Company Quick10K Filing
Quick10K
Tronc
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$18.09 36 $646
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-30 Annual: 2018-12-30
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-07-01 Quarter: 2018-07-01
10-Q 2018-04-01 Quarter: 2018-04-01
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-24 Quarter: 2017-09-24
10-Q 2017-06-25 Quarter: 2017-06-25
10-Q 2017-03-26 Quarter: 2017-03-26
10-K 2016-12-25 Annual: 2016-12-25
10-Q 2016-09-25 Quarter: 2016-09-25
10-Q 2016-06-26 Quarter: 2016-06-26
10-Q 2016-03-27 Quarter: 2016-03-27
10-K 2015-12-27 Annual: 2015-12-27
10-Q 2015-09-27 Quarter: 2015-09-27
10-Q 2015-06-28 Quarter: 2015-06-28
10-Q 2015-03-29 Quarter: 2015-03-29
10-K 2014-12-28 Annual: 2014-12-28
10-Q 2014-09-28 Quarter: 2014-09-28
10-Q 2014-06-29 Quarter: 2014-06-29
8-K 2019-08-19 Other Events
8-K 2019-08-07 Earnings, Exhibits
8-K 2019-05-30 Other Events, Exhibits
8-K 2019-05-15 Shareholder Vote
8-K 2019-05-08 Earnings, Exhibits
8-K 2019-05-08 Earnings, Exhibits
8-K 2019-03-13 Earnings, Other Events, Exhibits
8-K 2019-01-16 Officers, Regulation FD, Exhibits
8-K 2018-11-07 Earnings, Exhibits
8-K 2018-10-09 Amend Bylaw, Exhibits
8-K 2018-10-04 Regulation FD, Exhibits
8-K 2018-08-09 Earnings, Exhibits
8-K 2018-06-18 Leave Agreement, M&A, Other Events, Exhibits
8-K 2018-05-28 Enter Agreement, Regulation FD, Exhibits
8-K 2018-05-23 M&A, Exhibits
8-K 2018-05-18 Officers, Shareholder Vote
8-K 2018-05-09 Earnings, Exhibits
8-K 2018-03-18 Officers
8-K 2018-03-07 Earnings, Exhibits
8-K 2018-02-07 Enter Agreement, Officers, Regulation FD, Exhibits
8-K 2018-01-19 Officers, Regulation FD
RSYS Radisys 62
DTRM Determine 22
MGTI MGT Capital Investments 7
RSCF Reflect Scientific 4
ABCE Abco Energy 0
GREAT Greater Cannabis Company 0
SCGY Scientific Energy 0
TDFF Ceres Tactical Systematic 0
BBLG Bone Biologics 0
NAP Navios Maritime Midstream Partners 0
TRNC 2019-06-30
Part I.
Item 1. Financial Statements
Note 1: Description of Business and Basis of Presentation
Note 2: Leases
Note 3: Revenue Recognition
Note 4: Changes in Operations
Note 5: Related Party Transactions
Note 6: Acquisitions
Note 8: Inventories
Note 9: Goodwill and Other Intangible Assets
Note 10: Income Taxes
Note 11: Pension and Other Postretirement Benefits
Note 12: Noncontrolling Interest
Note 13: Earnings per Share
Note 14: Stockholders' Equity
Note 15: Accumulated Other Comprehensive Income (Loss)
Note 16: Contingencies
Note 17: Segment Information
Note 18: Supplemental Cash Flow Information
Note 19: Subsequent Events
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.
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
EX-31.1 a2019q210qexhibit311.htm
EX-31.2 a2019q210qexhibit312.htm
EX-32 a2019q210qexhibit32.htm

Tronc Earnings 2019-06-30

TRNC 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 a2019q210q.htm 10-Q Document





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

FORM 10-Q
[ X ]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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 Illinois
 
60601
(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 $.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  X   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  X   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   X   
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  X

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 August 5, 2019
Common Stock, $0.01 par value
 
35,747,365






 
 
TRIBUNE PUBLISHING COMPANY
 
 
 
 
FORM 10-Q
 
 
 
 
TABLE OF CONTENTS
 
 
 
 
 
 
Page
 
 
 
 
 
PART I
 
 
 
 
 
 
 
 
Item 1.
 
 
 
 
 
 
 
Item 2.
 
 
 
 
 
 
 
Item 3.
 
 
 
 
 
 
 
Item 4.
 
 
 
 
 
 
 
PART II
 
 
 
 
 
 
 
Item 1.
 
 
 
 
 
 
 
Item 1A.
 
 
 
 
 
 
 
Item 2.
 
 
 
 
 
 
 
Item 3.
 
 
 
 
 
 
 
Item 4.
 
 
 
 
 
 
 
Item 5.
 
 
 
 
 
 
 
Item 6.
 
 
 
 
 
 
 
 
 
 

1




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, changes in advertising demand, circulation levels and audience shares; competition and other economic conditions; 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 develop and grow our online businesses; changes in newsprint price; our ability to maintain effective internal control over financial reporting; concentration of stock ownership among our principal stockholders whose interests 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 18, 2019, 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.

2




PART I.
Item 1.    Financial Statements
TRIBUNE PUBLISHING COMPANY
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(In thousands, except per share data)
(Unaudited)
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30, 2019
 
July 1, 2018
 
June 30, 2019
 
July 1, 2018
Operating revenues
 
$
250,327

 
$
253,037

 
$
494,852

 
$
491,576

Operating expenses:
 
 
 
 
 
 
 
 
Compensation
 
95,808

 
106,455

 
193,517

 
217,293

Newsprint and ink
 
15,118

 
16,770

 
31,221

 
31,368

Outside services
 
80,425

 
81,818

 
164,238

 
180,803

Other operating expenses
 
39,223

 
36,297

 
81,441

 
69,159

Depreciation and amortization
 
11,648

 
12,942

 
23,732

 
25,959

Total operating expenses
 
242,222

 
254,282

 
494,149

 
524,582

Income (loss) from operations
 
8,105

 
(1,245
)
 
703

 
(33,006
)
Interest income (expense), net
 
315

 
(5,412
)
 
535

 
(11,976
)
Loss on early extinguishment of debt
 

 
(7,666
)
 

 
(7,666
)
Loss on equity investments, net
 
(555
)
 
(665
)
 
(1,042
)
 
(1,394
)
Other income (expense), net
 
(56
)
 
3,640

 
17

 
7,303

Income (loss) from continuing operations before income taxes
 
7,809

 
(11,348
)
 
213

 
(46,739
)
Income tax expense (benefit)
 
2,465

 
3,753

 
(417
)
 
(2,926
)
Net income (loss) from continuing operations
 
5,344

 
(15,101
)
 
630

 
(43,813
)
Plus: Earnings (loss) from discontinued operations, net of taxes
 
(722
)
 
280,545

 
(722
)
 
294,745

Net income (loss)
 
4,622

 
265,444

 
(92
)
 
250,932

Less: Income attributable to noncontrolling interest
 
1,926

 
448

 
1,887

 
710

Net income (loss) attributable to Tribune common stockholders
 
$
2,696

 
$
264,996

 
$
(1,979
)
 
$
250,222

 
 
 
 
 
 
 
 
 
Net income (loss) from continuing operations, net of income attributable to noncontrolling interest, per common share:
 
 
 
 
 
 
 
 
Basic
 
$
0.10

 
$
(0.44
)
 
$
(0.04
)
 
$
(1.27
)
Diluted
 
$
0.10

 
$
(0.44
)
 
$
(0.04
)
 
$
(1.27
)
Net income (loss) attributable to Tribune per common share:
 
 
 
 
 
 
 
 
Basic
 
$
0.08

 
$
7.51

 
$
(0.06
)
 
$
7.14

Diluted
 
$
0.08

 
$
7.51

 
$
(0.06
)
 
$
7.14

Weighted average shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
35,711

 
35,288

 
35,669

 
35,045

Diluted
 
35,866

 
35,288

 
35,669

 
35,045

  
 
 
 
 
 
 
 
 

The accompanying notes are an integral part of these unaudited consolidated financial statements.
3




TRIBUNE PUBLISHING COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30, 2019
 
July 1, 2018
 
June 30, 2019
 
July 1, 2018
Net income (loss)
 
$
4,622

 
$
265,444

 
$
(92
)
 
$
250,932

Comprehensive income (loss), net of taxes:
 
 
 
 
 
 
 
 
Amortization of items to periodic pension cost during the period, net of taxes of ($23), ($915), ($46) and ($1,830), respectively
 
(59
)
 
(2,376
)
 
(118
)
 
(4,752
)
Foreign currency translation
 
(10
)
 
(5
)
 
(12
)
 
(5
)
Comprehensive loss recognized in continuing operations, net of taxes
 
(69
)
 
(2,381
)
 
(130
)
 
(4,757
)
Accumulated other comprehensive income recognized in discontinued operations, net of taxes of $9,702
 

 
25,397

 

 
25,397

Comprehensive income (loss)
 
4,553

 
288,460

 
(222
)
 
271,572

Less: Comprehensive income attributable to noncontrolling interest
 
1,926

 
448

 
1,887

 
710

Comprehensive income (loss) attributable to Tribune common stockholders
 
$
2,627

 
$
288,012

 
$
(2,109
)
 
$
270,862




The accompanying notes are an integral part of these unaudited consolidated financial statements.
4



TRIBUNE PUBLISHING COMPANY
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)

 
 
June 30, 2019
 
December 30, 2018
Assets
 
 
 
 
Current assets
 
 
 
 
Cash
 
$
102,632

 
$
97,560

Accounts receivable, (net of allowances of $10,831 and $11,458)
 
112,047

 
145,463

Inventories
 
6,516

 
9,587

Prepaid expenses and other
 
19,534

 
18,197

Total current assets
 
240,729

 
270,807


 
 
 
 
Property, plant and equipment
 
 
 
 
Machinery, equipment and furniture
 
126,650

 
124,243

Buildings and leasehold improvements
 
85,377

 
82,399

 
 
212,027

 
206,642

Accumulated depreciation
 
(84,141
)
 
(74,013
)
 
 
127,886

 
132,629

Advance payments on property, plant and equipment
 
3,997

 
12,334

Property, plant and equipment, net
 
131,883

 
144,963

 
 
 
 
 
Other assets
 
 
 
 
Goodwill
 
132,172

 
132,146

Intangible assets, net
 
72,896

 
77,229

Software, net
 
23,270

 
27,117

Lease right-of-use asset
 
106,851

 

Restricted cash
 
37,290

 
43,947

Deferred income taxes
 
1,364

 
2,414

Other long-term assets
 
14,145

 
28,004

Total other assets
 
387,988

 
310,857

 
 
 
 
 
Total assets
 
$
760,600

 
$
726,627

 
 
 
 
 

The accompanying notes are an integral part of these unaudited consolidated financial statements.
5



TRIBUNE PUBLISHING COMPANY
CONSOLIDATED CONDENSED BALANCE SHEETS (continued)
(In thousands, except per share data)
(Unaudited)


 
 
June 30, 2019
 
December 30, 2018
Liabilities and stockholders’ equity
 
 
 
 
Current liabilities
 
 
 
 
Accounts payable
 
$
45,129

 
$
70,555

Employee compensation and benefits
 
42,896

 
61,001

Deferred revenue
 
47,632

 
51,114

Dividends payable to stockholders
 
53,845

 

Current portion of long-term lease liability
 
21,558

 

Current portion of long-term debt
 
100

 
405

Other current liabilities
 
21,283

 
21,203

Tax liabilities associated with discontinued operations
 

 
6,249

Total current liabilities
 
232,443

 
210,527

 
 
 
 
 
Non-current liabilities
 
 
 
 
Long-term lease liability
 
108,416

 

Workers’ compensation, general liability and auto insurance payable
 
25,703

 
30,606

Pension and postretirement benefits payable
 
18,477

 
20,150

Deferred rent
 

 
25,424

Long-term debt
 
6,801

 
6,799

Other obligations
 
8,218

 
20,053

Total non-current liabilities
 
167,615

 
103,032

 
 
 
 
 
Noncontrolling interest
 
38,243

 
39,756

 
 
 
 
 
Stockholders’ equity
 
 
 
 
Preferred stock, $.01 par value. Authorized 30,000 shares; no shares issued or outstanding at June 30, 2019 and December 30, 2018
 

 

Common stock, $.01 par value. Authorized 300,000 shares, 37,686 shares issued and 35,733 shares outstanding at June 30, 2019; 37,551 shares issued and 35,597 shares outstanding at December 30, 2018
 
377

 
376

Additional paid-in capital
 
175,305

 
166,668

Retained earnings
 
172,880

 
232,401

Accumulated other comprehensive income (loss)
 
(103
)
 
27

Treasury stock, at cost - 1,954 shares at June 30, 2019 and December 30, 2018
 
(26,160
)
 
(26,160
)
Total stockholders’ equity
 
322,299

 
373,312

 
 
 
 
 
Total liabilities and stockholders’ equity
 
$
760,600

 
$
726,627



The accompanying notes are an integral part of these unaudited consolidated financial statements.
6




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

 
 
Common Stock
 
Additional Paid in Capital
 
Retained Earnings
 
AOCI
 
Treasury Stock
 
Total Equity
 
 
Shares
 
Amount
 
 
 
 
 
Balance at December 30, 2018
 
37,551

 
$
376

 
$
166,668

 
$
232,401

 
$
27

 
$
(26,160
)
 
$
373,312

Cumulative effect of adoption of leasing standard
 

 

 

 
(1,787
)
 

 

 
(1,787
)
Adjusted balance at December 30, 2018
 
37,551

 
376

 
166,668

 
230,614

 
27

 
(26,160
)
 
371,525

Comprehensive loss attributable to controlling interests
 

 

 

 
(4,675
)
 
(61
)
 

 
(4,736
)
Issuance of stock from restricted stock and restricted stock unit (“RSU”) conversions
 
67

 

 

 

 

 

 

Stock-based compensation
 

 

 
5,737

 

 

 

 
5,737

Withholding for taxes on RSU conversions
 

 

 
(13
)
 

 

 

 
(13
)
Balance at March 31, 2019
 
37,618

 
$
376

 
$
172,392

 
$
225,939

 
$
(34
)
 
$
(26,160
)
 
$
372,513

Comprehensive income (loss) attributable to controlling interests
 

 

 

 
2,696

 
(69
)
 

 
2,627

Dividends to common stockholders
 

 

 

 
(55,755
)
 

 

 
(55,755
)
Issuance of stock from restricted stock and RSU conversions
 
68

 
1

 
(1
)
 

 

 

 

Stock-based compensation
 

 

 
2,914

 

 

 

 
2,914

Balance at June 30, 2019
 
37,686

 
$
377

 
$
175,305

 
$
172,880

 
$
(103
)
 
$
(26,160
)
 
$
322,299


The accompanying notes are an integral part of these unaudited consolidated financial statements.
7




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

 
 
Common Stock
 
Additional Paid in Capital
 
Retained Earnings (Deficit)
 
AOCI
 
Treasury Stock
 
Total Equity
 
 
Shares
 
Amount
 
 
 
 
 
Balance at December 31, 2017
 
37,551

 
$
376

 
$
150,229

 
$
(16,390
)
 
$
(13,527
)
 
$
(51,526
)
 
$
69,162

Comprehensive loss attributable to controlling interests
 

 

 

 
(14,627
)
 
(2,377
)
 

 
(17,004
)
AOCI recognized in discontinued operations
 

 

 

 

 
108

 

 
108

Issuance of stock from treasury for acquisition
 

 

 
9,229

 

 

 
25,366

 
34,595

Issuance of stock from restricted stock and RSU conversions
 
122

 
1

 
(1
)
 

 

 

 

Exercise of stock options
 
7

 

 
133

 

 

 

 
133

Stock-based compensation
 

 

 
2,447

 

 

 

 
2,447

Withholding for taxes on RSU conversions
 

 

 
(943
)
 

 

 

 
(943
)
Forfeited restricted stock
 
(450
)
 
(5
)
 
5

 

 

 

 

Balance at April 1, 2018
 
37,230

 
372

 
161,099

 
(31,017
)
 
(15,796
)
 
(26,160
)
 
88,498

Comprehensive income (loss) attributable to controlling interests
 

 

 

 
264,849

 
(2,380
)
 

 
262,469

AOCI recognized in discontinued operations
 

 

 

 

 
25,289

 

 
25,289

Issuance of stock from restricted stock and RSU conversions
 
12

 

 

 

 

 

 

Exercise of stock options
 

 

 
1

 

 

 

 
1

Stock-based compensation
 

 

 
2,748

 

 

 

 
2,748

Withholding for taxes on RSU conversions
 

 

 
(119
)
 

 

 

 
(119
)
Balance at July 1, 2018
 
37,242

 
$
372

 
$
163,729

 
$
233,832

 
$
7,113

 
$
(26,160
)
 
$
378,886



The accompanying notes are an integral part of these unaudited consolidated financial statements.
8




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

 
 
Six Months Ended
 
 
June 30, 2019
 
July 1, 2018
Operating Activities From Continuing Operations
 
 
 
 
Net income (loss) from continuing operations
 
$
630

 
$
(43,813
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
23,732

 
25,959

Stock compensation expense
 
8,651

 
5,195

Loss on equity investments, net
 
1,042

 
1,394

Loss on early extinguishment of debt
 

 
7,666

Deferred income taxes
 
1,822

 
7,094

Defined benefit plan contribution
 
(1,054
)
 
(534
)
Postretirement medical, life and other benefits
 
(782
)
 
(2,369
)
Changes in working capital items, excluding acquisitions:
 
 
 
 
Accounts receivable, net
 
33,417

 
15,801

Prepaid expenses, inventories and other current assets
 
(7,088
)
 
16,934

Accounts payable, employee compensation and benefits, deferred revenue and other current liabilities
 
(42,527
)
 
9,898

Other, net
 
(274
)
 
(2,046
)
Net cash provided by operating activities
 
17,569

 
41,179

 
 
 
 
 
Investing Activities From Continuing Operations
 
 
 
 
Capital expenditures
 
(9,288
)
 
(30,435
)
Acquisition of business, net of cash acquired
 

 
(67,952
)
Other, net
 
(179
)
 
(2,371
)
Net cash used for investing activities
 
(9,467
)
 
(100,758
)
 
 
 
 
 
Financing Activities From Continuing Operations
 
 
 
 
Repayments of capital lease obligations
 
(303
)
 

Repayment of long-term debt
 

 
(353,253
)
Dividends paid to noncontrolling interest
 
(3,400
)
 

Withholding for taxes on RSU vesting
 
(13
)
 
(1,062
)
Other
 

 
170

Net cash used for financing activities
 
(3,716
)
 
(354,145
)
 
 
 
 
 
Increase (decrease) in cash attributable to continuing operations
 
$
4,386

 
$
(413,724
)

The accompanying notes are an integral part of these unaudited consolidated financial statements.
9




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

 
 
Six Months Ended
 
 
June 30, 2019
 
July 1, 2018
 
 
 
 
 
Cash flows provided by (used for) operating activities from discontinued operations, net
 
$
(5,971
)
 
$
2,387

Cash flows provided by investing activities from discontinued operations, net
 

 
483,320

Cash flows used for financing activities from discontinued operations, net
 

 
(190
)
Increase (decrease) in cash attributable to discontinued operations
 
(5,971
)
 
485,517

 
 
 
 
 
Net increase (decrease) in cash
 
(1,585
)
 
71,793

Cash, cash equivalents and restricted cash, beginning of period
 
141,507

 
185,351

Cash, cash equivalents and restricted cash, end of period
 
$
139,922

 
$
257,144


The accompanying notes are an integral part of these unaudited consolidated financial statements.
10


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, formerly tronc. Inc., 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, 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 on February 6, 2018, the Company became a majority owner in BestReviews LLC (“BestReviews”). On May 28, 2018, the Company acquired Virginian-Pilot Media Companies LLC, owner of The Virginian-Pilot, a daily newspaper based in Norfolk, Virginia, and associated businesses (“Virginian-Pilot”). See Note 6 for further information on acquisitions.
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”). See Note 7 for more information on the dispositions and related discontinued operations.
Tribune’s continuing legacy of brands, including the The Virginian-Pilot, 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.
Fiscal Periods—The Company’s fiscal year ends on the last Sunday in December. Fiscal year 2019 ends on December 29, 2019 and fiscal year 2018 ended on December 30, 2018. Fiscal year 2019 and 2018 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 June 30, 2019 and December 30, 2018 and the results of operations for the three and six months ended June 30, 2019 and July 1, 2018, respectively, and the cash flows for the six months ended June 30, 2019 and July 1, 2018, 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.
Effective as of the sale dates, the operations of the California Properties and forsalebyowner.com qualify as discontinued operations. Accordingly, results of these operations for all periods presented have been reflected as discontinued operations in the accompanying Consolidated Financial Statements. Additionally, assets and liabilities related to the divested properties are classified as such in all 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 related to the California Properties and forsalebyowner.com.
Accounting standards adopted in 2019—In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-15, Subtopic 350-40, Intangibles-Goodwill and Other-Internal-Use Software; Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”). ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). ASU 2018-15 can be applied either retrospectively or prospectively. ASU 2018-15 is effective for interim and annual reporting periods beginning after December 15, 2019. Early adoption is permitted, including adoption in any interim period. The Company adopted this

11


TRIBUNE PUBLISHING COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)



standard effective the beginning of fiscal year 2019 and will apply the provisions of the standard prospectively. The adoption had no material effect on the Company’s consolidated financial statements.
In February 2018, the FASB issued ASU 2018-02, Topic 220, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (“ASU 2018-02”). ASU 2018-02 amends ASC 220, Income Statement — Reporting Comprehensive Income, to “allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act.” In addition, under the ASU, an entity will be required to provide certain disclosures regarding stranded tax effects. ASU 2018-02 is effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The Company adopted this standard effective the beginning of fiscal year 2019 and adoption had no material effect on the Company’s consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Topic 842, Leases (“ASC 842”), which requires lessees to recognize lease assets and lease liabilities for operating leases. The Company adopted this standard effective December 31, 2018 using the modified retrospective transition method whereby the Company applied the new standard at the adoption date and recognized a cumulative-effect adjustment of $1.8 million, net of tax of $0.7 million, to reduce the opening balance of retained earnings in the first quarter of 2019, primarily due to lease impairments determined during the adoption. The Company has elected the practical expedients which allow the Company to forgo reassessing whether existing contracts are or contain leases, forgo reassessing the classification of existing leases, forgo reassessing initial direct costs of existing leases at the initial application date and to combine lease and nonlease components. Additionally, the Company did not consider any leases with original lease terms less than one year. See Note 2 for additional disclosures related to the Company’s leases.
Accounting standards not yet adopted—In June 2016, the FASB issued ASU 2016-13, Topic 326, Financial Instruments – Credit Losses (“ASU 2016-13”). ASU 2016-13 changes the impairment model for most financial assets and will require the use of an “expected loss” model for instruments measured as amortized cost. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. The Company expects to adopt the standard effective December 30, 2019. The Company has initiated efforts to assess the impact of this new standard on the Company’s future reported results and operating and accounting processes and systems.
NOTE 2: LEASES
Tribune’s leased facilities are approximately 4.0 million square feet in the aggregate. The Company currently has leased newspaper production facilities in Connecticut, Florida, Illinois, Maryland, New Jersey, and Pennsylvania, however Tribune owns substantially all of the production equipment. For printing plants, the initial lease term is 10 years with two options to renew for additional 10 year terms. For distribution facilities, the initial lease term is generally five years, with options to renew either two or three additional five year terms. Our corporate headquarters are located at 160 N. Stetson Avenue, Chicago, Illinois. The lease is for approximately 137,000 square feet with a 10 year and 11 month term for one floor and a 12 year term for four floors, expiring in 2028 and 2030, respectively. The Company has rent escalations, rent holidays and leasehold improvement incentives which are included in the determination of the right-of-use asset (“ROU”) and the lease liabilities.
Tribune subleases certain facilities that are approximately 0.1 million square feet in aggregate. The terms of these subleases are from five to seven years and expire between 2019 and 2023.
Tribune determines if an arrangement is a lease at inception. Operating leases are included in lease ROU assets, current portion of long-term lease liabilities, and long-term lease liabilities on the consolidated balance sheets. Finance leases are included in property, plant and equipment, current portion of long-term debt and long-term debt on the consolidated balance sheets. Amortization of the operating leases ROU assets is included in other operating expenses. Amortization of finance leases is included in depreciation expense. Sublease income is included as an offset to lease expense in other operating expenses.
Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of the Company’s leases do not provide an implicit rate, Tribune uses its incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The recorded operating lease ROU asset on the balance sheet reflects lease

12


TRIBUNE PUBLISHING COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)



payments made to date and excludes lease incentives and initial direct costs incurred. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the option will be exercised. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Certain lease agreements have lease and non-lease components, which are generally accounted for together.
Below is a summary of information related to the Company’s leases for the three and six months ended June 30, 2019 (in thousands):
 
 
Three Months Ended June 30, 2019
 
Six Months Ended June 30, 2019
Lease cost:
 
 
 
 
Finance lease cost
 
$
79

 
$
157

Operating lease cost
 
7,329

 
14,825

Variable lease cost
 
1,945

 
3,570

Sublease income
 
(443
)
 
(1,572
)
Total lease cost
 
$
8,910

 
$
16,980

Below is a summary of the supplemental cash flow information related to leases for the six months ended June 30, 2019 (in thousands):
Cash paid for amounts included in the measurement of lease liabilities:
 
 
Operating cash flows from operating leases
 
$
20,431

Operating cash flows from finance leases
 
$
60

Financing cash flows from finance leases
 
$
303

Right of use assets obtained in exchange for new operating lease liabilities
 
$
2,159

Weighted average remaining lease term - finance leases (in years)
 
2.3

Weighted average remaining lease term - operating leases (in years)
 
6.3

Weighted average discount rate - finance leases
 
5.75
%
Weighted average discount rate - operating leases
 
4.74
%
Future minimum lease payments under noncancelable operating lease arrangements having initial terms of one year or more as of June 30, 2019 are as follows (in thousands):
 
 
Operating Leases
 
Finance Leases
 
Subleases
7/1/2019 - 6/28/2020
 
$
31,149

 
$
100

 
$
3,037

6/29/2020 - 6/27/2021
 
28,668

 
50

 
2,471

6/28/2021 - 6/26/2022
 
26,002

 
6,892

 
1,707

6/27/2022 - 6/25/2023
 
23,331

 

 
1,625

6/26/2023 - 6/30/2024
 
9,916

 

 
793

Thereafter
 
33,544

 

 

Total future lease payments
 
152,610

 
7,042

 
9,633

Less imputed interest
 
22,636

 
141

 

Net future minimum lease payments
 
$
129,974

 
$
6,901

 
$
9,633


13


TRIBUNE PUBLISHING COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)



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.
The Company receives a significant portion of the payments from its subscribers in advance of the delivery of the content both 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 30, 2018, the Company had a contract liabilities balance of $54.0 million, of which $40.4 million has been recognized as revenue in the six months ended June 30, 2019. As of the adoption of ASC 606 on January 1, 2018, the Company had a contract liabilities balance from of $55.1 million, of which $41.5 million was recognized as revenue in the six months ended July 1, 2018.
The Company’s revenues disaggregated by type of revenue and segment are presented in Note 17.
The Company generally expenses sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within cost of sales. 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. The discussion and amounts below represent activity in the Company’s continuing operations and exclude any amounts in the Company’s assets, liabilities or operations from discontinued operations.
During the six months ended June 30, 2019, the Company implemented reductions in staffing levels in its operations of 105 positions for which the Company recorded pretax charges related to these reductions and executive separations totaling $6.7 million. The pretax charges related to the reductions during the three months ended June 30, 2019 were immaterial. The reductions for the six months ended June 30, 2019, include 23 positions related to the voluntary severance incentive plan initiated in the fourth quarter of 2018. The related salary continuation payments began during the first quarter and are expected to continue through the first quarter of 2020.
Included in the 2019 severance charge is approximately $4.0 million related to the separation of the Company’s CEO and two senior executives in the digital space in the first quarter of 2019. Each of these employees had employment contracts which provided for immediate payout of any contractual compensation under the employment agreement in the event of separation. These employment agreements were amended to permit payment of the severance as salary continuation over the remainder of 2019, during which time equity-based awards would continue to vest. The severance payments to these executives, including compensation and medical benefits, if any, were accrued in the first quarter of 2019. Additionally, as a result of the separation, the Company recognized accelerated stock-based compensation expense in the first quarter of 2019 of $1.5 million.
During the three and six months ended July 1, 2018, the Company implemented reductions in staffing levels of 106 and 287 positions respectively, and for which the Company recorded pretax charges related to these reductions totaling $5.0 million and $10.7 million, respectively.

14


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 six months ended June 30, 2019 is as follows (in thousands):
Balance at December 30, 2018
 
$
28,845

Provision
 
6,667

Payments
 
(25,788
)
Balance at June 30, 2019
 
$
9,724

Charges for severance and related expenses are included in compensation expense in the accompanying Consolidated Statements of Income (Loss).
NOTE 5: RELATED PARTY TRANSACTIONS
Transition Services Agreement with NantMedia Holdings, LLC
In connection with the closing of the sale of the California Properties, the Company entered into a transition services agreement (“TSA”) with NantMedia Holdings, LLC (“NantMedia”), providing for up to twelve months of transition services between the parties at negotiated rates approximating cost. On January 17, 2019, this agreement was amended to extend the date of transition services to June 30, 2020. Either party may discontinue all or a portion of the services being provided to such party by providing 60 days advance notice. See Note 7 for additional information on the sale of the California Properties.
As the operational transition continues, there are certain costs that the Company paid on behalf of NantMedia due to commingled contracts and processes. Such costs include newsprint, rent, benefits, and other operating activities. The TSA provides for reimbursement to the Company for such charges until the contracts and processes can be separated. Additionally, the Company receives some revenue payments related to commingled revenue contracts that include the California Properties. These payments are reimbursed to NantMedia. A summary of the activity with respect to the TSA for the three and six months ended June 30, 2019 is as follows (in thousands):
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30, 2019
 
July 1, 2018
 
June 30, 2019
 
July 1, 2018
Accounts receivable from NantMedia beginning balance
 
$
10,775

 
$

 
$
17,909

 
$

Revenue for TSA services
 
5,948

 
1,181

 
12,954

 
1,181

Reimbursable costs
 
13,332

 
12,028

 
29,677

 
12,028

Amounts received for TSA services
 
(6,537
)
 

 
(12,403
)
 

Amounts received for reimbursable costs
 
(14,775
)
 

 
(40,013
)
 

Amounts reimbursed to Nant for amounts collected from third parties under commingled revenue contracts
 
7,011

 

 
13,076

 

Amounts collected from third parties under commingled revenue contracts
 
(6,787
)
 
(688
)
 
(12,233
)
 
(688
)
Accounts receivable from NantMedia balance as of June 30, 2019(i)
 
$
8,967

 
$
12,521

 
$
8,967

 
$
12,521

(i)The accounts receivable from NantMedia balance as of June 30, 2019 consists of $6.2 million of charges which had been billed and $2.7 million of charges which had not been billed as of that date.
Event Services Agreement with Los Angeles Times Communications LLC
On June 21, 2019, the Company entered into an event services agreement with Los Angeles Times Communications LLC (“LATC”), whereby LATC will perform event organization, production, operation and marketing of the 2019 Chicago Food Bowl. The Company agrees to license the Chicago Tribune as a sponsor, to provide advertising and to print the program for the event. Consideration received for the agreement includes $0.1 million in cash, $0.6 million in noncash trade advertising and commissions on sponsorship fees. The agreement continues until September 30, 2019.

15


TRIBUNE PUBLISHING COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)



Merrick Consulting Agreement
On December 20, 2017, the Company entered into a Consulting Agreement with Merrick Ventures LLC (“Merrick Ventures”) and solely for certain sections thereof, Michael W. Ferro, Jr. and Merrick Media, LLC (“Merrick Media”). At the time the agreement was signed, Mr. Ferro was also Chairman of Tribune’s Board of Directors and, together with Merrick Ventures and Merrick Media, a significant stockholder. The Consulting Agreement provided for the engagement of Merrick Ventures on a non-exclusive basis to provide certain management expertise and technical services for an annual fee of $5.0 million in cash, payable in advance on the first business day of each calendar year. The Consulting Agreement provided for a rolling three-year term, with the initial term continuing through December 31, 2020. The Company made the initial $5.0 million payment in early January 2018. On March 18, 2018, Mr. Ferro retired from the Company’s Board. As Mr. Ferro was no longer actively engaged in the business and the Company remained contractually committed for the future payments due under the Consulting Agreement, the Company recognized expense for the full $15.0 million due under the Consulting Agreement in outside services in the first quarter of 2018. In the second quarter of fiscal year 2018, the Company amended the Consulting Agreement. The amendment reduced the total fees due under the Consulting Agreement by $2.5 million (from $15.0 million to $12.5 million) and allows the Company to engage Merrick Ventures as its advisor, if it so chooses, but at no additional cost to the Company. If so engaged, the Company would indemnify Merrick Ventures if the Company requests it to meet with third parties. In June 2018, the Company paid the remaining $7.5 million in fees due under the amended Consulting Agreement in connection with the execution of the amendment. The Company recognized a credit of $2.5 million for the reduction in fees due under the Consulting Agreement in outside services in the second quarter of 2018. The non-compete covenants and amended Securities Purchase Agreement terms contained in the Consulting Agreement were not altered by the amendment and remain in place through December 31, 2020.
NOTE 6: ACQUISITIONS
Virginian-Pilot
On May 28, 2018, the Company acquired Virginian-Pilot Media Companies, LLC (“Virginian-Pilot”), the owner of The Virginian-Pilot daily newspaper based in Norfolk, Virginia, pursuant to a Securities Purchase Agreement, for a cash purchase price of $34.0 million less a post-close working capital adjustment of $0.1 million from the seller.
During the first quarter of 2019, the Company completed the determination of the fair value of the assets acquired, including intangible assets and liabilities assumed. There were no adjustments to the allocation of the purchase price which is as follows (in thousands):
Consideration
 
 
Cash consideration for acquisition
 
$
33,912

Total consideration
 
33,912

 
 
 
Allocated Fair Value of Acquired Assets and Assumed Liabilities
 
 
Accounts receivable and other current assets
 
8,257

Property, plant and equipment
 
29,843

Mastheads
 
4,700

Intangible assets subject to amortization
 
1,300

Accounts payable and other current liabilities
 
(10,749
)
Other long term obligations
 
(68
)
Total identifiable assets, net
 
33,283

Goodwill
 
629

Total net assets acquired
 
$
33,912


16


TRIBUNE PUBLISHING COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)



NOTE 7: DISPOSITIONS AND DISCONTINUED OPERATIONS
On February 7, 2018, the Company entered into a Membership Interest Purchase Agreement (“MIPA”) by and between the Company and Nant Capital, LLC (“Nant Capital”) pursuant to which the Company agreed to sell the California Properties to Nant Capital for an aggregate purchase price of $500.0 million in cash, plus the assumption of unfunded pension liabilities related to the San Diego Pension Plan, less a post-closing working capital adjustment to the buyer of $9.7 million (the "Nant Transaction"). The Nant Transaction closed on June 18, 2018 and resulted in a pre-tax gain of $404.8 million.
On May 23, 2018, the Company sold substantially all of the assets of forsalebyowner.com in an asset sale for $2.5 million, less a post-closing working capital payment to the buyer of $0.1 million, plus an advertising sales commitment of $4.5 million over a term of two years. The forsalebyowner.com balances are reflected as related to discontinued operations on the consolidated balance sheets for all periods presented and the results of operations are included in discontinued operations for all periods presented.
Discontinued Operations
During the three months ended June 30, 2019, the Company made adjustments to certain reserves related to indemnified liabilities. Earnings (loss) from discontinued operations for the respective transaction dates, included in the Consolidated Statements of Loss are comprised of the following (in thousands):
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30, 2019
 
July 1, 2018
 
June 30, 2019
 
July 1, 2018
Operating revenues
 
$

 
$
94,251

 
$

 
$
211,327

Operating expenses:
 
 
 
 
 
 
 
 
Compensation
 

 
25,065

 

 
58,763

Newsprint and ink
 

 
6,938

 

 
14,373

Outside services
 

 
30,075

 

 
61,650

Other operating expenses
 
1,000

 
26,804

 
1,000

 
56,541

Depreciation and amortization
 

 
1,328

 

 
2,960

Total operating expenses
 
1,000

 
90,210

 
1,000

 
194,287

Income (loss) from operations
 
(1,000
)
 
4,041

 
(1,000
)
 
17,040

Gain on sale
 

 
409,334

 

 
409,334

Interest expense, net
 

 
(23
)
 

 
(53
)
Other income, net
 

 
613

 

 
1,338

Income tax benefit (expense)
 
278

 
(133,420
)
 
278

 
(132,914
)
Income (loss) from discontinued operations, net of tax
 
$
(722
)
 
$
280,545

 
$
(722
)
 
$
294,745


17


TRIBUNE PUBLISHING COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)



Discontinued operations by segment are presented below (in thousands):
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30, 2019
 
July 1, 2018
 
June 30, 2019
 
July 1, 2018
Operating revenues
 
 
 
 
 
 
 
 
M
 
$

 
$
81,631

 
$

 
$
185,836

X
 

 
12,570

 

 
25,429

Corporate and eliminations
 

 
50

 

 
62

 
 
$

 
$
94,251

 
$

 
$
211,327

Income (loss) from Operations
 
 
 
 
 
 
 
 
M
 
$
(1,000
)
 
$
(75
)
 
$
(1,000
)
 
$
10,918

X
 

 
4,065

 

 
6,079

Corporate and eliminations
 

 
51

 

 
43

 
 
$
(1,000
)
 
$
4,041

 
$
(1,000
)
 
$
17,040

Depreciation and amortization
 
 
 
 
 
 
 
 
M
 
$

 
$
1,289

 
$

 
$
2,856

X
 

 
39

 

 
104

 
 
$

 
$
1,328

 
$

 
$
2,960


The following table presents the aggregate carrying amounts of assets and liabilities related to discontinued operations in the Consolidated Balance Sheets (in thousands):
 
 
June 30, 2019
 
December 30, 2018
Carrying amount of liabilities associated with discontinued operations:
 
 
 
 
Income tax payable
 
$

 
$
6,249

Total liabilities associated with discontinued operations
 
$

 
$
6,249

NOTE 8: INVENTORIES
Inventories consisted of the following (in thousands):
 
 
June 30, 2019
 
December 30, 2018
Newsprint
 
$
6,242

 
$
9,273

Supplies and other
 
274

 
314

Total inventories
 
$
6,516

 
$
9,587

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

18


TRIBUNE PUBLISHING COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)



NOTE 9: GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets at June 30, 2019 and December 30, 2018, consisted of the following (in thousands):
 
 
June 30, 2019
 
December 30, 2018
 
 
Gross Amount
 
Accumulated Amortization
 
Net Amount
 
Gross Amount
 
Accumulated Amortization
 
Net Amount
Intangible assets subject to amortization:
 
 
 
 
 
 
 
 
 
 
 
 
Subscribers (useful life of 2 to 10 years)
 
$
7,312

 
$
(5,243
)
 
$
2,069

 
$
7,312

 
$
(4,730
)
 
$
2,582

Advertiser relationships (useful life of 2 to 13 years)
 
27,648

 
(13,806
)
 
13,842

 
27,648

 
(12,497
)
 
15,151

Tradenames (useful life of 20 years)
 
15,100

 
(3,733
)
 
11,367

 
15,100

 
(3,343
)
 
11,757

Other (useful life of 1 to 20 years)
 
16,181

 
(5,389
)
 
10,792

 
17,744

 
(4,831
)
 
12,913

Total intangible assets subject to amortization
 
$
66,241

 
$
(28,171
)
 
38,070

 
$
67,804

 
$
(25,401
)
 
42,403

 
 
 
 
 
 
 
 
 
 
 
 
 
Software (useful life of 2 to 10 years)
 
$
140,055

 
$
(116,785
)
 
23,270

 
$
136,005

 
$
(108,888
)
 
27,117

 
 
 
 
 
 
 
 
 
 
 
 
 
Goodwill and other intangible assets not subject to amortization:
 
 
 
 
 
 
 
 
 
 
 
 
Goodwill
 
 
 
 
 
132,172

 
 
 
 
 
132,146

Newspaper mastheads
 
 
 
 
 
34,826

 
 
 
 
 
34,826

Total goodwill and other intangible assets
 
 
 
 
 
$
228,338

 
 
 
 
 
$
236,492

NOTE 10: INCOME TAXES
For the three and six months ended June 30, 2019, the Company recorded an income tax expense related to continuing operations of $2.5 million and an income tax benefit related to continuing operations of $0.4 million, respectively. The effective tax rate on pretax income was 31.6% and (195.8)% in the three and six months ended June 30, 2019, respectively. For the three and six months ended June 30, 2019, the rate differs from the U.S. federal statutory rate of 21% primarily due to state income taxes, net of federal benefit, income from non-controlling interest, tax expense related to vesting of stock compensation, and nondeductible expenses.
For the three and six months ended July 1, 2018, the Company recorded an income tax expense of$3.8 million and an income tax benefit of $2.9 million, respectively. The effective tax rate on pretax income from continuing operations was (33.1%) and 6.3% in the three and six months ended July 1, 2018, respectively. The negative rate for three months ending July 1, 2018 resulted from the year-to-date true-up arising from the annual effective tax rate dropping from approximately 19% to 6%. The annual effective tax rate decreased due to the increase in estimated taxable income due to the reduction of interest expense stemming from the debt extinguishment. For the three and six months ended July 1, 2018, the rate differs from the U.S. federal statutory rate of 21% primarily due to state income taxes, net of federal benefit, and nondeductible expenses. For fiscal year 2018, the Company forecasted a full year pretax loss. In the case of a pretax loss, the unfavorable permanent differences, such as non-deductible meals and entertainment expense, have the effect of decreasing the tax benefit which, in turn, decreases the effective tax rate.
NOTE 11: 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 six months ended June 30, 2019, the Company made contributions totaling $10.6 million to the Chicago Newspaper Publishers Drivers’ Union Pension Plan (the “Drivers’ Plan”), pursuant to its amended rehabilitation plan. The Company expects to contribute an additional $1.1 million during the remainder of 2019. These payments are expensed when due to be paid.

19


TRIBUNE PUBLISHING COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)



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. The Company contributed $1.1 million to the NYDN Pension Plan in the six months ended June 30, 2019. The Company expects to contribute $1.4 million to the NYDN Pension Plan during the remainder of 2019. The components of net periodic benefit for the NYDN Pension Plan are as follows (in thousands):
 
 
Three Months Ended
 
Six Months Ended
 
Affected Line Items in the Consolidated Statements of Income (Loss)
 
 
June 30, 2019
 
July 1, 2018
 
June 30, 2019
 
July 1, 2018
 
Service cost
 
$
(80
)
 
$
(8
)
 
$

 
$
72

 
Compensation
Interest cost
 
947

 
825

 
1,759

 
1,636

 
Other income, net
Expected return on assets
 
(938
)
 
(1,165
)
 
(2,107
)
 
(2,333
)
 
Other income, net
Net periodic benefit
 
$
(71
)
 
$
(348
)
 
$
(348
)
 
$
(625
)
 
 
Postretirement Benefits Other Than Pensions
The Company provides postretirement health care to retirees pursuant to a number of benefit plans. The plans are frozen for new non-union employees. There is some variation in the provisions of these plans, including different provisions for lifetime maximums, prescription drug coverage and certain other benefits. The components of net periodic benefit credit for the Company’s postretirement health care and life insurance plans are as follows (in thousands):
 
 
Three Months Ended
 
Six Months Ended
 
Affected Line Items in the Consolidated Statements of Income (Loss)
 
 
June 30, 2019
 
July 1, 2018
 
June 30, 2019
 
July 1, 2018
 
Service cost
 
$
4

 
$
4

 
$
8

 
$
7

 
Compensation
Interest cost
 
9

 
8

 
19

 
17

 
Other income, net
Amortization of prior service credits
 
(82
)
 
(2,634
)
 
(164
)
 
(5,267
)
 
Other income, net
Amortization of actuarial gains
 

 
(657
)
 

 
(1,315
)
 
Other income, net
Net periodic benefit
 
$
(69
)
 
$
(3,279
)
 
$
(137
)
 
$
(6,558
)
 
 
NOTE 12: NONCONTROLLING INTEREST
The noncontrolling interest represents the 40% membership interest in BestReviews not owned by the Company. In connection with acquisition of BestReviews, the Company and the seller entered into an amended and restated limited liability company agreement of BestReviews (the “LLC Agreement”). Subject to the terms of the LLC Agreement, the Company currently has the right, which began six months after the closing date of the acquisition, to purchase all (but not less than all) of the remaining 40% of the membership interests of BestReviews (the “Call Option”). In addition, beginning six months after closing date of the acquisition, the Company is entitled to exercise a one-time right to purchase 25% of the units of membership interest of BestReviews retained by the seller with terms identical to those applicable to the Call Option.
The seller also has the right, beginning three years after closing date of the acquisition, to cause the Company to purchase all (but not less than all) of the remaining 40% of the membership interests of BestReviews (the “Put Option”) at a purchase price to be determined in the same manner as if the Call Option was exercised.
The noncontrolling interest is presented between liabilities and stockholders’ equity within the Company’s consolidated balance sheet because the Put Option described above could, upon exercise, require the Company, under certain circumstances, to pay cash to purchase the noncontrolling interest. Each quarter, the carrying value of noncontrolling interest

20


TRIBUNE PUBLISHING COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)



is adjusted to the amount the Company would be 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 (decrease) the carrying value of noncontrolling interest also reduce (increase) the amount of net income or loss attributable to Tribune common stockholders for purposes of determining both basic and diluted earnings per share.
In the six months ended June 30, 2019, BestReviews declared dividends of $8.5 million to its shareholders. The Company’s portion of these dividends was $5.1 million and the noncontrolling shareholders’ portion was $3.4 million.
A summary of the activity with respect to non-controlling interest for the six months ended June 30, 2019 is as follows (in thousands):
Balance at December 30, 2018
 
$
39,756

Dividends declared
 
(3,400
)
Income attributable to noncontrolling interest
 
1,887

Balance at June 30, 2019
 
$
38,243

NOTE 13: EARNINGS 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 loss from continuing operations is the control number in determining whether potential common shares are dilutive. In periods where there is a loss from continuing operations, all potential common shares are considered anti-dilutive.

21


TRIBUNE PUBLISHING COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)



For the three and six months ended June 30, 2019 and July 1, 2018, basic and diluted earnings per common share were as follows (in thousands, except per share amounts):
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30, 2019
 
July 1, 2018
 
June 30, 2019
 
July 1, 2018
Income (loss) - Numerator:
 
 
 
 
 
 
 
 
Net income (loss) from continuing operations
 
$
5,344

 
$
(15,101
)
 
$
630

 
$
(43,813
)
Less: Income attributable to noncontrolling interest
 
1,926

 
448

 
1,887

 
710

Net income (loss) from continuing operations available to Tribune common stockholders, before discontinued operations
 
3,418

 
(15,549
)
 
(1,257
)
 
(44,523
)
Income (loss) from discontinued operations
 
(722
)
 
280,545

 
(722
)
 
294,745

Net income (loss) attributable to Tribune common stockholders
 
$
2,696

 
$
264,996

 
$
(1,979
)
 
$
250,222

 
 
 
 
 
 
 
 
 
Shares - Denominator: