Quarterly Report (10-q)

Share Name	Share Symbol	Market	Type
Tribune Publishing Company	NASDAQ:TPCO	NASDAQ	Common Stock

	Price Change	% Change	Share Price	Bid Price	Offer Price	High Price	Low Price	Open Price	Shares Traded	Last Trade
	0.00	0.00%	17.26	17.24	17.26				0	01:00:00

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 September 29, 2019



[ ]	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 November 5, 2019
Common Stock, $0.01 par value		36,023,145



	TRIBUNE PUBLISHING COMPANY
	FORM 10-Q
	TABLE OF CONTENTS
		Page

PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)	3

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	27

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	39

Item 4.	Controls and Procedures	40

PART II	OTHER INFORMATION	40

Item 1.	Legal Proceedings	40

Item 1A.	Risk Factors	41

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41

Item 3.	Defaults Upon Senior Securities	41

Item 4.	Mine Safety Disclosures	41

Item 5.	Other Information	41

Item 6.	Exhibits	41

	SIGNATURES	43

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.

PART I.

Item 1. Financial Statements

TRIBUNE PUBLISHING COMPANY

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(In thousands, except per share data)

(Unaudited)



	Three Months Ended						Nine Months Ended
	September 29, 2019			September 30, 2018			September 29, 2019			September 30, 2018
Operating revenues	$	236,027		$	255,770		$	730,879		$	747,173
Operating expenses:
Compensation	83,066			107,762			276,583			324,982
Newsprint and ink	12,613			16,980			43,834			48,348
Outside services	77,549			81,572			241,787			262,372
Other operating expenses	42,163			47,270			123,604			116,220
Depreciation and amortization	11,261			12,179			34,993			37,567
Total operating expenses	226,652			265,763			720,801			789,489
Income (loss) from operations	9,375			(9,993		)	10,078			(42,316		)
Interest income (expense), net	(57		)	303			478			(11,673		)
Loss on early extinguishment of debt	—			—			—			(7,666		)
Loss on equity investments, net	(2,213		)	(434		)	(3,255		)	(1,828		)
Other income (expense), net	248			3,640			265			10,943
Income (loss) from continuing operations before income taxes	7,353			(6,484		)	7,566			(52,540		)
Income tax expense (benefit)	480			(5,835		)	63			(8,719		)
Net income (loss) from continuing operations	6,873			(649		)	7,503			(43,821		)
Plus: Earnings (loss) from discontinued operations, net of taxes	(12,848		)	(3,586		)	(13,570		)	290,665
Net income (loss)	(5,975		)	(4,235		)	(6,067		)	246,844
Less: Income (loss) attributable to noncontrolling interest	1,150			(239		)	3,037			471
Net income (loss) attributable to Tribune common stockholders	$	(7,125	)	$	(3,996	)	$	(9,104	)	$	246,373

Net income (loss) from continuing operations available to Tribune common stockholders, per common share:
Basic	$	(0.25	)	$	(0.01	)	$	(0.29	)	$	(1.26	)
Diluted	$	(0.25	)	$	(0.01	)	$	(0.29	)	$	(1.26	)
Net income (loss) available to Tribune common stockholders, per common share:
Basic	$	(0.61	)	$	(0.11	)	$	(0.67	)	$	7.01
Diluted	$	(0.61	)	$	(0.11	)	$	(0.67	)	$	7.01
Weighted average shares outstanding:
Basic	35,863			35,409			35,734			35,166
Diluted	35,863			35,409			35,734			35,166

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

TRIBUNE PUBLISHING COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)



	Three Months Ended						Nine Months Ended
	September 29, 2019			September 30, 2018			September 29, 2019			September 30, 2018
Net income (loss)	$	(5,975	)	$	(4,235	)	$	(6,067	)	$	246,844
Comprehensive income (loss), net of taxes:
Amortization of items to periodic pension cost during the period, net of taxes of ($22), ($916), ($68) and ($2,746), respectively	(60		)	(2,376		)	(178		)	(7,128		)
Foreign currency translation	(4		)	(6		)	(16		)	(11		)
Comprehensive loss recognized in continuing operations, net of taxes	(64		)	(2,382		)	(194		)	(7,139		)
Accumulated other comprehensive income recognized in discontinued operations, net of taxes of $9,702	—			—			—			25,397
Comprehensive income (loss)	(6,039		)	(6,617		)	(6,261		)	265,102
Less: Comprehensive income (loss) attributable to noncontrolling interest	1,150			(239		)	3,037			471
Comprehensive income (loss) attributable to Tribune common stockholders	$	(7,189	)	$	(6,378	)	$	(9,298	)	$	264,631

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

TRIBUNE PUBLISHING COMPANY

CONSOLIDATED CONDENSED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)



	September 29, 2019			December 30, 2018
Assets
Current assets
Cash	$	56,526		$	97,560
Accounts receivable, (net of allowances of $9,872 and $11,458)	103,713			145,463
Inventories	5,682			9,587
Prepaid expenses and other current assets	21,535			18,197
Total current assets	187,456			270,807

Property, plant and equipment
Machinery, equipment and furniture	127,874			124,243
Buildings and leasehold improvements	86,396			82,399
	214,270			206,642
Accumulated depreciation	(89,504		)	(74,013		)
	124,766			132,629
Advance payments on property, plant and equipment	2,186			12,334
Property, plant and equipment, net	126,952			144,963

Other assets
Goodwill	132,172			132,146
Intangible assets, net	70,960			77,229
Software, net	23,066			27,117
Lease right-of-use asset	102,071			—
Restricted cash	37,290			43,947
Deferred income taxes	7,105			2,414
Other long-term assets	14,604			28,004
Total other assets	387,268			310,857

Total assets	$	701,676		$	726,627

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

TRIBUNE PUBLISHING COMPANY

CONSOLIDATED CONDENSED BALANCE SHEETS (continued)

(In thousands, except per share data)

(Unaudited)



	September 29, 2019			December 30, 2018
Liabilities and stockholders’ equity
Current liabilities
Accounts payable	$	40,962		$	70,555
Employee compensation and benefits	32,954			61,001
Deferred revenue	44,438			51,114
Current portion of long-term lease liability	25,120			—
Current portion of long-term debt	100			405
Other current liabilities	41,293			21,203
Liabilities associated with discontinued operations	—			6,249
Total current liabilities	184,867			210,527

Non-current liabilities
Long term lease liability	102,430			—
Workers’ compensation, general liability and auto insurance payable	26,895			30,606
Pension and postretirement benefits payable	17,419			20,150
Deferred rent	—			25,424
Long-term debt	6,777			6,799
Other obligations	7,861			20,053
Total non-current liabilities	161,382			103,032

Noncontrolling interest	54,246			39,756

Stockholders’ equity
Preferred stock, $.01 par value. Authorized 30,000 shares; no shares issued or outstanding at September 29, 2019 and December 30, 2018	—			—
Common stock, $.01 par value. Authorized 300,000 shares, 37,907 shares issued and 35,953 shares outstanding at September 29, 2019; 37,551 shares issued and 35,597 shares outstanding at December 30, 2018	379			376
Additional paid-in capital	176,227			166,668
Retained earnings	150,902			232,401
Accumulated other comprehensive income (loss)	(167		)	27
Treasury stock, at cost - 1,954 shares at September 29, 2019 and December 30, 2018	(26,160		)	(26,160		)
Total stockholders’ equity	301,181			373,312

Total liabilities and stockholders’ equity	$	701,676		$	726,627

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

TRIBUNE PUBLISHING COMPANY

CONSOLIDATED STATEMENT OF EQUITY

(In thousands)

(Unaudited)



	Common Stock			Additional Paid in Capital			Retained Earnings			AOCI			Treasury Stock			Total Equity
	Shares	Amount		Additional Paid in Capital			Retained Earnings			AOCI			Treasury Stock			Total Equity
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
Comprehensive loss attributable to controlling interests	—	—		—			(7,125		)	(64		)	—			(7,189		)
Issuance of stock from restricted stock and RSU conversions	220	2		(2		)	—			—			—			—
Stock-based compensation	—	—		2,449			—			—			—			2,449
Withholding for taxes on restricted stock unit conversions	—	—		(1,525		)	—			—			—			(1,525		)
Noncontrolling interest carrying value adjustment	—	—		—			(14,853		)	—			—			(14,853		)
Balance at September 29, 2019	37,906	$	379	$	176,227		$	150,902		$	(167	)	$	(26,160	)	$	301,181

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

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			Additional Paid in Capital			Retained Earnings (Deficit)			AOCI			Treasury Stock			Total Equity
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
Comprehensive loss attributable to controlling interests	—		—			—			(3,849		)	(2,382		)	—			(6,231		)
Issuance of stock from restricted stock and RSU conversions	205		2			(2		)	—			—			—			—
Stock-based compensation	—		—			2,982			—			—			—			2,982
Withholding for taxes on RSU conversions	—		—			(2,044		)	—			—			—			(2,044		)
Balance at September 30, 2018	37,447		$	374		$	164,665		$	229,983		$	4,731		$	(26,160	)	$	373,593

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

TRIBUNE PUBLISHING COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



	Nine Months Ended
	September 29, 2019			September 30, 2018
Operating Activities From Continuing Operations
Net income (loss) from continuing operations	$	7,503		$	(43,821	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	34,993			37,567
Stock compensation expense	11,100			7,513
Loss on equity investments, net	3,255			1,828
Loss on early extinguishment of debt	—			7,666
Deferred income taxes	(3,896		)	3,818
Defined benefit plan contribution	(1,929		)	(3,419		)
Postretirement medical, life and other benefits	(1,047		)	(12,615		)
Changes in working capital items, excluding effects from acquisitions:
Accounts receivable, net	41,601			2,045
Prepaid expenses, inventories and other current assets	(12,808		)	14,084
Accounts payable, employee compensation and benefits, deferred revenue and other current liabilities	(46,289		)	(22,700		)
Other, net	(530		)	742
Net cash provided by (used for) operating activities	31,953			(7,292		)

Investing Activities From Continuing Operations
Capital expenditures	(13,866		)	(48,956		)
Acquisition of businesses, net of cash acquired	—			(70,999		)
Other, net	(718		)	(2,207		)
Net cash used for investing activities	(14,584		)	(122,162		)

Financing Activities From Continuing Operations
Dividends paid to Tribune common stockholders	(53,846		)	—
Repayments of capital lease obligations	(305		)	—
Repayments of long-term debt	—			(353,253		)
Dividends paid to noncontrolling interest	(3,400		)	(2,000		)
Withholding for taxes on RSU vesting	(1,538		)	(3,106		)
Other	—			(151		)
Net cash used for financing activities	(59,089		)	(358,510		)

Decrease in cash attributable to continuing operations	$	(41,720	)	$	(487,964	)

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

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

	Nine Months Ended
	September 29, 2019			September 30, 2018

Cash flows used for operating activities from discontinued operations, net	$	(5,971	)	$	(47,071	)
Cash flows provided by investing activities from discontinued operations, net	—			491,504
Cash flows used for financing activities from discontinued operations, net	—			(291		)
Increase (decrease) in cash attributable to discontinued operations	(5,971		)	444,142

Net decrease in cash	(47,691		)	(43,822		)
Cash, cash equivalents and restricted cash, beginning of period	141,507			185,351
Cash, cash equivalents and restricted cash, end of period	$	93,816		$	141,529

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

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1: DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Description of Business—Tribune Publishing Company, 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 is 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 this acquisition.

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 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 September 29, 2019 and December 30, 2018 and the results of operations for the three and nine months ended September 29, 2019 and September 30, 2018, respectively, and the cash flows for the nine months ended September 29, 2019 and September 30, 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

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 is assessing 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 total 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 total 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

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 nine months ended September 29, 2019 (in thousands):



	Three Months Ended			Nine Months Ended
	September 29, 2019			September 29, 2019
Lease cost:
Finance lease cost
Amortization of right-of-use assets	$	78		$	235
Interest on lease liabilities	26			78
Operating lease cost	7,314			21,560
Short-term lease cost	113			692
Variable lease cost	1,833			5,403
Sublease income	(864		)	(2,436		)
Total lease cost	$	8,500		$	25,532

Below is a summary of the supplemental cash flow information related to leases for the nine months ended September 29, 2019 (in thousands):



Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used for operating leases	$	22,289
Operating cash flows used for finance leases	$	109
Financing cash flows used for finance leases	$	305
Right-of-use assets obtained in exchange for new operating lease liabilities	$	2,930
Weighted average remaining lease term - finance leases (in years)	2.1
Weighted average remaining lease term - operating leases (in years)	6.1
Weighted average discount rate - finance leases	5.75		%
Weighted average discount rate - operating leases	4.75		%

Future minimum lease payments under noncancelable operating lease arrangements having initial terms of one year or more as of September 29, 2019 are as follows (in thousands):



	Operating Leases		Finance Leases		Subleases
9/30/2019 - 9/27/2020	$	30,656	$	100	$	2,873
9/28/2020 - 9/26/2021	28,199		6,942		2,300
9/27/2021 - 9/25/2022	25,767		—		1,645
9/26/2022 - 9/24/2023	19,796		—		1,625
9/25/2023 - 9/29/2024	9,480		—		391
Thereafter	34,804		—		—
Total future lease payments	148,702		7,042		8,834
Less imputed interest	21,152		165		—
Net future minimum lease payments	$	127,550	$	6,877	$	8,834

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 $44.0 million has been recognized as revenue in the nine months ended September 29, 2019. As of the adoption of ASC 606 on January 1, 2018, the Company had a contract liabilities balance of $55.1 million, of which $45.6 million was recognized as revenue in the nine months ended September 30, 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

During the nine months ended September 29, 2019, the Company implemented reductions in staffing levels in its operations of 118 positions for which the Company recorded pretax charges related to these reductions and executive separations totaling $7.6 million. The pretax charges related to the reductions during the three months ended September 29, 2019 totaled $0.9 million. The reductions for the nine months ended September 29, 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 of 2019 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 operations 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.

In July 2018, the Company implemented reductions in staffing levels of 178 positions of which approximately 50% were at the New York Daily News. The Company recorded pretax charges related to these reductions totaling $4.6 million.

In addition to the initiatives in July 2018, the Company implemented additional reductions of 52 and 339 positions during the three and nine months ended September 30, 2018, respectively, and recorded pretax charges related to these reductions of $3.5 million and $14.3 million, respectively.

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 nine months ended September 29, 2019 is as follows (in thousands):



Balance at December 30, 2018	$	28,845
Provision	7,574
Payments	(31,261		)
Balance at September 29, 2019	$	5,158

Charges for severance and related expenses are included in compensation expense in the accompanying Consolidated Statements of Income (Loss).

On July 23, 2019, the Company entered into an agreement to sell real property located in Norfolk, Virginia for a sales price of $9.5 million. The sale is dependent on the purchaser obtaining the required certificates and the purchaser’s determination of feasibility. Such determination must be made by March 5, 2020. Should the certificates not be acquired or the property not be feasible for the purchaser’s purposes, the purchaser can elect to terminate the agreement.

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 nine months ended September 29, 2019 is as follows (in thousands):



	Three Months Ended						Nine Months Ended
	September 29, 2019			September 30, 2018			September 29, 2019			September 30, 2018
Accounts receivable from NantMedia beginning balance	$	8,967		$	12,521		$	17,909		$	—
Revenue for TSA services	4,061			8,618			17,014			9,799
Reimbursable costs	9,123			23,495			38,801			35,523
Amounts received for TSA services	(5,467		)	(5,189		)	(17,870		)	(5,189		)
Amounts received for reimbursable costs	(9,694		)	(8,339		)	(49,706		)	(8,339		)
Amounts reimbursed to Nant for amounts collected from third parties under commingled revenue contracts	4,104			2,898			17,180			2,898
Amounts collected from third parties under commingled revenue contracts	(3,307		)	(5,093		)	(15,541		)	(5,781		)
Accounts receivable from NantMedia balance as of September 29, 2019⁽¹⁾	$	7,787		$	28,911		$	7,787		$	28,911

⁽¹⁾The accounts receivable from NantMedia balance as of September 29, 2019 consists of $7.3 million of charges which had been billed and $0.5 million of charges which had not been billed as of that date.

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: ACQUISITION

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

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.

As part of the Nant Transaction, the Company provided Nant Capital indemnification with respect to certain legal matters which were at various states of adjudication at the date of the sale. On August 19, 2019, the Los Angeles Times received an unfavorable jury verdict of $15.5 million in an indemnified employment litigation matter. Included in other operating expenses within discontinued operations for the three and nine months ended September 29, 2019, the Company recorded litigation reserves of $17.0 million and $18.0 million, respectively, associated with the verdict, legal fees and other indemnified legal matters. The Company plans to appeal the verdict. As of September 29, 2019, the Company has fully reserved for the unfavorable verdict.

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

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



	Three Months Ended						Nine Months Ended
	September 29, 2019			September 30, 2018			September 29, 2019			September 30, 2018
Operating revenues	$	—		$	11		$	—		$	211,511
Operating expenses:
Compensation	—			3			—			58,839
Newsprint and ink	—			3			—			14,376
Outside services	845			57			845			61,711
Other operating expenses	16,950			474			17,950			57,224
Depreciation and amortization	—			—			—			3,530
Total operating expenses	17,795			537			18,795			195,680
Income (loss) from operations	(17,795		)	(526		)	(18,795		)	15,831
Gain (loss) on sale	—			(3,151		)	—			406,183
Interest expense, net	—			—			—			(52		)
Other income, net	—			—			—			1,338
Income tax (expense) benefit	4,947			91			5,225			(132,635		)
Income (loss) from discontinued operations, net of tax	$	(12,848	)	$	(3,586	)	$	(13,570	)	$	290,665

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Discontinued operations by segment are presented below (in thousands):



	Three Months Ended						Nine Months Ended
	September 29, 2019			September 30, 2018			September 29, 2019			September 30, 2018
Operating revenues
M	$	—		$	(25	)	$	—		$	185,811
X	—			36			—			25,638
Corporate and Eliminations	—			—			—			62
	$	—		$	11		$	—		$	211,511
Income (loss) from operations
M	$	(17,795	)	$	(350	)	$	(18,795	)	$	9,997
X	—			(171		)	—			5,795
Corporate and Eliminations	—			(5		)	—			39
	$	(17,795	)	$	(526	)	$	(18,795	)	$	15,831
Depreciation and amortization
M	$	—		$	—		$	—		$	3,426
X	—			—			—			104
	$	—		$	—		$	—		$	3,530

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



	September 29, 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):



	September 29, 2019		December 30, 2018
Newsprint	$	5,329	$	9,273
Supplies and other	353		314
Total inventories	$	5,682	$	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.

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

NOTE 9: GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill and other intangible assets at September 29, 2019 and December 30, 2018, consisted of the following (in thousands):



	September 29, 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	$	(5,409	)	$	1,903	$	7,312	$	(4,730	)	$	2,582
Advertiser relationships (useful life of 2 to 13 years)	27,648		(14,374		)	13,274		27,648		(12,497		)	15,151
Trade names (useful life of 20 years)	15,100		(3,904		)	11,196		15,100		(3,343		)	11,757
Other (useful life of 1 to 20 years)	16,181		(6,420		)	9,761		17,744		(4,831		)	12,913
Total intangible assets subject to amortization	$	66,241	$	(30,107	)	36,134		$	67,804	$	(25,401	)	42,403

Software (useful life 2 to 10 years)	$	143,689	$	(120,623	)	23,066		$	136,005	$	(108,888	)	27,117

Goodwill and other intangible assets not subject to amortization
Goodwill						132,172							132,146
Newspaper mastheads and other						34,826							34,826
Total goodwill and other intangible assets						$	226,198						$	236,492

NOTE 10: INCOME TAXES

For the three and nine months ended September 29, 2019, the Company recorded income tax expense related to continuing operations of $0.5 million and $0.1 million, respectively. The effective tax rate on pretax income was 6.5% and 0.8% in the three and nine months ended September 29, 2019, respectively. During the three months ended September 29, 2019, the Company recorded a discrete item which resulted in a tax benefit of $1.5 million relating to an adjustment in state tax expense for the treatment of the Nant Transaction gain for state apportionment in selected states. For the three and nine months ended September 29, 2019, the rate also differs from the U.S. federal statutory rate of 21% primarily due to state income taxes, net of federal benefit, income from noncontrolling interest, tax expense related to vesting of stock compensation, and nondeductible expenses.

For the three and nine months ended September 30, 2018, the Company recorded an income tax benefit related to continuing operations of $5.8 million and $8.7 million, respectively. The effective tax rate on pretax income from continuing operations was 90.0% and 16.6% in the three and nine months ended September 30, 2018, respectively. For the three and nine months ended September 30, 2018, the rate differs from the U.S. federal statutory rate of 21% primarily due to a year-to-date true-up that increased the income tax benefit for the quarter by $4.3 million to the estimated annual tax provision. The rate also differs due to state income taxes, net of federal benefit, and nondeductible expenses. For the nine months ended September 30, 2018, the rate differs from the U.S. federal tax rate of 21% primarily due to state income taxes, net of federal benefit, and nondeductible expenses. 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. Also, in periods in which income (loss) before income taxes is close to break-even, permanent differences and changes in estimate tend to have a greater impact on 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 nine months ended September 29, 2019, the

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Company made contributions totaling $11.0 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 $0.7 million during the remainder of 2019. These payments are expensed when due to be paid.

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 $1.9 million to the NYDN Pension Plan in the nine months ended September 29, 2019. The Company expects to contribute $0.6 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						Nine Months Ended						Affected Line Items in the Consolidated Statements of Income (Loss)
	September 29, 2019			September 30, 2018			September 29, 2019			September 30, 2018
Service Cost	$	—		$	—		$	—		$	72		Compensation
Interest cost	878			818			2,637			2,454			Other income (expense), net
Expected return on assets	(1,052		)	(1,167		)	(3,159		)	(3,500		)	Other income (expense), net
Net periodic benefit	$	(174	)	$	(349	)	$	(522	)	$	(974	)

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						Nine Months Ended						Affected Line Items in the Consolidated Statements of Income (Loss)
	September 29, 2019			September 30, 2018			September 29, 2019			September 30, 2018
Service Cost	$	5		$	3		$	13		$	10		Compensation
Interest cost	10			9			29			26			Other income (expense), net
Amortization of prior service credits	(82		)	(2,634		)	(246		)	(7,901		)	Other income (expense), net
Amortization of actuarial gains	—			(658		)	—			(1,973		)	Other income (expense), net
Net periodic benefit	$	(67	)	$	(3,280	)	$	(204	)	$	(9,838	)

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.

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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 condensed balance sheets 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 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. During the three months ended September 29, 2019, the Company recorded a carrying value adjustment of $14.9 million.

In the nine months ended September 29, 2019, BestReviews declared dividends of $8.5 million to its stockholders. The Company’s portion of these dividends was $5.1 million and the noncontrolling stockholders’ portion was $3.4 million.

A summary of the activity with respect to noncontrolling interest for the nine months ended September 29, 2019 is as follows (in thousands):



Balance at December 30, 2018	$	39,756
Dividends declared and paid to noncontrolling interest	(3,400		)
Carrying value adjustment	14,853
Income attributable to noncontrolling interest	3,037
Balance at September 29, 2019	$	54,246

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.

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

For the three and nine months ended September 29, 2019 and September 30, 2018, basic and diluted earnings per common share were as follows (in thousands, except per share amounts):



	Three Months Ended						Nine Months Ended
	September 29, 2019			September 30, 2018			September 29, 2019			September 30, 2018
Income (loss) - Numerator:
Net income (loss) from continuing operations	$	6,873		$	(649	)	$	7,503		$	(43,821	)
Less: Income (loss) attributable to noncontrolling interest	1,150			(239		)	3,037			471
Less: Noncontrolling interest carrying value adjustment	14,853			—			14,853			—
Net income (loss) from continuing operations available to Tribune common stockholders, before discontinued operations	(9,130		)	(410		)	(10,387		)	(44,292		)
Plus: Earnings (loss) from discontinued operations, net of taxes	(12,848		)	(3,586		)	(13,570		)	290,665
Net income (loss) attributable to Tribune common stockholders	$	(21,978	)	$	(3,996	)	$	(23,957	)	$	246,373

Shares - Denominator:
Weighted average number of common shares outstanding (basic)	35,863			35,409			35,734			35,166
Dilutive effect of employee stock options and RSUs	—			—			—			—
Adjusted weighted average shares outstanding (diluted)	35,863			35,409			35,734			35,166

Net income (loss) attributable to Tribune per common share - Basic
Continuing operations	$	(0.25	)	$	(0.01	)	$	(0.29	)	$	(1.26	)
Discontinued operations	(0.36		)	(0.10		)	(0.38		)	8.27
Net income (loss) attributable to Tribune per common share - Basic	$	(0.61	)	$	(0.11	)	$	(0.67	)	$	7.01

Net income (loss) attributable to Tribune per common share - Diluted
Income (loss) per share from continuing operations	$	(0.25	)	$	(0.01	)	$	(0.29	)	$	(1.26	)
Earnings per share from discontinued operations	(0.36		)	(0.10		)	(0.38		)	8.27
Net income (loss) attributable to Tribune per common share - Diluted	$	(0.61	)	$	(0.11	)	$	(0.67	)	$	7.01

The number of stock options that were excluded from the computation of diluted earnings per share because their inclusion would result in an anti-dilutive effect on per share amounts was 858,219 and 902,664 for the three and nine months ended September 29, 2019, respectively. The number of stock options that were excluded from the computation of diluted earnings per share because their inclusion would result in an anti-dilutive effect on per share amounts was 924,887 for both the three and nine months ended September 30, 2018.

The number of RSUs that were excluded from the computation of diluted earnings per share because their inclusion would result in an anti-dilutive effect on per share amounts was 1,099,943 and 1,221,963 for the three and nine months ended September 29, 2019, respectively. The number of stock options that were excluded from the computation of diluted earnings per share because their inclusion would result in an anti-dilutive effect on per share amounts was 1,437,363 for both the three and nine months ended September 30, 2018.

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

NOTE 14: STOCKHOLDERS’ EQUITY

Dividends

On May 29, 2019, the Board of Directors declared a special cash dividend of $1.50 per share of common stock outstanding. The cash dividend of $53.8 million was paid on July 2, 2019, to shareholders of record as of June 12, 2019. Additionally, the Company accrued dividend equivalents of $1.9 million for RSUs outstanding as of the record date.

Stock Repurchases

On March 13, 2019, the Board of Directors authorized $25.0 million to be used for stock repurchases for 24 months from the date of authorization. No repurchases were made in the nine months ended September 29, 2019.

Significant Shareholders

Merrick Media, LLC

On March 23, 2017, the Company entered into Amendment No. 1 (the “Amendment”) to the Securities Purchase Agreement dated February 3, 2016 among the Company, Merrick Media, LLC (“Merrick Media”) and Michael W. Ferro, Jr., the Company’s non-executive Chairman of the Board at the time the agreement was signed. The Amendment increased from 25% to 30% the maximum percentage of the Company’s outstanding shares of common stock that Merrick Media and its affiliates may acquire. This restriction expires 30 days after the expiration of the Consulting Agreement with Merrick Ventures described in Note 5.

Mr. Ferro is the manager of Merrick Venture Management, LLC, which is the sole manager of Merrick Media. Because Merrick Venture Management, LLC serves as the sole manager of Merrick Media, Mr. Ferro may be deemed to indirectly control all of the shares of the Company’s common stock owned by Merrick Media. Mr. Ferro, together with his affiliated entities, beneficially owned 9,071,529 shares of Tribune common stock, which represented 25.2% of Tribune common stock as of September 29, 2019.

Nant Capital, LLC

Dr. Patrick Soon-Shiong, a former director of the Company, together with Nant Capital, LLC (“Nant Capital”), beneficially own 8,743,619 shares of Tribune common stock, which represented 24.3% of the outstanding shares of Tribune common stock as of September 29, 2019. California Capital Equity, LLC (“CalCap”) directly owns all of the equity interests of Nant Capital, and CalCap may be deemed to have beneficial ownership of the shares held by Nant Capital. Dr. Soon-Shiong directly owns all of the equity interests of CalCap and may be deemed to beneficially own and share voting power and investment power with Nant Capital over all shares of Tribune common stock beneficially owned by Nant Capital. Under the Securities Purchase Agreement dated May 22, 2016, among the Company, Nant Capital and Dr. Patrick Soon-Shiong (“Nant Purchase Agreement”), Nant Capital and Dr. Soon-Shiong and their respective affiliates are prohibited, without the prior written approval of the Board of Directors, from acquiring additional equity of the Company if the acquisition could result in their beneficial ownership of more than 25% of the Company’s then-outstanding shares of common stock. This prohibition expired on June 1, 2019. The Nant Purchase Agreement also includes covenants perpetually prohibiting the transfer of shares of the Company’s common stock if the transfer would result in a person beneficially owning more than 4.9% of the Company’s then-outstanding shares of common stock following the transfer, as well as transfers to a material competitor of the Company in any of the Company’s then-existing primary geographical markets.

On January 17, 2019, Dr. Patrick Soon-Shiong, NantMedia Holdings, LLC and Nant Capital entered into a Standstill and Voting Agreement (“Standstill Agreement”) with the Company. The Standstill Agreement provides that until June 30, 2020, Dr. Patrick Soon-Shiong, Nant Media, and Nant Capital will not (a) make or participate in any solicitation of proxies to vote, or seek to advise or knowingly influence any person with respect to the voting of any voting securities of the Company, (b) join or participate in a “group” (as defined in the rules of the SEC) in connection with any securities of the Company or (c) seek to control or knowingly influence the management, board of directors or policies of the Company. Furthermore, under the Standstill Agreement, Dr. Patrick Soon-Shiong, Nant Media and Nant Capital will, until June 30, 2020, vote their shares of common stock (a) in favor of each nominee or director designated by the Nominating and Governance Committee

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

of the Board of Directors at each election of directors and (b) in accordance with the Board’s recommendations on any change of control transaction involving the Company at or above a minimum purchase price. The Company recorded a charge to non-operating expense during the nine months ended September 29, 2019 for $0.5 million related to the Standstill Agreement.

NOTE 15: ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table sets forth the components of accumulated other comprehensive income (loss), net of tax, where applicable (in thousands):



	Foreign Currency			OPEB			Pension			Total
Balance at December 30, 2018	$	(39	)	$	303		$	(237	)	$	27
Amounts reclassified from AOCI	—			(178		)	—			(178		)
Foreign currency translation adjustments	(16		)	—			—			(16		)
Balance at September 29, 2019	$	(55	)	$	125		$	(237	)	$	(167	)

The following table presents the amounts and line items in the Consolidated Statements of Income (Loss) where adjustments reclassified from accumulated other comprehensive income (loss) were recorded during the three and nine months ended September 29, 2019 and September 30, 2018 (in thousands):



	Three Months Ended						Nine Months Ended						Affected Line Items in the Consolidated Statements of Income (Loss)
	September 29, 2019			September 30, 2018			September 29, 2019			September 30, 2018
Accumulated Other Comprehensive Income Components
Pension and postretirement benefit adjustments:
Amortization of prior service credits	$	(82	)	$	(2,634	)	$	(246	)	$	(7,901	)	Other income, net
Amortization of actuarial gains	—			(658		)	—			(1,973		)	Other income, net
Total before taxes	(82		)	(3,292		)	(246		)	(9,874		)
Tax effect	(22		)	(916		)	(68		)	(2,746		)	Income tax benefit
Total reclassifications for the period	$	(60	)	$	(2,376	)	$	(178	)	$	(7,128	)

NOTE 16: CONTINGENCIES

Legal Proceedings

The Company is subject to various legal proceedings and claims that have arisen in the ordinary course of business. The legal entities comprising our operations are defendants from time to time in actions for matters arising out of their business operations. In addition, the legal entities comprising our operations are involved from time to time as parties in various regulatory, environmental and other proceedings with governmental authorities and administrative agencies.

NOTE 17: SEGMENT INFORMATION

The Company’s business segments are based on the organization structure used by management for making operating and investment decisions and for assessing performance. Segment M is comprised of the Company’s media groups excluding their digital revenues and related digital expenses, except digital subscription revenues when bundled with a print subscription. Segment X includes the Company’s digital revenues and related digital expenses from local Tribune websites, third party websites, mobile applications, digital only subscriptions, TCA and BestReviews. The Company determined that the disposition of the California Properties and forsalebyowner.com did not result in changes to the Company’s segments.

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Assets are not presented to or used by management at a segment level for making operating and investment decisions and therefore are not reported.

The Company measures segment profit using income (loss) from operations, which is defined as income (loss) from operations before net interest expense, gain on investment transactions, reorganization items and income taxes.

Disaggregated operating revenues and income (loss) from continuing operations by operating segment for the three months ended September 29, 2019 and September 30, 2018, respectively, were as follows for the periods indicated (in thousands):



	Three Months Ended
	M					X				Corporate and Eliminations						Consolidated
	(Print)					(Digital)				Corporate and Eliminations						Consolidated
	Sep 29, 2019		Sep 30, 2018			Sep 29, 2019		Sep 30, 2018		Sep 29, 2019			Sep 30, 2018			Sep 29, 2019			Sep 30, 2018
Advertising	$	71,376	$	83,990		$	21,843	$	25,748	$	(1	)	$	40		$	93,218		$	109,778
Circulation	82,992		87,644			—		—		—			(6		)	82,992			87,638
Commercial print and delivery	22,404		24,445			—		—		—			—			22,404			24,445
Direct mail	8,853		8,608			—		—		—			—			8,853			8,608
Content syndication and other	2,003		2,698			22,978		15,329		3,579			7,274			28,560			25,301
Other	33,260		35,751			22,978		15,329		3,579			7,274			59,817			58,354
Operating revenues	187,628		207,385			44,821		41,077		3,578			7,308			236,027			255,770
Operating expenses	171,009		210,640			41,696		37,380		13,947			17,743			226,652			265,763
Income (loss) from operations	$	16,619	$	(3,255	)	$	3,125	$	3,697	$	(10,369	)	$	(10,435	)	9,375			(9,993		)
Interest income (expense), net																(57		)	303
Loss on equity investments, net																(2,213		)	(434		)
Other income (expense), net																248			3,640
Income (loss) from continuing operations before income taxes																$	7,353		$	(6,484	)
Depreciation and amortization	$	5,002	$	4,151		$	2,683	$	4,274	$	3,576		$	3,754		$	11,261		$	12,179

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Disaggregated operating revenues and income (loss) from continuing operations by operating segment for the nine months ended September 29, 2019 and September 30, 2018, respectively, were as follows for the periods indicated (in thousands):



	Nine Months Ended
	M				X				Corporate and Eliminations						Consolidated
	(Print)				(Digital)				Corporate and Eliminations						Consolidated
	Sep 29, 2019		Sep 30, 2018		Sep 29, 2019		Sep 30, 2018		Sep 29, 2019			Sep 30, 2018			Sep 29, 2019			Sep 30, 2018
Advertising	$	227,135	$	254,532	$	66,399	$	71,785	$	4		$	40		$	293,538		$	326,357
Circulation	254,471		260,886		—		—		—			(6		)	254,471			260,880
Commercial print and delivery	70,765		77,234		—		—		—			—			70,765			77,234
Direct mail	26,431		24,236		—		—		—			—			26,431			24,236
Content syndication and other	6,651		7,005		63,071		44,404		15,952			7,057			85,674			58,466
Other	103,847		108,475		63,071		44,404		15,952			7,057			182,870			159,936
Operating revenues	585,453		623,893		129,470		116,189		15,956			7,091			730,879			747,173
Operating expenses	543,383		619,461		122,109		109,548		55,309			60,480			720,801			789,489
Income (loss) from operations	$	42,070	$	4,432	$	7,361	$	6,641	$	(39,353	)	$	(53,389	)	10,078			(42,316		)
Interest income (expense), net															478			(11,673		)
Loss on early extinguishment of debt															—			(7,666		)
Loss on equity investments, net															(3,255		)	(1,828		)
Other income (expense), net															265			10,943
Income (loss) from continuing operations before income taxes															$	7,566		$	(52,540	)
Depreciation and amortization	$	16,229	$	12,113	$	7,248	$	13,328	$	11,516		$	12,126		$	34,993		$	37,567

The operating revenues and operating results from continuing operations presented above are not necessarily indicative of the results that may be expected for the full fiscal year.

NOTE 18: SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental cash flow information for each of the periods presented is as follows (in thousands):



	Nine Months Ended
	September 29, 2019		September 30, 2018
Cash paid during the period for:
Interest	$	—	$	10,489
Income taxes, net of refunds	8,176		3,405
Non-cash items in investing activities:
Issuance of stock from treasury for acquisition	—		34,595

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The Company established restricted cash to collateralize outstanding letters of credit related to workers compensation obligations. The following table provides a reconciliation of cash, cash equivalents, and restricted cash as reported within the Consolidated Condensed Balance Sheets that sum to the cash, cash equivalents and restricted cash as reported in the Consolidated Statements of Cash Flows (in thousands):



	September 29, 2019		December 30, 2018
Cash	$	56,526	$	97,560
Restricted cash	37,290		43,947
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$	93,816	$	141,507

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the other sections of this 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 SEC on March 18, 2019 (“the “2018 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, 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”).

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. See Note 4 to the Consolidated Financial Statements for more information on changes in operations in the nine months ended September 29, 2019. The Company expects to continue to take actions deemed appropriate to enhance profitability but does not currently know whether or when any such actions will occur or the potential costs and expected savings. Depending on the actions taken and the timing of any such actions, the anticipated cost savings could be recognized in fiscal periods that do not correspond to the fiscal period(s) in which the charges are recognized. As a result, the Company’s net income trends could be impacted and more difficult to predict.

Segments

The Company manages its business as two distinct segments, M and X. Segment M is comprised of the Company’s media groups excluding their digital revenues and related digital expenses, except digital subscription revenues when bundled with a print subscription. Segment X includes the Company’s digital revenues and related digital expenses, from local Tribune websites, third party websites, mobile applications, digital-only subscriptions, Tribune Content Agency, and BestReviews.

Segment M

Segment M’s media groups include the Chicago Tribune Media Group, the Sun Sentinel Media Group, the Orlando Sentinel Media Group, The Baltimore Sun Media Group, the Hartford Courant Media Group, the Morning Call Media Group, the New York Daily News Group and the Virginia Media Group (includes the Daily Press and The Virginian-Pilot).

In the nine months ended September 29, 2019, 38.8% of segment M’s operating revenues were derived from advertising. These revenues were generated from the sale of advertising space in published issues of the newspapers and from the delivery of preprinted advertising supplements. Approximately 43.5% of operating revenues for the nine months ended September 29, 2019 were generated from the sale of newspapers and other publications to individual subscribers or to sales outlets that re-sell the newspapers. The remaining 17.7% of operating revenues for the nine months ended September 29, 2019 were generated from the provision of commercial printing and delivery services to other newspapers, direct mail advertising and services, and other related activities.

Newspaper print advertising is typically in the form of display, 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 tend to do business directly with the public. National is a category of customers who tend to do business directly with other businesses. Classified is a type of advertising which is other than display or preprint.

Circulation revenue results from the sale of print editions of newspapers to individual subscribers and the sale of print editions of newspapers to sales outlets that re-sell the newspapers.

Other revenues are derived from commercial printing and delivery services provided to other newspapers, direct mail advertising and services, and other related activities. The Company contracts with a number of national and local newspapers to both print and distribute their respective publications in local markets where 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.

Products and Services

Our product mix consists of three publication types: (i) daily newspapers, (ii) weekly newspapers and (iii) niche publications and direct mail. The key characteristics of each of these types of publications are summarized in the table below.



	Daily Newspapers	Weekly Newspapers	Niche Publications
Cost:	Paid	Paid and free	Paid and free
Distribution:	Distributed four to seven days per week	Distributed one to three days per week	Distributed weekly, monthly or on an annual basis
Income:	Revenue from advertisers, subscribers, rack/box sales	Paid: Revenue from advertising, subscribers, rack/box sales	Paid: Revenue from advertising, rack/box sales
		Free: Advertising revenue only	Free: Advertising revenue only

As of September 29, 2019, the Company’s prominent print publications include:



Media Group	City	Masthead	Circulation Type	Paid or Free
Chicago Tribune Media Group
	Chicago, IL	Chicago Tribune	Daily	Paid
	Chicago, IL	Chicago Magazine	Monthly	Paid
	Chicago, IL	Hoy	Weekly	Free
	Chicago, IL	RedEye	Weekly	Free
The New York Daily News Group
	New York, NY	New York Daily News	Daily	Paid
Sun Sentinel Media Group
	Broward County, FL, Palm Beach County, FL	Sun Sentinel	Daily	Paid
	Broward County, FL, Palm Beach County, FL	el Sentinel	Weekly	Free
Orlando Sentinel Media Group
	Orlando, FL	Orlando Sentinel	Daily	Paid
	Orlando, FL	el Sentinel	Weekly	Free
The Baltimore Sun Media Group
	Baltimore, MD	The Baltimore Sun	Daily	Paid
	Annapolis, MD	The Capital	Daily	Paid
	Westminster, MD	Carroll County Times	Daily	Paid
Hartford Courant Media Group
	Hartford County, CT, Middlesex County, CT, Tolland County, CT	The Hartford Courant	Daily	Paid
Virginia Media Group
	Newport News, VA (Peninsula)	Daily Press	Daily	Paid
	Norfolk, VA	The Virginian-Pilot	Daily	Paid
The Morning Call Media Group
	Lehigh Valley, PA	The Morning Call	Daily	Paid

Segment X

Segment X comprises the Company’s digital operations and includes the Company’s digital revenues and related digital expenses from local Tribune websites, third party websites, mobile applications, digital only subscriptions, TCA, and BestReviews.

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.

On February 6, 2018, the Company acquired a 60% membership interest in BestReviews LLC (“BestReviews”), 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.

On May 23, 2018, the Company sold substantially all of the assets of forsalebyowner.com in an asset sale. The forsalebyowner.com results are included in discontinued operations in the statement of operations for all periods presented.

In the nine months ended September 29, 2019, 51.3% of segment X’s operating revenues were derived from advertising. These revenues were generated from the sale of advertising space on interactive websites and digital marketing services. The remaining 48.7% of operating revenues for the nine months ended September 29, 2019 were generated from the sale of digital content and other related activities.

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 its customers’ web presence for small to medium size businesses.

Products and Services

As of September 29, 2019, the Company’s prominent websites include:



Websites
www.tribpub.com	www.orlandosentinel.com	www.thedailymeal.com
www.chicagotribune.com	www.orlandosentinel/elsentinel.com	www.theactivetimes.com
www.chicagomag.com	www.baltimoresun.com	www.dailypress.com
www.sun-sentinel.com	www.capitalgazette.com	www.pilotonline.com
www.sun-sentinel/elsentinel.com	www.carrollcountytimes.com	www.vivelohoy.com
www.bestreviews.com	www.courant.com	www.redeyechicago.com
www.nydailynews.com	www.themorningcall.com

The Company’s results of operations, when examined on a quarterly basis, reflect the seasonality of Tribune’s revenues. Second and fourth quarter advertising revenues are typically higher than first and third quarter revenues. Results for the second quarter reflect spring advertising revenues, while the fourth quarter includes advertising revenues related to the holiday season.

Results of Operations

Consolidated

Operating results from continuing operations for the three and nine months ended September 29, 2019 and September 30, 2018 are shown in the table below (in thousands).



	Three Months Ended								Nine Months Ended
	Sep 29, 2019			Sep 30, 2018			% Change		Sep 29, 2019			Sep 30, 2018			% Change
Operating revenues	$	236,027		$	255,770		(7.7	%)	$	730,879		$	747,173		(2.2	%)
Compensation	83,066			107,762			(22.9	%)	276,583			324,982			(14.9	%)
Newsprint and ink	12,613			16,980			(25.7	%)	43,834			48,348			(9.3	%)
Outside services	77,549			81,572			(4.9	%)	241,787			262,372			(7.8	%)
Other operating expenses	42,163			47,270			(10.8	%)	123,604			116,220			6.4	%
Depreciation and amortization	11,261			12,179			(7.5	%)	34,993			37,567			(6.9	%)
Total operating expenses	226,652			265,763			(14.7	%)	720,801			789,489			(8.7	%)
Income (loss) from operations	9,375			(9,993		)	*		10,078			(42,316		)	*
Interest income (expense), net	(57		)	303			*		478			(11,673		)	*
Loss on early extinguishment of debt	—			—			*		—			(7,666		)	*
Loss on equity investments, net	(2,213		)	(434		)	*		(3,255		)	(1,828		)	78.1	%
Other income (expense), net	248			3,640			(93.2	%)	265			10,943			(97.6	%)
Income tax expense (benefit)	480			(5,835		)	*		63			(8,719		)	*
Net income (loss) from continuing operations	6,873			(649		)	*		7,503			(43,821		)	*
Plus: Earnings (loss) from discontinued operations, net of taxes	(12,848		)	(3,586		)	*		(13,570		)	290,665			*
Net income (loss)	(5,975		)	(4,235		)	41.1	%	(6,067		)	246,844			*
Less: Income (loss) attributable to noncontrolling interest	1,150			(239		)	*		3,037			471			*
Net income (loss) attributable to Tribune common stockholders	$	(7,125	)	$	(3,996	)	78.3	%	$	(9,104	)	$	246,373		*

* Represents positive or negative change in excess of 100%

Three months ended September 29, 2019 compared to the three months ended September 30, 2018

Operating Revenues—Operating revenues decreased 7.7%, or $19.7 million, in the three months ended September 29, 2019, compared to the same period for 2018, due primarily to decreases in print revenue categories.

Compensation Expense—Compensation expense decreased 22.9%, or $24.7 million, in the three months ended September 29, 2019. This decrease was due primarily to a decrease in salary and payroll tax expense of $12.1 million, a decrease in severance expense of $7.5 million and a decrease in medical insurance expense of $4.5 million as a result of the reduction in headcount related to personnel restructuring in prior periods.

Newsprint and Ink Expense—Newsprint and ink expense decreased 25.7%, or $4.4 million, in the three months ended September 29, 2019. This decrease was due primarily to a decrease in the average cost per ton of newsprint related to the repeal of the tariff on certain newsprint products sourced from Canada and a decrease in volume.

Outside Services Expense—Outside services expense decreased 4.9%, or $4.0 million, in the three months ended September 29, 2019. This decrease was due primarily to a reduction of $2.4 million in professional services expense, a reduction of $0.9 million in third party delivery expense and a reduction in temporary help of $0.8 million.

Other Operating Expenses—Other expenses include occupancy costs, promotion and marketing costs, affiliate fees and other miscellaneous expenses. These expenses decreased 10.8%, or $5.1 million, in the three months ended September 29, 2019, due primarily to a $2.0 million reduction in occupancy expenses and a $3.1 million reduction in repairs and maintenance, insurance, supplies and bad debt expenses.

Depreciation and Amortization Expense—Depreciation and amortization expense decreased 7.5%, or $0.9 million, due primarily to accelerated depreciation in the prior year related to shortened lives for certain assets removed from service.

Interest Expense, Net—Interest expense remained comparable period over period.

Loss on Equity Investments, Net—Loss on equity investments, net increased $1.8 million primarily due to additional reserves for certain investments of the Company.

Other Income, Net—The decrease in other income, net is due to increased credits in 2018 related to periodic benefit costs. In 2018, the Company terminated the non-union post-retirement medical plan. As such, remaining amounts in accumulated other comprehensive income (loss) were amortized to expense during 2018.

Income Tax Expense (Benefit)—Income tax expense (benefit) decreased $6.3 million for the three months ended September 29, 2019 over the prior year period. For the three months ended September 29, 2019, the Company recorded an 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 state tax expense for the treatment of the Nant Transaction gain for state apportionment in selected states. The effective tax rate on pretax income was 6.5% in the three 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, noncontrolling interest, tax expense related to vesting of stock compensation, and non-deductible expenses.

For the three months ended September 30, 2018, the Company recorded income tax benefit of $5.8 million. The effective tax rate on pretax income was 90.0% in the three months ended September 30, 2018. 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 29, 2019 compared to the nine months ended September 30, 2018

Operating Revenues—Operating revenues decreased 2.2%, or $16.3 million, in the nine months ended September 29, 2019, compared to the same period for 2018 due primarily to a decrease in advertising and circulation revenue partially offset by an increase in other revenue and the combined impact of the acquisitions of BestReviews in the first quarter of 2018, The Virginian-Pilot in the second quarter of 2018 and TSA revenue related to the sale of the California Properties in the second quarter of 2018. The acquisitions contributed $65.8 million in revenue during the nine months ended September 29, 2019, compared to $34.7 million during the nine months ended September 30, 2018. TSA revenue for the nine months ended September 29, 2019 was $17.0 million compared to $9.8 million for nine months ended September 30, 2018.

Compensation Expense—Compensation expense decreased 14.9%, or $48.4 million, in the nine months ended September 29, 2019. This decrease was due primarily to a decrease in salary and payroll tax expense of $48.6 million, a decrease in severance expense of $10.9 million and a decrease in medical insurance expense of $8.0 million as a result of the reduction in headcount related to personnel restructuring in the prior periods. This decrease was partially offset by increased pension expense related to a $11.0 million in contributions to the Drivers’ Plan, increased workers compensation expense of $3.4 million and increased compensation expense due to acquisitions which contributed $14.5 million in the nine months ended September 29, 2019 compared to $10.1 million during the nine months ended September 30, 2018.

Newsprint and Ink Expense—Newsprint and ink expense decreased 9.3% or $4.5 million. This decrease was due primarily to a decrease in the average cost per ton of newsprint related to the repeal of the tariff on certain newsprint products sourced from Canada and a decrease in volume. The decreases in price and volume were partially offset by contributions from the acquisition of The Virginian-Pilot which contributed $3.0 million in the nine months ended September 29, 2019 compared to $1.8 million during the nine months ended September 30, 2018.

Outside Services Expense—Outside services expense decreased 7.8%, or $20.6 million, in the nine months ended September 29, 2019. This decrease was due primarily to $12.5 million of expense recorded in 2018 related to the Consulting Agreement described in Note 5 to the Consolidated Financial Statements. Additionally, there was a reduction of $4.4 million in third-party delivery expense, $3.3 million in temporary help, $2.2 million in outside printing and production costs and

$13.7 million in other outside services. The decreases were partially offset by increases due to acquisitions which contributed $14.4 million in the nine months ended September 29, 2019 compared to $6.1 million during the nine months ended September 30, 2018.

Other Operating Expenses—Other expenses include occupancy costs, promotion and marketing costs, affiliate fees and other miscellaneous expenses. These expenses increased 6.4%, or $7.4 million, in the nine months ended September 29, 2019, due primarily to $19.8 million of operating expenses previously allocated to the California Properties in the prior year. These allocated operating expenses are recovered as a component of TSA revenue in periods subsequent to the sale. Additionally, the acquisitions contributed $22.0 million in other operating expenses for the nine months ended September 29, 2019, compared to $14.2 million for the nine months ended September 30, 2018. These increases were partially offset by decreases in all categories, primarily a $3.3 million decrease in occupancy costs, a $5.0 million decrease in insurance expense, a $3.3 million decrease in bad debt expense and a $2.2 million decrease in travel, entertainment and other employee expenses.

Depreciation and Amortization Expense—Depreciation and amortization expense decreased 6.9%, or $2.6 million, due primarily to accelerated depreciation in the prior year related to shortened lives for certain assets removed from service. This decrease was partially offset by increases due to acquisitions which contributed $5.9 million in the nine months ended September 29, 2019 compared to $0.3 million during the nine months ended September 30, 2018.

Interest Expense, Net—Interest expense decreased as the Company’s senior term facility was repaid in full in June 2018.

Loss on early extinguishment of debt—In June 2018, the Company repaid the outstanding principal balance under the Senior Term Facility and terminated the agreement. As a result of the early extinguishment of debt, the Company incurred a $7.7 million loss to expense the remaining balance of original issue discount and debt origination fees.

Loss on Equity Investments, Net—Loss on equity investments, net increased $1.4 million primarily due to additional reserves for certain of the Company’s investments.

Other Income, Net—The decrease in other income, net is due to credits in 2018 related to periodic benefit costs. In 2018, the Company terminated the non-union post-retirement medical plan. As such, remaining amounts in accumulated other comprehensive income were amortized to expense during 2018.

Income Tax Expense (Benefit)—Income tax expense (benefit) decreased $8.8 million for the nine months ended September 29, 2019 over the prior year period. For the nine months ended September 29, 2019, the Company recorded an income tax expense of $0.1 million including a discrete item which resulted in a tax benefit of $1.5 million relating to an adjustment in state tax expense for the treatment of the Nant Transaction gain for state apportionment in selected states. The effective tax rate on pretax income was 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, noncontrolling interest, tax expense related to vesting of stock compensation, and non-deductible expenses.

For the nine months ended September 30, 2018, the Company recorded income tax benefit of $8.7 million. The effective tax rate on pretax income was 16.6% in the nine months ended September 30, 2018. 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.

Segments

The Company manages its business as two distinct segments, M and X. Segment M is comprised of the Company’s media groups excluding their digital revenues and related digital expenses, except digital subscription revenues when bundled with a print subscription. Segment X includes the Company’s digital revenues and related digital expenses from local Tribune websites, third party websites, mobile applications, digital only subscriptions, TCA, and BestReviews.

The Company measures segment profit using income (loss) from operations, which is defined as net income (loss) before net interest expense, gain on investment transactions, reorganization items and income taxes.

The tables below show the segmentation of income and expenses from continuing operations for the three and nine months ended September 29, 2019 as compared to the three and nine months ended September 30, 2018 (in thousands). Each three-month period consists of 13 weeks.



	Three Months Ended
	M					X				Corporate and Eliminations						Consolidated
	Sep 29, 2019		Sep 30, 2018			Sep 29, 2019		Sep 30, 2018		Sep 29, 2019			Sep 30, 2018			Sep 29, 2019		Sep 30, 2018
Total revenues	$	187,628	$	207,385		$	44,821	$	41,077	$	3,578		$	7,308		$	236,027	$	255,770
Operating expenses	171,009		210,640			41,696		37,380		13,947			17,743			226,652		265,763
Income (loss) from operations	16,619		(3,255		)	3,125		3,697		(10,369		)	(10,435		)	9,375		(9,993		)
Depreciation and amortization	5,002		4,151			2,683		4,274		3,576			3,754			11,261		12,179
Adjustments ⁽¹⁾	635		7,182			316		2,475		3,219			4,797			4,170		14,454
Adjusted EBITDA	$	22,256	$	8,078		$	6,124	$	10,446	$	(3,574	)	$	(1,884	)	$	24,806	$	16,640

(1) See Non-GAAP Measures for additional information on adjustments.



	Nine Months Ended
	M				X				Corporate and Eliminations						Consolidated
	Sep 29, 2019		Sep 30, 2018		Sep 29, 2019		Sep 30, 2018		Sep 29, 2019			Sep 30, 2018			Sep 29, 2019		Sep 30, 2018
Total revenues	$	585,453	$	623,893	$	129,470	$	116,189	$	15,956		$	7,091		$	730,879	$	747,173
Operating expenses	543,383		619,461		122,109		109,548		55,309			60,480			720,801		789,489
Income (loss) from operations	42,070		4,432		7,361		6,641		(39,353		)	(53,389		)	10,078		(42,316		)
Depreciation and amortization	16,229		12,113		7,248		13,328		11,516			12,126			34,993		37,567
Adjustments ⁽¹⁾	4,196		15,926		6,183		7,737		15,075			28,485			25,454		52,148
Adjusted EBITDA	$	62,495	$	32,471	$	20,792	$	27,706	$	(12,762	)	$	(12,778	)	$	70,525	$	47,399

(1) See Non-GAAP Measures for additional information on adjustments.

Segment M



	Three Months Ended							Nine Months Ended
(in thousands)	Sep 29, 2019		Sep 30, 2018			% Change		Sep 29, 2019		Sep 30, 2018		% Change
Operating revenues:
Advertising	$	71,376	$	83,990		(15.0	%)	$	227,135	$	254,532	(10.8	%)
Circulation	82,992		87,644			(5.3	%)	254,471		260,886		(2.5	%)
Other	33,260		35,751			(7.0	%)	103,847		108,475		(4.3	%)
Total revenues	187,628		207,385			(9.5	%)	585,453		623,893		(6.2	%)
Operating expenses	171,009		210,640			(18.8	%)	543,383		619,461		(12.3	%)
Income (loss) from operations	16,619		(3,255		)	*		42,070		4,432		*
Depreciation and amortization	5,002		4,151			20.5	%	16,229		12,113		34.0	%
Adjustments ⁽¹⁾	635		7,182			(91.2	%)	4,196		15,926		(73.7	%)
Adjusted EBITDA	$	22,256	$	8,078		*		$	62,495	$	32,471	92.5	%

* Represents positive or negative change in excess of 100%

(1) See Non-GAAP Measures for additional information on adjustments.

Three months ended September 29, 2019 compared to the three months ended September 30, 2018

Advertising Revenues—Total advertising revenues decreased 15.0%, or $12.6 million, in the three months ended September 29, 2019. Retail advertising decreased $11.6 million, year over year, due primarily to decreases in financial services, furniture, specialty merchandise and retail health care categories. National advertising decreased $1.0 million, due primarily to decreases in the media and movies categories. Classified advertising remained consistent year over year.

Circulation Revenues—Circulation revenues decreased 5.3%, or $4.7 million, in the three months ended September 29, 2019. Single copy circulation decreased $3.1 million and home delivery revenue decreased $1.5 million.

Other Revenues—Other revenues decreased 7.0%, or $2.5 million, in the three months ended September 29, 2019, due primarily to declines of $2.0 million in revenues from commercial print and delivery.

Operating Expenses—Operating expenses decreased 18.8%, or $39.6 million, in the three months ended September 29, 2019. The decreases were in all expense categories with the largest being in compensation, allocations of shared costs, newsprint and ink, and occupancy costs.

Nine months ended September 29, 2019 compared to the nine months ended September 30, 2018

Advertising Revenues—Total advertising revenues decreased 10.8%, or $27.4 million, in the nine months ended September 29, 2019. Retail advertising decreased $34.9 million year over year, due primarily to decreases in furniture, department store, general merchandise, specialty merchandise and amusements categories. Classified and national advertising remained consistent year over year. These decreases were partially offset by the acquisition of The Virginian-Pilot in the second quarter of 2018. The acquisition contributed $20.9 million in revenue during the nine months ended September 29, 2019, compared to $11.8 million during the nine months ended September 30, 2018.

Circulation Revenues—Circulation revenues decreased 2.5%, or $6.4 million, in the nine months ended September 29, 2019. This decrease was due primarily to a decrease of $6.8 million in home delivery revenue and $6.0 million in single copy revenue. These decreases were partially offset by revenues attributable to the acquisition of The Virginian-Pilot which contributed $11.9 million in the nine months ended September 29, 2019, compared to $5.5 million in the nine months ended September 30, 2018.

Other Revenues—Other revenues decreased 4.3%, or $4.6 million, in the nine months ended September 29, 2019, due primarily to declines of $7.0 million in revenues from commercial print and delivery and $1.2 million from content syndication. These decreases were partially offset by an increase of $1.9 million in direct mail revenue and by revenues from

the acquisition, which contributed $2.9 million in the nine months ended September 29, 2019, compared to $1.2 million in the nine months ended September 30, 2018.

Operating Expenses—Operating expenses decreased 12.3%, or $76.1 million, in the nine months ended September 29, 2019. The decreases were in all expense categories with the largest being compensation, allocation of shared costs, newsprint and ink, insurance, bad debt, and circulation and distribution expenses. These decreases were partially offset by expenses from The Virginian-Pilot, which contributed $38.6 million in the nine months ended September 29, 2019, compared to $18.5 million in the nine months ended September 30, 2018.

Segment X



	Three Months Ended						Nine Months Ended
(in thousands)	Sep 29, 2019		Sep 30, 2018		% Change		Sep 29, 2019		Sep 30, 2018		% Change
Operating revenues:
Advertising	$	21,843	$	25,748	(15.2	%)	$	66,399	$	71,785	(7.5	%)
Content	22,978		15,329		49.9	%	63,071		44,404		42.0	%
Total revenues	44,821		41,077		9.1	%	129,470		116,189		11.4	%
Operating expenses	41,696		37,380		11.5	%	122,109		109,548		11.5	%
Income (loss) from operations	3,125		3,697		(15.5	%)	7,361		6,641		10.8	%
Depreciation and amortization	2,683		4,274		(37.2	%)	7,248		13,328		(45.6	%)
Adjustments ⁽¹⁾	316		2,475		(87.2	%)	6,183		7,737		(20.1	%)
Adjusted EBITDA	$	6,124	$	10,446	(41.4	%)	$	20,792	$	27,706	(25.0	%)

* Represents positive or negative change in excess of 100%

(1) See Non-GAAP Measures for additional information on adjustments.

Three months ended September 29, 2019 compared to the three months ended September 30, 2018

Advertising Revenues—Advertising revenues decreased 15.2%, or $3.9 million in the three months ended September 29, 2019 primarily due to decreases in retail advertising revenues and digital marketing services.

Content Revenues—Content revenues increased 49.9%, or $7.6 million, in the three months ended September 29, 2019. This increase was due primarily to increases in ecommerce and digital-only subscriptions.

Operating Expenses—Operating expenses increased 11.5%, or $4.3 million, in the three months ended September 29, 2019. This increase was due primarily to an increase in allocation of shared costs. This increase was partially offset by a decrease in compensation.

Nine months ended September 29, 2019 compared to the nine months ended September 30, 2018

Advertising Revenues—Total advertising revenues decreased 7.5%, or $5.4 million, in the nine months ended September 29, 2019 compared to the prior period. This decrease is due primarily to a $2.9 million decrease in retail advertising revenues, a $2.5 million decrease in national advertising revenues and a $2.4 million decrease in classified revenues. These decreases were partially offset by contribution from the acquisitions of BestReviews in the first quarter of 2018 and The Virginian-Pilot in the second quarter of 2018. The acquisitions contributed $5.1 million in revenue during the nine months ended September 29, 2019 compared to $2.5 million during the nine months ended September 30, 2018.

Content Revenues—Content revenues increased 42.0%, or $18.7 million, in the nine months ended September 29, 2019. This increase was due primarily to contributions from acquisitions of $25.0 million during the nine months ended September 29, 2019 compared to $13.7 million during the nine months ended September 30, 2018.

Operating Expenses—Operating expenses increased 11.5%, or $12.6 million, in the nine months ended September 29, 2019. The increase is due primarily to increased allocation of shared costs and expenses from the acquisitions of BestReviews and The Virginian-Pilot which contributed $21.2 million in the nine months ended September 29, 2019 compared to $14.0 million

in the nine months ended September 30, 2018. The increases were partially offset by decreases in all expense categories with the largest being compensation.

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 operating performance. These items include stock-based compensation expense, restructuring charges, 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)	September 29, 2019			September 30, 2018			% Change		September 29, 2019			September 30, 2018			% Change
Net income (loss) from continuing operations	$	6,873		$	(649	)	*		$	7,503		$	(43,821	)	*
Income tax expense (benefit) from continuing operations	480			(5,835		)	*		63			(8,719		)	*
Interest income (expense), net	57			(303		)	*		(478		)	11,673			*
Loss on early extinguishment of debt	—			—			*		—			7,666			*
Loss on equity investments, net	2,213			434			*		3,255			1,828			78.1	%
Other income (expense), net	(248		)	(3,640		)	(93.2	%)	(265		)	(10,943		)	(97.6	%)
Income (loss) from operations	9,375			(9,993		)	*		10,078			(42,316		)	*
Depreciation and amortization	11,261			12,179			(7.5	%)	34,993			37,567			(6.9	%)
Restructuring and transaction costs ⁽¹⁾	1,721			11,472			(85.0	%)	14,389			44,635			(67.8	%)
Stock based compensation	2,449			2,982			(17.9	%)	11,065			7,513			47.3	%
Adjusted EBITDA from continuing operations	$	24,806		$	16,640		49.1	%	$	70,525		$	47,399		48.8	%

* 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, costs related to completed and potential acquisitions and a one-time charge related to the Consulting Agreement.

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, 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.

Liquidity and Capital Resources

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. The Company’s access to, and the availability of, financing in the future will be impacted by many factors, including its credit rating, the liquidity of the overall capital markets and the current state of the economy. There can be no assurances that the Company will have access to capital markets on acceptable terms.

Sources and Uses

The Company expects to fund capital expenditures and pension payments due in 2019 and other operating requirements through a combination of existing cash balances and cash flows from operations and investments. 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 and, 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.

The table below details the total operating, investing and financing activity cash flows from continuing operations for the nine months ended September 29, 2019 and September 30, 2018 (in thousands):



	Nine Months Ended
	September 29, 2019			September 30, 2018
Net cash provided by (used for) operating activities	$	31,953		$	(7,292	)
Net cash used for investing activities	(14,584		)	(122,162		)
Net cash used for financing activities	(59,089		)	(358,510		)
Decrease in cash attributable to continuing operations	$	(41,720	)	$	(487,964	)

Cash flow generated from operating activities is Tribune’s primary source of liquidity. Net cash provided by operating activities from continuing operations increased by $39.2 million to $32.0 million for the nine months ended September 29, 2019, compared to cash used of $7.3 million for the nine months ended September 30, 2018. The increase was primarily driven by increased net income of $51.3 million due to an increase of $3.7 million related to the acquisitions and a decrease in net loss for the remaining continuing operations of $47.6 million, plus payments received under the TSA agreement. This increase was partially offset by unfavorable fluctuations in working capital due to payments related to headcount reductions of $31.3 million.

Net cash used for investing activities from continuing operations totaled $14.6 million in the nine months ended September 29, 2019, primarily due to $13.9 million used for capital expenditures. In the nine months ended September 30, 2018, net cash used in investing activities totaled $122.2 million primarily due to $71.0 million used for acquisitions and $49.0 million for capital expenditures.

Net cash used for financing activities totaled $59.1 million for the nine months ended September 29, 2019, primarily due to payment of the cash dividend of $53.8 million on July 2, 2019. In the nine months ended September 30, 2018, net cash used for financing activities totaled $358.5 million, which included $353.3 million in loan payments on senior debt.

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. In the nine months ended September 30, 2018, net cash provided by discontinued operations totaled $444.1 million primarily due to proceeds from the sale of the California Properties.

Dividends

On May 29, 2019, the Board of Directors declared a special cash dividend of $1.50 per share of common stock outstanding. The cash dividend of $53.8 million was paid on July 2, 2019 to shareholders of record as of June 12, 2019. Additionally, the Company accrued dividend equivalents of $1.9 million for RSUs outstanding as of the record date.

Multiemployer pension

As disclosed in the 2018 Annual Report, the trustees of the Drivers’ Plan agreed to a plan of merger with the Teamsters Local Union No. 727 Pension Fund. In contemplation of the merger, on December 13, 2018, the Drivers’ Plan adopted an amendment to its prior rehabilitation plan under which the Company has been committed to make contributions of $68.4 million payable over seven years regardless of whether the merger is consummated. During the nine months ended September 29, 2019 the Company has paid $11.0 million of the payments required under the amended rehabilitation plan. Following approval by the Pension Benefit Guaranty Corporation (“PBGC”), the plans merged effective as of August 1, 2019. In addition to the committed future contributions payable to the Teamsters Local Union No. 727 Pension Fund under the amended rehabilitation plan, the Company’s funding obligation will be 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. The Company expects to contribute $0.7 million in the fourth quarter of 2019. These payments are expensed when due to be paid.

Employee Reductions

During the nine months ended September 29, 2019, the Company implemented reductions in staffing levels in its operations of 118 positions for which the Company recorded pretax charges related to these reductions totaling $7.6 million. These reductions 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 of 2019 and the final payment to the last employee is expected to be made in the first quarter of 2020.

Discontinued Operations

New Accounting Standards

See Note 1 in the Consolidated Financial Statements for a description of new accounting standards issued and/or adopted in the nine months ended September 29, 2019.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As of September 29, 2019, there had been no material changes in the Company’s exposure to market risk from the disclosure included in the 2018 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 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 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.

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 29, 2019 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II.

Item 1. Legal Proceedings

We are subject to various legal proceedings and claims that have arisen in the ordinary course of business. The legal entities comprising our operations are defendants from time to time in actions for matters arising out of their business operations. In addition, the legal entities comprising our operations are involved from time to time as parties in various regulatory, environmental and other proceedings with governmental authorities and administrative agencies.

Tribune Company Bankruptcy

On December 31, 2012, Tribune Media Company, formerly Tribune Company (“TCO”) and 110 of its direct and indirect wholly-owned subsidiaries that had filed voluntary petitions for relief under Chapter 11 of title 11 of the United States Code in the United States Bankruptcy Court for the District of Delaware on December 8, 2008 (or on October 12, 2009, in the case of Tribune CNLBC, LLC) (collectively, the “Debtors”) emerged from Chapter 11. Certain of the legal entities included in the Consolidated Financial Statements of Tribune were Debtors or, as a result of the restructuring transactions undertaken at the time of the Debtors’ emergence, are successor legal entities to legal entities that were Debtors (“Tribune Debtors”).

Notices of appeal of the Bankruptcy Court’s order confirming the Plan (the “Confirmation Order”) were filed by (i) Aurelius Capital Management L.P. on behalf of its managed entities that were holders of TCO’s senior notes and Exchangeable Subordinated Debentures due 2029 (“PHONES”), (ii) Law Debenture Trust Company of New York (n/k/a Delaware Trust Company (“Delaware Trust Company”)) and Deutsche Bank Trust Company Americas (“Deutsche Bank”), each successor trustees under the respective indentures for TCO’s senior notes; (iii) Wilmington Trust Company, as successor indenture trustee for the PHONES, and (iv) EGI-TRB, L.L.C., a Delaware limited liability company wholly-owned by Sam Investment Trust (a trust established for the benefit of Samuel Zell and his family) (the “Zell Entity”). The appellants sought, among other relief, to overturn the Confirmation Order and certain prior orders of the Bankruptcy Court embodied in the Plan, including the settlement of certain claims and causes of action related to a series of transactions consummated by TCO, the TCO employee stock ownership plan, the Zell Entity and Samuel Zell in 2007. Each of the Confirmation Order appeals have been dismissed or otherwise resolved by a final order, with the exception of the appeals of Delaware Trust Company and Deutsche Bank. On July 30, 2018, the United States District Court for the District of Delaware (the “District Court”) entered an order affirming (i) the Bankruptcy Court’s judgment overruling Delaware Trust Company’s and Deutsche Bank’s objections to confirmation of the Plan and (ii) the Bankruptcy Court’s order confirming the Plan. Delaware Trust Company and Deutsche Bank appealed the District Court’s order to the United States Court of Appeals for the Third Circuit (the “Third Circuit”) on August 27, 2018. That appeal remains pending before the Third Circuit. There is no stay of the Confirmation Order in place pending resolution of the confirmation related appeals.

The Bankruptcy Court has entered final decrees collectively closing 106 of the Debtors’ Chapter 11 cases, including the last one of the Tribune Debtors’ cases. The remaining Chapter 11 cases relate to Debtors and successor legal entities that are subsidiaries of TCO. These cases have not yet been closed by the Bankruptcy Court, and certain claims asserted against various of the Debtors (including certain of the Tribune Debtors) in the Chapter 11 cases remain unresolved. The remaining Chapter 11 cases continue to be administered under the caption “In re: Tribune Media Company, et al.,” Case No 08-13141.

The Company does not believe that any matters or proceedings presently pending will have a material adverse effect, individually or in the aggregate, on our consolidated financial position, results of operations or liquidity. However, legal matters and proceedings are inherently unpredictable and subject to significant uncertainties, some of which are beyond our control. As such, there can be no assurance that the final outcome of these matters and proceedings will not materially and adversely affect our consolidated financial position, results of operations or liquidity.

Item 1A. Risk Factors

In addition to the other information in this report, investors should carefully consider the discussion under “Risk Factors” in Item 1A as filed in the 2018 Annual Report. As of the filing date of this report there have been no material changes to our risk factors as disclosed in such filings.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibits marked with an asterisk (*) are incorporated by reference to documents previously filed by the Company with the Securities and Exchange Commission, as indicated. All other documents are filed with this report. Exhibits marked with a tilde (~) are management contracts, compensatory plan contracts or arrangements filed pursuant to Item 601(b)(10)(iii)(A) of Regulation S-K. Certain agreements are included as exhibits to this Quarterly Report on Form 10-Q to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about the Company or the parties to the agreement. Each agreement may contain representations and warranties by the parties to the agreement. These representations and warranties have been made solely for the benefit of the other party or parties to the agreement and (1) should not in all instances be treated as categorical statements of fact, but rather as a means of allocating the risk to one of the parties if those statements prove to be inaccurate; (2) may have been qualified by disclosures that were made to the other party or parties in connection with the negotiation of the attached agreement, which disclosures are not necessarily reflected in the agreement; (3) may apply standards of materiality in a manner that is different from what may be viewed as material to you or other investors; and (4) were made only as of the date of the agreement or other date or dates that may be specified in the agreement and are subject to more recent developments. Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time.

Exhibit Description

Number


2.1*	Acquisition Agreement, dated February 6, 2018, by and among Best Reviews, Inc., Best Reviews LLC, Tribune Publishing Company, LLC, and tronc, Inc., and Denis Grosz (as the Sellers’ Representative), and the Stockholders defined in the Purchase Agreement (incorporated by reference to Exhibit 2.1 to the Form 8-K filed on February 7, 2018).


2.2*	Membership Interest Purchase Agreement, dated February 7, 2018, by and among Nant Capital, LLC, and tronc, Inc. (incorporated by reference to Exhibit 2.1 to the Form 8-K filed on February 7, 2018).


2.3*	Asset Purchase Agreement dated March 13, 2018, by and among forsalebyowner.com, LLC; the Buyer thereunder; and for certain sections, In-House Realty LLC and Tribune Publishing Company, LLC (incorporated by reference to Exhibit 2.1 to the Form 8-K filed on May 23, 2018).


2.4*	Securities Purchase Agreement, dated May 28, 2018, by and among Tribune Publishing Company, LLC, Virginian-Pilot Media Companies, LLC and Landmark Media Enterprises, LLC (incorporated by reference to Exhibit 2.1 to the Form 8-K filed on May 29, 2018).


3.1*	Amended and Restated Certificate of Incorporation of Tribune Publishing Company, as amended (incorporated by reference to Exhibit 3.1 to the Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2018 filed on November 30, 2018).


3.2*	Amended and Restated By-laws of Tribune Publishing Company (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed on October 9, 2018).


31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002


31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002


32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


101.INS	XBRL Instance Document


101.SCH	XBRL Taxonomy Extension Scheme Document


101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document


101.DEF	XBRL Taxonomy Extension Definition Linkbase Document


101.LAB	XBRL Taxonomy Extension Labels Linkbase Document


101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		TRIBUNE PUBLISHING COMPANY

November 7, 2019	By:	/s/ Terry Jimenez
		Terry Jimenez
		Executive Vice President and Chief Financial Officer

November 7, 2019	By:	/s/ Michael N. Lavey
		Michael N. Lavey
		Chief Accounting Officer and Controller

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TPCO Tribune Publishing Company