Tribune Publishing Earnings 2021-03-28

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

tpco-20210328

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended March 28, 2021

☐

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.)

560 W. Grand Avenue
Chicago, Illinois						60654
(Address of principal executive offices)						(Zip code)

Registrant’s telephone number, including area code: (312) 222-9100

Former name, former address and former fiscal year, if changed since last report.

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.01 per share	TPCO	The NASDAQ Stock Market LLC

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,” an “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 ☑

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 May 4, 2021
Common Stock, $0.01 par value						36,874,348

TRIBUNE PUBLISHING COMPANY

FORM 10-Q

TABLE OF CONTENTS

Page

PART I

FINANCIAL INFORMATION

Item 1.

Financial Statements (unaudited)

Item 2.

Management's Discussion and Analysis

of Financial Condition and Results of Operations

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Item 4.

Controls and Procedures

PART II

OTHER INFORMATION

Item 1.

Legal Proceedings

Item 1A.

Risk Factors

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.

Defaults Upon Senior Securities

Item 4.

Mine Safety Disclosures

Item 5.

Other Information

Item 6.

Exhibits

SIGNATURES

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

The statements contained in this Quarterly Report on Form 10-Q, 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, the acquisition of the Company by Alden Global Capital may not be completed in a timely manner or at all; the effect of the novel coronavirus (“COVID-19”) and related governmental and economic responses; circulation levels and audience shares; changes in advertising demand; 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. For more information about these and other risks, see “Risk Factors” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 8, 2021, and in our other filings with the SEC.

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 Quarterly Report on Form 10-Q. 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.

PART I.

Item 1. Financial Statements

TRIBUNE PUBLISHING COMPANY

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(In thousands, except per share data)

(Unaudited)


	Three months ended
	March 28, 2021		March 29, 2020
Operating revenues	$	173,554	$	206,441
Operating expenses:
Compensation	61,759		96,268
Newsprint and ink	6,624		10,720
Outside services	63,200		74,585
Other operating expenses	28,284		30,154
Depreciation and amortization	5,242		8,813
Impairment	—		51,049
Total operating expenses	165,109		271,589
Income (loss) from operations	8,445		(65,148)
Interest expense, net	(144)		(30)
Other income, net	403		387
Income (loss) from continuing operations before income taxes	8,704		(64,791)
Income tax expense (benefit)	2,582		(15,811)
Net income (loss) from continuing operations	6,122		(48,980)
Plus: Income from discontinued operations, net of taxes	20,500		4,974
Net income (loss)	26,622		(44,006)
Less: Income (loss) attributable to noncontrolling interest ("NCI")	(413)		1,330
Net income (loss) attributable to Tribune common stockholders	$	27,035	$	(45,336)

Net income (loss) from continuing operations, per common share:
Basic	$	0.17	$	(1.35)
Diluted	$	0.17	$	(1.35)
Net income (loss) available to Tribune common stockholders, per common share:
Basic	$	1.44	$	(1.26)
Diluted	$	1.43	$	(1.26)
Weighted average shares outstanding:
Basic	36,687		36,294
Diluted	37,023		36,294

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

TRIBUNE PUBLISHING COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)


	Three months ended
	March 28, 2021		March 29, 2020
Net income (loss)	$	26,622	$	(44,006)
Comprehensive loss, net of taxes:
Amortization of items to periodic pension cost during the period, (net of taxes of $9 at March 29, 2020)	—		(23)
Foreign currency translation	(1)		—
Other comprehensive loss recognized in continuing operations, net of taxes	(1)		(23)
Derecognition of noncontolling interest	(35,284)		—
Accumulated other comprehensive income related to foreign currency translation recognized in discontinued operations	53		—
Comprehensive loss	(8,610)		(44,029)
Less: Comprehensive income (loss) attributable to NCI	(413)		1,330
Comprehensive loss attributable to Tribune common stockholders	$	(8,197)	$	(45,359)

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

TRIBUNE PUBLISHING COMPANY

CONSOLIDATED CONDENSED BALANCE SHEETS

(In thousands)

(Unaudited)


	March 28, 2021		December 27, 2020
Assets
Current assets
Cash	$	222,409	$	98,862
Accounts receivable, net	59,548		73,866
Inventories	5,331		4,055
Prepaid expenses and other current assets	16,107		18,344
Current assets related to discontinued operations	234		111,239
Total current assets	303,629		306,366

Property, plant and equipment
Machinery, equipment and furniture	93,326		100,625
Buildings and leasehold improvements	42,410		42,361
	135,736		142,986
Accumulated depreciation	(92,027)		(96,527)
	43,709		46,459
Advance payments on property, plant and equipment	1,211		1,866
Property, plant and equipment, net	44,920		48,325

Other assets
Goodwill	28,146		28,146
Intangible assets, net	49,079		50,148
Software, net	16,471		17,503
Lease right-of-use asset	32,992		36,705
Restricted cash	28,270		29,925
Deferred income taxes	10,840		11,294
Equity investments	11,354		11,354
Other long-term assets	8,526		8,388
Total other assets	185,678		193,463

Total assets	$	534,227	$	548,154

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

TRIBUNE PUBLISHING COMPANY

CONSOLIDATED CONDENSED BALANCE SHEETS (continued)

(In thousands, except per share data)

(Unaudited)


	March 28, 2021		December 27, 2020
Liabilities and stockholders’ equity
Current liabilities
Accounts payable	$	34,018	$	28,022
Employee compensation and benefits	23,906		33,495
Deferred revenue	33,688		34,620
Current portion of long-term lease liability	24,645		23,914
Other current liabilities	25,621		23,329
Current liabilities associated with discontinued operations	7,930		4,759
Total current liabilities	149,808		148,139

Non-current liabilities
Long term lease liability	44,786		49,182
Workers’ compensation, general liability and auto insurance payable	19,921		20,120
Pension and postretirement benefits payable	15,926		16,803
Deferred revenue	1,786		1,921
Other obligations	6,443		10,587
Total non-current liabilities	88,862		98,613

Stockholders’ equity
Preferred stock, $0.01 par value. Authorized 30,000 shares; no shares issued or outstanding at March 28, 2021 and December 27, 2020	—		—
Common stock, $0.01 par value. Authorized 300,000 shares; 38,787 shares issued and 36,833 shares outstanding at March 28, 2021; 38,524 shares issued and 36,570 shares outstanding at December 27, 2020	388		385
Additional paid-in capital	184,549		181,839
Retained earnings	139,420		86,491
Noncontrolling interest	—		61,539
Accumulated other comprehensive income (loss)	(2,640)		(2,692)
Treasury stock, at cost - 1,954 shares at March 28, 2021 and December 27, 2020	(26,160)		(26,160)
Total stockholders’ equity	295,557		301,402

Total liabilities and stockholders’ equity	$	534,227	$	548,154

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


TRIBUNE PUBLISHING COMPANY
CONSOLIDATED STATEMENT OF EQUITY
(In thousands)
(Unaudited)


	Common Stock			Additional Paid in Capital		Retained Earnings		Non controlling Interest		AOCI		Treasury Stock		Total Equity
	Shares	Amount
Balance at December 27, 2020	38,524	$	385	$	181,839	$	86,491	$	61,539	$	(2,692)	$	(26,160)	$	301,402
Comprehensive income (loss)	—	—		—		27,035		(413)		52		—		26,674
Derecognition of NCI	—	—		—		—		(35,284)		—		—		(35,284)
Elimination of cumulative NCI carrying value adjustments	—	—		—		25,842		(25,842)		—		—		—
Dividends declared to common stockholders	—	—				52		—		—		—		52
Issuance of stock from restricted stock and restricted stock unit ("RSU") conversions	113	1		(1)		—		—		—		—		—
Exercise of stock options	150	2		2,223		—		—		—		—		2,225
Stock-based compensation	—	—		1,116		—		—		—		—		1,116
Withholding for taxes on RSU conversions	—	—		(628)		—		—		—		—		(628)
Balance at March 28, 2021	38,787	$	388	$	184,549	$	139,420	$	—	$	(2,640)	$	(26,160)	$	295,557


	Common Stock			Additional Paid in Capital		Retained Earnings (Deficit)		Non controlling Interest		AOCI		Treasury Stock		Total Equity
	Shares	Amount
Balance at December 29, 2019	38,018	$	380	$	177,957	$	135,001	$	—	$	(2,352)	$	(26,160)	$	284,826
Reclassification of NCI from temporary equity	—	—		—		—		64,133		—		—		64,133
Comprehensive income (loss)	—	—		—		(45,336)		1,020		(23)		—		(44,339)
NCI carrying value adjustment	—	—		—		(322)		—		—		—		(322)
Dividends declared to common stockholders	—	—		—		(9,305)		—		—		—		(9,305)
Dividends declared to noncontrolling interest	—	—		—		—		(5,200)		—		—		(5,200)
Issuance of stock from restricted stock and RSU conversions	320	3		(3)		—		—		—		—		—
Stock-based compensation	—	—		1,592		—		—		—		—		1,592
Withholding for taxes on RSU conversions	—	—		(533)		—		—		—		—		(533)











Balance at March 29, 2020	38,338	$	383	$	179,013	$	80,038	$	59,953	$	(2,375)	$	(26,160)	$	290,852

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


TRIBUNE PUBLISHING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)


	Three months ended
	March 28, 2021		March 29, 2020
Operating Activities From Continuing Operations
Net income (loss) from continuing operations	$	6,122	$	(48,980)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	5,242		8,813
Impairment	—		51,049
Stock compensation expense	1,116		1,592
Gain on sale of property	—		(5,159)
Deferred income taxes	453		(6,704)
Pension contribution	(476)		(555)
Postretirement benefits expense	(401)		(326)
Changes in working capital items:
Accounts receivable, net	14,365		17,346
Prepaid expenses, inventories and other current assets	1,905		(2,864)
Accounts payable, employee compensation and benefits, deferred revenue and other current liabilities	(6,846)		(23,194)
Other, net	1,261		(141)
Net cash provided by (used for) operating activities	22,741		(9,123)

Investing Activities From Continuing Operations
Capital expenditures	(2,271)		(3,483)
Proceeds from the sale of property, plant and equipment	—		8,983
Net cash provided by (used for) investing activities	(2,271)		5,500

Financing Activities From Continuing Operations
Exercise of stock options	2,225		—
Repayments of capital lease obligations	—		(50)
Dividends paid to common stockholders	—		(9,091)
Withholding for taxes on restricted stock unit vesting	(628)		(533)
Net cash used for financing activities	1,597		(9,674)

Increase (decrease) in cash attributable to continuing operations	$	22,067	$	(13,297)

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


TRIBUNE PUBLISHING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(In thousands)
(Unaudited)


	Three months ended
	March 28, 2021		March 29, 2020
Cash Flows From Discontinued Operations
Cash flows provided by operating activities from discontinued operations, net	$	442	$	10,123
Cash flows provided by (used for) investing activities from discontinued operations, net	99,383		(16)
Cash flows used for financing activities from discontinued operations, net	—		(5,200)
Increase in cash attributable to discontinued operations	99,825		4,907

Net increase (decrease) in cash	121,892		(8,390)
Cash, cash equivalents and restricted cash, beginning of period	128,787		92,130
Cash, cash equivalents and restricted cash, end of period	$	250,679	$	83,740

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

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1: DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Description of Business—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, the Company operates local media businesses in eight markets with titles including the Chicago Tribune, New York Daily News, The Baltimore Sun, Hartford Courant, South Florida’s Sun Sentinel, Orlando Sentinel, Virginia’s Daily Press and The Virginian-Pilot, and The Morning Call of Lehigh Valley, Pennsylvania. Tribune also operates Tribune Content Agency (“TCA”).

On December 29, 2020, the Company completed the sale of its majority ownership of BestReviews Inc. (“BestReviews”). See Note 5 for additional information on the sale of BestReviews.

On February 16, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among Tribune Enterprises, LLC, a Delaware limited liability company (“TELLC”), Tribune Merger Sub, Inc, a Delaware corporation and a direct, wholly owned subsidiary of TELLC (“Merger Sub”), and the Company, pursuant to which Merger Sub will merge with and into the Company, with the Company surviving as a wholly owned subsidiary of TELLC. TELLC is an affiliate of Alden Global Opportunities Master Fund, L.P. and Alden Global Value Recovery Master Fund, L.P. (collectively, “Alden Funds”), the Company’s largest shareholder. Upon completion of the transaction the Company will become a privately held company, and its common stock will no longer be listed on any public market. See Note 11 for additional information related to the Merger Agreement.

Fiscal Periods—The Company’s fiscal year ends on the last Sunday in December. Fiscal year 2021 ends on December 26, 2021, and fiscal year 2020 ended on December 27, 2020. Fiscal year 2021 and 2020 are 52-week years with 13 weeks in each quarter.

Basis of Presentation—The accompanying unaudited Consolidated Financial Statements and notes of the Company have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited Consolidated Financial Statements and accompanying notes. Actual results could differ from these estimates. In the opinion of management, the financial statements contain all adjustments necessary to present fairly the financial position of Tribune as of March 28, 2021, and December 27, 2020, and the results of operations for the three months ended March 28, 2021, and March 29, 2020, respectively, and the cash flows for the three months ended March 28, 2021, and March 29, 2020, respectively. This includes all normal and recurring adjustments and elimination of intercompany transactions. Results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. The year-end Consolidated Balance Sheet was derived from audited financial statements but does not include all disclosures required by U.S. GAAP.

The Company has reported the results of BestReviews as discontinued operations for all periods presented in the accompanying Consolidated Statements of Income (Loss) and Consolidated Statements of Cash Flows. Additionally, assets and liabilities related to the divested properties are classified as such in all prior periods in the Consolidated Condensed Balance Sheets. Unless otherwise noted, amounts and disclosures throughout these Notes to Consolidated Financial Statements relate to continuing operations and exclude all discontinued operations. See Note 5 for additional information related to discontinued operations.

NOTE 2: EXPECTED CREDIT LOSSES

Tribune holds financial assets in the form of accounts receivable that are primarily generated from certain circulation-related revenues, advertising revenues and commercial print and delivery revenues, and are grouped as such. The accounts receivable and allowance for credit losses are analyzed under the expected credit losses method. Payment terms vary by revenue stream. Home delivery circulation and classified advertising terms are usually prepaid with advertising having terms of 30 to 60 days. Credit is extended based on an evaluation of each customer’s financial condition, and generally collateral is not required

For accounts receivable, Tribune uses an aging expected credit losses method that includes forward-looking qualitative factors when they arise. The Company has identified the market effects of the COVID-19 pandemic as a forward-looking

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

qualitative factor to be considered. The Company uses an analysis of 24-months of collection and write off history to calculate historical loss percentages by aging group, which are applied to all accounts within the aging group. Specific reserves are reviewed and handled on a case by case basis. Accounts receivable balances outstanding for a year are reserved at 100%. As customer balances are determined to be uncollectible, the balances are written off against the allowance for credit losses. Included in the allowance for credit losses are amounts for sales adjustments not related to expected credit losses; such as, rebates, billing adjustments, and returns. The credit loss expense was $0.9 million and $3.0 million for the three months ended March 28, 2021 and March 29, 2020, respectively, and is included in other operating expenses on the Consolidated Statements of Income (Loss).

A summary of the activity with respect to the allowance for credit losses for the three months ended March 28, 2021, is as follows (in thousands):


Balance at December 27, 2020	$	8,312
Current period provision	873
Write offs	(1,356)
Sales adjustments, net	(19)
Balance at March 28, 2021	$	7,810

Accounts receivable, net, at March 28, 2021, and December 27, 2020, consisted of the following (in thousands):


	March 28, 2021		December 27, 2020
Accounts receivable	$	67,358	$	82,178
Less: Allowance for credit losses	7,810		8,312
Accounts receivable, net	$	59,548	$	73,866

NOTE 3: REVENUE RECOGNITION

Revenues are recognized when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for goods or services. Revenues are recognized as performance obligations are satisfied at either a point in time, such as when an advertisement is published, or over time, such as content licensing. No single customer represented 10% or more of the Company’s net revenue in any fiscal period presented.

The Company receives a significant portion of the payments from its subscribers in advance of the delivery of the content either in print or digitally. These up-front payments and fees are recorded as deferred revenue upon receipt and generally require deferral of revenue recognition to a future period until the Company performs its obligations under the subscription agreement. The deferred revenue is recognized as revenue as the content is delivered. The deferred revenue is considered a contract liability under ASC 606. Amounts are recorded as accounts receivable when the Company’s right to consideration is unconditional. Therefore, the Company has no contract assets as defined under ASC 606. As of December 27, 2020, the Company had a contract liabilities balance of $36.5 million, of which $27.0 million has been recognized as revenue in the three months ended March 28, 2021.

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The Company’s revenues disaggregated by type of revenue is as follows (in thousands):


	Three months ended
		March 28, 2021		March 29, 2020
Print		$	72,920	$	81,191
Digital		14,622		8,821
Circulation		87,542		90,012
Print		41,056		57,914
Digital		15,475		18,902
Advertising		56,531		76,816
Commercial print & delivery		16,975		21,916
Direct mail		4,989		7,610
Content syndication and other		7,517		10,087
Other		29,481		39,613
Total operating revenues		$	173,554	$	206,441

The Company generally expenses sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within compensation in the accompanying Consolidated Statements of Income (Loss). Additionally, the Company does not disclose the value of unsatisfied performance obligations because the vast majority of contracts have original expected lengths of one year or less and payment terms are generally short-term in nature unless a customer is in bankruptcy.

NOTE 4: CHANGES IN OPERATIONS

The Company continually assesses its operations in an effort to identify opportunities to enhance operational efficiencies and reduce expenses. In the past these activities have included, and could include in the future, outsourcing of various functions or operations, abandonment of leased space and other activities which may result in changes to employee headcount.

Employee Reductions

During the three months ended March 28, 2021, the Company implemented reductions in staffing levels in its operations of 86 positions for which the Company recorded pretax charges related to these reductions and executive separation totaling $1.6 million. Charges for severance and related expenses are included in compensation expense on the Consolidated Statements of Income (Loss).

During the three months ended March 29, 2020, the Company implemented reductions in staffing levels in its operations of 276 positions for which the Company recorded pretax charges related to these reductions totaling $16.8 million.

The 2020 severance charge included reductions for 191 positions related to a Voluntary Severance Incentive Plan (“2020 VSIP”) initiated in the first quarter of 2020. The 2020 VSIP provided enhanced separation benefits to eligible employees with more than eight years of service. The Company is funding the 2020 VSIP ratably over the payout period through salary continuation. The related salary continuation payments began during the first quarter of 2020 and are expected to continue through the third quarter of 2021.

Additionally, included in the 2020 severance charge was approximately $0.6 million related to the separation of the Company’s former CEO which included continuation of his base salary for one year through February 2021, his bonus for 2019, and certain benefit continuation.

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

A summary of the activity with respect to the Company’s severance accrual for the three months ended March 28, 2021, is as follows (in thousands):


Balance at December 27, 2020	$	8,321
Provision	1,622
Payments	(5,570)
Balance at March 28, 2021	$	4,373

NOTE 5: DISCONTINUED OPERATIONS

BestReviews

On December 11, 2020, the Company entered into the Membership Unit Purchase Agreement (the “BR Agreement”), by and among the Company and BR Holding Company, Inc. (collectively the “Sellers”), BestReviews and Nexstar Inc. (“Nexstar”), pursuant to which the Sellers agreed to sell 100% of BestReviews to Nexstar (the “BR Transaction”). The sale closed on December 29, 2020, for a cash sales price of $160.0 million plus a $9.8 million working capital adjustment. Under the terms of the BR Transaction, the Company received 60% of the proceeds, net of transaction fees, totaling $100.1 million including the final working capital adjustment of $0.2 million received subsequent to March 28, 2021, and recognized a pre-tax gain of $29.5 million.

With the sale of BestReviews, the Company is exiting that line of business. The sale of BestReviews represented a strategic shift that will have a major effect on the Company’s operations and financial results. As a result, BestReviews is reflected as discontinued operations on the Consolidated Condensed Balance Sheets and the results of operations of BestReviews are presented as discontinued operations in the Consolidated Statements of Income (Loss) for all periods presented.

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Discontinued Operations

Earnings from discontinued operations through the respective transaction dates, included in the Consolidated Statements of Income (Loss), are comprised of the following (in thousands):


	Three months ended
	March 28, 2021		March 29, 2020
Operating revenues	$	152	$	10,044
Operating expenses:
Compensation	1,123		560
Outside services	66		460
Other operating expenses	73		5,261
Depreciation and amortization	6		660
Operating expenses	1,268		6,941
Gain on sale	29,546		—
Income from operations before income taxes	28,430		3,103
Income tax expense (benefit)	7,930		(1,871)
Income from discontinued operations, net of tax	20,500		4,974
Less: Income (loss) attributable to noncontrolling interest	(413)		1,330
Income from discontinued operations, net of tax available to common stockholders	$	20,913	$	3,644

The following table presents the aggregate carrying amounts of assets and liabilities related to discontinued operations in the Consolidated Condensed Balance Sheets (in thousands):


	March 28, 2021		December 27, 2020
Carrying amount of assets related to discontinued operations:
Cash	$	—	$	1,159
Accounts receivable, (net of allowances of $396 at March 29, 2020) (1)	234		17,888
All other current assets	—		57
Property, plant and equipment, net	—		16
Goodwill	—		87,052
Intangible assets, net	—		5,053
Software, net	—		13
Other long-term assets	—		1
Total assets related to discontinued operations	$	234	$	111,239

Carrying amount of liabilities associated with discontinued operations:
Accounts payable and employee compensation and benefits	$	—	$	4,734
Taxes payable	7,930		25
Total liabilities associated with discontinued operations	$	7,930	$	4,759

(1) - The March 28, 2021 balance is the working capital adjustment due from the sale of BestReviews.

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

NOTE 6: INVENTORIES

Inventories at March 28, 2021, and December 27, 2020, consisted of the following (in thousands):


	March 28, 2021		December 27, 2020
Newsprint	$	5,181	$	3,914
Supplies and other	150		141
Total inventories	$	5,331	$	4,055

Inventories are stated at the lower of cost or net realizable value determined using the first-in, first-out basis for all inventories.

NOTE 7: GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill and other intangible assets at March 28, 2021, and December 27, 2020, consisted of the following (in thousands):


	March 28, 2021						December 27, 2020
	Gross Amount		Accumulated Amortization		Net Amount		Gross Amount		Accumulated Amortization		Net Amount
Goodwill	$	28,146			$	28,146	$	28,146			$	28,146

Newspaper mastheads (1)	$	27,735	$	—	$	27,735	$	27,735	$	—	$	27,735
Subscribers (useful life of 2 to 10 years)	7,312		(6,497)		815		7,312		(6,326)		986
Advertiser relationships (useful life of 2 to 13 years)	27,648		(18,143)		9,505		27,648		(17,515)		10,133
Trade names (useful life of 20 years)	15,100		(5,036)		10,064		15,100		(4,848)		10,252
Other (useful life of 1 to 20 years)	3,641		(2,681)		960		3,641		(2,599)		1,042
Total intangible assets	$	81,436	$	(32,357)	$	49,079	$	81,436	$	(31,288)	$	50,148

Software (useful life of 2 to 10 years)	$	142,937	$	(126,466)	$	16,471	$	141,720	$	(124,217)	$	17,503

(1) - Intangible assets not subject to amortization.

NOTE 8: INCOME TAXES

For the three months ended March 28, 2021, the Company recorded an income tax expense of $2.6 million. The effective tax rate on pretax income was 29.7%. The rate differs from the U.S. federal statutory rate of 21% primarily due to state income taxes, net of federal benefit, tax expense related to the vesting of stock compensation, and other nondeductible expenses.

For the three months ended March 29, 2020, the Company recorded an income tax benefit related to continuing operations of $15.8 million which included the impact of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) enacted in 2020 and the early adoption in 2020 of ASU 2019-12. The effective tax rate on pretax income was 24.4% in the three months ended March 29, 2020. The rate differs from the U.S. federal statutory rate of 21% primarily due to state income taxes, net of federal benefit, impact of the CARES Act, tax expense related to the vesting of stock compensation, nondeductible goodwill impairment, and other nondeductible expenses.

NOTE 9: PENSION AND OTHER POSTRETIREMENT BENEFITS

Multiemployer Pension Plans

The Company contributes to a number of multiemployer defined benefit pension plans under the terms of collective-bargaining agreements that cover its union-represented employees. During the three months ended March 28, 2021, the Company made contributions totaling $2.3 million to the Teamsters Local Union No. 727 Pension Fund (the “Teamsters

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Fund”), pursuant to its amended rehabilitation plan. The Company expects to contribute an additional $6.8 million during the remainder of 2021. These payments are expensed as the payments become due.

Defined Benefit Plans

The Company is the sponsor of a single-employer defined benefit plan, the Daily News Retirement Plan (the “NYDN Pension Plan”). The NYDN Pension Plan provides benefits to certain current and former employees of the New York Daily News. As of March 31, 2018, future benefits under the NYDN Pension Plan were frozen and no new participants are permitted after that time. On March 11, 2021, the President signed into law the American Rescue Plan Act (“ARPA”). The ARPA, among other things, provided that the interest rate stabilization was enhanced and extended, the existing deficit shortfall amortization basis were eliminated to establish a new base and all future bases would amortize over 15 years instead of 7 years. Company’s could choose which plan year to apply the changes. The Company elected to apply the changes to the 2021 plan year which reduced the required minimum contributions from $1.6 million to $1.0 million. The Company contributed $0.5 million to the NYDN Pension Plan in the three months ended March 28, 2021. The Company’s remaining required minimum contribution for 2021 is $0.5 million.

The components of net periodic benefit for the NYDN Pension Plan are as follows (in thousands):


	Three months ended			Affected Line Items in the Consolidated Statements of Income (Loss)
		March 28, 2021				March 29, 2020
Interest cost		$	293	$	550		Other income, net
Expected return on assets		(701)		(946)			Other income, net
Net periodic benefit		$	(408)	$	(396)

NOTE 10: EARNINGS (LOSS) PER SHARE

Basic earnings per common share is calculated by dividing net income (loss) attributable to Tribune common stockholders by the weighted average number of shares of common stock outstanding. Diluted earnings per common share is similarly calculated, except that the calculation includes the dilutive effect of the assumed issuance of common shares under equity-based compensation plans, except where the inclusion of such common shares would have an anti-dilutive impact. In accordance with ASC 260-10-55, net income (loss) from continuing operations is the control number in determining whether potential common shares are dilutive. If there is net loss from continuing operations, all potential common shares are considered anti-dilutive.

When the Company purchased a 60% controlling interest in BestReviews in February 2018, the Company and the seller entered into an agreement subject to which the seller had a right, beginning three years after the purchase date, to cause the Company to purchase all of the remaining 40% of the membership interests of BestReviews at a purchase price based on a predetermined multiple of BestReviews’ trailing 12-month EBITDA (“Put Option”). Each quarter, through January 2020 when the agreement was amended, the carrying value of the noncontrolling interest was adjusted to the amount the Company would have been required to pay the noncontrolling interest holders as if the Put Option had been exercised as of the balance sheet date, with an offsetting adjustment to stockholders’ equity. Adjustments to increase or decrease the carrying value of the noncontrolling interest also reduced or increased the amount of net income or loss attributable to Tribune common stockholders for purposes of determining both basic and diluted earnings per share. In January 2020, the agreement was amended to remove the Put Option. With the sale of BestReviews on December 29, 2020 the prior carrying value adjustments were eliminated. The elimination of the carrying value adjustments is reflected in the basic and diluted earnings per share calculation.

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Basic and diluted earnings per common share were as follows (in thousands, except per share amounts):


	Three months ended
		March 28, 2021		March 29, 2020
Income (loss) - Numerator:
Net income (loss) available to Tribune common stockholders, before discontinued operations		6,122		(48,980)

Income from discontinued operations, net of taxes		20,500		4,974
Less: Income (loss) attributable to NCI		(413)		1,330
Less: NCI carrying value adjustment		—		322
Plus: Elimination of cumulative NCI carrying value adjustments		25,842		—
Income available to common shareholders from discontinued operations, net of taxes		46,755		3,322
Net income (loss) attributable to Tribune common stockholders		$	52,877	$	(45,658)

Shares - Denominator:
Weighted average number of common shares outstanding (basic)		36,687		36,294
Dilutive effect of employee stock options and RSUs		336		—
Adjusted weighted average shares outstanding (diluted)		37,023		36,294

Basic net income (loss) attributable to Tribune per common share:
Income (loss) from continuing operations		$	0.17	$	(1.35)
Income from discontinued operations		$	1.27	$	0.09
Basic net income (loss) attributable to Tribune per common share		$	1.44	$	(1.26)

Diluted net income (loss) attributable to Tribune per common share:
Income (loss) from continuing operations		$	0.17	$	(1.35)
Income from discontinued operations		$	1.26	$	0.09
Diluted net income (loss) attributable to Tribune per common share		$	1.43	$	(1.26)

The number of stock options that were excluded from the computation of diluted earnings per share because their inclusion would result in an anti-dilutive effect on per share amounts was 14,000 for the three months ended March 28, 2021. The number of stock options that were excluded from the computation of diluted earnings per share because their inclusion would result in an anti-dilutive effect on per share amounts was 584,940 for the three months ended March 29, 2020.

The number of RSUs that were excluded from the computation of diluted earnings per share because their inclusion would result in an anti-dilutive effect on per share amounts was 654,561 for the three months ended March 29, 2020.

NOTE 11: STOCKHOLDERS’ EQUITY

The holders of common stock are entitled to one vote per share on all matters to be voted on by stockholders. Holders of common stock will share in any dividend declared by the Board of Directors of the Company (the “Board”). In the event of the Company’s liquidation, dissolution or winding up, all holders of common stock are entitled to share ratably in any assets available for distribution to holders of common stock.

Agreement and Plan of Merger

On February 16, 2021, the Company entered into a Merger Agreement pursuant to which the Merger Sub will merge with and into the Company, with the Company surviving as a wholly owned subsidiary of TELLC (the “Merger”). TELLC is the acquirer and is an affiliate of Alden Funds, the Company’s largest shareholder.

Subject to the terms and conditions set forth in the Merger Agreement, at the closing of the Merger, each share of common stock, par value $0.01 per share (other than treasury stock or common stock held by TELLC or any of its affiliates)

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

issued and outstanding immediately as of the closing (other than dissenting shares) will be converted into the right to receive $17.25 in cash, without interest (the “Merger Consideration”).

The consummation of the Merger (the “Closing”) is subject to certain customary mutual conditions, including (i) the approval of the Company’s stockholders holding two-thirds of the outstanding shares of common stock not owned by TELLC and its affiliates, (ii) the expiration or termination of any waiting period applicable to the closing of the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”) and (iii) the absence of any order of any U.S. court that prohibits, renders illegal or permanently enjoins the consummation of the Merger. The obligation of each party to consummate the Merger is also conditioned upon (i) the accuracy of the representations and warranties of the other party as of the date of the Merger Agreement and as of the Closing (subject to customary materiality qualifiers), (ii) compliance by the other party in all material respects with its pre-Closing obligations under the Merger Agreement and (iii) in TELLC’s case, the absence of a material adverse effect with respect to the Company.

The Company and TELLC have each made customary representations, warranties and covenants in the Merger Agreement. Subject to certain exceptions, the Company has agreed, among other things, to covenants relating to the conduct of its business during the interim period between the execution of the Merger Agreement and the consummation of the Merger. The parties have also agreed to use their respective reasonable best efforts to obtain governmental and regulatory approvals. In addition, subject to certain exceptions, the Company has agreed to covenants relating to (i) the submission of the Merger Agreement to the Company’s stockholders at a special meeting thereof for approval, (ii) the recommendation by the Board in favor of the adoption by the Company’s stockholders of the Merger Agreement and (iii) non-solicitation obligations of the Company relating to alternative acquisition proposals.

Either the Company or TELLC may terminate the Merger Agreement if (i) TELLC, Merger Sub and the Company agree by mutual written consent to do so, (ii) the Merger has not been consummated on or before December 31, 2021 (the “End Date”), (iii) any court has issued an order permanently restraining, enjoining or otherwise prohibiting the Merger and such order or other action is, or has become, final and non-appealable, (iv) the approval of the Company’s stockholders is not obtained at a meeting of the Company’s stockholders called for the purpose of adopting the Merger Agreement or (v) the other party breaches any representation, warranty or covenant that results in the failure of the related closing condition to be satisfied, subject to a cure period in certain circumstances. In addition, the Company may, under certain circumstances, terminate the Merger Agreement in order for the Company to enter concurrently into a definitive written agreement with respect to an unsolicited superior acquisition proposal, subject to the Company having first complied with certain matching rights and other obligations set forth in the Merger Agreement. Additionally, TELLC may, under certain circumstances, terminate the Merger Agreement if (i) the Board changes or adversely modifies its recommendation that the Company’s stockholders vote in favor of adopting the Merger Agreement or (ii) the Company materially breaches its non-solicitation obligations and such breach results in an alternative transaction proposal.

If the Merger Agreement is terminated (i) by the Company in order for the Company to enter into a definitive written agreement with respect to an unsolicited superior acquisition proposal, (ii) by TELLC because (a) the Board changes or adversely modifies its recommendation that the Company’s stockholders vote in favor of adopting the Merger Agreement or (b) the Company materially breaches its non-solicitation obligations and such breach results in an alternative transaction proposal, or (iii) by (x) either party because the Merger was not consummated on or before the End Date (as it may be extended) or approval of the Company’s stockholders was not obtained or (y) by TELLC if the Company commits a breach of any representation, warranty or covenant that results in the failure of the related closing condition to be satisfied (subject to a cure period in certain circumstances), but only if, in the case of this clause (iii), an alternative acquisition proposal was previously made and, within 12 months after termination of the Merger Agreement, the Company enters into an agreement for an alternative transaction or an acquisition transaction is consummated, then, in each case, the Company will be obligated to pay to TELLC a one-time fee equal to $20.0 million in cash.

If the Merger Agreement is terminated by the Company (i) if TELLC breaches any representation, warranty or covenant that results in the failure of the related closing condition to be satisfied, subject to a cure period in certain circumstances or (ii) if the conditions to TELLC’s obligations to consummate the Merger are satisfied or waived, and TELLC does not consummate the Merger when required by the Merger Agreement, then TELLC will be obligated to pay to the Company a one-time liquidated damages amount equal to $50.0 million in cash.

Pursuant to the Merger Agreement, TELLC agreed to vote all of its shares of common stock in favor of the adoption of the Merger Agreement and the approval of the transactions contemplated thereby, including the Merger, so long as the Board

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

has not changed or adversely modified its recommendation in favor of the Merger Agreement. The Merger Agreement also prohibits TELLC from transferring any of its shares of common stock, subject to certain exceptions.

Alden Global Opportunities Master Fund, L.P. and Alden Global Value Recovery Master Fund, L.P. (each, a “Guarantor”), have entered into a Limited Guarantee dated February 16, 2021 (the “Limited Guarantee”) with the Company to guarantee TELLC’s obligation to pay the liquidated damages amount to the Company and certain other specified payments to the Company, subject to the terms and obligations set forth in the Limited Guarantee.

The Guarantors have also entered into an equity commitment letter dated as of February 16, 2021 (the “Equity Commitment Letter”) with TELLC pursuant to which the Guarantors have made an equity commitment of $375.0 million to TELLC to fund the payment of the aggregate Merger Consideration. The Company is a third-party beneficiary of the Equity Commitment Letter and has the right to specifically enforce the Guarantors’ obligations thereunder, if the conditions to TELLC’s obligations to consummate the Merger are satisfied or waived, and the Merger is consummated substantially simultaneously.

Concurrent with the signing of the Merger Agreement, Alden Funds has signed a non-binding term sheet to sell The Baltimore Sun to Sunlight for All Institute, a public charity formed by Stewart Bainum Jr..

Significant Shareholders

Alden Funds

Alden Funds beneficially owned 11,554,306 shares of Tribune common stock, which represented 31.4% of the outstanding shares of Tribune common stock as of March 28, 2021. During November 2019, the Alden Funds acquired 11,544,213 shares 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 non-executive Chairman of the Board, in a private transaction and the remaining shares were purchased on the open market.

On July 1, 2020, the Company entered into an Amended and Restated Cooperation Agreement (the “Amended and Restated Cooperation Agreement”) with the Alden Funds and Alden Global Capital LLC regarding the composition of the Board and related matters. The Amended and Restated Cooperation Agreement provides that the Board will increase the size of the Board to seven directors and appoint Randall D. Smith to fill the resulting vacancy. The Board had been reduced to six members at the 2020 annual shareholders meeting when two of the Board members retired.

The Amended and Restated Cooperation Agreement further provides, among other things, that:

•Until the earlier of June 16, 2021 or the first business day following the Company’s 2021 annual meeting of stockholders, which will be held on or before June 15, 2021 (the “Amended Cooperation Period”), the size of the Board will not be increased above seven members.

•During the Amended Cooperation Period, the Alden Funds and their affiliates will be subject to customary standstill restrictions, including (among others) refraining from (i) acquiring securities of the Company if it would result in their ownership of more than 33.0% of the Company’s outstanding shares of common stock, $0.01 par value (“Common Stock”); (ii) soliciting proxies to vote any securities of the Company; (iii) forming or participating in a “group” in connection with the Company’s voting securities or (iv) otherwise acting alone, or in concert with others, to seek to control or knowingly influence the management, Board or policies of the Company; provided that such prohibitions terminate if (a) a person or group that owns more than 10.0% of the issued and outstanding Common Stock (a “Related Party Investor”) (x) submits a valid stockholders proposal (other than a precatory proposal) at a meeting of the Company’s stockholders or (y) submits a valid notice of nomination to nominate on or more persons for election to the Board at a meeting of the Company’s stockholders; (b) the Company enters into a material agreement with any Related Party Investor, other than a Related Party Agreement or alters, amends or modifies in any way a Related Party Agreement, other than on terms no less favorable to the Company than would be obtainable through arms’-length negotiations with a hypothetically similarly situated bona fide third-party; (c) the Company amends, waives or fails to enforce, the terms of any voting agreement or standstill agreement between the Company and a Related Party Investor other than such amendments or waivers that, taken as a whole, make the agreement more restrictive on the Related Party Investor; (d) any of Ms. Dana Goldsmith Needleman, Mr. Christopher Minnetian, Mr.

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Randall D. Smith and their successors designated by the Alden Funds are not nominated for election at, or are not elected at, the Company’s 2021 annual stockholder meeting; or (e) on the date that (1) the Company executes a definitive agreement providing for the acquisition of a majority of the outstanding shares of common stock or a majority of the consolidated assets of the Company and its subsidiaries or (2) is 10 business days after commencement of a tender offer that, if consummated, would result in the offeror acquiring a majority of the outstanding shares of common stock and the Board has not recommended against acceptance of such tender offer. The prohibitions described in clause (i) of the Standstill Restrictions above will also terminate on the date that any person or group, other than the Alden Funds and their affiliates, acquires beneficial ownership of shares of common stock that results in such person or group beneficially owning 30.0% or more of the Company’s then-outstanding shar

Price	-0.00	EPS	-0
Shares	36	P/E	0
MCap	-0	P/FCF	-0
Net Debt	-87	EBIT	-4
TEV	-87	TEV/EBIT	20
TTM 2019-09-29, in MM, except price, ratios

10-Q	2021-03-28	Filed 2021-05-06
10-K	2020-12-27	Filed 2021-03-08
10-K	2019-12-29	Filed 2020-03-11

8-K	2020-06-05
8-K	2020-03-04
8-K	2020-01-31

EX-31.1	a2021q1-10qexhibit311.htm
EX-31.2	a2021q1-10qexhibit312.htm
EX-32	a2021q1-10qexhibit32.htm

TPCO 10Q Quarterly Report

Tribune Publishing Earnings 2021-03-28