UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

_______________________
FORM 10-Q

(Mark One)_______________________

☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019March 31, 2020
OR

☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number:number 001-36097
___________________________________________________________________________________________
New Media Investment Group Inc.GANNETT CO., INC.
(Exact name of registrant as specified in its charter)
___________________________________________________________________________________________
Delaware 38-3910250
(State or other jurisdictionOther Jurisdiction of
incorporation Incorporation or organization)
Organization)		 
(I.R.S. Employer
Identification No.)
    
1345 Avenue of the Americas 45th floor, 
New York,7950 Jones Branch Drive,New YorkMcLean,Virginia 1010522107-0910
(Address of principal executive offices) (Zip Code)
Telephone: (212) 479-3160
(Registrant’sRegistrant's telephone number, including area code)
_________________________________________________________________________________________________________code: (703) 854-6000.
Securities Registered Pursuantregistered pursuant to Section 12(b) of the Act:
Title of each class:Each ClassTrading SymbolName of each exchangeEach Exchange on which registered:Which Registered
Common stock,Stock, par value $0.01 per shareNEWMGCIThe 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 definitions of “large"large accelerated filer,” “accelerated" "accelerated filer,” “smaller" "smaller reporting company”company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated Filer☒Accelerated filer☐Emerging growth companyFiler☐
    
Non-Accelerated Filer☐Smaller Reporting Company☐
    
Non-accelerated filerEmerging Growth Company☐Smaller reporting 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 AugustMay 5, 2019, 60,481,5392020, the total number of shares of the registrant’s common stock were outstanding.registrant's Common Stock, $0.01 par value, outstanding was 132,097,487.
 



CAUTIONARY NOTE REGARDING FORWARD LOOKING INFORMATION

Certain statements in this report on Form 10-Q may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect our current views regarding, among other things, our future growth, results of operations, performance, and business prospects and opportunities the proposed Merger described under the heading “Agreement and Plan of Merger with Gannett” in Note 15 to the unaudited condensed consolidated financial statements, “Subsequent Events”, the expected timetable of the Merger (as defined below), the benefits and synergies of the Merger and future opportunities for the combined company, as well as other statements that are other than historical fact. Words such as “anticipate(s),” “expect(s),” “intend(s), “intend(s)” “plan(s), “plan(s)” “target(s), “target(s)” “project(s), “project(s)” “believe(s), “believe(s)” “will,” “aim,” “would,” “seek(s), “will”, “aim”, “would”, “seek(s)”, “estimate(s)” 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 that 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 lookingforward-looking statements are not a guarantee of future performance and involve risks and uncertainties, and there are certain important factors that could cause our actual results to differ, possibly materially, from expectations or estimates reflected in such forward-looking statements, including, among others:
risks
Risks and uncertainties relating toassociated with the Merger, including the Company's and Gannett's (as defined below) ability to consummate the Merger and to meet expectations regarding the timing and completion of the Merger; the satisfaction or waiver of the conditions to the completion of the Merger, including the receipt of the required approval of the Company’s (as defined below) stockholders and Gannett’s (as defined below) stockholders with respect to the Merger and the receipt of regulatory approvals required to consummate the Merger, in each case, on the terms expected or on the anticipated schedule; the risk that the parties may be unable to achieve the anticipated benefits of the Merger, including synergies and operating efficiencies, within the expected time-frames or at all; the risk that the committed financing necessary for the consummation of the Merger is unavailable at the closing, and that any replacement financing may not be available on similar terms, or at all; the risk that the businesses will not be integrated successfully or that integration may be more difficult, time-consuming or costly than expected; the risk that operating costs, customer loss and business disruption (including, without limitation, difficulties in maintaining relationships with employees, customers, clients or suppliers) may be greater than expected following the Merger; and the retention of certain key employees;COVID-19 pandemic;
general
General economic and market conditions;
economic
Economic conditions in the various regions of the United States;
the
The growing shift within the publishing industry from traditional print media to digital forms of publication;
declining
Risks and uncertainties associated with our Marketing Solutions segment, including its significant reliance on Google for media purchases, its international operations, and its ability to develop and gain market acceptance for new products or services;

Declining print advertising revenue and circulation subscribers;
the combined company's
Our ability to grow itsour digital marketing and business services initiatives, and grow its digital audience, and advertiser base;
our
Our ability to grow our business organically:organically;
our ability
Variability in the exchange rate relative to acquire local media print assets at attractive valuations;the U.S. dollar of currencies in foreign jurisdictions in which we operate;
the
The risk that we may not realize the anticipated benefits of our recent or potential future acquisitions;
the
The availability and cost of capital for future investments;
our
Our indebtedness may restrict our operations and / and/or require us to dedicate a portion of cash flow from operations to the payment of principal and interest;payments associated with our debt;
our
Our ability to pay dividends consistent with prior practice or at all;
our
Our ability to reduce costs and expenses;
our ability to realize the benefits of the Management Agreement (as defined below);
theThe impact of any material transactions with the Manager (as defined below) or one of its affiliates, including the impact of any actual, potential, or perceived conflicts of interest;
the
The competitive environment in which we operate; and
our
Our ability to recruit and retain key personnel.

Additional risk factors that could cause actual results to differ materially from our expectations include, but are not limited to, the risks identified by us under the heading “Risk Factors” in Part II, Item 1A of this report.report and the statements made in subsequent


filings. Such forward-looking statements speak only as of the date on which 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.
Q1 2020 FORM 10-Q
Page
PART I.
FINANCIAL INFORMATION
Item 1.
Financial Statements
Condensed Consolidated Balance Sheets (unaudited) as of June 30, 2019 and December 30, 2018
4
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (unaudited) for the three and six months ended June 30, 2019 and July 1, 2018
5
Condensed Consolidated Statements of Stockholders’ Equity (unaudited) for the six months ended June 30, 2019 and July 1, 2018
6
Condensed Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2019 and July 1, 2018
8
Notes to Unaudited Condensed Consolidated Financial Statements
9
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
25
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
38
Item 4.
Controls and Procedures
38
PART II.
OTHER INFORMATION
Item 1.
Legal Proceedings
39
Item 1A.
Risk Factors
39
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
54
Item 3.
Defaults Upon Senior Securities
54
Item 4.
Mine Safety Disclosures
54
Item 5.
Other Information
54
Item 6.
Exhibits
54
Signatures
56
Item No. Page
 
Part I. Financial Information
 
   
1
Financial Statements
2
   
2
Management's Discussion and Analysis of Financial Condition and Results of Operations
23
   
3
Quantitative and Qualitative Disclosures About Market Risk
36
   
4
Controls and Procedures
36
   
 
Part II. Other Information
 
   
1
Legal Proceedings
37
   
1A
Risk Factors
37
   
2
Unregistered Sales of Equity Securities and Use of Proceeds
52
   
3
Defaults Upon Senior Securities
52
   
4
Mine Safety Disclosures
52
   
5
Other Information
52
   
6
Exhibits
52
   
 
Signatures
52





PART I. FINANCIAL INFORMATION
Item 1.Financial Statements
Item 1. Financial Statements

NEW MEDIA INVESTMENT GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except share data)Gannett Co., Inc. and Subsidiaries
 June 30, 2019 December 30, 2018
    
ASSETS
Current assets:   
Cash and cash equivalents$20,029
 $48,651
Restricted cash3,155
 4,119
Accounts receivable, net of allowance for doubtful accounts of $8,694 and
$8,042 at June 30, 2019 and December 30, 2018, respectively		150,675
 174,274
Inventory19,647
 25,022
Prepaid expenses30,506
 23,935
Other current assets20,733
 21,608
Total current assets244,745

297,609
Property, plant, and equipment, net of accumulated depreciation of $243,304
and $219,256 at June 30, 2019 and December 30, 2018, respectively		330,942
 339,608
Operating lease right-of-use assets, net109,521
 —
Goodwill317,151
 310,737
Intangible assets, net of accumulated amortization of $119,561 and $101,543
at June 30, 2019 and December 30, 2018, respectively		474,900
 486,054
Other assets10,619
 9,856
Total assets$1,487,878

$1,443,864
    
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:   
Current portion of long-term debt$3,296
 $12,395
Current portion of operating lease liabilities14,492
 —
Accounts payable12,454
 16,612
Accrued expenses98,864
 113,650
Deferred revenue113,259
 105,187
Total current liabilities242,365

247,844
Long-term liabilities:   
Long-term debt434,672
 428,180
Long-term operating lease liabilities102,431
 —
Deferred income taxes6,486
 8,282
Pension and other postretirement benefit obligations23,747
 24,326
Other long-term liabilities10,817
 16,462
Total liabilities820,518

725,094
Redeemable noncontrolling interests1,098
 1,547
Stockholders’ equity:   
Common stock, $0.01 par value, 2,000,000,000 shares authorized;
60,806,451 shares issued and 60,481,674 shares outstanding at June 30, 2019;
60,508,249 shares issued and 60,306,286 shares outstanding at December 30, 2018		608
 605
Additional paid-in capital677,574
 721,605
Accumulated other comprehensive loss(6,938) (6,881)
(Accumulated deficit) retained earnings(2,409) 3,767
Treasury stock, at cost, 324,777 and 201,963 shares at June 30, 2019
and December 30, 2018, respectively		(2,573) (1,873)
Total stockholders’ equity
666,262

717,223
Total liabilities, redeemable noncontrolling interests and stockholders’ equity$1,487,878

$1,443,864
Unaudited; in thousands, except share dataMarch 31, 2020 December 31, 2019
ASSETS(Unaudited)  
Current assets   
Cash and cash equivalents$199,651
 $156,042
Accounts receivable, net of allowance for doubtful accounts of $20,486 and $19,923379,862
 438,523
Inventories47,775
 55,090
Prepaid expenses and other current assets135,608
 129,460
Total current assets762,896
 779,115
Property, plant and equipment, at cost net of accumulated depreciation of $323,934 and $277,291764,000
 815,807
Operating lease assets306,491
 309,112
Goodwill909,741
 914,331
Intangible assets, net981,966
 1,012,564
Deferred income tax assets64,387
 76,297
Other assets121,730
 112,876
Total assets$3,911,211
 $4,020,102
    
LIABILITIES AND EQUITY   
Current liabilities   
Accounts payable and accrued liabilities$449,833
 $453,628
Deferred revenue225,609
 218,823
Current portion of long-term debt—
 3,300
Other current liabilities48,832
 42,702
Total current liabilities724,274
 718,453
Long-term debt1,633,468
 1,636,335
Convertible debt3,300
 3,300
Deferred tax liabilities10,406
 9,052
Pension and other postretirement benefit obligations219,803
 235,906
Long-term operating lease liabilities293,144
 297,662
Other long-term liabilities135,864
 136,188
Total noncurrent liabilities2,295,985
 2,318,443
Total liabilities3,020,259
 3,036,896
Redeemable noncontrolling interests1,396
 1,850
Commitments and contingent liabilities (See Note 12)   
    
Equity   
Common stock of $0.01 par value per share, 2,000,000,000 shares authorized, 132,715,532 issued and 132,058,367 shares outstanding at March 31, 2020; 129,386,258 issued and 128,991,544 shares outstanding at December 31, 20191,327
 1,294
Treasury stock at cost, 657,165 and 394,714 shares at March 31, 2020 and December 31, 2019, respectively(4,491) (2,876)
Additional paid-in capital1,093,705
 1,090,694
Accumulated deficit(196,110) (115,958)
Accumulated other comprehensive income (loss)(4,875) 8,202
Total equity889,556
 981,356
Total liabilities and equity$3,911,211
 $4,020,102
See
The accompanying notes to unauditedare an integral part of these condensed consolidated financial statements.


NEW MEDIA INVESTMENT GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
(InGannett Co., Inc. and Subsidiaries
Unaudited; in thousands, except per share data)data
 Three months ended Six months ended
 June 30, 2019 July 1, 2018 June 30, 2019 July 1, 2018
Revenues:       
Advertising$184,767
 $187,609
 $363,462
 $350,868
Circulation150,850
 144,536
 303,015
 274,527
Commercial printing and other68,770
 56,657
 125,510
 104,172
Total revenues404,387
 388,802
 791,987
 729,567
Operating costs and expenses:       
Operating costs233,407
 217,775
 462,902
 414,164
Selling, general, and administrative130,040
 126,837
 261,548
 245,656
Depreciation and amortization23,328
 19,935
 44,251
 39,182
Integration and reorganization costs3,230
 1,749
 7,342
 4,179
Impairment of long-lived assets1,262
 —
 2,469
 —
Net loss (gain) on sale or disposal of assets947
 (808) 2,737
 (3,979)
Operating income12,173
 23,314
 10,738
 30,365
Interest expense10,212
 8,999
 20,346
 17,351
Other income(311) (337) (571) (857)
Income (loss) before income taxes2,272
 14,652
 (9,037) 13,871
Income tax (benefit) expense(343) 2,946
 (2,297) 2,830
Net income (loss)2,615
 11,706
 (6,740) 11,041
Net loss attributable to redeemable
    noncontrolling interests
(200) —
 (449) —
Net income (loss) attributable to New Media$2,815
 $11,706
 $(6,291) $11,041
Income (loss) per share:       
Basic:       
Net income (loss) attributable to New Media$0.05
 $0.20
 $(0.10) $0.20
Diluted:       
Net income (loss) attributable to New Media$0.05
 $0.20
 $(0.10) $0.20
        
Dividends declared per share$0.38
 $0.37
 $0.76
 $0.74
        
Comprehensive income (loss)$2,588
 $11,638
 $(6,797) $10,906
Comprehensive loss attributable to redeemable
   noncontrolling interests
(199) —
 (448) —
Comprehensive income (loss) attributable to
   New Media
$2,787
 $11,638
 $(6,349) $10,906
 Three months ended March 31,
 2020 2019
Operating revenues:   
Advertising and marketing services$487,010
 $193,544
Circulation374,723
 152,165
Other86,949
 41,890
Total operating revenues948,682
 387,599
Operating expenses:   
Operating costs566,463
 229,495
Selling, general and administrative expenses299,137
 129,050
Depreciation and amortization78,024
 20,923
Integration and reorganization costs28,254
 5,798
Acquisition costs5,969
 772
Impairment of long-lived assets—
 1,207
Loss on sale or disposal of assets657
 1,789
Total operating expenses978,504
 389,034
Operating loss(29,822) (1,435)
Non-operating (income) expense:   
Interest expense57,899
 10,134
Loss on early extinguishment of debt805
 —
Other income(16,899) (260)
Non-operating expense41,805
 9,874
Net loss before income taxes(71,627) (11,309)
Provision (benefit) for income taxes8,979
 (1,954)
Net loss(80,606) (9,355)
Net loss attributable to redeemable noncontrolling interests(454) (249)
Net loss attributable to Gannett$(80,152) $(9,106)
Loss per share attributable to Gannett - basic$(0.61) $(0.15)
Loss per share attributable to Gannett - diluted$(0.61) $(0.15)
Dividends declared per share$0.00
 $0.38
    
Other comprehensive loss:   
Foreign currency translation adjustments$(14,033) —
Pension and other postretirement benefit items:   
Amortization of net actuarial gain(14) (30)
Other966
 —
Total pension and other postretirement benefit items952
 (30)
Other comprehensive loss before tax(13,081) (30)
Income tax effect related to components of other comprehensive income4
 —
Other comprehensive loss, net of tax(13,077) (30)
Comprehensive loss(93,683) (9,385)
Comprehensive loss attributable to redeemable noncontrolling interests(454) (249)
Comprehensive loss attributable to Gannett$(93,229) $(9,136)
    
SeeThe accompanying notes to unauditedare an integral part of these condensed consolidated financial statements.



NEW MEDIA INVESTMENT GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
(In thousands, except share data)
 Common stock Additional
paid-in capital		 Accumulated 
other
comprehensive
loss		 Retained earnings (accumulated deficit) Treasury stock Total
 Shares Amount Shares Amount 
Three months ended June 30, 2019:               
Balance at March 31, 201960,806,451
 $608
 $699,787
 $(6,911) $(5,224) 276,590
 $(2,562) $685,698
Net income—
 —
 —
 —
 2,815
 —
 —
 2,815
Net actuarial loss and prior service cost, net of income taxes of $0—
 —
 —
 (30) —
 —
 —
 (30)
Foreign currency translation adjustment—
 —
 —
 3
 —
 —
 —
 3
Non-cash compensation expense—
 —
 707
 —
 —
 —
 —
 707
Restricted share forfeiture—
 —
 —
 —
 —
 47,232
 —
 —
Purchase of treasury stock—
 —
 —
 —
 —
 955
 (11) (11)
Common stock cash dividend—
 —
 (22,920) —
 —
 —
 —
 (22,920)
Balance at June 30, 201960,806,451
 $608
 $677,574
 $(6,938) $(2,409) 324,777
 $(2,573) $666,262
                
Six months ended June 30, 2019:               
Balance at December 30, 201860,508,249
 $605
 $721,605
 $(6,881) $3,767
 201,963
 $(1,873) $717,223
Net loss—
 —
 —
 —
 (6,291) —
 —
 (6,291)
Net actuarial loss and prior service cost, net of income taxes of $0—
 —
 —
 (60) —
 —
 —
 (60)
Foreign currency translation adjustment—
 —
 —
 3
 —
 —
 —
 3
Restricted share grants298,202
 3
 (3) —
 —
 —
 —
 —
Non-cash compensation expense—
 —
 1,843
 —
 —
 —
 —
 1,843
Impact of adoption of ASC 842 - Leases—
 —
 —
 —
 115
 —
 —
 115
Restricted share forfeiture—
 —
 —
 —
 —
 70,093
 —
 —
Purchase of treasury stock—
 —
 —
 —
 —
 52,721
 (700) (700)
Common stock cash dividend—
 —
 (45,871) —
 —
 —
 —
 (45,871)
Balance at June 30, 201960,806,451
 $608
 $677,574
 $(6,938) $(2,409) 324,777
 $(2,573) $666,262
                

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY 
GANNETT CO., INC.
Unaudited; in thousands, except share data               
 Common stock Additional
Paid-in
Capital		 Accumulated other comprehensive income (loss) Retained
Earnings (Accumulated Deficit)		 Treasury stock  
 Shares AmountShares Amount Total
Three months ended March 31. 2020:               
Balance as of December 31, 2019129,386,258
 $1,294
 $1,090,694
 $8,202
 $(115,958) 394,714
 $(2,876) $981,356
Net loss—
 —
 —
 —
 (80,152) —
 —
 (80,152)
Restricted stock awards settled, net of withholdings2,257,335
 22
 (9,844) —
 —
 —
 —
 (9,822)
Restricted share grants815,034
 8
 (8) —
 —
 —
 —
 —
Other comprehensive income, net of income taxes of $4—
 —
 —
 (13,077) —
 —
 —
 (13,077)
Equity-based compensation expense—
 —
 11,577
 —
 —
 —
 —
 11,577
Issuance of common stock256,905
 3
 1,549
 —
 —
 —
 —
 1,552
Purchase of treasury stock—
 —
 —
 —
 —
 262,451
 (1,615) (1,615)
Other activity—
 —
 (263) —
 —
 —
 —
 (263)
Balance as of March 31, 2020132,715,532
 1,327
 1,093,705
 (4,875) (196,110) 657,165
 (4,491) 889,556
                
Three months ended March 31, 2019:               
Balance as of December 30, 201860,508,249
 $605
 $721,605
 $(6,881) $3,767
 201,963
 $(1,873) $717,223
Net income (loss)—
 —
 —
 —
 (9,106) —
 —
 (9,106)
Restricted share grants298,202
 3
 (3) —
 —
 —
 —
 —
Other comprehensive income, net of income taxes of $0—
 —
 —
 (30) —
 —
 —
 (30)
Equity-based compensation expense—
 —
 1,136
 —
 —
 —
 —
 1,136
Impact of adoption of ASC 842 - Leases—
 —
 —
 —
 115
 —
 —
 115
Purchase of treasury stock—
 —
 —
 —
 —
 51,766
 (689) (689)
Restricted share forfeiture—
 —
 —
 —
 —
 22,861
 —
 —
Dividends declared—
 —
 (22,951) —
 —
 —
 —
 (22,951)
Balance as of March 31, 201960,806,451
 608
 699,787
 (6,911) (5,224) 276,590
 (2,562) 685,698
See
The accompanying notes to unaudited condensedare an integral part of these consolidated financial statements.





NEW MEDIA INVESTMENT GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)CASH FLOWS
(InGannett Co., Inc. and Subsidiaries
Unaudited; in thousands except share data)
 Common stock Additional
paid-in capital		 Accumulated 
other
comprehensive
loss		 Retained earnings (accumulated deficit) Treasury stock Total
 Shares Amount Shares Amount 
Three months ended July 1, 2018:               
Balance at April 1, 201853,580,827
 $536
 $664,805
 $(5,528) $(3,417) 189,914
 $(1,816) $654,580
Net income—
 —
 —
 —
 11,706
 —
 —
 11,706
Net actuarial loss and prior service cost, net of income taxes of $0—
 —
 —
 (68) —
 —
 —
 (68)
Restricted share grants6,010
 —
 —
 —
 —
 —
 —
 —
Non-cash compensation expense—
 —
 669
 —
 —
 —
 —
 669
Issuance of common stock, net of underwriters' discount and offering costs6,900,000
 69
 110,650
 —
 —
 —
 —
 110,719
Restricted share forfeiture—
 —
 —
 —
 —
 2,823
 —
 —
Purchase of treasury stock—
 —
 —
 —
 —
 1,097
 (18) (18)
Common stock cash dividend—
 —
 (17,658) —
 (4,645) —
 —
 (22,303)
Balance at July 1, 201860,486,837
 $605
 $758,466
 $(5,596) $3,644
 193,834
 $(1,834) $755,285
                
Six months ended July 1, 2018:               
Balance at December 31, 201753,367,853
 $534
 $683,168
 $(5,461) $(2,767) 140,972
 $(1,081) $674,393
Net income—
 —
 —
 —
 11,041
 —
 —
 11,041
Net actuarial loss and prior service cost, net of income taxes of $0—
 —
 —
 (135) —
 —
 —
 (135)
Restricted share grants218,984
 2
 223
 —
 —
 —
 —
 225
Non-cash compensation expense—
 —
 1,832
 —
 —
 —
 —
 1,832
Issuance of common stock, net of underwriters' discount and offering costs6,900,000
 69
 110,650
 —
 —
 —
 —
 110,719
Restricted share forfeiture—
 —
 —
 —
 —
 9,039
 —
 —
Purchase of treasury stock—
 —
 —
 —
 —
 43,823
 (753) (753)
Common stock cash dividend—
 —
 (37,407) —
 (4,630) —
 —
 (42,037)
Balance at July 1, 201860,486,837
 $605
 $758,466
 $(5,596) $3,644
 193,834
 $(1,834) $755,285
                
 Three months ended March 31,
 2020 2019
    
Cash flows from operating activities:   
Net loss$(80,606) $(9,355)
Adjustments to reconcile net income to operating cash flows:   
Depreciation and amortization78,024
 20,923
Facility consolidation cost484
 —
Equity-based compensation expense11,577
 1,136
Non-cash interest expense56,160
 344
Loss on sale or disposal of assets657
 1,789
Loss on early extinguishment of debt805
 —
Impairment of long-lived assets—
 1,207
Pension and other postretirement benefit obligations, net of contributions(30,545) (276)
Change in other assets and liabilities, net23,933
 15,974
Net cash provided by operating activities60,489
 31,742
Cash flows from investing activities:   
Acquisitions, net of cash acquired—
 (37,953)
Purchase of property, plant, and equipment(13,783) (2,242)
Proceeds from sale of real estate and other assets10,400
 2,465
Change in other investing activities(36) —
Net cash used for investing activities(3,419) (37,730)
Cash flows from financing activities:   
Repayment under term loans(12,701) (2,197)
Borrowing under revolving credit facility—
 54,400
Repayments under revolving credit facility—
 (46,400)
Payments for employee taxes withheld from stock awards(1,615) (689)
Payment of dividends—
 (23,245)
Changes in other financing activities(363) —
Net cash used for financing activities(14,679) (18,131)
Effect of currency exchange rate change on cash1,554
 —
Increase (decrease) in cash and cash equivalents and restricted cash43,945
 (24,119)
Balance of cash, cash equivalents, and restricted cash at beginning of period188,664
 52,770
Balance of cash, cash equivalents, and restricted cash at end of period$232,609
 $28,651
    
Supplemental cash flow information:   
Cash paid for taxes, net of refunds$(2,036) $13
Cash paid for interest$551
 $12,756
Non-cash investing and financing activities:   
Accrued capital expenditures$1,292
 $294
SeeThe accompanying notes to unauditedare an integral part of these condensed consolidated financial statements.


NEW MEDIA INVESTMENT GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
 Six months ended
 June 30, 2019 July 1, 2018
Cash flows from operating activities:   
Net (loss) income$(6,740) $11,041
Adjustments to reconcile net (loss) income to net cash provided
by operating activities:		   
Depreciation and amortization44,251
 39,182
Non-cash compensation expense1,843
 1,832
Non-cash interest expense689
 1,078
Deferred income taxes(1,796) 2,264
Net loss (gain) on sale or disposal of assets2,737
 (3,979)
Impairment of long-lived assets2,469
 —
Pension and other postretirement benefit obligations(649) (984)
Changes in assets and liabilities:   
Accounts receivable, net26,707
 15,591
Inventory6,287
 (4,858)
Prepaid expenses(6,035) (3,777)
Other assets(109,775) 5,255
Accounts payable(4,962) (806)
Accrued expenses3,328
 (6,845)
Deferred revenue2,254
 1,452
Other long-term liabilities97,045
 1,157
Net cash provided by operating activities57,653

57,603
Cash flows from investing activities:   
Acquisitions, net of cash acquired(39,353) (149,604)
Purchases of property, plant, and equipment(4,934) (5,041)
Proceeds from sale of real estate, other assets and insurance7,107
 12,585
Net cash used in investing activities(37,180)
(142,060)
Cash flows from financing activities:   
Payment of debt issuance costs—
 (500)
Borrowings under term loans—
 49,750
Repayments under term loans(11,296) (2,062)
Borrowings under revolving credit facility102,900
 —
Repayments under revolving credit facility(94,900) —
Payment of offering costs—
 (152)
Issuance of common stock, net of underwriters' discount—
 111,099
Purchase of treasury stock(700) (753)
Payment of dividends(46,066) (42,226)
Net cash (used in) provided by financing activities(50,062)
115,156
Effect of exchange rate changes on cash and cash equivalents3
 —
Net (decrease) increase in cash, cash equivalents and
restricted cash		(29,586) 30,699
Cash, cash equivalents and restricted cash at beginning of period52,770
 46,162
Cash, cash equivalents and restricted cash at end of period$23,184
 $76,861
    
See accompanying notes to unaudited condensed consolidated financial statements.

NEW MEDIA INVESTMENT GROUP INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)


(1) Unaudited Financial StatementsNOTE 1 — Basis of presentation and summary of significant accounting policies
The accompanying unaudited condensed consolidated financial statements
Description of business: Gannett Co., Inc. ("we", "us", "our", or the "Company") is an innovative, digitally focused media and marketing solutions company committed to fostering the communities in our network and helping them build relationships with their local businesses. On November 19, 2019, New Media Investment Group Inc. ("Legacy New Media") completed its acquisition of Gannett ("Legacy Gannett"), which retained the name Gannett Co., Inc. and its subsidiaries (together,trades on the “Company” or “New Media”) have been preparedNew York Stock Exchange under the ticker symbol "GCI".

Our current portfolio of media assets includes USA TODAY, local media organizations in accordance with46 states in the U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the instructions to Form 10-QGuam, and applicable provisions of Regulation S-X, each as promulgated byNewsquest (a wholly owned subsidiary operating in the United States SecuritiesKingdom (the "U.K.") with more than 140 local media brands). Gannett also owns the digital marketing services companies ReachLocal, Inc. ("ReachLocal"), UpCurve, Inc. ("UpCurve"), and Exchange Commission (the “SEC”WordStream, Inc. ("WordStream"). Certain information and note disclosures normallyruns the largest media-owned events business in the U.S.

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 2 segments: Publishing and Marketing Solutions. A full description of our segments is included in comprehensive annual financial statements presented in accordance with GAAP have been condensed or omitted pursuantNote 14 — Segment reporting of the notes to SEC rules and regulations.
Management believes that the accompanying condensed consolidated financial statements contain all adjustments (which include normal recurring adjustments) that, in the opinion of management, are necessary to present fairly the Company’s consolidated financial condition, results of operations, changes in stockholders' equity and cash flows for the periods presented. The results of operations for interim periods are not necessarily indicative of the results that may be expected for the full year. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes for the year ended December 30, 2018, included in the Company’s Annual Report on Form 10-K.statements.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The Company’s reporting units (Newspapers and BridgeTower) are aggregated into one reportable business segment.
COVID-19 Pandemic:The newspaper industry and the Company have experienced declining same-store revenue and profitability over the past several years.years and these industry trends are expected to continue in the future. Additionally, during the first quarter of 2020, the Company experienced additional revenue and profitability declines in connection with the COVID-19 global pandemic. More specifically, during March 2020, the Company began to experience decreased demand for its advertising and digital marketing services as well as reductions in the single copy and commercial distribution of its newspapers. At this point, the Company’s newspaper production operations have not been significantly impacted and the vast majority of the Company’s employees are currently working remotely. The Company currently expects that the COVID-19 global pandemic will have a significant negative impact, in the near-term, on the Company’s business and results of operations and such impact may be material. Longer-term, the impact of the COVID-19 pandemic on the Company’s business and results of operations will depend on the severity and length of the pandemic, the duration and extent of the mitigation measures and governmental actions designed to combat the pandemic, as well as the changes in customer behavior as a result of the pandemic, all of which are highly uncertain. As a result, the Company has implemented, and continues to implement, measures to reduce costs and preserve cash flow. This includes cost-reduction programs andThese measures include suspension of the sale ofquarterly dividend, employee furloughs, decreases in employee compensation, as well as reductions in discretionary spending. In addition, the Company is continuing with its previously disclosed plan to monetize non-core assets. The Company believes these initiatives along with cash on hand and cash provided by operating activities will provide it with the financial resources necessary to invest in the business and provide sufficient cash flow to enable the Company to meet its commitments. However, these measures may not be sufficient to fully offset the negative impact of the COVID-19 pandemic on the Company's business and results of operations.
Recently Issued Accounting Pronouncements
Basis of presentation: Our condensed consolidated financial statements are unaudited; however, in the opinion of management, they contain all of the adjustments (consisting of those of a normal, recurring nature) considered necessary to present fairly the financial position, results of operations, and cash flows for the periods presented in conformity with U.S. generally accepted accounting principles (U.S. GAAP) applicable to interim periods. All significant intercompany accounts and transactions have been eliminated in consolidation. The Company consolidates entities that it controls due to ownership of a majority voting interest. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019.

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

Examples of significant estimates include pension and postretirement benefit obligation assumptions, income taxes, leases, self-insurance liabilities, goodwill impairment analysis, stock-based compensation, business combinations and valuation of property, plant and equipment and intangible assets. Actual results could differ from those estimates.



Fiscal period: Starting in 2019 and subsequent to our acquisition of Legacy Gannett, our fiscal periods coincide with the
Gregorian calendar. In Februaryperiods prior to the acquisition, our fiscal periods ended on the last Sunday of the calendar month. Our fiscal period for the first quarter of 2019 was March 31, 2019.

Advertising and marketing services revenues: Pursuant to our acquisition of Legacy Gannett, we realigned the presentation of marketing services revenues generated by our UpCurve subsidiary from other revenues to advertising and marketing services revenue on the Condensed consolidated statements of operations and comprehensive income. As a result of this updated presentation, advertising and marketing services revenues increased and other revenues decreased $14.9 million for the three months ended March 31, 2019. Operating revenues, net income, retained earnings, and earnings per share remained unchanged.

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

Cash and cash equivalents, including restricted cash: Cash equivalents represent highly liquid certificates of deposit which have original maturities of three months or less. Restricted cash is held as cash collateral for certain business operations. Restricted cash primarily consists of funding for letters of credit, cash held in an irrevocable grantor trust for our deferred compensation plans and cash held with banking institutions for insurance 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
 March 31,
In thousands2020 2019
Cash and cash equivalents$199,651
 $24,597
Restricted cash included in other current assets11,028
 4,054
Restricted cash included in investments and other assets21,930
 —
Total cash, cash equivalents, and restricted cash$232,609
 $28,651


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

Financial Instruments—Credit Losses: In June 2016, the FASBFinancial Accounting Standards Board ("FASB") issued ASU No. 2016-02 (“ASU 2016-02”), “Leases (Topic 842)”, which revised the accounting related to lease accounting for both lessees and lessors. Under the new guidance lessees are required to recognize a lease liability and a right-of-use assetwhich amends the principles around the recognition of credit losses by mandating entities incorporate an estimate of current expected credit losses when determining the value of certain assets. The guidance also amends reporting around allowances for credit losses on the balance sheet for all leases with terms greater than twelve months. Leases are classified as either finance or operating, with classification affecting the classification of expense recognition in the income statement. As permitted under the transitionavailable-for-sale marketable securities. This guidance we have carried forward the assessment of whether our contracts contain or are leases, classification of our leases and remaining lease terms. Refer to Note 6 for further discussion.
In February 2018, the FASB issued ASU 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (“AOCI”)”. This ASU provides entities the option to reclassify tax effects to retained earnings from AOCI which are impacted by the Tax Cuts and Jobs Act (“TCJA”). The ASU is effective for fiscal years beginning after December 15, 2018 but2019, with early adoption permitted. Adopting this guidance did not have a material impact on our consolidated financial statements, refer to Note 4 — Accounts receivable, net for further details.

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

Fair Value Measurement—Disclosure Framework: In August 2018, the FASB issued new guidance that changes disclosure requirements related to AOCI, and therefore, there are no tax effectsfair value measurements as part of the disclosure framework project. The disclosure framework project aims to be reclassifiedimprove the effectiveness of disclosures in the notes to retained earnings.the financial statements by focusing on requirements that clearly
All other issued and

communicate the most important information to users of the financial statements. This guidance is effective for fiscal years beginning after December 15, 2019, with early adoption permitted. Adopting this guidance did not have a material impact on our consolidated financial statements.

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

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

Simplifying the Accounting for Income Taxes: In December 2019, the FASB issued new guidance that simplifies the accounting standardsfor income taxes. The guidance amends the rules for recognizing deferred taxes for investments, performing intraperiod tax allocations and calculating income taxes in interim periods. It also reduces complexity in certain areas, including accounting for transactions that result in a step-up in the tax basis of goodwill and allocating taxes to members of a consolidated group. This guidance is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. We are not relevant toevaluating the Company.provisions of the updated guidance and assessing the impact on our consolidated financial statements.

(2)NOTE 2 — Revenues

Revenue Recognition

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

The Company’s Condensed consolidated statements of operations and comprehensive income presents revenues disaggregated by revenue type. Sales taxes and other usage-based taxes are excluded from revenues. The following table presents our revenues disaggregated by source:

 Three months ended March 31,
In thousands2020
2019
Print advertising$267,842
 $150,900
Digital advertising and marketing services219,168
 42,644
Total advertising and marketing services487,010
 193,544
Circulation374,723
 152,165
Other86,949
 41,890
Total revenues$948,682
 $387,599

Approximately 7% of our quarter to date revenues were generated from international locations.

Deferred revenue: The Company records deferred revenues when cash payments are received in advance of the Company’s performance obligation. The most significant unsatisfied performance obligation is the delivery of publications to subscription customers. The Company expects to recognize the revenue related to unsatisfied performance obligations over the next three to twelve months in accordance with the terms of the subscriptions.

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



The following table presents changes in the deferred revenue balance for the three months ended March 31, 2020 by type of revenue:
In thousandsAdvertising, Marketing Services, and Other Circulation Total
Beginning balance$67,543
 $151,280
 $218,823
Cash receipts86,918
 307,502
 394,420
Revenue recognized(79,467) (308,167) (387,634)
Ending balance$74,994
 $150,615
 $225,609


The Company’s primary source of deferred revenue is from circulation subscriptions paid in advance of the service provided. The majority of our subscription customers are billed and pay on monthly terms, but subscription periods can last between one and twelve months. The remaining deferred revenue balance relates to advertising and marketing services and other revenue.

NOTE 3 — Leases

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

As of March 31, 2020, our Condensed consolidated balance sheets include $306.5 million of operating lease right-to use assets, $45.3 million of short-term operating lease liabilities included in Other current liabilities, and $293.1 million of long-term operating lease liabilities.

The components of lease expense were as follows:
 Three months ended March 31,
In thousands2020 2019
Operating lease cost (a)
$23,884
 $8,105
Short-term lease cost, excluding expenses relating to leases with a lease term of one month or less3,142
 764
Net lease cost$27,026
 $8,869
(a) Includes variable lease costs of $4.3 million and $0.5 million, respectively, and sublease income of $1.1 million and $0.5 million, respectively, for the three months endedMarch 31, 2020 and 2019.

Future minimum lease payments under non-cancellable leases as of March 31, 2020 are as follows:

In thousands
Year ended December 31, (a)
2020 (excluding the three months ended March 31, 2020)$61,202
202178,444
202271,330
202358,724
202451,955
Thereafter235,267
Total future minimum lease payments556,922
Less: Imputed interest218,441
Total$338,481
(a) Operating lease payments exclude $8.7 million of legally binding minimum lease payments for leases signed but not yet commenced.



Other information related to leases were as follows:

 Three months ended March 31,
In thousands, except lease term and discount rate2020
2019
Supplemental information   
Cash paid for amounts included in the measurement of operating lease liabilities$16,771
 $6,317
Right-of-use assets obtained in exchange for operating lease obligations1,238
 4,098
    
 As of March 31,
 2020 2019
Weighted-average remaining lease term (in years)8.1
 9.0
Weighted-average discount rate12.45% 10.67%


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 less recoveries) for the prior three year period to total outstanding trade accounts receivable for the same three year period. The calculated reserve percentage by customer category is applied to the consolidated gross advertising receivable balance, irrespective of aging. In addition, each category has specific reserves for at risk accounts that vary based on the nature of the underlying trade receivables. Due to the short-term nature of our circulation receivables, the Company reserves all receivables aged over 90 days.

The following table presents changes in the allowance for doubtful accounts for the three months ended March 31, 2020:

In thousands 
Beginning balance$19,923
     Current period provision5,143
     Write-offs charged against the allowance(5,347)
     Recoveries of amounts previously written-off918
     Foreign currency(151)
Ending balance$20,486


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

For the three months ended March 31, 2020 and 2019, the Company recorded $5.1 million and $2.1 million in bad debt expense, included in Selling, general and administrative expenses on the Condensed consolidated statements of operations and comprehensive income. We did not record any one-time adjustments as a result of adopting the new guidance on credit losses.



NOTE 5 — Acquisitions

2019 Acquisitions

The Company acquired substantially all the assets, properties, and business of Legacy Gannett on November 19, 2019. The acquisition, which included the USA TODAY NETWORK (made up of USA TODAY and 109 local media organizations in 46 states in the U.S. and Guam, including digital sites and affiliates), ReachLocal, Inc. ("ReachLocal"), a marketing solutions company, and Newsquest (a wholly owned subsidiary of Legacy Gannett operating in the U.K. with more than 140 local media brands), was completed for an aggregate purchase price of $1.3 billion. The acquisition was financed from the Apollo term loan facility as described in Note 8 — Debt and the issuance of common stock to Legacy Gannett shareholders. The rationale for the acquisition was primarily the attractive nature of the various publications, businesses, and digital platforms as well as the estimated cash flows and cost-saving and revenue-generating opportunities.
The allocation of the purchase price is preliminary pending the finalization of certain acquired intangibles, deferred income taxes, and assumed income and non-income based tax liabilities. The following table summarizes the preliminary determination of fair values of the assets and liabilities for the Legacy Gannett acquisition. There were no material measurement period adjustments recorded during the three months ended March 31, 2020.
In thousands 
Cash and restricted cash acquired$149,452
Current assets383,965
Other assets97,459
Property, plant, and equipment536,511
Operating lease assets200,550
Developed technology47,770
Advertiser relationships272,740
Subscriber relationships104,490
Other customer relationships63,820
Trade names16,470
Mastheads97,340
Goodwill645,046
Total assets2,615,613
Current liabilities513,752
Long-term liabilities787,019
Total liabilities1,300,771
Net assets$1,314,842


Outside of the Legacy Gannett acquisition, the Company also acquired substantially all the assets, properties and business of certain publications and businesses on June 21,in 2019, June 14, 2019, May 31, 2019, February 11, 2019, February 2, 2019, January 31, 2019, and December 31, 2018 (“2019 Acquisitions”), which included 1011 daily newspapers, 11 weekly publications, eight9 shoppers, a remnant advertising agency,


three 5 events production businesses, and a business community and networking platform for an aggregate purchase price of $35,723,$46.6 million including estimated working capital. The acquisitions were financed from cash on hand. The rationale for the acquisitions was primarily due to the attractive nature, as applicable, of the newspaper or event-related assetsvarious publications, businesses, and digital platforms and theiras well as the estimated cash flows combined with theand cost-saving and revenue-generating opportunities available.
In the June 21, 2019 acquisition, the Company acquired an 80% equity interest in the acquiree, and the minority equity owners retained a 20% interest, which have been classified as redeemable noncontrolling interests in the accompanying financial statements. Noncontrolling interests with embedded redemption features, such as put rights, that are not solely within the control of the Company are considered redeemable noncontrolling interests and are presented outside of stockholders’ equity on the Company's Unaudited Condensed Consolidated Balance Sheets.
The Company accounted for the 2019 Acquisitions using the acquisition method of accounting for those acquisitions determined to meet the definition of a business. The net assets, including goodwill, have been recorded in the consolidated balance sheet at their fair values in accordance with Accounting Standards Codification ("ASC") 805, “Business Combinations” (“ASC 805”). The fair value determination of the assets acquired and liabilities assumed are preliminary based upon all information currently available to the Company and are subject to working capital and other adjustments and the completion of valuations to determine the fair market value of the tangible and intangible assets. The final calculation of working capital and other adjustments and determination of fair values for tangible and intangible assets may result in different allocations among the various asset classes from those set forth below, and any such differences could be material.
The 2019 Acquisitions that were determined to be asset acquisitions were measured at the fair value of the consideration transferred on the acquisition date. Intangible assets acquired in an asset acquisition have been recognized in accordance with ASC 350 “Intangibles - Goodwill and Other”. Goodwill is not recognized in an asset acquisition.
The following table summarizes the preliminary determination of fair values of the assets and liabilities:liabilities for the aforementioned acquisitions. As of March 31, 2020, the Company finalized the fair values of $34.2 million in net assets included in the table below:
in thousands 
Cash acquired$323
Current assets$6,684
9,320
Other assets950
Property, plant and equipment20,062
20,492
Noncompete agreements280
Non-compete agreements280
Advertiser relationships2,540
2,357
Subscriber relationships1,560
1,457
Customer relationships1,380
Other customer relationships1,323
Software140
140
Trade names299
299
Mastheads2,860
2,896
Goodwill7,308
20,850
Total assets43,113
60,687
Current liabilities assumed7,390
11,961
Long-term liabilities assumed463
Total liabilities7,390
12,424
Minority interest$1,651
Net assets$35,723
$46,612


Pro forma information: The following table sets forth unaudited pro forma results of operations assuming the Legacy Gannett acquisition, along with transactions necessary to finance the acquisition, occurred at the beginning of 2019:
 Three months ended
In thousands; unauditedMarch 31, 2019
Total revenues$1,049,988
Net loss(53,808)
Earnings per share - diluted$(0.44)


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


NOTE 6 — Goodwill & Intangible Assets
Goodwill and intangible assets consisted of the following:
 March 31, 2020
 
Gross carrying
amount
 
Accumulated
amortization
 
Net carrying
amount
Amortized intangible assets:     
Advertiser relationships$532,266
 $88,448
 $443,818
Other customer relationships109,333
 17,454
 91,879
Subscriber relationships259,391
 52,172
 207,219
Other intangible assets76,552
 15,210
 61,342
Total$977,542
 $173,284
 $804,258
Non-amortized intangible assets:   
Goodwill$909,741
 
Mastheads177,708
 
Total$1,087,449
 
  
 December 31, 2019
 Gross carrying
amount		 Accumulated
amortization		 Net carrying
amount
Amortized intangible assets:     
Advertiser relationships$534,161
 $75,363
 $458,798
Other customer relationships109,674
 14,303
 95,371
Subscriber relationships259,391
 44,878
 214,513
Other intangible assets76,552
 11,229
 65,323
Total$979,778
 $145,773
 $834,005
Non-amortized intangible assets:   
Goodwill$914,331
 
Mastheads178,559
 
Total$1,092,890
 

The Company’s annual impairment assessment is made on the last day of its fiscal second quarter. In addition to the annual impairment test, the Company obtained third party independent valuations oris required to regularly assess whether a triggering event has occurred which would require interim impairment testing.
As of March 31, 2020, the Company performed a review of potential impairment indicators. In connection with its review, the Company noted that the market capitalization of the Company declined significantly during the three months ended March 31, 2020 and there was widespread stock-market volatility, resulting from the COVID-19 pandemic. Although the Company expects its near-term operating results to be negatively impacted as a result of the COVID-19 pandemic, its overall financial forecasts have not changed materially from the financial forecasts used in the Company’s year-end impairment assessment. As a result, the Company concluded that it was not more likely than not that the fair value of our reporting units is less than carrying value. The Company reached a similar calculations internally to assistconclusion for its indefinite-lived intangible assets, which consist of mastheads.

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 EBITDA projections, discount rates and long-term growth rates. The long-term growth rates are dependent on overall market growth rates, the competitive environment, inflation and relative currency exchange rates and could be adversely impacted by a sustained decrease in any of certain assets acquiredthese measures. 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 liabilities assumed. Three basic approaches were used to determine value:equity components of the cost approach (used for equipment where an active secondary marketcapital structure. It may be impacted by adverse changes in the macroeconomic environment and volatility in the equity and debt markets.
While we have concluded that it is not available, building improvements,more likely than not that the fair value of our reporting units and software),mastheads is less than the direct sales comparison (market) approach (used for landrespective carrying values as of March 31, 2020, the severity and equipment where an active secondary market is available)length of the pandemic, the duration and extent of the income approach (used for intangible assets).
The weighted average amortization periods for recently acquired amortizable intangible assets are equal to or similar to the periods presented in Note 5.
The Company expensed approximately $765 of acquisition-related costs for the 2019 Acquisitions during the six months ended June 30, 2019, and these expenses are included in selling, general, and administrative expenses.
For tax purposes, the amount of goodwill that is expected to be deductible is $7,003.
2018 Acquisitions



The Company acquired substantially allmitigation measures and governmental actions designed to combat the assets, properties and business of certain publications and businesses on November 16, 2018, November 14, 2018, October 1, 2018, August 15, 2018, July 2, 2018, June 18, 2018, June 4, 2018, May 11, 2018, May 1, 2018, April 2, 2018, March 31, 2018, March 6, 2018, February 28, 2018, February 23, 2018, and February 7, 2018 (“2018 Acquisitions”), which included seven business publications, eightdaily newspapers, 16 weekly publications, one shopper,pandemic, as well as the changes in customer behavior as a print facility, an events production business, cloud services and digital platforms and related domains, for an aggregate purchase price of $205,785, including estimated working capital. The acquisitions were financed from cash on hand. The rationale for the acquisitions was primarily due to the attractive nature, as applicable,result of the newspaper assetspandemic, all of which are highly uncertain and digital platforms, and their estimated cash flows combined withdifficult to predict at the cost-saving and revenue-generating opportunities available.
Incurrent time, could negatively impact the August 15, 2018 acquisition, the Company acquired an 80% equity interest in the acquiree,Company’s future assessment of its results of operations and the minority equity owners retained a 20% interest, which have been classified as redeemable noncontrolling interestsunderlying assumptions utilized in the accompanying financial statements. Noncontrolling interests with embedded redemption features, such as put rights, that are not solely within the control of the Company are considered redeemable noncontrolling interests and are presented outside of stockholders’ equity on the Company's Unaudited Condensed Consolidated Balance Sheets.
The Company accounted for the 2018 Acquisitions using the acquisition method of accounting for those acquisitions determined to meet the definition of a business. The net assets, including goodwill, have been recorded in the consolidated balance sheet at their fair values in accordance with ASC 805. The fair value determination of the assets acquired and liabilities assumed are preliminary based upon all information currently available to the Company and are subject to working capital and other adjustments and the completion of valuations to determine the fair market value of the tangible and intangible assets. The final calculation of working capital and other adjustments and determination of fair values for tangible and intangible assets may result in different allocations among the various asset classes from those set forth below and any such differences could be material.
During the six months ended June 30, 2019, the Company recorded adjustments to the recordedestimated fair values of the assets acquiredreporting units and liabilities assumed in the 2018 acquisitions. The recorded amount of net assets acquired was increased by $65, while the recorded balances of property, plant and equipment, goodwill and current liabilities were decreased by $267, $847 and $1,179, respectively.related mastheads.

(3) Share-Based Compensation
The Company recognized compensation cost for share-based payments of $707, $669, $1,843NOTE 7 — Integration and $1,832 during the threereorganization costs and six months ended June 30, 2019 and July 1, 2018, respectively. The total compensation cost not yet recognized related to non-vested Restricted Stock Grants (“RSGs”) pursuant to the Company’s Nonqualified Stock Option and Incentive Award Plan as of June 30, 2019 was $5,592, which is expected to be recognized over a weighted average period of 2.19 years through February 2022. As of June 30, 2019, the aggregate intrinsic value of unvested RSGs was $4,251.
RSG activity during the six months ended June 30, 2019 was as follows:
 Number of RSGs 
Weighted-Average
Grant Date
Fair Value
Unvested at December 30, 2018384,471
 $16.11
Granted298,202
 13.65
Vested(162,309) 15.90
Forfeited(70,093) 15.27
Unvested at June 30, 2019450,271
 $14.69
long-lived asset impairments
Under FASB ASC Topic 718, “Compensation – Stock Compensation”, the Company elected to recognize share-based compensation expense for the number of awards that are ultimately expected to vest. The Company’s estimated forfeitures are based on historical forfeiture rates. Estimated forfeitures are reassessed periodically, and the estimate may change based on new facts and circumstances.
(4) Restructuring
Over the past several years, in furtherance of the Company’s cost-reduction and cash-preservation plans outlined in Note 1, 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 of the Company’s operations and are often influenced by the terms of union contracts. All costs related to these programs, which primarily include severance expense, are accrued at the time of the program announcement or overannouncement.

Severance-related expenses: We recorded severance-related expenses by segment as follows:
 Three months ended March 31,
In thousands2020 2019
Publishing$11,917
 $1,979
Marketing Solutions1,384
 556
Corporate and Other7,873
 878
Total$21,174
 $3,413

A rollforward of the remaining service period.
Severance-related expenses
Accrued restructuringaccrued severance and related costs are included in accrued expenses on the Unaudited Condensed Consolidated Balance Sheets. The activity in accrued restructuring costsconsolidated balance sheets for the sixthree months ended June 30, 2019 isMarch 31, 2020 are as follows:
In thousands 
Beginning balance$30,785
Restructuring provision included in integration and reorganization costs21,174
Cash payments(25,555)
Ending balance$26,404

 
Severance and
Related Costs
 
Other
Costs (1)
 Total
Balance at December 30, 2018$2,554
 $346
 $2,900
Restructuring provision included in Integration and Reorganization6,293
 1,049
 7,342
Cash payments(5,660) (801) (6,461)
Balance at June 30, 2019$3,187
 $594
 $3,781

(1)
Other costs primarily include costs to consolidate operations.
The majority of the accrued restructuring reserve balance is expected to be paid out over the next twelve months.

Facility consolidation and other restructuring-related expenses: We recorded facility consolidation charges and other restructuring-related costs by segment as follows:
 Three months ended March 31,
In thousands2020 2019
Publishing$839
 $405
Marketing Solutions4
 —
Corporate and Other247
 294
Total$1,090
 $699


Long-lived asset impairment charges and accelerated depreciation
Duringdepreciation: As part of ongoing cost efficiency programs, the sixCompany has ceased a number of print operations. There were 0 long-lived asset impairment charges recorded for the three months ended June 30,March 31, 2020. There were $1.2 million long-lived asset impairment charges recorded for the same period in 2019 by the Company ceased operations ofCorporate and other segment.

We incurred $24.7 million accelerated depreciation for the three print publications and nine print facilities as part ofmonths ended March 31, 2020. NaN accelerated depreciation was incurred for the ongoing cost reduction programs. As a result,same period in 2019. For the Company recognized an impairment chargethree months ended March 31, 2020, accelerated depreciation expenses were related to retired equipment of $2,469, a loss on disposal of assets related to retired equipment of $168the publishing segment and intangibles of $405, and acceleratedare included within depreciation of $2,636 during the six months ended June 30, 2019. There were no publication closures or facility consolidations during the six months ended July 1, 2018.expense.



NOTE 8 — Debt

(5) Goodwill and Intangible AssetsApollo Term Loan
Goodwill and intangible assets consisted


In November 2019, pursuant to the acquisition of Legacy Gannett, the Company entered into a five-year, senior-secured term loan facility with Apollo Capital Management, L.P. ("Apollo") in an aggregate principal amount of approximately $1.8 billion. The term loan facility, which matures on November 19, 2024, generally bears interest at the rate of 11.5% per annum. Origination fees totaled 6.5% of the following:
 June 30, 2019
 
Gross carrying
amount
 
Accumulated
amortization
 
Net carrying
amount
Amortized intangible assets:     
Advertiser relationships$261,452
 $62,398
 $199,054
Customer relationships45,860
 10,936
 34,924
Subscriber relationships155,102
 37,304
 117,798
Other intangible assets14,026
 8,923
 5,103
Total$476,440

$119,561

$356,879
Nonamortized intangible assets:   
Goodwill$317,151
 
Mastheads118,021
 
Total$435,172
 
  
 December 30, 2018
 Gross carrying
amount		 Accumulated
amortization		 Net carrying
amount
Amortized intangible assets:     
Advertiser relationships$260,142
 $53,477
 $206,665
Customer relationships44,630
 8,704
 35,926
Subscriber relationships153,923
 31,560
 122,363
Other intangible assets13,046
 7,802
 5,244
Total$471,741

$101,543

$370,198
Nonamortized intangible assets:   
Goodwill$310,737
 
Mastheads115,856
 
Total$426,593
 

Astotal principal amount of June 30, 2019, the weighted average amortization periods for amortizable intangible assets are 14.4 years for advertiser relationships, 12.3 years for customer relationships, 13.6 years for subscriber relationshipsfinancing at closing. Pursuant to the agreement, Apollo has the right to designate 2 individuals to attend Board of Directors meetings as non-fiduciary and 5.2 years for other intangible assets. The weighted average amortization periodnon-voting observers and participants. In addition, if the total gross leverage ratio exceeds certain thresholds, Apollo has the right to appoint up to 2 voting directors. Upon the occurrence and during the continuance of an Event of Default (as defined in total for all amortizable intangible assets is 13.7 years.
Amortization expense for the three and six months ended June 30, 2019 and July 1, 2018 was $8,898, $8,177, $18,348 and $15,332, respectively. Estimated future amortization expense as of June 30, 2019, is as follows:
For the following fiscal years: 
2019 (six months remaining)$17,968
202035,503
202135,313
202234,363
202334,069
Thereafter199,663
Total$356,879


term loan facility), the interest rate increases by 2.0%.

The changes interm loan facility contains customary covenants and events of default, including a covenant that the carrying amountCompany have at least $20 million of goodwill for the period from December 30, 2018 to June 30, 2019 are as follows:
Balance at December 30, 2018, net of accumulated impairments of $25,641$310,737
Goodwill acquired in business combinations7,308
Measurement period adjustments(852)
Goodwill of disposed publication(42)
Balance at June 30, 2019, net of accumulated impairments of $25,641$317,151

The Company’s annual impairment assessment is madeunrestricted cash on the last day of itseach fiscal second quarter.
The carrying value of goodwill and indefinite-lived intangible assets are evaluated for possible impairment on an annual basis or between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit or indefinite-lived intangible asset below its carrying value. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.
The Company performed its 2019 annual assessment for possible impairment of the carrying value of goodwill and indefinite-lived intangibles as of June 30, 2019. The fair value of the Company's reporting units, including Newspapers and BridgeTower, which include newspaper mastheads, were estimated using the expected present value of future cash flows, recent industry multiples and using estimates, judgments and assumptions that management believes were appropriate in the circumstances. The estimates and judgments used in the assessment included multiples for EBITDA, the weighted average cost of capital and the terminal growth rate. The Company determined that the future cash flow and industry multiple analysis provided the best estimate of the fair value of its reporting units.  Key assumptions in the impairment analysis include revenue and EBITDA projections, discount rates, long-term growth rates and the effective tax rate that the Company determined to be appropriate. Revenue projections reflected slight declines in the current and next year, and revenues are expected to moderate to a terminal growth rate of 0.5%. The discount rate was 17% and the effective tax rate was 27%. The fair value of the Newspaper reporting unit exceeded the carrying value by less than 10%.
The total Company’s estimate of reporting unit fair values was reconciled to its market capitalization (based upon the stock market price and fair value of debt) plus an estimated control premium.
The Company uses a “relief from royalty” approach, a discounted cash flow model, to determine the fair value of its indefinite-lived intangible assets.  The estimated fair value equaled or exceeded carrying value for mastheads. The fair value of mastheads exceeded carrying value by less than 10% for the central and east regions. Key assumptions within the masthead analysis included revenue projections, discount rates, royalty rates, long-term growth rates and the effective tax rate that the Company determined to be appropriate. Revenue projections reflected declines in the current and next year, and revenues are expected to moderate to a terminal growth rate of 0.5% for Newspapers and 1% for BridgeTower. Discount rates ranged from 16.5% to 17%, royalty rates ranged from 1.5% to 1.75%, and the effective tax rate was 27%.
The newspaper industry and the Company have experienced declining same-store revenue and profitability over the past several years. Should general economic, market or business conditions decline and have a negative impact on estimates of future cash flow and market transaction multiples, the Company may be required to record impairment charges in the future.
(6) Leases
Adoption
Effective December 31, 2018, the Company adopted FASB ASU 2016-02, “Leases (Topic 842)” using the modified retrospective method at the adoption date. In addition, the Company elected the package of practical expedients permitted under the transition guidance within the new standard. This allowed us to carry-forward the historical lease classification. The Company elected to make the accounting policy election for short-term leases resulting in lease payments being recorded as an expense on a straight-line basis over the lease term. The Company also adopted this approach for individually insignificant operating leases. Also, the Company elected to not separate lease and non-lease components for leases. Adoption of this standard resulted in the recording of net operating lease right-of-use assets of $102,512 and corresponding operating lease liabilities of $109,230. The Company's financial position for reporting periods beginning on or after December 31, 2018 is presented under the new guidance, while prior period amounts are not adjusted and continue to be reported in accordance with previous guidance.


A significant portion of our operating lease portfolio includes office space, distribution centers, press facilities, office equipment, and vehicles. The majority of our leases have remaining lease terms of 1 year to 10 years, some of which include options to extend the leases. As of June 30, 2019, the Company has an additional obligation of approximately $5,122 for future payments related to operating leases that have not yet commenced.
Total lease expense consists of the following:
 Three months ended Six months ended
 June 30, 2019 June 30, 2019
Operating lease expense related to right-of-use assets$6,678
 $12,921
Other operating lease expense1,827
 4,213
Sublease income(641) (1,165)
Total lease expense$7,864
 $15,969

Supplemental information related to leases was as follows:
 Three months ended Six months ended
 June 30, 2019 June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:   
Operating cash flows for operating leases$6,311
 $12,200
Right-of-use assets obtained in exchange for lease obligations:   
Operating leases$10,838
 $117,495

Supplemental balance sheet information related to leases was as follows:
 June 30, 2019
Operating leases: 
Operating lease right-of-use assets, net$109,521
Current portion of operating lease liabilities$14,492
Long-term operating lease liabilities102,431
Total operating lease liabilities$116,923
  
Weighted-average remaining lease term8.8 years
Weighted-average discount rate10.58%

As of June 30, 2019, maturities of lease liabilities were as follows:
2019 (six months remaining)$13,137
202024,867
202123,150
202219,921
202316,496
Thereafter87,226
Total lease payments184,797
Less: interest(67,874)
Present value of lease liabilities$116,923

(7) Indebtedness
New Media Credit Agreement


The Company, through its wholly-owned subsidiary New Media Holdings II LLC (the “New Media Borrower”) maintains secured credit facilities (the “Credit Facilities”) under an agreement (the “New Media Credit Agreement”) with a syndication of lenders, including a term loan facility and a revolving credit facility. The term loan facility expires on July 14, 2022,is required to be prepaid with (i) any unrestricted cash in excess of $40 million at the end of fiscal year 2020 and fiscal year 2021, (ii) 50% of excess cash flow (as such term is defined in the revolving creditterm loan facility) measured at the end of each fiscal quarter (beginning with the third quarter of 2020), subject to a step-up to 90% of excess cash flow for each period in fiscal year 2021 or later if the ratio of consolidated debt to EBITDA (as such terms are defined in the term loan facility) is greater than or equal to 1.00 to 1.00, and (iii) 100% of the net proceeds of any non-ordinary course asset sales. The term loan facility expires on July 14, 2021. Maximum borrowingsprohibits the payment of cash dividends prior to the thirtieth day of the second quarter of 2020, and thereafter permits payment of cash dividends up to an agreed-upon amount, provided that the ratio of consolidated debt to EBITDA (as such terms are defined therein) does not exceed a specified threshold. As of March 31, 2020, the Company is in compliance with all of the covenants and obligations under the revolving creditterm loan facility.

In connection with the Apollo term loan facility, including lettersthe Company incurred approximately $4.9 million of credit, total $40,000.
Asfees and expenses and $116.6 million of June 30, 2019, therelender fees which were outstanding borrowings againstcapitalized and will be amortized over the term of the term loan facility and revolving credit facility totaling $433,961 and $8,000, respectively. Asusing the effective interest method. 

The Company is permitted to prepay the principal of December 30, 2018, there were outstanding borrowings against the term loan facility, in whole or in part, at par plus accrued and revolving credit facility totaling $437,257 and $0, respectively. As of June 30, 2019, there were $495 letters of credit issued against the revolving credit facility and the Company had $31,505 of borrowing availability under the revolving credit facility.
Borrowings under theunpaid interest, without any prepayment premium or penalty. The term loan facility bear interest, at the New Media Borrower’s option, at a rate equal to either (i) an adjusted Eurodollar rate (subject to a floor of 1.00%), plus an applicable margin equal to 6.25% per annum or (ii) an adjusted base rate (subject to a floor of 2.00%), plus an applicable margin equal to 5.25% per annum. The New Media Borrower currently uses the Eurodollar rate option.
Borrowings under the revolving credit facility bear interest, at the New Media Borrower’s option, at a rate equal to either (i) an adjusted Eurodollar rate, plus an applicable margin equal to 5.25% per annum or (ii) an adjusted base rate, plus an applicable margin equal to 4.25% per annum, with a step down based on achievement of a certain total leverage ratio. The New Media Borrower currently uses the Eurodollar rate option.
As of June 30, 2019, the New Media Credit Agreement had a weighted average interest rate of 8.56%.
The Credit Facilities are unconditionallyis guaranteed by New Media Holdings I LLC (“Holdings I”), athe material wholly-owned subsidiary of New Media and the parent of the New Media Borrower, as well as by certain subsidiaries of the New Media Borrower (collectively, the “Guarantors”)Company, and are required to be guaranteed by all future material wholly-owned domestic subsidiaries, subject to certain exceptions. All obligations under the Credit Facilities are secured, subject to certain exceptions, by substantially all of the New Media Borrower’s assetsCompany and the assets of the Guarantors.
Repayments made under theits subsidiary guarantors are or will be secured by first priority liens on certain material real property, equity interests, land, buildings, and fixtures. The term loans are equal to 1% annually of the original principal amount in equal quarterly installments for the life of the term loans, with the remainder due at maturity. The New Media Borrower is permitted to make voluntary prepayments at any time without premium or penalty, except in the case of prepayments made in connection with certain repricing transactions with respect to the term loans effected within six months of November 28, 2018, to which a 1.00% prepayment premium applies.
The New Media Credit Agreementloan facility contains customary representations and warranties, and affirmative covenants, and negative covenants applicable to Holdings I, the New Media BorrowerCompany and the New Media Borrower'sits subsidiaries, including, among other things, restrictions on indebtedness, liens, investments, fundamental changes, dispositions, dividends and other distributions, capital expenditures, and events of default. The New Media Credit Agreement contains a financial covenant that requires Holdings I,Company used the New Media Borrower and the New Media Borrower’s subsidiaries to maintain a maximum total leverage ratio of 3.25 to 1.00. As of June 30, 2019, the Company is in compliance with allproceeds of the covenants and obligations underterm loan facility to (i) partially fund the New Media Credit Agreement.
Halifax Alabama Credit Agreement
In connection with the purchaseacquisition of Legacy Gannett, (ii) repay, prepay, repurchase, redeem, or otherwise discharge in full each of the assets of Halifax Mediaexisting financing facilities (as defined in 2015, the Company assumed obligations of Halifax Media includingagreement and discussed in part below), and (iii) pay fees and expenses incurred to obtain the amount owing ($8,000 at that time) under the credit agreement dated June 18, 2013 between Halifax Alabama, LLC and Southeast Community Development Fund V, L.L.C.. This debt bore interest at an annual rate of 2% and was repaid in full on April 1, 2019.
Fair Value
The fair value of long-term debt was estimated at $441,961 as of June 30, 2019, based on discounted future contractual cash flows and a market interest rate adjusted for necessary risks, including the Company’s own credit risk as there are no rates currently observable in publicly traded debt markets of similar risk, terms and average maturities. Accordingly, the Company’s long-term debt under the Credit Facilities is classified within Level 3 of the fair value hierarchy.

term loan facility.

Payment Schedule
As of June 30, 2019, scheduledMarch 31, 2020, the Company had $1.7 billion in aggregate principal paymentsoutstanding under the term loan facility, $4.6 million of outstanding debt are as follows:
2019 (six months remaining)$1,099
20204,395
202112,395
2022424,072
 441,961
Less: 
Current3,296
Unamortized original issue discount1,590
Deferred financing costs2,403
Long-term debt$434,672

(8) Related Party Transactions
Asdeferred financing costs, and $105.4 million of June 30, 2019, the Company’s manager, FIG LLC (the “Manager”), which is an affiliate of Fortress Investment Group LLC ("Fortress"), and its affiliates owned approximately 1.1% of the Company’s outstanding stock and approximately 39.5% of the Company’s outstanding warrants. The Manager and its affiliates hold 2,904,811 stock options of the Company’s common stock as of June 30, 2019.capitalized lender fees. During the three and six months ended June 30, 2019March 31, 2020, the Company recorded $50.8 million in interest expense, $5.9 million in amortization of deferred financing costs and July 1, 2018, Fortress and its affiliates were paid $244, $238, $488 and $490 in dividends, respectively.
$0.8 million for loss on early extinguishment of debt. The Company’s Chairman and Chief Executive Officereffective interest rate is an employee of Fortress (or one of its affiliates), and his salary is paid by Fortress (or one of its affiliates)12.9%.
Management Agreement
Convertible debt

On November 26, 2013, the Company entered into a management agreement with the Manager (as amended and restated, the “Management Agreement”). The Management Agreement requires the Manager to manage the Company’s business affairs, subject to the supervision of the Company’s board of directors (the “Board of Directors” or “Board”). The Management Agreement had an initial three-year term and will be automatically renewed for one-year terms thereafter unless terminated either by the Company or the Manager. The Manager is (a) entitled to receive from the Company a management fee, (b) eligible to receive incentive compensation that is based on the Company’s performance and (c) eligible to receive options to purchase New Media Common Stock upon the successful completion ofApril 9, 2018, Legacy Gannett completed an offering of shares4.75% convertible senior notes, resulting in total aggregate principal of $201.3 million and net proceeds of approximately $195.3 million. Interest on the notes is payable semi-annually in arrears. The notes mature on April 15, 2024 with our earliest redemption date being April 15, 2022. The stated conversion rate of the Company’s Common Stocknotes is 82.4572 shares per $1,000 in principal or any shares of preferred stock with an exercise price equal to the priceapproximately $12.13 per share paid by the public or other ultimate purchaser in the offering (see Note 10). In addition, the Company is obligated to reimburse certain expenses incurred by the Manager. The Manager is also entitled to receive a termination fee from the Company under certain circumstances.
Subsequent to June 30, 2019 and in connection with entering into a agreement and plan of merger, the Company and the Manager have amended the Management Agreement, effective as of the closing of the agreement. Refer to Note 15 for further information on the amended Management Agreement.
The following provides the management and incentive fees recognized and paid to the Manager for the three and six months ended June 30, 2019 and July 1, 2018:
 Three months ended Six months ended
 June 30, 2019 July 1, 2018 June 30, 2019 July 1, 2018
Management fee expense$2,456
 $2,740
 $4,912
 $5,107
Incentive fee expense1,413
 4,802
 1,413
 5,755
Management fees paid2,456
 4,179
 6,167
 6,836
Incentive fees paid—
 953
 5,220
 9,327
Reimbursement for expenses577
 615
 1,226
 1,059


share.

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

The $3.3 million principal value of the remaining notes outstanding liability for all management agreement related fees of $4,996 and $10,696 at June 30, 2019 and December 30, 2018, respectively, included in accrued expenses.
(9) Income Taxes
Income tax expense includes Federal and state income taxes and interest and penalties on uncertain tax positions. Certain income and expenses are not reported in tax returns and financial statements in the same year. The tax effect of such temporary differences is reported as deferred income taxes. Deferred tax assets are reported net of a full valuation allowance since it is more likely than not that a tax benefit will not be realized.
The Company recorded an income tax benefit of $343 and $2,297 (excluding the minority interest) for the three and six months ended June 30, 2019, respectively, and an income tax expense of $2,946 and $2,830 for the three and six months ended July 1, 2018, respectively, using projected effective tax rates of approximately 27% for 2019 and 20% for 2018, respectively. The projected effective tax rates are primarily attributable to indefinite lived deferred tax liabilities which are a source of income to support realization of certain deferred tax assets which are expected to become indefinite lived net operating losses when they reverse in future years.
The Company performs a quarterly assessment of its deferred tax assets and liabilities. ASC Topic 740, “Income Taxes” (“ASC 740”) limits the ability to use future taxable income to support the realization of deferred tax assets when a company has experienced a history of losses even if future taxable income were supported by detailed forecasts and projections.
In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences are projected to become deductible. The Company considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. The Company concluded that during the six months ended June 30, 2019, a net increase to the valuation allowance of $1,264 is necessary to offset additional deferred tax assets (primarily the tax benefit of the net operating loss). All of this amount was recognized through the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss.
The realization of the remaining deferred tax assets is primarily dependent on their scheduled reversals. Any changes to deferred taxes may require an additional valuation allowance. Any increase or decreaseconvertible debt in the valuation allowance could result in an increase or decrease in income tax expense inCondensed consolidated balance sheets. The effective interest rate on the periodnotes was 6.05% as of adjustment.March 31, 2020.
The computation of the annual expected effective tax rate at each interim period requires certain estimates and assumptions including, but not limited to, the expected operating (loss) income for the year, projections of the proportion of income or loss, permanent and temporary differences, and an assessment of the likelihood of recovering deferred tax assets generated in the current year. The accounting estimates used to compute the provision for income taxes may change as new events occur, more experience is acquired, or as additional information is obtained.
For the six months ended June 30, 2019, the difference between the expected tax benefit (excluding the minority interest) of $1,803, at the statutory rate of 21%, and the recorded tax benefit of $2,297 is primarily attributable to the tax effect of the federal valuation allowance, state taxes and non-deductible expenses.
The Company and its subsidiaries file a U.S. federal consolidated income tax return. The U.S. federal and state statute of limitations generally remains open for the 2015 tax year and beyond.


(10) EquityNOTE 9 — Pensions and other postretirement benefit plans

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

Retirement plan costs include the following components:

 Three months ended March 31,
 2020 2019
In thousandsPension OPEB Pension OPEB
Operating expenses:       
Service cost - Benefits earned during the period$681
 $33
 $159
 $—
Non-operating expenses (Other income):       
Interest cost on benefit obligation20,717
 567
 736
 23
Expected return on plan assets(39,759) —
 (967) —
Amortization of actuarial loss (gain)(27) 13
 39
 (9)
Total non-operating expenses (benefit)$(19,069) $580
 $(192) $14
Total expense (benefit) for retirement plans$(18,388) $613
 $(33) $14


During the three months ended March 31, 2020, we contributed $10.0 million and $2.8 million to our pension and other postretirement plans, respectively. In response to the COVID-19 pandemic, our U.K. Pension Plans have negotiated deferral of $17 million in 2020 contributions to be paid in 2021.

NOTE 10 — Income (Loss) Per Sharetaxes

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

Three months ended March 31,
In thousands2020 2019
Pre-tax net loss$(71,627) $(11,309)
Provision (benefit) for income taxes8,979
 (1,954)
Effective tax rate***
 17.3%

*** Indicates a percentage that is not meaningful.

The provision for income taxes for three months ended March 31, 2020 was higher than the comparable period in 2019 due to non-deductible officers' compensation, state income tax expense, and foreign income tax expense. The provision for income taxes for the three months ended March 31, 2020 was calculated using the estimated annual effective tax rate. The estimated annual effective tax rate is negative, resulting in income tax expense primarily driven by state income tax and foreign tax expense.

The Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was enacted on March 27, 2020. The Company will realize a tax benefit attributable to the legislation which permits a refund of tax benefits from earlier years. The legislation also allows the Company to defer certain employer payroll tax payments in 2020 to the end of 2021 and 2022. The Company is anticipating additional guidance from the U.S. Department of the Treasury (the "Treasury") and the Internal Revenue Service to determine whether additional tax benefits are available from this legislation.

The total amount of unrecognized tax benefits that, if recognized, may impact the effective tax rate was approximately $33.8 million as of March 31, 2020 and $32.4 million as of December 31, 2019. The amount of accrued interest and penalties payable related to unrecognized tax benefits was $2.1 million as of March 31, 2020 and $1.9 million as of December 31, 2019.

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.


NOTE 11 — Supplemental equity information

Earnings (loss) per share

The following table sets forth the computation of basic and diluted incomeearnings (loss) per share (“EPS”):share:

 Three months ended Six months ended
 June 30, 2019 July 1, 2018 June 30, 2019 July 1, 2018
Numerator for income (loss) per share calculation:       
Net income (loss) attributable to New Media$2,815
 $11,706
 $(6,291) $11,041
Denominator for income (loss) per share calculation:       
Basic weighted average shares outstanding60,030,748
 59,279,159
 59,997,891
 56,106,899
Effect of dilutive securities:       
Stock options and restricted stock—
 440,851
 —
 379,575
Diluted weighted average shares outstanding60,030,748
 59,720,010
 59,997,891
 56,486,474
in thousands, except share dataThree months ended March 31,
 2020 2019
Net income (loss) attributable to Gannett$(80,152) $(9,106)
    
Basic weighted average shares outstanding130,568
 59,965
Diluted weighted average shares outstanding130,568
 59,965


The Company excluded the following securities from the computation of diluted income (loss) per share because their effect would have been antidilutive:
Three months ended Six months endedThree months ended March 31,
June 30, 2019 July 1, 2018 June 30, 2019 July 1, 2018
in thousands, except share data2020 2019
Stock warrants1,362,479
 1,362,479
 1,362,479
 1,362,479
1,362
 1,362
Stock options2,904,811
 700,000
 2,904,811
 700,000
6,068
 2,905
Unvested restricted stock450,271
 —
 450,271
 —
Restricted stock grants9,494
 501

Equity
Share repurchase program

On May 17, 2017, the Board of Directors authorized the repurchase of up to $100,000$100.0 million of the Company's common stock (“("Share Repurchase Program”Program") over the next 12twelve months. On May 1, 2018, theThe Board of Directors has authorized an extensionextensions of the Share Repurchase Program through May 18, 2019 and on May 20, 2019, the Board of Directors authorized a further extension through May 19, 2020. Under the Share Repurchase Program, the Company may purchase its shares from time to time in the open market or in privately negotiated transactions.transactions, subject to restrictions in our credit facility. NaN shares were repurchased under the program during the three months ended March 31, 2020.

Manager stock options

Pursuant to the anti-dilution provisions of the Incentive Plan, the exercise price on the 652,311 remaining options granted to the ManagerCompany's manager, FIG LLC (the "Manager") in 2014 were equitably adjusted during the three months ended March 31, 2019 from $12.95 to $11.46 as a result of return of capital distributions. Also, these options were equitably adjusted during the three months ended March 31, 2020 from $11.46 to $9.94 as a result of return of capital distributions.

Pursuant to the anti-dilution provisions of the Incentive Plan, the exercise price on the 700,000 options granted to the Manager in 2015 were equitably adjusted during the three months ended March 31, 2019 from $18.94 to $17.45 as a result of return of capital distributions.  Also, these options were equitably adjusted during the three months ended March 31, 2020 from $17.45 to $15.93 as a result of return of capital distributions.

Pursuant to the anti-dilution provisions of the Incentive Plan, the exercise price on the 862,500 options granted to the Manager in 2016 were equitably adjusted during the three months ended March 31, 2019 from $13.24 to $11.75 as a result of return of capital distributions.  Also, these options were equitably adjusted during the three months ended March 31, 2020 from $11.75 to $10.23 as a result of return of capital distributions.

Pursuant to the anti-dilution provisions of the Incentive Plan, the exercise price on the 690,000 options granted to the Manager in 2018 were equitably adjusted during the three months ended March 31, 2019 from $16.45 to $14.96 as a result of return of capital distributions. Also, these options were equitably adjusted during the three months ended March 31, 2020 from $14.96 to $13.44 as a result of return of capital distributions.




The following table includes additional information regarding the Manager stock options:
 Number of Options Weighted-Average Grant Date Fair Value Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term (Years) Aggregate Intrinsic Value ($000)
Outstanding at December 30, 20182,904,811
 $3.59
 $15.31
 7.3 $—
Outstanding at June 30, 20192,904,811
 $3.59
 $13.82
 6.8 $—
          
Exercisable at June 30, 20192,536,811
   $13.66
 6.5 $—

in thousands, except share dataNumber of Options Weighted-Average Grant Date Fair Value Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term (Years) Aggregate Intrinsic Value ($000)
Outstanding at December 31, 20196,068
 $1.78
 $14.70
 8.2 $—
Granted—
 $—
 $—
    
Outstanding at March 31, 20206,068
 $1.78
 $13.97
 7.9 $—
          
Exercisable at March 31, 20203,166
 $1.78
 $12.67
 6.4 $—

Accumulated Other Comprehensive Loss
Stock compensation

The changes in accumulatedCompany recognized compensation cost for share-based payments of $11.6 million for the three months ended March 31, 2020 and $1.1 million for the three months ended March 31, 2019. The total compensation cost not yet recognized related to non-vested awards as of March 31, 2020 was $34.5 million, which is expected to be recognized over a weighted average period of 2.3 years through July 2022.

Restricted stock grants (“RSGs”)

In connection with the 2019 acquisition of Legacy Gannett, Legacy Gannett adopted the New Media Investment Group Inc. Employee Restricted Stock Grant Agreement. The following table outlines RSG activity specific to Legacy Gannett for the three months ended March 31, 2020:
 Three months ended March 31,
 2020
in thousands, except per share dataNumber
of RSGs		 Weighted-
Average
Grant Date
Fair Value
Unvested at beginning of period7,368
 $6.28
Granted2,666
 4.28
Vested(3,239) 6.28
Forfeited(74) 6.25
Unvested at end of period6,721
 $5.49

Legacy New Media RSG activity was as follows:
 Three months ended March 31,
 2020 2019
in thousands, except per share data
Number
of RSGs
 
Weighted-
Average
Grant Date
Fair Value
 
Number
of RSGs
 Weighted-
Average
Grant Date
Fair Value
Unvested at beginning of period317
 $14.61
 384
 $16.11
Granted1,562
 4.71
 298
 13.65
Vested(876) 6.72
 (159) 15.89
Forfeited(15) 16.64
 (23) 16.16
Unvested at end of period988
 $5.94
 500
 $14.71


As of March 31, 2020, the consolidated aggregate intrinsic value of unvested RSGs was $11.4 million.



Accumulated other comprehensive loss by component

The following tables summarize the components of, and the changes in, Accumulated other comprehensive loss (net of tax) for the sixthree months ended June 30, 2019March 31, 2020 and July 1, 2018 are outlined below.2019:
 
Net actuarial loss
and prior service
cost (1)
 Foreign translation adjustment Total
For the six months ended June 30, 2019:     
Balance at December 30, 2018$(6,881) $—
 $(6,881)
Other comprehensive income before reclassifications—
 3
 3
Amounts reclassified from accumulated other comprehensive loss(60) —
 (60)
Net current period other comprehensive loss, net of taxes(60) 3
 (57)
Balance at June 30, 2019$(6,941) $3
 $(6,938)
For the six months ended July 1, 2018:     
Balance at December 31, 2017$(5,461) $—
 $(5,461)
Amounts reclassified from accumulated other comprehensive loss(135) —
 (135)
Balance at July 1, 2018$(5,596) $—
 $(5,596)
 Three months ended March 31, 2020
In thousandsRetirement Plans Foreign Currency Translation



Total
Beginning balance$936
 $7,266
 $8,202
Other comprehensive income (loss) before reclassifications966
 (14,033) (13,067)
Amounts reclassified from accumulated other comprehensive loss(1)
(10) —
 (10)
Net current period other comprehensive income (loss), net of taxes956
 (14,033) (13,077)
Ending balance$1,892
 $(6,767) $(4,875)
(1) 
This accumulated other comprehensive lossincome (loss) component is included in the computation of net periodic benefit.benefit cost. See Note 12.9 — Pensions and other postretirement benefit plans
The following table presents reclassifications out of accumulated other comprehensive loss for the three and six months ended June 30, 2019 and July 1, 2018.
 Three months ended March 31, 2019
In thousandsRetirement Plans Foreign Currency Translation Total
Beginning balance$(6,881) $—
 $(6,881)
Other comprehensive income (loss) before reclassifications—
 —
 —
Amounts reclassified from accumulated other comprehensive loss(30) —
 (30)
Other comprehensive loss(30) —
 (30)
Ending balance$(6,911) $—
 $(6,911)
 Amounts Reclassified from Accumulated Other Comprehensive Loss Affected Line Item in the
Consolidated Statements of
Operations and Comprehensive Income (Loss)
 Three months ended Six months ended 
 June 30, 2019 July 1, 2018 June 30, 2019 July 1, 2018 
Amortization of unrecognized (gain) loss$(30) $(68) $(60) $(135)
(1) 
 
Amounts reclassified from accumulated other comprehensive loss(30) (68) (60) (135)  Income (loss) before income taxes
Income tax expense—
 —
 —
 —
  Income tax (benefit) expense
Amounts reclassified from accumulated other comprehensive loss, net of taxes$(30) $(68) $(60) $(135)  Net income (loss)
(1)
This accumulated other comprehensive loss component is included in the computation of net periodic benefit. See Note 12.


Dividends
During
The Company did 0t pay dividends during the sixthree months ended July 1, 2018, the CompanyMarch 31, 2020 and paid dividends of $0.74 per share of Common Stock of New Media.
During$23.2 million for the sixthree months ended June 30, 2019,March 31, 2019.

On April 1, 2020, the Company paid dividendsannounced that in light of $0.76 per sharethe unprecedented economic disruption and uncertainty caused by the COVID-19 pandemic, the Board of Common StockDirectors had determined that it is in the best interests of New Media.shareholders for the Company to preserve liquidity by suspending the Company’s quarterly dividend.


(11) Unearned Revenues
Changes in unearned revenue were as follows:
 Circulation Advertising Other Total
Six months ended June 30, 2019       
Balance at December 30, 2018$82,645
 $9,107
 $13,435
 $105,187
Acquired deferred revenues6,378
 —
 917
 7,295
Cash receipts, net of refunds213,078
 17,296
 31,324
 261,698
Revenue recognized(217,500) (16,114) (27,307) (260,921)
Balance at June 30, 2019$84,601
 $10,289
 $18,369
 $113,259
        
Six months ended July 1, 2018       
Balance at December 31, 2017$73,874
 $6,615
 $7,675
 $88,164
Acquired deferred revenues14,654
 312
 1,724
 16,690
Cash receipts, net of refunds179,210
 13,455
 18,123
 210,788
Revenue recognized(183,769) (11,653) (14,650) (210,072)
Balance at July 1, 2018$83,969
 $8,729
 $12,872
 $105,570

NOTE 12 — Fair value measurement
The Company records deferred revenue when cash payments are received in advance of the Company’s performance. The most significant unsatisfied performance obligation is the delivery of publications to subscription customers. The Company expects to recognize the revenue related to unsatisfied performance obligations over the next three to twelve months in accordance with the terms of the subscriptions. The increase in deferred revenue balance for the six months ended June 30, 2019 is primarily driven by acquisitions and the timing of company-sponsored events.
(12) Pension and Postretirement Benefits
As a result of the Enterprise News Media LLC (in 2005), Copley Press, Inc. (in 2007), and Times Publishing Company (in 2016) acquisitions, the Company maintains two pension and several postretirement medical and life insurance plans which cover certain employees. The Company uses the accrued benefit actuarial method and best estimate assumptions to determine pension costs, liabilities and other pension information for defined benefit plans. Amounts related to the postretirement benefit plans are immaterial.
The George W. Prescott Company pension plan, assumed in the Enterprise News Media, LLC acquisition, was amended to freeze all future benefit accruals by December 31, 2008, except for a select group of union employees whose benefits were frozen during 2009. The Times Publishing Company pension plan was frozen prior to the acquisition.


The following provides information on the pension plans for the threeWe measure and six months ended June 30, 2019 and July 1, 2018:
 Three months ended Six months ended
 June 30, 2019 July 1, 2018 June 30, 2019 July 1, 2018
Components of net periodic benefit:       
Service cost$159
 $150
 $317
 $300
Interest cost736
 700
 1,473
 1,400
Expected return on plan assets(967) (1,062) (1,934) (2,124)
Amortization of unrecognized loss39
 68
 78
 135
     Net periodic benefit$(33) $(144) $(66) $(289)

The service cost component of net periodic benefit is included within Operating Costs and the other components are included within Other Income in the Company’s Condensed Consolidated Statements of Operations and Comprehensive Loss. During the three and six months ended June 30, 2019, the Company paid $288 and $400 into the pension plans, respectively. The Company expects to pay an additional $652 in employer contributions to the pension plans during the remainder of 2019.
(13) Fair Value Measurement
The Company measures and records in the accompanying condensed consolidated financial statementsrecord certain assets and liabilities at fair value on a recurring basis. ASC Topic 820 “Fair Value Measurements and Disclosures” establishes avalue. A fair value measurement is determined based on market assumptions that a market participant would use in pricing an asset or liability. A three-tiered hierarchy for those instruments measured at fair value that distinguishesdraws distinctions between market participant assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs).
These inputs are prioritized as follows:
Level 1: Observable(i) observable inputs such as quoted prices in active markets for identical assets or liabilities;
Level 2: Inputs(Level 1), (ii) inputs other than quoted prices included within Level 1active markets that are observable either directly or indirectly such as quoted prices for similar assets or liabilities or market corroborated inputs;(Level 2), and
Level 3: Unobservable (iii) unobservable inputs for which there is little or no market datathat require use of our own estimates and which require the Company to develop their own assumptions about how market participants price the asset or liability.
Thethrough present value and other valuation techniques that may be used to measurein determination of fair value are as follows:
Market approach – Uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities;
Income approach – Uses valuation techniques to convert future amounts to a single present amount based on current market expectation about those future amounts;
Cost approach – Based on the amount that currently would be required to replace the service capacity of an asset (replacement cost)(Level 3).
The following table provides information for the Company’s major categories
As of financialMarch 31, 2020 and December 31, 2019, assets and liabilities measured or disclosed at fair value on a recurring basis:


 Fair Value Measurements at Reporting Date Using  
 
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total 
Fair Value
Measurements
As of June 30, 2019       
Assets       
Cash and cash equivalents$20,029
 $—
 $—
 $20,029
Restricted cash3,155
 —
 —
 3,155
Total$23,184
 $—
 $—
 $23,184
        
Liabilities       
Contingent consideration$—
 $—
 $1,963
 $1,963
        
Redeemable noncontrolling interests$—
 $—
 $1,098
 $1,098
As of December 30, 2018       
Assets       
Cash and cash equivalents$48,651
 $—
 $—
 $48,651
Restricted cash4,119
 —
 —
 4,119
Total$52,770
 $—
 $—
 $52,770
        
Liabilities       
Contingent consideration$—
 $—
 $3,256
 $3,256
        
Redeemable noncontrolling interests$—
 $—
 $1,547
 $1,547

Contingent consideration relates to certain of the Company’s 2018 Acquisitions and is primarily payable to the sellers based on the passage of time or as a component of earnings above an agreed-upon target as detailed in the applicable purchase agreements. The decrease in contingent consideration since December 30, 2018 is the result of a measurement period adjustment.
Redeemable Noncontrolling Interests
The Company accounts for the redeemable noncontrolling interests in accordance with ASC 480-10-S99-3A, “Distinguishing Liabilities from Equity”, because the exercise is outside the control of the Company. The redeemable noncontrolling interests recorded at fair value are put arrangements heldand measured on a recurring basis primarily consist of pension plan assets. As permitted by U.S. GAAP, we use net asset values as a practical expedient to determine the noncontrolling interestsfair value of certain investments. These investments measured at net asset value have not been classified in the Company’s majority-owned events business.fair value hierarchy.

The changesterm loan facility is recorded at carrying value, which approximates fair value, in redeemable noncontrolling intereststhe Condensed consolidated balance sheets and is classified as Level 3.

We also have certain assets requiring fair value measurement on a non-recurring basis. Our assets measured on a non-recurring basis are assets held for sale, which are classified as Level 3 measurements were as follows:assets and evaluated using executed purchase
 Six months ended Year Ended
 June 30, 2019 December 30, 2018
Beginning balance$1,547
 $—
Purchases (1)
—
 1,636
Net loss(449) (89)
Ending balance$1,098
 $1,547




(1)Refer to Note 2.
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 inagreements, letters of intent, or third-party valuation analyses when certain circumstances (for example, when there is evidencearise. Assets held for sale totaled $22.4 million as of impairment).
For the 2019 AcquisitionsMarch 31, 2020 and 2018 Acquisitions, the Company recorded the assets and liabilities under the acquisition method$25.5 million as of accounting. Accordingly, the assets acquired and liabilities assumed were recorded at their fair value. Property, plant

December 31, 2019.

and equipment was valued using Level 2 inputs, and intangible assets were valued using Level 3 inputs. Refer to Note 2 for discussion of the valuation techniques, significant inputs, assumptions utilized, and the fair value recognized.
Refer to Note 7 for the discussion on the fair value of the Company’s total long-term debt.
(14)NOTE 13 — Commitments, contingencies and Contingenciesother matters

The Company is and may become involved from time to time in legal proceedings in the ordinary course of its business, including but not limited to with respect to such matters as libel, invasion of privacy, intellectual property infringement, wrongful termination actions, and 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 condensed consolidated results of operations or financial position.

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

Environmental contingency: We assumed responsibility for certain environmental contingencies in connection with our acquisition of Legacy Gannett. More specifically, in March 2011, the Advertiser Company (Advertiser), a subsidiary that publishes the Montgomery Advertiser, was notified by the U.S. Environmental Protection Agency (EPA) that it had been identified as a potentially responsible party (PRP) for the investigation and remediation of groundwater contamination in downtown Montgomery, Alabama. The Advertiser is a member of the Downtown Environmental Alliance, which has agreed to jointly fund and conduct all required investigation and remediation. In 2016, the Advertiser and other members of the Downtown Environmental Alliance reached a settlement with the U.S. EPA regarding the costs the U.S. EPA spent to investigate the site. The U.S. EPA has transferred responsibility for oversight of the site to the Alabama Department of Environmental Management, which has approved the work plan for the additional site investigation that is currently underway. The Advertiser's final costs cannot be determined until the investigation is complete, a determination is made on whether any remediation is necessary, and contributions from other PRPs are finalized.

Other litigation: We are defendants in judicial and administrative proceedings involving matters incidental to our business. Although the Company is unable to predict with certainty the eventual outcome of any litigation, regulatory investigation or inquiry, in the opinion of management, the Company does not expect its current and any threatened legal proceedings to have a material adverse effect on the Company’s business, financial position or consolidated results of operations. Given the inherent unpredictability of these types of proceedings, however, it is possible that future adverse outcomes could have a material effect on the Company’s financial results.
Restricted cash of $3,155 and $4,119 at June 30, 2019 and December 30, 2018, respectively, was primarily held as cash collateral for certain business operations.
(15) Subsequent EventsNOTE 14 — Segment reporting
We define our reportable segments based on the way the Chief Operating Decision Maker (CODM), currently the Chief Executive Officer of our operating subsidiary, manages the operations for purposes of allocating resources and assessing performance. Our reportable segments include the following:

Publishing, which consists of our portfolio of local, regional, national, and international newspaper publishers. The results of this segment include local, classified, and national advertising revenues consisting of both print and digital advertising, circulation revenues from the distribution of our publications on our digital platforms, home delivery of our publications, single copy sales, and other revenues from commercial printing, events, and distribution arrangements. The Publishing reportable segment is an aggregation of 2 operating segments: Domestic Publishing and the U.K.
Marketing Solutions, which is comprised of our digital marketing solutions subsidiaries ReachLocal and UpCurve. 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, 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 and includes 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 to evaluate the performance of the segments and allocate resources. Adjusted EBITDA is a non-GAAP financial performance measure we believe offers a useful view of the overall operation of our businesses and may be different than similarly-titled non-GAAP financial measures used by other companies. We define Adjusted EBITDA as net income (loss) from continuing operations attributable to Gannett before (1) income tax expense (benefit), (2) interest expense, (3) gains or losses on early extinguishment of debt, (4) non-operating items, primarily pension costs, (5) depreciation and amortization, (6) integration and reorganization costs, (7) impairment of long-lived assets, (8) goodwill and intangible impairments, (9) net loss (gain) on sale or disposal of assets, (10) equity-based compensation, (11) acquisition costs, and (12) certain other non-recurring charges.

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

The following tables present our segment information:

 Three months ended March 31, 2020
In thousandsPublishing Marketing Solutions Corporate and other Intersegment Eliminations Consolidated
Advertising and marketing services - external sales$369,878
 $116,283
 $849
 $—
 $487,010
Advertising and marketing services - intersegment sales33,758
 —
 —
 (33,758) —
Circulation374,720
 —
 3
 —
 374,723
Other79,794
 4,998
 2,157
 —
 86,949
Total revenues$858,150
 $121,281
 $3,009
 $(33,758) $948,682
          
Adjusted EBITDA$110,928
 $7,887
 $(19,746) $—
 $99,069

 Three months ended March 31, 2019
In thousandsPublishing Marketing Solutions Corporate and other Intersegment Eliminations Consolidated
Advertising and marketing services - external sales$171,817
 $21,390
 $337
 $—
 $193,544
Advertising and marketing services - intersegment sales17,040
 —
 —
 (17,040) —
Circulation152,164
 —
 1
 —
 152,165
Other37,059
 4,497
 334
 —
 41,890
Total revenues$378,080
 $25,887
 $672
 $(17,040) $387,599
          
Adjusted EBITDA$41,693
 $(3,230) $(5,616) $—
 $32,847



The following table presents our reconciliation of adjusted EBITDA to net loss:


Three months ended March 31,
In thousands2020 2019
Net loss attributable to Gannett$(80,152) $(9,106)
Provision (benefit) for income taxes8,979
 (1,954)
Interest expense57,899
 10,134
Loss on early extinguishment of debt805
 —
Other income(16,899) (260)
Depreciation and amortization78,024
 20,923
Integration and reorganization costs28,254
 5,798
Acquisition costs5,969
 772
Impairment of long-lived assets—
 1,207
Loss on sale or disposal of assets657
 1,789
Equity-based compensation expense11,577
 1,136
Other items3,956
 2,408
Adjusted EBITDA (non-GAAP basis)$99,069
 $32,847


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 provision 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.

Agreement and Plan of Merger with GannettNOTE 15 — Related party transactions
On August 5, 2019,
As of March 31, 2020, the Company entered intoManager, which is an Agreementaffiliate of Fortress Investment Group LLC ("Fortress"), and Plan of Merger (the “Merger Agreement”) to acquire Gannett Co., Inc. (“Gannett”) in a cash and stock transaction for $12.06 per share of Gannett common stock, orits affiliates owned approximately $1,400,000 at the date of the announcement (the “Merger”). Each share of Gannett common stock will be exchanged for $6.25 per share in cash and 0.5427 shares4% of the Company’s common stock.
Subject to the terms, carve-outsoutstanding stock and conditions of the Merger Agreement, at the effective time of the Merger, Gannett shareholders will own approximately 49.5%40% of the Company’s commonoutstanding warrants. The Manager or its affiliates hold 6,068,075 stock on a fully-diluted basis based on the numberoptions of the Company’s shares then outstanding. stock as of March 31, 2020. During the three months ended March 31, 2020 and 2019, Fortress and its affiliates were paid 0 dividends and $0.2 million in dividends, respectively.

The Company expects that the cash portion of the purchase price will be financed with new debt and cash on hand. As further discussed below, the Company has a commitment for the Merger financing.
GannettCompany's Chief Executive Officer is an innovative, digitally focused media and marketing solutions company committed to fostering the communities in their network and helping them build relationships with their local businesses. Gannett owns ReachLocal, Inc., a digital marketing solutions company, the USA TODAY NETWORK (made upemployee of USA TODAY and 109 local media organizations in 34 states in the U.S. and Guam, including digital sites andFortress (or one of its affiliates), and Newsquest (a wholly-owned subsidiary operating in the United Kingdom with more than 150 local media brands).
Consummationhis salary is paid by Fortress (or one of the Merger Agreementits affiliates). The management fee paid is subject to certain closing conditions, including approval by Gannett’s and the Company’s stockholders (in the case of the Company’s stockholder approval disregarding any shares held by certain affiliates of Fortress) and is subject to reviewreduced by the U.S. Department of Justicecompensation paid to the Chief Financial Officer.

Amended and the European Commission. The MergerRestated Management Agreement does not contain a financing condition. The Merger is expected to close before December 31, 2019, although there can be no assurance that the Merger will occur by such date. Either party may terminate the Merger Agreement if the Merger is not consummated within six months of the execution of the Merger Agreement, subject to an automatic three-month extension if necessary to obtain regulatory approvals.
Financing Commitment
On August 5, 2019, in connection with entering into the Merger Agreement, the Company hasNovember 26, 2013, New Media entered into a commitment letter (the "Commitment Letter"management agreement (as amended and restated, "the Management Agreement") with Apollo Capital Management, L.P. (“Apollo”)the Manager, an affiliate of Fortress, pursuant to provide a $1,792,000 first lien term loan facility (the "Acquisition Credit Facility")which the Manager managed the operations of New Media. New Media paid the Manager an annual management fee equal to fund the cash portion1.50% of the Merger consideration, refinance the existing indebtedness of both the Company and Gannett, pay fees and expenses in connection with the Merger, and to the extent of any remaining proceeds, finance ongoing working capital and other general corporate needs. The Acquisition Credit Facility will bear a fixed interest rate of 11.5%, subject to a one-year step-up of 50 basis pointsCompany's Total Equity (as defined in the event that the closing of the Merger occurs more than six months following the date of the Commitment Letter. The Acquisition Credit Facility will have a five-


year term and will be freely pre-payable without penalty. Under the terms of the Commitment Letter and its accompanying Fee Letter, the Company will pay fees of 6.5% of the principal amount of the financing at closing.
The Acquisition Credit Facility is subject to negotiation of a mutually acceptable credit or loan agreement and other mutually acceptable definitive documentation, which will include certain representations and warranties, affirmative and negative covenants, financial covenants, events of default and collateral and guarantee agreements that are customarily required for similar financings. Additionally, Apollo’s obligation to provide the financing is subject to the satisfaction of specified conditions, including that the Company must have at least $40,000 (on a combined company basis) of unrestricted cash at closing,Management Agreement), and the accuracy of specified representations. The documentation governing the Acquisition Credit Facility has not been finalized and, accordingly, the actual terms may differ from the description in the foregoing summary of the Commitment Letter.Manager was eligible to receive incentive compensation.
Amended Management Agreement
On August 5, 2019, in connection with the execution of the Merger Agreement,Legacy Gannett acquisition agreement, the Company and the Manager entered into the Amended and Restated Management and Advisory Agreement (the "Amended“Amended Management Agreement"Agreement”). Effective upon the consummation of the Merger,acquisition on November 19, 2019, the Amended Management Agreement will replacereplaced the existing Amended and Restated Management and Advisory Agreement, dated as of February 14, 2014, between the Company and the Manager.Agreement. The Amended Management Agreement (i) establishes a termination date for the Manager’s services of December 31, 2021, in lieu of annual renewals of the term; (ii) reduces the “incentive fee” payable under the Amended Management Agreement from 25% to 17.5% for the remainder of the term; (iii) reduces by 50% the number of options that would otherwise be issuable in connection with the issuance of shares as consideration for the Merger,acquisition, and imposes a premium on the exercise price; (iv) eliminates the Manager’s right to receive options in connection with future equity raises by the Company; and (v) eliminates certain payments otherwise due at or after the end of the term of the prior management agreement.

In connection with entering into the Amended Management Agreement and the occurrence of the Effective Time,consummation of the acquisition, the Company will issueissued to the Manager 4,205,607 shares of Company Common Stock and granted to the Manager options to acquire 3,163,264 shares of Company Common Stock. The Manager is restricted from selling thesethe issued shares until


the expiration of the Amended Management Agreement, or otherwise upon a change in control and certain other extraordinary events. The Company will also grant to the Manager options to acquire 3,163,265 shares of Company Common Stock. These options will have an exercise price of $15.50 and become exercisable upon the first trading day immediately following the first 20 consecutive trading day period in which the closing price of the Company Common Stock (on its principal U.S. national securities exchange) is at or above $20 per share (subject to adjustment), and. The options also become exercisable upon a change in control and certain other extraordinary events.

Upon expiration of the term of the Amended Management Agreement, the Manager will cease providing external management services to the Company, and the Manager will no longer be the employer of the person serving in the role of Chief Executive Officer of the combinedconsolidated company.
Dividends
The following table provides the management and incentive fees recognized and paid to the Manager:

 Three months ended March 31,
In thousands2020 2019
Management fee expense3,759
 2,456
Incentive fee expense(10) —
Management fees paid3,624
 3,711
Incentive fees paid2,602
 5,220
Reimbursement for expenses667
 550
On August 5,

The Company had an outstanding liability for all Management Agreement related fees of $4.6 million and $6.5 million at March 31, 2020 and December 31, 2019, the Company announced a second quarter 2019 cash dividend of $0.38 per share of Common Stock, par value $0.01 per share, of New Media. The dividend will be paid on August 28, 2019, to shareholders of record as of the close of business on August 20, 2019.respectively, included in accrued expenses.

NOTE 16 — Subsequent events

Dividends

For information regarding the Board of Director’s determination to suspend the Company’s quarterly dividend, see Note 11 — Supplemental equity information.

Rights Agreement

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

Under the Rights Agreement, the Board declared a non-taxable dividend of 1 preferred share purchase right for each outstanding share of common stock. The rights will be exercisable only if a person or group acquires 4.99% or more of Gannett’s common stock. Gannett’s existing shareholders 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 shareholders 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 percent discount or Gannett may exchange each right held by such holders for 1 share of common stock. Rights held by the person or group triggering the rights will become void and will not be exercisable. The Board of Directors has the discretion to exempt any person or group from the provisions of the Rights Agreement.

The rights issued under the Rights Agreement will expire on the day following the certification of the voting results for Gannett’s 2021 annual meeting of shareholders, unless Gannett’s shareholders ratify the Rights Agreement at or prior to such meeting, in which case the Rights Agreement will continue in effect until April 5, 2023. Gannett’s Board also has the ability to terminate the plan if it determines that doing so would be in the best interest of Gannett’s shareholders. 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. The Apollo term loan facility was amended April 6, 2020, to allow for the Rights Agreement.

Item 2.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s


The following discussion and analysis of our financial condition and results of operations is intended to help the reader understand the results of operations and financial condition of New Media Investment Group Inc.quantitative and its subsidiaries (“New Media”, “Company”, “we”, “us” or “our”). The followingqualitative disclosures should be read in conjunction with theour unaudited Condensed consolidated financial statements and notes thereto included herein,related notes. Management's Discussion and Analysis of Financial Condition and Results of Operations contains a number of forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and other factors described under Cautionary Note Regarding Forward-Looking Statements and throughout this Quarterly Report, as well as the factors described in our 2019 Annual Report on Form 10-K, this report, and subsequent periodic reports filed with Part II, Item 1A, “Riskthe Securities and Exchange Commission, particularly under "Risk Factors.”"

Overview

Gannett Co., Inc. ("Gannett", "we", "us", "our", or "the Company") is an innovative, digitally focused media and marketing solutions company committed to fostering the communities in our network and helping them build relationships with their local businesses. Until November 19, 2019, our corporate name was New Media supports smallInvestment Group Inc. ("New Media") and Gannett Co, Inc. was a separate publicly traded company. On November 19, 2019 New Media completed its acquisition of Gannett Co., Inc. (which was renamed Gannett Media Corp. and is referred to mid-size communities by providing locally-focused printherein as “Legacy Gannett”). In connection with the acquisition, New Media changed its name to Gannett Co., Inc. and digital contentassumed Legacy Gannett's ticker symbol "GCI" (having previously traded under "NEWM").

As a result of the acquisition, historical results for fiscal years 2019 and prior are those of legacy New Media up to its consumers, premier marketing and technology solutions for our small and medium business partners, and producing world-class events forthrough the media industry anddate of the communities they serve. We have a particular focus on owning and acquiring strong local media assets in small to mid-size markets. With our collection of assets, we focus on two large categories: consumers and small to medium-sized businesses (“SMBs”).acquisition.

Our current portfolio of media assets spans across 612 markets and 39 states. Our products include 654 community print publications and 612 websites. As of June 30, 2019, we reach over 21 million people per week and serve over 200,000 business customers.


Our mission is to be theincludes USA TODAY, local audience and small-business expertmedia organizations in 46 states in the markets that we operate in. We leverage this local expertise to sell our unique, hyperlocal content to consumersU.S. and our market-leading technology solutions to SMBs. There are three key elements of our strategy:
1.We aim to grow our business organically through both our consumerGuam, and SMB strategies,
2.We pursue strategic acquisitions of high-qualityNewsquest, a wholly owned subsidiary operating in the United Kingdom ("U.K.") with more than 140 local media andbrands. Gannett also owns the digital marketing assets at attractive valuation levels, and
3.We intend to distribute a portion of our free cash flow generated from operations or other sources as a dividend to stockholders through a quarterly dividend, subject to satisfactory financial performance, approval by our board of directors (the “Board of Directors” or “Board”services companies ReachLocal, Inc. ("ReachLocal") and dividend restrictions in the New Media Credit Agreement (as defined below). The Board of Directors’ determinations regarding dividends will depend on a variety of factors, including the Company’s U.S. generally accepted accounting principles (“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.
We believe that our focus on owning and operating leading local-content-oriented media properties in small to mid-size markets puts us in a position to better execute on our strategy. We believe that being the leading provider of local news and information in the markets in which we operate, and distributing that content across multiple print and digital platforms, gives us an opportunity to grow our audiences and reach. Further, we believe our strong local media brands and our market presence give us the opportunity to expand our advertising and lead generation products with local business customers.
For our SMB category, we focus on leveraging our strong local media brands, our in-market sales force and our high consumer penetration rates to offer technology solutions that allow SMBs to operate efficiently and effectively in a digital world. Central to this business strategy is our wholly-owned subsidiary, UpCurve, Inc. ("UpCurve"). UpCurve provides two broad categories, and WordStream, Inc. ("WordStream") and runs the largest media-owned events business in the U.S., GateHouse Live.

Through USA TODAY, our local property network, and Newsquest, Gannett delivers high-quality, trusted content where and when consumers want to engage with it on virtually any device or platform. Additionally, the Company has strong relationships with hundreds of services: ThriveHive, previously known as Propel Marketing, which provides guidedthousands 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 for SMBs,product suite. The Company reports in two operating segments, Publishing and UpCurve Cloud which offers cloud-based products with expert guidanceMarketing Solutions. We also have a corporate and support. ThriveHiveother category that includes activities not directly attributable to a specific segment. A full description of our segments is designed to offer a complete setincluded in Note 14 — Segment reporting of turn-key guided marketing and business solutions to SMBs that provide transparent resultsthe notes to the business owners.Condensed consolidated financial statements.

The Company has made both internal and external investments to align with the shift in spending habits to digital products by both consumers and marketers. In 2016, we acquired a turn-key proprietary software application that enables SMB owners to run their ownthe three months ended March 31, 2020, total digital advertising and guided marketing campaigns,services revenues were $219.2 million, or 23% of total Company revenues. Our U.S. media network, which includes USA TODAY and we have made a number of strategic acquisitions since.
We launched the UpCurve products in 2012 and have seen rapid growth since then. We believe UpCurve, combined with our strong local brands and in-market sales force, is positioned to continue to be a key component to our overall organic growth strategy. UpCurve is well positioned to seize upon the approximately 30.2 million SMBs in the U.S. in 2015 according to the U.S. Small Business Administration. Of these, approximately 29.0 million had 20 employees or fewer. Many of the owners and managers of these SMBs do not have the resources or expertise to navigate the fast evolving workplace technologies market but are increasingly aware of the need to embrace the digital disruption to their business model.
GateHouse Live, our events and promotions business, was started in 2015 to leverage our local brands to create world-class events inproperties, has more than 5,300 newsroom employees and approximately 170 million(a) unique visitors as of March 2020 who access content through desktops, smartphones, and tablets. In the markets we serve.  In 2018, GateHouse Live produced over 350 eventsU.K., Newsquest is a publishing and digital leader with a collective attendance over 400,000.  Among our core event offerings are a variety of themed expos focused on target audiences, including men, women, seniorsapproximately 750 newsroom employees and young families.  Other signature event series produced across many of our markets include one of the nation's largest high school sports recognition events and the official community's choice awards for dozens of markets across the country.  In 2018, GateHouse Live expanded into endurance events that include a network of web sites that attracts over 90 marathons, half marathons, other footraces and obstacle course races across the United States and Canada with over 250,000 attendees annually.  GateHouse Live also offers white label event services for retailers and other media companies.
Portfolio Detail
Our core products include:
154 daily newspapers with total paid circulation of approximately 1.5 million;
292 weekly newspapers (published up to three times per week) with total paid circulation of approximately 300,000 and total free circulation of approximately 2.1 million;
133 “shoppers” (generally advertising-only publications) with total circulation of approximately 3.2 million;
612 locally-focused websites, which extend our businesses onto the internet and mobile devices with approximately 40836.9 million page views per month;

(b) unique visitors monthly.

75 business publications;
UpCurve CloudCertain matters affecting current and ThriveHive digital marketing; andfuture operating results
GateHouse Live.
In addition to our core products, we also opportunistically produce niche publications that address specific local market interests such as recreation, sports, healthcare and real estate. Our print and online products focus on the local community from a content, advertising, and digital marketing perspective. As a result of our focus on small and mid-size markets, we are usually the primary, and sometimes the sole, provider of comprehensive local market news and information in the communities we serve. Our content is primarily devoted to topics that we believe are highly relevant and of interest to our audiences such as local news and politics, community and regional events, youth sports, opinion and editorial pages, local schools, obituaries, weddings and police reports.
We believe our local media properties and local sales infrastructure are uniquely positioned to sell digital marketing and business services to local business owners and give us distinct advantages, including:
our strong and trusted local brands, with 88% of our daily newspapers having published local content for more than 100 years;
our ability to market through our print and online properties, driving branding and traffic; and
our more than 1,085 local, direct, in-market sales professionals with long-standing relationships with small businesses in the communities we serve.
We believe the large number of publications we have, our focus on smaller markets, and our geographic diversity also provide the following benefits to our strategy:
Diversified revenue streams, both in terms of customers and markets;
Operational efficiencies realized from clustering of business assets;
Operational efficiencies realized from centralization of back office functions;
Operational efficiencies realized from improved buying power for key operating cost items through our increased size and scale;
Ability to provide consistent management practices and ensure best practices; and
Less competition and high barriers to entry.
The revenues derivedfollowing items affect period-over-period comparisons from our SMB category come from a variety of print2019 and guided marketing and business solutions products we offer through UpCurve and commercial printing services. Our consumer revenue category comes primarily from subscription income as consumers pay for our deep, rich local content, both in print and online, however primarily in print today.
Our advertising revenue tends to follow a seasonal pattern, with higher advertising revenue in months containing significant events or holidays. Accordingly, our first quarter and our third quarter, historically, are our weakest revenue quarters of the year. Correspondingly, our second and fourth fiscal quarters, historically, are our strongest quarters. We expect that this seasonality will continue to affect our advertising revenue inperiod-over-period comparisons for future periods.results:
We have experienced ongoing declines in same store print advertising revenue streams
Acquisitions

In November 2019, we acquired substantially all of the assets, properties, and increased volatilitybusiness of operating performance, despite our geographic diversity, well-balanced portfolioLegacy Gannett for an aggregate purchase price of products, broad customer base$1.3 billion. The acquisition was funded by a new term loan facility with an aggregate principal balance of $1.8 billion and relianceavailable cash on smaller markets. We may experience additional declines and volatility in the future. These declines in print advertising revenue have come with the shift from traditional mediahand.

During 2019 prior to the internet for consumers and businesses. We believe our local advertising tends to be less sensitive to economic cycles than national advertising because local businesses generally have fewer advertising channels through which to reach their target audience. We are making investments in digital platforms, such as UpCurve, as well as online and mobile applications, to support our print publications in order to capture this shift as witnessed by our digital advertising and business services revenue growth, which more than doubled between 2013 and 2017, and continues to grow.
Our operating costs consist primarilyacquisition of labor, newsprint, and delivery costs. Our selling, general and administrative expenses consist primarily of labor costs.


Compensation represents just under 50% of our expenses. Over the last few years, we have worked to drive efficiencies and centralization of work throughout our Company. Additionally, we have taken steps to cluster our operations, thereby increasing the production volume of our facilities and equipment while increasing the productivity of our labor force. We expect to continue to employ these steps as part of our business strategy.
Our reporting units (Newspapers and BridgeTower) are aggregated into one reportable business segment.
Acquisitions
During the six months ended June 30, 2019,Legacy Gannett, we acquired substantially all the assets, properties, and business of certain publications/publications and businesses, which included 10including 11 daily newspapers, 11 weekly publications, eight9 shoppers, a remnant advertising agency, three5 events production businesses, and a business community and networking platform for an aggregate purchase price of $35.7$46.6 million, including estimated working capital. As part of one of the 2019 acquisitions, the Company
During 2018, we

also acquired substantially alla 58% equity interest in the assets, properties,acquiree, and businessthe minority equity owners retained a 42% interest, which has been classified as a redeemable non-controlling interest on the Condensed consolidated statements of certain publications/businesses, which included seven business publications, eight daily newspapers, 16 weekly newspapers, one shopper, a print facility, an events production business, cloud servicesoperations and digital platformscomprehensive income. These acquisitions were financed from available cash on hand.

Integration and reorganization costs

In the three months ended March 31, 2020, the Company incurred integration and reorganization costs of $28.3 million. Of the total charges incurred, $21.2 million were related domains,to severance activities while $7.1 million were related to other costs, including those for an aggregate purchase pricethe purpose of $205.8 million, including estimated working capital.consolidating operations.
On August 5, 2019, we entered into an agreement to acquire Gannett, as discussed below under
In the heading “Agreement and Plan of Merger with Gannett”.
Agreement and Plan of Merger with Gannett
On August 5,three months ended March 31, 2019, the Company entered into an Agreementincurred integration and Planreorganization costs of Merger (the “Merger Agreement”) with Gannett Co., Inc. ("Gannett"), in a cash and stock transaction$5.8 million. Of the total charges incurred, $3.4 million were related to severance activities while $2.4 million were related to other costs, including those for $12.06 per sharethe purpose of Gannett common stock, or approximately $1.4 billion atconsolidating operations.

Facility consolidation

In the datethree months ended March 31, 2020, the Company ceased operations of fourteen printing facilities as part of the announcement.
Subject to the terms, carve-outssynergy and conditions of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each share of common stock, par value $0.01 per share, of Gannett issued and outstanding immediately prior to the Effective Time shall be converted automatically into (A) 0.5427 ofongoing cost reduction programs. As a fully paid and nonassessable share of common stock, par value $0.01 per share, ofresult, the Company and (B)recognized accelerated depreciation of $24.7 million during the rightthree months ended March 31, 2020. There were no impairment charges recognized relating to receive $6.25 in cash, without interest. Followingretired equipment during the Merger, it is anticipated that stockholders ofthree months ended March 31, 2020.

In the Company will own approximately 50.5 percent of the Company’s common stock and stockholders of Gannett will own approximately 49.5 percent of the Company’s common stock. For information about the anticipated financing for the Merger, see “Apollo Commitment Letter” below.
Consummation of the Merger is subject to customary closing conditions, including (i) the approval by Gannett’s stockholders and the Company’s stockholders (in the case of the Company stockholder approval, disregarding any shares held by certain affiliates of Fortress), (ii) the absence of any judgment or law restraining, enjoining or otherwise prohibiting the Merger and (iii) the receipt of required regulatory clearances, including the expiration or termination of the applicable waiting period (and any extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and obtaining the necessary clearance from the European Commission. The Merger Agreement does not contain a financing condition. The Merger is expected to close before Decemberthree months ended March 31, 2019, although there can be no assurance that the Merger will occur by such date. Either party may terminate the Merger Agreement if the Merger is not consummated within six months of the execution of the Merger Agreement, subject to an automatic three-month extension if necessary to obtain regulatory approvals.
In connection with the execution of the Merger Agreement, the Company has also agreed to amend the Management Agreement, as discussed below under the heading “Amended and Restated Management Agreement”.
The Merger Agreement contains representations and warranties and covenants of the parties customary for transactions of this nature.
The Board approved the Merger Agreement and the transactions contemplated thereby following the recommendation of a transaction committee consisting solely of independent and disinterested directors of the Company, to which the Board had delegated all power and authority that may otherwise be exercised by the Board in reviewing, evaluating, and negotiating a potential transaction with Gannett.


At the Effective Time, the Board will be comprised of nine directors, consisting of five independent members of the Board, three independent members of the board of directors of Gannett and the Chief Executive Officer of the Company. The Company currently has three independent directors and is currently in the process of identifying two additional directors to serve on the Board.
The parties have agreed to certain post-closing governance matters in the Merger Agreement. At the Effective Time, the Chief Executive Officer (“CEO”) of the Company will continue to serve as the CEO of the Company, and the CEO of Gannett as of the date of the Merger Agreement will serve as the CEO of all of the Company’s operating subsidiaries, provided such person is serving as the CEO of Gannett immediately prior to the Effective Time.
The Merger Agreement also provides that the Company’s operating subsidiaries will operate under the “Gannett” brand as of or within a reasonable time following the Effective time. In addition, from and after the Effective Time, Gannett’s headquarters in McLean, Virginia will serve as the headquarters of the combined company, with a continued corporate presence in existing locations.
Management Agreement
On November 26, 2013, New Media entered into the management agreement (as amended and restated, the “Management Agreement”) with FIG LLC (the “Manager”), an affiliate of Fortress Investment Group LLC ("Fortress"), pursuant to which the Manager manages the operations of New Media. We pay the Manager an annual management fee equal to 1.5% of New Media’s Total Equity (as defined in the Management Agreement) and the Manager is eligible to receive incentive compensation. Following the Merger, the terms of the Management Agreement will change as described below under the heading “Amended and Restated Management Agreement”.
Amended and Restated Management Agreement
On August 5, 2019, in connection with the execution of the Merger Agreement, the Company and the Manager entered into the Amended and Restated Management Agreement (the “Amended Management Agreement”). Effective upon the consummation of the Merger, the Amended Management Agreement will replace the Management Agreement. The Amended Management Agreement (i) establishes a termination date for the Manager’s services of December 31, 2021, in lieu of annual renewals of the term; (ii) reduces the “incentive fee” payable under the Amended Management Agreement from 25% to 17.5% for the remainder of the term; (iii) reduces by 50% the number of options that would otherwise be issuable in connection with the issuance of shares as consideration for the Merger, and imposes a premium on the exercise price; (iv) eliminates the Manager’s right to receive options in connection with future equity raises by the Company; and (v) eliminates certain payments otherwise due at or after the end of the term of the prior management agreement.
In connection with entering into the Amended Management Agreement and the occurrence of the Effective Time, the Company will issue to the Manager 4,205,607 shares of Company Common Stock. The Manager is restricted from selling these shares until the expiration of the Amended Management Agreement, or otherwise upon a change in control and certain other extraordinary events. The Company will also grant to the Manager options to acquire 3,163,264 shares of Company Common Stock. These options will have an exercise price of $15.50 and become exercisable upon the first trading day immediately following the first 20 consecutive trading day period in which the closing price of the Company Common Stock (on its principal U.S. national securities exchange) is at or above $20 per share (subject to adjustment), and also upon a change in control and certain other extraordinary events.
Upon expiration of the term of the Amended Management Agreement, the Manager will cease providing external management services to the Company, and the Manager will no longer be the employer of the person serving in the role of Chief Executive Officer of the combined company.
Facility consolidation charges and accelerated depreciation
During the six months ended June 30, 2019, we ceased operations of three print publications and nine print facilitiesone printing operation as part of the ongoing cost reduction programs. As a result, wethe Company recognized an impairment charge relatedcharges relating to retired equipment of $2.5 million, a loss on disposal of assets related to retired equipment of $0.2 million and intangibles of $0.4 million, and accelerated depreciation of $2.6$1.2 million during the sixthree months ended June 30,March 31, 2019. There were no publication closures or facility consolidations during the six months ended July 1, 2018.
Industry

Foreign currency

The newspaper industryCompany's U.K. publishing operations are conducted through its Newsquest subsidiary. In addition, the Company's 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.

Newsprint supply

Newsprint expense at our publishing segment was $15.3 million higher in the first quarter of 2020 compared to the first quarter of 2019 primarily due to acquired expenses of $22.1 million offset by declines in circulation and print advertising volumes and lower prices when compared to the same period in 2019.

Outlook for the remainder of 2020

Strategy

The Company's areas of focus for 2020 include (1) integrating the Legacy Gannett and New Media organizations and achieving synergy targets, (2) deleveraging the balance sheet via cash flow from operations and real estate monetization, and (3) driving improved revenue trends by focusing on complementary growth businesses. Key integration and synergy workstreams include consolidating production and distribution facilities, integrating and centralizing back office functions, centralizing and regionalizing our publishing sales, content, and circulation marketing organizations, and consolidating our marketing solutions organizations. The Company will continue to invest in our current growth businesses such as digital marketing services, digital subscriptions, and events while also experimenting with new business models, such as a marketplace model, to help offset the revenue declines from traditional businesses to enable the Company to return to revenue growth over the next three to five years.

Impacts of COVID-19

The COVID-19 pandemic and related measures to contain its spread have created significant volatility and economic uncertainty, which is expected to continue in the near term. While we have generally been exempt from mandates requiring closures of non-essential business and have been able to continue operations, these circumstances are expected to create


volatility and unfavorable trends in our financial results as individuals and businesses rationalize expenditures during this time of uncertainty.

During March 2020, the Company began to experience decreased demand for its advertising and digital marketing services as well as reductions in events and the single copy and commercial distribution of its newspapers. The Company currently expects that the COVID-19 global pandemic will have experienced declining same store revenuea significant negative impact on the Company’s business and profitability overresults of operations in the past several years. near-term. Longer-term, the impact of the COVID-19 pandemic on the Company’s business and results of operations will depend on the severity and length of the pandemic, the duration and extent of the mitigation measures and governmental actions designed to combat the pandemic, as well as the changes in customer behavior as a result of the pandemic, all of which are highly uncertain.

As a result, we havethe Company has implemented, and continuecontinues to implement, measures to reduce costs and preserve cash flow. We have also investedThese measures include suspension of the quarterly dividend, employee furloughs, decreases in potential growth opportunities, primarilyemployee compensation, as well as reductions in discretionary spending. In addition, the digital, business servicesCompany is continuing with its previously disclosed plan to monetize non-core assets. Currently, the Company believes these initiatives along with cash on hand, cash provided by operating activities, and events spaces. We believerelief from the cost reductions and the new digital, business services and events initiativesCARES Act will provide the appropriate capital structure and financial resources necessary to invest in the business and ensure our future success and provideit with sufficient cash flow to enable usthe Company to meet our commitments forits commitments. However, these measures may not be sufficient to fully offset the next year.
General economic conditions, including declines in consumer confidence, high unemployment levels in certain local markets, declines in real estate values in certain local markets,impact of the COVID-19 pandemic on the Company’s business and, other trends, have also impactedas such, the markets in which we operate. Additionally, media companies continue to be impacted by the migrationCompany’s results of consumers and businesses to an internet and mobile-based digital medium. These conditions may continue to negatively impact print advertising and other revenue sources as well as increase operating costs in the future. We expect that we will have adequate capital resources and liquidity to meet our working capital needs, borrowing obligations and all required capital expenditures for at least the next twelve months.
We periodically perform testing for impairment of goodwill and newspaper mastheads in which the fair value of our reporting units for goodwill impairment testing and newspaper mastheads are estimated using the expected present value of future cash flows and recent industry transaction multiples, using estimates, judgments and assumptions, that we believe are appropriate in the circumstances. Should general economic, market or business conditions decline, and have a negative impact on estimates of future cash flow and market transaction multiples, weoperations may be required to record additional impairment charges in the future.
Critical Accounting Policy Disclosure
The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make decisions based on estimates, assumptionsnegatively impacted, and factors it considers relevant to the circumstances. Such decisions include the selection of applicable principles and the use of judgment in their application, the results of whichsuch impacts could differ from those anticipated.
A summary of our significant accounting policies are described in Note 1, of our consolidated financial statements, "Description of Business, Basis of Presentation, and Summary of Significant Accounting Policies", included in our 2018 Annual Report on Form 10-K.
During the three months ended March 31, 2019, we changed our lease accounting policy in order to adopt Financial Accounting Standards Board (“FASB”) Accounting Standards Update No. 2016-02 (“ASU 2016-02”), “Leases (Topic 842)”. There have been no other material changes in critical accounting policies in the current year from those described in our Annual Report on Form 10-K for the year ended December 30, 2018.be material.



Results of Operations
The following table summarizes
Consolidated Summary

A summary of our segment results of operations for the three and six months ended June 30, 2019 and July 1, 2018:
NEW MEDIA INVESTMENT GROUP INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
(In thousands)
is presented below:
 Three months ended Six months ended
 June 30, 2019 July 1, 2018 June 30, 2019 July 1, 2018
Revenues:       
Advertising$184,767
 $187,609
 $363,462
 $350,868
Circulation150,850
 144,536
 303,015
 274,527
Commercial printing and other68,770
 56,657
 125,510
 104,172
Total revenues404,387
 388,802
 791,987
 729,567
Operating costs and expenses:  
 
 
Operating costs233,407
 217,775
 462,902
 414,164
Selling, general, and administrative130,040
 126,837
 261,548
 245,656
Depreciation and amortization23,328
 19,935
 44,251
 39,182
Integration and reorganization costs3,230
 1,749
 7,342
 4,179
Impairment of long-lived assets1,262
 —
 2,469
 —
Net loss (gain) on sale or disposal of assets947
 (808) 2,737
 (3,979)
Operating income12,173
 23,314
 10,738
 30,365
Interest expense10,212
 8,999
 20,346
 17,351
Other income(311) (337) (571) (857)
Income (loss) before income taxes2,272
 14,652
 (9,037) 13,871
Income tax (benefit) expense(343) 2,946
 (2,297) 2,830
Net income (loss)$2,615
 $11,706
 $(6,740) $11,041
 Three months ended March 31,
In thousands2020 2019 Change
Operating revenues:     
Publishing$858,150
 $378,080
 $480,070
Marketing Solutions121,281
 25,887
 95,394
Corporate and other3,009
 672
 2,337
Intersegment eliminations(33,758) (17,040) (16,718)
Total operating revenues948,682
 387,599
 561,083
Operating expenses:     
Publishing$830,530
 $359,830
 $470,700
Marketing Solutions122,730
 31,513
 91,217
Corporate and other59,002
 14,731
 44,271
Intersegment eliminations(33,758) (17,040) (16,718)
Total operating expenses978,504
 389,034
 589,470
Operating income(29,822) (1,435) (28,387)
Non-operating expense41,805
 9,874
 31,931
Loss before income taxes(71,627) (11,309) (60,318)
Provision (benefit) for income taxes8,979
 (1,954) 10,933
Net loss$(80,606) $(9,355) $(71,251)
      
Loss per share attributable to Gannett - diluted$(0.61) $(0.15) $(0.46)

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

Three Months Ended June 30,Operating revenues:



Our Publishing segment generates revenue primarily through advertising and subscriptions for our print and digital publications. Our advertising teams sell local, national, and classified advertising across multiple platforms including print, online, mobile, and tablet as well as niche publications. In addition, our Publishing segment advertising teams sell digital marketing services which are primarily fulfilled by teams within our Marketing Solutions segment. Circulation revenues are derived principally from home delivery and single copy sales of our publications and distributing our publications on our digital platforms. Other revenues are derived mainly from commercial printing, events, and distribution arrangements.

Our Marketing Solutions 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, Google-suite offerings, and software-as-a-service solutions. Other revenues in our Marketing Solutions segment are derived from system integration services, cloud offerings, and software licensing.

Quarter ended March 31, 2020 versus quarter ended March 31, 2019 Compared To Three Months Ended July 1, 2018
Revenue.
Total revenue for the three months ended June 30, 2019 increased by $15.6 million, or 4.0%, to $404.4 million from $388.8operating revenues were $948.7 million for the three months ended July 1, 2018.first quarter of 2020. The increase in total revenue was comprised of a $6.3$293.5 million or 4.4%,increase in advertising and marketing services revenues, a $222.6 million increase in circulation revenue,revenues, and a $12.1$45.1 million or 21.4%, increase in commercial printingother revenues. Revenue at the Publishing and other revenue, partially offsetMarketing Solutions segments increased by a $2.8$480.1 million or 1.5%, decrease in advertising revenue.
Revenues increasedand $95.4 million, respectively, primarily due to acquisitions. The advertisingacquisition-related revenues, including revenue increase from acquisitions was more than offsetcontributed by declines driven by reductions in the local retail, classified, and preprint categories due to secular pressures and a continuing difficult retail environment. These secular trends and economic conditions have also led to a decline in our print circulation volumes that have largely been offset by price increases and distribution of premium editions in select locations. The majority of the remaining increase in commercial printing and other revenue is due to digital marketing services, events revenue, and new commercial print and distribution contracts.
Operating Costs. Operating costs for the three months ended June 30, 2019 increased by $15.6 million, or 7.2%, to $233.4 million from $217.8 million for the three months ended July 1, 2018. The increase includes operating costs from acquisitions of $30.3 million and an increase in outside services of $2.7 million. These increases were partially offset by declines in operating costs related to the remaining operations, which was primarily due to decreases in compensation of $9.5 million, hauling and delivery of $3.8 million, newsprint and ink of $2.3 million, web hosting and domain expenses of $1.3 million, repairs and maintenance of $0.6 million, building rental and maintenance of $0.6 million, utilities of $0.5 million and news and editorial of $0.5 million. There were no other increases or decreases greater than $0.5 million.

Legacy Gannett.

Selling, GeneralOperating expenses:

Operating expenses consist primarily of the following:

Operating costs such as labor, newsprint, and Administrative.delivery costs in our Publishing segment or the cost of online media acquired from third parties and costs to manage and operate our marketing solutions and technology infrastructure in our Marketing Solutions segment;
Selling, general, and administrative expenses such as labor, payroll, outside services, and benefits costs;
Depreciation and amortization;
Integration and reorganization costs such as severance charges, facility consolidation charges, and acquisition or integration-related costs;
Costs incurred pursuant to acquisitions or mergers;
Impairment charges such as those for long-lived assets, goodwill, or other intangible assets; and
Net gains or losses on the three monthssale or disposal of assets such as property, plant, and equipment.

Quarter ended June 30,March 31, 2020 versus quarter ended March 31, 2019 increased by $3.2 million, or 2.5%, to $130.0 million from $126.8

Total operating expenses were $978.5 million for the three months ended July 1, 2018. Thefirst quarter of 2020, an increase includesfrom the same period in 2019. Total operating expenses across all segments increased primarily due to acquired operating expenses of $605.0 million, including $591.3 million from expenses contributed by Legacy Gannett.

Operating costs were $566.5 million in the first quarter of 2020. Publishing segment operating costs increased $293.2 million, while Marketing Solutions segment operating costs increased $55.0 million, primarily due to the contributions of Legacy Gannett, partially offset by continued cost efficiency efforts resulting from the consolidation and centralization of operations and costs associated with declines in revenue from continuing operations.

Selling, general, and administrative expenses were $299.1 million in the first quarter of 2020, an increase compared to 2019. Publishing segment selling, general, and administrative expenses from acquisitionsincreased $117.9 million, while Marketing Solutions segment selling, general, and administrative expenses increased $29.3 million, primarily due to the contributions of $12.3 million, an increase in professional and consulting fees of $1.5 million and an increase in bad debt expense of $0.6 million. These increases wereLegacy Gannett, partially offset by declinescontinued cost efficiency efforts.

Integration and reorganization costs were $28.3 million in operating costs relatedthe first quarter of 2020, an increase of $22.5 million compared to the remaining operations, which wassame period in 2019. Integration and reorganization costs at the Publishing, Corporate and other, and Marketing Solutions segments increased $10.9 million, $10.7 million, and $0.8 million, respectively, primarily due to decreases in outside services of $3.2 million, compensation of $2.3 million, advertising and promotion of $0.7 million, other expenses of $0.7 million and travel and entertainment expenses of $0.5 million. There were no other increases or decreases greater than $0.5 million.
Integration and Reorganization Costs. During the three month periods ended June 30, 2019 and July 1, 2018, we recorded integration and reorganization costs of $3.2 million and $1.7 million, respectively, primarily resulting fromadditional severance costs related tostemming from acquisition-related synergies and the continued consolidation of our operations resulting from the ongoing implementation of our measuresplans to reduce costs and preserve cash flow as well as acquisition-related synergies.and the integration of acquired businesses.
Impairment


Acquisitions costs were $6.0 million in the first quarter of Long-lived Assets.During2020, an increase of $5.2 million compared to the three months ended June 30, 2019, we recorded a $1.3same period in 2019. The increase in acquisition costs, the vast majority of which were incurred at the Corporate and other segment, was primarily due to costs of $4.7 million incurred in conjunction with the acquisition of Legacy Gannett.

There was no impairment of long-lived assets duein the first quarter of 2020, a decrease of $1.2 million compared to the cessation of operations at twosame period in 2019.

Publishing segment

A summary of our printing facilities. No such charge was recorded during the three monthsPublishing segment results is presented below:

 Three months ended March 31,
In thousands2020 2019 Change ($)
Operating revenues:     
Advertising and marketing services$403,636
 $188,857
 $214,779
Circulation374,720
 152,164
 222,556
Other79,794
 37,059
 42,735
Total operating revenues858,150
 378,080
 480,070
Operating expenses:    

Operating costs518,859
 225,703
 293,156
Selling, general and administrative expenses230,813
 112,894
 117,919
Depreciation and amortization66,957
 18,830
 48,127
Integration and reorganization costs13,309
 2,384
 10,925
Acquisition costs—
 —
 —
Net loss on sale or disposal of assets592
 19
 573
Total operating expenses830,530

359,830
 470,700
Operating income$27,620
 $18,250
 9,370

Operating revenues:

Quarter ended July 1, 2018.March 31, 2020 versus quarter ended March 31, 2019
Interest Expense.Interest expense for the three months ended June 30, 2019 increased by $1.2 million to $10.2 million from $9.0
Advertising and marketing services revenues were $403.6 million for the three months ended July 1, 2018,first quarter of 2020, which primarily relates to increased interest rates.
Income Tax (Benefit) Expense. Duringincluded revenues from international operations of $34.0 million for the three months ended June 30, 2019 and July 1, 2018, we recorded an income tax benefitfirst quarter of $0.3 million and an income tax expense of $2.9 million, respectively. The change is2020. This increase was primarily attributable to an increase$249.3 million in the estimated effective annual tax rate during the three months ended June 30, 2019 from 18% (the estimated rate for the three months ended March 31, 2019) to 27%.
Net Income (Loss). Net income for the three months ended June 30, 2019acquired advertising and July 1, 2018 was $2.6marketing services revenues, including $246.0 million and $11.7 million, respectively. The difference is related to the factors noted above.Legacy Gannett.
Six Months Ended June 30, 2019 Compared To Six Months Ended July 1, 2018
Revenue. Total revenue for the six months ended June 30, 2019 increased by $62.4 million, or 8.6%, to $792.0 million from $729.6Print advertising revenues were $267.6 million for the six months ended July 1, 2018.first quarter of 2020, an increase of $116.7 million compared to the same period in 2019. Local and national print advertising revenues were $136.8 million and $36.4 million, respectively, for the first quarter of 2020, an increase of $41.3 million and $30.1 million, respectively, compared to the same period in 2019. The increases in local and national print advertising revenues were attributable to $97.5 million in acquired revenues, including $95.1 million in acquired revenues related to Legacy Gannett. Classified print advertising revenues of $94.4 million for 2020 increased $45.4 million compared to 2019, primarily attributable to acquired revenues of $52.2 million, including $51.6 million in acquired revenues related to Legacy Gannett. The increases across all categories of print advertising revenues were partially offset by reduced demand consistent with general trends adversely impacting the publishing industry and unfavorable impacts resulting from the COVID-19 pandemic in the latter part of the first quarter of 2020.

Digital advertising and marketing services revenues were $136.0 million for the first quarter of 2020, an increase of $98.1 million compared to the same period in total revenue was comprised2019. Digital media revenues were $86.5 million for the first quarter of a $12.62020, an increase of $65.8 million or 3.6%, increasecompared to the same period in advertising revenue, a $28.5 million, or 10.4%, increase in circulation revenue, and a $21.3 million, or 20.5%, increase in commercial printing and other revenue.
Revenues increased2019, primarily due to acquisitions,$65.3 million in acquired revenues, including $65.1 million in acquired revenues related to Legacy Gannett. Digital marketing services revenues were $30.5 million for the first quarter of 2020, an increase of $20.0 million compared to the same period in 2019. This increase was attributable to $21.0 million in acquired revenues related to Legacy Gannett. Digital classified revenues were $19.0 million for the first quarter of 2020, an increase of $12.3 million compared to the same period in 2019 due to $13.2 million in acquired revenues, including $13.2 million in acquired revenues related to Legacy Gannett. The impacts from the COVID-19 pandemic in the latter part of the first quarter of 2020 negatively affected digital revenues across each category but were mostly offset by growth in national advertising campaigns.



Circulation revenues were $374.7 million for the first quarter of 2020. Print circulation revenues were $355.0 million for the first quarter of 2020, an increase of $208.0 million from the same period in 2019 due $218.9 million in acquired revenues, including $216.7 million in acquired revenues related to Legacy Gannett and increases from our strategic pricing programs, partially offset by declines driven by reductionsstemming from a reduction in volume of our single copy and home delivery sales, reflecting general industry trends. Digital circulation revenues were $19.7 million for the local retail, classified, and preprint categoriesfirst quarter of 2020, an increase of $14.6 million from the same period in 2019 primarily due to secular pressures and a continuing difficult retail environment. These secular trends and economic conditions have also led to a decline$14.0 million in our print circulation volumes that have largely been offset by price increases and distribution of premium editions in select locations. The majority of the remaining increase in commercialacquired revenues.

Commercial printing and other revenue is duerevenues of $79.8 million in the first quarter of 2020 increased $42.7 million compared to digital marketing services, events revenue, and new commercial print and distribution contracts.the same period in 2019. Other revenues accounted for approximately 9% of total Publishing segment revenues for the quarter.

Operating Costs.expenses:

Quarter ended March 31, 2020 versus quarter ended March 31, 2019

Operating costs for the six months ended June 30, 2019 increased by $48.7 million, or 11.8%, to $462.9 million from $414.2were $518.9 million for the six months ended July 1, 2018. Thefirst quarter of 2020, an increase includes operatingof $293.2 million from the same period in 2019. Operating costs from acquisitionsacquired entities totaled $325.6 million in the first quarter of $72.32020, including $316.8 million related to Legacy Gannett. Newsprint and ink costs were $40.3 million in the first quarter, an increase in outside services of $4.6$16.2 million compared to 2019, primarily as a result of acquired newsprint and a $1.0ink costs of $23.2 million, increase in other expense. These increases wereincluding $23.0 million related to Legacy Gannett, partially offset by declines in operating costscirculation and print advertising volumes and lower prices when compared to the same period in 2019. News and editorial expenses were $11.4 million in the first quarter of 2020, an increase of $4.0 million compared to 2019, primarily as a result of acquired news and editorial expenses of $4.8 million, including $4.7 million related to Legacy Gannett, partially offset by synergy savings. Hauling and delivery costs were $107.0 million in the remaining operations, which wasfirst quarter of 2020, an increase of $67.6 million, primarily due to decreases in compensation of $16.2 million,acquired hauling and delivery costs of $6.3$71.8 million, web hostingincluding $71.1 million related to Legacy Gannett partially offset by synergy savings and domainlower production volumes. Other material categories of Legacy Gannett costs contributing to the overall increase in operating costs include $122.6 million in compensation and benefit costs and $55.3 million in outside services.

Total selling, general, and administrative expenses were $230.8 million for the first quarter of $1.82020, an increase of $117.9 million newsprint and ink of $1.4 million, building rental and maintenance of $1.0 million, news and editorial of $0.9 million, supplies of $0.8 million, utilities of $0.8 million, postage of $0.7 million and repairs and maintenance of $0.7 million. There were no other increases or decreases greater than $0.5 million.
Selling, General and Administrative.from the same period in 2019. Selling, general and administrative expenses forfrom acquired entities totaled $130.8 million in the six months ended June 30,first quarter of 2020, including $126.7 million related to Legacy Gannett. Outside services costs were $13.0 million in the first quarter, an increase of $4.9 million compared to 2019, increased by $15.8primarily as a result of acquired outside services costs of $6.8 million, or 6.5%,including $6.5 million related to $261.5 million from $245.7 million forLegacy Gannett. Other material categories of Legacy Gannett costs contributing to the six months ended July 1, 2018. Theoverall increase includesin selling, general, and administrative expenses include $53.6 million in compensation and benefit costs and $44.3 million in other general and administrative costs.

Depreciation and amortization expense was $67.0 million for the first quarter of 2020, a $48.1 million increase from acquisitions of $32.4the same period in 2019, primarily attributable to $30.6 million an increase in professionalacquired depreciation and consulting fees of $2.0amortization expense, including $30.0 million and an increase in business insurance of $0.6 million. These increases were partially offset by declines in operating costs related to the remaining operations, which was primarily due to decreases in compensation of $4.8 million, outside services of $3.0 million, web hostingacquired property and domain expenses of $1.4 million, travel and entertainment expenses of $0.9 million and property tax of $0.7 million. There were no other increases or decreases greater than $0.5 million.

intangibles from the Legacy Gannett acquisition.

Integration and Reorganization Costs. Duringreorganization costs were $13.3 million in the six month periods ended June 30,first quarter of 2020, an increase of $10.9 million compared to the same period in 2019, and July 1, 2018, we recordedprimarily attributable to integration and reorganization costs from acquired entities of $7.3$10.8 million, and $4.2including $10.6 million respectively, primarily resulting fromin acquired expenses related to Legacy Gannett driven by severance costs related to acquisition-related synergies and the continued consolidation of our operations resulting from the ongoing implementation of our measuresplans to reduce costs and preserve cash flow, as well as acquisition-related synergies.flow.

Publishing segment adjusted EBITDA:
Impairment

 Three months ended March 31,
In thousands2020 2019 Change ($)
Net income before income taxes$33,840
 $18,754
 $15,086
Interest expense18
 55
 (37)
Other non-operating items, net(5,784) (310) (5,474)
Depreciation and amortization66,957
 18,830
 48,127
Integration and reorganization costs13,309
 2,384
 10,925
Net loss on sale or disposal of assets592
 19
 573
Other items1,996
 1,961
 35
Adjusted EBITDA (non-GAAP basis)$110,928
 $41,693
 $69,235

Adjusted EBITDA for our publishing segment was $110.9 million for the first quarter of Long-lived Assets.2020, an increase of $69.2 million compared to the same period in 2019. The increase was primarily attributable to acquired Adjusted EBITDA for Legacy Gannett of $77.1 million and ongoing operating efficiencies offset by declines in print advertising and circulation revenues in part reflecting lower demand near the end of the first quarter of 2020, which were impacted by the ongoing economic effects of COVID-19, and ongoing operating efficiencies.

Marketing Solutions segment

A summary of our Marketing Solutions segment results is presented below:
 Three months ended March 31,
In thousands2020 2019 Change
Operating revenues:     
Advertising and marketing services$116,283
 $21,390
 $94,893
Other4,998
 4,497
 501
Total operating revenues121,281
 25,887
 95,394
Operating expenses:    
Operating costs73,254
 18,271
 54,983
Selling, general and administrative expenses40,734
 11,407
 29,327
Depreciation and amortization7,331
 1,277
 6,054
Integration and reorganization costs1,388
 556
 832
Net loss on sale or disposal of assets23
 2
 21
Total operating expenses122,730
 31,513
 91,217
Operating loss$(1,449) $(5,626) $4,177

Operating revenues:

Quarter ended March 31, 2020 versus quarter ended March 31, 2019

Advertising and marketing services revenues were $116.3 million for the first quarter of 2020, an increase compared to the same period in 2019, which included revenues from international entities of $10.5 million for the first quarter of 2020. This increase was primarily attributable to $96.3 million in acquired advertising and marketing services revenues related to Legacy Gannett. Other revenues were $5.0 million for the first quarter of 2020, an increase of 11% compared to the same period in 2019. This increase is primarily the result of increases in license revenue for cloud software products. These increases were partially offset by decreases driven by the impacts of the COVID-19 pandemic towards the end of the quarter.

Operating expenses:

Quarter ended March 31, 2020 versus quarter ended March 31, 2019



Operating costs, which include online media acquired from third parties, costs to manage and operate the segment's solutions and technology infrastructure, and other third-party direct costs, were $73.3 million for the first quarter of 2020, an increase compared to the same period in 2019. This increase was primarily attributable to $54.6 million in acquired operating costs related to Legacy Gannett. Outside service costs, which include costs of online media acquired from third-party publishers, totaled $55.0 million for the first quarter of 2020 compared to $11.3 million for the same period in 2019. The increase is primarily the result of acquired outside service costs of $42.8 million related to Legacy Gannett and increased costs of media associated with lower rebates and margin pressure experienced in the first quarter of 2020. Other material categories of Legacy Gannett costs contributing to the overall increase in operating costs include $12.1 million in compensation and benefit costs.

Selling, general, and administrative expenses were $40.7 million for the first quarter of 2020, an increase compared to the same period in 2019. This increase was primarily attributable to $31.6 million in acquired selling, general, and administrative expenses related to Legacy Gannett. Outside services costs were $2.3 million in the first quarter of 2020, an increase of 73% compared to the same period in 2019, primarily the result of acquired outside services costs of $1.9 million related to Legacy Gannett.

Depreciation and amortization were $7.3 million for the first quarter of 2020, an increase compared to the first quarter of 2019. This was primarily attributable to an increase in amortization expense stemming new product and development initiatives.

Marketing Solutions segment adjusted EBITDA:During
 Three months ended March 31,
In thousands2020 2019 Change
Net loss before income taxes$(5,073) $(5,626) $553
Other non-operating items, net3,624
 —
 3,624
Depreciation and amortization7,331
 1,277
 6,054
Integration and reorganization costs1,388
 556
 832
Net loss on sale or disposal of assets23
 2
 21
Other items594
 561
 33
Adjusted EBITDA (non-GAAP basis)$7,887
 $(3,230) $11,117

Adjusted EBITDA for our Marketing Solutions segment was $7.9 million for the six months ended June 30,first quarter of 2020, an increase compared to the same period in 2019 we recorded a $2.5 million impairment of long-lived assetsprimarily due to additional Adjusted EBITDA from Legacy Gannett of $10.8 million.


Corporate and other segment

Corporate and other operating expenses were $59.0 million for the cessationfirst quarter of operations at three2020, an increase of our printing facilities during$44.3 million compared to the six months ended June 30, 2019. No such charge was recorded during the six months ended July 1, 2018.same period in 2019 primarily attributable to operating expenses from acquired entities of $32.7 million, including $32.6 million in acquired operating expenses related to Legacy Gannett and an increase in acquisition costs of $5.2 million. Also included in corporate operating expenses for 2020 were $13.6 million of integration and reorganization costs and $3.7 million of depreciation and amortization expenses.

Non-operating expense

Interest Expense.expense: Interest expense for the sixfirst quarter of 2020 was $57.9 million compared to $10.1 million in the same period in 2019. The increase in interest expense for first three months of 2020 is due to a higher effective interest rate and a larger debt balance compared to the prior year period.

Other non-operating items, net: Our non-operating items, net, are driven by certain items that fall outside of our normal business operations. Non-operating items, net, consisted of $16.9 million in income for the first quarter of 2020 compared to $0.3 million in income for the same period in 2019. The increase was primarily attributable to an increase of $18.3 million in non-operating pension income.

Income tax expense (benefit)



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

 Three months ended March 31,
In thousands2020 2019
Pre-tax net loss$(71,627) $(11,309)
Provision (benefit) for income taxes8,979
 (1,954)
Effective tax rate***
 17.3%
*** Indicates a percentage that is not meaningful.

The provision for income taxes for the three months ended June 30,March 31, 2020 was higher than the comparable period in 2019 increased by $2.9 milliondue to $20.3 million from $17.4 million for the six months ended July 1, 2018, which primarily relates to increased interest rates.
Income Tax (Benefit) Expense. During the six months ended June 30, 2019 and July 1, 2018, we recorded an income tax benefit of $2.3 million and annon-deductible officers' compensation, state income tax expense of $2.8 million, respectively. Theand foreign income tax benefitexpense. The provision for income taxes for the sixthree months ended June 30, 2019March 31, 2020 was computedcalculated using an estimated annual effective rate of 27%, while the estimated annual effective tax rate. The estimated annual effective tax rate is negative, resulting in income tax expense primarily driven by state income tax and foreign tax expense.

The CARES Act was enacted on March 27, 2020. The Company will realize a tax benefit attributable to the legislation which permits a refund of tax benefits from earlier years. The legislation also allows the Company to defer certain employer payroll tax payments in 2020 to the end of 2021 and 2022. The Company intends to use this deferral. The Company is anticipating additional guidance from the Treasury and the Internal Revenue Service to determine whether additional tax benefits are available from this legislation.

Net loss and diluted loss per share

Net loss was $80.6 million and diluted loss per share was $0.61 for the six months ended July 1, 2018 was 20%.
Net Income (Loss). Netfirst quarter of 2020 compared to net loss of $9.4 million and diluted loss per share of $0.15 for the six months ended June 30, 2019 was $6.7 million and net income forsame period in 2019. The change reflects the six months ended July 1, 2018 was $11.0 million. The difference is related to the factors notedvarious items discussed above.

Liquidity and Capital Resourcescapital resources

Our primaryoperations, which have historically generated strong positive cash flow are expected to provide sufficient liquidity, together with cash on hand, to meet our requirements, are for working capital, debt obligationsprimarily operating expenses, interest expense and capital expenditures. We have no material outstanding commitments for capital expenditures. We expect

Details of our 2019 capital expenditures to total between $12 million and $13 million. The 2019 capital expenditures will be primarily comprisedcash flows are included in the table below:
 Three months ended March 31,
In thousands2020 2019
Net cash provided by operating activities$60,489
 $31,742
Net cash used for investing activities(3,419) (37,730)
Net cash used for financing activities(14,679) (18,131)
Effect of currency exchange rate change on cash1,554
 —
Increase (decrease) in cash$43,945
 $(24,119)

Operating cash flows

Our largest source of projects related to the consolidation of print operations and system upgrades. For more information on our long term debt and debt service obligations, see Note 7 to the unaudited condensed consolidated financial statements, “Indebtedness”. Our principal sources of funds have historically been, and are expected to continue to be, cash provided by operating activities.
We expect to fund 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 provided byfrom our operating activities the incurrence of debt or the issuance of additional equity securities. In connection with the Merger, we expect to fund certain severanceinclude compensation, newsprint, delivery, and change in control payments, primarily related to certain of Gannett’s pension plans, which are expected to be approximately $80 million. We expect that we will have adequate capital resources and liquidity to meet our working capital needs, borrowing obligations and all required capital expenditures for at least the next twelve months.
Our leverage may adversely affect our business and financial performance and restricts our operating flexibility. The level of our indebtedness and our on-going 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 credit facilities. 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.
Dividends
On August 5, 2019, we announced a second quarter 2019 cash dividend of $0.38 per share of Common Stock, par value $0.01 per share, of New Media. The dividend will be paid on August 28, 2019, to shareholders of record as of the close of business on August 20, 2019.
On May 2, 2019, we announced a first quarter 2019 cash dividend of $0.38 per share of Common Stock, par value $0.01 per share, of New Media. The dividend was paid on May 22, 2019, to shareholders of record as of the close of business on May 13, 2019.
On February 27, 2019, we announced a fourth quarter 2018 cash dividend of $0.38 per share of Common Stock, par value $0.01 per share, of New Media. The dividend was paid on March 20, 2019, to shareholders of record as of the close of business on March 11, 2019.
On October 31, 2018, we announced a third quarter 2018 cash dividend of $0.38 per share of Common Stock, par value $0.01 per share, of New Media. The dividend was paid on November 20, 2018, to shareholders of record as of the close of business on November 12, 2018.

outside services.

On August 2, 2018, we announced a second quarter 2018Our net cash dividendflow from operating activities was $60.5 million for the first three months of $0.37 per share2020, an increase of Common Stock, par value $0.01 per share,$28.7 million compared to the same period in 2019. The increase in net cash flow from operating activities was primarily attributable to the merger with Legacy Gannett in November 2019, offset by an increase in severance payments of New Media. The dividend was paid on August 21, 2018, to shareholders$22.2 million.



Investing cash flows

Cash flows used for investing activities totaled $3.4 million for the first three months of record as2020, primarily consisting of capital expenditures of $13.8 million, partially offset by proceeds from sale of certain assets of $10.4 million.

Cash flows used for investing activities totaled $37.7 million for the closefirst three months of business on August 13, 2018.2019, primarily consisting of payments for acquisitions, net of cash acquired, of $38.0 million and capital expenditures of $2.2 million, offset by proceeds from sales of certain assets of $2.5 million.
On May 3, 2018, we announced a
Financing cash flows

Cash flows used for financing activities totaled $14.7 million for the first quarter 2018 cash dividendthree months of $0.37 per share2020, primarily consisting of Common Stock, par value $0.01 per share,repayments of New Media. The dividend was paid on May 16, 2018, to shareholders of record as of the close of business on May 14, 2018.
On February 28, 2018, we announced a fourth quarter 2017 cash dividend of $0.37 per share of Common Stock, par value $0.01 per share, of New Media. The dividend was paid on March 22, 2018, to shareholders of record as of the close of business on March 14, 2018.
New Media Credit Agreement
The Company, through its wholly-owned subsidiary New Media Holdings II LLC (the “New Media Borrower”) maintains secured credit facilities (the “Credit Facilities”)borrowings under an agreement (the “New Media Credit Agreement”) with a syndication of lenders, including aour Apollo term loan facility of $12.7 million and a revolving credit facility. The$1.6 million in payments for employee taxes withheld from stock awards.

Cash flows used for financing activities totaled $18.1 million for the first three months of 2019, primarily consisting of the payments of dividends of $23.2 million and repayments of borrowings under our term loan facility expires on July 14, 2022$2.2 million and the revolving credit facility expires on July 14, 2021. Maximum$0.7 million in payments for employee taxes withheld from stock awards, offset by net borrowings under the revolving credit facility including letters of credit, total $40.0$8.0 million.

Apollo Term Loan

In November 2019, pursuant to the acquisition of Legacy Gannett, the Company entered into a five-year, senior-secured term loan facility with Apollo Capital Management, L.P. ("Apollo") in an aggregate principal amount of approximately $1.8 billion. The term loan facility, which matures on November 19, 2024, generally bears interest at the rate of 11.5% per annum. Origination fees totaled 6.5% of the total principal amount of the financing at closing. Pursuant to the agreement, Apollo has the right to designate two individuals to attend Board of Directors meetings as non-fiduciary and non-voting observers and participants. In addition, if the total gross leverage ratio exceeds certain thresholds, Apollo has the right to appoint up to two voting directors. Upon the occurrence and during the continuance of an Event of Default (as defined in the term loan facility), the interest rate increases by 2.0%.

The term loan facility contains customary covenants and events of default, including a covenant that the Company have at least $20 million of unrestricted cash on the last day of each fiscal quarter. The term loan facility is required to be prepaid with (i) any unrestricted cash in excess of $40 million at the end of fiscal year 2020 and fiscal year 2021, (ii) 50% of excess cash flow (as such term is defined in the term loan facility) measured at the end of each fiscal quarter (beginning with the third quarter of 2020), subject to a step-up to 90% of excess cash flow for each period in fiscal year 2021 or later if the ratio of consolidated debt to EBITDA (as such terms are defined in the term loan facility) is greater than or equal to 1.00 to 1.00, and (iii) 100% of the net proceeds of any non-ordinary course asset sales. The term loan facility prohibits the payment of cash dividends prior to the thirtieth day of the second quarter of 2020, and thereafter permits payment of cash dividends up to an agreed-upon amount, provided that the ratio of consolidated debt to EBITDA (as such terms are defined therein) does not exceed a specified threshold. As of June 30, 2019, thereMarch 31, 2020, the Company is in compliance with all of the covenants and obligations under the term loan facility.

In connection with the Apollo term loan facility, the Company incurred approximately $4.9 million of fees and expenses and $116.6 million of lender fees which were outstanding borrowings againstcapitalized and will be amortized over the term of the term loan facility and revolving credit facility totaling $434.0 million and $8.0 million, respectively. Asusing the effective interest method. 

The Company is permitted to prepay the principal of December 30, 2018, there were outstanding borrowings against the term loan facility, in whole or in part, at par plus accrued and revolving creditunpaid interest, without any prepayment premium or penalty. The term loan facility totaling $437.3 millionis guaranteed by the material wholly-owned subsidiaries of the Company, and $0, respectively. Asall obligations of June 30, 2019, there were $0.5 million letters of credit issued against the revolving creditCompany and its subsidiary guarantors are or will be secured by first priority liens on certain material real property, equity interests, land, buildings, and fixtures. The term loan facility and we had $31.5 million of borrowing availability under the revolving credit facility.
The New Media Credit Agreement contains customary representations and warranties, and affirmative covenants, and negative covenants applicable to Holdings I, the New Media BorrowerCompany and the New Media Borrower'sits subsidiaries, including, among other things, restrictions on indebtedness, liens, investments, fundamental changes, dispositions, dividends and other distributions, capital expenditures, and events of default. The New Media Credit Agreement contains a financial covenant that requires Holdings I,Company used the New Media Borrower and the New Media Borrower’s subsidiaries to maintain a maximum total leverage ratio of 3.25 to 1.00. As of June 30, 2019, we are in compliance with allproceeds of the covenants and obligations under the New Media Credit Agreement.
Refer to Note 7 to the unaudited condensed consolidated financial statements, “Indebtedness,” and to “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources,” in our Annual Report on Form 10-K for the fiscal year ended December 30, 2018, for further discussion of the New Media Credit Agreement.
Apollo Commitment Letter
On August 5, 2019, in connection with the execution of the Merger Agreement, the Company entered into a commitment letter (the “Commitment Letter”) with Apollo Capital Management, L.P. (“Apollo”), pursuant to which Apollo, on behalf of one or more funds, accounts or other clients managed by it or its affiliates, has committed to provide the Company with a $1,792 million first lien term loan facility (the “Acquisition Credit Facility”), to be made available to(i) partially fund the Company upon the closingacquisition of Legacy Gannett, (ii) repay, prepay, repurchase, redeem, or otherwise discharge in full each of the Merger, subject to certain terms and conditions set forthexisting financing facilities (as defined in the Commitment Letter.
The Acquisition Credit Facility will bear a fixed interest rate of 11.50% annually, subject to a one-year step-up of 50 basis pointsagreement and discussed in the event that the closing of the Merger occurs more than 6 months following the date of the Commitment Letter. The Acquisition Credit Facility will mature five years following the closing of the Mergerpart below), and will be freely pre-payable without penalty.
Proceeds from the Acquisition Credit Facility will be used to repay Gannett’s existing revolving credit facility, the Company’s existing credit facilities, and Gannett’s outstanding convertible senior notes to the extent put to the Company by the holders thereof, pay the cash portion of the consideration for the Merger,(iii) pay fees and expenses incurred in connection withto obtain the Merger and the Acquisition Credit Facility and, to the extent of any remaining proceeds, finance ongoing working capital and other general corporate needs.term loan facility.



As of March 31, 2020, the Company had $1.7 billion in aggregate principal outstanding under the term loan facility, $4.6 million of deferred financing costs, and $105.4 million of capitalized lender fees. During the three months ended March 31, 2020, the Company recorded $50.8 million in interest expense, $5.9 million in amortization of deferred financing costs and $0.8 million for loss on early extinguishment of debt for the three months ended March 31, 2020. The effective interest rate is 12.9%.

Convertible debt

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

The Acquisition Credit Facility is subject to negotiationCompany's acquisition of Legacy Gannett constituted a mutually acceptable credit or loan agreementFundamental Change and other mutually acceptable definitive documentation, which will include certain representations and warranties, affirmative and negative covenants, financial covenants, eventsMake-Whole Fundamental Change under the terms of default and collateral and guarantee agreements that are customarily required for similar financings. Additionally, Apollo’s obligation to provide the financing is subject toindenture governing the satisfaction of specified conditions, including thatnotes. At the acquisition date, the Company mustdelivered to noteholders a notice offering the right to surrender all or a portion of their notes for cash on December 31, 2019. On December 31, 2019, we completed the redemption of $198.0 million in aggregate principal in exchange for cash.

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

Additional information

We continue to evaluate the impacts of the COVID-19 pandemic on our results of operations and cash flows. As part of these measures, we have at least $40 million (on a combined company basis) of unrestrictedtaken steps to manage cash at closing,outflow by rationalizing expenses and implementing various cost containment initiatives. These initiatives include, but are not limited to, strategic reductions in force, furloughs, reductions in pay for senior management and the accuracycancellation of specified representations. The documentation governingcertain non-essential expenditures. We are also evaluating opportunities to manage the Acquisition Credit Facility has not been finalizedamount and accordingly, the actual terms may differ from the description in the foregoing summarytiming of the Commitment Letter.significant expenditures associated with vendors, creditors, and pension regulators.
Halifax Alabama Credit Agreement
In connection with these measures, we determined it is in the purchasebest interest of the assetsCompany to preserve liquidity by suspending the quarterly dividend until economic conditions improve. We expect to reinstate the dividend when appropriate but cannot provide assurance if or when we will resume paying dividends on a regular basis.

The CARES Act, enacted March 27, 2020, provides various forms of Halifax Media in 2015,relief to companies impacted by the Company assumed obligationsCOVID-19 pandemic. As part of Halifax Media including the amount owing ($8.0 million at that time)relief available under the credit agreement dated June 18, 2013 between Halifax Alabama, LLC and Southeast Community Development Fund V, L.L.C.. This debt bore interest at an annual rateact, we have enacted a plan to defer remittance of 2%, and was repaidour Federal Insurance Contributions Act taxes as allowed by the legislation.

In the U.K. we have negotiated a deferral of $17 million in full on April 1, 2019.pension contributions due in 2020 to now be paid in 2021.
Cash Flows
The following table summarizes our historical cash flows.
 Six months ended June 30, 2019 Six months ended July 1, 2018
Cash provided by operating activities$57,653
 $57,603
Cash used in investing activities(37,180) (142,060)
Cash (used in) provided by financing activities(50,062) 115,156
Cash Flows from Operating Activities. Our largest source of cash provided by our operations is advertising revenues primarily generated from local advertising (local retail, local classified and online). Additionally,Although we generate cash through national advertising sales, circulation subscriptions, commercial printing services to third parties, digital marketing and business services through UpCurve and event revenue through GateHouse Live.
Our primary uses of cash in our operating activities include personnel costs, newsprint, delivery, and outside services.
Cash Flows from Investing Activities. Net cash used in investing activities forcurrently forecast sufficient near-term liquidity, the six months ended June 30, 2019 was $37.2 million. During the six months ended June 30, 2019, we used $39.4 million, net of cash acquired, for acquisitions and $4.9 million for capital expenditures, which was partially offset by $7.1 million we received from the sale of publications, real estate and other assets, and insurance proceeds.
Net cash used in investing activities for the six months ended July 1, 2018 was $142.1 million. During the six months ended July 1, 2018, we used $149.6 million, net of cash acquired, for acquisitions and $5.0 million for capital expenditures, which was partially offset by $12.6 million we received from the sale of real estate and other assets.
Cash Flows from Financing Activities. Net cash used in financing activities for the six months ended June 30, 2019 was $50.1 million and was primarily comprisedultimate impact of the payment of dividends of $46.1 million,COVID-19 pandemic could have a materially negative impact on the Company's liquidity and its ability to meet its ongoing obligations, including its obligations under the Apollo term loan repayments of $11.3 million and a $0.7 million purchase of treasury stock, partially offset by net borrowings under the revolving credit facility of $8.0 million.
Net cash provided by financing activities for the six months ended July 1, 2018 was $115.2 million and was primarily comprised of the issuance of common stock, net of underwriters' discount and the payment of offering costs, of $110.9 million, borrowings under term loans of $49.8 million, partially offset by the payment of dividends of $42.2 million, repayments under term loans of $2.1 million, a $0.8 million purchase of treasury stock, and payment of debt issuance costs of $0.5 million.
Changes in Financial Position
The discussion that follows highlights significant changes in our financial position and working capital from December 30, 2018 to June 30, 2019.

facility.

Accounts Receivable. Accounts receivable decreased $23.6 million, which primarily relates to seasonality and the timing of cash collections, which was partially offset by accounts receivable acquired in business acquisitions in the six months ended June 30, 2019.
Inventory. Inventory decreased $5.4 million, which primarily relates to a decrease in newsprint inventory due to a price decrease through a negotiated contract with one vendor, partially offset by inventory acquired in business acquisitions in the six months ended June 30, 2019.
Prepaid Expenses. Prepaid expenses increased $6.6 million, which primarily relates to the timing of payments and assets acquired in business acquisitions in the six month period ending June 30, 2019.
Operating Lease Right-of-Use Assets. Operating lease right-of-use assets increased $109.5 million due to the adoption of new leasing guidance under FASB ASU 2016-02, “Leases (Topic 842)”.
Current Portion of Long-Term Debt. Current portion of long-term debt decreased $9.1 million due to the April 1, 2019 payment of $8.0 million of debt that was assumed in the Halifax acquisition in 2015 and a $1.1 million reclassification to long-term debt.
Current Portion of Operating Lease Liabilities. Current portion of operating lease liabilities increased $14.5 million due to the adoption of new leasing guidance under FASB ASU 2016-02, “Leases (Topic 842)”.
Accounts Payable. Accounts payable decreased $4.2 million due to the timing of vendor payments.
Accrued Expenses. Accrued expenses decreased $14.8 million, which primarily relates to an $8.7 million decrease in accrued compensation, a decrease in the accrual for all management agreement related fees of $5.7 million, a $4.4 million decrease in the accrued acquisition liability due to working capital settlements, a $3.0 million decrease in accrued interest, and a $1.1 million decrease in accrued taxes, partially offset by a $3.6 million increase in accrued accounts payable, a $1.6 million increase in accrued legal and professional fees, a $0.9 million increase in accrued insurance, a $0.9 million increase in accrued restructuring and a $0.8 million increase in deferred compensation.
Long-term Operating Lease Liabilities. Long-term operating lease liabilities increased $102.4 million due to the adoption of new leasing guidance under FASB ASU 2016-02, “Leases (Topic 842)”.
Other Long-term Liabilities. Other long-term liabilities decreased $5.6 million, primarily due to a reclassification of accrued lease liabilities due to the adoption of new leasing guidance under FASB ASU 2016-02, “Leases (Topic 842)”.
Deferred Income Taxes. Deferred income taxes decreased $1.8 million, which primarily relates to the tax benefit attributable to the loss reflected during the six months ended June 30, 2019.
Additional Paid-in Capital. Additional paid-in capital decreased $44.0 million, which resulted primarily from dividends of $45.9 million, partially offset by non-cash compensation expense of $1.8 million.
Accumulated Deficit. Accumulated deficit increased $6.2 million, primarily due to the net loss attributable to New Media.
Summary Disclosure About Contractual Obligations and Commercial Commitments
There have been no significant changes to our contractual obligations previously reported in our Annual Report on Form 10-K for the year ended December 30, 2018.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements reasonably likely to have a current or future effect on our financial statements.
Contractual Commitments


There were no material changes made to our contractual commitments during the period from December 30, 2018 to June 30, 2019.
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 adjusted in the most comparable GAAP measure. We define and use Adjusted EBITDA, a non-GAAP financial measure, as set forth below.

Adjusted EBITDA

We define Adjusted EBITDA as follows:
Incomeincome (loss) from continuing operations before:

incomeIncome tax expense (benefit);
Interest expense;
interest/financing expense;Gains or losses on early extinguishment of debt;
depreciationNon-operating items, primarily pension costs;


Depreciation and amortization;
Integration and reorganization costs;
Impairment of long-lived assets;
Goodwill and intangible impairments;
Net loss (gain) on sale or disposal of assets;
Equity-based compensation;
Acquisition costs; and
non-cash impairments.Certain other non-recurring charges.

Management’s Use of Adjusted EBITDA

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

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

Limitations of Adjusted EBITDA

Adjusted EBITDA has limitations as an analytical tool. It should not be viewed in isolation or as a substitute for GAAP measures of earnings or cash flows. Material limitations in making the adjustments to our earnings to calculate Adjusted EBITDA and using this non-GAAP financial measure as compared to GAAP net income (loss) income, include: the cash portion of interest/interest / financing expense, income tax (benefit) provision, and charges related to impairment of long-lived assets, which may significantly affect our financial results.

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

Adjusted EBITDA is not an alternative to net income, income from operations, or cash flows provided by or used in operations as calculated and presented in accordance with GAAP. Readers of our financial statements should not rely on Adjusted EBITDA as a substitute for any such GAAP financial measure. We strongly urge readers of our financial statements to review the reconciliation of income (loss) income from continuing operations to Adjusted EBITDA along with our consolidated financial statements included elsewhere in this report. We also strongly urge readers of our financial statements to not rely on any single financial measure to evaluate our business. In addition, because Adjusted EBITDA is not a measure of financial performance under GAAP and is susceptible to varying calculations, the Adjusted EBITDA measure as presented in this report may differ from and may not be comparable to similarly titled measures used by other companies.


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



The table below shows the reconciliation of net loss(loss) income from continuing operations to Adjusted EBITDA for the periods presented:
Three months ended Six months ended Three months ended March 31,
June 30, 2019 July 1, 2018 June 30, 2019 July 1, 2018 
(in thousands) 
Net income (loss)$2,615
 $11,706
 $(6,740) $11,041
 
Income tax (benefit) expense(343) 2,946
 (2,297) 2,830
  
In thousands2020 2019 Change
Net loss attributable to Gannett$(80,152) $(9,106) $(71,046)
Provision (benefit) for income taxes8,979
 (1,954) 10,933
Interest expense10,212
 8,999
 20,346
 17,351
  57,899
 10,134
 47,765
Loss on early extinguishment of debt805
 —
 805
Other income(16,899) (260) (16,639)
Depreciation and amortization78,024
 20,923
 57,101
Integration and reorganization costs28,254
 5,798
 22,456
Acquisition costs5,969
 772
 5,197
Impairment of long-lived assets1,262
 —
 2,469
 —
 —
 1,207
 (1,207)
Depreciation and amortization23,328
 19,935
 44,251
 39,182
  
Adjusted EBITDA$37,074
(a)  
$43,586
(b)  
$58,029
(c)  
$70,404
(d)  
Loss on sale or disposal of assets657
 1,789
 (1,132)
Equity-based compensation expense11,577
 1,136
 10,441
Other items3,956
 2,408
 1,548
Adjusted EBITDA (non-GAAP basis)$99,069
 $32,847
 $66,222

(a)Adjusted EBITDA for the three months ended June 30, 2019 included net expenses of $10,432, related to transaction and project costs, non-cash compensation, and other expense of $6,255, integration and reorganization costs of $3,230 and a $947 loss on the sale or disposal of assets.
(b)Adjusted EBITDA for the three months ended July 1, 2018 included net expenses of $5,165, related to transaction and project costs, non-cash compensation, and other expense of $4,224, integration and reorganization costs of $1,749 and an $808 gain on the sale or disposal of assets.
(c)Adjusted EBITDA for the six months ended June 30, 2019 included net expenses of $22,533, related to transaction and project costs, non-cash compensation, and other expense of $12,454, integration and reorganization costs of $7,342 and a $2,737 loss on the sale or disposal of assets.
(d)Adjusted EBITDA for the six months ended July 1, 2018 included net expenses of $10,874, related to transaction and project costs, non-cash compensation, and other expense of $10,674, integration and reorganization costs of $4,179 and an $3,979 gain on the sale or disposal of assets.
Item 3.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
During
We believe our market risk from financial instruments, such as accounts receivable and accounts payable, is not material.

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

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

Our cumulative foreign currency translation adjustment reported as part of our equity totaled $6.8 million at March 31, 2020. No such amounts were reported for the three months ended June 30, 2019, thereMarch 31, 2019.

Newsquest's assets and liabilities were no material changestranslated from British pounds sterling to U.S. dollars at the March 31, 2020 exchange rate of 1.24. Newsquest's financial results were translated at an average rate of 1.28 for the first three months of 2020.

If the price of the British pound sterling against the U.S. dollar had been 10% more or less than the actual price, operating income would have increased or decreased approximately $0.2 million for the first three months of 2020. In addition, a 10% fluctuation in each of ReachLocal's currencies relative to the quantitative and qualitative disclosures about market risk that were presented in Item 7A of our Annual Report on Form 10-KU.S. dollar would have increased or decreased operating income by approximately $0.2 million for the year ended December 30, 2018.first three months of 2020.

Item 4.
Controls and Procedures
Disclosure Controls and Procedures
Our management, with the participation of
Based on their evaluation, our Chief Executive Officer (principalprincipal executive officer)officer and interim Chief Financial Officer (interim principal financial officer), has evaluated the effectiveness ofofficer have concluded that our disclosure controls and procedures (as is defined in RulesRule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 as amended), as(the “Exchange Act”)) were not effective because of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our Chief Executive Officer and interim Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective.
Changespreviously reported material weakness in Internal Control
Beginning December 31, 2018, we implemented the updated guidance on lease accounting. In connection with the adoption of this standard, we implemented changes to our disclosure controls, procedures related to lease accounting as well as the associated control activities within. These included the implementation of lease management and accounting software, development of new policies based on the updated guidance, ongoing contract review requirements and gathering of information provided for disclosures.
Other than the updates described above, there has not been any change in our internal control over financial reporting, (as such term is definedwhich we describe in Rule 13a-15(f) underpart II, Item 9A of our 2019 Form 10-K.

Remediation of Material Weakness

We continue to implement our remediation plan for the Exchange Act)previously reported material weakness in internal control over financial reporting, described in Part II, Item 9A of our 2019 Form 10-K, which includes steps to prioritize dedicated personnel, improve reporting processes, and enhance 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 Controls over Financial Reporting

There have been no changes in our internal controls over financial reporting or in other factors during the fiscal quarter to which this Quarterly Report on Form 10-Q relates that hashave materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.


As a result of the COVID-19 pandemic, our workforce has shifted to a primarily work from home environment beginning in 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 controls over financial reporting were 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
PART II. OTHER INFORMATION

Item 1.
Item 1. Legal Proceedings
There
Except as disclosed in Note 13 — Commitments, contingencies and other matters, there have been no material changesdevelopments with respect to theour potential liability for legal proceedingsand environmental matters previously disclosed under “Legal Proceedings” includedreported in our 2019 Annual Report on Form 10-K filed with the SEC on February 27, 2019.10-K.

Item 1A.Risk Factors
Item 1A. Risk Factors

You should carefully consider the following risks and other information in this Quarterly Report on Form 10-Q in evaluating us and our common stock. Any of the following risks could materially and adversely affect our results of operations, or financial condition. Thecondition, our ability to make distributions on our common stock and the market price of our common stock. For ease of review, the risk factors generally have been separatedgrouped into categories, but many of the following groups: Risks Relatedrisks described in a given category relate to Our Business, Risks Related to Our Manager, and Risks Related to Our Common Stock.multiple categories.

Risks Related to Our BusinessAcquisition and Integration of Legacy Gannett

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

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

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

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

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



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

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

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

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

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

In November 2019, pursuant to the acquisition of Legacy Gannett, the Company entered into a five-year, senior-secured term loan facility with Apollo Capital Management, L.P. ("Apollo") in an aggregate principal amount of approximately $1.8 billion. The term loan facility matures on November 19, 2024 and generally bears interest at the rate of 11.5% per annum. Accordingly, we are required to dedicate a substantial portion of cash flow from operations to fund interest payments. In addition, we are required to repay our credit facility from time to time with (i) the proceeds of non-ordinary course asset sales and casualty and condemnation events, (ii) a percentage of excess cash flow (ranging from 50% to 90%, depending on the current leverage ratio), and (iii) any unrestricted cash at the end of the 2020 and 2021 fiscal years in excess of $40 million. Our debt service obligations reduce the amount of cash flow available to fund our working capital, capital expenditures, investments and potential distributions to stockholders. Moreover, there can be no assurance that we will be able to generate sufficient cash flow to satisfy our debt service obligations. Our ability to satisfy our debt service obligations depends on our ability to generate cash flow from operations, which is subject to a greatvariety of risks, including general economic conditions and the strength of our competitors, which are outside our control.

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

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

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

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

Our credit facility grants Apollo the right to appoint two board observers to our Board. In the event that the ratio of consolidated debt to EBITDA (as such terms are defined in the term loan facility) drops below certain specified thresholds,


Apollo will have the right to appoint up to two voting directors (who must be reasonably acceptable to us) in lieu of such board observer(s). The interests of Apollo, as a lender under our credit facility, may conflict with those of our stockholders.

Risks Related to Competition from Digital Media

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

In recent years, we have experienced declining revenue (on a same-store basis). The majority of our revenue is from (i) advertising and marketing services and (ii) paid circulation (in each case, both in print and digital mediums). Print advertising alone accounted for approximately 28% of our total revenue as of March 31, 2020.

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

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

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

We also generate revenue from a commercial printing and distribution business that manage printing and distribution of publications for third parties, which generated approximately 5% of our revenue in the first quarter 2020. Our commercial and / or printing businesses could also be adversely affected by the same secular trends that are affecting our core advertising and circulation revenues. These third parties are experiencing the same print volume declines our business experiences and as such our commercial printing and distribution revenues could experience declines in the future. In addition, our relationships with these third parties are generally pursuant to short-term contracts, and a decision by any of the three largest national publications or the major local publications to cease publishing in those markets or seek alternatives to their current business practice of partnering with us could have an additional adverse effect on our revenue trends.

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

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

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

There can be no assurance that we will be able to grow revenue from these or other complementary businesses we may develop internally or acquire, or that any revenue generated by new business lines will be adequate to offset revenue declines


from our legacy businesses. For example, technological developments could adversely affect the availability, applicability, marketability and profitability of the suite of SMB services we offer. Technological developments and any changes we make to our business strategy may require significant capital investments, and such investments may be restricted by our current credit facility.

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

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

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

Risks Related to Macroeconomic Factors

Our ability to generate revenue is highly sensitive to the strength of the economies in which we operate and the demographics of the local communities that we serve, and we are also susceptible to general economic downturns, which have had, and could continue to have, a material and adverse impact on our advertising and circulation revenues and on our profitability.serve.

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

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

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



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

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

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

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

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

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

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

Risks Related to International Operations

We may be unsuccessful in managing our international operations.

Newsquest operates in the U.K., and ReachLocal has international sales operations in Australia, New Zealand and Canada, as well as campaign support services in India. Revenue from Newsquest accounted for 6.7% of our Publishing segment's total revenue for the three months ended March 31, 2020. Revenue from international operations outside North America accounted for 4.7% of our Marketing Solutions segment's total revenue for the three months ended March 31, 2020. Our ability to generate revenuesmanage these international operations successfully is correlatedsubject to numerous risks inherent in foreign operations, including:

Challenges or uncertainties arising from unexpected legal, political, or systemic events;
Difficulties or delays in developing a network of clients in international markets;
Restrictions on the ability of U.S. companies to do business in foreign countries;
Different legal or regulatory requirements, including with respect to internet services, privacy and data protection, censorship, banking and money transmitting, and selling, which may limit or prevent the economic conditionsoffering of three geographic regionsour products in some jurisdictions or otherwise harm our business;
International intellectual property laws that may be insufficient to protect our intellectual property or permit us to successfully defend our intellectual property in international lawsuits;


Different employee/employer relationships and the existence of workers' councils and labor unions, which could make it more difficult to terminate underperforming salespeople;
Difficulties in staffing and managing foreign operations;
Difficulties in accounts receivable collection;
Currency fluctuations and price controls or other restrictions on foreign currency;
Potential adverse tax consequences including difficulties in repatriating earnings generated abroad; and
Lack of infrastructure to adequately conduct electronic commerce transactions.

Any of the United States.foregoing factors could adversely impact our international operations, which could harm our overall business, operating results, and financial condition.
Our Company primarily generates revenue in three geographic regions: the Northeast, the Midwest,
Foreign exchange variability could materially and the Southeast. During the six months ended June 30, 2019, approximately 28% of our total revenues were generated in four states in the Northeast: Massachusetts, Pennsylvania, New York, and Rhode Island. During the same period, approximately 27% of our total revenues were generated in four states in the Midwest: Ohio, Nebraska, Illinois, and Oklahoma. Also during the same period, approximately 22% of our total revenues were generated in two states in the Southeast: Florida and North Carolina. As a result of this geographic concentration, our financial results, including advertising and circulation revenue, depend largely upon economic conditions in these principal market areas. Accordingly, adverse economic developments within these three regions in particular could significantlyadversely affect our consolidated operations and financialoperating results.


Our indebtedness and any future indebtedness may limit our financial and operating activities and our ability to incur additional debt to fund future needs or dividends.
We maintain secured credit facilities under a credit agreement with a syndication of lenders, including a term loan facility and a revolving credit facility. The term loan facility expires on July 14, 2022 and the revolving credit facility expires on July 14, 2021. Maximum borrowings under the revolving credit facility, including letters of credit, total $40 million. As of June 30, 2019, there were outstanding borrowings against the term loan facility and revolving credit facility totaling $434.0 million and $8.0 million, respectively. As of June 30, 2019, there were $0.5 million letters of credit issued against the revolving credit facility. As of June 30, 2019, the Company had $31.5 million of borrowing availability under the revolving credit facility.
Our indebtedness and any future indebtedness we incur could:
require us to dedicate a portion of cash flow from operations to the payment of principal and interest on indebtedness, including indebtedness we may incurstatements are denominated in U.S. dollars. Newsquest operates in the future, thereby reducingU.K., and its operations are conducted in foreign currency, primarily the funds available for other purposes, including dividends or other distributions;
subject us to increased sensitivity to increases in prevailing interest rates;
place us at a competitive disadvantage to competitors with relatively less debt in economic downturns, adverse industry conditions or catastrophic external events; or
reduce our flexibility in planning for or responding to changing business, industry and economic conditions.
In addition, our indebtedness could limit our ability to obtain additional financing on acceptable terms or at all to fund future acquisitions, working capital, capital expenditures, debt service requirements, general corporate and other purposes, which would have a material effect on our business and financial condition. Our liquidity needs could vary significantly and may be affected by general economic conditions, industry trends, performance and many other factors not within our control.
Discontinuation, reform or replacement of LIBOR, or uncertainty related to the potential for any of the foregoing, may adversely affect us
The U.K. Financial Conduct Authority announced in 2017 that LIBOR could be effectively discontinued after 2021.  In addition, other regulators have suggested reforming or replacing other benchmark rates.  The discontinuation, reform or replacement of LIBOR or any other benchmark rates may have an unpredictable impact on contractual mechanicsBritish pound sterling. Weakening in the credit markets or cause disruptionBritish pound sterling to the broader financial markets. Uncertainty as to the nature of such potential discontinuation, reform or replacement may negatively impact the volatility of LIBOR rates.
Under our existing Term Loans, if LIBOR becomes unavailable or if LIBOR ceases to accurately reflect the costs to the lenders, we may be required to pay interest under an alternative baseU.S. dollar exchange rate which could cause the amount of interest payable on the Term Loans to be materially different than expected.  We may choose in the future to pursue an amendment to our existing Term Loans to provide for a transition mechanism or other reference rate in anticipation of LIBOR’s discontinuation, but we can give no assurance that we will be able to reach agreement with our lenders on any such amendment.
The New Media Credit Agreement contains covenants that restrict our operations and may inhibit our ability to grow our business, increase revenues and pay dividends to our stockholders.
The New Media Credit Agreement contains various restrictions, covenants and representations and warranties. If we fail to comply with any of these covenants or breach these representations or warranties in any material respect, such noncompliance would constitute a default under the New Media Credit Agreement (subject to applicable cure periods), and the lenders could elect to declare all amounts outstanding under the agreements related thereto to be immediately due and payable and enforce their respective interests against collateral pledged under such agreements.
The covenants and restrictions in the New Media Credit Agreement generally restrict our ability to, among other things:
incur or guarantee additional debt;
make certain investments, loans or acquisitions;
transfer or sell assets;


make distributions on capital stock or redeem or repurchase capital stock;
create or incur liens;
enter into transactions with affiliates;
consolidate, merge or sell all or substantially all of our assets; and
create restrictions on the payment of dividends or other amounts to us from our restricted subsidiaries.
The restrictions described above may interfere with our ability to obtain new or additional financing or may affect the manner in which we structure such new or additional financing or engage in other business activities, which may significantly limit or harm our results of operations, financial condition and liquidity. A default under the New Media Credit Agreement could also significantly limit our alternatives to refinance the debt under which the default occurred. This limitation may significantly restrict our financing options during times of either market distress or our financial distress, which are precisely the times when having financing options is most important.
We may not generate a sufficient amount of cash or generate sufficient funds from operations to fund our operations or repay our indebtedness.
Our ability to make payments on our indebtedness as required depends on our ability to generate cash flow from operations in the future. This ability, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.
If we do not generate sufficient cash flow from operations to satisfy our debt obligations, including interest payments and the payment of principal at maturity, we may have to undertake alternative financing plans, such as refinancing or restructuring our debt, selling assets, reducing or delaying capital investments or seeking to raise additional capital. We cannot provide assurance that any refinancing would be possible, that any assets could be sold, or, if sold, of the timeliness and amount of proceeds realized from those sales, that additional financing could be obtained on acceptable terms, if at all, or that additional financing would be permitted under the terms of our various debt instruments then in effect. Furthermore, our ability to refinance would depend upon the condition of the finance and credit markets. Our inability to generate sufficient cash flow to satisfy our debt obligations, or to refinance our obligations on commercially reasonable terms or on a timely basis, would materially affect our business, financial condition and results of operations.
We may not be able to pay dividends in accordance with our announced intent or at all.
We have announced our intent to distribute a portion of our free cash flow generated from operations or other sources as a dividend to our stockholders, through a quarterly dividend, subject to satisfactory financial performance, approval by our Board of Directors and dividend restrictions in the New Media Credit Agreement. The Board of Directors’ determinations regarding dividends will depend on a variety of factors, including the Company’s GAAP net income, free cash flow generated from operations or other sources, liquidity position and potential alternative uses of cash, such as acquisitions, as well as economic conditions and expected future financial results. Although we recently paid a first quarter 2019 cash dividend of $0.38 per share of Common Stock and have paid regularly quarterly dividends since the third quarter of 2014, there can be no guarantee that we will continue to pay dividends in the future or that this recent dividend is representative of the amount of any future dividends. Our ability to declare future dividends 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.
We may acquire additional companies with declining cash flow as part of a strategy aimed at stabilizing cash flow through expense reduction and digital expansion. If our strategy is not successful, we may not be able to pay dividends.
We are also dependent on our subsidiaries being able to pay dividends. Our subsidiaries are subject to restrictions on the ability to pay dividends under the various instruments governing their indebtedness. If our subsidiaries incur additional debt or losses, such additional indebtedness or loss may further impair their ability to pay dividends or make other distributions to us. In addition, the ability of our subsidiaries to declare and pay dividends to us will also be dependent on their cash income and cash available and may be restricted under applicable law or regulation. Under Delaware law, approval of the board of directors is required to approve any dividend, which may only be paid out of surplus or net profit for the applicable fiscal year. As a result, we may not be able to pay dividends in accordance with our announced intent or at all.


We have invested in growing our digital business, including UpCurve and including through strategic acquisitions, but such investments may not be successful, which could adversely affect our results of operations.
We continue to evaluate our business and how we intend to grow our digital business. Internal resources and effort are put towards this business and acquisitions are sought to expand this business. In addition, key partnerships have been entered into to assist with our digital business, including UpCurve. We continue to believe that our digital businesses, including UpCurve, offer opportunities for revenue growth to support and, in some cases, offset the revenue trends we have seen in our print business. There can be no assurances that the partnerships we have entered into, the acquisitions we have completed or the internal strategy being employed will result in generating or increasing digital revenues in amounts necessary to stabilize or offset trends in print revenues. In addition, we have a limited history of operations in this area and there can be no assurances that past performance will be indicative of future performance or future trends or that the demand trends for online advertising and services experienced in recent periods will continue. If our digital strategy, including with regard to UpCurve, is not as successful as we anticipate, our financial condition, results of operations and ability to pay dividends could be adversely affected.

Acquisitions have formed a significant part of our growth strategyhas in the past, and are expectedcould in the future, diminish Newsquest's contributions to continueour results of operations. In addition, ReachLocal conducts operations in several foreign jurisdictions. If the value of currency in any of those jurisdictions weakens as compared with the U.S. dollar, ReachLocal’s operations in those jurisdictions similarly will contribute less to do so. If we are unableour results.

The U.K. vote to identify suitable acquisition candidates or successfully integrateleave the businesses we acquire, our growth strategy may not succeed. Acquisitions involve numerous risks, including risks related to integration, and these risksEuropean Union could adversely affectimpact our business, financial condition and results of operations.
Our business strategy relies on acquisitions. We expect to derive a significant portion of our growth by acquiring businesses and integrating those businesses into our existing operations. We continue to seek acquisition opportunities; however, we may not be successful in identifying acquisition opportunities, assessing the value, strengths and weaknesses of these opportunities or consummating acquisitions on acceptable terms. Furthermore, suitable acquisition opportunities may not even be made available or known to us. In addition, valuations of potential acquisitions may rise materially, making it economically unfeasible to complete identified acquisitions.
Additionally, our ability to realize the anticipated benefits of the synergies between New Media and our recent or potential future acquisitions of assets or companies will depend, in part, on our ability to appropriately integrate the business of New Media and the businesses of other such acquired companies. The process of acquiring assets or companies may disrupt our business and may not result in the full benefits expected. The risks associated with integrating the operations of New Media and recent and potential future acquisitions include, among others:
uncoordinated market functions;
unanticipated issues in integrating the operations and personnel of the acquired businesses;
the incurrence of indebtedness and the assumption of liabilities;
the incurrence of significant additional capital expenditures, transaction and operating expenses and non-recurring acquisition-related charges;
unanticipated adverse impact on our earnings from the amortization or write-off of acquired goodwill and other intangible assets;
cultural challenges associated with integrating acquired businesses with the operations of New Media;
not retaining key employees, vendors, service providers, readers and customers of the acquired businesses; and
the diversion of management’s attention from ongoing business concerns.
If we are unable to successfully implement our acquisition strategy or address the risks associated with integrating the operations of New Media and past acquisitions or potential future acquisitions, or if we encounter unforeseen expenses, difficulties, complications or delays frequently encountered in connection with the integration of acquired entities and the expansion of operations, our growth and ability to compete may be impaired, we may fail to achieve acquisition synergies and we may be required to focus resources on integration of operations rather than other profitable areas. Moreover, the success of any acquisition will depend upon our ability to effectively integrate the acquired assets or businesses. The acquired assets or businesses may not contribute to our revenues or earnings to any material extent, and cost savings and synergies we expect at the time of an acquisition may not be realized once the acquisition has been completed. Furthermore, if we incur indebtedness to finance an acquisition, the acquired business may not be able to generate sufficient cash flow to service that indebtedness.


Unsuitable or unsuccessful acquisitions could adversely affect our business, financial condition, results of operations, cash flow and ability to pay dividends.
If we are unable to retain and grow our digital audience and advertiser base, our digital business will be adversely affected.
Given the ever-growing and rapidly changing number of digital media options available, we may not be able to increase our online traffic sufficiently and retain or grow a base of frequent visitors to our websites and applications on mobile devices.
We have experienced declines in advertising revenue due in part to advertisers’ shift from print to digital media, and we may not be able to create sufficient advertiser interest in our digital businesses to maintain or increase the advertising rates of the inventory on our websites. There can be no assurances that past performance will be indicative of future performance or future trends or that the demand trends for digital advertising and services experienced in recent periods will continue.
In addition, the ever-growing and rapidly changing number of digital media options available may lead to technologies and alternatives that we are not able to offer or about which we are not able to advise. Such circumstances could directly and adversely affect the availability, applicability, marketability and profitability of the suite of SMB services and the private ad exchange we offer as a significant part of our digital business. Specifically, news aggregation websites and customized news feeds (often free to users) may reduce our traffic levels by driving interaction away from our websites or our digital applications. If traffic levels stagnate or decline, we may not be able to create sufficient advertiser interest in our digital businesses or to maintain or increase the advertising rates of the inventory on our digital platforms. We may also be adversely affected if the use of technology developed to block the display of advertising on websites proliferates.
Technological developments and any changes we make to our business strategy may require significant capital investments. Such investments may be restricted by our current or future credit facilities.
If there is a significant increase in the price of newsprint or a reduction in the availability of newsprint, our results of operations, and financial condition may suffer.condition.
A basic raw material for our publications is newsprint. We generally maintain
The U.K. left the European Union on January 31, 2020 (“Brexit”). At this stage, the nature of the future relationship between the U.K. and the remaining European Union countries following Brexit has yet to be agreed, and negotiations with the European Union on the terms of Brexit have demonstrated the difficulties that exist in reaching such an agreement. Depending on the terms of the negotiations, the U.K. could also lose access to the single European Union market and to the global trade deals negotiated by the European Union on behalf of its members. Such a 45 to 55-day inventorydecline in trade could affect the attractiveness of newsprint. An inability to obtain an adequate supply of newsprint atthe U.K. as a favorable price or at allglobal investment center and, as a result, could have a material adverse effectdetrimental impact on our ability to produce our publications. Historically, the price of newsprint has been volatile, reaching a high of approximately $823 per metric ton in 2008 and experiencing a low of almost $410 per metric ton in 2002. The average price of newsprint during 2018 was approximately $728 per metric ton. Recent and future consolidation of major newsprint suppliers may adversely affect price competition among suppliers. Tariffs, duties and other restrictions on non-U.S. suppliers of newsprint have increased and mayeconomic growth in the country. Furthermore, regardless of the form of any withdrawal agreement, there are likely to be changes in the legal rights and obligations of commercial parties across all industries following Brexit, and British regulatory requirements once outside the European Union could be subject to significant change. Any of the foregoing could result in an economic downturn in Newsquest’s markets, which could depress the demand for our products and services.

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

On March 19, 2020, Her Majesty's Treasury and Her Majesty's Revenue & Customs (HMRC) introduced updated draft legislation describing the priceframework of newsprint and/or limita proposed Digital Services Tax (DST) in the supplyUnited Kingdom. This tax, if enacted, would apply from April 1, 2020. The 2% DST is based on the framework previously provided on July 11, 2019 and would apply to gross revenue of available newsprint. Significant increases in newsprint costs for propertiesspecified digital business models deriving value from participation of their U.K.-based users. While the tax is intended to apply to search engines, social media platforms, and periods not covered byonline marketplaces, it may be applied to online advertising when users of our newsprint vendor agreement couldpublications receive advertising based on their participation with the publications. If the DST is enacted, we may have a material adverse effect on our financial condition and results of operations.
We have experienced declines in advertising revenue, and further declines,to pay additional cash taxes which could adversely affect our results of operations, and financial condition, may occur.
Excluding acquisitions, we have experienced declines in advertising revenue, notably, in traditional print advertising, due in part to advertisers’ shift from print to digital media. We continue to search for organic growth opportunities, including in our digital advertising business, and for ways to stabilize print revenue declines through new product launches and pricing. However, there can be no assurance that our advertising revenue will not continue to decline. In addition, the range of advertising choices across digital products and platforms and the large inventory of available digital advertising space have historically resulted in significantly lower rates for digital advertising than for print advertising. Consequently, our digital advertising revenue may not be able to replace print advertising revenue lost as a result of the shift to digital consumption. Further declines in advertising revenue could adversely affect our results of operations and financial condition.
We compete with a large number of companies in the local media industry; if we are unable to compete effectively, our advertising and circulation revenues may decline.
Our business is concentrated in newspapers and other print publications located primarily in small and mid-size markets in the United States. Our revenues primarily consist of advertising and paid circulation. Competition for advertising revenues and paid circulation comes from direct mail, directories, radio, television, outdoor advertising, other newspaper publications, the internet and other media. For example, as the use of the internet and mobile devices has increased, we have lost some classified advertising and subscribers to online advertising businesses and our free internet sites that contain abbreviated versions of our publications. Competition for advertising revenues is based largely upon advertiser results, advertising rates,

cash flows.

readership, demographics and circulation levels. Competition for circulation is based largely upon the content of the publication and its price and editorial quality.Additional Risks Related to Our local and regional competitors vary from market to market, and many of our competitors for advertising revenues are larger and have greater financial and distribution resources than us. We may incur increased costs competing for advertising expenditures and paid circulation. We may also experience further declines of circulation or print advertising revenue due to alternative media. If we are not able to compete effectively for advertising expenditures and paid circulation, our revenues may decline.Business
We are undertaking strategic process upgrades that could have a material adverse financial impact if unsuccessful.
We are implementing strategic process upgrades of our business. Among other things we are implementing the standardization and centralization of systems and processes, the outsourcing of certain financial processes and the use of new software for our circulation, advertising and editorial systems. As a result of ongoing strategic evaluation and analysis, we have made and will continue to make changes that, if unsuccessful, could have a material adverse financial impact.
Our business is subject to seasonal and other fluctuations, which affects our revenues and operating results.

Our business is subject to seasonal fluctuations that we expect to continue to be reflected in our operating results in future periods. Our first fiscal quarter of the year tends to be our weakest quarter because advertising volume is at its lowest levels following the December holiday season. Correspondingly, our second and fourth fiscal quarters tend to be our strongest because they include heavy holiday and seasonal advertising. Other factors that affect our quarterly revenues and operating results may be beyond our control, including changes in the pricing policies of our competitors, the hiring and retention of key personnel, wage and cost pressures, distribution costs, changes in newsprint prices and general economic factors.
We could be adversely affected by declining circulation subscribers.
Overall daily newspaper circulation subscribers, including national and urban newspapers, has declined in recent years. For the year ended December 30, 2018, our circulation revenue increased by $100.6 million, or 21.2%, as compared to the year ended December 31, 2017, while our acquisitions during the year added $122.2 million of circulation revenue. There can be no assurance that our circulation revenue will not decline in the future. We have been able to maintain annual circulation revenue from existing operations in recent years through, among other things, increases in per copy prices. However, there can be no assurance that we will be able to continue to increase prices to offset any declines in the number of subscribers. Further declines in the number of subscribers could impair our ability to maintain or increase our advertising prices, cause purchasers of advertising in our publications to reduce or discontinue those purchases and discourage potential new advertising customers, all of which could have a material adverse effect on our business, financial condition, results of operations, cash flows and ability to pay dividends.
The increasing popularity of digital media and the fragmentation of audience resulting from the rapidly changing number of available digital media options could also adversely affect the number of subscribers of our content, which may decrease circulation revenue and cause more marked declines in advertising. Further, readership demographics and habits may change over time. If we are not successful in offsetting such declines in revenues from our print products, our business, financial condition and prospects will be adversely affected.
The value of our intangible assets may become impaired, depending uponwhich could adversely affect future operating results.reported results of operations and stockholders’ equity
At June 30, 2019 the carrying value of our


Our goodwill is $317.2 million, of mastheads is $118.0 million, and the carrying value of our amortizable intangible assets is $356.9 million. The indefinite-lived assets (goodwill and mastheads)(mastheads) are subject to annual impairment testing, and more frequent testing upon the occurrence of certain events or significant changes in our circumstances, that indicate all or a portionto determine whether the fair value of such assets is less than the their carrying values may no longer be recoverable, in whichvalue. In such case, a non-cash charge to earnings may be necessary in the relevant period. We may subsequently experience market pressuresperiod, which could cause future cash flows to decline below our current expectations, or volatile equity markets could negatively impact market factors used in the impairment analysis, including earnings multiples, discount rates, and long-term growth rates. Any future evaluations requiring an asset impairment charge for goodwill or other intangible assets would adversely affect future reported results of operations and shareholders’stockholders’ equity. At March 31, 2020, the carrying value of our goodwill was $909.7 million, the carrying value of mastheads was $177.7 million, and the carrying value of our amortizable intangible assets was $804.3 million.

We performed our 2019 annual assessmentassessments for possible impairment of the carrying value of goodwill and indefinite-lived intangibles in connection with the Legacy Gannett acquisition and as of June 30,December 31, 2019. The estimated fair value equaled or exceeded carrying valueFor the impairment assessments performed for goodwill and mastheads.


However,the fourth quarter of 2019, the fair value of the NewspaperDomestic Publishing, Newsquest and Marketing Solutions reporting unit exceeded carrying value byunits were less than 10%. greater than the carrying value. The footnotes to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019 describe the key assumptions used in the 2019 goodwill impairment analysis.

As of March 31, 2020, we performed a review of potential impairment indicators. In addition,connection with our review, we noted that the market capitalization of the Company declined significantly during the three months ended March 31, 2020 and there was widespread stock-market volatility, resulting from the COVID-19 pandemic. Although we expect our near-term operating results to be negatively impacted as a result of the COVID-19 pandemic, our overall financial forecasts have not changed materially from the financial forecasts used in our year-end impairment assessment. As a result, we concluded that it was not more likely than not that the fair value of mastheads exceeded carrying value byour reporting units is less than 10%carrying value. We reached a similar conclusion for our indefinite-lived intangible assets, which consist of mastheads.

Management assumptions used to calculate fair value are highly subjective and involve forecasts of future economic and market conditions and their impact on operating performance. Changes in key assumptions impacting the centralanalyses could result in the recognition of impairment. The severity and east regions.  No impairment was recognized.length of the COVID-19 pandemic, the duration and extent of the mitigation measures and governmental actions designed to combat the pandemic, as well as the changes in customers behavior as a result of the pandemic, all of which are highly uncertain and difficult to predict at the current time, could negatively impact our future assessment of projected results of operations and the underlying assumptions utilized in the determination of the estimated fair values of the reporting units and related mastheads.

For further information on goodwill and intangible assets, see Note 56 — Goodwill & Intangible Assets.

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

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

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



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

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

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

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

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

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

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

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

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

Our operations are subject to federal, state and local laws and regulations pertaining to the environment, storage tanks and the management and disposal of wastes at our facilities. Under various environmental laws, a current or previous owner or


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

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

Future events, such as changes in existing laws and regulations, new laws or regulations or the discovery of conditions not currently known to us, may give rise to additional compliance or remedial costs that could be material.
Sustained increases in costs of employee health and welfare benefits may reduce our profitability. Moreover, our pension plan obligations are currently underfunded, and we may have to make significant cash contributions to our plans, which could reduce the cash available for our business.
In recent years, we have experienced significant increases in the cost of employee benefits because of economic factors beyond our control, including increases in health care costs. At least some of these factors may continue to put upward pressure on the cost of providing medical benefits. Although we have actively sought to control increases in these costs, there can be no assurance that we will succeed in limiting cost increases, and continued upward pressure could reduce the profitability of our businesses.
Our pension and postretirement plans were underfunded by $24.1 million at June 30, 2019. Our pension plans invest in a variety of equity and debt securities. Future volatility and disruption in the equity and bond markets could cause declines in the asset values of our pension plans. In addition, decreases in the discount rate used to determine minimum funding requirements could result in increased future contributions. If either occurs, we may need to make additional pension contributions above what is currently estimated, which could reduce the cash available for our businesses.
We may not be able to protect intellectual property rights upon which our business relies and, if we lose intellectual property protection, our assets may lose value.
Our business depends on our intellectual property, including, but not limited to, our titles, mastheads, content and proprietary software, which we may attempt to protect through patents, copyrights, trade laws and contractual restrictions, such as confidentiality agreements. We believe our proprietary and other intellectual property rights are important to our success and our competitive position.


Despite our efforts to protect our proprietary rights, unauthorized third parties may attempt to copy or otherwise obtain and use our content, services and other intellectual property, and we cannot be certain that the steps we have taken will prevent any misappropriation or confusion among consumers and merchants, or unauthorized use of these rights. If we are unable to procure, protect and enforce our intellectual property rights, we may not realize the full value of these assets, and our business may suffer. If we must litigate to enforce our intellectual property rights or determine the validity and scope of the proprietary rights of third parties, such litigation may be costly and divert the attention of our management from day-to-day operations.
We depend on key personnel and we may not be able to operate or grow our business effectively if we lose the services of any of our key personnel or are unable to attract qualified personnel in the future.
The success of our business is heavily dependent on our ability to retain our management and other key personnel and to attract and retain qualified personnel in the future. Competition for senior management personnel is intense, and we may not be able to retain our key personnel. Although we have entered into employment agreements with certain of our key personnel, these agreements do not ensure that our key personnel will continue in their present capacity with us for any particular period of time. We do not have key man insurance for any of our current management or other key personnel. The loss of any key personnel would require our remaining key personnel to divert immediate and substantial attention to seeking a replacement. An inability to find a suitable replacement for any departing executive officer on a timely basis could adversely affect our ability to operate or grow our business.
A shortage of skilled or experienced employees in the media industry, or our inability to retain such employees, could pose a risk to achieving improved productivity and reducing costs, which could adversely affect our profitability.
Production and distribution of our various publications requires skilled and experienced employees. A shortage of such employees, or our inability to retain such employees, could have an adverse impact on our productivity and costs, our ability to expand, develop and distribute new products and our entry into new markets. The cost of retaining or hiring such employees could exceed our expectations which could adversely affect our results of operations.
A number of our employees are unionized, and our business and results of operations could be adversely affected if current or additional labor negotiations or contracts were to further restrict our ability to maximize the efficiency of our operations.
As of June 30, 2019, we employed 10,284 employees, of whom 1,112 (or approximately 10.8%) were represented by 43 unions. 78% of the unionized employees are in four states: Ohio, Rhode Island, Massachusetts and Illinois and represent 31%, 20%, 14% and 13% of all our union employees, respectively.
Although our newspapers have not experienced a union strike in the recent past nor do we anticipate a union strike to occur, we cannot preclude the possibility that a strike may occur at one or more of our newspapers at some point in the future. We believe that, in the event of a newspaper strike, we would be able to continue to publish and deliver to subscribers, which is critical to retaining advertising and circulation revenues, although there can be no assurance of this. Further, settlement of actual or threatened labor disputes or an increase in the number of our employees covered by collective bargaining agreements can have unknown effects on our labor costs, productivity and flexibility.
The collectability of accounts receivable under adverse economic conditions could deteriorate to a greater extent than provided for in our financial statements and in our projections of future results.
Adverse economic conditions in the United States may increase our exposure to losses resulting from financial distress, insolvency and the potential bankruptcy of our advertising customers. We recorded write-offs of accounts receivable relating to recent bankruptcies of national retailers, including Sears and Bon Ton, among others. Our accounts receivable is stated at net estimated realizable value, and our allowance for doubtful accounts has been determined based on several factors, including receivable agings, significant individual credit risk accounts and historical experience. If such collectability estimates prove inaccurate, adjustments to future operating results could occur.
Our potential inability to successfully execute cost control measures could result in greater than expected total operating costs.
We have implemented general cost control measures, and we expect to continue such cost control efforts in the future. If we do not achieve expected savings as a result of such measures or if our operating costs increase as a result of our growth strategy, our total operating costs may be greater than expected. In addition, reductions in staff and employee benefits could affect our ability to attract and retain key employees.


We rely on revenue from the printing of publications for third parties that may be subject to many of the same business and industry risks that we are.
In 2018, we generated approximately 7.2% of our revenue from printing third-party publications, and our relationships with these third parties are generally pursuant to short-term contracts. As a result, if the macroeconomic and industry trends described herein such as the sensitivity to perceived economic weakness of discretionary spending available to advertisers and subscribers, circulation declines, shifts in consumer habits and the increasing popularity of digital media affect those third parties, we may lose, in whole or in part, a substantial source of revenue.
A decision by any of the three largest national publications or the major local publications to cease publishing in those markets, or seek alternatives to their current business practice of partnering with us, could materially impact our profitability.
Our possession and use of personal information and the use of payment cards by our customers present risks and expenses that could harm our business. Unauthorized access to or disclosure or manipulation of such data, whether through breach of our network security or otherwise, could expose us to liabilities and costly litigation and damage our reputation.

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

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

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


comply with any of these laws or regulations may have an adverse effect on our business, financial condition and results of operations.

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

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

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

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

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

We have released valuation allowance of $46.9 million relating to federal deferred tax assets. If we do not have taxable income in future years, we may be required to reestablish a valuation allowance against our federal deferred tax assets.

Risks Related to Pension Obligations and Employees

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

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

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

The excess of pension benefit obligations over assets is expected to give rise to required pension contributions over the next several years. We have committed to make a contribution of $35.8 million to the GRP in 2020, as well as a $15.0 million contribution in 2021. Our ability to make contribution payments will depend on our future cash flows, which are subject to general economic, financial, competitive, business, legislative, regulatory, and other factors beyond our control. Various factors, including future investment returns, interest rates, and potential pension legislative changes, may impact the timing and amount of future pension contributions. In addition, decreases in the discount rate used to determine minimum funding requirements could result in increased future contributions. As a result, we may need to make additional pension contributions


above what is currently estimated, which could reduce the cash available for our businesses.

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

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

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

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

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

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

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

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

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

Risks Related to Our Manager
We are dependent on our Manager and may not find a suitable replacement if our Manager terminates the Management Agreement.
The inability of our Manager to retain or obtain key personnel could delay or hinder implementation of our investment strategies, which could impair our ability to make distributions and could reduce the value of your investment.
Some of our officers
Our Chief Executive Officer and certain other individuals who perform services for us are employees of our Manager. We are reliant on our Manager, which has significant discretion as to the implementation of our operating policies and strategies, to conduct our business. We are subject to the risk that our Manager will terminate the Management Agreement and that we will not be able to find a suitable replacement for our Manager in a timely manner, at a reasonable cost or at all. Furthermore, we are dependent on


the services of certain key employees of our Manager whose compensation may be partially or entirely dependent upon the amount of incentive or management compensation earned by our Manager and whose continued service is not guaranteed, and the loss of such services could adversely affect our operations. If any of these people were to cease their affiliation with us or our Manager, either we or our Manager may be unable to find suitable replacements, and our operating results could suffer. We believe that



Because we are dependent upon our future success depends,Manager and its affiliates to conduct our operations, any adverse changes in large part, uponthe financial health of our Manager or its affiliates, or in our relationship with them, could hinder our Manager’s ability to hire and retain highly skilled personnel. Competition for highly skilled personnel is intense, andsuccessfully manage our operations.

We are dependent on our Manager may be unsuccessfuland its affiliates to manage our operations and acquire and manage our investments. Under the direction of our Board of Directors, our Manager makes decisions with respect to the management of our company. To conduct its operations, our Manager depends upon the fees and other compensation that it receives from us in attractingconnection with managing our company and retaining such skilled personnel. If we losefrom other entities and investors with respect to investment management services it provides. Any adverse changes in the financial condition of our Manager or are unable to obtain the services of highly skilled personnel,its affiliates, or our relationship with our Manager, could hinder our Manager’s ability to implementsuccessfully manage our investment strategies could be delayed or hindered and thisoperations, which could materially adversely affect our business, results of operations, financial condition and ability to make distributions to our stockholders. For example, adverse changes in the financial condition of our Manager could limit its ability to attract key personnel.
Concurrently with our entry into the Merger Agreement, we and the Manger amended the Management Agreement, effective as of the closing of the Merger. Refer to Management's Discussion and Analysis and to Note 15 to the unaudited condensed consolidated financial statements included herein, "Subsequent Events," for further information on the terms of the amended Management Agreement.
There are conflicts of interest in our relationship with our Manager.

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

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

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

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


The management compensation structure that we have agreed to with our Manager, as well as compensation arrangements that we may enter into with our Manager in the future (in connection with new lines of business or other activities), may


incentivize our Manager to invest in high risk investments. In addition to its management fee, our Manager is currently entitled to receive incentive compensation. In evaluating investments and other management strategies, the opportunity to earn incentive compensation may lead our Manager to place undue emphasis on the maximization of such measures at the expense of other criteria, such as preservation of capital, in order to achieve higher incentive compensation. Investments with higher yield potential are generally riskier or more speculative than lower-yielding investments. Moreover, because our Manager receives compensation in the form of options in connection with the completion of our equity offerings, our Manager may be incentivized to cause us to issue additional stock, which could be dilutive to existing stockholders.
Concurrently with our entry into the Merger Agreement, we and the Manger amended the Management Agreement, effective as of the closing of the Merger. Refer to Management's Discussion and Analysis and to Note 15 to the unaudited condensed consolidated financial statements included herein, "Subsequent Events," for further information on the terms of the amended Management Agreement.
It would be difficult and costly to terminate our Management Agreement with our Manager.
It would be difficult and costly for us to terminate our Management Agreement with our Manager. After its initial three-year term, the Management Agreement is automatically renewed for one-year terms unless (i) a majority consisting of at least two-thirds of our independent directors, or a simple majority of the holders of outstanding shares of our common stock, reasonably agree that there has been unsatisfactory performance by our Manager that is materially detrimental to us or (ii) a simple majority of our independent directors agree that the management fee payable to our Manager is unfair, subject to our Manager’s right to prevent such a termination by agreeing to continue to provide the services under the Management Agreement at a fee that our independent directors have determined to be fair. If we elect not to renew the Management Agreement, our Manager will be provided not less than 60 days’ prior written notice. In the event that we terminate the Management Agreement, our Manager will be paid a termination fee equal to the amount of the management fee earned by the Manager during the 12-month period immediately preceding such termination. In addition, following any termination of the Management Agreement, our Manager may require us to purchase its right to receive incentive compensation at a price determined as if our assets were sold for their then current fair market value or otherwise we may continue to pay the incentive compensation to our Manager. These provisions may increase the effective cost to us of terminating the Management Agreement, thereby adversely affecting our ability to terminate our Manager without cause.
Concurrently with our entry into the Merger Agreement, we and the Manger amended the Management Agreement, effective as of the closing of the Merger. Refer to Management's Discussion and Analysis and to Note 15 to the unaudited condensed consolidated financial statements included herein, "Subsequent Events," for further information on the terms of the amended Management Agreement.
Our Board of Directors does not approve each investment decision made by our Manager. In addition, we may change our investment strategy without a stockholder vote, which may result in our making investments that are different, riskier or less profitable than our current investments.

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

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


a change in our investment strategy may increase the guarantee obligations we agree to incur or increase the number of transactions we enter into with affiliates. Our failure to accurately assess the risks inherent in new asset categories or the financing risks associated with such assets could adversely affect our results of operations and our financial condition.

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

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

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

Our Manager intends to conduct due diligence with respect to each investment opportunity or other transaction it pursues. It is possible, however, that our Manager’s due diligence processes will not uncover all relevant facts, particularly with respect to any assets we acquire from third parties. In these cases, our Manager may be given limited access to information about the investment and will rely on information provided by the target of the investment. In addition, if investment opportunities are scarce, the process for selecting bidders is competitive, or the timeframe in which we are required to complete diligence is short, our ability to conduct a due diligence investigation may be limited, and we would be required to make investment decisions based upon a less thorough diligence process than would otherwise be the case. Accordingly, investments and other transactions that initially appear to be viable may prove not to be over time, due to the limitations of the due diligence process or other factors.
Because we are dependent upon our Manager and its affiliates to conduct our operations, any adverse changes in the financial health of our Manager or its affiliates, or in our relationship with them, could hinder our Manager’s ability to successfully manage our operations.
We are dependent on our Manager and its affiliates to manage our operations and acquire and manage our investments. Under the direction of our Board of Directors, our Manager makes all decisions with respect to the management of our company. To conduct its operations, our Manager depends upon the fees and other compensation that it receives from us in connection with managing our company and from other entities and investors with respect to investment management services it provides. Any adverse changes in the financial condition of our Manager or its affiliates, or our relationship with our Manager, could hinder our Manager’s ability to successfully manage our operations, which would materially adversely affect our business, results of operations, financial condition and ability to make distributions to our stockholders. For example, adverse changes in the financial condition of our Manager could limit its ability to attract key personnel.
Risks Relating to the Merger
New Media and Gannett may be unable to satisfy the conditions required to complete the Merger, and any delay in completing the Merger could diminish the anticipated benefits of the Merger. Failure to complete the Merger could adversely impact the market price of our shares as well as our business and operating results.
The consummation of the Merger (described under the heading “Agreement and Plan of Merger with Gannett” in Note 15 to the unaudited condensed consolidated financial statements, “Subsequent Events,” and in Management's Discussion and Analysis herein) is subject to numerous conditions, including approval by Gannett’s stockholders and New Media’s stockholders (in the case of the New Media stockholder approval, disregarding any shares held by certain affiliates of Fortress)



and other customary closing conditions. New Media cannot make any assurances that the Merger will be consummated on the terms or timeline currently contemplated, or at all.
Completion of the Merger is also conditioned upon the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and obtaining the necessary clearance from the European Commission. While we and Gannett intend to pursue vigorously all required governmental approvals, the requirement to receive these approvals before the consummation of the Merger could delay the Merger. Any delay in the completion of the Merger could diminish anticipated benefits of the Merger, including realization of expected synergies and operating efficiencies, or result in additional transaction costs, loss of revenue or other effects associated with uncertainty about the Merger.
Moreover, the Merger Agreement does not contain a financing contingency, which means that a failure to obtain the financing for the Merger would not excuse us from our obligations thereunder. We intend to obtain debt financing to fund the cash portion of the Merger consideration, repay existing indebtedness and fund certain fees and expenses related to the Merger. We have obtained a financing commitment from Apollo, which is subject to negotiation of a mutually acceptable credit or loan agreement and other mutually acceptable definitive documentation, which will include certain representations and warranties, affirmative and negative covenants, financial covenants, events of default and collateral and guarantee agreements that are customarily required for similar financings. Additionally, Apollo’s obligation to provide the financing is subject to the satisfaction of specified conditions, including that we must have at least $40 million (on a combined company basis) of unrestricted cash at closing, and the accuracy of specified representations. The documentation for the financing has not been finalized and, accordingly, the actual terms may differ from the foregoing description.
To the extent that the market price of the shares of New Media Common Stock reflects positive market assumptions that the Merger will be consummated, the price of such shares may decline if the Merger is not consummated for any reason or in a timely manner. New Media may also be subject to additional risks if the Merger is not consummated, including:
depending on the reasons for termination of the Merger Agreement, the requirement that New Media pay Gannett a termination fee of $28 million;
the fact that substantial costs related to the Merger, such as legal, accounting, filing, financial advisory and financial printing fees, must be paid regardless of whether the Merger is completed; and
possible negative reactions from our customers, clients, suppliers and employees.

The pendency of the Merger could adversely affect our business and operations.
Whether the Merger is ultimately consummated or not, its pendency could have a number of negative effects on our current business, including potentially disrupting our regular operations, diverting the attention of our workforce and management team, or increasing workforce turnover. The completion of the Merger, including, for example, efforts to obtain regulatory approvals, will require significant time and attention from our management and may divert attention from the day-to-day operations of our business. Any uncertainty over the ability of New Media and Gannett to complete the Merger could make it more difficult for us to retain certain key employees or attract new talent, or to pursue business strategies.
Parties with which we have business relationships, either contractual or operational, may experience uncertainty as to the future or desirability of such relationships and may delay or defer certain business decisions, seek alternative relationships with third parties or seek to alter their present business relationships with us. Parties with whom we otherwise may have sought to establish business relationships may seek alternative relationships with third parties. Additionally, we have contracts with certain customers, suppliers, vendors, distributors and other business partners, and these contracts may require us to obtain consent from these other parties in connection with the Merger. Obtaining such consents may be difficult and could impose costs on us, including renegotiating such contracts on terms less favorable to us, which in turn may result in us suffering a loss of potential future revenue, incurring contractual liabilities or losing rights that are material to our business.
The Merger Agreement subjects us to restrictions on our business activities and obligates us to generally operate our business in the ordinary course of business consistent in all material respects with past custom and practice prior to completion of the Merger. These restrictions could prevent us from pursuing attractive business opportunities that arise prior to the completion of the Merger and are outside the ordinary course of business, or otherwise have an adverse effect on our results of operations, cash flows and financial position. The Merger Agreement also subjects us to restrictions on our ability to pursue alternatives to the Merger and so we might have to forego another strategic transaction that would otherwise have been favorable to our stockholders.

Risks Related to our Common Stock


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

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

ourOur business profile and market capitalization may not fit the investment objectives of any stockholder;
aA shift in our investor base;
ourOur quarterly or annual earnings, or those of other comparable companies;
actualActual or anticipated fluctuations in our operating results;
changesChanges in accounting standards, policies, guidance, interpretations or principles;
announcementsAnnouncements by us or our competitors of significant investments, acquisitions or dispositions;
theThe failure of securities analysts to cover our Common Stock;
changesChanges in earnings estimates by securities analysts or our ability to meet those estimates;
theThe operating and stock price performance of other comparable companies;
negativeNegative public perception of us, our competitors, or industry;
overallOverall market fluctuations; and
generalGeneral economic conditions.

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

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

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

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

Sales or issuances of substantial amounts of shares of our Common Stock in the public market, or the perception that such sales or issuances might occur, could adversely affect the market price of our Common Stock. The issuance of our common stock in connection with property, portfolio or business acquisitions or the settlement of awards that may be granted under our Incentive PlanPlans (as defined below) or otherwise could also have an adverse effect on the market price of our Common Stock.
Failure to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could
We have a material adverse effect onsuspended our business and stock price.
As a public company, we are required to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002. We continue to seek acquisition opportunities, and such potential acquisitions may result in a change to our internal control over financial reporting that may materially affect our internal control over financial reporting. Internal control over financial reporting is complexquarterly dividend and may not be revised over timeable to adapt to changes in our business, or changes in applicable accounting rules. We cannot assure you that our internal control over financial reporting will be effectivepay dividends in the future or at all.

On April 1, 2020, we announced that a material weakness will not be discovered with respect to a prior period for which we had previously believedour Board of Directors determined that internal controls were effective. If we are not able to maintain or document effective internal control over financial reporting, our management and our independent registered public accounting firm will not be able to certify as toit is in the effectivenessbest interests of our internal control over financial reporting. Matters impactingstockholders for the Company to preserve liquidity by suspending our internal controls may cause usquarterly dividend. Although we expect to reinstate the dividend when appropriate, subject to approval by our Board of Directors and restrictions in our credit facility, there can be unable to report our financial informationno assurance if or when we will resume paying dividends on a timely basis, or may cause usregular basis.

Under our credit facility, we can only pay cash dividends up to restate previously issued financial information,an agreed-upon amount and thereby subject usprovided that the ratio of consolidated debt to adverse regulatory consequences, including sanctions or investigations by the SEC, or violations of applicable stock exchange listing rules. There could also be a negative reactionEBITDA (as such terms are defined in the credit facility) does not exceed a specified ratio. Stockholders also should be aware that they have no contractual or other legal right to dividends that have not been declared.

The Board of Directors’ determinations regarding dividends will depend on a variety of factors, including the Company’s GAAP net income, free cash flow generated from operations or other sources, liquidity position and potential alternative uses of cash, such as acquisitions, as well as economic conditions and expected future financial markets dueresults. There can be no guarantee regarding the timing and amount of any dividends. Our ability to a lossresume payment of investor confidencedividends in us and the reliabilityfuture will depend on our future financial performance, which in turn depends on the successful implementation of our strategy and on financial, statements. Confidence in the reliability


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 financial statements is also likely to suffer if we or our independent registered public accounting firm reports a material weakness in our internal control over financial reporting. This could materially adversely affect us by, for example, a decline in our share price and impairingcontrol. Therefore, our ability to raisegenerate free cash flow depends on the performance of our operations and could be limited by decreases in our profitability or increases in costs, capital if and when desirable.expenditures, or debt servicing requirements.

The percentage ownership of our existing shareholders in New Mediastockholders may be diluted in the future.


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

The percentage ownership of our existing shareholders in New Mediastockholders may also be diluted in the future as result of the issuance of ordinary shares in New MediaGannett upon the exercise of 10-year warrants (the “New Media“Gannett Warrants”). The New MediaGannett Warrants collectively represent the right to acquire New MediaGannett Common Stock, which in the aggregate are equal to 5% of New MediaGannett Common Stock outstanding as of November 26, 2013 (calculated prior to dilution from shares of New MediaGannett Common Stock issued pursuant to Drive Shack Inc.'s (formerly known as Newcastle Investment Corp.) contribution of Local Media Group Holdings LLC and assignment of related stock purchase agreement to New MediaGannett (the “Local Media Contribution”)) at a strike price of $46.35 calculated based on a total equity value of New MediaGannett prior to the Local Media Contribution of $1.2 billion as of November 26, 2013. As a result, New MediaGannett Common Stock may be subject to dilution upon the exercise of such New MediaGannett Warrants. As of December 30, 2018,31, 2019, the New MediaGannett Warrants arewere equal to 2%1% of New MediaGannett Common Stock outstanding as of December 30, 201831, 2019 at a strike price of $46.35.

Furthermore, the percentage ownership in New MediaGannett may be diluted in the future because of additional equity awards that we expect will be grantedoptions issued to our Manager pursuant to our Management Agreement. Upon the successful completion of an offering of shares of our Common Stock or any shares of preferred stock, we shall pay and issue to our Manager options to purchase our Common Stock equal to 10% of the number of shares sold in the offering, with an exercise price equal to the offering price per share paid by the public or other ultimate purchaser in the offering.Manager. As of June 30, 2019,March 31, 2020, there are 2,904,811were 6,068,075 options outstanding at a weighted average exercise price of $13.82.$13.97.
On February 3, 2014,
Dilution may also result from the Boardissuances of Directors adopted the New Media Investment Group Inc. Nonqualified Stock Option and Incentive Award Plan (theshares under our equity compensation plans (our "Incentive Plan"Plans"), which providesprovide for the grant of equity and equity-based awards, including restricted stock, stock options, stock appreciation rights, performance awards, tandem awards and other equity-based and non-equity based awards, in each case to our Manager, to the directors, officers, employees, service providers, consultants and advisorsamong others. As of our Manager who perform services for us, and to our directors, officers, employees, service providers, consultants and advisors. Any future grant would cause further dilution. We initially reserved 15 million shares of our Common Stock for issuance under the Incentive Plan; on the first day of each fiscal year beginning during the ten-year term of the Incentive Plan in and after calendar year 2015, that number will be increased by a number of shares of our Common Stock equal to 10% of the number of shares of our Common Stock newly issued by us during the immediately preceding fiscal year (and, in the case of fiscal year 2014, after the effective date of the Incentive Plan). In JanuaryDecember 31, 2019, and 2018, the number of shares reserved for issuance under theour Incentive PlanPlans was increased by 93,040 and 20,276, respectively, representing 10% of the shares of Common Stock newly issued in fiscal year 2018 and 2017, respectively.$15 million.

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

Our amended and restated certificate of incorporation, amended and restated bylaws and Delaware law contain provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids unacceptably expensive to the raider and to encourage prospective acquirers to negotiate with our Board rather than to attempt a hostile takeover. These provisions provide for:
amendment
Amendment of provisions in our amended and restated certificate of incorporation and amended and restated bylaws regarding the election of directors, classes of directors, the term of office of directors, the filling of director vacancies and the resignation and removal of directors only upon the affirmative vote of at least 80% of the then issued and outstanding shares of our capital stock entitled to vote thereon;
amendmentAmendment of provisions in our amended and restated certificate of incorporation regarding corporate opportunity only upon the affirmative vote of at least 80% of the then issued and outstanding shares of our capital stock entitled to vote thereon;
removalRemoval of directors only for cause and only with the affirmative vote of at least 80% of the voting interest of stockholders entitled to vote in the election of directors;
ourOur Board to determine the powers, preferences and rights of our preferred stock and to issue such preferred stock without stockholder approval;
provisionsProvisions in our amended and restated certificate of incorporation and amended and restated bylaws prevent stockholders from calling special meetings of our stockholders;


advanceAdvance notice requirements applicable to stockholders for director nominations and actions to be taken at annual meetings;
aA prohibition, in our amended and restated certificate of incorporation, stating that no holder of shares of our Common Stock will have cumulative voting rights in the election of directors, which means that the holders of majority of the issued and outstanding shares of our Common Stock can elect all the directors standing for election; and
actionAction by our stockholders outside a meeting, in our amended and restated certificate of incorporation and our amended and restated bylaws, only by unanimous written consent.



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

We are not required to repurchase our common stock, and any such repurchases may not result in effects we anticipated.

We have authorization from our Board of Directors to repurchase up to $100$100.0 million of the Company's common stock through May 19, 2020.2020, subject to certain restrictions in the Company's Credit Facility. We are not obligated to repurchase any specific amount of shares. The timing and amount of repurchases, if any, depends on several factors, including market and business conditions, the market price of shares of our common stock and our overall capital structure and liquidity position, including the nature of other potential uses of cash, not limited to investments in growth. There can be no assurance that any repurchases will have the effects we anticipated, and our repurchases will utilize cash that we will not be able to use in other ways, whether to grow the business or otherwise.


Item 2.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities and Use of Proceeds

Period Total Number of Shares Purchased Weighted-Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plan or Programs 
Approximate Number of Shares that May Yet Be 
Purchased Under the Plan or Programs
April 1, 2019 through May 5, 2019 935
(1) 
$10.62
 —
 10,162,098
May 6, 2019 through June 2, 2019 —
 $—
 —
 10,162,098
June 3, 2019 through June 30, 2019 —
 $—
 —
 10,162,098
Total 935
   —
  
This item is not applicable.
_____________________
(1)Pursuant to the "withhold to cover" method for collecting and paying withholding taxes for our employees upon the vesting of restricted securities, we withheld from certain employees the shares noted in the table above to cover such statutory minimum tax withholdings. These transactions took place outside of a publicly-announced repurchase plan. The weighted-average price per share listed in the above table is the weighted-average of the fair market prices at which we calculated the number of shares withheld to cover tax withholdings for the employees.
The Board of Directors authorized an extension of the Company’s previously announced authorization to repurchase up to $100 million of the Company's common stock (the "Share Repurchase Program") through May 19, 2020. Under the Share Repurchase Program, the Company may purchase its shares from time to time in the open market or in privately negotiated transactions.
Item 3.
Item 3. Defaults Upon Senior Securities
Not applicable
This item is not applicable.

Item 4.
Item 4. Mine Safety Disclosures
Not applicable
This item is not applicable.

Item 5.
Item 5. Other Information
Not applicable
This item is not applicable.

Item 6.
Item 6. Exhibits
See Index to Exhibits on page 58 of this Quarterly Report on Form 10-Q.




Exhibit
No.
3.1		 DescriptionCertificate of Designation of Series A Junior Participating Preferred Stock of Gannett Co., Inc.Certificate of Designation of Series A Junior Participating Preferred Stock of Gannett Co., Inc.
4.1
2.1**Section 382 Rights Agreement, dated as of April 6, 2020, between Gannett Co., Inc. and American Stock Transfer & Trust Company LLC, as Rights Agent.

 
Agreement and Plan of Merger, dated as of August 5, 2019, by and among New Media Investment Group Inc., Gannett Co., Inc., Arctic Holdings LLC and Arctic Acquisition Corp. (incorporatedIncorporated by reference to Exhibit 2.14.1 to New Media Investment Group Inc.'sGannett’s Current Report on Form 8-K, filed August 6, 2019)April 7, 2020.

   
10.1
10.1Transition Services Agreement, dated January 6, 2020, by and between Gannett Co., Inc. and Alison K. Engel.

 
Amended and Restated Management and Advisory Agreement, dated as of August 5, 2019, by and between New Media Investment Group Inc. and FIG LLC (incorporatedIncorporated by reference to Exhibit 10.1 to New Media Investment Group Inc.'sGannett’s Current Report on Form 8-K, filed AugustJanuary 8, 2020.

10.2Offer Letter Agreement, dated March 25, 2020, by and between Gannett Co., Inc. and Douglas E. Horne.
Incorporated by reference to Exhibit 10.1 to Gannett’s Current Report on Form 8-K, filed April 6, 2019)2020.

10.3
Amendment No. 1, dated as of December 9, 2019, to the Credit Agreement, dated as of November 19, 2019, by and among Gannett Co., Inc., Gannett Holdings LLC, each person listed as a guarantor on the signature pages thereto, the lenders from time to time party thereto and Cortland Capital Market Services LLC, as collateral agent and administrative agent.

Attached.
   
10.4
* 31.1Amendment No. 2, dated as of April 6, 2020, to the Credit Agreement, dated as of November 19, 2019, by and among Gannett Co., Inc., Gannett Holdings LLC, each person listed as a guarantor on the signature pages thereto, the lenders from time to time party thereto and Cortland Capital Market Services LLC, as collateral agent and administrative agent.

 
Rule 13a-14(a)/15d-14(d) Certification of Principal Executive Officer under the Securities Exchange Act of 1934 (included herewith).Attached.
  
* 31.2
31-1		Rule 13a-14(a) Certification of CEO 
Rule 13a-14(a)/15d-14(d) Certification of Principal Financial Officer under the Securities Exchange Act of 1934 (included herewith).Attached.
  
* 32.1
31-2		Rule 13a-14(a) Certification of CFO 
Section 1350 Certifications (included herewith).Attached.
  
* 101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
  
* 101.SCH32-1 XBRL Taxonomy Extension Schema
* 101.CALSection 1350 Certification of CEO XBRL Taxonomy Extension Calculation Linkbase
* 101.DEFXBRL Taxonomy Extension Definition Linkbase
* 101.LABXBRL Taxonomy Extension Label Linkbase
* 101.PREXBRL Taxonomy Extension Presentation Linkbase
Attached.
   
* 32-2Section 1350 Certification of CFO
Attached.
101The following financial information from Gannett Co., Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, formatted in XBRL: (i) Unaudited Condensed Consolidated Balance Sheets at March 31, 2020 and December 31, 2019, (ii) Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income for the fiscal quarters ended March 31, 2020 and March 31, 2019, (iii) Unaudited Condensed Consolidated Statements of Cash Flow for the fiscal quarters ended March 31, 2020 and March 31, 2019, and (iv) Unaudited Notes to Condensed Consolidated Financial StatementsAttached.
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).embedded within the Inline XBRL document)Attached.
*     Filed herewith.
**    Schedules omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplementally a copy of any omitted schedule or exhibit to the Securities and Exchange Commission upon request.



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

Date: May 7, 2020NEW MEDIA INVESTMENT GROUPGANNETT CO., INC.
  
Date: August 7, 2019/s/ MichaelDouglas E. ReedHorne
 MichaelDouglas E. ReedHorne
 Chief ExecutiveFinancial Officer
 (on behalf of Registrant and as Principal ExecutiveFinancial Officer)


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