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Dynamic quotes 
OFFON

TRIBUNE PUBLISHING COMPANY

(TPCO)
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TRIBUNE PUBLISHING : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

11/04/2020 | 05:11pm EDT
The following discussion and analysis should be read in conjunction with the
other sections of this Quarterly Report on Form 10-Q, including the Company's
Consolidated Financial Statements and related Notes filed as part of this
Quarterly Report, and "Cautionary Statement Concerning Forward-Looking
Statements." Management's Discussion and Analysis of Financial Condition and
Results of Operations contains a number of forward-looking statements, all of
which are based on our current expectations and could be affected by the
uncertainties and other factors described throughout this Quarterly Report as
well as the factors described in our Annual Report on Form 10-K as filed with
the Securities and Exchange Commission ("SEC") on March 11, 2020 ("the "2019
Annual Report"), particularly under Item 1A. "Risk Factors," and in the
Company's other filings with the SEC.
We believe that the assumptions underlying the Consolidated Financial Statements
included in this Quarterly Report are reasonable. However, the Consolidated
Financial Statements may not necessarily reflect our results of operations,
financial position and cash flows for future periods.
OVERVIEW
Tribune Publishing Company was formed as a Delaware corporation on November 21,
2013. Tribune Publishing Company together with its subsidiaries (collectively,
the "Company" or "Tribune") is a media company rooted in award-winning
journalism. Headquartered in Chicago, Tribune operates local media businesses in
eight markets with titles including the Chicago Tribune, New York Daily News,
The Baltimore Sun, Hartford Courant, South Florida'sSun 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") and is the majority owner in BestReviews LLC ("BestReviews").
Tribune's unique and valuable content across its brands have earned a combined
65 Pulitzer Prizes and are committed to informing, inspiring and engaging local
communities. Tribune's brands create and distribute content across our media
portfolio, offering integrated marketing, media, and business services to
consumers and advertisers, including digital solutions and advertising
opportunities.
The Company continues to position itself as a leaner, more agile operation in
order to sustain itself for the long term. Accordingly, the Company is
aggressively flattening its management organization, reducing its real estate
footprint and eliminating fixed cost infrastructure as well as continually
assessing 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. See Note 3 for more information on the Company's
lease activities and Note 5 to the Consolidated Financial Statements for more
information on changes in operations in the nine months ended
September 27, 2020. The Company expects to continue to take actions deemed
appropriate to enhance profitability but does not currently know whether or when
any such actions will occur or the potential costs and expected savings.
Depending on the actions taken and the timing of any such actions, the
anticipated cost savings could be recognized in fiscal periods that do not
correspond to the fiscal period(s) in which the charges are recognized. As a
result, the Company's net income trends could be impacted and be more difficult
to predict.
COVID-19 Update
With the global outbreak of the novel coronavirus ("COVID-19") and the
declaration of a pandemic by the World Health Organization on March 11, 2020,
the governments in the states in which Tribune operates have deemed news
publishing and media services as "critical infrastructure" providing essential
services and information during this global emergency. As a provider of critical
infrastructure, Tribune is not subject to business closure requirements and has
taken steps to keep employees working safely and news and information being
distributed. Tribune remains focused on protecting the health and well-being of
its employees and the communities in which it operates while assuring the
continuity of its business operations.
The Company has proactively implemented its business continuity plans and has
taken a variety of measures to ensure the ongoing availability of its newspapers
and information, while taking appropriate health and safety measures, including
implementing remote work policies, where possible, and implementing enhanced
cleaning and hygiene protocols in its production facilities. To date, as a
result of these business continuity measures, the Company has not experienced
disruptions in the distribution of news and information through the Company's
newspapers and websites.
Until fiscal 2019, advertising revenue was historically Tribune's largest source
of revenue. The Company's advertising customers are typically local and
regional, small and mid-sized businesses that purchase advertising to drive
traffic
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to their businesses. These are the businesses that have been particularly hard
hit by the widespread closures of businesses, government facilities and schools,
cancellation of events and sports leagues, restriction on gathering and a
significant reduction in economic activity. The decrease in advertising revenue
and ongoing disruptions in Tribune's operations due to the COVID-19 pandemic
have adversely impacted its business, results of operations, financial condition
and cash flows. The degree to which COVID-19 may impact Tribune's results of
operations and financial condition in the future is unknown at this time and
will depend on future developments, including the severity and the duration of
the pandemic.
The Company has taken extensive steps to mitigate the economic impact COVID-19
has had on its results of operations. These steps include evaluation of and
adjustments to manufacturing and distribution processes, delaying non-essential
repairs and maintenance, reducing third-party spending, freezing discretionary
spending, eliminating incentive and discretionary bonuses and salary reductions
and employee furloughs. These mitigation measures may not be sufficient to
prevent adverse impacts on our business and financial condition from COVID-19.
As part of the Company's reduction in spending, it has withheld payment of rent
for a majority of its leased facilities in April, May and June and requested
rent relief in various forms, as described in Note 3 to the Consolidated
Financial Statements. Tribune has been notified by a number of lessors that it
is in default under the terms of the respective leases and the Company and
certain of such lessors have formally filed complaints in their local
jurisdictions. The Company is negotiating with such lessors on the terms of the
potential rent relief and the lessors' remedies and is responding timely to all
filed complaints. The Company has secured rent abatements or deferrals and lease
restructuring for approximately 27 leases and terminations on 10 leases.
Products and Services
Our publication product mix includes three primary types: (i) daily newspapers,
(ii) weekly newspapers and (iii) niche publications and direct mail. The key
characteristics of each of these types of publications are summarized in the
table below.
                            Daily Newspapers                    Weekly Newspapers                    Niche Publications
Cost:                       Paid                                Paid and free                        Paid and free
                            Distributed four to seven           Distributed one to three days        Distributed weekly, monthly
Distribution:               days per week                       per week                             or on an annual basis
                                                                Paid: Revenue from
                            Revenue from advertisers,           advertising, subscribers,            Paid: Revenue from
Income:                     subscribers, rack/box sales         rack/box sales                       advertising, rack/box sales
                                                                                                     Free: Advertising revenue
                                                                Free:

Advertising revenue only only



As of September 27, 2020, the Company's prominent print publications and
websites include:
   Media Group                   City                        Masthead                           Website                      Circulation Type           Paid or Free
Chicago Tribune Media Group
                        Chicago, IL                   Chicago Tribune              www.chicagotribune.com                  Daily                       Paid
                        Chicago, IL                   Chicago Magazine             www.chicagomag.com                      Monthly                     Paid

New York Daily News Media Group

                        New York, NY                  New York Daily News          www.nydailynews.com                     Daily                      

Paid

The Baltimore Sun Media Group

                        Baltimore, MD                 The Baltimore Sun            www.baltimoresun.com                    Daily                       Paid
                        Annapolis, MD                 The Capital                  www.capitalgazette.com                  Daily                       Paid
                        Westminster, MD               Carroll County Times         www.carrollcountytimes.com              Daily                       Paid

Hartford Courant Media Group

                        Hartford County, CT,          Hartford Courant             www.courant.com                         Daily                       Paid
                        Middlesex County, CT,
                        Tolland County, CT


                                       28
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   Media Group                    City                           Masthead                                 Website                         Circulation Type           Paid or Free
Sun Sentinel Media Group
                        Broward County, FL,            Sun Sentinel                       www.sun-sentinel.com                          Daily                       Paid
                        Palm Beach County, FL
                        Broward County, FL,            el Sentinel                        www.sun-sentinel/elsentinel.com               Weekly                      Free
                        Palm Beach County, FL

Orlando Sentinel Media Group

                        Orlando, FL                    Orlando Sentinel                   www.orlandosentinel.com                       Daily                       Paid
                        Orlando, FL                    el Sentinel                        www.orlandosentinel/elsentinel.com            Weekly                      Free

Virginia Media Group

                        Newport News, VA               Daily Press                        www.dailypress.com                            Daily                       Paid
                        (Peninsula)
                        Norfolk, VA                    The Virginian-Pilot                www.pilotonline.com                           Daily                       Paid

The Morning Call Media Group

                        Lehigh Valley, PA              The Morning Call                   www.themorningcall.com                        Daily                       Paid


TCA is a syndication and licensing business providing content solutions for
publishers around the globe. Working with a vast collection of the world's news
and information sources, TCA delivers a daily news service and syndicated
premium content to over 2,000 media and digital information publishers in more
than 70 countries. Tribune News Service delivers material from 70 leading
publications, including Chicago Tribune, Bloomberg News, Miami Herald, The
Dallas Morning News, Seattle Times, The Philadelphia Inquirer, and Los Angeles
Times. Tribune Premium Content syndicates columnists such as Leonard Pitts, Cal
Thomas, Clarence Page, Ask Amy and Rick Steves. TCA manages the licensing of
premium content from publications such as Rolling Stone, The Atlantic, Fast
Company, Mayo Clinic, Variety and many more. TCA traces its roots back to 1918.
BestReviews is a company engaged in the business of testing, researching and
reviewing consumer products. BestReviews generates referral fee revenue by
directing online traffic from their published reviews to sites where the
products can be purchased. BestReviews has affiliate agreements with online
sellers, of which the largest is Amazon.com. BestReviews receives a referral fee
once the product is purchased.
Revenue Sources
Print advertising is typically in the form of display, preprint or classified
advertising. Advertising and marketing services revenues are comprised of three
basic categories: retail, national and classified. Retail is a category of
customers who generally do business directly with the public. National is a
category of customers who generally do business directly with other businesses.
Classified is a type of advertising which is other than display or preprint.
Digital advertising consists of website display, banner ads, advertising
widgets, coupon ads, video, search advertising and linear ads placed by Tribune
on websites. Digital marketing services include development of mobile websites,
search engine marketing and optimization, social media account management and
content marketing for customers' web presence for small to medium size
businesses.
Circulation revenue results from the sale of print and digital editions of
newspapers to individual subscribers, the sale of print editions of newspapers
to sales outlets that re-sell the newspapers, and the sale of digital
subscription access to the Company's websites.
Other revenues are derived from commercial printing and delivery services
provided to other newspapers, direct mail advertising and services, content
syndication and licensing, referral fees and other related activities. The
Company contracts with a number of national and local newspapers to both print
and distribute their respective publications in local markets where it is a
newspaper publisher. In some instances where it prints publications, it also
manages and procures newsprint, ink and plates on their behalf. These
arrangements allow the Company to leverage its investment in infrastructure in
those markets that support its own publications. As a result, these arrangements
tend to contribute incremental profitability and revenues. The Company currently
distributes national newspapers (including The New York Times, USA Today, and
The Wall Street Journal) in its local markets under multiple agreements.
Additionally, in New York, Chicago, and South Florida, the Company provides some
or all of these services to other local publications.
                                       29
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RESULTS OF OPERATIONS
Operating results from continuing operations are shown in the table below (in
thousands):
                                                            Three months ended                                                   Nine months ended
                                        Sept 27, 2020           Sept 29, 2019            % Change            Sept 27, 2020           Sept 29, 2019            % Change
Advertising                           $       57,583$       93,218               (38.2  %)       $      188,160$      293,538               (35.9  %)
Circulation                                   88,330                  90,598                (2.5  %)              265,597                 275,044                (3.4  %)
Other                                         42,755                  52,211               (18.1  %)              134,496                 162,297               (17.1  %)
Total operating revenues                     188,668                 236,027               (20.1  %)              588,253                 730,879               (19.5  %)
Compensation                                  64,888                  83,066               (21.9  %)              231,981                 276,583               (16.1  %)
Newsprint and ink                              7,665                  12,613               (39.2  %)               25,784                  43,834               (41.2  %)
Outside services                              61,982                  77,549               (20.1  %)              203,193                 241,787               (16.0  %)
Other operating expenses                      32,400                  42,163               (23.2  %)               97,891                 123,604               (20.8  %)
Depreciation and amortization                  9,360                  11,261               (16.9  %)               28,702                  34,993               (18.0  %)
Impairment                                     4,960                       -                *                      56,009                       -                *
Total operating expenses                     181,255                 226,652               (20.0  %)              643,560                 720,801               (10.7  %)
Income (loss) from operations                  7,413                   9,375               (20.9  %)              (55,307)                 10,078                *
Interest income (expense), net                  (176)                    (57)               *                        (391)                    478                *
Loss on equity investments, net                    -                  (2,213)               *                        (117)                 (3,255)              (96.4  %)
Other income (expense), net                      401                     248                61.7  %                 1,237                     265                *
Income tax expense (benefit)                     853                    (480)               *                      20,619                     (63)               *
Net income (loss) from
continuing operations                          8,491                   6,873                23.5  %               (33,959)                  7,503                *
Plus: Loss from discontinued
operations, net of taxes                           -                 (12,848)               *                           -                 (13,570)               *
Net income (loss)                              8,491                  (5,975)               *                     (33,959)                 (6,067)               *
Less: Income attributable to
noncontrolling interest                        1,824                   1,150                58.6  %                 5,316                   3,037                75.0  %

Net income (loss) attributable to Tribune common stockholders $ 6,667$ (7,125)

               *              $      (39,275)$       (9,104)               *


* Represents positive or negative change in excess of 100%
Three months ended September 27, 2020 compared to the three months ended
September 29, 2019
Advertising Revenue-Advertising revenues decreased 38.2%, or $35.6 million, in
the three months ended September 27, 2020, compared to the same period for 2019,
due to decreases in all revenue categories. Retail advertising decreased $29.5
million, year over year, classified advertising decreased $4.8 million and
national advertising decreased $1.7 million. The COVID-19 pandemic continues to
exacerbate the decline in advertising revenue.
Circulation Revenue-Circulation revenues decreased 2.5%, or $2.3 million, in the
three months ended September 27, 2020, compared to the same period for 2019.
Home delivery revenue decreased $5.5 million and single copy sales decreased
$1.9 million. These decreases were partially offset by an increase of $5.1
million in digital subscription revenue as customers turn to digital delivery.
Other Revenue-Other revenues consist of commercial print and delivery, direct
mail and marketing, and content syndication and licensing, referral fees and
other revenue. Other revenues decreased 18.1%, or $9.5 million, in the three
months ended September 27, 2020, compared to the same period for 2019.
Commercial print and delivery revenue decreased $5.2 million, direct mail
revenue decreased $3.6 million, and revenue from the TSA agreement decreased
$4.2 million. These decreases were partially offset by a $3.9 million increase
in referral revenue at BestReviews.
Compensation Expense-Compensation expense decreased 21.9%, or $18.2 million, in
the three months ended September 27, 2020. This decrease was due primarily to a
decrease in salary and payroll tax expense of $15.5 million, a decrease in
incentive
                                       30
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compensation of $3.6 million and a decrease in stock-based compensation of $1.4
million. These decreases were partially offset by an increase of $3.1 million in
multiemployer pension expense and an increase in severance costs of $2.2
million.
Newsprint and Ink Expense-Newsprint and ink expense decreased 39.2%, or $4.9
million, in the three months ended September 27, 2020. This decrease was due
primarily to a decrease in the average cost per ton of newsprint and a decrease
in volume.
Outside Services Expense-Outside services expense decreased 20.1%, or $15.6
million, in the three months ended September 27, 2020. This decrease was due
primarily to a reduction of $6.0 million in third party delivery expense, a
reduction of $3.2 million in outside printing and production expenses, a
decrease of $1.7 million in consultative services, a decrease of $1.2 million in
temporary help and a decrease of $1.2 million in freelance purchased content.
Other Operating Expenses-Other expenses include occupancy costs, promotion and
marketing costs, affiliate fees and other miscellaneous expenses, including
gains on fixed asset sales. These expenses decreased 23.2%, or $9.8 million, in
the three months ended September 27, 2020, due primarily to a decrease of $2.8
million in promotion expenses, a decrease of $2.1 million in occupancy expenses,
a decrease of $1.4 million in travel and entertainment expenses, a decrease of
$1.2 million in repairs and maintenance, with additional decreases across all
categories.
Depreciation and Amortization Expense-Depreciation and amortization expense
decreased 16.9%, or $1.9 million, primarily due to decreased depreciation
related to asset retirements in previous periods partially offset by the
accelerated depreciation related to printing and packaging outsourcing at The
Virginian-Pilot.
Impairment Expense-For the three months ended September 27, 2020, the Company
recorded a non-cash impairment charge of $5.0 million related to abandoned lease
space. See Note 3 to the consolidated financial statements for additional
information on these impairments.
Loss on Equity Investments, Net-Loss on equity investments, net decreased $2.2
million primarily due to additional reserves for certain investments of the
Company in the prior year.
Income Tax Expense (Benefit)-Income tax benefit increased $1.3 million for the
three months ended September 27, 2020, over the prior year period. For the three
months ended September 27, 2020, the Company recorded an income tax benefit of
$0.9 million which includes an additional $0.7 million benefit from the
Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") relating to the
carryback of a loss to a period with a higher tax rate. The effective tax rate
on pretax income was (11.2%) in the three months ended September 27, 2020. This
rate differs from the U.S. federal statutory rate of 21% primarily due to state
income taxes, net of federal benefit, noncontrolling interest, tax expense
related to vesting of stock compensation, and non-deductible expenses.
For the three months ended September 29, 2019, the Company recorded income tax
expense of $0.5 million including a discrete item which resulted in a tax
benefit of $1.5 million relating to an adjustment in the state tax expense for
the treatment of the Nant Transaction gain for state apportionment in select
states. The effective tax rate on pretax income was 6.5% in the three months
ended September 29, 2019. The rate differs from the U.S. federal statutory rate
of 21% primarily due to state income taxes, net of federal benefit and
non-deductible expenses.
Nine months ended September 27, 2020 compared to the nine months ended
September 29, 2019
Advertising Revenue-Advertising revenues decreased 35.9%, or $105.4 million, in
the nine months ended September 27, 2020, compared to the same period for 2019,
due to decreases in all revenue categories. Retail advertising decreased $83.4
million, year over year, classified advertising decreased $12.6 million and
national advertising decreased $9.9 million. The COVID-19 pandemic continues to
exacerbate the decline in advertising revenue.
Circulation Revenue-Circulation revenues decreased 3.4%, or $9.4 million, in the
nine months ended September 27, 2020, compared to the same period for 2019. Home
delivery revenue decreased $14.2 million and single copy sales decreased $6.4
million. These decreases were partially offset by an increase of $11.1 million
in digital subscription revenue as customers turn to digital delivery.
Other Revenue-Other revenues consist of commercial print and delivery, direct
mail and marketing, and content syndication and licensing, referral fees and
other revenue. Other revenues decreased 17.1%, or $27.8 million, in the nine
months ended September 27, 2020, compared to the same period for 2019.
Commercial print and delivery revenue decreased $14.6 million,
                                       31
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direct mail revenue decreased $8.5 million, and revenue from the TSA agreement
decreased $14.5 million. These decreases were partially offset by a $10.2
million increase in referral revenue at BestReviews.
Compensation Expense-Compensation expense decreased 16.1%, or $44.6 million, in
the nine months ended September 27, 2020. This decrease was due primarily to a
decrease in salary and payroll tax expense of $33.6 million, a decrease in
incentive compensation of $13.9 million, a decrease in stock-based compensation
of $7.0 million and a decrease of $4.9 million in multiemployer pension expense.
These decreases were partially offset by an increase in severance costs of $17.9
million.
Newsprint and Ink Expense-Newsprint and ink expense decreased 41.2% or $18.1
million for the nine months ended September 27, 2020. This decrease was due
primarily to a decrease in the average cost per ton of newsprint and a decrease
in volume.
Outside Services Expense-Outside services expense decreased 16.0%, or $38.6
million, in the nine months ended September 27, 2020. This decrease was due
primarily to a reduction of $16.2 million in third party delivery expense, a
reduction of $7.0 million in outside printing and production expenses, a
decrease of $4.7 million in consultative services expense, a decrease of $2.9
million in temporary help and a decrease of $2.5 million in freelance purchased
content.
Other Operating Expenses-Other expenses include occupancy costs, promotion and
marketing costs, affiliate fees and other miscellaneous expenses. These expenses
decreased 20.8%, or $25.7 million, in the nine months ended September 27, 2020,
due primarily to a decrease of $5.5 million in promotion expenses, the $5.2
million gain recognized related to the sale of property in Virginia, a decrease
of $5.1 million in occupancy expenses, a decrease of $3.5 million in repairs and
maintenance and a decrease of $3.0 million in travel and entertainment expenses.
These decreases were partially offset by an increase of $2.1 million in bad debt
expense.
Depreciation and Amortization Expense-Depreciation and amortization expense
decreased 18.0%, or $6.3 million, primarily due to decreased depreciation
related to asset retirements in previous periods partially offset by the
accelerated depreciation related to printing and packaging outsourcing at The
Virginian-Pilot.
Impairment Expense-For the nine months ended September 27, 2020, the Company
recorded a non-cash impairment charge of $56.0 million with $46.4 million
related to long-lived assets, $7.1 million related to mastheads, and $2.5
million related to goodwill. Long-lived asset impairments include $11.9 million
related to abandoned lease space. See the notes to the consolidated financial
statements for additional information on these impairments.
Loss on Equity Investments, Net-Loss on equity investments, net decreased $3.1
million primarily due to additional impairments for certain of the Company's
investments recorded in the prior year.
Income Tax Expense (Benefit)-Income tax benefit increased $20.7 million for the
nine months ended September 27, 2020, over the prior year period. For the nine
months ended September 27, 2020, the Company recorded an income tax benefit of
$20.6 million which includes an additional $1.7 million benefit from the CARES
Act relating to the carryback of a loss to a period with a higher tax rate. The
effective tax rate on pretax income was 37.8% in the nine months ended
September 27, 2020. This rate differs from the U.S. federal statutory rate of
21% primarily due to state income taxes, net of federal benefit, noncontrolling
interest, tax expense related to vesting of stock compensation, and
non-deductible expenses.
For the nine months ended September 29, 2019, the Company recorded income tax
benefit of $0.1 million including a discrete item which resulted in a tax
benefit of $1.5 million relating to an adjustment in the state tax expense for
the treatment of the Nant Transaction gain for state apportionment in select
states. The effective tax rate on pretax income was 0.8% in the nine months
ended September 29, 2019. This rate differs from the U.S. federal statutory rate
of 21% primarily due to state income taxes, net of federal benefit and
non-deductible expenses, income from noncontrolling interest, tax expense
related to vesting of stock compensation, and non-deductible expenses.
NON-GAAP MEASURES
Adjusted EBITDA-The Company defines Adjusted EBITDA as income (loss) from
continuing operations before equity in earnings of unconsolidated affiliates,
income taxes, loss on early debt extinguishment, interest income (expense),
other (expense) income, realized gain (loss) on investments, reorganization
items, depreciation and amortization, net income attributable to noncontrolling
interest, and other items that the Company does not consider in the evaluation
of ongoing
                                       32
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operating performance. These items include stock-based compensation expense,
restructuring charges, impairment, transaction expenses, certain other charges
and gains that the Company does not believe reflects the underlying business
performance.
                                                           Three months ended                                        Nine months ended
(in thousands)                          Sept 27, 2020           Sept 29, 2019           % Change           Sept 27, 2020           Sept 29, 2019            % Change
Net income (loss) from
continuing operations                 $        8,491$        6,873             23.5%           $      (33,959)$        7,503                 *
Income tax expense (benefit)
from continuing operations                      (853)                    480               *                    (20,619)                     63                 *
Interest income (expense), net                   176                      57               *                        391                    (478)      

*

Loss on equity investments, net                    -                   2,213               *                        117                   3,255              (96.4%)
Other income (expense), net                     (401)                   (248)            61.7%                   (1,237)                   (265)                *
Income (loss) from operations                  7,413                   9,375            (20.9%)                 (55,307)                 10,078                 *
Depreciation and amortization                  9,360                  11,261            (16.9%)                  28,702                  34,993                (18.0  %)
Impairment                                     4,960                       -               *                     56,009                       -                 *
Restructuring and transaction
costs (1)                                      4,531                   1,721               *                     25,813                  14,389               79.4%
Stock based compensation                       1,001                   2,449            (59.1%)                   4,133                  11,065                (62.6  %)
Adjusted EBITDA from continuing
operations                            $       27,265$       24,806              9.9%           $       59,350$       70,525                (15.8  %)


* Represents positive or negative change in excess of 100%
(1) - Restructuring and transaction costs include costs related to Tribune's
internal restructuring, such as severance, charges associated with vacated space
and costs related to completed and potential acquisitions.
Adjusted EBITDA is a financial measure that is not calculated in accordance with
U.S. GAAP. Management believes that because Adjusted EBITDA excludes (i) certain
non-cash expenses (such as depreciation, amortization, stock-based compensation,
and gain/loss on equity investments) and (ii) expenses that are not reflective
of the Company's core operating results over time (such as restructuring costs,
including the employee voluntary separation program and gain/losses on employee
benefit plan terminations, litigation or dispute settlement charges or gains,
premiums on stock buyback, impairment, and transaction-related costs), this
measure provides investors with additional useful information to measure the
Company's financial performance, particularly with respect to changes in
performance from period to period.  The Company's management uses Adjusted
EBITDA (a) as a measure of operating performance; (b) for planning and
forecasting in future periods; and (c) in communications with the Company's
Board of Directors concerning the Company's financial performance. In addition,
Adjusted EBITDA, or a similarly calculated measure, has been used as the basis
for certain financial maintenance covenants that the Company was subject to in
connection with certain credit facilities. Since not all companies use identical
calculations, the Company's presentation of Adjusted EBITDA may not be
comparable to other similarly titled measures of other companies and should not
be used by investors as a substitute or alternative to net income or any measure
of financial performance calculated and presented in accordance with U.S. GAAP.
Instead, management believes Adjusted EBITDA should be used to supplement the
Company's financial measures derived in accordance with U.S. GAAP to provide a
more complete understanding of the trends affecting the business.
Although Adjusted EBITDA is frequently used by investors and securities analysts
in their evaluations of companies, Adjusted EBITDA has limitations as an
analytical tool, and investors should not consider it in isolation or as a
substitute for, or more meaningful than, amounts determined in accordance with
U.S. GAAP. Some of the limitations to using non-GAAP measures as an analytical
tool are:
•they do not reflect the Company's interest income and expense, or the
requirements necessary to service interest or principal payments on the
Company's debt;
•they do not reflect future requirements for capital expenditures or contractual
commitments; and
•although depreciation and amortization charges are non-cash charges, the assets
being depreciated and amortized will often have to be replaced in the future,
and non-GAAP measures do not reflect any cash requirements for such
replacements.
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LIQUIDITY AND CAPITAL RESOURCES
The Company expects to fund capital expenditures and potential pension
contributions in 2020 and other operating requirements through a combination of
existing cash balances and cash flows from operations and investments. The
Company believes that its working capital and future cash from operations
discussed below will provide adequate resources to fund its operating and
financing needs for the foreseeable future. However, as discussed above under
the COVID-19 Update section and in Item 1A Risk Factors, the Company's financial
and operating performance remains subject to prevailing economic and industry
conditions and to financial, business and other factors, some of which are
beyond the control of the Company. Tribune's liquidity could be negatively
impacted if these conditions continue for a significant period of time and the
Company may be required to pursue additional sources of financing to obtain
working capital, maintain appropriate inventory levels and to meet our financial
obligations. Capital and credit markets have been disrupted by the crisis and
our ability to obtain any required financing is not guaranteed and largely
dependent upon evolving market conditions and other factors. Depending on the
continued impact of the crisis, further actions may be required to improve the
Company's cash position and capital structure. Despite the Company's current
liquidity position, no assurances can be made that cash flows from operations
and investments, or dispositions of assets or operations will be sufficient to
satisfy the Company's future liquidity needs.
Sources and Uses
The table below details the total operating, investing and financing activity
cash flows from continuing operations (in thousands):
                                                                            

Nine months ended

                                                                   September 27, 2020          September 29, 2019
Net cash provided by operating activities                        $            42,523          $           31,953
Net cash provided by (used for) investing activities                             844                     (14,584)
Net cash used for financing activities                                       (20,257)                    (59,089)

Increase (decrease) in cash attributable to continuing operations

                                                       $          

23,110 $ (41,720)



Cash flow generated from operating activities is Tribune's primary source of
liquidity. Cash provided by continuing operating activities for the nine months
ended September 27, 2020, totaled $42.5 million compared to cash provided by
continuing operating activities of $32.0 million for the nine months ended
September 29, 2019. The increase in cash provided by operating activities was
driven by an increase in cash from working capital of $16.1 million primarily
related to decreases in prepaid expenses and accounts payable, partially offset
by a decrease in operating results of $5.6 million (defined as net income (loss)
adjusted for non-working capital items).
Net cash provided by investing activities from continuing operations totaled
$0.8 million in the nine months ended September 27, 2020, primarily due to the
net proceeds of $9.0 million related to the sale of real property in Norfolk,
Virginia, partially offset by $8.6 million used for capital expenditures. In the
nine months ended September 29, 2019, net cash used for investing activities
from continuing operations totaled $14.6 million, primarily due to $13.9 million
used for capital expenditures.
Net cash used for financing activities totaled $20.3 million for the nine months
ended September 27, 2020, primarily due to payment of a cash dividend of $9.1
million to the Company's common stockholders on March 16, 2020, and a payment of
$9.8 million in dividends paid to the noncontrolling interest. In the nine
months ended September 29, 2019, net cash used for financing activities was
$59.1 million, primarily due to payment of a cash dividend of $53.8 million on
July 2, 2019.
There was no cash used for discontinued operations for the nine months ended
September 27, 2020. Cash used for discontinued operations totaled $6.0 million
for the nine months ended September 29, 2019, related to the final tax payment
related to the sale of the California Properties.
Dividends
On February 19, 2020, the Board of Directors declared a cash dividend of $0.25
per share of common stock outstanding. The cash dividend of $9.1 million was
paid on March 16, 2020, to shareholders of record as of March 2, 2020.
Additionally, the Company accrued dividend equivalents of $0.2 million for RSUs
outstanding as of the record date.
During the three and nine months ended September 27, 2020, BestReviews declared
and paid dividends of $5.5 million and $24.5 million, respectively, to its
stockholders. The Company's portion of these dividends for the three and nine
months
                                       34
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ended September 27, 2020, were $3.3 million and $14.7 million, respectively. The
noncontrolling interest's portion for the three and nine months ended
September 27, 2020, were $2.2 million and $9.8 million, respectively. These
dividends are presented in the Consolidated Statement of Equity. See Note 13 to
the Consolidated Financial Statements for additional information on the dividend
to the noncontrolling interest.
On May 8, 2020, the Board of Directors of the Company suspended the Company's
quarterly cash dividend program until further notice given the unprecedented
economic disruption caused by COVID-19. This action along with many other
operational actions taken at the Company will help preserve liquidity. The Board
of Directors will continue to monitor liquidity needs and capital allocation in
the future.
Multiemployer pension
During 2020 the Company is required to make $7.3 million in payments to the
Teamsters Local Union No. 727 Pension Fund (the "Teamsters Fund") under the
amended rehabilitation plan. During the nine months ended September 27, 2020,
the Company has paid $5.8 million of the payments required. The Company expects
to contribute an additional $1.5 million during the remainder of 2020.
In 2018, the Company's last employee that was a member of the CWA/ITU Union at
the Company's Baltimore location retired. This retirement effected a partial
withdrawal from the CWA/ITU Negotiated Pension Plan. The partial withdrawal
creates a liability for which the Company is required to pay quarterly
installments over a 20-year period. The Company has accrued $1.0 million to
reflect this obligation which is reflected in other long-term obligations in the
Consolidated Condensed Balance Sheets.
The Company's funding obligation under multiemployer plans are subject to change
based on a number of factors, including the outcome of collective bargaining
with the unions, actual returns on plan assets as compared to assumed returns,
actions taken by trustees who manage the plan, changes in the number of plan
participants, changes in the rate used for discounting future benefit
obligations, as well as changes in legislation or regulations impacting funding
and payment obligations. These payments are expensed as the payments become due.
Employee Reductions
During the nine months ended September 27, 2020, the Company implemented
reductions in staffing levels in its operations of 647 positions for which the
Company recorded pretax charges related to these reductions totaling $26.2
million. These reductions include 199 positions related to the voluntary
severance incentive plan initiated in the first quarter of 2020 and 141 position
related to the outsourcing below. The related salary continuation payments began
during the first quarter of 2020 and the final payment to the last employee is
expected to be made in the third quarter of 2021.
During the second quarter of 2020, the Company contracted with a third party to
outsource the printing and packaging of The Virginian-Pilot. The services were
fully transitioned to the third party at the end of the third quarter. The
related salary continuation payments began during the second quarter of 2020 and
are expected to continue through the third quarter of 2021.
Contractual Obligations
The table below represents Tribune's contractual obligations as of September 27,
2020, which has been updated to reflect the rent abatements and deferrals, lease
restructurings, and terminations during the nine months ended September 27, 2020
(in thousands):
                                           Total            2020, remaining            2021               2022               2023               2024             Thereafter
Finance leases                             6,949                    -                  6,949                  -                  -                  -                  -
Operating leases (1)                     119,190               12,431                 27,570             24,875             15,166              8,176             30,972
Teamsters Fund                            51,145                1,500                  9,100              9,975             10,950             12,210              7,410
NYDN Pension Plan                          2,459                   97                  2,362                  -                  -                  -                  -
Total                                    179,743               14,028                 45,981             34,850             26,116             20,386             38,382


(1) - The Company leases certain equipment and office and production space under
various operating leases. Net lease expense for Tribune was $17.7 million and
$18.6 million for the nine months ended September 27, 2020, and
September 29, 2019, respectively.
                                       35
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The contractual obligations table includes the Company's estimated minimum
contribution to the NYDN Pension Plan for 2020 and 2021. The contractual
obligations table does not include actuarially projected minimum funding
requirements of the NYDN Pension Plan after 2021. The projected minimum funding
requirements contain significant uncertainties regarding the actuarial
assumptions involved in making such minimum funding projections, including
interest rate levels, asset returns, mortality and cost trends, and what, if
any, changes will occur to regulatory requirements. Further contributions are
currently projected for 2021 through 2025, however the amounts cannot be
reasonably estimated.

The contractual obligation table includes the Company's required minimum
contributions to the Teamsters Fund under the amended rehabilitation plan. With
respect to the additional contributions to the Teamsters Fund outside of the
required payments under the amended rehabilitation plan and the Company's
contributions to other multiemployer plans, the Company's funding obligation
will be subject to change based on a number of factors, including the outcome of
collective bargaining within the unions, actual returns on plan assets as
compared to assumed returns, actions taken by trustees who manage the plan,
changes in the number of plan participants, changes in the rate used for
discounting future benefit obligations, as well as changes in legislation or
regulations impacting funding and payment obligations. See Note 12 to the
Consolidated Financial Statements for additional information on the Company's
pension plans.
Other Changes
On July 23, 2019, the Company entered into an agreement to sell real property
located in Norfolk, Virginia for a cash sales price of $9.5 million. The sale
closed on January 22, 2020. The Company received net proceeds of $9.0 million
and recorded a pre-tax gain of $5.2 million related to the sale.
Subsequent Events
Subsequent to September 27, 2020, the Company contracted with a third party to
outsource the printing and packaging of the Hartford Courant which will result
in a reduction of 148 positions. Additionally, certain assets required to print
and package the Hartford Courant will no longer be used as of the transition
date. The services will be fully transitioned to the third party at the end of
the fourth quarter of 2020. As a result of this agreement, the Company expects
to record an estimated severance charge of $2.3 million and accelerated
depreciation of $1.2 million in the fourth quarter of 2020. The related salary
continuation payments will begin in the fourth quarter of 2020 and are expected
to continue through the first quarter of 2022.
On November 2, 2020, the Company completed the sale of real property located in
Virginia Beach, Virginia for a cash sales price of $5.2 million. The Company
received net proceeds of $4.9 million and expects to record a pre-tax gain of
$1.3 million related to the sale in the fourth quarter of 2020. Additionally the
Company leased back 39,975 square feet for a distribution center at $0.2 million
per year for an initial term of two years with an option to renew for an
additional two years.
NEW ACCOUNTING STANDARDS
See Note 1 in the Consolidated Financial Statements for a description of new
accounting standards issued and/or adopted in the three and nine months ended
September 27, 2020.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As of September 27, 2020, there had been no material changes in the Company's
exposure to market risk from the disclosure included in the 2019 Annual Report.
Item 4. Controls and Procedures
The Company carried out an evaluation under the supervision and with the
participation of the Company's management, including the Company's Chief
Executive Officer and the Interim Chief Financial Officer, of the effectiveness
of the Company's disclosure controls and procedures (as defined in Rule
13a-15(e) and Rule 15d-15(e) of the Securities Exchange Act of 1934), as of the
end of the period covered by this report. Based upon that evaluation, the Chief
Executive Officer and the Interim Chief Financial Officer concluded that, as of
the end of the period covered by this report, the Company's disclosure controls
and procedures were effective.
                                       36

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Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that
occurred during the quarter ended September 27, 2020, that materially affected,
or is reasonably likely to materially affect, our internal control over
financial reporting.
We have not experienced any material change in our internal controls over
financial reporting despite most of our employees working remotely due to the
COVID-19 pandemic. We are continually monitoring and assessing the COVID-19
situation on our internal controls to minimize the impact on their design and
operating effectiveness.

© Edgar Online, source Glimpses

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