Company Quick10K Filing
Tribune Publishing
Price-0.00 EPS-0
Shares36 P/E0
MCap-0 P/FCF-0
Net Debt-87 EBIT-4
TEV-87 TEV/EBIT20
TTM 2019-09-29, in MM, except price, ratios
10-K 2019-12-29 Filed 2020-03-11
8-K 2020-06-05
8-K 2020-03-04
8-K 2020-01-31

TPCO 10K Annual Report

Part I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
Part II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Part III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
Part IV
Item 15. Exhibits and Financial Statement Schedules
Note 1: Description of Business and Basis of Presentation
Note 2: Summary of Significant Accounting Policies
Note 3: Leases
Note 4: Revenue Recognition
Note 5: Changes in Operations
Note 6: Related Party Transactions
Note 7: Acquisitions
Note 9: Inventories
Note 10: Goodwill and Other Intangible Assets
Note 11: Debt
Note 12: Commitments and Contingent Liabilities
Note 13: Income Taxes
Note 14: Defined Benefit Pension Plans and Other Postretirement Benefits
Note 15: Noncontrolling Interest
Note 16: Stock - Based Compensation
Note 17: Earnings per Share
Note 18: Stockholders' Equity
Note 19: Accumulated Other Comprehensive Income (Loss)
Note 20: Segment Information
Note 21: Supplemental Cash Flow Information
Note 22: Unaudited Quarterly Financial Information
EX-4.1 a2019q4-10kexhibit41.htm
EX-10.18 a2019q4-10kexhibit1018.htm
EX-21.1 a2019q4-10kexhibit211.htm
EX-23.1 a2019q4-10kexhibit231.htm
EX-31.1 a2019q4-10kexhibit311.htm
EX-31.2 a2019q4-10kexhibit312.htm
EX-32 a2019q4-10kexhibit32.htm

Tribune Publishing Earnings 2019-12-29

Balance SheetIncome StatementCash Flow
79563647731815902018201820192020
Assets, Equity
28522616710849-102018201820192020
Rev, G Profit, Net Income
150-15-30-45-602018201820192020
Ops, Inv, Fin

tpco-20191229
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 FORM 10-K
[ X ]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 29, 2019
 OR
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 001-36230 
TRIBUNE PUBLISHING COMPANY
(Exact name of registrant as specified in its charter) 
Delaware 38-3919441
(State or other jurisdiction of incorporation or organization) (I.R.S. employer identification no.)
160 N. Stetson Avenue
Chicago, Illinois60601
(Address of principal executive offices)(Zip code)
Registrant’s telephone number, including area code: (312) 222-9100
Securities registered pursuant to Section 12(b) of the Act:
Title of ClassTrading SymbolName of Exchange on Which Registered
Common Stock, par value $.01 per shareTPCOThe NASDAQ Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes   No 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the 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, 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 
The aggregate market value of the voting and non-voting stock held by non-affiliates of the registrant was approximately $138,055,910 on the closing market price of $7.97 per share of Common Stock on the Nasdaq Global Select Market as of June 30, 2019.
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class Outstanding at March 6, 2020
Common Stock, par value $0.01 per share 36,260,680  
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement of the registrant to be filed pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, for the 2020 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K.





TRIBUNE PUBLISHING COMPANY
FORM 10-K
TABLE OF CONTENTS
Page
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.

1


PART I
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
The statements contained in this Annual Report on Form 10-K, as well as the information contained in the notes to our Consolidated Financial Statements, include certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that are based largely on our current expectations and reflect various estimates and assumptions by us. Forward-looking statements are subject to certain risks, trends and uncertainties that could cause actual results and achievements to differ materially from those expressed in such forward-looking statements. Such risks, trends and uncertainties, which in some instances are beyond our control, include, without limitation, changes in advertising demand, circulation levels and audience shares; competition and other economic conditions; our ability to develop and grow our online businesses; changes in newsprint price and availability; our ability to maintain data security and comply with privacy-related laws; economic and market conditions that could impact the level of our required contributions to the defined benefit pension plans to which we contribute; decisions by trustees under rehabilitation plans (if applicable) or other contributing employers with respect to multiemployer plans to which we contribute which could impact the level of our contributions; our ability to maintain effective internal control over financial reporting; concentration of stock ownership among our principal stockholders whose interest may differ from those of other stockholders; and other events beyond our control that may result in unexpected adverse operating results, including those discussed in Item 1A. Risk Factors in this filing.
The words “believe,” “expect,” “anticipate,” “estimate,” “could,” “should,” “intend,” “may,” “will,” “plan,” “seek” and similar expressions generally identify forward-looking statements. However, such words are not the exclusive means for identifying forward-looking statements, and their absence does not mean that the statement is not forward looking. Whether or not any such forward-looking statements, in fact occur will depend on future events, some of which are beyond our control. Readers are cautioned not to place undue reliance on such forward-looking statements, which are being made as of the date of this Annual Report on Form 10-K. Except as required by law, we undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.
Item 1. Business
Overview
Tribune Publishing Company was formed as a Delaware corporation on November 21, 2013. Tribune Publishing Company, together with its subsidiaries (collectively, the “Company” or “Tribune”), is a media company rooted in award-winning journalism. Headquartered in Chicago, Tribune operates local media businesses in eight markets with titles including the Chicago Tribune, New York Daily News, The Baltimore Sun, Orlando Sentinel, South Florida’s Sun Sentinel, Virginia’s Daily Press and The Virginian-Pilot, The Morning Call of Lehigh Valley, Pennsylvania and the Hartford Courant. Tribune also operates Tribune Content Agency (“TCA”) and is the majority owner of BestReviews LLC (“BestReviews”).
On May 23, 2018, the Company completed the sale of substantially all of the assets of forsalebyowner.com and on June 18, 2018, the Company completed the sale of the Los Angeles Times, The San Diego Union-Tribune and various other titles of the Company’s California properties (“California Properties”). In connection with the sales of forsalebyowner.com and the California Properties, the Company entered into transition service agreements with the buyers. See Note 8 to the Consolidated Financial Statements for further information on dispositions and related discontinued operations.
Tribune’s continuing legacy of brands have earned a combined 61 Pulitzer Prizes and are committed to informing, inspiring and engaging local communities. Tribune’s brands create and distribute content across its media portfolio, offering integrated marketing, media and business services to consumers and advertisers, including digital solutions and advertising opportunities.
The Company’s results of operations, when examined on a quarterly basis, reflect the seasonality of Tribune’s revenues. Second and fourth quarter advertising revenues are typically higher than first and third quarter revenues. Results for the second quarter reflect spring advertising revenues, while the fourth quarter includes advertising revenues related to the holiday season.
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Significant transactions and recent events
On January 17, 2019, the Company and NantMedia Holdings, LLC (“NantMedia”) entered an amended transition services agreement (“Amended TSA”) related to the California Properties. The Amended TSA extended the term of the contract to June 30, 2020, settled the working capital adjustment from the sale of the California Properties and provided an indemnity related to certain receivables. See Note 6 to the Consolidated Financial Statements for additional information on the Amended TSA.
On May 29, 2019, and November 13, 2019, the Company declared dividends of $1.50 and $0.25 per common share, respectively, to be paid to shareholders of record as of June 12, 2019, and November 25, 2019, respectively. The Company declared dividends of $65.0 million during the year ended December 29, 2019. See Note 18 to the Consolidated Financial Statements for additional information on the dividends declared.
On July 23, 2019, the Company entered into an agreement to sell real property located in Norfolk, Virginia, for a sales price of $9.5 million. The sale was dependent on the purchaser obtaining the required certificates and the purchaser's determination of feasibility. Subsequent to December 29, 2019, the certificates were obtained, feasibility was determined and the sale closed on January 22, 2020. See Note 5 to the Consolidated Financial Statements for additional information on changes in operations.
On June 3, 2019, the Chicago Newspaper Publishers Drivers’ Union Pension Plan (“Drivers’ Plan”) received approval from the Pension Benefit Guaranty Corporation (“PBGC”) to merge with the Teamsters Local Union No. 727 Pension Fund (“Teamsters Fund”), which became effective on August 1, 2019. The Company contributed a total of $11.5 million to the Drivers’ Plan and the Teamsters Fund during the year ended December 29, 2019 under a previously existing amended rehabilitation plan. See Note 14 to the Consolidated Financial Statements for additional information on the Company’s multiemployer pension plans.
As part of the sale of the California Properties to Nant Capital, LLC (“Nant Capital”) pursuant to the Membership Interest Purchase Agreement dated February 7, 2018, by and between the Company and Nant Capital (“Nant Transaction”), the Company provided the buyer indemnification with respect to certain legal matters which were at various states of adjudication at the date of the sale. On August 19, 2019, the Los Angeles Times received an unfavorable jury verdict in an indemnified employment litigation matter. The Company successfully challenged the jury verdict by post-trial motions, and as a result, the verdict has been set aside and a new trial has been ordered. See Note 8 to the Consolidated Financial Statements for additional information on discontinued operations.
During November 2019, Alden Global Opportunities Mast Fund, L.P. (“AGOMF”) and Alden Global Value Recovery Master Fund, L.P. (“AGVRMF”) (together, the “Alden Funds”) acquired 11,544,213 shares, or 32.0%, of the Company’s common stock. Of those shares, 9,071,529 shares were purchased from Merrick Media, LLC (“Merrick Media”) and Michael W. Ferro, previously the Company's largest shareholder, in a private transaction. On December 1, 2019, the Company entered into a Cooperation Agreement with the Alden Funds. See Note 18 to the Consolidated Financial Statements for additional information regarding the Cooperation Agreement.
Subsequent to December 29, 2019, the Company offered a Voluntary Severance Incentive Plan (“2020 VSIP”) which provides enhanced separation benefits to eligible employees with more than eight years of service. The Company plans to fund the 2020 VSIP ratably over the payout period through salary continuation that started in the first quarter of 2020 and continues through the second quarter 2021.
On February 19, 2020, the Company declared a cash dividend of $0.25 per share of common stock to be paid on March 16, 2020, to shareholders of record as of March 2, 2020.
Segments
The Company manages its business as two distinct segments, M and X. Segment M is comprised of the Company’s media groups excluding their digital revenues and related digital expenses, except digital subscription revenues when bundled with a print subscription. Segment X includes the Company’s digital revenues and related digital expenses from local Tribune websites, third-party and affiliate websites, mobile applications, digital only subscriptions, TCA and BestReviews.
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Segment M
Segment M’s media groups include the Chicago Tribune Media Group, the New York Daily News Media Group, The Baltimore Sun Media Group, the Orlando Sentinel Media Group, the Sun Sentinel Media Group, the Virginia Media Group, the Morning Call Media Group and the Hartford Courant Media Group. The Virginia Media Group includes the Daily Press and The Virginian-Pilot. Tribune’s major daily newspapers have served their respective communities with local, regional, national and international news and information for more than 150 years. The Hartford Courant is the nation’s oldest continuously published newspaper and celebrated its 255th anniversary in October 2019.
In the year ended December 29, 2019, 43.0% of segment M’s operating revenues were generated from the sale of newspapers and other owned publications to individual subscribers or to sales outlets that resell the newspapers. 39.3% of segment M’s operating revenues were derived from advertising. These revenues were generated from the sale of advertising space in published issues of the newspapers and from the delivery of preprinted advertising supplements. The remaining 17.7% of operating revenues for the year ended December 29, 2019, were generated from the provision of commercial printing and delivery services to other newspapers, direct mail advertising and services and other related activities.
Newspaper print advertising is typically in the form of display, classified or preprint advertising. Advertising and marketing services revenues are comprised of three basic categories: retail, national and classified. Retail is a category of customers who generally do business directly with the general public. National is a category of customers who generally do business directly with other businesses. Classified is a type of advertising which is other than display or preprint.
Circulation revenue results from the sale of print editions of newspapers to individual subscribers and to sales outlets that resell the newspapers.
Other revenues are derived from commercial printing and delivery services provided to other newspapers, direct mail advertising and services and other related activities. The Company contracts with a number of national and local newspapers to both print and distribute their respective publications in local markets where the Company is a newspaper publisher. The Company currently distributes national newspapers (including The New York Times, USA Today and The Wall Street Journal) in its local markets under multiple agreements. In some instances where it prints publications, it also manages and procures newsprint, ink and plates on their behalf. These arrangements allow the Company to leverage its investment in infrastructure in those markets that support its own publications. As a result, these arrangements tend to contribute incremental profitability and revenues. To provide delivery services to other newspapers, the Company contracts with independent third-party delivery vendors and generally does not provide such services directly.
Products and Services
Segment M’s product mix consists of three publication types: (i) daily newspapers, (ii) weekly newspapers and (iii) niche publications and direct mail. The key characteristics of each of these types of publications are summarized in the table below.
Daily NewspapersWeekly NewspapersNiche Publications
Cost:PaidPaid and freePaid and free
Distribution:Distributed four to seven days per weekDistributed one to three days per weekDistributed weekly, monthly or on an annual basis
Income:Revenue from advertisers, subscribers, rack/box sales, resellers
Paid: Revenue from advertising, subscribers, rack/box sales
Paid: Revenue from advertising, rack/box sales
Free: Advertising revenue only
Free: Advertising revenue only
As of December 29, 2019, segment M’s prominent print publications included:
Media GroupCityMastheadCirculation
Type
Paid or
Free
Chicago Tribune Media Group
Chicago, ILChicago Tribune DailyPaid
Chicago, ILChicago MagazineMonthlyPaid
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Media GroupCityMastheadCirculation
Type
Paid or
Free
Chicago, ILRedEyeWeeklyFree
New York Daily News Media Group
New York, NYNew York Daily NewsDailyPaid
Sun Sentinel Media Group
Broward County, FL, Palm Beach County, FLSun SentinelDailyPaid
Broward County, FL, Palm Beach County, FLel SentinelWeeklyFree
Orlando Sentinel Media Group
Orlando, FLOrlando SentinelDailyPaid
Orlando, FLel SentinelWeeklyFree
The Baltimore Sun Media Group
Baltimore, MDThe Baltimore SunDailyPaid
Annapolis, MDThe Capital GazetteDailyPaid
Westminster, MDCarroll County TimesDailyPaid
Hartford Courant Media Group
Hartford County, CT, Middlesex County, CT, Tolland County, CT Hartford CourantDailyPaid
Virginia Media Group
Newport News, VA (Peninsula)Daily PressDailyPaid
Norfolk, VAThe Virginian-PilotDailyPaid
The Morning Call Media Group
Lehigh Valley, PAThe Morning CallDailyPaid
Segment X
Segment X comprises the Company’s digital operations and includes the Company’s digital revenues and related digital expenses from local Tribune websites, third-party and affiliated websites, mobile applications, digital only subscriptions, TCA and BestReviews.
TCA is a syndication and licensing business providing quality content solutions for publishers around the globe that traces its roots to 1918.  Working with a vast collection of the world’s best news and information sources, TCA delivers a daily news service and syndicated premium content to more than 2,000 media and digital information publishers in nearly 70 countries. Tribune News Service delivers the best material from 70 leading publishers, including Chicago Tribune, Bloomberg News, Miami Herald, The Dallas Morning News, Seattle Times, The Philadelphia Inquirer, and the Los Angeles Times. Tribune Premium Content syndicates columnists such as Leonard Pitts, Cal Thomas, Clarence Page, Ask Amy and Rick Steves. TCA manages the licensing of premium content from publications such as Rolling Stone, The Atlantic, Fast Company, Mayo Clinic, Inc. and many more.
BestReviews is a company engaged in the business of testing, researching and reviewing consumer products. BestReviews generates referral fee revenue by directing online traffic from their published reviews to sites where the products can be purchased. BestReviews has affiliate agreements with online sellers, of which the largest is Amazon.com. BestReviews receives a referral fee once the product is purchased.
In the year ended December 29, 2019, 50.4% of segment X’s operating revenues were derived from advertising. These revenues were generated from the sale of advertising space on Tribune websites, third-party and affiliated websites and applications, and digital marketing services. The remaining 49.6% of operating revenues for the year ended December 29, 2019 were generated from the sale of digital content, referral fees and other related activities.
Digital advertising can be in the form of display, banner advertisements (“ads” or “ad”), advertising widgets, coupon ads, video, search advertising and linear ads placed on Tribune, third-party and affiliated websites. Digital marketing
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services include development of mobile websites, search engine marketing and optimization, social media account management and content marketing for its customers’ web presence for small to medium size businesses.
Products and Services
As of December 29, 2019, the Company’s prominent websites include:
Websites
www.tribpub.comwww.nydailynews.comwww.mcall.com
www.chicagotribune.comwww.orlandosentinel.comwww.thedailymeal.com
www.chicagomag.comwww.orlandosentinel.com/elsentinelwww.theactivetimes.com
www.sun-sentinel.comwww.baltimoresun.comwww.dailypress.com
www.sun-sentinel.com/espanolwww.capitalgazette.comwww.pilotonline.com
www.bestreviews.comwww.courant.com
Competition
Each of the Company’s nine major daily newspapers holds a leading market position in their respective designated market areas as determined by Nielsen, and competes for readership and advertising with both local or community newspapers as well as national newspapers and other traditional and web-based media sources. Increasingly, the Company is facing competition from digital platforms that have content, search, aggregation and social media functionality, magazines, broadcast, cable and satellite television, over-the-top video services, radio, direct mail, yellow pages, outdoor, and other media as advertisers adjust their spending based on the perceived value of the audience reached and the cost to reach that audience.  Over time, less competition for advertising dollars is coming from the traditional local, regional and national newspapers.
The secular shift of how content is consumed, including the ubiquity of mobile platforms, has led to increased competition from a wide variety of new digital content offerings, many of which are often free to users. Besides price, variables impacting customer acquisition and retention include the quality and nature of the user experience and the quality of the content offered.
To address the structural shift to digital media, the Company provides editorial content on a wide variety of platforms and formats - from the printed daily newspaper to the Company’s leading local websites; on social network sites such as Facebook, Apple News and Twitter; on smartphones, tablets and e-readers; on websites and blogs; in niche online publications and in e-mail newsletters.
Raw Materials
As a publisher of newspapers, Tribune utilizes substantial quantities of various types of paper. During 2019, we consumed approximately 118 thousand metric tons of newsprint. Our earnings are sensitive to changes in newsprint prices. The Company currently obtains substantially all of its newsprint under a long-term contract with a national purchasing aggregator who then draws upon U.S. and internationally based newsprint producers. We believe that our current source of paper supply is adequate. Newsprint and ink expense accounted for 5.8% of total operating expenses in the year ended December 29, 2019.
Employees
As of December 29, 2019, we had approximately 4,114 full-time and part-time employees, including approximately 1,422 employees represented by various employee unions. We believe our relations with our employees are satisfactory.
Intellectual Property
Currently, our operations are generally not reliant on patents owned by third parties. However, because we operate a large number of websites and mobile applications in high-visibility markets, we do defend patent litigation, from time to time, brought primarily by non-practicing entities, as opposed to marketplace competitors. We have sought patent protection in certain instances; however, we do not consider patents to be material to our business as a whole. Of greater
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importance to our overall business are the federal, international and state trademark registrations and applications that protect, along with our common law rights, our brands, certain of which are long-standing and well known, such as Chicago Tribune, New York Daily News and Hartford Courant. Generally, the duration of a trademark registration is perpetual if it is renewed on a timely basis and continues to be used properly as a trademark. We also own a large number of copyrights, none of which individually is material to the business. We maintain certain licensing and content sharing relationships with third-party content providers that allow us to produce the particular content mix we provide to our customers in our markets. The Company entered into a number of agreements with Tribune Media Company, formerly Tribune Company, or its subsidiaries (collectively, “TCO”) that provide for licenses to certain intellectual property, and in particular, we entered into a license agreement with TCO that provides a non-exclusive, royalty-free license for us to use certain trademarks, service marks and trade names, including the Tribune name. Other than the foregoing and commercially available software licenses, we do not believe that any of our licenses to third-party intellectual property are material to our business as a whole.
Available Information
Tribune maintains its corporate website at www.tribpub.com. The Company makes available free of charge on www.tribpub.com this Annual Report on Form 10-K, the Company’s Quarterly Reports on Form 10-Q, the Company’s Current Reports on Form 8-K, and amendments to all those reports, all as filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after the reports are electronically filed with or furnished to the Securities and Exchange Commission (“SEC”).
Item 1A. Risk Factors
Investors should carefully consider each of the following risks, together with all of the other information in this Annual Report on Form 10-K, in evaluating an investment in the Company’s common stock. The following risks relate to the Company’s business, the securities markets and ownership of the Company’s common stock. If any of the following risks and uncertainties develop into actual events, the Company could be materially and adversely affected. If this occurs, the trading price of the Company’s common stock could decline, and investors may lose all or part of their investment.
Risks Relating to Our Business
Advertising demand is expected to continue to be affected by changes in economic conditions and fragmentation of the media landscape.
Advertising revenue is our largest source of revenue. Expenditures by advertisers tend to be cyclical, reflecting overall economic conditions, as well as budgeting and buying patterns. National and local economic conditions, particularly in major metropolitan markets, affect the levels of retail, national and classified newspaper advertising revenue. Changes in gross domestic product, consumer spending, auto sales, fuel prices, housing sales, unemployment rates, job creation, and circulation levels and rates, as well as federal, state and local election cycles and customers reactions to health epidemics, all affect demand for advertising. For example, the impact of widespread health emergencies may adversely impact the demand for advertising, such as the potential impact from the recent outbreak of the coronavirus, which originated in Wuhan, Hubei Province, China but has now spread to other countries.
The trend towards online shopping has negatively impacted retailers, which constitute a primary advertising channel of the Company. A decline in the economic prospects of advertisers or the economy in general could alter current or prospective advertisers’ spending priorities. Consolidation across various industries, such as large department store and telecommunications companies, may also reduce overall advertising revenue.
Competition from other media, including other metropolitan, suburban and national newspapers, websites, including news aggregation websites, social media websites and search engines, broadcasters, cable systems and networks, satellite television and radio, magazines, direct marketing and solo and shared mail programs, affects our ability to retain advertising clients and maintain or raise rates. In recent years, Internet sites devoted to recruitment, automotive and real estate have become significant competitors of our newspapers and websites for classified advertising and have significantly eroded our share of classified advertising revenue.
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Seasonal variations in consumer spending cause our quarterly advertising revenue to fluctuate. Second and fourth quarter advertising revenue is typically higher than first and third quarter advertising revenue, reflecting the slower economic activity in the winter and summer and the stronger fourth quarter holiday season.
Demand for our products is also one of many factors in determining advertising rates. For example, circulation levels for our newspapers have been declining which could affect the rate and volume of advertising revenue.
All of these factors continue to contribute to a difficult advertising sales environment and may further adversely affect our ability to grow or maintain our advertising revenue. Our advertising revenues may decline or may decline at a faster rate than anticipated.
Decreases, or slow growth, in print circulation may adversely affect our circulation and advertising revenues.
Our newspapers, and the newspaper industry as a whole, are experiencing reduced consumer demand for print circulation and decreased print circulation revenue. This results from, among other factors, increased competition from other media, particularly the online media outlets (which are often free to users), changing newspaper readership demographics and shifting preferences among some consumers to receive all or a portion of their news from sources other than a newspaper. These factors could affect our ability to implement circulation price increases, or even maintain current pricing for our print products. As a result, our print circulation and circulation revenue may decline or may decline at a faster rate than anticipated.
In addition, our circulation revenue is sensitive to discretionary spending available to subscribers in the markets we serve, as well as their perceptions of economic trends and uncertainty. Weak economic indicators in various regions across the nation may adversely impact subscriber sentiment and therefore impair our ability to maintain and grow our circulation.
A continued decline in print circulation could affect the rate and volume of advertising revenue. To maintain a certain level of our circulation base, we may incur additional costs, and may not be able to recover these costs through circulation and advertising revenue. To address declining print circulation, we may increase spending on marketing designed to retain our existing subscriber base and continue or create niche publications targeted at specific market groups. We may also increase marketing efforts to drive traffic to our proprietary websites.
Increasing popularity of digital media and the shift in newspaper readership demographics, consumer habits and advertising expenditures from traditional print to digital media have adversely affected and may continue to adversely affect our operating revenues and may require significant capital investments due to changes in technology.
Technology in the media industry continues to evolve rapidly. Advances in technology have led to an increasing number of methods for delivery of news and other content and have resulted in a wide variety of consumer demands and expectations, which are also rapidly evolving. If we are unable to exploit new and existing technologies to distinguish our products and services from those of our competitors or adapt to new distribution methods that provide optimal user experiences, our business and financial results may be adversely affected.
The increasing number of digital media options available on the Internet, through social networking tools and through mobile and other devices distributing news and other content, is expanding consumer choice significantly. Faced with a multitude of media choices and a dramatic increase in accessible information, consumers may place greater value on when, where, how and at what price they consume digital content than they do on the source or reliability of such content. Further, as existing newspaper readers get older, younger generations may not develop similar readership habits. 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.
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. Digital advertising networks and exchanges, real-time bidding and other programmatic buying channels that allow advertisers to buy audiences at scale are also playing a significant role in the advertising marketplace, which may cause downward pricing pressure. In addition, evolving standards for delivery of digital advertising, such as viewability, could adversely affect advertising revenues. Consequently, our digital advertising revenue may not be able to replace print
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advertising revenue lost as a result of the shift to digital consumption. A decrease in our customers’ advertising expenditures, reduced demand for our offerings or a surplus of advertising inventory could lead to a reduction in pricing and advertising spending, which could have an adverse effect on our businesses and assets. Our inability to maintain and/or improve the performance of our customers’ advertising results on our digital properties may negatively influence rates we achieve in the marketplace for our advertising inventory.
Paywalls on our newspaper websites require users to pay for content after accessing a limited number of pages or news articles for free each month. Our ability to build a subscriber base on our digital platforms depends on market acceptance, consumer habits, pricing, terms of delivery, platforms and other factors. Stagnation or a decline in website traffic levels may adversely affect our advertiser base and advertising rates and result in a decline in digital revenue. In order to retain and grow our digital subscription base and audience, we may have to further evolve our digital subscription model, address changing consumer requirements and develop and improve our digital products while continuing to deliver high-quality journalism and content that is interesting and relevant to our audience. There can be no assurance that we will be able to successfully maintain and increase our digital subscription base and audience or that we will be able to do so without taking steps such as reducing pricing or increasing costs that would affect our financial condition and results of operations.
Any changes we make to our business model to address these challenges may require significant capital investments. We have invested, and expect to continue to invest, in digital technologies. However, we may be limited in our ability to invest funds and resources in digital products, services or opportunities and we may incur costs of research and development in building and maintaining the necessary and continually evolving technology infrastructure. Some of our competitors may have greater operational, financial and other resources or may otherwise be better positioned to compete for opportunities and as a result, our digital businesses may be less successful, which may adversely affect our business and financial results.
Our business operates in highly competitive markets and our ability to maintain market share and generate operating revenues depends on how effectively we compete with our competition.
Our business operates in highly competitive markets. Our newspapers often times compete for audiences and advertising revenue with other newspapers as well as with other media such as the Internet, magazines, broadcast, cable and satellite television, radio, direct mail, and yellow pages. Some of our competitors have greater financial and other resources than we do.
Our operating revenues primarily consist of advertising and paid circulation. Competition for advertising expenditures and paid circulation comes from a variety of sources, including local, regional and national newspapers, the Internet, including news aggregation websites, social media websites and search engines, magazines, broadcast, cable and satellite television, radio, direct mail, yellow pages, outdoor billboards, and other media. Free daily newspapers are available in several metropolitan markets, and there can be no assurance that free daily publications, or other publications, will not be introduced in any markets in which we publish newspapers. Competition for newspaper advertising revenue is based largely upon advertiser results, advertising rates, readership, demographics, and circulation levels. Competition for circulation is based largely upon the content of the newspaper, its price, editorial quality, customer service, and other sources of news and information. Circulation revenue and our ability to achieve price increases for, or even maintain prices for, our print products may be affected by competition from other publications and other forms of media available in our various markets, declining consumer spending on discretionary items like newspapers, decreasing amounts of free time, and declining frequency of regular newspaper buying among certain demographics. We may incur higher costs competing for advertising dollars and paid circulation. If we are not able to compete effectively for advertising dollars and paid circulation, our operating revenues may decline and our financial condition and results of operations may be adversely affected.
Our primary strategy is to transition from a print-focused media company to a digital platform media company, and if we are not successful in our transition, our business, financial condition and prospects will be adversely affected.
Our ability to successfully transition from a print-focused media company to a digital platform media company depends on various factors, including, among other things, the ability to:
increase digital audiences;
increase the amount of time spent on our websites, the likelihood of users returning to our websites, and their level of engagement;
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attract advertisers to our websites;
serve and monetize increasingly mobile news readers with product enhancements, advertising revenue capabilities and subscription conversion rates that are as strong as those of our desktop products;
maintain or increase online advertising rates;
exploit new and existing technologies to distinguish our products and services from those of competitors and develop new content, products and services; and
invest funds and resources in digital opportunities.
There are no assurances that we will be able to attract and retain employees with skill sets and knowledge base needed to successfully operate in a digital business structure, that our sales force will be able to effectively sell advertising in the digital advertising arena versus our historical print advertising business, or that we will be able to effect the operational changes necessary to transition from a print-focused business to a digital-focused business. We may be limited in our ability to invest funds and resources in digital products, services or opportunities, and we may incur research and development costs in building, maintaining and evolving our technology infrastructure.
The sale of the California Properties and the Transition Services Agreement entered into in connection with such sale could impact our results of operations and financial condition.
On June 18, 2018, we completed the sale of the California Properties. For the year ended December 31, 2017, the California Properties accounted for 33.0% of our total revenues. Without the California Properties, the scale and geographic scope of our operations are substantially decreased, which could negatively impact our negotiating power in both revenue matters such as advertising sales rates, as well as procurement activities such as newsprint purchase prices.
Additionally, in connection with the closing of the sale of the California Properties, we entered into a transition services agreement (“TSA”) with NantMedia, whereby the Company will provide back-office and operational services to NantMedia for up to 12 months after the transaction at negotiated rates approximating cost. NantMedia also provides a small number of transition services to the Company under the TSA. During January 2019, the TSA was extended to June 30, 2020, at the same pricing. During 2019, the Company recognized $19.5 million of revenue from provision of TSA services to NantMedia.
Under the TSA, either party may discontinue all or a portion of the services being provided by the other party upon 60 days advance notice. As TSA services are discontinued by NantMedia, our revenue will decrease. If we are unable to implement cost-control measures to offset the lost revenue, our net income would be negatively impacted.
We rely on revenue from the printing and distribution of publications for third parties that may be subject to many of the same business and industry risks that we are.
In 2019, we generated approximately 9.6% of our revenue from printing and distributing third-party publications. As a result, if 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, which may adversely impact our results of operations.
Our business, operating results and reputation may be negatively impacted, and we may be subject to legal and regulatory claims if there is a loss, destruction, disclosure, misappropriation or alteration of or unauthorized access to data owned or maintained by us, or if we are the subject of a significant data breach or cyberattack.
We rely on our information technology and communications systems to manage our business data, including communications, news and advertising content, digital products, order entry, fulfillment and other business processes. These technologies and systems also help us manage many of our internal controls over financial reporting, disclosure controls and procedures and financial systems. Attempts to compromise information technology and communications systems occur regularly across many industries and sectors, and we may be vulnerable to security breaches resulting from accidental events (such as human error) or deliberate attacks. Moreover, the techniques used to attempt attacks and the perpetrators of such
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attacks are constantly expanding. We face threats both from use of malicious code (such as malware, viruses and ransomware), employee theft or misuse, advanced persistent threats, and phishing and denial-of-service attacks. For example, in December 2018, the Company was attacked by a ransomware virus, which locked up certain Company systems and data, requiring implementation of components of the Company’s business continuity plans and restoration of data from backups. The Company investigated the incident and determined that it did not result in any unauthorized access to or acquisition of sensitive data stored within its systems. Additionally, between late 2018 and mid-2019, the Company identified and investigated unrelated activity involving unauthorized access gained to certain Company staff email accounts and payroll-related user accounts, which was the result of email phishing attacks. The Company has complied with all applicable legal requirements relating to this activity and is taking steps to implement additional safeguards to reduce the risk of successful email phishing attacks. Neither the malware infection nor the email phishing attacks resulted in any material costs to the Company. As cyberattacks become increasingly sophisticated, and as tools and resources become more readily available to malicious third parties, the Company will incur increased costs to secure its technology environment and there can be no guarantee that the Company’s and our third-party vendors’ actions, security measures and controls designed to prevent, detect or respond to security breaches, to limit access to data, to prevent destruction, alteration, or exfiltration of data, or to limit the negative impact from such attacks, can provide absolute security against compromise. As a result, our business data, communications, news and advertising content, digital products, order entry, fulfillment and other business processes may be lost, destroyed, disclosed, misappropriated, altered or accessed without consent and various controls, automated procedures and financial systems could be compromised.
A significant security breach or other successful attack could result in significant remediation costs, including repairing system damage, engaging third-party experts, deploying additional personnel or vendor support, training employees, and compensation or incentives offered to third parties whose data has been compromised. These incidents may also lead to lost revenues resulting from a loss in competitive advantage due to the unauthorized disclosure, alteration, destruction or use of business data, the failure to retain or attract customers, the disruption of critical business processes or systems, and the diversion of management’s attention and resources. Moreover, such incidents may result in adverse media coverage, which may harm our reputation. These incidents may also lead to legal claims or proceedings, including regulatory investigations and actions and private lawsuits, and related legal fees, as well as potential settlements, judgments and fines. We maintain insurance, but the coverage and limits of our insurance policies may not be adequate to reimburse us for losses caused by security breaches.
Our possession and use of personal information, including payment methods of our customers, present risks and expenses that could harm our business. A security breach involving such data, whether through breach of our security measures or otherwise, could expose us to liabilities and costly litigation and damage our reputation.
Our information technology and communications systems store and process subscriber, employee and other personal information, such as names, email addresses, payment method information, addresses, personal health information, social security numbers, and other personal information. Maintaining the security of this information and our systems 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’, information technology and communications systems could jeopardize the security of this personal information. Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage information technology and communications 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 or omissions by an employee, can also result in a security breach. A party that is able to circumvent our security measures could misappropriate the personal information relating to our customers, users or employees. As a result of any such breaches, we may be subject to legal claims, and these events may adversely impact our reputation and interfere with our ability to provide our products and services, all of which may have a material 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 personal 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 or our third-party vendors 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.
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There can be no assurance that any security measures we, or our third-party service providers, take will be effective in preventing a security breach or that we or our third-party service providers may make some other act or omission that could result in a security 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 personal information of our customers and employees or to provide affected individuals with adequate notice of any security breach where required by law could also subject us to liabilities imposed by United States federal and state regulatory agencies or courts.
Privacy-related laws are constantly evolving and may increase our compliance costs and potential for liability, either of which may have an adverse effect on our business, financial condition and results of operations.
Many jurisdictions have enacted or are considering enacting privacy or data protection laws and regulations that apply to the processing or protection of personal information, including laws at the city, state and federal level in the United States. For instance, these laws and regulations may impose additional security breach notification requirements, notice and consent requirements and specific data security obligations, and may also provide for a private right of action or statutory damages. The compliance costs and operational burdens imposed by these laws and regulations could be significant. Additionally, as these laws and regulations continue to evolve and continue to be interpreted by courts and regulators, compliance may result in increasing regulatory and public scrutiny and escalating levels of enforcement, litigation, damages and sanctions and may necessitate shifts in business practices that could impact revenue. For example, California enacted the California Consumer Privacy Act (“CCPA”) which came into effect on January 1, 2020. The CCPA gives California residents several additional rights, including the right to access and delete their personal information, restrict certain personal information sharing, and receive greater transparency about how their personal information is used. The CCPA provides for civil penalties for violations, as well as a limited private right of action for security breaches that is expected to increase security breach litigation. The CCPA could mark the beginning of a trend toward more stringent privacy legislation in the United States, which could increase our potential liability and compliance costs and adversely affect our business. The law has already been amended and may be amended again. Additionally, the California Attorney General’s office has issued proposed rules, which may be further adjusted before becoming final. These changes make it difficult to predict how the CCPA will affect our business or operations. Aside from actions by state legislatures, the Federal Trade Commission and state attorneys general are active in enforcing against alleged privacy and data protection failures through authority granted to them under broad consumer protection laws, which could also create potential liability and adversely affect our business.
If in the future, we decide to expand any existing or future lines of our business outside of the United States, we may become subject to additional privacy and data protection obligations by other nations’ privacy laws. For example, an expansion into European Union countries may subject us to the European Union’s existing data protection law, the General Data Protection Regulation (“GDPR”). The GDPR has several very specific and often burdensome compliance requirements that apply to the processing of personal data, including stringent conditions for consent when relied upon for processing, granting of rights for individuals (including erasure, access, portability and rectification), conditions applicable to the trans-border flow of such data, more burdensome security breach reporting and other requirements. The GDPR also has significant penalties for non-compliance (up to 20 million euros, or approximately 23 million U.S. dollars, or 4% of an entity’s worldwide annual turnover in the preceding financial year, whichever is higher) and increases the enforcement powers of the data protection authorities and private citizens. The European Union is also considering an update to its Privacy and Electronic Communication (e-Privacy) Directive with a regulation to, among other things, amend the current directive’s rules on the use of cookies and email marketing.
Our failure to comply with any of these laws or regulations, foreign or domestic, may have an adverse effect on our business, financial condition and results of operations. Any failure, or perceived failure, by us to comply with laws and regulations that govern our business operations, as well as any failure, or perceived failure, by us to comply with our own posted policies, could result in claims against us by governmental entities or others and/or increased costs to change our practices. They could also result in negative publicity and a loss of confidence in us by our users and advertisers. All of these potential consequences could adversely affect our business and results of operations.
If we are unable to execute cost-control measures successfully, our total operating costs may be greater than expected, which would adversely affect our profitability.
We continually assess our operations in an effort to identify opportunities to enhance operational efficiencies and reduce expenses. These activities have in the past included, and could include in the future, outsourcing of various functions
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or operations, additional abandonment of leased space, offering employee buyouts, amending retirement benefits and other activities that may result in changes to employee headcount. See Note 5 to the Consolidated Financial Statements for more information on changes in operations during 2019. The Company expects to continue to take actions deemed appropriate to control expenses and enhance profitability but does not currently know whether or when any such actions will occur or the potential costs and expected savings. If we do not achieve expected savings, are unable to implement additional cost-control measures, or our operating costs increase as a result of investments in strategic initiatives, our total operating costs would be greater than anticipated. In addition, if we do not manage our costs properly, such efforts may affect the quality of our products and our ability to generate future revenues. Reductions in staff and employee benefits and changes to our compensation structure could also adversely affect our ability to attract and retain key employees. Finally, depending on the actions taken and the timing of any such actions, the anticipated cost savings could be recognized in fiscal periods that do not correspond to the fiscal period(s) in which the charges are recognized. As a result, our net income trends could be impacted and more difficult to predict.
Significant portions of our expenses are fixed costs that neither increase nor decrease proportionately with revenues. If we are not able to implement further cost-control efforts or reduce our fixed costs sufficiently in response to a decline in our revenues, this could adversely affect our results of operations.
Newsprint prices and availability may continue to be volatile and difficult to predict and control.
Newsprint and ink expense was 5.8% of our total operating expenses for the year ended December 29, 2019. The price of newsprint has historically been subject to change, and the consolidation of North American newsprint mills over the years has reduced the number of suppliers and the available supply of newsprint. We have historically been able to realize favorable newsprint pricing by virtue of our company-wide volume and a long-term contract with a significant supplier. Failure to maintain our current consumption levels, further supplier consolidation or the inability to maintain our existing relationships with our newsprint suppliers may adversely affect newsprint prices in the future.
We may not be able to adapt to technological changes.
Advances in technologies or alternative methods of content delivery or changes in consumer behavior driven by these or other technologies have had and could continue to have a negative effect on our business. New delivery platforms may lead to pricing restrictions, the loss of distribution control and the loss of a direct relationship with consumers. Our advertising and circulation revenues have declined, reflecting general trends in the newspaper industry, including declining newspaper buying (by young people in particular) and the migration to other available forms of media for news. We may also be adversely affected if the use of technology developed to block the display of advertising on websites and mobile devices, fraudulent traffic generated by “bots,” or malware proliferate. We cannot predict the effect such technologies will have on our operations. In addition, the expenditures necessary to implement these new technologies could be substantial and other companies employing such technologies before we are able to do so could aggressively compete with our business.
We rely on third-party service providers for various services.
We rely on third-party service providers for various services. We do not control the operation of these service providers. If any of these third-party service providers terminate their relationship with us, or do not provide an adequate level of service, it could be disruptive to our business as we seek to replace the service provider or remedy the inadequate level of service. This disruption may adversely affect our operating results.
Significant problems with our key systems or those of our third-party service providers could have a material adverse effect on our operating results.
The systems underlying the operations of each of our businesses are complex and diverse, and must efficiently integrate with third-party systems, such as wire feeds, video playback systems and credit card processors. Key systems include, without limitation, billing, website and database management, customer support, editorial content management, advertisement and circulation serving and management systems, information technology and communications systems, print and insert production systems, and internal financial systems. Some of these systems and/or support thereof are outsourced to third parties. We or our third-party service providers may experience problems with these systems. All information technology and communication systems are subject to reliability issues, integration and compatibility concerns, and security-threatening intrusions. The continued and uninterrupted performance of our key systems is critical to our success. Unanticipated problems affecting these systems could cause interruptions in our services. In addition, if our third-party
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service providers face financial or other difficulties, our business could be adversely impacted. Any significant errors, damage, failures, interruptions, delays, or other problems with our systems, our backup systems or our third-party service providers or their systems could adversely impact our ability to satisfy our customers or operate our businesses and could have a material adverse effect on our operating results.
Our brands and reputation are key assets, and negative perceptions or publicity could adversely affect our business, financial condition and results of operations.
Our brands are key assets of the Company, and our success depends on our ability to preserve, grow and leverage the value of our brands. We believe that our brands are trusted by consumers and have excellent reputations for high-quality journalism and content. To the extent consumers perceive the quality of our products to be less reliable or our reputation is damaged, our business, financial condition or results of operations may be adversely affected.
We may not be able to adequately protect our intellectual property and other proprietary rights that are material to our business, or to defend successfully against intellectual property infringement claims by third parties.
Our ability to compete effectively depends in part upon our intellectual property rights, including our trademarks, copyrights and proprietary technology. Protecting our intellectual property rights and proprietary technology requires us to continually police against the unauthorized use of our products and services and related intellectual property and rely on our contractual provisions, confidentiality procedures and agreements, and trademark, copyright, unfair competition, trade secret and other laws, all which may not be adequate.
Despite our best efforts to enforce our intellectual property rights, developments in technology may increase the threat of content piracy by making it easier to duplicate and widely distribute pirated material. Protection of our intellectual property rights is dependent on the scope and duration of our rights as defined by applicable laws in the U.S. and abroad and the manner in which those laws are construed. If those laws are drafted or interpreted in ways that limit the extent or duration of our rights, or if existing laws are changed, our ability to generate revenue from intellectual property may decrease, or the cost of obtaining and maintaining rights may increase. There can be no assurance that our efforts to enforce our rights and protect our products, services and intellectual property will be successful in preventing content piracy.
Litigation may be necessary to enforce our intellectual property rights and protect our proprietary technology, or to defend against claims by third parties that the conduct of our businesses or our use of intellectual property infringes upon such third-party’s intellectual property rights. Any intellectual property litigation or claims brought against us, whether or not meritorious, could result in substantial costs and diversion of our resources, and there can be no assurances that favorable final outcomes will be obtained in all cases. The terms of any settlement or judgment may require us to pay substantial amounts to the other party or cease exercising our rights in such intellectual property. In addition, we may have to seek a license to continue practices found to be in violation of a third-party’s rights, which may not be available on reasonable terms, or at all. Our business, financial condition or results of operations may be adversely affected as a result.
Adverse results from litigation or governmental investigations can impact our business practices and operating results.
From time to time, we are party to litigation, including matters relating to alleged libel or defamation, breaches of fiduciary duties by our Board of Directors, employment-related matters or claims that may provide for statutory damages, in addition to regulatory, environmental and other proceedings with governmental authorities and administrative agencies. The coverage, if any, and limits of our insurance policies may not be adequate to reimburse us for all costs and/or losses associated with lawsuits or investigations. If we are not successful in our defense of any claims that may be asserted against us and/or those claims are not covered by insurance or exceed our insurance coverage, we may have to pay damage awards, indemnify our officers and directors from damage awards that may be entered against them and pay the costs and expenses incurred in defense of, or in any settlement of, such claims. Any such payments or settlement arrangements could be significant and have a material adverse effect on our business, financial condition, results of operations or cash flows if the claims are not covered by our insurance carriers or if damages exceed the limits of our insurance coverage. Furthermore, regardless of the outcome of any claims that may be filed against us, defending litigation itself could result in substantial costs and divert management’s attention and resources, which could have a material adverse effect on our business, operating results, financial condition and ability to finance our operations.
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In some instances, we may have an obligation to indemnify a third-party for liabilities related to litigation or governmental investigations. It is possible that the resolution of one or more such legal matters could result in significant monetary damages, which could adversely affect our financial condition and cash flow. For example, as part of the Nant Transaction, the Company provided Nant Capital indemnification with respect to certain legal matters which were at various states of adjudication at the date of the sale. On August 19, 2019, the Los Angeles Times received an unfavorable jury verdict in an indemnified employment litigation matter. On December 27, 2019, the judge in this case overturned the jury verdict on the grounds that the monetary damages were excessive and could not be justified by the evidence. A new trial will be held solely for the purpose of determining damages. This future award could adversely affect our financial condition.
In other instances, third parties may have an obligation to indemnify us for liabilities related to litigation or governmental investigations, and may be unable to, or fail to fulfill such obligations. It is possible that the resolution of one or more such legal matters could result in significant monetary damages. If such third parties were to fail to indemnify us, we would be responsible for the monetary damages, which could adversely affect our financial condition and cash flow.
We may not achieve the acquisition component of our business strategy, or successfully complete strategic acquisitions, investments or divestitures.
We continuously evaluate our businesses and make strategic acquisitions, investments and divestitures as part of our strategic plan. These transactions involve challenges and risks in negotiation, execution, valuation and integration. There can be no assurance that any such acquisitions, investments or divestitures can be completed.
Acquisitions are an important component of our business strategy; however, there can be no assurance that we will be able to grow our business through acquisitions, that any businesses acquired will perform in accordance with expectations or that business judgments concerning the value, strengths and weaknesses of businesses acquired will prove to be correct.
Acquisitions involve a number of risks, including (i) the challenges in achieving strategic objectives, cost savings and other anticipated benefits; (ii) potential adverse short-term effects on operating results through increased costs or otherwise; (iii) diversion of management’s attention and failure to recruit new, and retain existing, key personnel of the acquired business; (iv) stockholder dilution if an acquisition is consummated (in whole or in part) through an issuance of our securities; (v) failure to successfully implement systems integration; (vi) potential future impairments of goodwill associated with the acquired business; (vii) the risks inherent in the systems of the acquired business and risks associated with unanticipated events or liabilities, any of which could have a material adverse effect on our business, financial condition and results of operations (viii) exceeding the capability of our systems; (ix) problems implementing disclosure controls and procedures for the newly acquired business; and (x) unforeseen difficulties extending internal control over financial reporting and performing the required assessment at the newly acquired business.
Our ability to execute an acquisition strategy may also encounter limitations in completing transactions.  Among other considerations, we may not be able to obtain necessary financing on attractive terms or at all, and we may face regulatory considerations that limit the candidates with whom we are permitted to proceed or may impose transaction execution delays. Future acquisitions may result in the Company incurring debt and contingent liabilities, pension obligations, an increase in interest and amortization expense and significant charges relative to integration costs. Our strategy could be impeded if we do not identify suitable acquisition candidates and our financial condition and results of operations will be adversely affected if we overpay for acquisitions. Even if successfully negotiated, closed and integrated, certain acquisitions may prove not to advance our business strategy and may fall short of expected returns.
Strategic investments are an important component of our business strategy as well. Investments in other companies expose us to the risk that we may not be able to control the operations of the companies we have invested in, which could decrease the benefits we realize from a particular relationship. The success of these investments is dependent on the companies we invest in, as well as other investors. We also are exposed to the risk that a company in which we have made an investment may encounter financial difficulties, which could lead to disruption of that company’s business or operations. Further, our ability to monetize the investments and/or the value we may receive upon any disposition may depend on the actions of the companies we have invested in and other investors. As a result, our ability to control the timing or process relating to a disposition may be limited, which could adversely affect the liquidity of these investments or the value we may ultimately attain upon disposition. If the value of the companies in which we invest declines, we may be required to record a charge to earnings. There can be no assurances that we will receive a return on these investments or that they will result in revenue growth or will produce equity income or capital gains in future years.
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If we are unable to successfully operate our business in new markets we may enter, our business, financial condition, and results of operations could be adversely affected.
Part of our strategy is to expand through both organic and inorganic growth. For example, we expanded the geographic scope of our business in 2018 through the acquisition of The Virginian-Pilot. In addition, through our acquisition of a 60% membership interest in BestReviews in 2018, we expanded into a new line of business of testing, researching and reviewing consumer products. Our future financial results will depend in part on our ability to profitably manage our business in these and any other new markets that we may enter. In order to successfully execute on our growth initiatives, we will need to, among other things, anticipate and react to market conditions and develop expertise in areas outside of our business’s traditional core competencies. If we are unable to do so, our business, financial condition, and results of operations could be adversely affected.
Continued economic uncertainty and the impact on our business or changes to our business and operations may result in goodwill and masthead impairment charges.
Because we have grown in part through acquisitions, goodwill and other acquired intangible assets represent a substantial portion of our assets. We also have long-lived assets consisting of property and equipment, right of use lease assets and other identifiable intangible assets which we review both on an annual basis as well as when events or circumstances indicate that the carrying amount of an asset may not be recoverable. Erosion of general economic, market or business conditions could have a negative impact on our business and stock price, which may require that we record impairment charges in the future, which negatively affects our results of operations. If a determination is made that a significant impairment in value of goodwill, other intangible assets or long-lived assets has occurred, such determination could require us to impair a substantial portion of our assets. Asset impairments could have a material adverse effect on our financial condition and results of operations.
We assumed underfunded pension liabilities as part of the New York Daily News acquisition and our pension obligations under this plan, or other pension plans we may assume in future acquisitions, could increase.
In connection with acquisitions, we have in the past assumed, and may in the future assume, single-employer and/or multiemployer pension obligations of the acquired entity(ies) which may or may not be fully funded at the time of acquisition.  In connection with our acquisition of the New York Daily News, we assumed the Daily News Retirement Plan (“NYDN Pension Plan”) which is currently underfunded.  The Company’s contributions to the NYDN Pension Plan were $2.5 million in fiscal 2019. There are no unfunded commitments of the NYDN Pension Plan as of December 29, 2019. Our pension funding requirements could increase due to a reduction in the plan’s funded status. The extent of underfunding of this plan is directly affected by a variety of factors, including performance of financial markets, changing interest rates, changes in assumptions or investments that do not achieve adequate or expected returns, and liquidity of the plan’s investments. It also is affected by the rate and age of employee retirements, along with actual experience compared to actuarial projections. These items affect pension plan assets and the calculation of pension obligations and expenses. Such changes could increase the cost to our obligations, which could have a material adverse effect on our results and our ability to meet those obligations. In addition, changes in the law, rules, or governmental regulations with respect to pension funding could also materially and adversely affect cash flow and our ability to meet our pension obligations.
Our annual pension funding obligations could also further increase if we assume additional pension plans (whether or not unfunded) in connection with future acquisitions. No assurances can be made regarding whether we will assume other pension plan obligations and, if we do, the level of any underfunded status, if any.
We may be obligated to make greater contributions to multiemployer defined benefit pension plans that cover our union-represented employees in the next several years than previously required, placing greater liquidity needs upon our operations.
As of December 29, 2019, we participate in, and make periodic contributions to, nine multiemployer pension plans that cover many of our current and former union employees. The risks of participating in multiemployer plans are different from single-employer plans in that assets contributed are pooled and may be used to provide benefits to employees of other participating employers. If a participating employer withdraws from or otherwise ceases to contribute to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers. Our required contribution to these plans could increase because of a shrinking contribution base as a result of the insolvency or withdrawal of other companies that currently contribute to these plans, the inability or failure of withdrawing companies to pay their withdrawal liability, low
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interest rates, lower than expected returns on pension fund assets or the other funding deficiencies. Our withdrawal liability for any multiemployer pension plan will depend on the nature and timing of any triggering event and the extent of that plan’s funding of vested benefits.
Under federal pension law, special funding rules apply to multiemployer pension plans that are classified as “endangered,” “critical” or “critical and declining.” If plans in which we participate are in one of these statuses, benefit reductions may apply and/or we could be required to make additional contributions.
Three of the multiemployer plans that we contribute to are in critical and declining status and project insolvency at various dates within the next 10 years. All three of these plans have adopted rehabilitation plans designed to forestall the plans’ insolvency dates. A fourth plan, the IAM National Pension Fund, is in critical status, but not critical and declining status. This plan adopted a rehabilitation plan designed to enable it to emerge from critical status within the time frame stipulated by the Internal Revenue Code.
Rehabilitation plans are required to be reviewed annually and modified if necessary to meet federal requirements. Therefore, there can be no assurances that the funding obligations under the rehabilitation plans will not increase in the future or that the rehabilitation plans will be successful in preventing or forestalling the projected insolvency of the multiemployer plans.
Given the critical and declining status of the three plans, the trustees may amend the current, or adopt new, rehabilitation plans with increased funding obligations. Trustees of a plan or the PBGC also may decide to terminate a multiemployer plan rather than permit it to become insolvent, and a termination would result in additional liabilities for the participating employers.
With respect to three of the nine multiemployer defined benefit pension plans to which we are obligated to contribute, we are among only a limited number of participating employers. As a result, if one or more of the other contributing employers withdraws from, or ceases to contribute to, such plans, our required contributions to such plans could increase. A withdrawal by a significant percentage of participating employers may result in a mass withdrawal, which would require us to record additional withdrawal liabilities. Additionally, if we are the last remaining participating employer in such plan, we may become obligated to fund the plan’s future liabilities more quickly as if it were a single employer plan and the unfunded liability could reside on our financial statements which would impact our financial condition.
If, in the future, we elect to withdraw from an underfunded multiemployer plan, or if we trigger a partial withdrawal due to declines in contribution base units or a partial cessation of our obligation to contribute, additional liabilities would be required to be recorded that could have an adverse effect on our business, results of operations, financial condition or cash flows. We are not currently able to quantify such potential increased contributions or withdrawal liabilities. See Note 14 to the Consolidated Financial Statements for additional information on individual multiemployer plans.
Labor strikes, lockouts and protracted negotiations can lead to business interruptions and increased operating costs.
As of December 29, 2019, union employees comprised approximately 34.6% of our workforce. We are required to negotiate collective bargaining agreements across our business units on an ongoing basis. Complications in labor negotiations can lead to work slowdowns or other business interruptions and greater overall employee costs. Additionally, certain of our employee groups could elect to unionize in the future. If we or our suppliers are unable to negotiate new or renew expiring collective bargaining agreements, it is possible that the affected unions or others could take action in the form of strikes or work stoppages. Such actions, higher costs in connection with these agreements or a significant labor dispute could adversely affect our business by disrupting our ability to provide customers with our products or services. Depending on its duration, any lockout, strike or work stoppage may have an adverse effect on our operating revenues, cash flows or operating income or the timing thereof.
Our revenues and operating results fluctuate on a seasonal basis and may suffer if revenues during the peak season do not meet our expectations.
Our advertising business is seasonal, and our quarterly revenues and operating results typically exhibit this seasonality. Our revenues and operating results tend to be higher in the second and fourth quarters than the first and third quarters. Results for the second quarter reflect spring advertising revenues, while the fourth quarter includes advertising
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revenues related to the holiday season. Our operating results may suffer if advertising revenues during the second and fourth quarters do not meet expectations. Our working capital and cash flows also fluctuate as a result of this seasonality. Moreover, the operational risks described elsewhere in these risk factors may be significantly exacerbated if those risks were to occur during the fourth quarter.
Our ability to operate effectively could be impaired if we fail to attract, integrate and retain our senior management team.
We rely heavily on the skills and expertise of our senior management team and therefore, our success depends, in part, upon the services they provide us. For example, in January 2020, we appointed a new Chief Executive Officer, new Interim Chief Financial Officer and new Chairman of the Board. If we are unable to assimilate these new senior managers, if they or our other leaders fail to perform effectively, if we are unable to retain them, or if we are unable to attract additional qualified senior managers as needed, our strategic initiatives could be adversely impacted which could adversely affect our business, financial condition and results of operations.
We may not be able to access the credit and capital markets at the times and in the amounts needed and on acceptable terms.
From time to time we may need to access the long-term and short-term capital markets to obtain financing. Our access to, and the availability of, financing on acceptable terms and conditions in the future will be impacted by many factors, including: (i) our financial performance, (ii) our credit ratings or absence of a credit rating, (iii) the liquidity of the overall capital markets and (iv) the state of the economy. There can be no assurance that we will have access to the capital markets on terms acceptable to us.
We may incur significant costs to address contamination issues at certain sites operated or used by our publishing businesses.
We may incur costs in connection with the investigation or remediation of contamination at sites currently or formerly owned or operated by us. Issues generally relate to sites previously owned, operated or used by the Company’s publishing businesses and in some cases, continue to be used for our publishing businesses at which contaminations were identified. Historically, our publishing business was obligated to investigate and remediate contamination at certain of these sites. We were also required to contribute to cleanup costs at certain of these sites that were third-party waste disposal facilities at which it disposed of its wastes. In addition, we acquired real property in connection with our acquisitions of the New York Daily News and The Virginian-Pilot, which includes sites at which contaminations were identified. The sellers in these acquisitions have agreed to indemnify us for certain environmental liabilities, but we may have additional investigation and remediation obligations and be required to contribute to cleanup costs at these facilities. We could have additional investigation and remediation obligations and be required to contribute to cleanup costs at these facilities. Environmental liabilities, including investigation and remediation obligations, could adversely affect our operating results or financial condition.
Macroeconomic trends may adversely impact our business, financial condition and results of operations.
Our operating revenues are sensitive to discretionary spending available to advertisers and subscribers in the markets we serve, as well as their perceptions of economic trends and uncertainty. Weak economic indicators, such as high unemployment rates, weakness in housing, fuel prices and uncertainty regarding the national and state governments’ ability to resolve fiscal issues, may adversely impact advertiser and subscriber sentiment. These types of conditions could impair our ability to maintain and grow our advertiser and subscriber bases.
Events beyond our control may result in unexpected adverse operating results.
Our results could be affected in various ways by global or domestic events beyond our control, such as wars, political unrest, acts of terrorism, natural disasters, Internet outages or disruption caused by health epidemics, such as the coronavirus outbreak. Such events can quickly result in significant declines in advertising revenue and significant increases in news gathering costs. There are no assurances that our business continuity or disaster recovery plans are adequate or that they will be implemented successfully if any such events were to occur.
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Risks Relating to our Common Stock and the Securities Market
Concentration of ownership among our existing directors and principal stockholders may prevent new investors from influencing significant corporate decisions.
As of March 6, 2020, our two largest shareholders are (i) Alden Funds which beneficially owned approximately 32.0% of our outstanding common stock, and (ii) Nant Capital, together with Dr. Patrick Soon-Shiong, which beneficially owned approximately 24.2% of our outstanding common stock. Dr. Patrick Soon-Shiong is the indirect sole owner of Nant Capital. The interests of the Alden Funds and Nant Capital may differ from those of the Company’s other stockholders. The Alden Funds and Nant Capital are in the business of making investments in companies and maximizing the return on those investments. They currently may have and may from time to time in the future acquire, interests in businesses that directly or indirectly compete with certain aspects of our business or that supply us with goods and services.
Due to their significant stockholdings, the Alden Funds and Nant Capital and their affiliates may be able to significantly influence matters requiring approval of stockholders, including the election of directors, amendment of our certificate of incorporation and approval of significant corporate transactions. For additional information on the purchase agreements under which the Alden Funds and Nant Capital acquired their shares, see Note 18 to the Consolidated Financial Statements.
Certain provisions of our certificate of incorporation, by-laws, and Delaware law may discourage takeovers.
Our amended and restated certificate of incorporation and amended and restated by-laws contain certain provisions that may discourage, delay or prevent a change in our management or control over us. For example, our amended and restated certificate of incorporation and amended and restated by-laws, collectively:
authorize the issuance of “blank check” preferred stock that could be issued by our Board of Directors to thwart a takeover attempt;
provide that vacancies on our Board of Directors, including vacancies resulting from an enlargement of our Board of Directors, may be filled only by a majority vote of directors then in office;
prohibit stockholders from calling special meetings of stockholders;
prohibit stockholder action by written consent;
establish advance notice requirements for nominations of candidates for elections as directors or to bring other business before an annual meeting of our stockholders; and
require the approval of holders of at least 66 2/3% of the outstanding shares of our common stock to amend certain provisions of our amended and restated certificate of incorporation or to amend our amended and restated by-laws.
Additionally, Section 203 of the General Corporation Law of the State of Delaware (“DGCL”) restricts certain business combinations with interested stockholders in certain situations. In general, this statute prohibits a publicly held Delaware corporation from engaging in a business combination with an interested stockholder for a period of three years after the date of the transaction by which that person became an interested stockholder, unless the business combination is approved in a prescribed manner. For purposes of Section 203, a business combination includes a merger, asset sale or other transaction resulting in a financial benefit to the interested stockholder, and an interested stockholder is a person who, together with affiliates and associates, owns, or within three years prior, did own, 15% or more of voting stock.
These provisions could discourage potential acquisition proposals and could delay or prevent a change in control, even though a majority of stockholders may consider such proposal, if effected, desirable. Such provisions could also make it more difficult for third parties to remove and replace the members of the Board of Directors. Moreover, these provisions may inhibit increases in the trading price of our common stock that may result from takeover attempts or speculation.
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Substantial sales, or stock issuances by us, of our common stock or the perception that such sales or issuances might occur, could depress the market price of our common stock.
Any sales of substantial amounts of our common stock in the public market, including resales by our investors such as those to whom we have granted registration rights, or the perception that such sales might occur, could depress the market price of our common stock. Pursuant to the purchase agreement under which Nant Capital acquired shares from us, certain of the restrictions on resales of those shares expired and, therefore, Nant Capital could sell a significant number of shares either in the open market or in privately negotiated transactions. There is no assurance that there will be sufficient buying interest to offset any such public market sales, and, accordingly, the price of our common stock may be depressed by those sales and have periods of volatility.
In addition, we could from time to time issue new securities (debt or equity) or use treasury stock to fund potential acquisitions. For example, we used approximately 1.9 million shares of our common stock held in treasury in connection with our acquisition of a 60.0% interest in BestReviews. Any issuance of common stock by us could dilute the ownership of current stockholders and could impact the price per share of our common stock. In addition, if we were to issue debt and/or preferred equity, the holders of such securities would have rights senior to those of our common stockholders. There can be no assurances whether we will issue additional securities in the future and, if so, how many and how such issuance could impact our current stockholders and our share price.
The market price for our common stock may be volatile.
Many factors could cause the trading price of our common stock to rise and fall, including the following: (i) declining newspaper print circulation; (ii) declining operating revenues derived from our core business; (iii) variations in quarterly results; (iv) announcements regarding dividends; (v) announcements of technological innovations by us or by competitors; (vi) introductions of new products or services or new pricing policies by us or by competitors; (vii) acquisitions or strategic alliances by us or by competitors; (viii) recruitment or departure of key personnel or key groups of personnel; (ix) the gain or loss of significant advertisers or other customers; (x) changes in the estimates of our operating performance or changes in recommendations by any securities analysts that elect to follow our stock; and (xi) market conditions in the newspaper industry, the media industry, the industries of our customers, and the economy as a whole.
We may be subject to the actions of activist shareholders, which could adversely impact our business.
Activist shareholders and other third parties have made, or may in the future make, strategic proposals, including unsolicited takeover proposals, suggestions or requested changes concerning the Company’s operations, strategy, governance, management, business or other matters. Responding to these campaigns or proposals can be costly and time-consuming, disrupt our operations, and divert the attention of management and our employees from our strategic initiatives. These activities can create perceived uncertainties as to our future direction, strategy, or leadership and may result in the loss of potential business opportunities, harm our ability to attract new investors and customers, and cause the price of our common stock to be depressed and have periods of volatility. We cannot predict, and no assurances can be given, as to the outcome or timing of any matters relating to the foregoing, and such matters may adversely affect our ability to effectively and timely implement our current initiatives, retain and attract key employees, and execute on our business strategy.
Our ability to pay regular dividends to our stockholders is subject to the discretion of our Board of Directors.
We expect to pay quarterly cash dividends on our common stock. However, our Board of Directors may, in its sole discretion, change the amount or frequency of dividends or discontinue the payment of dividends entirely. The declaration and payment of dividends to holders of our common stock is at the discretion of our Board of Directors in accordance with applicable law after taking into account various factors, including actual results of operations, liquidity and financial condition, restrictions imposed by applicable law, our taxable income, our operating expenses, changes in our business needs, including working capital and funding for business initiatives or acquisitions, changes in corporate strategy, and other factors our Board of Directors deems relevant. In addition, because we are a holding company with no material direct operations, we are dependent on loans, dividends and other payments from our operating subsidiaries to generate the funds necessary to pay dividends on our common stock. We expect to cause our subsidiaries to make distributions to us in an amount sufficient for us to pay dividends. However, their ability to make such distributions will be subject to their operating results, cash requirements and financial condition and the applicable provisions of Delaware law that may limit the amount of funds available for distribution, and our ability to pay cash dividends will be subject to covenants and financial ratios related to existing or future indebtedness and other agreements with third parties.

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In addition, each of the companies in our corporate chain must manage its assets, liabilities and working capital in order to meet all of its cash obligations, including the payment of dividends or distributions. As a consequence of these various limitations and restrictions, we may not be able to make, or may have to reduce or eliminate, the payment of dividends on our common stock. Any change in the level of our dividends or the suspension of the payment thereof could adversely affect the market price of our common stock.
If securities or industry analysts do not publish research or publish misleading or unfavorable research about our business, our stock price and trading volume could decline.
The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us or our business. If one or more of the security or industry analysts downgrades our stock, ceases coverage of our company, fails to publish reports on us regularly, or publishes misleading or unfavorable research about our business, demand for our stock may decrease, which could cause our stock price or trading volume to decline.
Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed to us or our stockholders by any of our directors, officers, employees or agents, (iii) any action asserting a claim against us arising under the DGCL, our amended and restated certificate of incorporation or our amended and restated by-laws or (iv) any action asserting a claim against us that is governed by the internal affairs doctrine. By becoming a stockholder in our company, you will be deemed to have notice of and have consented to the provisions of our amended and restated certificate of incorporation related to choice of forum. The choice of forum provision in our amended and restated certificate of incorporation may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Our owned facilities are approximately 0.5 million square feet, which primarily include a printing plant, distribution center, and office space in Virginia. Our leased facilities are approximately 4.3 million square feet in the aggregate. The Company currently has leased office and newspaper production facilities in Connecticut, Florida, Illinois, Maryland, New Jersey, New York, Texas and Pennsylvania, however Tribune owns substantially all of the production equipment. See Note 3 to the Consolidated Financial Statements for additional information about the Company’s leases.
We believe that our current facilities, including the terms and conditions of the relevant lease agreements, are adequate to operate our businesses as currently conducted. As discussed in Note 20 of the Consolidated Financial Statements, we do not manage our assets at a segment level.
Item 3. Legal Proceedings
We are subject to various legal proceedings and claims that have arisen in the ordinary course of business. The legal entities comprising our operations are defendants from time to time in actions for matters arising out of their business operations. In addition, the legal entities comprising our operations are involved from time to time as parties in various regulatory, environmental and other proceedings with governmental authorities and administrative agencies.
The Company does not believe that any matters or proceedings presently pending will have a material adverse effect, individually or in the aggregate, on our consolidated financial position, results of operations or liquidity. However, legal matters and proceedings are inherently unpredictable and subject to significant uncertainties, some of which are beyond our control. As such, there can be no assurance that the final outcome of these matters and proceedings will not materially and adversely affect our consolidated financial position, results of operations or liquidity.
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Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
The common stock of Tribune is traded on The Nasdaq Global Select Market (“Nasdaq”) under the symbol “TPCO.” On March 6, 2020, the closing price for the Company’s common stock as reported on Nasdaq was $10.02. The approximate number of stockholders of record of the common stock at the close of business on such date was 20. A substantially greater number of holders of Tribune’s common stock are “street name” or beneficial holders, whose shares of record are held by banks, brokers, and other financial institutions.
On November 13, 2019, the Company announced that its Board of Directors approved the initiation of a cash dividend program under which the Company intends to declare regular quarterly cash dividends in respect of each share of the Company’s outstanding common stock. Future cash dividends, if any, will be at the discretion of our Board of Directors and the amount of cash dividends per share will depend upon, among other things, our future earnings, financial condition, results of operations, level of indebtedness, capital requirements and surplus, contractual restrictions, number of shares of common stock outstanding, as well as legal requirements, regulatory constraints, industry practice and other factors that our Board of Directors deems relevant.
Tribune Stock Comparative Performance Graph
The following graph compares the cumulative total stockholder return on our common stock for the period commencing December 26, 2014 through December 27, 2019 (the last trading day of fiscal 2019) with the cumulative total return on the Standard & Poor’s 500 Stock Index (“S&P 500”) and the Standard & Poor’s Publishing Stock Index (“S&P Publishing Index”).
Total return values were calculated based on cumulative total return assuming (i) the investment of $100 in our common stock, the S&P 500 and the S&P Publishing Index and (ii) reinvestment of dividends.
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The following stock performance graph and related information shall not be deemed “soliciting material” or “filed” with the SEC, nor should such information be incorporated by reference into any future filings under the Securities Act or the Exchange Act, except to the extent that we specifically incorporate it by reference in such filing.
tpco-20191229_g1.jpg

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Item 6. Selected Financial Data
As of and for the years ended
(In thousands, except per share data)December 29, 2019December 30, 2018December 31, 2017December 25, 2016December 27, 2015
Statement of Operations Data:
Operating revenues$983,149  $1,030,669  $1,015,453  $1,063,363  $1,145,885  
Income (loss) from continuing operations3,093  (39,863) (29,813) (35,363) (32,578) 
Income (loss) from discontinued operations, net of tax(3,337) 289,510  35,348  41,900  29,813  
Net income (loss)(244) 249,647  5,535  6,537  (2,765) 
Less: Income attributable to noncontrolling interest4,825  856  —  —  —  
Net income (loss) attributable to Tribune common stockholders$(5,069) $248,791  $5,535  $6,537  $(2,765) 
Income (loss) from continuing operations per share:
Basic$(0.76) $(1.15) $(0.88) $(1.05) $(1.25) 
Diluted $(0.76) $(1.15) $(0.88) $(1.05) $(1.25) 
Dividends declared per share$1.75  $—  $—  $—  $0.70  
Balance Sheet Data:
Total assets$682,278  $726,627  $865,133  $888,766  $832,966  
Total debt$6,962  $7,204  $352,551  $369,031  $388,264  

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with the other sections of this Annual Report on Form 10-K, including the Consolidated Financial Statements and related Notes thereto and “Cautionary Statement Concerning Forward-Looking Statements.” 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 throughout this Form 10-K, including the factors disclosed under “Item 1A. Risk Factors.”
We believe that the assumptions underlying the Consolidated Financial Statements included in this Annual Report are reasonable. However, the Consolidated Financial Statements may not necessarily reflect our results of operations, financial position and cash flows for future periods.
Overview
Tribune was formed as a Delaware corporation on November 21, 2013. Tribune is a media company rooted in award-winning journalism. Headquartered in Chicago, Tribune operates local media businesses in eight markets, with titles including the Chicago Tribune, New York Daily News, The Baltimore Sun, Orlando Sentinel, South Florida’s Sun Sentinel, Virginia’s Daily Press and The Virginian-Pilot, The Morning Call of Lehigh Valley, Pennsylvania, and the Hartford Courant. Tribune also operates TCA and is the majority owner of BestReviews.
On May 23, 2018, the Company completed the sale of substantially all of the assets of forsalebyowner.com and on June 18, 2018, the Company completed the sale of the California Properties. See Note 8 for further information on the dispositions and related discontinued operations.
The Company continually assesses its operations in an effort to identify opportunities to enhance operational efficiencies and reduce expenses. These activities have in the past included, and could include in the future, outsourcing of
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various functions or operations, additional abandonment of leased space and other activities which may result in changes to employee headcount. See Note 5 to the Consolidated Financial Statements for further information on changes in operations during fiscal year 2019. The Company expects to continue to take actions deemed appropriate to enhance profitability but does not currently know whether or when any such actions will occur or the potential costs and expected savings. Depending on the actions taken and the timing of any such actions, the anticipated cost savings could be recognized in fiscal periods that do not correspond to the fiscal period(s) in which the charges are recognized.
2019 Highlights and Recent Events
On January 17, 2019, the Company and NantMedia amended the TSA. The Amended TSA extended the term of the contract to June 30, 2020, settled the working capital adjustment from the sale of the California Properties and provided an indemnity related to certain receivables. See Note 6 to the Consolidated Financial Statements for additional information on the Amended TSA.
On May 29, 2019, and November 13, 2019, the Company declared dividends of $1.50 and $0.25 per common share, respectively, to be paid to shareholders of record as of June 12, 2019, and November 25, 2019, respectively, for total declared dividends of $65.0 million during the year ended December 29, 2019. See Note 18 to the Consolidated Financial Statements for additional information on the dividends declared.
On July 23, 2019, the Company entered into an agreement to sell real property located in Norfolk, Virginia, for a sales price of $9.5 million. The sale was dependent on the purchaser obtaining the required certificates and the purchaser's determination of feasibility. Subsequent to December 29, 2019, the certificates were obtained, feasibility was determined and the sale closed on January 22, 2020. See Note 5 to the Consolidated Financial Statements for additional information on changes in operations.
On June 3, 2019, the Drivers’ Plan received approval from the PBGC to merge with the Teamsters Fund effective August 1, 2019. The Company contributed a total of $11.5 million to the Drivers’ Plan and the Teamsters Fund during the year ended December 29, 2019 under a previously existing amended rehabilitation plan. See Note 14 to the Consolidated Financial Statements for additional information on the Company’s multiemployer pension plans.
As part of the Nant Transaction, the Company provided Nant Capital indemnification with respect to certain legal matters which were at various states of adjudication at the date of the sale. On August 19, 2019, the Los Angeles Times received an unfavorable jury verdict in an indemnified employment litigation matter. The Company successfully challenged the jury verdict by post-trial motions, and as a result, the verdict has been set aside and a new trial has been ordered. See Note 8 to the Consolidated Financial Statements for additional information on discontinued operations.
During November 2019, Alden Funds acquired 11,544,213 shares, or 32.0%, of the Company’s common stock. Of those shares, 9,071,529 shares were purchased from Merrick Media and Michael W. Ferro, previously the Company’s largest shareholder, in a private transaction. On December 1, 2019, the Company entered into a Cooperation Agreement with the Alden Funds. See Note 18 to the Consolidated Financial Statements for additional information regarding the Cooperation Agreement.
Subsequent to December 29, 2019, the Company offered the 2020 VSIP which provides enhanced separation benefits to eligible employees with more than eight years of service. The Company plans to fund the 2020 VSIP ratably over the payout period through salary continuation that started in the first quarter of 2020 and continues through the second quarter 2021. See Note 5 to the Consolidated Financial Statements for additional information on changes in operations.
On February 19, 2020, the Company declared a cash dividend of $0.25 per share of common stock to be paid on March 16, 2020, to shareholders of record as of March 2, 2020. See Note 18 to the Consolidated Financial Statements for additional information on the dividend declared.
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Results of Operations
The Company intends for the following discussion of its financial condition and results of operations to provide information that will assist in understanding the Company’s consolidated financial statements, the changes in certain key items in those statements from period to period and the primary factors that accounted for those changes as well as how certain accounting principles, policies and estimates affect the Company’s consolidated financial statements.
Consolidated
Operating results for the years ended December 29, 2019, December 30, 2018, and December 31, 2017, are shown in the table below (in thousands). References in this discussion to individual markets include daily newspapers in those markets and their related businesses.
Year endedYear ended
December 29, 2019December 30, 2018% ChangeDecember 30, 2018December 31, 2017% Change
Operating revenues$983,149  $1,030,669  (4.6 %)$1,030,669  $1,015,453  1.5 %
Compensation362,450  443,084  (18.2 %)443,084  406,279  9.1 %
Newsprint and ink56,785  66,134  (14.1 %)66,134  59,241  11.6 %
Outside services328,333  348,827  (5.9 %)348,827  331,202  5.3 %
Other operating expenses166,614  163,702  1.8 %163,702  162,495  0.7 %
Depreciation and amortization47,314  53,262  (11.2 %)53,262  47,306  12.6 %
Impairment14,496  1,872   1,872  —   
Operating expenses975,992  1,076,881  (9.4 %)1,076,881  1,006,523  7.0 %
Income (loss) from operations7,157  (46,212)  (46,212) 8,930   
Interest income (expense), net499  (11,353)  (11,353) (26,334) (56.9 %)
Loss on early extinguishment of debt—  (7,666)  (7,666) —   
Premium on stock buyback—  —   —  (6,031)  
Loss on equity investments, net(2,988) (1,868) 60.0 %(1,868) (2,725) (31.4 %)
Other non-operating income (expense)45  14,513  (99.7 %)14,513  3,535   
Income (loss) from continuing operations before income taxes4,713  (52,586)  (52,586) (22,625)  
Income tax expense (benefit)1,620  (12,723)  (12,723) 7,188   
Income (loss) from continuing operations3,093  (39,863)  (39,863) (29,813) 33.7 %
Income (loss) from discontinued operations, net of tax(3,337) 289,510   289,510  35,348   
Net income (loss)(244) 249,647   249,647  5,535   
Less: Income attributable to noncontrolling interest4,825  856   856  —   
Net income (loss) attributable to Tribune common stockholders$(5,069) $248,791   $248,791  $5,535   
* Represents positive or negative change in excess of 100%
Year ended December 29, 2019 compared to the year ended December 30, 2018
Operating Revenues—Operating revenues decreased 4.6%, or $47.5 million, in the year ended December 29, 2019, compared to the prior year period due primarily to the decrease in advertising, circulation and other revenue partially offset by the combined impact of the acquisitions of BestReviews in the first quarter of 2018, The Virginian-Pilot in the second quarter of 2018 and TSA revenue related to the sale of the California Properties in the second quarter of 2018. The acquisitions
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contributed $93.6 million in revenue during the year ended December 29, 2019, compared to $61.9 million during the year ended December 30, 2018. TSA revenue for the year ended December 29, 2019, was $19.5 million compared to $17.2 million for the year ended December 30, 2018.
Compensation Expense—Compensation expense decreased 18.2%, or $80.6 million, in the year ended December 29, 2019, compared to the prior period. This decrease was due primarily to a decrease in salary and payroll tax expense of $55.0 million, a decrease in severance expense of $34.5 million and a decrease in medical insurance expense of $9.3 million as a result of the reduction in headcount related to personnel restructuring in prior periods. This decrease was partially offset by increased pension expense of $8.3 million due primarily to contributions to the Drivers' Plan, and increased compensation expense due to the acquisitions which contributed $19.2 million in the year ended December 29, 2019, compared to $18.2 million in the year ended December 30, 2018.
Newsprint and Ink Expense—Newsprint and ink expense decreased 14.1%, or $9.3 million, in the year ended December 29, 2019, compared to the prior year. This decrease was due primarily to a decrease in the average cost per ton of newsprint related to the repeal of the tariff on certain newsprint products sourced from Canada and a decrease in volume. The decreases in price and volume were partially offset by increased newsprint and ink expense from the acquisition of The Virginian-Pilot which contributed $4.0 million in the year ended December 29, 2019, compared to $3.0 million during the year ended December 30, 2018.
Outside Services Expense—Outside services expense decreased 5.9%, or $20.5 million, in the year ended December 29, 2019, compared to the prior year. This decrease was due primarily to $12.5 million of expense recorded in 2018 related to the Consulting Agreement described in Note 6 to the Consolidated Financial Statements. Additionally, there was a reduction of $5.2 million in third-party delivery expense, $4.2 million in temporary help, $2.9 million in outside printing and production costs, and $2.0 million in consulting costs. The decreases were partially offset by increases due to the acquisitions which contributed $19.3 million in the year ended December 29, 2019, compared to $11.4 million during the year ended December 30, 2018.
Other Operating Expenses—Other operating expenses include occupancy costs, promotion and marketing costs, affiliate fees and other miscellaneous expenses. These expenses increased 1.8%, or $2.9 million, in the year ended December 29, 2019, compared to the prior year. This increase was due primarily to $23.9 million of operating expense previously allocated to the California Properties in the prior year. These allocated operating expenses are recovered as a component of TSA revenue in periods subsequent to the sale. Additionally, acquisitions contributed $32.1 million in other operating expenses for the year ended December 29, 2019, compared to $24.3 million for the year ended December 30, 2018. These increases were partially offset by decreases in all categories, primarily a $7.4 million decrease in occupancy costs, a $5.2 million decrease in insurance expense, a $3.9 million decrease in bad debt expense and a $2.3 million decrease in travel, entertainment and other employee expenses.
Depreciation and Amortization Expense—Depreciation and amortization expense decreased 11.2%, or $5.9 million, for the year ended December 29, 2019, compared to the prior year. This decrease was due primarily to accelerated depreciation in 2018 related to the shortened lives for certain assets removed from service. This decrease was partially offset by increases due to the acquisitions which contributed $7.4 million in the year ended December 29, 2019, compared to $2.6 million during the year ended December 30, 2018.
Impairment Expense—In the fourth quarter of 2019, the Company recorded a non-cash impairment charge of $14.5 million related to the goodwill associated with the Baltimore Sun and Virginia Media Groups.
Interest Expense, Net—Interest expense, net decreased as the Senior Term Facility was repaid in full in June 2018.
Loss on early extinguishment of debt—In June 2018, the Company repaid the outstanding principal balance under the Senior Term Facility and terminated the agreement. As a result of the early extinguishment of debt, the Company incurred a $7.7 million loss in 2018 to expense the remaining balance of original issue discount and debt origination fees.
Loss on Equity Investments, Net—Loss on equity investments, net increased $1.1 million due primarily to additional reserves for certain of the Company’s investments.
Other Non-Operating Income (Expense), Net—The decrease in other non-operating income, net is due primarily to credits in 2018 related to periodic benefit costs. In 2018, the Company terminated the non-union post-retirement medical plan. As
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such, remaining amounts in accumulated other comprehensive income were amortized to expense during 2018.
Income Tax Expense (Benefit)—Income tax expense increased $14.3 million for the year ended December 29, 2019, over the prior year period. For the year ended December 29, 2019, the Company recorded an income tax expense of $1.6 million including a discrete item which resulted in a tax benefit of $1.5 million relating to an adjustment in state tax expense for the treatment of the Nant Transaction gain for state apportionment in selected states. The effective tax rate on pretax income was 34.4% in the year ended December 29, 2019. This rate differs from the U.S. federal statutory rate of 21.0% due primarily to state income taxes, net of federal benefit, noncontrolling interest, tax expense related to vesting of stock compensation and non-deductible expenses.
For the year ended December 30, 2018, the Company recorded income tax benefit of $12.7 million. The effective tax rate on pretax income was 24.2% in the year ended December 30, 2018. This rate differs from the U.S. federal statutory rate of 21.0% due primarily to state income taxes, net of federal benefit and non-deductible expenses.
Year ended December 30, 2018 compared to the year ended December 31, 2017
Operating Revenues—Operating revenues increased 1.5%, or $15.2 million, in the year ended December 30, 2018 compared to the prior year period due to the combined impact of the acquisitions of the New York Daily News in the third quarter of 2017, BestReviews in the first quarter of 2018 and The Virginian-Pilot in the second quarter of 2018. Such acquisitions contributed $175.3 million in revenue during the year ended December 30, 2018 compared to $40.2 million during the year ended December 31, 2017. This increase was partially offset by a $111.9 million decrease in advertising revenue, $3.4 million decrease in circulation revenue and a $4.7 million decrease in other revenue. The decrease in advertising revenue includes $39.9 million related to the conversion of the Cars.com agreement.
Compensation Expense—Compensation expense increased 9.1%, or $36.8 million, in the year ended December 30, 2018, compared to the prior period. This increase was due primarily to the acquisitions which contributed $98.2 million in the year ended December 30, 2018, compared to $29.0 million in the year ended December 31, 2017. The increase from acquisitions was partially offset by a decrease in salary expense of $37.6 million as a result of the reduction in headcount due to current and prior periods personnel restructuring.
Newsprint and Ink Expense—Newsprint and ink expense increased 11.6%, or $6.9 million, in the year ended December 30, 2018, compared to the prior year. This increase was due primarily to the acquisitions which contributed $17.3 million in the year ended December 30, 2018, compared to $4.6 million during the year ended December 31, 2017. In addition to the increase related to acquisitions, the Company experienced a 23.1% increase in average cost per ton of newsprint, related to the proposed tariff on certain newsprint products sourced from Canada. The increases were partially offset by a 13.4% decrease in consumption.
Outside Services Expense—Outside services expense increased 5.3%, or $17.6 million in the year ended December 30, 2018. This increase was due primarily to the acquisitions which contributed $35.9 million in the year ended December 30, 2018, compared to $7.2 million during the year ended December 31, 2017, as well as expense related to the Consulting Agreement described in Note 6 to the Consolidated Financial Statements. These increases were partially offset by decreases in circulation and distribution expenses of $15.8 million, outsourced services of $2.9 million and outside printing and production expenses of $1.9 million.
Other Operating Expenses—Other operating expenses include occupancy costs, promotion and marketing costs, affiliate fees and other miscellaneous expenses. These expenses increased 0.7%, or $1.2 million, in the year ended December 30, 2018, compared to the prior year. This increase was due primarily to the acquisitions which contributed $48.3 million in the year ended December 30, 2018, compared to $6.1 million during the year ended December 31, 2017. This increase was partially offset by a $33.1 million decrease in affiliate fees related to the conversion of the Cars.com agreement and a $7.7 million decrease in bad debt expense.
Depreciation and Amortization Expense—Depreciation and amortization expense increased 12.6%, or $6.0 million, for the year ended December 30, 2018. This increase was due primarily to the acquisitions which contributed $6.8 million in the year ended December 30, 2018, compared to $1.2 million during the year ended December 31, 2017.
Impairment Expense—In the fourth quarter of 2018, the Company recorded a non-cash impairment charge of $1.9 million related to the goodwill associated with the Sun Sentinel Media Group.
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Interest Expense, Net—Interest expense, net decreased as the Senior Term Facility was repaid in full in June 2018. See Note 11 to the Consolidated Financial Statements for further information on the debt repayment.
Loss on Early Extinguishment of Debt—In June 2018, the Company repaid the outstanding principal balance under the Senior Term Facility and terminated the agreement. As a result of the early extinguishment of debt, the Company incurred a $7.7 million loss to expense the remaining balance of original issue discount and debt origination fees. See Note 11 to the Consolidated Financial Statements for further information on the debt repayment.
Premium on Stock Buyback—On March 23, 2017, the Company repurchased 3,745,947 shares of the Company’s stock for $56.2 million, or $15.00 per common share. The fair value of the stock as of the purchase date was $50.2 million, or $13.39 per common share. The $6.0 million difference between the purchase price and the transaction date fair value was recorded as a non-operating expense. See Note 18 to the Consolidated Financial Statements for additional information.
Loss on Equity Investments, net—Loss on equity investments, net was consistent with the prior year.
Other Non-Operating Income (Expense), NetThe increase in other non-operating income, net is primarily due to increased credits related to early termination of certain postretirement benefit plans. As a result of the adoption of Accounting Standards Update (“ASU”) 2017-07, Topic 715, Compensation - Retirement Benefits; Improving the Presentation of Net Periodic Pension cost and Net Periodic Postretirement Benefit Cost on January 1, 2018, credits for amortization of prior service costs related to such plans are reported in other non-operating income, net, instead of compensation.
Income Tax Expense (Benefit)—Income tax expense (benefit) on continuing operations decreased $19.9 million for the year ended December 30, 2018, over the prior year primarily due to prior year tax law changes and lower taxable income. On December 22, 2017, the Tax Cuts and Jobs Act of 2017 was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a corporate tax rate decrease from 35.0% to 21.0% effective for tax years beginning after December 31, 2017. The effects of the changes in tax rates are required to be recognized in the period enacted and as a result, the Company recorded $10.8 million as additional income tax expense in the fourth quarter of 2017, the period in which the legislation was enacted. The Company has recorded an additional $0.2 million of expense in the third quarter of 2018, to bring the total expense to $11.0 million. The additional provision resulted from the remeasurement of certain deferred tax assets and liabilities, based on the rates at which they are expected to reverse in the future. See Note 13 to the Consolidated Financial Statements for further explanation of the tax law change.
The effective tax rate on pretax income (loss) was 24.2% and (31.8%) in the years ended December 30, 2018, and December 31, 2017, respectively.
Segments
The Company manages its business as two distinct segments, M and X. The Company measures segment profit using income from continuing operations, which is defined as net income before net interest expense, gain on investment transactions, reorganization items and income taxes. The tables below show the segmentation of income and expenses for the
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year ended December 29, 2019, as compared to the year ended December 30, 2018, as well as the year ended December 31, 2017 (in thousands).
MXCorporate and EliminationsConsolidated
Year endedYear endedYear endedYear ended
 Dec. 29, 2019Dec. 30, 2018Dec. 29, 2019Dec. 30, 2018Dec. 29, 2019Dec. 30, 2018Dec. 29, 2019Dec. 30, 2018
Operating revenues$782,501  $851,069  $182,719  $165,612  $17,929  $13,988  $983,149  $1,030,669  
Operating expenses738,293  846,122  167,141  152,698  70,558  78,061  975,992  1,076,881  
Income from operations44,208  4,947  15,578  12,914  (52,629) (64,073)