Gannett Co., Inc. [GCI] Filings

10-Q 1 gci-20230331.htm 10-Q gci-20230331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________

FORM 10-Q

_______________________

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-36097

___________________________

GANNETT CO., INC.
(Exact name of registrant as specified in its charter)

___________________________

Delaware

38-3910250

(State or Other Jurisdiction of Incorporation or Organization)

(I.R.S. Employer Identification No.)

7950 Jones Branch Drive,

McLean,

Virginia

22107-0910

(Address of principal executive offices)

(Zip Code)

Registrant's telephone number, including area code: (703) 854-6000

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol

Name of Each Exchange on Which Registered

Common Stock, par value $0.01 per share

GCI

New York Stock Exchange

Preferred Stock Purchase Rights

N/A

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	☐	Accelerated Filer	☒

Non-Accelerated Filer	☐	Smaller Reporting Company	☐

		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒

As of May 1, 2023, 149,006,837 shares of the registrant's Common Stock were outstanding.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including "Part I, Item 2 — Management's Discussion and Analysis of Financial Condition and Results of Operations," and "Part II, Item 1A — Risk Factors" contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect our current views regarding, among other things, our future growth, results of operations, performance, business prospects and opportunities, and our environmental, social and governance goals, and are not statements of historical fact. Words such as "anticipate(s)," "expect(s)," "intend(s)," "plan(s)," "goal," "project(s)," "believe(s)," "see," "will," "aim," "would," "could," "may," "seek(s)," "estimate(s)" and similar expressions are intended to identify such forward-looking statements.

Forward-looking statements are based on management's current expectations and beliefs and are subject to a number of known and unknown risks, uncertainties, and other factors that could lead to actual results materially different from those described in the forward-looking statements. We can give no assurance our expectations will be attained. Our actual results, liquidity, and financial condition may differ from the anticipated results, liquidity, and financial condition indicated in the forward-looking statements. Forward-looking statements are not a guarantee of future performance and involve risks and uncertainties, and there are certain important factors that could cause our actual results to differ, possibly materially, from expectations or estimates reflected in such forward-looking statements, including, among others, the risks identified by us under the heading "Risk Factors" in this Quarterly Report on Form 10-Q, and under the heading "Risk Factors" in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the Securities and Exchange Commission on February 23, 2023, as well as other risks and factors identified from time to time in our subsequent filings with the Securities and Exchange Commission. You are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. Except to the extent required by law, we expressly disclaim any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or change in events, conditions, or circumstances on which any statement is based.

INDEX TO GANNETT CO., INC.

Q1 2023 FORM 10-Q


Item No.		Page
	Part I. Financial Information
1	Financial Statements (unaudited)	2
2	Management's Discussion and Analysis of Financial Condition and Results of Operations	22
3	Quantitative and Qualitative Disclosures About Market Risk	39
4	Controls and Procedures	39

	Part II. Other Information
1	Legal Proceedings	40
1A	Risk Factors	40
2	Unregistered Sales of Equity Securities and Use of Proceeds	40
3	Defaults Upon Senior Securities	41
4	Mine Safety Disclosures	41
5	Other Information	41
6	Exhibits	42
	Signatures	43

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

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GANNETT CO., INC.

CONDENSED CONSOLIDATED BALANCE SHEETS


In thousands, except share data	March 31, 2023		December 31, 2022
Assets	(Unaudited)
Current assets:
Cash and cash equivalents	$	83,074	$	94,255
Accounts receivable, net of allowance of $14,499 and $16,697 as of March 31, 2023 and December 31, 2022, respectively	256,465		289,415
Inventories	41,882		45,223
Prepaid expenses	48,038		46,205
Other current assets	21,399		32,679
Total current assets	450,858		507,777
Property, plant and equipment, net of accumulated depreciation of $379,524 and $360,522 as of March 31, 2023 and December 31, 2022, respectively	291,785		305,994
Operating lease assets	231,957		233,322
Goodwill	533,469		533,166
Intangible assets, net	591,688		613,358
Deferred tax assets	73,122		56,618
Pension and other assets	155,555		143,320
Total assets	$	2,328,434	$	2,393,555

Liabilities and equity
Current liabilities:
Accounts payable and accrued liabilities	$	304,912	$	351,848
Deferred revenue	141,716		153,648
Current portion of long-term debt	60,452		60,452
Operating lease liabilities	46,248		44,872
Other current liabilities	6,229		6,218
Total current liabilities	559,557		617,038
Long-term debt	660,974		695,642
Convertible debt	408,943		405,681
Deferred tax liabilities	—		1,439
Pension and other postretirement benefit obligations	49,161		50,710
Long-term operating lease liabilities	215,499		219,109
Other long-term liabilities	113,657		108,563
Total noncurrent liabilities	1,448,234		1,481,144
Total liabilities	2,007,791		2,098,182
Commitments and contingent liabilities (See Note 11)
Equity
Preferred stock, $0.01 par value per share, 300,000 shares authorized, of which 150,000 shares are designated as Series A Junior Participating Preferred Stock, none of which were issued and outstanding at March 31, 2023 and December 31, 2022	—		—
Common stock, $0.01 par value per share, 2,000,000,000 shares authorized, 157,980,877 shares issued and 149,221,069 shares outstanding at March 31, 2023; 153,286,104 shares issued and 146,223,179 shares outstanding at December 31, 2022	1,580		1,533
Treasury stock, at cost, 8,759,808 shares and 7,062,925 shares at March 31, 2023 and December 31, 2022, respectively	(16,883)		(14,737)
Additional paid-in capital	1,413,397		1,409,578
Accumulated deficit	(989,057)		(999,401)
Accumulated other comprehensive loss	(87,941)		(101,231)
Total Gannett stockholders' equity	321,096		295,742
Noncontrolling interests	(453)		(369)
Total equity	320,643		295,373
Total liabilities and equity	$	2,328,434	$	2,393,555

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

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GANNETT CO., INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(Unaudited)


	Three months ended March 31,
In thousands, except per share amounts		2023		2022
Advertising and marketing services		$	340,847	$	375,114
Circulation		241,285		288,602
Other		86,785		84,361
Total operating revenues		668,917		748,077
Operating costs		430,188		469,885
Selling, general and administrative expenses		180,390		221,837
Depreciation and amortization		43,698		47,783
Integration and reorganization costs		12,127		11,398
Asset impairments		5		854

Gain on sale or disposal of assets, net		(17,681)		(2,804)
Other operating expenses		229		1,102
Total operating expenses		648,956		750,055
Operating income (loss)		19,961		(1,978)
Interest expense		28,330		26,006
(Gain) loss on early extinguishment of debt		(496)		2,743
Non-operating pension income		(1,815)		(18,213)

Other non-operating expense (income), net		1,011		(1,805)
Non-operating expenses		27,030		8,731
Loss before income taxes		(7,069)		(10,709)
Benefit for income taxes		(17,329)		(7,607)
Net income (loss)		10,260		(3,102)
Net loss attributable to noncontrolling interests		(84)		(135)
Net income (loss) attributable to Gannett		$	10,344	$	(2,967)

Income (loss) per share attributable to Gannett - basic		$	0.07	$	(0.02)
Income (loss) per share attributable to Gannett - diluted		$	0.07	$	(0.02)

Other comprehensive loss:
Foreign currency translation adjustments		$	6,337	$	(7,556)
Pension and other postretirement benefit items:
Net actuarial gain (loss)		11,596		(1,796)
Amortization of net actuarial gain (loss)		4		(32)

Amortization of prior service cost		16		—
Equity method investments		610		—
Other		(2,911)		536
Total pension and other postretirement benefit items		9,315		(1,292)
Other comprehensive income (loss) before tax		15,652		(8,848)
Income tax provision (benefit) related to components of other comprehensive income (loss)		2,362		(457)
Other comprehensive income (loss), net of tax		13,290		(8,391)
Comprehensive income (loss)		23,550		(11,493)
Comprehensive loss attributable to noncontrolling interests		(84)		(135)
Comprehensive income (loss) attributable to Gannett		$	23,634	$	(11,358)

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

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GANNETT CO., INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Three months ended March 31,
In thousands	2023		2022
Operating activities
Net income (loss)	$	10,260	$	(3,102)
Adjustments to reconcile net income (loss) to operating cash flows:
Depreciation and amortization	43,698		47,783
Share-based compensation expense	3,736		3,393
Non-cash interest expense	5,267		5,316
Gain on sale or disposal of assets, net	(17,681)		(2,804)

(Gain) loss on early extinguishment of debt	(496)		2,743

Asset impairments	5		854

Pension and other postretirement benefit obligations	(3,725)		(27,291)
Change in other assets and liabilities, net	(34,346)		5,537







Cash provided by operating activities	6,718		32,429
Investing activities
Acquisitions, net of cash acquired	—		(15,427)
Purchase of property, plant and equipment	(8,798)		(10,764)
Proceeds from sale of real estate and other assets	29,502		20,471
Change in other investing activities	—		(500)
Cash provided by (used for) investing activities	20,704		(6,220)
Financing activities
Payments of deferred financing costs	—		(423)


Borrowings of long-term debt	—		72,500
Repayments of long-term debt	(36,178)		(70,476)
Acquisition of noncontrolling interests	—		(2,050)


Treasury stock	(2,138)		(3,138)


Changes in other financing activities	(324)		(231)
Cash used for financing activities	(38,640)		(3,818)
Effect of currency exchange rate change on cash	38		(992)
Increase (decrease) in cash, cash equivalents and restricted cash	(11,180)		21,399
Cash, cash equivalents and restricted cash at beginning of period	104,804		143,619
Cash, cash equivalents and restricted cash at end of period	$	93,624	$	165,018

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

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GANNETT CO., INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)


	Three months ended March 31, 2023
	Common stock			Additional paid-in capital		Accumulated other comprehensive income (loss)		Accumulated deficit		Treasury stock			Non-controlling interest
In thousands	Shares	Amount								Shares	Amount				Total
Balance at December 31, 2022	153,286	$	1,533	$	1,409,578	$	(101,231)	$	(999,401)	7,063	$	(14,737)	$	(369)	$	295,373
Net income attributable to Gannett	—	—		—		—		10,344		—	—		(84)		10,260


Restricted share grants	4,682	47		(47)		—		—		—	—		—		—

Other comprehensive income, net(a)	—	—		—		13,290		—		—	—		—		13,290
Share-based compensation expense	—	—		3,736		—		—		—	—		—		3,736
Issuance of common stock	13	—		25		—		—		—	—		—		25

Treasury stock	—	—		—		—		—		957	(2,139)		—		(2,139)
Restricted share forfeiture	—	—		—		—		—		740	(7)		—		(7)
Other activity	—	—		105		—		—		—	—		—		105
Balance at March 31, 2023	157,981	$	1,580	$	1,413,397	$	(87,941)	$	(989,057)	8,760	$	(16,883)	$	(453)	$	320,643


	Three months ended March 31, 2022
	Common stock			Additional paid-in capital		Accumulated other comprehensive income (loss)		Accumulated deficit		Treasury stock			Non-controlling interest
In thousands	Shares	Amount								Shares	Amount				Total
Balance at December 31, 2021	144,667	$	1,446	$	1,400,206	$	59,998	$	(921,399)	2,368	$	(8,151)	$	(2,485)	$	529,615
Net loss attributable to Gannett	—	—		—		—		(2,967)		—	—		(135)		(3,102)
Acquisition of noncontrolling interests	—	—		(4,419)		—		—		—	—		2,369		(2,050)
Restricted stock awards settled, net of withholdings	615	7		(1,541)		—		—		—	—		—		(1,534)
Restricted share grants	5,728	57		(57)		—		—		—	—		—		—

Other comprehensive loss, net(a)	—	—		—		(8,391)		—		—	—		—		(8,391)
Share-based compensation expense	—	—		3,393		—		—		—	—		—		3,393
Issuance of common stock	7	—		62		—		—		—	—		—		62

Treasury stock	—	—		—		—		—		692	(3,138)		—		(3,138)
Restricted share forfeiture	—	—		—		—		—		128	(1)		—		(1)
Other activity	—	—		(128)		—		—		—	—		—		(128)
Balance at March 31, 2022	151,017	$	1,510	$	1,397,516	$	51,607	$	(924,366)	3,188	$	(11,290)	$	(251)	$	514,726

(a) For the three months ended March 31, 2023 and 2022, Other comprehensive income (loss) is net of income tax provision of $2.4 million and income tax benefit of $0.5 million, respectively.

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

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — Description of business and basis of presentation

Description of business

Gannett Co., Inc. ("Gannett", "we", "us", "our", or the "Company") is a subscription-led and digitally-focused media and marketing solutions company committed to empowering communities to thrive. Gannett operates a scalable, data-driven media platform that aligns with consumer and digital marketing trends. We aim to be the premier source for clarity, connections and solutions within our communities. Our mission is to provide unbiased, unique local and national content and unrivaled marketing solutions to the communities we serve. We seek to drive audience growth and engagement by delivering valuable content experiences to our consumers, while offering the unique products and marketing expertise our advertisers desire. Our strategy prioritizes the growth of highly recurring digital businesses, while maximizing the lifetime value of our legacy print business, and we expect the execution of this strategy to enable us to continue our evolution to a digitally-focused content platform.

Our current portfolio of media assets includes the USA TODAY NETWORK, which includes USA TODAY and local media organizations in 43 states in the United States (the "U.S."), and Newsquest, a wholly-owned subsidiary operating in the United Kingdom (the "U.K."). We also own digital marketing services companies under the brand LocaliQ, which provide a cloud-based platform of products to enable small and medium-sized businesses to accomplish their marketing goals. In addition, our portfolio includes what we believe is the largest media-owned events business in the U.S., USA TODAY NETWORK Ventures.

Through USA TODAY, our network of local properties, and Newsquest, we deliver high-quality, trusted content with a commitment to balanced, unbiased journalism, where and when consumers want to engage with it on virtually any device or platform. Additionally, the Company has strong relationships with hundreds of thousands of local and national businesses in both our U.S. and U.K. markets due to our large local and national sales forces and a robust advertising and marketing solutions product suite. The Company reports in two segments, Gannett Media and Digital Marketing Solutions ("DMS"). We also have a Corporate and other category that includes activities not directly attributable to a specific reportable segment and includes broad corporate functions such as legal, human resources, accounting, analytics, finance and marketing, as well as other general business costs. A full description of our reportable segments is included in Note 12 — Segment reporting in the notes to the condensed consolidated financial statements.

Basis of presentation

The unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. As permitted under those rules, certain notes or other financial information that are normally required by U.S. GAAP have been condensed or omitted from these interim financial statements. The unaudited condensed consolidated financial statements should therefore 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, 2022.

In the opinion of management, the unaudited condensed consolidated financial statements as of March 31, 2023 include all the assets, liabilities, revenues, expenses and cash flows of entities which Gannett controls due to ownership of a majority voting interest ("subsidiaries"). All significant intercompany accounts and transactions have been eliminated in consolidation, and the Company consolidates its subsidiaries.

Use of estimates

The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and footnotes thereto. Actual results could differ materially from those estimates. Significant estimates inherent in the preparation of the unaudited condensed consolidated financial statements include pension and postretirement benefit obligation assumptions, income taxes, and goodwill and intangible asset impairment analysis.

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NOTE 2 — Revenues

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

The Company's condensed consolidated statements of operations and comprehensive income (loss) present revenues disaggregated by revenue type. Sales taxes and other usage-based taxes are excluded from revenues. The following table presents our revenues disaggregated by source:


	Three months ended March 31,
In thousands		2023		2022
Print advertising		$	147,954	$	173,518
Digital advertising and marketing services		192,893		201,596
Total advertising and marketing services		340,847		375,114
Circulation		241,285		288,602
Other		86,785		84,361
Total revenues		$	668,917	$	748,077

For the three months ended March 31, 2023 and 2022, revenues generated from international locations were approximately 10.2% and 8.9% of total revenues, respectively.

Deferred revenues

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

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

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


	Three months ended March 31, 2023						Three months ended March 31, 2022
In thousands	Advertising, marketing services, and other		Circulation		Total		Advertising, marketing services, and other		Circulation		Total
Beginning balance	$	46,327	$	107,321	$	153,648	$	60,665	$	124,173	$	184,838
Acquisition	—		—		—		—		2,388		2,388
Cash receipts, net of refunds	65,632		207,486		273,118		76,125		237,860		313,985
Revenue recognized	(72,663)		(212,387)		(285,050)		(75,463)		(240,169)		(315,632)
Ending balance	$	39,296	$	102,420	$	141,716	$	61,327	$	124,252	$	185,579

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NOTE 3 — Accounts receivable, net

Receivables are presented net of allowances, which reflect the Company's expected credit losses based on historical experience as well as current and expected economic conditions. The following table presents changes in the allowance for doubtful accounts:


	Three months ended March 31,
In thousands	2023		2022
Beginning balance	$	16,697	$	16,470
Current period provision	1,383		(2,403)
Write-offs charged against the allowance	(4,839)		(3,868)
Recoveries of amounts previously written-off	1,199		942
Other	59		425

Ending balance	$	14,499	$	11,566

For the three months ended March 31, 2023 and 2022, the Company recorded an expense of $1.4 million and a benefit of $2.4 million in bad debt expense, respectively. Bad debt expense is included in Selling, general and administrative expenses on the condensed consolidated statements of operations and comprehensive income (loss).

NOTE 4 — Goodwill and intangible assets

Goodwill and intangible assets consisted of the following:


	March 31, 2023						December 31, 2022
In thousands	Gross carrying amount		Accumulated amortization		Net carrying amount		Gross carrying amount		Accumulated amortization		Net carrying amount
Finite-lived intangible assets:
Advertiser relationships	$	446,162	$	202,973	$	243,189	$	445,775	$	192,032	$	253,743
Other customer relationships	102,259		48,535		53,724		102,224		45,811		56,413
Subscriber relationships	251,090		133,959		117,131		251,083		126,899		124,184
Other intangible assets	68,780		57,614		11,166		68,780		55,932		12,848
Sub-total	$	868,291	$	443,081	$	425,210	$	867,862	$	420,674	$	447,188
Indefinite-lived intangible assets:
Mastheads					166,478						166,170
Total intangible assets					$	591,688					$	613,358

Goodwill					$	533,469					$	533,166

The Company performs its annual goodwill and indefinite-lived intangible impairment assessments as of November 30. In addition to the annual impairment test, the Company is required to regularly assess whether a triggering event has occurred under both ASC 350 "Intangibles - Goodwill and Other" ("ASC 350"), and ASC 360 "Property, Plant and Equipment" ("ASC 360"), which would require interim impairment testing.

As of March 31, 2023, the Company performed a review of potential impairment indicators under both ASC 350 and ASC 360 and it was determined that no indicators of impairment were present.

NOTE 5 — Integration and reorganization costs

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

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Severance-related expenses

The Company recorded severance-related expenses by segment as follows:


	Three months ended March 31,
In thousands		2023		2022
Gannett Media		$	6,112	$	5,177
Digital Marketing Solutions		20		9
Corporate and other		4,121		174
Total		$	10,253	$	5,360

A roll-forward of the accrued severance and related expenses included in Accounts payable and accrued liabilities on the condensed consolidated balance sheets for the three months ended March 31, 2023 is as follows:


In thousands	Severance and related costs
Beginning balance	$	29,773
Restructuring provision included in integration and reorganization costs	10,253
Cash payments	(18,178)
Ending balance	$	21,848

Other restructuring-related expenses

Other restructuring-related expenses represent costs for consolidating operations, systems implementation, outsourcing of corporate functions and facility consolidations. The Company recorded other restructuring-related costs by segment as follows:


	Three months ended March 31,
In thousands		2023		2022
Gannett Media (a)		$	(1,463)	$	544
Digital Marketing Solutions		—		142
Corporate and other		3,337		5,352
Total		$	1,874	$	6,038

(a) For the three months ended March 31, 2023, other restructuring-related costs decreased compared to the three months ended March 31, 2022, primarily due to the reversal of a withdrawal liability related to a multiemployer pension plan.

NOTE 6 — Debt

The Company's debt consisted of the following:


	March 31, 2023								December 31, 2022
(In millions)	Principal balance		Unamortized original issue discount		Unamortized deferred financing costs		Carrying value		Principal balance		Unamortized original issue discount		Unamortized deferred financing costs		Carrying value
Senior Secured Term Loan	$	407.1	$	(7.8)	$	(1.7)	$	397.6	$	438.4	$	(8.9)	$	(1.9)	$	427.6
2026 Senior Notes	339.1		(8.6)		(6.7)		323.8		345.2		(9.4)		(7.3)		328.5
2027 Notes	485.3		(78.0)		(1.7)		405.6		485.3		(81.2)		(1.7)		402.4
2024 Notes	3.3		—		—		3.3		3.3		—		—		3.3
Total debt	$	1,234.8	$	(94.4)	$	(10.1)	$	1,130.3	$	1,272.2	$	(99.5)	$	(10.9)	$	1,161.8
Less: Current portion of long-term debt	$	(60.5)	$	—	$	—	$	(60.5)	$	(60.5)	$	—	$	—	$	(60.5)
Non-current portion of long-term debt	$	1,174.3	$	(94.4)	$	(10.1)	$	1,069.8	$	1,211.7	$	(99.5)	$	(10.9)	$	1,101.3

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Senior Secured Term Loan

On October 15, 2021, Gannett Holdings LLC ("Gannett Holdings"), a wholly-owned subsidiary of the Company, entered into the five-year senior secured term loan facility in an original aggregate principal amount of $516.0 million (the "Senior Secured Term Loan," formerly referred to as the New Senior Secured Term Loan) with Citibank N.A., as collateral agent and administrative agent for the lenders. On January 31, 2022, Gannett Holdings entered into an amendment (the "Term Loan Amendment") to the Senior Secured Term Loan to provide for new incremental senior secured term loans (the "Incremental Term Loans") in an aggregate principal amount of $50 million. The Incremental Term Loans have substantially identical terms as the Senior Secured Term Loan and are treated as a single tranche with the Senior Secured Term Loan. The Term Loan Amendment also amended the Senior Secured Term Loan to transition the interest rate base from the London Inter-bank Offered Rate ("LIBOR") to the Adjusted Term Secured Overnight Financing Rate ("Adjusted Term SOFR"). Effective as of March 21, 2022 and April 8, 2022, Gannett Holdings entered into two separate amendments to the Senior Secured Term Loan to provide for incremental senior secured term loans totaling an aggregate principal amount of $30.0 million (collectively, the "Exchanged Term Loans"). The Exchanged Term Loans have substantially identical terms as the Senior Secured Term Loan and Incremental Term Loans and are treated as a single tranche with the Senior Secured Term Loan and the Incremental Term Loans.

The Senior Secured Term Loan bears interest at a per annum rate equal to the Adjusted Term SOFR (which shall not be less than 0.50% per annum) plus a margin equal to 5.00% or an alternate base rate (which shall not be less than 1.50% per annum) plus a margin equal to 4.00%. Loans under the Senior Secured Term Loan may be prepaid, at the option of Gannett Holdings, at any time without premium. In addition, we are required to repay the Senior Secured Term Loan from time to time with (i) the proceeds of non-ordinary course asset sales and casualty and condemnation events, (ii) the proceeds of indebtedness not permitted under the Senior Secured Term Loan, and (iii) the aggregate amount of cash and cash equivalents on hand at the Company and its restricted subsidiaries in excess of $100 million at the end of each fiscal year of the Company. Subsequent to the amendment effective as of April 8, 2022, the Senior Secured Term Loan is amortized at $15.1 million per quarter (or, if the ratio of debt secured on an equal basis with the Senior Secured Term Loan less unrestricted cash of the Company and its restricted subsidiaries to Consolidated EBITDA (as such terms are defined in the Senior Secured Term Loan ) (such ratio, the "First Lien Net Leverage Ratio"), for the most recently ended period of four consecutive fiscal quarters is equal to or less than 1.20 to 1.00, $7.6 million per quarter). All obligations under the Senior Secured Term Loan are secured by all or substantially all of the assets of the Company and the wholly-owned domestic subsidiaries of the Company (the "Senior Secured Term Loan Guarantors"). The obligations of Gannett Holdings under the Senior Secured Term Loan are guaranteed on a senior secured basis by the Company and the Senior Secured Term Loan Guarantors.

The Senior Secured Term Loan contains usual and customary covenants for credit facilities of this type, including a requirement to have minimum unrestricted cash of $30 million as of the last day of each fiscal quarter, and restricts, among other things, our ability to incur debt, grant liens, sell assets, make investments and pay dividends, in each case with customary exceptions, including an exception that permits dividends and repurchases of outstanding junior debt or equity in (i) an amount of up to $25 million per fiscal quarter if the First Lien Net Leverage Ratio for such fiscal quarter is equal to or less than 2.00 to 1.00, (ii) an amount of up to $50 million per fiscal quarter if the First Lien Net Leverage Ratio for such fiscal quarter is equal to or less than 1.50 to 1.00, and (iii) an unlimited amount if First Lien Net Leverage Ratio for such fiscal quarter is equal to or less than 1.00 to 1.00. As of March 31, 2023, the Company was in compliance with all of the covenants and obligations under the Senior Secured Term Loan.

As of March 31, 2023 and December 31, 2022, the Senior Secured Term Loan was recorded at carrying value, which approximated fair value, in the condensed consolidated balance sheets and was classified as Level 2.

For the three months ended March 31, 2023, the Company recognized interest expense of $10.3 million and paid cash interest of $10.4 million. For the three months ended March 31, 2022, the Company recognized interest expense of $6.9 million and paid cash interest of $6.9 million. For the three months ended March 31, 2023, the Company recognized amortization of original issue discount of $0.8 million, and amortization of deferred financing costs of $0.1 million. For the three months ended March 31, 2022, the Company recognized amortization of original issue discount of $0.9 million, and amortization of deferred financing costs of $0.2 million. Additionally, during the three months ended March 31, 2023, the Company recognized losses on early extinguishment of debt of $0.4 million, and for the three months ended March 31, 2022, the Company recognized losses on early extinguishment of debt of $1.4 million related to the write-off of original issue discount and deferred financing costs as a result of early prepayments on the Senior Secured Term Loan.

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For the three months ended March 31, 2023, the Company made $31.3 million of prepayments, including quarterly amortization payments, which were classified as financing activities in the condensed consolidated statements of cash flows. As of March 31, 2023, the effective interest rate for the Senior Secured Term Loan was 10.6%.

Senior Secured Notes due 2026

On October 15, 2021, Gannett Holdings completed a private offering of $400 million aggregate principal amount of 6.00% first lien notes due November 1, 2026 (the "2026 Senior Notes"). The 2026 Senior Notes were issued pursuant to an indenture, dated October 15, 2021 (the "2026 Senior Notes Indenture") among Gannett Holdings, the Company, the guarantors from time to time party thereto (the "2026 Senior Notes Guarantors"), U.S. Bank National Association, as trustee, and U.S. Bank National Association, as collateral agent, registrar, paying agent and authenticating agent.

For the year ended December 31, 2022, the Company repurchased $54.8 million in aggregate principal amount of outstanding 2026 Senior Notes pursuant to privately negotiated agreements with certain holders of the 2026 Senior Notes. As part of these repurchases, we exchanged an aggregate principal amount equal to $30.0 million of the 2026 Senior Notes for $30.0 million of new term loans under the Senior Secured Term Loan. The repurchases were treated as an extinguishment of a portion of the 2026 Senior Notes, and as a result, for the year ended December 31, 2022, the Company recognized a net gain on the early extinguishment of debt of approximately $2.6 million, which included write-offs of unamortized original issue discount and deferred financing costs.

For the three months ended March 31, 2023, the Company repurchased $6.1 million in aggregate principal amount of outstanding 2026 Senior Notes at a discount to par value pursuant to a privately negotiated agreement with a holder of the 2026 Senior Notes. As a result of this transaction, for the three months ended March 31, 2023, the Company recognized a net gain on the early extinguishment of debt of approximately $0.9 million, which included the write-off of unamortized original issue discount and deferred financing costs.

Interest on the 2026 Senior Notes is payable semi-annually in arrears, beginning on May 1, 2022. The 2026 Senior Notes mature on November 1, 2026, unless redeemed or repurchased earlier pursuant to the 2026 Senior Notes Indenture. The 2026 Senior Notes may be redeemed at the option of Gannett Holdings, in whole or in part, at any time and from time to time after November 1, 2023, at the redemption prices set forth in the 2026 Senior Notes Indenture. At any time prior to such date, Gannett Holdings will be entitled at its option to redeem all, but not less than all, of the 2026 Senior Notes at the "make-whole" redemption price set forth in the 2026 Senior Notes Indenture. Additionally, at any time prior to November 1, 2023, Gannett Holdings may, on one or more occasions, redeem up to 40% of the aggregate principal amount of the 2026 Senior Notes at the redemption price set forth in the 2026 Senior Notes Indenture with the net cash proceeds of certain equity offerings. If certain changes of control with respect to Gannett Holdings or the Company occur, Gannett Holdings must offer to purchase the 2026 Senior Notes at a purchase price in cash equal to 101% of the principal amount thereof on the date of purchase, plus accrued and unpaid interest to, but excluding, the date of purchase. In addition, during any twelve-month period commencing on or after October 15, 2021 and ending prior to November 1, 2023, up to 10% of the aggregate principal amount of the 2026 Senior Notes issued under the 2026 Senior Notes Indenture may be redeemed at a purchase price equal to 103% of the aggregate principal amount of the 2026 Senior Notes to be redeemed, plus accrued and unpaid interest, if any, to but excluding, the redemption date.

The 2026 Senior Notes are unconditionally guaranteed, jointly and severally, on a senior secured basis by the 2026 Senior Notes Guarantors. The 2026 Senior Notes and such guarantees are secured on a first-priority basis by the collateral, consisting of substantially all of the assets of Gannett Holdings and the 2026 Senior Notes Guarantors, subject to certain intercreditor arrangements.

The 2026 Senior Notes Indenture limits the Company and its restricted subsidiaries' ability to, among other things, make investments, loans, advances, guarantees and acquisitions; incur or guarantee additional debt and issue certain disqualified equity interests and preferred stock; make certain restricted payments, including a limit on dividends on equity securities or payments to redeem, repurchase or retire equity securities or other indebtedness; dispose of assets; create liens on assets to secure debt; engage in transactions with affiliates; enter into certain restrictive agreements; and consolidate, merge, sell or otherwise dispose of all or substantially all of their or the 2026 Senior Notes Guarantor's assets. These covenants are subject to a number of limitations and exceptions. The 2026 Senior Notes Indenture also contains customary events of default.

As of March 31, 2023 and December 31, 2022, the 2026 Senior Notes were recorded at carrying value in the condensed consolidated balance sheets, which did not approximate fair value. The 2026 Senior Notes were classified as Level 2, and based on unadjusted quoted prices in the active market obtained from third-party pricing services, the Company determined that the

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estimated fair value of the 2026 Senior Notes was $284.4 million and $281.7 million as of March 31, 2023 and December 31, 2022, respectively, and was primarily affected by fluctuations in market interest rates.

The unamortized original issue discount and deferred financing costs will be amortized over the remaining contractual life of the 2026 Senior Notes using the effective interest method. For the three months ended March 31, 2023, the Company recognized interest expense of $5.0 million, and paid cash interest of $0.1 million. For the three months ended March 31, 2022, the Company recognized interest expense of $6.0 million, and paid cash interest of $0.6 million. For the three months ended March 31, 2023, the Company recognized amortization of original issue discount of $0.6 million and amortization of deferred financing costs of $0.5 million. For the three months ended March 31, 2022, the Company recognized amortization of original discount of $0.7 million and amortization of deferred financing costs of $0.6 million. As of March 31, 2023, the effective interest rate on the 2026 Senior Notes was 7.3%.

Senior Secured Convertible Notes due 2027

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

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

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

The conversion rate is subject to customary adjustment provisions as provided in the 2027 Notes Indenture. In addition, the conversion rate will be subject to adjustment in the event of any issuance or sale of Common Stock (or securities convertible into Common Stock) at a price equal to or less than the Conversion Price in order to ensure that following such issuance or sale, the 2027 Notes would be convertible into approximately 42% (adjusted for repurchases and certain other events that reduce the outstanding amount of the 2027 Notes) of the Common Stock after giving effect to such issuance or sale (assuming the initial principal amount of the 2027 Notes remains outstanding). After giving effect to the repurchase of $11.8 million in aggregate principal amount of outstanding 2027 Notes during the year ended December 31, 2021, such percentage is approximately 41%.

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

Holders of the 2027 Notes will have the right to put up to approximately $100 million of the 2027 Notes at par on or after the date that is 91 days after the maturity date of the Senior Secured Term Loan.

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

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

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The 2027 Notes are guaranteed by Gannett Holdings and any subsidiaries of the Company that guarantee the Senior Secured Term Loan. The 2027 Notes are secured by the same collateral that secures the Senior Secured Term Loan. The 2027 Notes rank as senior secured debt of the Company and are secured by a second priority lien on the same collateral package that secured the indebtedness incurred in connection with the Senior Secured Term Loan.

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

The 2027 Notes have two components: (i) a debt component, and (ii) an equity component. As of March 31, 2023 and December 31, 2022, the debt component of the 2027 Notes was recorded at carrying value in the condensed consolidated balance sheets. The carrying value of the 2027 Notes reflected the balance of the unamortized discount related to the value of the conversion feature assessed at inception and did not approximate fair value as of March 31, 2023 and December 31, 2022. The 2027 Notes were classified as Level 2, and based on unadjusted quoted prices in the active market obtained from third-party pricing services, the Company determined that the estimated fair value of the 2027 Notes was $354.3 million and $353.7 million as of March 31, 2023 and December 31, 2022, respectively, and was primarily affected by fluctuations in market interest rates and the price of the Company's Common Stock. The fair value of the equity component was classified as Level 3 because it was measured at fair value using a binomial lattice model using assumptions based on market information and historical data, and significant unobservable inputs. As of March 31, 2023 and December 31, 2022, the amount of the conversion feature recorded in Additional paid-in capital was $279.6 million.

For the three months ended March 31, 2023 and 2022, the Company recognized interest expense of $7.2 million and $7.2 million, respectively. In addition, during the three months ended March 31, 2023, the Company recognized amortization of the original issue discount of $3.2 million and an immaterial amount of amortization of deferred financing costs. For the three months ended March 31, 2022, the Company recognized amortization of original issue discount of $2.9 million and amortization of deferred financing costs of $0.1 million. As of March 31, 2023, the effective interest rate on the liability component of the 2027 Notes was 10.5%.

For the three months ended March 31, 2023, no shares were issued upon conversion, exercise, or satisfaction of the required conditions. Refer to Note 10 — Supplemental equity information for details on the impact of the 2027 Notes to diluted earnings per share under the if-converted method.

Senior Convertible Notes due 2024

The $3.3 million principal value of the remaining 4.75% convertible senior notes due April 15, 2024 (the "2024 Notes") outstanding is reported as convertible debt in the condensed consolidated balance sheets. As of March 31, 2023, the effective interest rate on the 2024 Notes was 6.05%. As of March 31, 2023 and December 31, 2022, the 2024 Notes were recorded at carrying value, which approximated fair value, in the condensed consolidated balance sheets and were classified as Level 2.

NOTE 7 — Pensions and other postretirement benefit plans

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

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Retirement plan costs include the following components:


	Pension benefits				Postretirement benefits
	Three months ended March 31,				Three months ended March 31,
In thousands	2023		2022		2023		2022
Operating expenses:
Service cost - benefits earned during the period	$	324	$	475	$	10	$	15
Non-operating expenses:
Interest cost on benefit obligations	21,201		18,649		632		451
Expected return on plan assets	(23,668)		(37,281)		—		—
Amortization of prior service benefit	16		—		—		—
Amortization of actuarial loss (gain)	540		20		(536)		(52)

Total non-operating (benefit) expense	$	(1,911)	$	(18,612)	$	96	$	399
Total (benefit) expense for retirement plans	$	(1,587)	$	(18,137)	$	106	$	414

Contributions

We are contractually obligated to contribute to our pension and postretirement benefit plans. During the three months ended March 31, 2023, we contributed $0.3 million and $1.9 million to our pension and other postretirement plans, respectively. Beginning with the quarter ended December 31, 2022, and ending with the quarter ending September 30, 2024, the GR Plan's appointed actuary will certify the GR Plan's funded status for each quarter (the "Quarterly Certification") in accordance with U.S. GAAP. If the GR Plan is less than 100% funded, the Company will make a $1.0 million contribution to the GR Plan no later than 60 days following the receipt of the Quarterly Certification, provided, however, that the Company's obligation to make additional contractual contributions will terminate the earlier of (a) the day following the date that a contractual contribution would be due for the quarter ending September 30, 2024, and (b) the date the Company has made a total of $5.0 million of contractual contributions subsequent to June 30, 2022. As of March 31, 2023, the GR Plan was more than 100% funded.

NOTE 8 — Fair value measurement

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

As of March 31, 2023 and December 31, 2022, assets and liabilities recorded at fair value and measured on a recurring basis primarily consist of pension plan assets. As permitted by U.S. GAAP, we use net asset values ("NAV") as a practical expedient to determine the fair value of certain investments. These investments measured at NAV have not been classified in the fair value hierarchy.

The Company's debt is recorded on the condensed consolidated balance sheets at carrying value. Refer to Note 6 — Debt for additional discussion regarding fair value of the Company's debt instruments.

Certain assets are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances (for example, when there is evidence of impairment). Assets held for sale (Level 3) are measured on a nonrecurring basis and are evaluated using executed purchase agreements, letters of intent or third-party valuation analyses when certain circumstances arise. The Company had assets held for sale totaling $2.3 million and $8.4 million as of March 31, 2023 and December 31, 2022, respectively. The Company performs its annual goodwill and indefinite-lived intangible impairment assessment during the fourth quarter of the year. Any resulting asset impairment would require that the asset be recorded at its fair value. The resulting fair value measurements of the assets are considered to be Level 3 measurements. Refer to Note 4 — Goodwill and intangible assets for additional discussion regarding the annual impairment assessment.

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NOTE 9 — Income taxes

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


	Three months ended March 31,
In thousands		2023			2022
Loss before income taxes		$	(7,069)		$	(10,709)
Benefit for income taxes		(17,329)			(7,607)
Effective tax rate		245.1		%	71.0		%

The provision for income taxes is calculated by applying the projected annual effective tax rate for the year to the current period income or loss before tax plus the tax effect of any significant or unusual items (discrete events), and changes in tax laws. The benefit for income taxes for the three months ended March 31, 2023, was mainly driven by the tax benefit of the pre-tax book loss, the change in valuation allowances on non-deductible U.S. interest expense carryforwards, the global intangible low-taxed income inclusion and stock compensation. The benefit was calculated using an estimated annual effective tax rate of 273.3%. The estimated annual effective tax rate is principally impacted by valuation allowances on non-deductible interest expense carryforwards, the global intangible low-taxed income inclusion and foreign tax expense, partially offset by the benefit of U.S. pre-tax book loss. The estimated annual effective tax rate is based on the projected tax expense for the full year.

The total amount of unrecognized tax benefits that, if recognized, may impact the effective tax rate was approximately $50.7 million and $43.3 million as of March 31, 2023 and December 31, 2022, respectively. The amount of accrued interest and penalties payable related to unrecognized tax benefits was $

Gannett Co., Inc. [GCI] Filings
10-Q	[2023-05-04]
10-K	[2023-02-23]
10-Q	[2022-11-03]
10-Q	[2022-08-04]
10-Q	[2022-05-05]
10-K	[2022-02-24]
10-Q	[2021-11-05]
10-Q	[2021-08-06]
10-Q	[2021-05-07]
10-K	[2021-02-26]
10-Q	[2020-11-03]
10-Q	[2020-08-06]
10-Q	[2020-05-07]
10-K	[2020-03-02]
10-Q	[2019-10-31]
10-Q	[2019-08-07]
10-Q	[2019-05-02]
10-K	[2019-02-28]
10-Q	[2018-10-31]
10-Q	[2018-08-02]
10-Q	[2018-05-03]
10-K	[2018-02-28]
10-Q	[2017-10-26]
10-Q	[2017-07-27]
10-Q	[2017-04-27]
10-K	[2017-02-21]
10-Q	[2016-10-27]
10-Q	[2016-07-28]
10-Q	[2016-04-28]
10-K	[2016-02-25]
10-Q	[2015-10-29]
10-Q	[2015-07-30]
10-Q	[2015-04-30]
10-K	[2015-03-06]
S-1	[2014-12-19]
10-Q	[2014-10-30]
10-Q	[2014-07-31]
10-Q	[2014-05-05]
10-K	[2014-03-19]
S-1	[2014-02-12]
S-1	[2013-12-10]