to thrive. We aim to be the premier source for clarity, connections and solutions within our communities. Our strategy is focused on driving audience growth and engagement by delivering deeper content experiences to our consumers, while offering the products and marketing expertise our advertisers desire. The execution of this strategy is expected to allow us to continue our 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 Newsquest, a wholly-owned subsidiary operating in the United Kingdom ("U.K.") with more than 120 local media brands. We also own the digital marketing services companies ReachLocal, Inc. ("ReachLocal"), UpCurve, Inc. ("UpCurve"), and WordStream, Inc. ("WordStream") which are marketed under the LOCALiQ brand, and run the largest media-owned events business in the U.S., USA TODAY NETWORK Ventures.
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Through USA TODAY, our local property network, and Newsquest, we deliver high-quality, trusted content where and when consumers want to engage with it on virtually any device or platform. Additionally, we 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.

Business Trends

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

•Print advertising continues to decline as the audience increasingly moves to digital platforms. We look to optimize our print operations to efficiently manage for this declining print audience. We are focused on converting the growing digital audience into digital-only subscribers to our publications.
•Small and medium-sized businesses ("SMBs") are facing an increasingly complex marketing environment and need to create digital presence to capture audience online. We offer a broad suite of DMS products that offer a single, unified solution to meet their digital marketing needs.
•Consumers are looking for experience-based, emotional connections and communities. USA TODAY NETWORK Ventures was designed to celebrate local communities and create opportunities for meaningful in-person and virtual experiences. However, the COVID-19 pandemic has temporarily negatively impacted our ability to secure necessary permitting for in-person events and consumers' desire to attend or participate in live events.
•Digital consumer engagement has declined in comparison to such engagement at the height of the COVID-19 pandemic in the second quarter of 2020, as consumers have resumed certain pre-pandemic activities. In addition, the overall news cycle, specifically political coverage, has also slowed, driving less consumer engagement to our sites.
•Newsprint availability is constrained due to manufacturing facility closures and conversions to specialty paper and packaging grades. Further, transportation and other issues are challenging supplier deliveries, including delays, and are expected to worsen with increased seasonal demand associated with the holidays in the fourth quarter. Additionally, inflationary pressures are impacting the overall cost of newsprint and delivery services.

Recent Developments

Debt Refinancing

On October 15, 2021, Gannett Holdings LLC ("Gannett Holdings"), our wholly-owned subsidiary, entered into a five-year senior secured term loan facility in an aggregate principal amount of $516 million (the "New Senior Secured Term Loan"). Also on October 15, 2021, Gannett Holdings completed a private offering of $400 million aggregate principal amount of 6.00% first lien notes due November 1, 2026 (the "2026 Senior Notes"). The proceeds of the New Senior Secured Term Loan, together with the net proceeds from the 2026 Senior Notes were applied towards the full repayment of our five-year, senior-secured term loan facility (the "5-Year Term Loan"). Please see the disclosure below under "Liquidity and Capital Resources - Debt Refinancing" and Note 15 — Subsequent events for further information regarding the debt refinancing.


Certain matters affecting comparability

The following items affect period-over-period comparisons from 2020 and will continue to affect period-over-period comparisons for future results:

Reclassifications

Certain amounts in the prior period condensed consolidated financial statements have been reclassified to conform to the current year presentation. In the fourth quarter of 2020, we re-aligned the breakout of the Publishing segment's Circulation revenues related to Digital-only circulation. As a result of this updated presentation, Print circulation revenues increased and Digital-only circulation revenues decreased $3.2 million and $10.7 million for the three and nine months ended September 30, 2020, respectively. There was no impact on reported total Publishing segment or consolidated Circulation revenues.

2027 Notes

At the Special Meeting of stockholders of the Company held on February 26, 2021 (the "Special Meeting"), our stockholders approved the issuance of the maximum number of shares of Common Stock issuable upon conversion of the 6.0%
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Senior Secured Convertible Notes due 2027 (the "2027 Notes"). As a result, the conversion option can be share-settled in full and qualified for equity classification. Upon reclassification, the conversion feature was adjusted to fair value as of the stockholder approval date and the increase in the fair 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 condensed consolidated statements of operations and comprehensive income (loss) for the nine months ended September 30, 2021. As of September 30, 2021, the deferred tax asset related to the embedded conversion feature of the 2027 Notes was reclassified to Equity as a reduction to Additional paid-in-capital and reduced the carrying amount of the equity component of the 2027 Notes to $283.7 million.

Integration and reorganization costs

For the three and nine months ended September 30, 2021, we incurred Integration and reorganization costs of $13.6 million and $35.5 million, respectively, including $2.7 million and $10.9 million, respectively, related to severance activities and $11.0 million and $24.6 million, respectively, related to other costs, including those for the purpose of consolidating operations, systems implementation, and outsourcing of corporate functions.

For the three and nine months ended September 30, 2021, we ceased operations of four and 14 printing operations, respectively, as part of the synergy and ongoing cost reduction programs. As a result, we recognized accelerated depreciation of $1.1 million and $11.4 million during the three and nine months ended September 30, 2021, respectively.

For the three and nine months ended September 30, 2020, we incurred Integration and reorganization costs of $13.4 million and $74.0 million, respectively, including $7.3 million and $54.8 million, respectively, related to severance activities and $6.1 million and $19.2 million, respectively, related to other costs, including those for the purpose of consolidating operations.

For the three and nine months ended September 30, 2020, we ceased operations of 11 and 35 printing operations, respectively, as part of the ongoing cost reduction programs. As a result, we recognized accelerated depreciation of $9.3 million and $45.0 million during the three and nine months ended September 30, 2020, respectively.

Goodwill and intangible impairment

There were no goodwill and intangible impairments incurred for the three and nine months ended September 30, 2021.

There were no goodwill and intangible impairments incurred for the three months ended September 30, 2020. For the nine months ended September 30, 2020, we incurred goodwill and intangible impairments of $393.4 million, primarily due to the impact of the COVID-19 pandemic on our operations.

Foreign currency

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

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Outlook for 2021

Strategy

Our areas of strategic focus for 2021 include:

Accelerating digital subscriber growth

The broad reach of our newsroom network, linking leading national journalism at USA TODAY, our local property network in 46 states in the U.S., and Newsquest in the U.K. with more than 120 local media brands, gives us the ability to deepen our relationships with consumers at both the national and local levels. We bring consumers local news and information that impacts their day-to-day lives while keeping them informed of the national events that impact their country. We believe this local content is not readily obtainable elsewhere, and we are able to deliver that content to our customers across multiple print and digital platforms. As such, a key element of our consumer strategy is growing our paid digital-only subscriber base to 10 million subscribers over the next five years. We expect to do this through expansion of our current subscription 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 have now achieved significant digital scale, with unique reach at both the national and local community levels. We expect to leverage our integrated sales structure and lead generation strategy to continue to aggressively expand our digital marketing services business into our local markets, both domestically and internationally. Given our extensive client base and volume of digital campaigns, we will also use data and insights to inform new and dynamic advertising products that we believe will deliver superior results.

Optimizing our traditional businesses across print and advertising

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

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 250 events. This success has continued in 2021, with over 160 events held through the end of the third quarter of 2021. While live events have resumed in 2021, the majority of events remain virtual. In addition, in connection with our company-wide priority to explore online gaming, in July 2021, we entered into an exclusive agreement with Tipico USA Technology, Inc. ("Tipico"), a U.S.-based subsidiary of European-based Tipico Group of Companies, the leading sports betting provider in Germany, utilizing their Tipico Sportsbook brand.

Impacts of the COVID-19 pandemic

As a result of the COVID-19 pandemic, we experienced a significant decline in Advertising and marketing services revenues, which accelerated the secular declines that we continue to experience. In addition, we continue to experience constraints on the sales of single copy newspapers, largely tied to business travel and in-person events. While we have seen operating trends improve since the second quarter of 2020, which represents the quarter that was most significantly impacted by the pandemic, we expect that the COVID-19 pandemic will continue to have a negative impact on our business and results of operations in the near-term, including lower revenues associated with events and lower sales of single copy newspapers, largely as a result of reduced business travel. If the COVID-19 pandemic were to revert to conditions that existed during 2020, including measures to help mitigate and control the spread of the virus, we would expect to experience further negative impacts in Advertising and marketing services revenues and Circulation revenues.

We have implemented, and continue 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
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Protection Program ("PPP"), suspending our quarterly dividend, and debt refinancing, as well as reducing discretionary spending. In addition, we are continuing with our previously-disclosed plan to monetize non-core assets.

In connection with the CARES Act, the Company received PPP funding in support of certain of our locations that were meaningfully affected by the COVID-19 pandemic totaling $16.4 million, which was included in Operating activities in the condensed consolidated statements of cash flows for the nine months ended September 30, 2021. As permitted under the CARES Act, during the third quarter of 2021, the Company received forgiveness of such loans totaling $15.1 million, which was recognized in earnings in the condensed consolidated statements of operations and comprehensive income (loss) as an offset to Operating costs of $11.1 million and Selling, general, and administrative expenses of $4.0 million. As of September 30, 2021, the remaining PPP loans of $1.3 million were included in Other long-term liabilities in the condensed consolidated balance sheets. Management has applied for forgiveness of the remaining PPP loans in accordance with applicable guidelines. Interest expense related to PPP funding was immaterial for the three and nine months ended September 30, 2021.
Seasonality

Our revenues are subject to moderate seasonality, due primarily to fluctuations in advertising volumes. Advertising and marketing services revenues for our Publishing segment are typically highest in the fourth quarter, due to holiday and seasonal advertising, and lowest in the first quarter, following the holiday season. The volume of advertising sales in any period is also impacted by other external factors such as competitors' pricing, advertisers' decisions to increase or decrease their advertising expenditures in response to anticipated consumer demand, and general economic conditions.

RESULTS OF OPERATIONS

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Consolidated Summary

A summary of our segment results is presented below:
Three months ended September 30, Nine months ended September 30,
In thousands, except per share amounts Change Change
2021 2020 $ % 2021 2020 $ %
Operating revenues:
Publishing $ 715,807  $ 732,226  $ (16,419) (2) % $ 2,139,937  $ 2,286,268  $ (146,331) (6) %
Digital Marketing Solutions 116,771  105,443  11,328  11  % 329,089  321,287  7,802  2  %
Corporate and other 1,649  2,732  (1,083) (40) % 6,428  8,140  (1,712) (21) %
Intersegment eliminations (34,042) (25,862) (8,180) 32  % (93,910) (85,472) (8,438) 10  %
Total operating revenues 800,185  814,539  (14,354) (2) % 2,381,544  2,530,223  (148,679) (6) %
Operating expenses:
Publishing 657,561  684,788  (27,227) (4) % 1,969,046  2,560,811  (591,765) (23) %
Digital Marketing Solutions 110,573  109,209  1,364  1  % 316,712  372,341  (55,629) (15) %
Corporate and other 34,991  44,924  (9,933) (22) % 105,208  148,509  (43,301) (29) %
Intersegment eliminations (34,042) (25,862) (8,180) 32  % (93,910) (85,472) (8,438) 10  %
Total operating expenses 769,083  813,059  (43,976) (5) % 2,297,056  2,996,189  (699,133) (23) %
Operating income (loss) 31,102  1,480  29,622  *** 84,488  (465,966) 550,454  ***
Non-operating expenses, net 13,573  29,830  (16,257) (54) % 186,368  106,119  80,249  76  %
Income (loss) before income taxes 17,529  (28,350) 45,879  *** (101,880) (572,085) 470,205  (82) %
Provision (benefit) for income taxes 2,984  3,098  (114) (4) % 11,567  (22,200) 33,767  ***
Net income (loss) 14,545  (31,448) 45,993  *** (113,447) (549,885) 436,438  (79) %
Net loss attributable to redeemable noncontrolling interests (142) (188) 46  (24) % (933) (1,580) 647  (41) %
Net income (loss) attributable to Gannett $ 14,687  $ (31,260) $ 45,947  *** $ (112,514) $ (548,305) $ 435,791  (79) %
Income (loss) per share attributable to Gannett - basic $ 0.11  $ (0.24) $ 0.35  *** $ (0.84) $ (4.17) $ 3.33  (80) %
Income (loss) per share attributable to Gannett - diluted $ 0.09  $ (0.24) $ 0.33  *** $ (0.84) $ (4.17) $ 3.33  (80) %
*** 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 fulfilled by our DMS segment. When discussing segment results, these revenues and expenses are presented gross but are eliminated in consolidation.

Operating revenues

Total Operating revenues were $800.2 million and $2.382 billion for three and nine months ended September 30, 2021, respectively, a decrease of $14.4 million and $148.7 million, respectively, compared to the three and nine months ended September 30, 2020, for the reasons described below.

For the Publishing segment, Operating revenues decreased $16.4 million for the three months ended September 30, 2021 compared to the three months ended September 30, 2020, reflecting lower Circulation revenues of $29.5 million offset by higher Other revenues of $13.8 million. Advertising and marketing services revenues remained essentially flat for the three months ended September 30, 2021 compared to the three months ended September 30, 2020, reflecting lower print revenues offset by higher digital revenues. For the nine months ended September 30, 2021, Operating revenues decreased $146.3 million compared to the nine months ended September 30, 2020 due to lower Circulation revenues of $111.1 million and lower Advertising and marketing services revenues of $40.8 million, partially offset by higher Other revenues of $5.6 million. Advertising and marketing services revenues are generated by the sale of local, national, and classified print advertising products, digital advertising offerings such as digital classified advertisements, digital media such as display advertisements run on our platforms as well as third-party sites, and digital marketing services delivered by our DMS segment. Circulation revenues are derived from home delivery, digital distribution and single copy sales of our publications. Other revenues are
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derived mainly from commercial printing, distribution arrangements, revenues from our events business, digital content syndication and affiliate revenues and third-party newsprint sales.

For the DMS segment, Operating revenues increased $11.3 million and $7.8 million for the three and nine months ended September 30, 2021, respectively, compared to the three and nine months ended September 30, 2020, reflecting higher Advertising and marketing services revenues of $16.0 million and $21.3 million, respectively, partially offset by lower Other revenues of $4.6 million and $13.5 million, respectively. Our DMS segment generates Advertising and marketing services revenues through multiple services, including search advertising, display advertising, search optimization, social media, website development, web presence products, customer relationship management, and software-as-a-service solutions.

Operating expenses

Total Operating expenses were $769.1 million and $2.297 billion for the three and nine months ended September 30, 2021, respectively, a decrease of $44.0 million and $699.1 million compared to the three and nine months ended September 30, 2020, respectively. Operating expenses consist primarily of the following:

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

For the three months ended September 30, 2021, Operating expenses at our Publishing segment decreased $27.2 million compared to the three months ended September 30, 2020, reflecting a decrease in Operating costs of $10.7 million, a decrease in Depreciation and amortization of $16.6 million, a decrease in Integration and reorganization costs of $1.6 million and a decrease in Loss on the sale or disposal of assets of $2.8 million, partially offset by an increase in Selling, general and administrative expenses of $3.0 million and an increase in Asset impairments of $1.4 million. For the nine months ended September 30, 2021, Operating expenses at our Publishing segment decreased $591.8 million compared to the nine months ended September 30, 2020, reflecting a decrease in Operating costs of $104.5 million, a decrease in Selling, general and administrative expenses of $51.7 million, a decrease in Depreciation and amortization of $57.3 million, a decrease in Integration and reorganization costs of $28.4 million, a decrease in Asset impairments of $4.6 million and a decrease in Goodwill and intangible impairments of $352.9 million, partially offset by an increase in Loss on the sale or disposal of assets of $7.7 million.

For the three months ended September 30, 2021, Operating expenses at our DMS segment increased $1.4 million compared to the three months ended September 30, 2020, reflecting an increase in Operating costs of $9.2 million and an increase in Depreciation and amortization of $1.2 million, partially offset by a decrease in Selling, general and administrative expenses of $8.9 million. For the nine months ended September 30, 2021, Operating expenses at our DMS segment decreased $55.6 million compared to the nine months ended September 30, 2020, reflecting a decrease in Selling, general and administrative expenses of $31.9 million, a decrease in Goodwill and intangible impairments of $40.5 million and a decrease in Integration and reorganization costs of $4.3 million, partially offset by an increase in Operating costs of $16.4 million and an increase in Depreciation and amortization of $5.6 million.

For the three months ended September 30, 2021, Operating expenses at Corporate and other decreased $9.9 million compared to the three months ended September 30, 2020, reflecting a decrease in Selling, general and administrative expenses of $11.2 million, a decrease in Other operating expenses of $1.9 million and a decrease in Operating costs of $1.4 million, partially offset by an increase in Depreciation and amortization of $2.2 million and an increase Integration and reorganization costs of $2.1 million. For the nine months ended September 30, 2021, Operating expenses at Corporate and other decreased $43.3 million compared to the nine months ended September 30, 2020, due to a decrease in Selling, general and administrative expenses of $36.0 million, a decrease in Integration and reorganization costs of $5.8 million and a decrease in Operating costs of $3.3 million, partially offset by an increase in Other operating expenses of $1.1 million and an increase in Depreciation and amortization of $0.5 million.
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Refer to the discussion of segment results below for further information.

Non-operating (income) expense

Interest expense: For the three and nine months ended September 30, 2021, Interest expense was $34.6 million and $109.4 million, respectively, compared to $58.1 million and $173.9 million for the three and nine months ended September 30, 2020, respectively. The decrease in interest expense for the three and nine months ended September 30, 2021 was mainly due to a lower effective interest rate driven by the refinancing of our 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 and nine months ended September 30, 2021, Loss on early extinguishment of debt was $3.8 million and $26.0 million, respectively. For the three and nine months ended September 30, 2020, Loss on early extinguishment of debt was $0.5 million and $1.7 million, respectively. The increase in loss for the three months ended September 30, 2021 was mainly due to early prepayments on the 5-Year Term Loan. The increase in loss for the nine months ended September 30, 2021 was mainly due to the payoff of the Acquisition Term Loan in the first quarter of 2021.

Non-operating pension income: For the three and nine months ended September 30, 2021, Non-operating pension income was $23.9 million and $71.6 million, respectively, compared to $18.3 million and $54.4 million for the three and nine months ended September 30, 2020, respectively. The increase in non-operating pension income for the three and nine months ended September 30, 2021 was primarily due to an increase in the expected return on plan assets held by the Gannett Retirement Plan and lower interest costs on benefit obligations.

Loss on convertible notes derivative: For the nine months ended September 30, 2021, Loss on convertible notes derivative was $126.6 million, due to the increase in the fair value of the derivative liability as a result of the increase in the Company's stock price.

Other non-operating income, net: Other non-operating income, net consisted of certain items that fall outside of our normal business operations. For the three and nine months ended September 30, 2021, Other non-operating income, net was $0.9 million and $4.0 million, respectively, compared to $10.4 million and $15.0 million for the three and nine months ended September 30, 2020, respectively. The decrease in Other non-operating income, net for the three and nine months ended September 30, 2021 was primarily due to a gain on disposal of a cost method investment held by the DMS segment during the third quarter of 2020.

Provision (benefit) for income taxes

The following table summarizes our pre-tax net income (loss) before income taxes and income tax accounts:

Three months ended September 30, Nine months ended September 30,
In thousands 2021 2020 2021 2020
Income (loss) before income taxes $ 17,529  $ (28,350) $ (101,880) $ (572,085)
Provision (benefit) for income taxes 2,984  3,098  11,567  (22,200)
Effective tax rate 17.0  % *** (11.4) % 3.9  %
*** Indicates an absolute value percentage change greater than 100.

The provision for income taxes for the three months ended September 30, 2021 was mainly driven by pre-tax income and is impacted by forgiveness of PPP loans during the quarter. For federal tax purposes, book income from forgiven loans is not included in taxable income, and expenses paid utilizing the loan proceeds can be deducted. The impact of PPP loan forgiveness is partially offset by the creation of valuation allowances on non-deductible interest expense carryforwards. The provision was calculated using the estimated annual effective tax rate of 77.7%. The annual effective tax rate is principally impacted by the derivative revaluation, which is non-deductible for federal tax purposes, and the creation of valuation allowances on non-deductible interest expense carryforwards. The estimated annual effective tax rate is based on a projected tax expense for the full year.

The tax provision for the nine months ended September 30, 2021 was mainly driven by the pre-tax net loss generated during the first quarter of 2021. The tax provision is impacted by the derivative revaluation, which is nondeductible for federal
33
tax purposes, the creation of valuation allowances on non-deductible interest expense carryforwards, and PPP loan forgiveness, in combination with state income tax and foreign tax expense.

During the three months ended June 30, 2021, we reclassified $32.5 million (tax effected) in connection with the retirement of the deferred tax asset related to the embedded conversion feature associated with the 2027 Notes. The retirement of the deferred tax asset resulted from the reclassification of the embedded conversion feature from a derivative liability to Equity as a reduction to Additional paid-in-capital during the first quarter of 2021. See Note 7 - Debt for additional information about the 2027 Notes.

The provision for income taxes for the three months ended September 30, 2020 was mainly impacted by a reduction in the year to date tax benefit as a result of a lower projected annualized effected tax rate. The provision for income taxes for the three months ended September 30, 2020 was calculated using 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 nine months ended September 30, 2020 is lower than the 21% statutory federal rate due to the impact of non-deductible asset impairments, non-deductible officers’ compensation, and the creation of valuation allowances on non-deductible interest expense carryforwards and capital losses.

Several economic relief bills have been enacted into law in response to the COVID-19 pandemic. We continue to monitor the applicability of federal and state legislation to the Company, as well as regulatory interpretations of enacted legislation that provide economic relief in response to the pandemic, and expect to utilize these provisions as we determine necessary or desirable.
Net income (loss) attributable to Gannett and diluted income (loss) per share attributable to Gannett

For the three months ended September 30, 2021, Net income attributable to Gannett and diluted income per share attributable to Gannett were $14.7 million and $0.09, respectively, compared to Net loss attributable to Gannett and diluted loss per share attributable to Gannett of $31.3 million and $0.24, respectively, for the three months ended September 30, 2020. For the nine months ended September 30, 2021, Net loss attributable to Gannett and diluted loss per share attributable to Gannett were $112.5 million and $0.84, respectively, compared to $548.3 million and $4.17, respectively, for the nine months ended September 30, 2020. The change for the three and nine months ended September 30, 2021 reflects the various items discussed above.

Publishing segment

A summary of our Publishing segment results is presented below:
Three months ended September 30, Nine months ended September 30,
Change Change
In thousands 2021 2020 $ % 2021 2020 $ %
Operating revenues:
Advertising and marketing services $ 328,784  $ 329,508  $ (724) —  % $ 984,575  $ 1,025,396  $ (40,821) (4) %
Circulation 306,698  336,152  (29,454) (9) % 942,392  1,053,517  (111,125) (11) %
Other 80,325  66,566  13,759  21  % 212,970  207,355  5,615  3  %
Total operating revenues 715,807  732,226  (16,419) (2) % 2,139,937  2,286,268  (146,331) (6) %
Operating expenses:
Operating costs 427,887  438,588  (10,701) (2) % 1,285,904  1,390,366  (104,462) (8) %
Selling, general and administrative expenses 189,032  186,000  3,032  2  % 541,165  592,856  (51,691) (9) %
Depreciation and amortization 35,861  52,481  (16,620) (32) % 118,664  175,990  (57,326) (33) %
Integration and reorganization costs 3,512  5,120  (1,608) (31) % 10,641  39,049  (28,408) (73) %
Asset impairments 2,301  868  1,433  *** 3,134  7,727  (4,593) (59) %
Goodwill and intangible impairments —  —  —  —  % —  352,947  (352,947) (100) %
(Gain) loss on sale or disposal of assets, net (1,032) 1,731  (2,763) *** 9,538  1,876  7,662  ***
Total operating expenses 657,561  684,788  (27,227) (4) % 1,969,046  2,560,811  (591,765) (23) %
Operating income (loss) $ 58,246  $ 47,438  $ 10,808  23  % $ 170,891  $ (274,543) $ 445,434  ***
*** Indicates an absolute value percentage change greater than 100.

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Operating revenues

The following table provides the breakout of Operating revenues by category:
Three months ended September 30, Nine months ended September 30,
Change Change
In thousands 2021 2020 $ % 2021 2020 $ %
Local and national print $ 118,292  $ 132,013  $ (13,721) (10) % $ 363,291  $ 422,849  $ (59,558) (14) %
Classified print 71,752  76,210  (4,458) (6) % 220,874  240,888  (20,014) (8) %
Print advertising 190,044  208,223  (18,179) (9) % 584,165  663,737  (79,572) (12) %
Digital media 91,344  84,054  7,290  9  % 265,450  235,865  29,585  13  %
Digital marketing services 34,078  25,498  8,580  34  % 95,652  79,677  15,975  20  %
Digital classified 13,318  11,733  1,585  14  % 39,308  46,117  (6,809) (15) %
Digital advertising and marketing services 138,740  121,285  17,455  14  % 400,410  361,659  38,751  11  %
Advertising and marketing services 328,784  329,508  (724) —  % 984,575  1,025,396  (40,821) (4) %
Print circulation 280,980  315,833  (34,853) (11) % 869,489  1,000,210  (130,721) (13) %
Digital-only circulation 25,718  20,319  5,399  27  % 72,903  53,307  19,596  37  %
Circulation 306,698  336,152  (29,454) (9) % 942,392  1,053,517  (111,125) (11) %
Other 80,325  66,566  13,759  21  % 212,970  207,355  5,615  3  %
Total operating revenues $ 715,807  $ 732,226  $ (16,419) (2) % $ 2,139,937  $ 2,286,268  $ (146,331) (6) %

For the three and nine months ended September 30, 2021, the overall decline in Print advertising revenues of $18.2 million and $79.6 million, respectively, was driven by secular industry trends impacting all categories and the absence of revenues related to a business we divested in the fourth quarter of 2020. For the three and nine months ended September 30, 2021, Local and national print advertising revenues decreased $13.7 million and $59.6 million, respectively, compared to the three and nine months ended September 30, 2020, primarily due to lower advertising volumes, including a decrease in advertiser inserts. For the three and nine months ended September 30, 2021, Classified print advertising revenues decreased $4.5 million and $20.0 million, respectively, compared to the three and nine months ended September 30, 2020, due to decreased spend in classified advertisements, including legal, real estate, and obituaries.

For the three months ended September 30, 2021, Digital advertising and marketing services revenues increased $17.5 million, due to an increase of $7.3 million in Digital media revenues, an increase of $8.6 million in Digital marketing services revenues, and an increase of $1.6 million in Digital classified revenues, compared to the three months ended September 30, 2020. For the nine months ended September 30, 2021, Digital advertising and marketing services revenues increased $38.8 million, due to an increase of $29.6 million in Digital media revenues and an increase of $16.0 million in Digital marketing services revenues, offset by a decrease of $6.8 million in Digital classified revenues compared to the nine months ended September 30, 2020. For the three and nine months ended September 30, 2021, the overall increase in Digital advertising and marketing services revenues was due to an increase in Digital media spend and Digital marketing services revenues as well as continued improvement in operating trends since the prior year impacts of the COVID-19 pandemic. The increase in Digital media revenues for the three and nine months ended September 30, 2021 was driven by a higher mix of premium media sold, including premium sports products, as well as an overall increase in rate across both owned and operated sites as well as third-party sites. The increase in Digital marketing services revenues for the three and nine months ended September 30, 2021 was due to higher average revenue per customer for digital marketing services sold primarily as a result of focusing on strategic initiatives across our local marketing sales force. The increase in Digital classified revenues for the three months ended September 30, 2021 was due to increased spend in obituaries, legal and employment advertisements. The decrease in Digital classified revenues for the nine months ended September 30, 2021 was due to reduced spend in automotive advertisements, partially offset by increased spend in employment advertisements.

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For the three and nine months ended September 30, 2021, Print circulation revenues decreased $34.9 million and $130.7 million, respectively, compared to the three and nine months ended September 30, 2020, driven by a reduction in the volume of home delivery subscribers, a decline in single copy sales reflecting the overall secular trends impacting the industry, and the absence of revenues related to a business we divested in the fourth quarter of 2020, as well as the impact of the COVID-19 pandemic on business travel and overall consumer activity, partially offset by an increase in rate. For the three and nine months ended September 30, 2021, Digital-only circulation revenues increased $5.4 million and $19.6 million, respectively, compared to the three and nine months ended September 30, 2020, driven by an increase of 46% in paid digital-only subscribers, including those subscribers on introductory subscription offers, to approximately 1.543 million compared to the prior year.

For the three and nine months ended September 30, 2021, Other revenues increased $13.8 million and $5.6 million, respectively, compared to the three and nine months ended September 30, 2020, primarily due to an increase in digital content syndication volume, as well as commercial print growth in local markets driven by continued improvement in operating trends since the prior year impacts of the COVID-19 pandemic and customer retention, partially offset by the absence of revenues related to a business we divested in the fourth quarter of 2020. The growth in Other revenues for the nine months ended September 30, 2021 was negatively impacted by a decline in event revenues driven by the shift from in person events to virtual events as a result of the COVID-19 pandemic.

Operating expenses

For the three and nine months ended September 30, 2021, Operating costs decreased $10.7 million and $104.5 million, respectively, compared to the three and nine months ended September 30, 2020. The following table provides the breakout of the decrease in Operating costs:

Three months ended September 30, Nine months ended September 30,
Change Change
In thousands 2021 2020 $ % 2021 2020 $ %
Newsprint and ink $ 26,176  $ 31,250  $ (5,074) (16) % $ 78,160  $ 101,097  $ (22,937) (23) %
Distribution 112,884  99,189  13,695  14  % 321,435  306,768  14,667  5  %
Compensation and benefits 129,620  153,643  (24,023) (16) % 414,513  478,996  (64,483) (13) %
Outside services 90,428  87,574  2,854  3  % 248,110  252,046  (3,936) (2) %
Other 68,779  66,932  1,847  3  % 223,686  251,459  (27,773) (11) %
Total operating costs $ 427,887  $ 438,588  $ (10,701) (2) % $ 1,285,904  $ 1,390,366  $ (104,462) (8) %

For the three and nine months ended September 30, 2021, Newsprint and ink costs decreased $5.1 million and $22.9 million, respectively, compared to the three and nine months ended September 30, 2020, mainly due to lower print circulation driven by the decline in volume of home delivery and single copy sales. In addition, the decrease in Newsprint and ink costs for the nine months ended September 30, 2021 was also impacted by declines in print advertising volumes.

For the three and nine months ended September 30, 2021, Distribution costs increased $13.7 million and $14.7 million, respectively, compared to the three and nine months ended September 30, 2020, primarily driven by an increase in distribution postage, as well as activity in our commercial print business. In addition, the increase in Distribution costs for the nine months ended September 30, 2021 was offset by the decline in print circulation and print advertising volumes incurred in the first quarter of 2021.

For the three and nine months ended September 30, 2021, Compensation and benefits costs decreased $24.0 million and $64.5 million, respectively, compared to the three and nine months ended September 30, 2020, primarily due to a reduction in costs associated with ongoing integration efforts, including headcount reductions, as well as the benefit in 2021 of cost containment initiatives implemented in 2020 in connection with the COVID-19 pandemic and $11.1 million of PPP loan forgiveness, offset by the absence of the temporary reduction of expenses in the prior year, such as furloughs and wage reductions in response to the COVID-19 pandemic.
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For the three months ended September 30, 2021, Outside services costs, which includes outside printing, professional services fulfilled by third parties, paid search and ad serving, feature services, and credit card fees, increased $2.9 million compared to the three months ended September 30, 2020, due to higher costs associated with the increase in Digital media and Digital marketing services revenues, including paid search fees and affiliate revenue share as well as other related costs, offset by a reduction in costs associated with ongoing integration efforts. For the nine months ended September 30, 2021, Outside services costs decreased $3.9 million compared to the nine months ended September 30, 2020, due to a reduction in costs associated with ongoing integration efforts and the benefit in 2021 of cost containment initiatives implemented in 2020 in connection with the COVID-19 pandemic, offset by higher costs associated with the increase in Digital media and Digital marketing services revenues.

For the three months ended September 30, 2021, Other costs, which primarily includes travel, and facility and equipment costs, increased $1.8 million compared to the three months ended September 30, 2020, due to an increase in travel costs in the period as travel began to resume after the height of the COVID-19 pandemic travel restrictions. For the nine months ended September 30, 2021, Other costs decreased $27.8 million compared to the nine months ended September 30, 2020, due to a reduction in costs associated with ongoing integration efforts and cost containment initiatives, including the consolidation of print facilities.

For the three and nine months ended September 30, 2021, Selling, general and administrative expenses increased $3.0 million and decreased $51.7 million, respectively, compared to the three and nine months ended September 30, 2020. The following table provides the breakout of Selling, general and administrative expenses:
Three months ended September 30, Nine months ended September 30,
Change Change
In thousands 2021 2020 $ % 2021 2020 $ %
Compensation and benefits $ 93,762  $ 93,619  $ 143  —  % $ 283,875  $ 295,569  $ (11,694) (4) %
Outside services and other 95,270  92,381  2,889  3  % 257,290  297,287  (39,997) (13) %
Total Selling, general and administrative expenses $ 189,032  $ 186,000  $ 3,032  2  % $ 541,165  $ 592,856  $ (51,691) (9) %

For the three months ended September 30, 2021, Compensation and benefits remained essentially flat compared to the three months ended September 30, 2020, due to an increase in costs associated with employee insurance benefits and the absence of the temporary reduction of expenses in the prior year period, such as furloughs and wage reductions, offset by PPP loan forgiveness of $4.0 million. For the nine months ended September 30, 2021, Compensation and benefits costs decreased $11.7 million compared to the nine months ended September 30, 2020, due to a reduction in costs associated with ongoing integration efforts, including headcount reductions, the benefit in 2021 of cost containment initiatives implemented in 2020 in connection with the COVID-19 pandemic, and PPP loan forgiveness of $4.0 million, partially offset by the impact of higher payroll and commission expenses driven by the growth in Advertising and marketing services revenues, an increase in costs associated with employee insurance benefits and the absence of the temporary reduction of expenses in the prior year, such as furloughs and wage reductions.

For the three months ended September 30, 2021, Outside services and other costs, which includes services fulfilled by third parties, increased $2.9 million compared to the three months ended September 30, 2020, due to an increase in promotion fees, offset by decreases in legal fees, facility related costs and bad debt expense. For the nine months ended September 30, 2021, Outside services and other costs decreased $40.0 million compared to the nine months ended September 30, 2020, due to lower facility related costs, lower bad debt expense, a reduction in costs associated with ongoing integration efforts, and the benefit in 2021 of cost containment initiatives implemented in 2020 in connection with the COVID-19 pandemic, partially offset by an increase in promotion fees.

For the three and nine months ended September 30, 2021, Depreciation and amortization expenses decreased $16.6 million and $57.3 million, respectively, compared to the three and nine months ended September 30, 2020, due to a decrease in accelerated depreciation of $8.2 million and $33.6 million, respectively, 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 September 30, 2021, Integration and reorganization costs decreased $1.6 million compared to the three months ended September 30, 2020, due to a decrease in severance costs of $2.0 million, partially offset by an increase in other costs, including those for the consolidation of operations of $0.4 million. For the nine months ended September 30, 2021, Integration and reorganization costs decreased $28.4 million compared to the nine months ended September 30, 2020,
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due to a decrease in severance costs of $25.3 million, as well as a decrease in other costs, including those for the consolidation of operations of $3.1 million. For the three and nine months ended September 30, 2021, severance costs were primarily related to facility consolidation and ongoing integration activities. For the three and nine months ended September 30, 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 and nine months ended September 30, 2021, we recorded Asset impairment charges of $2.3 million and $3.1 million, respectively, in the Publishing segment due primarily to the impairment of real estate held for sale. For the three months ended September 30, 2020, we recorded $0.9 million of Assets impairment charges as a result of fixed asset disposals related to the continued consolidation of operations. For the nine months ended September 30, 2020, we recorded $7.7 million of Assets impairment charges as a result of the Company’s recoverability test for long-lived assets, as well as fixed asset disposals related to the continued consolidation of operations.

For the nine months ended September 30, 2020, we recorded a goodwill and intangible impairment charge of $352.9 million at the Publishing segment, primarily due to the impact of the COVID-19 pandemic on our operations.

For the three months ended September 30, 2021, we recorded a Gain on the sale or disposal of assets, net of $1.0 million due to a gain on sale of real estate at Newsquest, offset by the loss on the sale of assets as part of our plan to monetize non-core assets, compared to a Loss on the sale or disposal of assets, net of $1.7 million for the three months ended September 30, 2020. For the nine months ended September 30, 2021, Loss on sale or disposal of assets increased $7.7 million compared to the nine months ended September 30, 2020, driven by the loss on the sale of assets in 2021 as part of our plan to monetize non-core assets, offset by a gain on sale of real estate at Newsquest.

Publishing segment Adjusted EBITDA
Three months ended September 30, Nine months ended September 30,
Change Change
In thousands 2021 2020 $ % 2021 2020 $ %
Net income (loss) attributable to Gannett $ 84,137  $ 67,726  $ 16,411  24  % $ 246,792  $ (213,490) $ 460,282  ***
Interest expense —  17  (17) (100) % —  127  (127) (100) %
Non-operating pension income (23,860) (18,262) (5,598) 31  % (71,644) (54,215) (17,429) 32  %
Depreciation and amortization 35,861  52,481  (16,620) (32) % 118,664  175,990  (57,326) (33) %
Integration and reorganization costs 3,512  5,120  (1,608) (31) % 10,641  39,049  (28,408) (73) %
Asset impairments 2,301  868  1,433  *** 3,134  7,727  (4,593) (59) %
Goodwill and intangible impairments —  —  —  —  % —  352,947  (352,947) (100) %
(Gain) loss on sale or disposal of assets, net (1,032) 1,731  (2,763) *** 9,538  1,876  7,662  ***
Other items 82  (929) 1,011  *** 273  1,756  (1,483) (84) %
Adjusted EBITDA (non-GAAP basis) $ 101,001  $ 108,752  $ (7,751) (7) % $ 317,398  $ 311,767  $ 5,631  2  %
Net income (loss) attributable to Gannett margin 11.8  % 9.2  % 11.5  % (9.3) %
Adjusted EBITDA margin (non-GAAP basis)(a)
14.1  % 14.9  % 14.8  % 13.6  %
*** 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 $101.0 million and $317.4 million for the three and nine months ended September 30, 2021, respectively, a decrease of $7.8 million and an increase of $5.6 million compared to the three and nine months ended September 30, 2020, respectively. The change for the three and nine months ended September 30, 2021 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 September 30, Nine months ended September 30,
Change Change
In thousands 2021 2020 $ % 2021 2020 $ %
Operating revenues:
Advertising and marketing services $ 116,771  $ 100,807  $ 15,964  16  % $ 328,184  $ 306,899  $ 21,285  7  %
Other —  4,636  (4,636) (100) % 905  14,388  (13,483) (94) %
Total operating revenues 116,771  105,443  11,328  11  % 329,089  321,287  7,802  2  %
Operating expenses:
Operating costs 80,405  71,223  9,182  13  % 224,112  207,741  16,371  8  %
Selling, general and administrative expenses 21,342  30,228  (8,886) (29) % 68,252  100,120  (31,868) (32) %
Depreciation and amortization 7,986  6,768  1,218  18  % 23,665  18,103  5,562  31  %
Integration and reorganization costs 931  1,237  (306) (25) % 1,301  5,587  (4,286) (77) %
Asset impairments —  717  (717) *** —  717  (717) ***
Goodwill and intangible impairments —  —  —  —  % —  40,499  (40,499) ***
Gain on sale or disposal of assets, net (91) (964) 873  (91) % (618) (426) (192) 45  %
Total operating expenses 110,573  109,209  1,364  1  % 316,712  372,341  (55,629) (15) %
Operating income (loss) $ 6,198  $ (3,766) $ 9,964  *** $ 12,377  $ (51,054) $ 63,431  ***
*** Indicates an absolute value percentage change greater than 100.

Operating revenues

For the three and nine months ended September 30, 2021, Advertising and marketing services revenues increased $16.0 million and $21.3 million, respectively, compared to the three and nine months ended September 30, 2020, primarily driven by growth in the core ReachLocal business and a continued improvement in operating trends since the prior year impacts of the COVID-19 pandemic. The increase for the nine months ended September 30, 2021 was partially offset by the absence of $11.7 million of revenues in 2021 as a result of the change in media rebate programs, as well as the absence of revenues associated with a business we divested in the third quarter of 2020.

For the three and nine months ended September 30, 2021, Other revenues decreased $4.6 million and $13.5 million, respectively, compared to the three and nine months ended September 30, 2020, primarily due to the absence of revenues related to a business we divested in the fourth quarter of 2020.

Operating expenses

For the three and nine months ended September 30, 2021, Operating costs increased $9.2 million and $16.4 million, respectively, compared to the three and nine months ended September 30, 2020. The following table provides the breakout of Operating costs:

Three months ended September 30, Nine months ended September 30,
Change Change
In thousands 2021 2020 $ % 2021 2020 $ %
Compensation and benefits $ 7,593  $ 10,809  $ (3,216) (30) % $ 23,408  $ 35,031  $ (11,623) (33) %
Outside services 70,332  56,787  13,545  24  % 193,423  160,722  32,701  20  %
Other 2,480  3,627  (1,147) (32) % 7,281  11,988  (4,707) (39) %
Total operating costs $ 80,405  $ 71,223  $ 9,182  13  % $ 224,112  $ 207,741  $ 16,371  8  %

For the three and nine months ended September 30, 2021, Compensation and benefits costs decreased $3.2 million and $11.6 million, respectively, compared to the three and nine months ended September 30, 2020, due to a reduction in costs associated with ongoing integration efforts, including headcount reductions, as well as the benefit in 2021 of cost containment
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initiatives implemented in 2020 in connection with the COVID-19 pandemic, offset by the absence of the temporary reduction of expenses in the prior year, such as furloughs and wage reductions.

For the three and nine months ended September 30, 2021, Outside services costs, which includes professional services fulfilled by third parties, media fees and other digital costs, increased $13.5 million and $32.7 million, respectively, compared to the three and nine months ended September 30, 2020, due to an increase in expenses associated with third-party media fees driven by a corresponding increase in revenues, partially offset by the absence of costs associated with a business we divested in the fourth quarter of 2020.

For the three and nine months ended September 30, 2021, Selling, general and administrative expenses decreased $8.9 million and $31.9 million, respectively, compared to the three and nine months ended September 30, 2020. The following table provides the breakout of Selling, general and administrative expenses by category:

Three months ended September 30, Nine months ended September 30,
Change Change
In thousands 2021 2020 $ % 2021 2020 $ %
Compensation and benefits $ 17,046  $ 28,426  $ (11,380) (40) % $ 52,283  $ 92,145  $ (39,862) (43) %
Outside services and other 4,296  1,802  2,494  *** 15,969  7,975  7,994  ***
Total Selling, general and administrative expenses $ 21,342  $ 30,228  $ (8,886) (29) % $ 68,252  $ 100,120  $ (31,868) (32) %
*** Indicates an absolute value percentage change greater than 100.

For the three and nine months ended September 30, 2021, Compensation and benefits costs decreased $11.4 million and $39.9 million, respectively, compared to the three and nine months ended September 30, 2020, primarily due to a reduction in costs associated with ongoing integration efforts, including headcount reductions, as well as the benefit in 2021 of cost containment initiatives implemented in 2020 in connection with the COVID-19 pandemic, offset by the absence of the temporary reduction of expenses in the prior year, such as furloughs and wage reductions.

For the three and nine months ended September 30, 2021, Outside services and other costs increased $2.5 million and $8.0 million, respectively, compared to the three and nine months ended September 30, 2020, due to an increase in various miscellaneous expenses, including higher technology and marketing expenses.

For the three and nine months ended September 30, 2021, Integration and reorganization costs decreased $0.3 million and $4.3 million, respectively, compared to the three and nine months ended September 30, 2020 due to lower severance costs of $0.8 million and $5.0 million, respectively, offset by higher facility consolidation and other restructuring related expenses of $0.5 million and $0.7 million, respectively. For the three and nine months ended September 30, 2020, severance costs were related to acquisition-related synergies and the consolidation of the business due to our acquisition of Legacy Gannett in the fourth quarter of 2019.

For the three and nine months ended September 30, 2020, we recorded $0.7 million of Asset impairment charges as a result of ongoing cost efficiency programs.

For the nine months ended September 30, 2020, we recorded a goodwill and intangible impairment charge of $40.5 million at the DMS segment, primarily due to the impact of the COVID-19 pandemic on our operations.
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Digital Marketing Solutions segment Adjusted EBITDA
Three months ended September 30, Nine months ended September 30,
Change Change
In thousands 2021 2020 $ % 2021 2020 $ %
Net income (loss) attributable to Gannett $ 5,005  $ 5,223  $ (218) (4) % $ 10,990  $ (43,076) $ 54,066  ***
Depreciation and amortization 7,986  6,768  1,218  18  % 23,665  18,103  5,562  31  %
Integration and reorganization costs 931  1,237  (306) (25) % 1,301  5,587  (4,286) (77) %
Asset impairments —  717  (717) (100) % —  717  (717) (100) %
Goodwill and intangible impairments —  —  —  —  % —  40,499  (40,499) (100) %
Gain on sale or disposal of assets, net (91) (964) 873  (91) % (618) (426) (192) 45  %
Other items 1,193  (8,804) 9,997  *** 1,387  (6,557) 7,944  ***
Adjusted EBITDA (non-GAAP basis) $ 15,024  $ 4,177  $ 10,847  *** $ 36,725  $ 14,847  $ 21,878  ***
Net income (loss) attributable to Gannett margin 4.3  % 5.0  % 3.3  % (13.4) %
Adjusted EBITDA margin (non-GAAP basis)(a)
12.9  % 4.0  % 11.2  % 4.6  %
*** 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 Digital Marketing Solutions segment was $15.0 million and $36.7 million for the three and nine months ended September 30, 2021, respectively, an increase of $10.8 million and $21.9 million compared to the three and nine months ended September 30, 2020, respectively. The change for the three and nine months ended September 30, 2021 was primarily attributable to the changes discussed above.

Corporate and other category

For the three months ended September 30, 2021, Corporate and other operating revenues were $1.6 million compared to $2.7 million for the three months ended September 30, 2020. For the nine months ended September 30, 2021, Corporate and other operating revenues were $6.4 million compared to $8.1 million for the nine months ended September 30, 2020.

For the three and nine months ended September 30, 2021, Corporate and other operating expenses decreased $9.9 million and $43.3 million, respectively, compared to the three and nine months ended September 30, 2020. The following table provides the breakout of the decrease in Corporate and other operating expenses:

Three months ended September 30, Nine months ended September 30,
Change Change
In thousands 2021 2020 $ % 2021 2020 $ %
Operating expenses:
Operating costs $ 6,039  $ 7,424  $ (1,385) (19) % $ 14,534  $ 17,864  $ (3,330) (19) %
Selling, general and administrative expenses 15,222  26,393  (11,171) (42) % 43,386  79,339  (35,953) (45) %
Depreciation and amortization 4,260  2,106  2,154  *** 12,123  11,613  510  4  %
Integration and reorganization costs 9,176  7,060  2,116  30  % 23,525  29,342  (5,817) (20) %
Loss on sale or disposal of assets, net 290  28  262  *** 286  90  196  ***
Other operating expenses 4  1,913  (1,909) (100) % 11,354  10,261  1,093  11  %
Total operating expenses $ 34,991  $ 44,924  $ (9,933) (22) % $ 105,208  $ 148,509  $ (43,301) (29) %
*** Indicates an absolute value percentage change greater than 100.

For the three months ended September 30, 2021, Corporate and other operating expenses decreased $9.9 million compared to the three months ended September 30, 2020 due to a decrease in Selling, general and administrative expenses of $11.2 million, mainly consisting of cost containment initiatives, a decrease in Other operating expenses of $1.9 million, which was due to the absence of $1.9 million of Acquisition costs incurred during the three months ended September 30, 2020, and a
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decrease in Operating costs of $1.4 million due to the decline in revenues. The decreases for the three months were partially offset by an increase in Depreciation and amortization of $2.2 million and an increase in Integration and reorganization costs of $2.1 million, driven by an increase of $3.9 million in costs associated with systems implementation and outsourcing of corporate functions, partially offset by a decrease in severance of $1.8 million.

For the nine months ended September 30, 2021, Corporate and other operating expenses decreased $43.3 million due to a decrease in Selling, general and administrative expenses of $36.0 million, mainly consisting of cost containment initiatives, offset by the absence of the temporary reduction of expenses in the prior year, such as furloughs and wage reductions, a decrease in Integration and reorganization costs of $5.8 million, driven by a decrease in severance of $13.6 million, offset by an increase of $7.8 million in costs associated with systems implementation and outsourcing of corporate functions. The decreases for the nine months were offset by an increase in Other operating expenses of $1.1 million, which was primarily due to $10.9 million of third-party fees related to the 5-Year Term Loan expensed during the nine months ended September 30, 2021, compared to $10.3 million of Acquisition costs incurred during the nine months ended September 30, 2020.

LIQUIDITY AND CAPITAL RESOURCES

Our primary cash requirements are for working capital, debt obligations, and capital expenditures.

We expect to fund our operations through cash provided by operating activities. We expect we will have adequate capital resources and liquidity to meet our ongoing working capital needs, borrowing obligations, and all required capital expenditures.

Details of our cash flows are included in the table below:
Nine months ended September 30,
In thousands 2021 2020
Net cash provided by operating activities $ 133,347  $ 74,280 
Net cash provided by (used for) investing activities 39,236  (1,979)
Net cash used for financing activities (212,284) (37,471)
Effect of currency exchange rate change on cash 389  439 
(Decrease) increase in cash, cash equivalents and restricted cash $ (39,312) $ 35,269 

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

Our net cash flow provided by operating activities was $133.3 million for the nine months ended September 30, 2021, compared to $74.3 million for the nine months ended September 30, 2020. The increase in net cash flow provided by operating activities was primarily due to a decrease in interest paid on debt of $96.1 million, a decrease in severance payments of $40.1 million, $16.4 million in PPP funding received in support of certain of our locations that were meaningfully affected by the COVID-19 pandemic and an increase in tax refunds, net of $4.5 million. These increases were partially offset by a decrease in working capital of $70.9 million due to the overall timing of payments, including accrued compensation and accounts receivable collections, and an increase in contributions to our pension and other postretirement benefit plans of $19.2 million.

Cash flows provided by (used for) investing activities: Cash flows provided by investing activities totaled $39.2 million for the nine months ended September 30, 2021 compared to $2.0 million used for investing activities in the nine months ended September 30, 2020. This increase was primarily due to an increase in proceeds from the sale of real estate and other assets of $41.2 million and a decrease in purchases of property, plant and equipment of $1.7 million.

Cash flows used for financing activities: Cash flows used for financing activities totaled $212.3 million for the nine months ended September 30, 2021 compared to $37.5 million for the nine months ended September 30, 2020. This increase was primarily due to an increase in net repayments under term loans of $148.1 million and payments of debt issuance costs of $33.9 million.

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Debt

5-Year Term Loan

On February 9, 2021, we entered into a five-year, senior-secured term loan facility with 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 $1.045 billion (the "5-Year Term Loan"). The 5-Year Term Loan was to mature on February 9, 2026 and, at the Company's option, bore interest at a rate equal to LIBOR plus a margin equal to 7.00% per annum or an alternate base rate plus a margin equal to 6.00% per annum. Interest on the 5-Year Term Loan was payable at least every three months in arrears, beginning in May 2021.

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 and expenses incurred to obtain the 5-Year Term Loan.

There were certain lenders that participated in both the Acquisition Term Loan and the 5-Year Term Loan and their balances in the Acquisition Term Loan were deemed to be modified. The Company continued to defer, over the 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 5-Year Term Loan and their balances in the Acquisition Term Loan were deemed to be extinguished. The Company recognized a Loss on early extinguishment of debt of $17.2 million in the first quarter of 2021 as a result of the write-off of the remaining original issue discount and deferred financing fees 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 amortized over the term of the 5-Year Term Loan using the effective interest method. For the nine months ended September 30, 2021, third-party fees of $10.9 million, which 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). No third-party fees were incurred during the three months ended September 30, 2021.

The 5-Year Term Loan amortized in equal quarterly installments at a rate of 10% per annum (or, if the ratio of Total Indebtedness secured on an equal priority basis with the 5-Year Term Loan (net of Unrestricted Cash) to Consolidated EBITDA (as such terms are defined in the 5-Year Term Loan) was equal to or less than a specified ratio, 5% per annum) (the "Quarterly Amortization Installment"), beginning September 30, 2021. In addition, we were required to repay the 5-Year Term Loan from time to time with (i) the proceeds of non-ordinary course asset sales and casualty and condemnation events, (ii) the proceeds of indebtedness that was 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 was subject to a requirement to have minimum unrestricted cash of $30 million as of the last day of each fiscal quarter. As of September 30, 2021, we were in compliance with all of the covenants and obligations under the 5-Year Term Loan.

As of September 30, 2021, we had $899.4 million in aggregate principal outstanding under the 5-Year Term Loan with an effective interest rate of 9.5%.

Under the 5-Year Term Loan, the Company was contractually obligated to make prepayments with the proceeds from asset sales and could have elected to make optional payments with excess free cash flow from operations. For the three and nine months ended September 30, 2021, we made prepayments totaling $91.1 million and $145.6 million, respectively, which were classified as financing activities in the condensed consolidated statements of cash flows. These amounts are inclusive of both mandatory and optional prepayments.

The 5-Year Term Loan was repaid using the proceeds from the 2026 Senior Notes and the New Senior Secured Term Loan. As a result of the debt refinancing in October 2021, we estimate that we will recognize a loss on the early extinguishment of the 5-Year Term Loan and other fees of approximately $31.2 million during the fourth quarter of 2021.

Senior Secured Convertible Notes due 2027

On November 17, 2020, the Company issued $497.1 million in aggregate principal amount of the Company’s 6.0% Senior Secured Convertible Notes due 2027 (the "2027 Notes"). The 2027 Notes were issued pursuant to an Indenture dated as of November 17, 2020, as amended by the First Supplemental Indenture dated as of December 21, 2020 and the Second
43
Supplemental Indenture dated as of February 9, 2021 (collectively, the "2027 Notes Indenture"), between the Company and U.S. Bank National Association, as trustee.

In connection with the issuance of the 2027 Notes, the Company entered into an Investor Agreement (the "Investor Agreement") with the holders of the 2027 Notes (the "Holders") establishing certain terms and conditions concerning the rights and restrictions on the Holders with respect to the Holders' ownership of the 2027 Notes. The Company also entered into an amendment to the Registration Rights Agreement dated November 19, 2019, between the Company and FIG LLC.

Interest on the 2027 Notes is payable semi-annually in arrears. The 2027 Notes mature on December 1, 2027, unless earlier repurchased or converted. The 2027 Notes may be converted at any time by the holders into cash, shares of the Company’s Common Stock or any combination of cash and Common Stock, at the Company's election. The initial conversion rate is 200 shares of Common Stock per $1,000 principal amount of the 2027 Notes, which is equal to a conversion price of $5.00 per share of Common Stock (the "Conversion Price").

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

Upon the occurrence of a "Make-Whole Fundamental Change" (as defined in the 2027 Notes Indenture), the Company will in certain circumstances increase the conversion rate for a specified period of time. If a "Fundamental Change" (as defined in the 2027 Notes 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 or any Refinancing Facilities (as defined in the 2027 Notes Indenture) in respect thereof.

Under the 2027 Notes Indenture, the Company can only pay cash dividends up to an agreed-upon amount, provided the ratio of consolidated debt to EBITDA (as such terms are defined in the 2027 Notes Indenture) does not exceed a specified ratio. In addition, the 2027 Notes Indenture provides that, at any time that the Company’s Total Gross Leverage Ratio (as defined in the 2027 Notes Indenture) exceeds 1.5 and the Company approves the declaration of a dividend, the Company must offer to purchase a principal amount of 2027 Notes equal to the proposed amount of the dividend.

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

The 2027 Notes are guaranteed by Gannett Holdings and any subsidiaries of the Company that guaranteed the 5-Year Term Loan. The 2027 Notes are secured by the same collateral that secured 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 that secured the indebtedness incurred in connection with the 5-Year Term Loan.

The 2027 Notes Indenture includes affirmative and negative covenants, including limitations on liens, indebtedness, dispositions, loan, advances and investors, sale and leaseback transactions, restricted payments, transactions with affiliates, restrictions on dividends and other payment restrictions affecting restricted subsidiaries, negative pledges and modifications to certain agreements. The 2027 Notes Indenture also requires that the Company maintain, as of the last day of each fiscal quarter, at least $30.0 million of Qualified Cash (as defined in the 2027 Notes Indenture). The 2027 Notes Indenture includes customary events of default.

For the nine months ended September 30, 2021, no shares were issued upon conversion, exercise, or satisfaction of the required conditions. Refer to Note 10 — Supplemental equity information to the condensed consolidated financial statements for details on the convertible debt's impact to diluted earnings per share under the if-converted method.
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Senior Convertible Notes due 2024

The $3.3 million principal value of the remaining 4.75% convertible senior notes due 2024 (the "2024 Notes") outstanding is reported as convertible debt in the condensed consolidated balance sheets. The effective interest rate on the 2024 Notes was 6.05% as of September 30, 2021.

Debt Refinancing

On October 15, 2021, Gannett Holdings entered into the New Senior Secured Term Loan. Also, on October 15, 2021, Gannett Holdings completed a private offering of the 2026 Senior Notes. The proceeds of the New Senior Secured Term Loan, together with the net proceeds from the 2026 Senior Notes were applied towards the full repayment of the 5-Year Term Loan.

The 2026 Senior Notes were issued pursuant to an Indenture, dated October 15, 2021 (the "2026 Senior Notes Indenture"), among Gannett Holdings, the Company, the guarantors party thereto, U.S. Bank National Association, as trustee, U.S. Bank National Association, as collateral agent, and U.S. Bank National Association, as registrar, paying agent and authenticating agent. Interest on the 2026 Senior Notes is payable semi-annually.

Loans under the New Senior Secured Term Loan bear interest at a per annum rate equal to LIBOR (which shall not be less than 0.50% per annum) plus a margin of 5.00% or an alternate base rate plus a margin equal to 4.00% per annum (which shall not be less than 1.50% per annum). The New Senior Secured Term Loan contains usual and customary covenants for credit facilities of this type that restrict, among other things, our ability to incur debt, grant liens, sell assets, and make investments and pay dividends, in each case with customary exceptions, including an exception that permits dividends and repurchases of outstanding junior debt or equity in (i) an amount of up to $25 million per fiscal quarter if the ratio of debt secured on an equal basis with the New Senior Secured Term Loan to EBITDA (as defined in the New Senior Secured Term Loan) of the Company and its restricted subsidiaries (the "First Lien Net Leverage Ratio") for such fiscal quarter is equal to or less than 2.00 to 1.00, (ii) an amount of up to $50 million per fiscal quarter if the First Lien Net Leverage Ratio for such fiscal quarter is equal to or less than 1.50 to 1.00, and (iii) an unlimited amount if First Lien Net Leverage Ratio for such fiscal quarter is equal to or less than 1.00 to 1.00. All obligations under the New Senior Secured Term Loan are secured by all or substantially all of the assets of the Company and the wholly-owned domestic subsidiaries of the Company (the "Guarantors"). The obligations of Gannett Holdings under the New Senior Secured Term Loan are guaranteed on a senior secured basis by the Company and the Guarantors.

As of the closing of these transactions on October 15, 2021, total debt outstanding was $1.416 billion, which included the (i) $516 million New Senior Secured Term Loan, (ii) $400 million of 2026 Senior Notes, (iii) $497.1 million of 2027 Notes and (iv) $3.3 million of 2024 Notes.

The 5-Year Term Loan was repaid using the proceeds from the 2026 Senior Notes and the New Senior Secured Term Loan. As a result of the debt refinancing in October 2021, we estimate that we will recognize a loss on the early extinguishment of the 5-Year Term Loan and other fees of approximately $31.2 million during the fourth quarter of 2021.

Additional information

We continue to evaluate our results of operations, liquidity and cash flows, and as part of these measures, we have taken steps to manage cash outflow by rationalizing expenses and implementing various cost containment initiatives. We do not presently pay a quarterly dividend and have no current intention to reinstate the dividend. In addition, the terms of our indebtedness, including our credit facility, the New Senior Secured Term Loan, and the 2026 Senior Secured Notes Indenture and the 2027 Notes Indenture have terms that restrict our ability to pay dividends.

The CARES Act, enacted March 27, 2020, provided various forms of relief to companies impacted by the COVID-19 pandemic. As part of the relief available under the CARES Act, we deferred remittance of our 2020 Federal Insurance Contributions Act taxes as allowed by the legislation. We deferred $41.6 million of the employer portion of FICA taxes for payroll paid between March 27, 2020 and December 31, 2020. We 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 $5.0 million per quarter through September 30, 2022.

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We expect our capital expenditures for the remainder of 2021 to total approximately $13.9 million. These capital expenditures are anticipated to be primarily comprised of projects related to digital product development, costs associated with 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 New Senior Secured Term Loan, the 2026 Senior Secured Notes, and the 2027 Notes. In addition, our leverage may limit cash flow available for general corporate purposes such as capital expenditures and our flexibility to react to competitive, technological, and other changes in our industry and economic conditions generally.

Although we currently forecast sufficient liquidity, a resurgence of the COVID-19 pandemic and related counter-measures could have a material negative impact on our liquidity and our ability to meet our ongoing obligations, including obligations under the New Senior Secured Term Loan, the 2026 Senior Secured Notes, and the 2027 Notes. The Company continues to closely monitor the COVID-19 pandemic and will continue to take the steps necessary to appropriately manage liquidity.

CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES

See our most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2020 for a discussion of our critical accounting policies and use of estimates. There have been no material changes to our critical accounting policies and use of estimates discussed in such report.

NON-GAAP FINANCIAL MEASURES

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

Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted Net income (loss) attributable to Gannett are non-GAAP financial 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, (3) Gains or losses on the early extinguishment of debt, (4) Non-operating pension income (expense), (5) Loss on convertible notes derivative, (6) Depreciation and amortization, (7) Integration and reorganization costs, (8) Other operating expenses, including third-party debt expenses and acquisition costs, (9) Asset impairments, (10) Goodwill and intangible impairments, (11) Gains or losses on the sale or disposal of assets, (12) Share-based compensation, and (13) certain other non-recurring charges, including gains or losses on the sale of investments. We define Adjusted EBITDA margin as Adjusted EBITDA divided by total Operating revenues. We define Adjusted Net income (loss) attributable to Gannett before (1) Gains or losses on the early extinguishment of debt, (2) Loss on convertible notes derivative, (3) Integration and reorganization costs, (4) Other operating expenses, including third-party debt expenses and acquisition costs, (5) Asset impairments, (6) Goodwill and intangibles impairments, (7) Gains or losses on the sale or disposal of assets, (8) Gains or losses on the sale of investments, and (9) the tax impact of the above items.

Management’s use of Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted Net income (loss) attributable to Gannett

Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted Net income (loss) attributable to Gannett are not measurements of financial performance under GAAP and should not be considered in isolation or as an alternative to income from operations, net income (loss), or any other measure of performance or liquidity derived in accordance with U.S. GAAP. We believe these non-GAAP financial measures, as we have defined them, 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. These measures provide an assessment of controllable expenses and afford management the ability to make decisions which are expected to facilitate meeting current financial goals as well as achieve optimal financial performance.

Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted Net income (loss) attributable to Gannett provide us with measures 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. These metrics measure our financial performance based on operational factors that management can impact in the short-term, namely
46
the cost structure or expenses of the organization. Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted Net income (loss) attributable to Gannett are metrics we use to review the financial performance of our business on a monthly basis.

We use Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted Net income (loss) attributable to Gannett 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, Adjusted EBITDA margin, and Adjusted Net income (loss) attributable to Gannett

Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted Net income (loss) attributable to Gannett have limitations as analytical tools. They should not be viewed in isolation or as a substitute for U.S. GAAP measures of earnings or cash flows. Material limitations in making the adjustments to our earnings to calculate Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted Net income (loss) attributable to Gannett and using these non-GAAP financial measures as compared to U.S. GAAP net income (loss) include: the cash portion of interest/financing expense, income tax (benefit) provision, and charges related to asset impairments, which may significantly affect our financial results.

Management believes these items are important in evaluating our performance, results of operations, and financial position. We use non-GAAP financial measures to supplement our U.S. GAAP results in order to provide a more complete understanding of the factors and trends affecting our business.

Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted Net income (loss) attributable to Gannett are not alternatives to net income and margin as calculated and presented in accordance with U.S. GAAP. As such, they should not be considered or relied upon as substitutes or alternatives for any such U.S. GAAP financial measures. We strongly urge you to review the reconciliation of Net income (loss) attributable to Gannett to Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted Net income (loss) attributable to Gannett along with our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. We also strongly urge you not to rely on any single financial measure to evaluate our business. In addition, because Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted Net income (loss) attributable to Gannett are not measures of financial performance under U.S. GAAP and are susceptible to varying calculations, the Adjusted EBITDA, Adjusted EBITDA margin, and Adjusted Net income (loss) attributable to Gannett measures as presented in this report may differ from and may not be comparable to similarly titled measures used by other companies.

The table below shows the reconciliation of Net income (loss) attributable to Gannett to Adjusted EBITDA and Net income (loss) attributable to Gannett margin to Adjusted EBITDA margin:
Three months ended September 30, Nine months ended September 30,
In thousands 2021 2020 2021 2020
Net income (loss) attributable to Gannett $ 14,687  $ (31,260) $ (112,514) $ (548,305)
Provision (benefit) for income taxes 2,984  3,098  11,567  (22,200)
Interest expense 34,603  58,063  109,370  173,890 
Loss on early extinguishment of debt 3,761  476  25,996  1,650 
Non-operating pension income (23,860) (18,334) (71,644) (54,433)
Loss on convertible notes derivative —  —  126,600  — 
Depreciation and amortization 48,107  61,355  154,452  205,706 
Integration and reorganization costs 13,619  13,417  35,467  73,978 
Other operating expenses 4  1,913  11,354  10,261 
Asset impairments 2,301  1,585  3,134  8,444 
Goodwill and intangible impairments —  —  —  393,446 
(Gain) loss on sale or disposal of assets, net (833) 795  9,206  1,540 
Share-based compensation expense 4,602  3,844  13,804  22,812 
Other items 2,092  (6,972) 1,509  (1,723)
Adjusted EBITDA (non-GAAP basis) $ 102,067  $ 87,980  $ 318,301  $ 265,066 
Net income (loss) attributable to Gannett margin 1.8  % (3.8) % (4.7) % (21.7) %
Adjusted EBITDA margin (non-GAAP basis) 12.8  % 10.8  % 13.4  % 10.5  %

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The table below shows the reconciliation of Net income (loss) attributable to Gannett to Adjusted Net income (loss) attributable to Gannett:
Three months ended September 30, Nine months ended September 30,
In thousands 2021 2020 2021 2020
Net income (loss) attributable to Gannett $ 14,687  $ (31,260) $ (112,514) $ (548,305)
Loss on early extinguishment of debt 3,761  476  25,996  1,650 
Loss on convertible notes derivative —  —  126,600  — 
Integration and reorganization costs 13,619  13,417  35,467  73,978 
Other operating expenses 4  1,913  11,354  10,261 
Asset impairments 2,301  1,585  3,134  8,444 
Goodwill and intangible impairments —  —  —  393,446 
(Gain) loss on sale or disposal of assets, net (833) 795  9,206  1,540 
Gain on sale of investments —  (7,800) —  (7,995)
Subtotal 33,539  (20,874) 99,243  (66,981)
Tax impact of above items (7,033) (25,449) (28,042) (61,364)
Adjusted Net income (loss) attributable to Gannett (non-GAAP basis) $ 26,506  $ (46,323) $ 71,201  $ (128,345)

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes during the quarter ended September 30, 2021, to the information disclosed in Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risks of our Form 10-K for the fiscal year ended December 31, 2020.

ITEM 4. CONTROLS 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, as amended (the “Exchange Act”)) were not effective because of the previously reported material weakness in internal control over financial reporting, which we describe in Part II, Item 9A, Controls and Procedures of our Form 10-K for the fiscal year ended December 31, 2020.

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 Form 10-K for the fiscal year ended December 31, 2020, which includes organizational enhancements, design enhancements, training, utilizing external resources and integration 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

Other than changes made in connection with our implementation of the remediation efforts mentioned above, there have been no changes in our internal control over financial reporting during the fiscal quarter ended September 30, 2021 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.

PART II. OTHER INFORMATION

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ITEM 1. LEGAL PROCEEDINGS

Please refer to Note 12 — Commitments, contingencies and other matters, for disclosures regarding material legal proceedings. There have been no material developments with respect to our potential liability for legal and environmental matters previously reported in our Form 10-K for the fiscal year ended December 31, 2020 and our quarterly reports on Form 10-Q for the quarters ended March 31, 2021 and June 30, 2021.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should consider the risks described in Part I, Item 1A, “Risk Factors” of our Form 10-K for the year ended December 31, 2020. Except as set forth below, there have been no material changes from the risk factors previously disclosed in the Form 10-K for the year ended December 31, 2020. All of these risks and uncertainties, including those discussed below, could materially and adversely affect our business, results of operations, financial condition, our ability to make distributions on our Common Stock and/or the market price of our Common Stock. The risks described below and in our Annual Report on Form 10-K for the year ended December 31, 2020, are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our financial condition and/or operating results.

Risks Related to our Indebtedness

Our substantial indebtedness could materially and adversely affect our business or financial condition.

On October 15, 2021, we issued the 2026 Senior Notes. Also as of such date, we entered into the New Senior Secured Term Loan in a principal amount up to $516 million. The net proceeds of the issuance of the 2026 Senior Notes, together with the proceeds of the New Senior Secured Term Loan, and real estate and asset sales, were used to prepay in full the obligations outstanding under the 5-Year Term Loan. We may incur additional indebtedness in the future.

The New Senior Secured Term Loan matures on October 15, 2026, and bears interest at the rate of LIBOR (which shall not be less than 0.50% per annum) plus a margin equal to 5.00% per annum or an alternate base rate plus a margin equal to 4.00% per annum (which shall not be less than 1.50% per annum). Accordingly, we are required to dedicate a substantial portion of cash flow from operations to fund interest payments. The New Senior Secured Term Loan amortizes at a rate equal to 10% per annum (or, if the ratio of Total Indebtedness secured on an equal priority basis with the New Senior Secured Term Loan (net of Unrestricted Cash) to Consolidated EBITDA (as such terms are defined in the New Senior Secured Term Loan) is equal to or less than a specified ratio, 5% per annum) payable in equal quarterly installments. In addition, we are required to repay the New Senior Secured Term Loan from time to time with (i) the proceeds of non-ordinary course asset sales and casualty and condemnation events, (ii) the proceeds of indebtedness that is not otherwise permitted under the New Senior Secured Term Loan and (iii) the aggregate amount of cash and cash equivalents on hand at the Company and its restricted subsidiaries in excess of $100 million as of the last day of any fiscal year of the Company (beginning with the fiscal year ending December 31, 2021). Our debt service obligations reduce the amount of cash flow available to fund our working capital, capital expenditures, investments and potential distributions to stockholders. Moreover, there can be no assurance that we will be able to generate sufficient cash flow to satisfy our debt service obligations. Our ability to satisfy our debt service obligations depends on our ability to generate cash flow from operations, which is subject to a variety of risks, including general economic conditions and the strength of our competitors, which are outside our control.

The terms of our indebtedness impose significant operating and financial restrictions on us. The New Senior Secured Term Loan, the 2026 Senior Notes, and the 2027 Notes require us to comply with numerous affirmative and negative covenants, including, in the case of the 2027 Notes, a requirement to maintain minimum liquidity of $30 million, and include restrictions limiting our ability to, among other things, incur additional indebtedness, make investments and acquisitions, pay certain dividends, sell assets, merge, incur certain liens, enter into agreements with our affiliates, change our business, engage in sale/leaseback transactions, and modify our organizational documents. These requirements may make it impractical to declare and pay dividends at any time that the requirements are in effect. Stockholders also should be aware that they have no contractual or other legal right to dividends that have not been declared. See also "Risks Related to our Common Stock" below.

A failure to satisfy our debt service obligations on the New Senior Secured Term Loan, a breach of a covenant in our credit facility, or a material breach of a representation or warranty in our credit facility, among other events specified in the credit facility, could give rise to a default, which could give rise to the right of our lenders to declare our indebtedness, together with accrued interest and other fees, to be immediately due and payable. A failure to satisfy our debt service or conversion obligations on the 2026 Senior Notes or the 2027 Notes, among other events specified in the 2026 Senior Notes Indenture or the
49
2027 Notes Indenture, could also give rise to a default, which could give rise to the right of noteholders to declare the principal of the 2026 Senior Notes and/or the 2027 Notes, together with accrued and unpaid interest, to be immediately due and payable. An acceleration of our indebtedness would have a material adverse effect on our business, financial condition, results of operations, cash flows and stock price.

Our inability to raise funds necessary to settle conversions of, or to repurchase, the 2026 Senior Notes or the 2027 Notes, when required by the indentures governing the respective notes, may lead to defaults under such indenture and under agreements governing our existing or future indebtedness.

Upon a "change of control" as described in the 2026 Senior Notes Indenture, we will be required to offer to repurchase any outstanding 2026 Senior Notes. Similarly, if we settle the 2027 Notes by cash, or by a combination of cash and shares of our Common Stock, upon a fundamental change as described in the 2027 Notes Indenture, we will be required to make cash payments with respect to the 2027 Notes being converted. However, we may not have enough available cash or be able to obtain financing at the time we are required to make purchases of the notes being surrendered or converted. In addition, our ability to repurchase the 2026 Senior Notes or the 2027 Notes or to pay cash upon conversion of the 2027 Notes is limited by the agreements governing our existing indebtedness (including the New Senior Secured Term Loan) and may also be limited by law, regulation, or by agreements that will govern our future indebtedness. Our failure to repurchase the 2026 Senior Notes or the 2027 Notes at a time when the repurchase is required by the governing indenture, or to pay cash payable on future conversions of the 2027 Notes as required by the 2027 Notes Indenture, would constitute a default under the respective indenture. A default under either indenture, or the change in control or fundamental change itself, could also lead to a default under agreements governing our existing or future indebtedness (including the New Senior Secured Term Loan).

Certain actions, including our ability to incur additional indebtedness, require the consent of our lenders and note holders which, if not provided, would limit our ability to take advantage of future opportunities.

Our loan agreements, including the New Senior Secured Term Loan, the 2026 Senior Notes and the 2027 Notes, contain restrictions and covenants that limit our ability to take certain actions without lender approval, approval of the holders of a majority in principal amount of the notes then outstanding, or modification of the loan agreements. These limitations include restrictions on our ability to incur additional indebtedness or refinance our existing debt, make certain investments and acquisitions, pay certain dividends, sell assets, merge, incur certain liens, enter into agreements with our affiliates, change our business, engage in sale/leaseback transactions, and modify our organizational documents. While we have historically partnered with lenders that we have established relationships with and whose priorities and interests are familiar to us, many of the lenders or holders under the New Senior Secured Term Loan and the holders of the 2026 Senior Notes are not historic relationships. There is no assurance that these lenders will approve or consent to our activities, even if the activities are in the best interests of our stockholders. If we are unable to secure the required consent of our lenders or noteholders, our ability to take advantage of future opportunities, including acquisition or financing opportunities, could be restricted.

Risks Related to the 2026 Senior Notes and the 2027 Notes

Our inability to raise funds necessary to repurchase the 2026 Senior Notes or the 2027 Notes, upon a change of control as described in the 2026 Senior Notes Indenture or fundamental change as described in the 2027 Notes Indenture, may lead to defaults under such indentures and under agreements governing our existing or future indebtedness. In addition, a change of control may constitute a default under the New Senior Secured Term Loan, the 2026 Senior Notes or the 2027 Notes.

Upon the occurrence of a change of control, as defined in the 2026 Senior Notes Indenture, we must, if certain other conditions are met, make an offer to repurchase the 2026 Senior Notes at a price equal to 101% of the principal amount thereof, together with any accrued and unpaid interest, if any, to, but excluding, the date of the repurchase. Similarly, upon the occurrence of a fundamental change, as defined in the 2027 Note Indenture, we must, if certain other conditions are met, make an offer to repurchase the 2027 Notes at a price equal to 110% of the principal amount thereof, together with any accrued and unpaid interest, if any, to, but excluding, the date of the repurchase. If we become obligated to repurchase the 2026 Senior Notes or 2027 Notes upon a change of control, we may not have enough available cash or may be unable to obtain financing at the time we are required to make purchases of the notes being surrendered. In addition, our ability to repurchase the notes is limited by the agreements governing our existing indebtedness (including the New Senior Secured Term Loan) and may also be limited by law or regulation, or by agreements that will govern our future indebtedness. Our failure to repurchase the 2026 Senior Notes or 2027 Notes at a time when the repurchase is required by the 2026 Senior Notes Indenture or the 2027 Notes Indenture, respectively, would constitute a default under the respective indenture. A default under the governing indenture or
50
the change of control itself could also lead to a default under agreements governing our existing or future indebtedness (including the New Senior Secured Term Loan).

The New Senior Secured Term Loan provides, and future credit agreements or other agreements relating to indebtedness to which we become a party may provide, that the occurrence of certain change of control events with respect to Gannett would constitute a default thereunder. If we experience a change of control event that triggers a default under our New Senior Secured Term Loan, we may seek a waiver of such default or may attempt to refinance the New Senior Secured Term Loan. In the event we do not obtain such a waiver or refinance the New Senior Secured Term Loan, such default could result in amounts outstanding under our New Senior Secured Term Loan being declared due and payable.

The New Senior Secured Term Loan, the 2026 Senior Notes, and the 2027 Notes contain, and future indebtedness that we may incur may contain, prohibitions on the occurrence of certain events that would constitute a change of control or, in the case of the 2026 Senior Notes and the 2027 Notes, require the repurchase of such indebtedness upon a change of control. Moreover, the exercise by the holders of their right to require us to repurchase their 2026 Senior Notes or the 2027 Notes could cause a default under such indebtedness, even if the change of control itself does not, due to the financial effect of such repurchase on us. Finally, the ability to pay cash to the holders of 2026 Senior Notes or the 2027 Notes following the occurrence of a change of control may be limited by our then existing financial resources. There can be no assurance that sufficient funds will be available when necessary to make any required repurchases.

The definition of “change of control” includes a disposition of all or substantially all of the assets of Gannett to any person. Although there is a limited body of case law interpreting the phrase "substantially all," there is no precise established definition of the phrase under applicable law. Accordingly, in certain circumstances there may be a degree of uncertainty as to whether a particular transaction would involve a disposition of "all or substantially all" of the assets of Gannett or would otherwise constitute a change of control under the governing indenture. As a result, it may be unclear as to whether a change of control has occurred and whether a holder of 2026 Senior Notes or 2027 Notes may require us to make an offer to repurchase such notes as described above, and we could, in the future, enter into certain transactions, including acquisitions, refinancings or other recapitalizations that would not constitute a change of control under the governing indenture but that could increase the amount of indebtedness outstanding at such time or otherwise affect our capital structure or our credit ratings or the 2026 Senior Notes or 2027 Notes. As a result, our obligation to repurchase the 2026 Senior Notes or the 2027 Notes upon the occurrence of a change of control may not preserve the value of the 2026 Senior Notes or the 2027 Notes, respectively, in the event of a highly leveraged transaction, reorganization, merger or similar transaction.

Risks Related to our Business

Government imposed COVID-19 vaccine mandates could have a material adverse impact on our business and results of operations.

The Department of Labor’s Occupational Safety and Health Administration ("OSHA") issued an Emergency Temporary Standard ("ETS") requiring that most employers with at least 100 employees ensure that their employees are fully vaccinated for COVID-19 or require employees to obtain a negative COVID-19 test at least once a week. As a company with more than 100 employees, the ETS will require us to mandate COVID-19 vaccination of our workforce or have our unvaccinated employees undergo required weekly COVID-19 testing, which could be difficult and costly. Further, additional vaccine and testing mandates may be announced in jurisdictions in which we operate our business, and there could be potential conflict with actions by certain states that are in conflict with the federal mandate, the impacts of which remain uncertain. Requirements to mandate COVID-19 vaccination of our workforce or require our unvaccinated employees to be tested weekly could result in labor disruptions, employee attrition and difficulty securing future labor needs, and could have a material adverse effect on our revenues, costs, financial condition and results of operations.

Risks Related to our Common Stock

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

We may raise additional capital through the issuance of debt or equity securities (including preferred stock) from time to time. Upon liquidation, holders of our debt securities (including holders of our 2026 Senior Notes and 2027 Notes) and preferred stock, if any, and lenders with respect to other borrowings (including the lenders under the New Senior Secured Term Loan) will be entitled to our available assets prior to the holders of our Common Stock. Preferred stock could have a preference
51
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 holdings in our stock.

We presently have no intention to declare or pay a dividend and we may not be able to pay dividends in the future or at all.

On April 1, 2020, we announced that our Board of Directors determined that it is in the best interests of our stockholders for the Company to preserve liquidity by suspending our quarterly dividend. We presently have no intention to reinstate the dividend, and there can be no assurance that we will resume paying dividends on a regular basis.

Our credit facility contains terms that restrict our ability to pay dividends or other distributions. Under the New Senior Secured Term Loan, we can only pay cash dividends up to an agreed-upon amount and provided that the ratio of Total Indebtedness secured on an equal priority basis with the New Senior Secured Term Loan (net of Unrestricted Cash) to Consolidated EBITDA (as such terms are defined in the New Senior Secured Term Loan) does not exceed a specified ratio. The 2026 Senior Notes Indenture and the 2027 Notes Indenture contain similar dividend restrictions. The 2027 Notes Indenture also provides that, at any time that the Company’s Total Gross Leverage Ratio (as defined in the 2027 Notes Indenture) exceeds 1.5 and we approve the declaration of a dividend, we must offer to purchase a principal amount of 2027 Notes equal to the proposed amount of the dividend. This repurchase offer requirement may make it impractical to declare and pay dividends at any time that the requirement is in effect. Stockholders also should be aware that they have no contractual or other legal right to dividends that have not been declared.

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

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

This item is not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS
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Exhibit Number
Description
Location
4.1
Indenture, by and among Gannett Co., Inc., Gannett Holdings LLC, the Guarantors from time to time party hereto, U.S. Bank National Association, as trustee and U.S. Bank National Association, as collateral agent, registrar, paying agent and authenticating agent.
10.1
First Lien Credit Agreement, by and among Gannett Co., Inc., Gannett Holdings LLC, each Person listed as a “Guarantor” on the signature pages hereto, the lenders from time to time party hereto, Citibank, N.A., as collateral agent and administrative agent for the Lenders.
10.2
Strategic Alliance Agreement, dated as of July 26, 2021, by and between Tipico USA Technology, Inc. and Gannett Media Corp.
31.1 Rule 13a-14(a) Certification of CEO
31.2 Rule 13a-14(a) Certification of CFO
32.1 Section 1350 Certification of CEO
32.2 Section 1350 Certification of CFO
101
The following financial information from Gannett Co., Inc. Quarterly Report on Form 10-Q for the quarter ended September 30, 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 Cover Page Interactive Data File (formatted as Inline XBRL and embedded within the Inline XBRL document) Attached.

* Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The registrant agrees to furnish supplementally a copy of any omitted schedule or exhibit to the U.S. Securities and Exchange Commission upon request.
53
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: November 5, 2021
GANNETT CO., INC.
/s/ Douglas E. Horne
Douglas E. Horne
Chief Financial Officer and Chief Accounting Officer
(On behalf of the Registrant and as principal financial and principal accounting officer)

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