SEC Info - Tribune Publishing Co - ‘10-K’ for 12/29/19

Operating revenues

i 983,149

i 1,030,669

i 1,015,453

Operating expenses:

Compensation

i 362,450

i 443,084

i 406,279

Newsprint and ink

i 56,785

i 66,134

i 59,241

Outside services

i 328,333

i 348,827

i 331,202

Other operating expenses

i 166,614

i 163,702

i 162,495

Depreciation and amortization

i 47,314

i 53,262

i 47,306

Impairment

i 14,496

i 1,872

i —

Operating expenses

i 975,992

i 1,076,881

i 1,006,523

Income (loss) from operations

i 7,157

( i 46,212)

i 8,930

Interest income (expense), net

i 499

( i 11,353)

( i 26,334)

Loss on early extinguishment of debt

i —

( i 7,666)

i —

Premium on stock buyback

i —

( i 6,031)

Loss on equity investments, net

( i 2,988)

( i 1,868)

( i 2,725)

Other non-operating income (expense)

i 45

i 14,513

i 3,535

Income (loss) from continuing operations before income taxes

i 4,713

( i 52,586)

( i 22,625)

Income tax expense (benefit)

i 1,620

( i i 12,723 / )

i i 7,188 /

Income (loss) from continuing operations

i 3,093

( i 39,863)

( i 29,813)

Income (loss) from discontinued operations, net of tax

( i 3,337)

i 289,510

i 35,348

Net income (loss)

( i 244)

i 249,647

i 5,535

Less: Income attributable to noncontrolling interest

i 4,825

i 856

i —

Net income (loss) attributable to Tribune common stockholders

( i 5,069)

i 248,791

i 5,535

Income (loss) from continuing operations per share:

Basic

( i 0.76)

( i 1.15)

( i 0.88)

Diluted

( i 0.76)

( i 1.15)

( i 0.88)

Net income (loss) attributable to Tribune per common share:

Basic

( i i 0.85 / )

i i 7.05 /

i i 0.16 /

Diluted

( i 0.85)

i i 7.05 /

i i 0.16 /

Weighted average shares outstanding

Basic

i 35,810

i 35,268

i 33,996

Diluted

i 35,810

i 35,268

i 33,996

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

F-3

TRIBUNE PUBLISHING COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

Year ended

Net income (loss)

( i 244)

i 249,647

i 5,535

Comprehensive income (loss), net of taxes:

Unrecognized benefit plan gains (losses):

Change in unrecognized benefit plan gain (loss) arising during the period, net of taxes of $ i 908, $ i 900 and $ i 2,019, respectively

( i 2,458)

( i 2,337)

i 3,532

Amortization of items to periodic pension cost during the period, net of taxes of $ i 39, $ i 3,657 and $ i 1,078, respectively

i 100

( i 9,498)

( i 2,220)

Plan amendments, net of taxes of $ i 1,623

i —

i 4,215

Foreign currency translation, net

( i 21)

( i 8)

i 1

Comprehensive income (loss) recognized in continuing operations, net of taxes

( i 2,379)

( i 11,843)

i 5,528

Accumulated other comprehensive income (loss) recognized in discontinued operations, net of taxes of $ i 6,784 and $ i 116, respectively

i —

i 25,397

( i 10,241)

Comprehensive income (loss)

( i 2,623)

i 263,201

i 822

Comprehensive income attributable to noncontrolling interest

( i 4,825)

( i 856)

i —

Comprehensive income (loss) attributable to Tribune common stockholders

( i 7,448)

i 262,345

i 822

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

F-4

TRIBUNE PUBLISHING COMPANY

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

Assets

Current assets:

Cash

i 60,963

i 97,560

Accounts receivable, (net of allowances of $ i 9,674 and $ i 11,458)

i 112,754

i 145,463

Inventories

i 4,820

i 9,587

Prepaid expenses

i 15,114

i 18,197

Total current assets

i 193,651

i 270,807

Property, plant and equipment

Machinery, equipment and furniture

i 119,859

i 124,243

Buildings and leasehold improvements

i 86,403

i 82,399

i 206,262

i 206,642

Accumulated depreciation

( i 84,530)

( i 74,013)

i 121,732

i 132,629

Advanced payments on property, plant and equipment

i 2,181

i 12,334

Property, plant and equipment, net

i 123,913

i 144,963

Other assets

Goodwill

i 117,675

i 132,146

Intangible assets, net

i 69,165

i 77,229

Software, net

i 20,736

i 27,117

Lease right-of-use asset

i 99,480

—

Restricted cash

i 37,290

i 43,947

Deferred income taxes

i 6,911

i 2,414

Other long-term assets

i 13,457

i 28,004

Total other assets

i 364,714

i 310,857

Total assets

i 682,278

i 726,627

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

F-5

TRIBUNE PUBLISHING COMPANY

CONSOLIDATED BALANCE SHEETS, (continued)

(In thousands, except per share data)

Liabilities and stockholders’ equity

Current liabilities

Accounts payable

i 46,482

i 70,555

Employee compensation and benefits

i 36,305

i 61,001

Deferred revenue

i 42,773

i 51,114

Current portion of long-term lease liability

i 25,380

—

Current portion of long-term debt

i 105

i 405

Other current liabilities

i 24,317

i 21,203

Liabilities associated with discontinued operations

i —

i 6,249

Total current liabilities

i 175,362

i 210,527

Non-current liabilities

Long-term lease liability

i 98,847

—

Pension and postretirement benefits payable

i 20,338

i 20,150

Deferred revenue

i 2,504

i 2,856

Long-term debt

i 6,857

i 6,799

Workers’ compensation, general liability and auto insurance payable

i 24,192

i 30,606

Deferred rent

i —

i 25,424

Other obligations

i 5,851

i 17,197

Total non-current liabilities

i 158,589

i 103,032

Commitments and contingencies (Note 12)

Noncontrolling interest

i 63,501

i 39,756

Stockholders’ equity

Preferred stock, $ i i .01 / par value. Authorized i i 30,000 / shares; i i i i no / / / shares issued or outstanding at December 29, 2019 and December 30, 2018

i —

Common stock, $ i i .01 / par value. Authorized i i 300,000 / shares, i 38,017 shares issued and i 36,064 shares outstanding at December 29, 2019; i 37,551 shares issued and i 35,597 shares outstanding at December 30, 2018

i 380

i 376

Additional paid-in capital

i 177,957

i 166,668

Retained earnings

i 135,001

i 232,401

Accumulated other comprehensive income

( i 2,352)

i 27

Treasury stock, at cost - i i 1,954 / shares at December 29, 2019 and December 30, 2018

( i 26,160)

Total stockholders' equity

i 284,826

i 373,312

Total liabilities and stockholders’ equity

i 682,278

i 726,627

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

F-6

TRIBUNE PUBLISHING COMPANY

CONSOLIDATED STATEMENT OF EQUITY (DEFICIT)

(In thousands)

Common Stock

Additional Paid in Capital

Retained Earnings (Deficit)

AOCI

Treasury Stock

Total Equity
(Deficit)

Amount

Balance at December 25, 2016

i 36,549

i 365

i 139,623

( i 21,925)

( i 8,814)

( i 1,368)

i 107,881

Comprehensive income attributable to controlling interests

—

i 5,535

i 5,528

—

i 11,063

AOCI recognized in discontinued operations

—

( i 10,241)

—

( i 10,241)

Issuance of stock from restricted stock and restricted stock unit conversions

i 887

i 9

( i 9)

—

i —

Exercise of stock options

i 115

i 2

i 1,656

—

i 1,658

Stock-based compensation

—

i 11,282

—

i 11,282

Withholding for taxes on restricted stock unit conversions

—

( i 2,323)

—

( i 2,323)

Purchase of treasury stock

—

( i 50,158)

Balance at December 31, 2017

i 37,551

i 376

i 150,229

( i 16,390)

( i 13,527)

( i 51,526)

i 69,162

Comprehensive income (loss) attributable to controlling interests

—

i 248,791

( i 11,843)

—

i 236,948

AOCI recognized in discontinued operations

—

i 25,397

—

i 25,397

Issuance from treasury stock for acquisition

—

i 9,229

—

i 25,366

i 34,595

Issuance of stock from restricted stock and restricted stock unit conversions

i 443

i 5

( i 5)

—

Exercise of stock options

i 7

—

i 134

—

i 134

Stock-based compensation

—

i 11,118

—

i 11,118

Withholding for taxes on restricted stock unit conversions

—

( i 4,042)

—

( i 4,042)

Forfeited restricted stock

( i 450)

( i 5)

i 5

—

i —

Balance at December 30, 2018

i 37,551

i 376

i 166,668

i 232,401

i 27

( i 26,160)

i 373,312

Cumulative effect of adoption of leasing standard

—

( i 1,787)

—

( i 1,787)

Adjusted balance at December 30, 2018

i 37,551

i 376

i 166,668

i 230,614

i 27

( i 26,160)

i 371,525

Comprehensive loss attributable to controlling interests

—

( i 5,069)

( i 2,379)

—

( i 7,448)

Dividends declared to common stockholders

—

( i 65,024)

—

( i 65,024)

Noncontrolling interest carrying value adjustment

—

( i 25,520)

—

( i 25,520)

Issuance of stock from restricted stock and restricted stock units conversions

i 467

i 4

( i 4)

—

i —

Stock-based compensation

—

i 13,203

—

i 13,203

Withholding for taxes on restricted stock unit conversions

—

( i 1,910)

—

( i 1,910)

Balance at December 29, 2019

i 38,018

i 380

i 177,957

i 135,001

( i 2,352)

( i 26,160)

i 284,826

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

F-7

TRIBUNE PUBLISHING COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Year ended

Operating Activities

Net income (loss) from continuing operations

i 3,093

( i 39,863)

( i 29,813)

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

i 47,314

i 53,262

i 47,306

Impairment

i 14,496

i 1,872

i —

Stock compensation expense

i 13,170

i 10,453

i 9,255

Premium on stock buyback

i —

i 6,031

Loss on early extinguishment of debt

i —

i 7,666

i —

Loss on equity investments, net

i 2,988

i 1,868

i 2,725

Deferred income taxes

( i 2,581)

( i 390)

i 15,544

Non-current deferred revenue

( i 353)

( i 1,961)

i 693

Pension contribution

( i 2,484)

( i 3,918)

( i 1,040)

Postretirement benefits expense

( i 593)

( i 10,932)

( i 4,622)

Changes in working capital items, excluding acquisitions:

Accounts receivable, net

i 32,542

( i 6,259)

i 22,343

Prepaid expenses, inventories and other current assets

( i 6,164)

i 24,704

( i 4,623)

Accounts payable, employee compensation and benefits, deferred revenue and other current liabilities

( i 48,467)

i 11,219

( i 33,462)

Other, net

i 138

i 3,232

i 9,417

Net cash provided by operating activities

i 53,099

i 50,953

i 39,754

Investing Activities

Capital expenditures, including software additions

( i 18,552)

( i 53,168)

( i 23,450)

Acquisitions, net of cash acquired

i —

( i 70,867)

i 2,556

Other, net

( i 155)

( i 4,175)

( i 2,281)

Net cash used for investing activities

( i 18,707)

( i 128,210)

( i 23,175)

Financing Activities

Repayment of long-term debt

i —

( i 353,253)

( i 26,362)

Purchase of treasury stock

i —

( i 56,189)

Withholding for taxes on RSU vesting

( i 1,910)

( i 4,042)

( i 2,324)

Dividends paid to noncontrolling interest

( i 6,600)

( i 2,000)

i —

Repayments of capital lease obligations

( i 305)

( i 259)

( i 286)

Proceeds from exercise of stock options

i —

i 134

i 1,658

Dividends paid to common stockholders

( i 62,860)

i —

( i 150)

Net cash used for financing activities

( i 71,675)

( i 359,420)

( i 83,653)

Decrease in cash attributable to continuing operations

( i 37,283)

( i 436,677)

( i 67,074)

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

F-8

TRIBUNE PUBLISHING COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(In thousands)

Year ended

Cash Flows From Discontinued Operations

Cash flows provided by (used for) operating activities of discontinued operations, net

( i 5,971)

( i 85,490)

i 49,441

Cash flows provided by investing activities of discontinued operations, net

i —

i 478,640

i 7,393

Cash flows used for financing activities of discontinued operations, net

i —

( i 317)

( i 545)

Increase (decrease) in cash attributable to discontinued operations

( i 5,971)

i 392,833

i 56,289

Net decrease in cash

( i 43,254)

( i 43,844)

( i 10,785)

Cash, cash equivalents and restricted cash beginning of period

i 141,507

i 185,351

i 196,136

Cash, cash equivalents and restricted cash, end of period

i i 98,253 /

i i 141,507 /

i 185,351

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

F-9

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1: DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Description of Business—Tribune Publishing Company was formed as a Delaware corporation on November 21, 2013. Tribune Publishing Company, together with its subsidiaries (collectively, the “Company” or “Tribune”) is a media company rooted in award-winning journalism. Headquartered in Chicago, Tribune operates local media businesses in i 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 the majority owner of BestReviews LLC (“BestReviews”).

On May 23, 2018, the Company completed the sale of substantially all of the assets of forsalebyowner.com and on June 18, 2018, the Company completed the sale of the Los Angeles Times, The San Diego Union-Tribune and various other titles of the Company’s California properties (“California Properties”). See Note 8 to the Consolidated Financial Statements for further information on dispositions and related discontinued operations.

Basis of Presentation— i The accompanying Consolidated Financial Statements and notes of the Company have been prepared in accordance with 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 Consolidated Financial Statements and accompanying notes. Actual results could differ from these estimates. All intercompany accounts within Tribune have been eliminated in consolidation.

The operations of the California Properties and forsalebyowner.com are reported as discontinued operations for all periods presented in the accompanying Consolidated Statements of Income and Consolidated Statements of Cash Flows. Additionally, assets and liabilities related to the divested properties are classified as such in all prior periods in the Consolidated Balance Sheets. Unless otherwise noted, amounts and disclosures throughout these Notes to Consolidated Financial Statements relate to continuing operations and exclude all discontinued operations including the California Properties and forsalebyowner.com.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Fiscal Year— i The Company’s fiscal year ends on the last Sunday in December. Fiscal years 2019 and 2018 ended on December 29, 2019 and December 30, 2018, respectively, and consisted of 52 weeks with 13 weeks in each quarter. Fiscal year 2017 ended on December 31, 2017, and consisted of 53 weeks with 13 weeks in each of the first three quarters and 14 weeks in the fourth quarter.

Use of Estimates— i The preparation of these consolidated financial statements in conformity with U.S. GAAP requires management to make use of estimates and assumptions that affect the reported amount of assets and liabilities, revenues and expenses and certain financial statement disclosures. Some of the significant estimates in these consolidated financial statements include the right-of-use asset (“ROU”) assets, lease liabilities, valuation assumptions used in allowances for doubtful accounts receivable, useful lives of property and identifiable intangible assets, the evaluation of recoverability of property, goodwill and identifiable intangible assets, income tax, self-insurance, pension and other postretirement benefits, stock-based compensation and purchase accounting. Actual results could differ from these estimates.

Segment Presentation— i The Company assesses its operating segments in accordance with ASC Topic 280, “Segment Reporting.” The Company is managed by its chief operating decision maker, as defined by ASC Topic 280, in i two / reportable 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. See Note 20 for additional segment information.

Business Combinations— i The allocation of the purchase consideration for acquisitions requires extensive use of accounting estimates and judgments to allocate the purchase consideration to the identifiable tangible and intangible assets acquired and liabilities assumed based on their respective fair values. The excess of the fair value of purchase consideration over the values of the identifiable assets and liabilities is recorded as goodwill. Critical estimates in valuing certain identifiable assets include but are not limited to expected long term revenues; future expected operating expenses; cost of

F-10

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

capital; appropriate attrition and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.

Leases— i 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. The ROU asset is adjusted to include lease payments made to date and initial direct costs incurred and to deduct for lease incentives received and impairments recognized. 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 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. See Note 3 for additional information related to leases.

Revenue Recognition— i 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 either at a point in time, such as when an advertisement is published, or over time, such as for content licensing. See Note 4 for additional information related to revenue recognition.

Cash— i Cash is stated at cost, which approximates market value. Cash includes cash equivalents which are investments with original maturities of three months or less at the time of purchase.

Restricted Cash— i Restricted cash is stated at cost, which approximates market value. The Company has cash held in a specified cash collateral account to secure letters of credit relating to workers compensation self-insurance. Restricted cash balances are included within cash and cash equivalents for purposes of the statements of cash flows.

Accounts Receivable Balance and Allowance for Doubtful Accounts— i Tribune’s accounts receivable are primarily due from advertisers and circulation-related accounts. Payment terms vary by revenue stream including prepayment for classified advertising and home delivery circulation, and 30-60 day terms for advertising, whereby credit is evaluated in advance. Credit is extended based on an evaluation of each customer’s financial condition, and generally collateral is not required. The allowance for uncollectible accounts is determined based on historical write-off experience and any known specific collectability exposures. As customer balances are determined to be uncollectible, the balances are written off against the allowance for doubtful accounts.

F-11

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A summary of the activity with respect to the accounts receivable allowances is as follows (in thousands):


Accounts receivable allowance balance at December 25, 2016	$	i 9,846
2017 additions	i 27,291
2017 deductions	( i 28,149)
Accounts receivable allowance balance at December 31, 2017	i 8,988
2018 additions	i 24,564
2018 deductions	( i 22,094)
Accounts receivable allowance balance at December 30, 2018	i 11,458
2019 additions	i 17,130
2019 deductions	( i 18,914)
Accounts receivable allowance balance at December 29, 2019	$	i 9,674

Trade Transactions— i Tribune, in the ordinary course of business, enters into trade transactions whereby advertising in a Tribune publication is exchanged for products or services or advertising, including advertising at an event or venue. Trade transactions are generally reported at the estimated fair value of the product or services received. Revenues are recorded when the advertisement runs in a Tribune publication and expenses are generally recorded when the products or services are utilized or the advertisement runs.

Inventories— i Inventories consist primarily of newsprint for publishing operations. Newsprint cost is determined using the first-in, first-out (“FIFO”) basis.

Properties— i Property, plant and equipment are stated at cost less accumulated depreciation. i The Company computes depreciation using the straight-line method over the following estimated useful lives: /


Building and building improvements						i 8 years - i 40 years
Leasehold improvements						i 3 years - i 15 years
Machinery and equipment						i 2 years - i 15 years
Computer hardware						i 3 years - i 8 years
Vehicles						i 2 years - i 8 years
Furniture, fixtures and other						i 3 years - i 10 years

Leasehold improvements are recorded as an asset and amortized over the shorter of the useful life or the remaining term of the lease. Expenditures for repairs and maintenance of existing assets are charged to expense as incurred. Property, plant and equipment assets that are financed under a finance lease are amortized over the shorter of the term of the lease or the useful lives of the assets. See Note 3 for additional information related to leases.

For the years ended December 29, 2019, December 30, 2018, and December 31, 2017, total depreciation expense was $ i 39.9 million, $ i 46.4 million and $ i 42.7 million, respectively.

Goodwill and Other Intangible Assets— i Goodwill and other intangible assets are summarized in Note 10. Tribune reviews goodwill and other indefinite-lived intangible assets, which include only newspaper mastheads, for impairment annually, or more frequently if events or changes in circumstances indicate that an asset may be impaired, in accordance with ASC Topic 350, “Intangibles–Goodwill and Other.” Under ASC Topic 350, the impairment review of goodwill and other intangible assets not subject to amortization must be based on estimated fair values. Impairment would occur when the carrying amount of a reporting unit with recorded goodwill or an individual masthead is greater than its fair value. The Company has determined that the reporting units at which goodwill will be evaluated are the i eight newspaper media groups, TCA, BestReviews and the aggregate of its other digital businesses.

The Company evaluates goodwill and indefinite-lived intangibles for impairment annually as of the first day of the fiscal fourth quarter or when an indicator of impairment exists. For the 2019 annual impairment test, the Company did a full quantitative analysis of both goodwill and mastheads. For both goodwill and mastheads, the calculated fair value exceeded the carrying value, except as noted below. For goodwill, the calculated fair value was determined using the income approach.

F-12

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Estimates of fair value include Level 3 inputs as they are subjective in nature, involve uncertainties and matters of significant judgment and are made at a specific point in time. Thus, changes in key assumptions from period to period could significantly affect the estimates of fair value. Significant assumptions used in the fair value estimates include projected revenues and related growth rates over time (for the 2019 impairment test, the perpetuity growth (decline) rates used ranged from ( i 15.0%) to i 1.8%), forecasted revenue growth rates (for the 2019 impairment test, forecasted revenue growth (decline) ranged from ( i 11.5%) to i 18.5%), projected operating cash flow margins, estimated tax rates, depreciation expense, capital expenditures, required working capital needs, and an appropriate risk-adjusted weighted-average cost of capital (for 2019, the weighted average cost of capital used was i 8.5% for print and ranged from i 11.3% to i 12.3% for digital properties). For goodwill as of the measurement date, the calculated fair value exceeded the carrying value by more than i 65.0% for all reporting units except the Baltimore Sun and Virginia Media Groups. For the Baltimore Sun and Virginia Media Groups, the carrying value exceeded the fair value and the Company recorded a non-cash impairment charge of $ i 14.5 million reflecting the reduction in fair value. The impairment charges resulted primarily from a decline in the fair value due to lower projected cash flows versus historical estimates.

For mastheads, the calculated fair value includes Level 3 inputs and was determined using the royalty savings method. The key assumptions used in the fair value estimates under the royalty savings method are revenue and market growth, royalty rates for newspaper mastheads (for 2019, the royalty rate used ranged from i 1.0% to i 4.4%), estimated tax rates, an appropriate risk-adjusted weighted-average cost of capital (for 2019, the weighted average cost of capital used was i 8.5% for print and ranged from i 11.3% to i 12.3% for digital properties). These assumptions reflect Tribune’s best estimates, but these items involve inherent uncertainties based on market conditions generally outside of Tribune’s control. For mastheads as of the measurement date, the calculated fair value exceeded the carrying value by more than i 85.0% in all instances, except for the Sun Sentinel Media Group where the masthead fair value exceeded the carrying value by approximately i 30%.

Adverse changes in expected operating results and/or unfavorable changes in other economic factors used to estimate fair values could result in non-cash impairment charges in the future under ASC Topic 350.

Impairment Review of Long-Lived Assets— i In accordance with ASC Topic 360, “Property, Plant and Equipment,” Tribune evaluates the carrying value of long-lived assets to be held and used whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset or asset group may be impaired. The carrying value of a long-lived asset or asset group may be impaired when the projected future undiscounted cash flows to be generated from the asset or asset group over its remaining depreciable life are less than its current carrying value. The Company measures impairment based on the amount by which the carrying value exceeds the estimated fair value of the long-lived asset or asset group. The fair value is determined primarily by using the projected future cash flows discounted at a rate commensurate with the risk involved as well as market valuations. Losses on long-lived assets to be disposed of are determined in a similar manner, except that the fair values are reduced for an estimate of the cost to dispose or abandon. There were no impairments recorded in any of the periods presented.

Adverse changes in expected operating results and/or unfavorable changes in other economic factors used to estimate future undiscounted cash flows could result in non-cash impairment charges in the future under ASC Topic 360.

Fair Value Measurements— i The Company measures and records in its consolidated financial statements certain assets and liabilities at fair value. ASC Topic 820, “Fair Value Measurements and Disclosures,” establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and Tribune’s own assumptions (unobservable inputs). This hierarchy consists of the following three levels:

•Level 1 – Assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market.

•Level 2 – Assets and liabilities whose values are based on inputs other than those included in Level 1, including quoted market prices in markets that are not active; quoted prices of assets or liabilities with similar attributes in active markets; or valuation models whose inputs are observable or unobservable but corroborated by market data.

F-13

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

•Level 3 – Assets and liabilities whose values are based on valuation models or pricing techniques that utilize unobservable inputs that are significant to the overall fair value measurement.

An asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used maximize the use of observable inputs and minimize the use of unobservable inputs.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

The carrying values of cash, trade accounts receivable and trade accounts payable approximate fair value due to their short term nature.

Certain assets are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis, but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).

Investments— i Investments in unconsolidated affiliates over which Tribune exercises significant influence, but does not control, are accounted for by the equity method. Under this method, an investment account for each unconsolidated affiliate is increased by contributions made and by Tribune’s share of net income of the unconsolidated affiliate, and decreased by the share of net losses of and distributions from the unconsolidated affiliate.

Pension Plans— i The Company is the sponsor of the Daily News Retirement Plan (“NYDN Pension Plan”) for the New York Daily News. The Company follows accounting guidance under ASC Topic 715, “Compensation—Retirement Benefits” for single employer defined benefit plans. Plan assets and the projected benefit obligation are measured each December 31, and the Company records as an asset or liability the net funded or underfunded position of the plans. Certain changes in actuarial valuations related to returns on plan assets and projected benefit obligations are recorded to other comprehensive income (loss) and are amortized to net periodic pension expense over the weighted average remaining life of plan participants. Net periodic pension expense is recognized each period by accruing interest expense on the projected benefit obligation and accruing a return on assets associated with the plan assets. In measuring the funded status of the plans, the Company has elected to measure the single employer defined benefit plan assets and obligations as of the end of the month closest to the Company’s fiscal year-end. See Note 14 for further information on the Company’s pension plans.

The projected benefit obligation of the pension plan is estimated using a theoretical zero-coupon spot curve representing the yields on high-quality corporate bonds with maturities that correlate to the timing of benefit payments to the plan’s participants. Future benefit payments are discounted to their present value at the appropriate yield curve rate to determine the projected benefit obligation outstanding at each year end. Interest expense included in net periodic pension expense was established at the beginning of the fiscal year. The long-term rate of return on the plan’s assets is based upon the investments strategies determined by the Company, less administrative expenses. Investment strategies for the plan’s assets are based upon factors such as the remaining useful life expectancy of participants and market risks.

Other Postretirement Benefits—Tribune provides certain health care and life insurance benefits for certain retired Tribune union employees through postretirement benefit plans. The plans are frozen to new participants. The expected cost of providing these benefits is accrued over the years that the employees render services. It is the Company’s policy to fund postretirement benefits as claims are incurred. In measuring the funded status of the plan, the Company has elected to measure the single employer defined benefit plan assets and obligations as of the end of the month closest to the Company’s fiscal year-end.

The Company recognizes the overfunded or underfunded status of its postretirement benefit plans as an asset or liability in its consolidated balance sheets and recognizes changes in that funded status in the year in which changes occur through comprehensive income. The amounts included within these consolidated financial statements were actuarially determined based on amounts allocable to eligible Tribune employees.

F-14

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Contributions made to union-sponsored plans are based upon collective bargaining agreements. See Note 14 for further information.

Multiemployer Pension Plans—The Company contributes to a number of multiemployer defined benefit pension plans under the terms of collective-bargaining agreements that cover certain of the Company’s union-represented employees. The risks of participating in these multiemployer plans are different from single-employer plans in that assets contributed are pooled and may be used to provide benefits to employees of other participating employers. If a participating employer withdraws from or otherwise ceases to contribute to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers. Alternatively, if Tribune chooses to stop participating in one of its multiemployer plans, it may incur a withdrawal liability based on its actuarially determined share of the unfunded status of the plan.

Contributions made to multiemployer plans are based on collective bargaining agreements and are accounted for under guidance related to multiemployer plans, which essentially provides that contributions to such plans are expensed when due. Any withdrawal liability would be recognized at the point withdrawal from the plan becomes probable. See Note 14 for further information.

Self-Insurance— i The Company self-insures for certain employee medical and disability income benefits, and insures with a high deductible for workers’ compensation, automobile and general liability claims. The recorded liabilities for self-insured risks are calculated using actuarial methods and are not discounted. The Company carries insurance coverage to limit exposure for the self-insured portions of workers’ compensation costs and automobile and general liability claims. The Company’s deductibles for the insured coverages are generally $ i 1.0 million per occurrence, depending on the applicable policy period. / The recorded liabilities for self-insured risks at December 29, 2019, and December 30, 2018, totaled $ i 32.3 million and $ i 41.7 million, respectively.

Deferred Revenue— i Deferred revenue arises in the normal course of business from advance subscription payments for newspapers, digital subscriptions and other publications, and interactive advertising sales. Deferred revenue is recognized in the period it is earned.

Stock-Based Compensation— i Stock-based compensation cost is measured at the grant date of the awards based on the estimated fair value of the awards. The stock-based compensation expense is recognized over the period from the date of grant to the date when the award is no longer contingent on the employee providing additional service. Forfeitures are credited to stock-based compensation expense when incurred.

Income Taxes— i Provisions for federal and state income taxes are calculated on reported pretax earnings based on current tax laws and also include, in the current period, the cumulative effect of any changes in tax rates, due to changes in tax laws, from those used previously in determining deferred income tax assets and liabilities. Taxable income reported to the taxing jurisdictions in which Tribune operates often differs from pretax earnings because some items of income and expense are recognized in different time periods for income tax purposes. The Company provides deferred taxes calculated on these temporary differences. Taxable income also may differ from pretax earnings due to statutory provisions under which specific revenues are exempt from taxation and specific expenses are not allowable as deductions.

The Company evaluates uncertain tax positions. The Company may recognize the tax benefit of an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. If a tax benefit was recognized the Company would measure the tax benefit based on the largest benefit that has a greater than 50.0% likelihood of being realized upon ultimate settlement.

Accounting standards adopted in 2019— i In August 2018, the Financial Accounting Standards Board (“FASB”) issued 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). The Company adopted this standard effective the beginning of fiscal 2019 and applied the provisions of the standard prospectively. The adoption had no material effect on the Company’s consolidated financial statements.

F-15

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 the beginning of fiscal year 2019, using the modified retrospective transition method whereby the Company applied the new standard at the adoption date and recognized a cumulative-effect adjustment of $ i 1.8 million, net of tax of $ i 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. As a result of the adoption the Company recorded ROU assets of $ i 123.5 million and lease liabilities of $ i 147.2 million, as of December 31, 2018. See Note 3 for additional disclosures related to the Company’s leases.

Accounting standards not yet adopted—In December 2019, the FASB issued ASU 2019-12, Topic 740, Income Taxes, which simplifies accounting for income taxes. ASU 2019-12 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company expects to adopt the standard effective January 1, 2021. The Company is currently reviewing the requirements of the standard.

In June 2016, the FASB issued ASU 2016-13, Topic 326, Financial Instruments – Credit Losses. 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 January 1, 2020. The adoption is not expected to have a material impact on the Company’s consolidated financial statements.

i i

NOTE 3: LEASES

Tribune’s leased facilities total approximately i 4.3 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 i 10 years with i two options to renew for additional i 10 year terms. For distribution facilities, the initial lease term is generally i five years, with options to renew either i two or i three additional five year terms. For office space, lease terms range from two to thirteen years. The Company has rent escalations, rent holidays and leasehold improvement incentives which are included in the determination of the ROU and the lease liabilities.

Tribune subleases certain facilities that total approximately i 0.1 million square feet in aggregate. The terms of these subleases are from five to seven years and expire between 2020 and 2023.

/ /

F-16

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Below is a summary of information related to the Company’s leases for the year ended December 29, 2019 (in thousands):


Lease Cost:
Finance lease cost:
Amortization of ROU assets	$	i 313
Interest on lease liabilities	i 114
Operating lease cost	i 28,649
Short-term lease costs	i 956
Variable lease costs	i 7,180
Sublease income	( i 3,259)
Total lease cost	$	i 33,953

/ i

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


Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used for operating leases	$	i 29,848
Operating cash flows used for finance leases	$	i 109
Financing cash flows used for finance leases	$	i 305
ROU assets obtained in exchange for new operating lease liabilities	$	i 4,830
Weighted average remaining lease term - finance leases (in years)	i 1.1
Weighted average remaining lease term - operating leases (in years)	i 5.9
Weighted average discount rate - finance leases	i 5.8		%
Weighted average discount rate - operating leases	i 4.8		%

/ i i i

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

Operating Leases

Finance Leases

Subleases

2020

i 30,661

i 100

i 2,726

2021

i 28,315

i 6,949

i 2,128

2022

i 26,150

i —

i 1,584

2023

i 16,558

i —

i 1,579

2024

i 9,483

i —

Thereafter

i 33,001

i —

Total future lease payments

i 144,168

i 7,049

i 8,017

Less: Imputed interest

i 19,941

i 146

—

Net future minimum lease payments

i 124,227

i 6,903

i 8,017

/ / /

Lease Abandonment

In 2017, the Company permanently vacated approximately i 33,629 sq. ft. of office space in the Chicago area and i 30,000 sq. ft. of office space in South Florida and took a charge of $ i 1.4 million and $ i 0.6 million, respectively, related to the abandonments. These charges are included in other operating expenses in the accompanying Consolidated Statements of Income (Loss). As of the December 31, 2018, adoption of ASC 842, the outstanding deferred balances were reclassed and applied to partially offset the ROU asset.

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 4: 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 either at a point in time, such as when an advertisement is published, or over time, such as for content licensing.

Advertising revenue

Print advertising revenue is typically in the form of print display appearing in Tribune newspapers and other owned publications and preprinted advertising inserted into Tribune newspapers. Digital advertising consists of website display, banner ads, advertising widgets, coupon ads, video, search advertising and linear ads placed by customers on Tribune or other third-party websites. Customers submit ads to appear either in the print newspapers or on websites. Advertising revenue is recognized when the Company satisfies the performance obligation by transferring the promised goods or services to the customer in an amount that reflects the consideration the Company is entitled to receive. For print advertising, classified and preprint advertising, this transfer, which occurs at a point in time, occurs when the advertising appears in the newspaper.

Digital advertising is typically sold on a cost-per-impression basis. An advertiser pays an amount based on the number of times the ad is displayed on the Company’s websites. Revenue is recognized at a point in time when the ad is displayed on the websites.

Advertising revenue also includes digital marketing services which include development of mobile websites, search engine marketing and optimization, social media account management and content marketing for customers’ web presence for small to medium size businesses. For mobile website development, revenue is recognized when the website is live. For search engine marketing and optimization, social account management and content marketing, revenue is recognized over the period of time the service is performed for the customer.

Certain customers receive cash-based incentives or credits, which are accounted for as variable consideration. The Company estimates these amounts based on the expected amount to be provided to customers and reduces revenues recognized. The Company expects there will be no significant changes to our estimates of variable consideration.

Circulation revenue

Circulation revenue results from the sale of print editions of newspapers to individual subscribers and to sales outlets that resell the newspapers. For individual subscribers, revenue is recognized at a point in time when the newspapers are delivered to the subscribers. For sales outlets, revenue is recognized at a point in time when the newspapers are delivered to the sales outlets or to an intermediary that has purchased the newspapers to resell to the sales outlets.

Other revenue

Other revenues are derived from commercial printing and delivery services provided to other newspapers, direct mail advertising and services, syndication and licensing revenue, ecommerce lead generation revenue and digital-only subscriptions.

Digital circulation revenue results from the provision of online content to subscribers. Tribune recognizes revenue daily, per the contract term, as the customer receives access to digital content.

For commercial printing and delivery services, the Company contracts with a number of national and local newspapers to both print and/or distribute their respective publications in local markets where it is a newspaper publisher. For commercial printing, revenue is recognized as the papers are printed and available for delivery. For commercial delivery, the Company operates under two models, the buy/sell model and the fee-for-delivery model. Under the buy/sell model, the Company buys the customers’ newspapers and resells them to subscribers and sales outlets. Revenue the Company receives for the sale of the newspapers is recognized when the newspapers are delivered to subscribers or sales outlets. Under the fee-for-delivery model, the Company receives a fee for each newspaper delivered. Revenue is recognized at the time the newspaper is delivered either to the subscriber or to the sales outlet.

F-18

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For direct mail advertising and services, the Company enters into an arrangement with customers to design, print and distribute advertising materials. Revenue is recognized when the items are delivered to the postage courier.

For licensing and syndication revenue, the Company enters into a sales-based royalty arrangement with the customer to provide a license to Tribune content. The Company receives a periodic royalty payment based on usage of the content or derived sales of the content. Revenue is recognized based on royalties earned.

For ecommerce referral fee revenue, the Company drives customers to ecommerce sites such as Amazon.com. Once the customer executes sales on these sites, the Company receives a percentage of the sales. Revenue is recognized when the customers executes sales, net of a reserve for returned items.

The Company’s revenues disaggregated by type of revenue and segment are presented in Note 20.

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.

The following table presents changes to the Company’s contract liabilities during the years ended December 29, 2019, and December 30, 2018 (in thousands):


Balance at December 31, 2017	$	i 55,132
2018 Additions	i 46,300
2018 Deductions	( i 47,462)
Balance at December 30, 2018	i 53,970
2019 Additions	i 37,730
2019 Deductions	( i 46,423)
Balance at December 29, 2019	$	i 45,277

The Company expenses sales commissions when incurred because the amortization period would generally 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 5: CHANGES IN OPERATIONS

The Company continually assesses its operations in an effort to identify opportunities to enhance operational efficiencies and reduce expenses. In the past these activities have included, and could include in the future, outsourcing of various functions or operations, abandonment of leased space and other activities which may result in changes to employee headcount. The discussion and amounts below represent activity in the Company’s continuing operations and exclude any amounts in the Company’s assets, liabilities or operations from discontinued operations.

Employee Reductions

2019

During the year ended December 29, 2019, the Company implemented reductions in staffing levels in its operations of i 138 positions for which the Company recorded pretax charges related to these reductions and executive separations totaling $ i 8.5 million. The pretax charges related to the reductions include i 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.

F-19

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Included in the 2019 severance charge is approximately $ i 4.0 million related to the separation of the Company’s former CEO and i 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 a one year period, during which time equity-based awards would continue to vest. Additionally, as a result of the separation, the Company recognized accelerated stock-based compensation expense of $ i 1.5 million.

2018

During the year ended December 30, 2018, the Company implemented reductions in staffing levels in its operations of i 840 positions for which the Company recorded pretax charges related to these reductions totaling $ i 45.8 million. These reductions include i 190 positions identified in the fourth quarter of 2018 related to a voluntary severance incentive plan; i 178 positions identified during the third quarter of 2018, of which approximately i 50.0% were at the New York Daily News; i 70 positions identified in the fourth quarter of 2018 related to the New York Daily News truck drivers’ union and i 38 positions identified in the fourth quarter of 2018 related to the Chicago Tribune truck drivers’ union.

In the fourth quarter of 2018, the Company offered a Voluntary Severance Incentive Plan (“2018 VSIP”) which provides enhanced separation benefits to eligible employees with more than i 10 years of service. The Company funded the 2018 VSIP ratably over the payout period through salary continuation that started in the fourth quarter of 2018 and continued through the fourth quarter 2019.

In the fourth quarter of 2018, the truck drivers’ union of the New York Daily News ratified a new collective bargaining agreement with the Company that extended the existing agreement from 2021 to 2024 and relinquished to NYDN the right of delivery of the remaining i 60 single copy routes in New York City. The agreement allows for the separation of a total of i 80 drivers. The remaining i 10 drivers’ separations will occur later in the term of the contract. In addition, the Company received other rights and reductions, including reduced dock manning, a move to bi-weekly payroll and a move to Company-provided medical benefits. The Company expects to achieve savings derived from driver salaries, overtime, collection pay, medical contributions to the union welfare plan, worker’s compensation, fleet expenses, insurance and other expenses, net of the third-party cost of single copy newspaper delivery. The severance payments were in the form of lump sum payments and were paid in the first quarter of 2019.

In the fourth quarter of 2018, the truck drivers’ union of the Chicago Tribune ratified a new collective bargaining agreement with the Company that extended the existing agreement to 2021 and allows the Company to reduce the number of union positions. The Company expects to achieve savings derived from driver salaries, overtime, collection pay, worker’s compensation, fleet expenses, insurance and other expenses, net of the third-party cost of single copy newspaper delivery. The Company funded the severance over the payout period through salary continuation that started in the first quarter of 2019 and continued through the fourth quarter 2019.

A summary of the activity with respect to Tribune’s severance accrual for the years ended December 29, 2019, and December 30, 2018, is as follows (in thousands):


Balance at December 31, 2017	$	i 11,430
2018 Provision	i 45,764
2018 Payments	( i 28,349)
Balance at December 30, 2018	i 28,845
2019 Provision	i 8,482
2019 Payments	( i 34,747)
Balance at December 29, 2019	i 2,580

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

F-20

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

plans to fund the 2020 VSIP ratably over the payout period through salary continuation that started in the first quarter of 2020 and continues through the second quarter of 2021.

Other

On July 23, 2019, the Company entered into an agreement to sell real property located in Norfolk, Virginia, for a sales price of $ i 9.5 million. The sale was dependent on the purchaser obtaining the required certificates and the purchaser’s determination of feasibility. Subsequent to December 29, 2019, the certificates were obtained, feasibility was determined and the sale closed on January 22, 2020.

NOTE 6: 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 i twelve months of transition services between the parties at negotiated rates approximating cost. On January 17, 2019, the Company and NantMedia amended the TSA (“Amended TSA”). The Amended TSA extended the term of the contract to June 30, 2020, settled the working capital adjustment from the sale of the California Properties and provided an indemnity related to certain receivables. Either party may discontinue all or a portion of the services being provided to such party by providing i 60 days advance notice. See Note 8 for additional information on the sale of the California Properties.

During the years ended December 29, 2019 and December 30, 2018, the Company paid certain costs on behalf of NantMedia due to shared contracts and processes. Such costs include newsprint, rent, payroll, 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 received certain customer payments related to comingled revenue billings and receipts that include the California Properties. These relevant amounts of such payments are reimbursed to NantMedia. i A summary of the activity with respect to the TSA and Amended TSA for the years ended December 29, 2019, and December 30, 2018, is as follows (in thousands):

Accounts receivable from NantMedia beginning balance

i 17,909

i —

Revenue for TSA services

i 19,473

i 17,174

Reimbursable costs

i 50,610

i 66,183

Amounts received for TSA services

( i 20,583)

( i 13,390)

Amounts received for reimbursable costs

( i 63,114)

( i 49,918)

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

i 18,371

i 9,351

Amounts collected from third parties under commingled revenue contracts

( i 16,548)

( i 11,491)

Accounts receivable balance from NantMedia⁽¹⁾

i 6,118

i 17,909

(1)The accounts receivable from NantMedia balance consists of $ i 4.4 million of charges which have been billed and $ i 1.7 million of charges which had not been billed as of December 29, 2019.

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”). Mr. Ferro is (1) Chairman and Chief Executive Officer of Merrick Ventures and (2) the manager of Merrick Venture Management, LLC which is the sole manager of 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 $ i 5.0 million in cash, payable in advance on the first

F-21

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 $ i 5.0 million payment in early January 2018. During the term of the Consulting Agreement, Merrick Ventures and Mr. Ferro agreed to certain non-competition covenants relating to engaging in certain other daily printed newspaper businesses, subject to certain exceptions.

On March 18, 2018, Mr. Ferro retired from the Company’s Board of Directors. 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 $ i 15.0 million due under the Consulting Agreement in outside services in the first quarter of 2018. In the second quarter of fiscal 2018, the Company amended the Consulting Agreement. The amendment reduced the total fees due under the Consulting Agreement by $ i 2.5 million (from $ i 15.0 million to $ i 12.5 million) and allows the Company to engage Merrick Ventures as its adviser, 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 the second quarter of 2018, the Company agreed to pay $ i 0.3 million in legal fees incurred by Mr. Ferro while conducting the Company’s business. Such legal fees were paid directly to the legal firm. The non-compete covenants and amended Merrick Purchase Agreement terms contained in the Consulting Agreement were not altered by the amendment and remain in place through December 31, 2020. On November 15, 2019, Mr. Ferro sold all of the shares he controlled to funds Alden Global Opportunities Master Fund, L.P. and Alden Global Value Recovery Master Fund, L.P. See Note 18 for further information concerning the sale.

Aircraft Dry Sublease

One of the Company’s subsidiaries, Tribune Publishing Company, LLC (“TPC”), entered into an Aircraft Dry Sublease Agreement, which became effective as of February 4, 2016, with Merrick Ventures. Under the agreement, TPC subleased on a non-exclusive basis, a Bombardier aircraft leased by Merrick Ventures, at a cost, including TPC’s proportionate share of the insurance premiums and maintenance expenses, of $ i 8,500 per flight hour flown. TPC also was responsible for charges attributable to the operation of the aircraft by TPC during the lease term. The initial term of the sublease was i 1 year, which term automatically renewed on an annual basis. Either party had the right to terminate the agreement upon i 30 days written notice to the other. During the year ended December 31, 2017, the Company incurred $ i 3.0 million related to the aircraft sublease, of which $ i 2.6 million has been paid to Merrick Ventures and $ i 0.4 million to an outside party for pilot services. The Consulting Agreement described above terminated the Aircraft Dry Sublease as of December 31, 2017.

Nucleus Marketing Solutions, LLC

In April 2016, Tribune, along with other leading media companies McClatchy, Gannett and Hearst, formed Nucleus Marketing Solutions, LLC (“Nucleus”). This network connected national advertisers to audiences across existing and emerging digital platforms. Nucleus worked with its marketing partners to address their goals by offering integrated services across all platforms. The Company owned i 25.0% of Nucleus. The Company’s interest in Nucleus was recorded as an equity method investment. In July 2019, Nucleus announced the shut-down of the ads sales operations, resulting in a $ i 1.0 million loss on the investment. During the year ended December 31, 2017, the Company recorded $ i 7.1 million on a net basis for revenue related to the Nucleus agreement. The revenue recorded during the years ended December 29, 2019 and December 30, 2018 was immaterial.

Following is the summarized financial information for Nucleus as of December 29, 2019, December 30, 2018, and December 31, 2017 (in thousands):

Revenues

i 886

i 6,815

i 1,917

Expenses

i 5,242

i 13,238

i 14,848

Net loss

( i 4,356)

( i 6,423)

( i 12,931)

Tribune’s portion of Nucleus net loss

( i 1,089)

( i 1,605)

( i 3,232)

F-22

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 7: ACQUISITIONS

2018 Acquisitions

Virginian-Pilot

On May 28, 2018, Tribune Publishing Company, LLC, a wholly-owned subsidiary of 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, entered into on the same date (“VP Purchase Agreement”), by and among the Company, Virginian-Pilot and Landmark Media Enterprises, LLC (“Seller”).

Upon the terms and subject to the conditions set forth in the VP Purchase Agreement, the Company acquired all of the issued and outstanding membership interests in Virginian-Pilot from Seller for a cash purchase price of $ i 34.0 million, less a post-closing working capital adjustment of $ i 0.1 million (“VP Acquisition”). As part of the VP Acquisition, the Company also acquired Virginian-Pilot’s real estate portfolio (comprised of approximately i 460,000 square feet), including its headquarters building in downtown Norfolk, its printing and distribution facilities in Virginia Beach and a number of satellite offices in Norfolk and North Carolina. The VP Purchase Agreement also contains representations, warranties, covenants, and indemnities of the parties thereto.

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. i There were no adjustments at that time to the allocation of the purchase price which is as follows (in thousands):


Consideration
Cash consideration for acquisition	$	i 33,912
Total consideration	$	i 33,912

Allocated Fair Value of Acquired Assets and Assumed Liabilities
Accounts receivable and other current assets	$	i 8,257
Property, plant and equipment	i 29,843
Mastheads	i 4,700
Intangible assets subject to amortization	i 1,300
Accounts payable and other current liabilities	( i 10,749)
Other long-term liabilities	( i 68)
Total identifiable assets (liabilities), net	i 33,283
Goodwill	i 629
Total net assets acquired	$	i 33,912

Goodwill was calculated as the excess of the consideration transferred over the fair value of the identifiable net assets acquired and represents the future economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, including expected future cost and revenue synergies. The goodwill above was deductible for tax purposes pursuant to Internal Revenue Code Section 197.

The results of operations of Virginian-Pilot and related assets and liabilities have been included in the Consolidated Financial Statements beginning on the closing date of the acquisition and are reported in the Company’s i two operating segments consistent with the Company’s other media groups as discussed in Note 20. For the period from the acquisition date to December 30, 2018, reported revenues from Virginian-Pilot were approximately $ i 36.9 million, and reported operating expenses were approximately $ i 36.7 million.

F-23

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

BestReviews

Acquisition Agreement

On February 6, 2018, the Company acquired a i 60.0% membership interest in BestReviews, a company engaged in the business of testing, researching and reviewing consumer products, pursuant to an Acquisition Agreement, entered into on the same date (“BestReviews Acquisition Agreement”), among the Company, BestReviews Inc., a Delaware corporation (“BR Parent”), BestReviews and the stockholders of BR Parent.

Upon the terms and subject to the conditions set forth in the BestReviews Acquisition Agreement, the Company acquired i 60.0% of BR Parent’s membership interest in BestReviews for a total purchase price of $ i 68.3 million, consisting of $ i 33.7 million in cash, less a post-closing working capital adjustment from the seller of $ i 0.6 million, and $ i 34.6 million in common stock of the Company (“BR Acquisition”). The Company issued i 1,913,438 shares of common stock in connection with the closing (“Stock Consideration”). The Stock Consideration was subject to lock-up provisions that prohibit certain transfers of the shares and standstill provisions, however as of the first anniversary of the BR Acquisition closing date, these lock-up provisions expired. The BestReviews Acquisition Agreement also contains representations, warranties, covenants and indemnities of the parties thereto.

Limited Liability Company Agreement

In connection with the BR Acquisition the Company and BR Parent also entered into an amended and restated limited liability company agreement of BestReviews (“LLC Agreement”). Subject to the terms of the LLC Agreement, the Company had the right, which began six months after the closing of the BR Acquisition, to purchase all (but not less than all) of the remaining i 40.0% of the membership interests of BestReviews (“Call Option”) using, at the Company’s election, cash, shares of common stock of the Company, or a combination thereof, at a purchase price to be based on a pre-determined multiple of BestReviews’ trailing 12-month EBITDA, with such purchase price capped per the LLC Agreement if the Call Option was exercised prior to the third anniversary of the closing of the BR Acquisition. In addition, beginning six months after closing the BR Acquisition, the Company was entitled to exercise a one-time right to purchase i 25.0% of the units of membership interest of BestReviews retained by BR Parent ( i 10.0% of the issued and outstanding equity) with terms identical to those applicable to the Call Option.

BR Parent also had the right, beginning three years after closing of the BR Acquisition, to cause the Company to purchase all (but not less than all) of the remaining i 40.0% of the membership interests of BestReviews (“Put Option”) using, at the Company’s election, cash, shares of common stock of the Company, or a combination thereof, at a purchase price to be determined in the same manner as if the Call Option was exercised.

If the exercise of the Call Option or the Put Option required that the Company seek stockholder approval prior to issuing common stock of the Company as consideration in connection with such exercise, and the Company does not obtain requisite stockholder approval, then BestReviews would have initiated a sale process for disposition of a majority of the voting power interests of BestReviews or other disposition of all or substantially all of BestReviews’ assets.

On February 3, 2020, subsequent to the end of the year, the Company and BR Parent amended the LLC Agreement to, among other things, remove the Put Option and Call Option sections of the LLC Agreement.

The LLC Agreement provides that BR Parent is entitled to certain registration rights under the Securities Act of 1933, as amended (“Securities Act”), with respect to the Company’s common stock issued to BR Parent. The Company (1) was required to file a registration statement on Form S-3 (“Form S-3”) with the Securities and Exchange Commission (“SEC”) to register the resale of the Stock Consideration within 90 days following the closing date of the BR Acquisition, which filing was completed, and (2) the Company is required to file a Form S-3 with the SEC to register the resale of any shares of common stock of the Company issued in connection with an exercise of the Call Option or the Put Option within 60 days after the issuance of such shares.

The LLC Agreement contains other terms and conditions, including transfer restrictions, tag-along and drag-along rights, and indemnification obligations.

F-24

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The determination of the fair value of the assets acquired, including intangible assets and noncontrolling interest, and liabilities assumed has been completed and the final allocation of the purchase price is as follows (in thousands):


Consideration
Cash consideration for acquisition	$	i 33,085
Fair value of noncontrolling interest	i 40,900
Value of shares issued for acquisition	i 34,595
Total consideration	$	i 108,580

Allocated Fair Value of Acquired Assets and Assumed Liabilities
Accounts receivable and other current assets	$	i 9,945
Property, plant and equipment	i 36
Intangible assets	i 12,540
Accounts payable and other current liabilities	( i 993)
Total identifiable assets (liabilities), net	i 21,528
Goodwill	i 87,052
Total net assets acquired	$	i 108,580

Goodwill was calculated as the excess of the consideration transferred over the fair value of the identifiable net assets acquired and represents the future economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, including access to the Company’s subscriber base and non-contractual relationships, as well as expected future cost and revenue synergies. The entire amount of purchase price allocated to intangible assets and i 60.0% of goodwill is expected to be deductible for tax purposes pursuant to Internal Revenue Code Section 197.

To determine the fair value of the noncontrolling interest, the Company applied a blended i 7.5% discount to the calculated i 40.0% interest in the fair value of BestReviews as a whole. The discount rate represents the lack of marketability resulting from the Company’s implicit right of first refusal related to the Call Option.

The results of operations and related assets and liabilities of BestReviews have been included in the Consolidated Financial Statements beginning on the closing date of the acquisition and are included in the results of the Company’s segment X. For the period from the date of acquisition to December 30, 2018, reported revenues from BestReviews were $ i 25.0 million, and reported operating expenses were $ i 22.9 million.

2017 Acquisitions

New York Daily News

On September 3, 2017, the Company completed the acquisition of i 100% of the partnership interests in Daily News, L. P. (“DNLP”), the owner of the New York Daily News in New York City, pursuant to the Partnership Interest Purchase Agreement dated September 3, 2017, for a cash purchase price of i one dollar and assumption of various liabilities, subject to a post-closing working capital adjustment. During the second quarter of 2018, the Company finalized the working capital calculation which resulted in an immaterial adjustment. DNLP’s assets include, among others, (1) the assets associated with the New York Daily News brand (including mastheads, resources, technology and archives), (2) net working capital, (3) plant and equipment assets and (4) certain real property rights (as described below). DNLP’s liabilities that remain with the acquired entity include, among others, (1) an existing single employer defined benefit pension obligation that provides benefits to certain current and former employees of the New York Daily News, (2) certain multi-employer pension obligations, (3) workers’ compensation and automobile insurance liabilities and (4) various outstanding letters of credit.

DNLP retained its lease with the New Jersey Economic Development Authority with respect to approximately i 18 acres of real property on which its printing facilities are located (“New Jersey Lease”). Under the New Jersey Lease, DNLP is required to purchase the real property at the end of the lease term in 2021 (and may acquire it prior to such date at any time) for up to $ i 6.9 million. The sellers in the DNLP transaction may, at any time, require DNLP to exercise the real property purchase option. Upon the exercise of the real property purchase option, the real property will be held by a

F-25

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

partnership (“Real Estate Partnership”) owned i 49.9% by DNLP and i 50.1% by New DN Company, an affiliate of the sellers in the DNLP transaction. New DN Company will control the management of the partnership. Due to the ownership structure of the Real Estate Partnership, DNLP’s net portion of the real property purchase price is approximately i 49.9% (or up to $ i 3.5 million), after reimbursement from New DN Company of its i 50.1% portion of the real property purchase price. After the exercise of the real property purchase option and transfer of such property to the Real Estate Partnership, DNLP: (1) will have the option to lease it for one dollar per year, compared to the current lease rate of $ i 100.0 thousand per year under the New Jersey Lease, for up to i 15 years and (2) may at any time, at its option, require sellers to acquire DNLP’s interest in the property based on its then-current fair market value. Should the Company discontinue printing operations on the property, the rent for the property would increase to a fair market rate and the sellers could purchase the Company’s i 49.9% share of the Real Estate Partnership based on its then-current fair market value.

Additionally, DNLP owns approximately i four acres of real property contiguous to the New Jersey Lease property, currently used as parking facilities, that it was obligated to transfer ownership to the Real Estate Partnership either prior to or concurrent with exercise of the real property purchase option. In the fourth quarter of 2018, the Company completed the transfer of the i four acres to the Real Estate Partnership.

During the third quarter of 2018, the final determination of the fair value of assets acquired and liabilities assumed has been completed. The final assigned values are presented in the table below (in thousands):


Allocated Fair Value of Acquired Assets and Assumed Liabilities
Cash acquired as part of the purchase	$	i 2,555
Accounts receivable and other current assets	i 17,703
Property, plant and equipment	i 48,099
Mastheads	i 3,400
Other long-term assets	i 9,565
Accounts payable and other current liabilities	( i 20,271)
Pension and postemployment benefits liability	( i 25,446)
Workers compensation and auto insurance liability	( i 25,116)
Other long-term liabilities	( i 10,489)
Total net assets acquired	$	i —

The results of operations of DNLP and related assets and liabilities have been included in the Consolidated Financial Statements beginning on the closing date of the acquisition and are reported in the Company’s i two operating segments consistent with the Company’s other media groups as discussed in Note 20. For the period from the date of acquisition to December 31, 2017, reported revenues from DNLP were approximately $ i 40.2 million and reported operating expenses were approximately $ i 47.8 million.

NOTE 8: DISPOSITIONS AND DISCONTINUED OPERATIONS

California Properties

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 $ i 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 $ i 9.7 million (“Nant Transaction”). The Nant Transaction closed on June 18, 2018, and resulted in a pre-tax gain of $ i 404.8 million. The operations of the California Properties were previously included in both the M and X segments.

The sale of the California Properties represented a strategic shift that has had a major effect on our operations and financial results. As a result, and as discussed in Note 1, effective as of the date of the sale, the California Properties are reflected as discontinued operations on the consolidated balance sheets in accordance with ASC 360 and the results of operations of the California Properties are presented as discontinued operations in the statements of income in accordance with ASC 205-20 for all periods presented.

F-26

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dr. Patrick Soon-Shiong, a former director of the Company, together with Nant Capital, beneficially own i 8,743,619 shares of Tribune common stock, which represents i 24.2% of the outstanding shares of Tribune common stock as of December 29, 2019.

CIPS Marketing Group Inc.

The Company previously utilized the services of CIPS Marketing Group Inc. (“CIPS”) for local marketing efforts such as distribution, door-to-door marketing and total market coverage. Prior to July 2017, the Company owned i 50.0% of CIPS, which was recorded as an equity investment. In July 2017, the Company sold its interest in CIPS for approximately $ i 7.3 million, resulting in a gain of $ i 5.7 million which is recorded in Gain on equity investments, net, in the Earnings from discontinued operations below, and entered into a long-term agreement with the buyer to utilize CIPS for certain distribution efforts. During the year ended December 31, 2017, the Company recorded $ i 0.6 million in revenue and $ i 4.2 million in other operating expenses related to such marketing services. The CIPS revenue and marketing services expenses are included in discontinued operations.

forsalebyowner.com

On May 23, 2018, the Company sold substantially all of the assets of forsalebyowner.com in an asset sale for $ i 2.5 million, less a post-closing working capital payment to the buyer of $ i 0.1 million, plus an advertising sales commitment of $ i 4.5 million over a term of two years.

The forsalebyowner.com balances are reflected as 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. In prior filings, forsalebyowner.com was part of segment X.

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

Year ended

Operating revenues

i —

i 211,522

i 508,566

Operating expenses:

Compensation

i —

i 58,819

i 146,605

Newsprint and ink

i —

i 14,357

i 35,099

Outside services

i 1,118

i 61,892

i 136,843

Other operating expenses

i 3,504

i 57,290

i 126,490

Depreciation and amortization

i —

i 3,531

i 9,390

Operating expenses

i 4,622

i 195,889

i 454,427

Income from operations

( i 4,622)

i 15,633

i 54,139

Gain on sale

i —

i 404,783

i —

Interest expense, net

i —

( i 52)

( i 147)

Gain on equity investments, net

i —

i 5,842

Other non-operating income, net

i —

i 1,338

i 7

Income tax expense (benefit)

( i 1,285)

i 132,192

i 24,493

Income from discontinued operations, net of tax

( i 3,337)

i 289,510

i 35,348

F-27

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Year ended

Operating revenues

i —

i 185,822

i 432,379

i —

i 25,638

i 76,001

Corporate and eliminations

i —

i 62

i 186

i —

i 211,522

i 508,566

Income (loss) from operations

( i 4,622)

i 9,803

i 31,743

i —

i 5,793

i 22,635

Corporate and eliminations

i —

i 37

( i 239)

( i 4,622)

i 15,633

i 54,139

Depreciation and amortization

i —

i 3,427

i 9,130

i —

i 104

i 260

i —

i 3,531

i 9,390

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

Carrying amount of liabilities associated with discontinued operations:

Income Tax Payable

i —

i 6,249

Total liabilities associated with discontinued operations

i —

i 6,249

NOTE 9: INVENTORIES

Inventories at December 29, 2019, and December 30, 2018, consisted of the following (in thousands):

Newsprint

i 4,510

i 9,273

Supplies and other

i 310

i 314

Total inventories

i 4,820

i 9,587

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

F-28

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 10: GOODWILL AND OTHER INTANGIBLE ASSETS

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

Gross Amount

Accumulated Amortization

Net Amount

Gross Amount

Accumulated Amortization

Net Amount

Goodwill

i 117,675

i 132,146

Newspaper mastheads ⁽¹⁾

i 34,826

—

i 34,826

—

i 34,826

Subscribers (useful life of i 2 to i 10 years)

i 7,312

( i 5,642)

i 1,670

i 7,312

( i 4,730)

i 2,582

Advertiser relationships (useful life of i 2 to i 13 years)

i 27,648

( i 15,002)

i 12,646

i 27,648

( i 12,497)

i 15,151

Trade names (useful life of i 20 years)

i 15,100

( i 4,093)

i 11,007

i 15,100

( i 3,343)

i 11,757

Other (useful life of i 1 to i 20 years)

i 16,181

( i 7,165)

i 9,016

i 17,744

( i 4,831)

i 12,913

Total intangible assets

i 101,067

( i 31,902)

i 69,165

i 102,630

( i 25,401)

i 77,229

Software (useful life of i 2 to i 10 years)

i 140,727

( i 119,991)

i 20,736

i 136,005

( i 108,888)

i 27,117

(1) - Intangible assets not subject to amortization.

As disclosed in Note 2, Tribune reviews goodwill and other indefinite-lived intangible assets for impairment annually on the first day of the fourth quarter, or more frequently if events or changes in circumstances indicate that an asset may be impaired, in accordance with ASC Topic 350, “Intangibles-Goodwill and Other.” In the year ended December 29, 2019, for the Baltimore Sun Media Group and Virginia Media Group reporting units, the carrying value exceeded the fair value and the Company recorded a non-cash goodwill impairment charge of $ i 14.5 million. In the year ended December 30, 2018, for the Sun Sentinel Media Group reporting unit, the carrying value exceeded the fair value and the Company recorded a non-cash goodwill impairment charge of $ i 1.9 million. The impairment charges resulted primarily from a decline in the fair value due to lower projected cash flows versus historical estimates.

The changes in the carrying amounts of goodwill during the years ended December 29, 2019, and December 30, 2018 were as follows (in thousands):

Total

Balance at December 31, 2017

i 28,721

i 16,627

i 45,348

Acquisitions

i 629

i 87,052

i 87,681

Impairment

( i 1,872)

i —

( i 1,872)

Other

i 733

i 256

i 989

Balance at December 30, 2018

i 28,211

i 103,935

i 132,146

Impairment

( i 14,496)

i —

( i 14,496)

Other

i 25

i —

i 25

Balance at December 29, 2019

i 13,740

i 103,935

i 117,675

See Note 7 for further information on the acquisitions and the additions related to goodwill.

F-29

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

i i

The changes in the carrying amounts of intangible assets excluding goodwill during the years ended December 29, 2019, and December 30, 2018, were as follows (in thousands):

Intangible assets subject to amortization

Other intangible assets not subject to amortization

Total

Balance at December 31, 2017

i 35,538

i 29,458

i 64,996

Disposition

( i 108)

—

( i 108)

Acquisitions

i 13,840

i 5,368

i 19,208

Amortization

( i 6,867)

—

( i 6,867)

Balance at December 30, 2018

i 42,403

i 34,826

i 77,229

Amortization

( i 7,186)

—

( i 7,186)

Net lease right-of-use asset reclassed

( i 878)

—

( i 878)

Balance at December 29, 2019

i 34,339

i 34,826

i 69,165

/ /

The changes in the carrying amounts of software during the years ended December 29, 2019, and December 30, 2018, were as follows (in thousands):


Balance at December 31, 2017	$	i 40,700
Purchases and capitalized development costs	i 13,822
Retirements	i 227
Amortization expense	( i 27,632)
Balance at December 30, 2018	i 27,117
Purchases and capitalized development costs	i 10,593
Retirements	( i 21)
Amortization expense	( i 16,953)
Balance at December 29, 2019	$	i 20,736

The estimated amortization expense relating to amortizable intangible assets and software for the next five years are approximately (in thousands):

Year Ended

Intangible assets subject to amortization

Software

2020

i 6,793

i 8,955

2021

i 6,536

i 5,908

2022

i 4,797

i 3,206

2023

i 3,204

i 890

2024

i 2,680

i 376

Total

i 24,010

i 19,335

NOTE 11: DEBT

On August 4, 2014, the Company entered into a credit agreement (as amended, amended and restated or supplemented) with JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, and the lenders party thereto (“Senior Term Facility”). The Senior Term Facility originally provided for secured loans (“Term Loans”) in an aggregate principal amount of $ i 350.0 million, which were issued at a discount of $ i 3.5 million. On May 21, 2015, the Company entered into a lender joinder agreement with Citicorp North America, Inc. and JPMorgan Chase Bank, N.A. to partially finance an acquisition. This joinder agreement expanded the borrowings under the Senior Term Facility by $ i 70.0 million issued at a discount of $ i 1.1 million. This borrowing had the same interest rate and had the same maturity date as the existing loans under the Senior Term Facility. The interest rates applicable to the Term Loans were based on a fluctuating rate of interest

F-30

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

measured by reference to either, at the Company’s option, (i) the greater of (x) an adjusted London inter-bank offered rate (adjusted for reserve requirements) and (y) i 1.00%, plus a borrowing margin of i 4.75%, or (ii) an alternate base rate, plus a borrowing margin of i 3.75%. On June 21, 2018, the Company repaid the outstanding principal balance of $ i 348.0 million under the Senior Term Facility and terminated the agreement. As a result of the early extinguishment of debt, the Company incurred a $ i 7.7 million loss to expense the remaining balance of original issue discount and debt origination fees.

NOTE 12: COMMITMENTS AND CONTINGENT LIABILITIES

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 the Company’s 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 i 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 (“Confirmation Order”) were filed by (i) Aurelius Capital Management L.P. on behalf of its managed entities that were holders of Tribune Company'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) (“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 (“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 (“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 had entered final decrees collectively closing i 108 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 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.

NOTE 13: INCOME TAXES

i The following is a reconciliation of income taxes computed at the U.S. federal statutory rate to income tax expense reported in the Consolidated Statements of Income (in thousands):

F-31

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year ended

Income (loss) from continuing operations before income taxes

i 4,713

( i 52,586)

( i 22,625)

Federal income taxes at the statutory rate

i 990

( i 11,043)

( i 7,919)

State and local income taxes, net of federal tax benefit

( i 923)

( i 2,948)

( i 693)

Noncontrolling interest

( i 1,013)

( i 180)

i —

Impact of U.S. tax reform

i —

i 213

i 10,815

Tax on stock buyback premium

i —

i 2,111

Tax on stock-based equity exercised

i 747

( i 79)

i 1,308

Nondeductible meals and entertainment expenses

i 530

i 628

i 859

Research and development credits

( i 193)

( i 639)

i —

Nondeductible executive compensation

i 1,302

i 912

i 549

Other, net

i 180

i 413

i 158

Income tax expense (benefit)

i 1,620

( i 12,723)

i 7,188

Effective tax rate

i 34.4

i 24.2

( i 31.8)

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (“Act”) was signed into law making significant changes to the Internal Revenue Code. Changes include, but were not limited to, a corporate tax rate decrease from 35.0% to 21.0%, effective for tax years beginning after December 31, 2017. During the year ended December 31, 2017, the Company recorded $ i 10.8 million as additional income tax expense, which was the Company’s provisional estimate of the impact of the Act. The Company completed calculating the impact of the Act in 2018 and recorded an additional $ i 0.2 million of expense in the third quarter of 2018, to bring the total expense to $ i 11.0 million.

During the third quarter of 2019, the Company recorded a discrete item which resulted in a tax benefit of $ i 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 2019, the tax rate differs from the U.S. federal statutory rate of 21.0% primarily due to state income taxes, net of benefit, income from noncontrolling interest, tax expense related to vesting of stock compensation, and nondeductible expenses. For 2018, the tax rate differs from the U.S. federal statutory rate of 21.0% primarily due to state income taxes, non-deductible expenses and research and development credits. For 2017, the rate differs from the U.S. federal statutory rate of 35.0% primarily due to a $ i 11.0 million adjustment to remeasure the Company’s deferred taxes to reflect the new tax law changes as described above, premium on stock buyback expense being a nondeductible permanent difference for the calculation of income taxes, state taxes, net of federal benefit, and nondeductible expenses.

Components of income tax expense (benefit) were as follows (in thousands):

Year ended

Current:

U.S. federal

i 4,530

( i 8,629)

( i 14,532)

State and local

( i 364)

( i 3,743)

( i 3,817)

Foreign

i 35

i 39

i 59

Subtotal current

i 4,201

( i 12,333)

( i 18,290)

Deferred:

U.S. federal

( i 2,045)

( i 331)

i 23,090

State and local

( i 536)

( i 59)

i 2,388

Subtotal deferred

( i 2,581)

( i 390)

i 25,478

Total income tax expense (benefit)

i 1,620

( i i 12,723 / )

i i 7,188 /

F-32

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Significant components of Tribune’s net deferred tax assets and liabilities were as follows (in thousands):

Deferred tax assets:

Long-term lease liability

i 34,535

i —

Employee compensation and benefits

i 13,640

i 18,244

Pension

i 5,085

i 5,210

Other future deductible items

i 2,600

i 7,557

Accounts receivable

i 3,268

i 2,864

Net operating losses carryforwards

i 317

i 393

Research and development credits

i —

i 639

Postretirement and postemployment benefits other than pensions

i 287

Total deferred tax assets

i 59,732

i 35,194

Deferred tax liabilities:

Lease right-of-use asset

i 27,254

i —

Net properties

i 19,345

i 24,241

Net intangibles

i 835

i 3,449

Tax basis in TPC, LLC

i 4,909

Investments

i 478

i 181

Total deferred tax liabilities

i 52,821

i 32,780

Net deferred tax assets

i 6,911

i 2,414

As of December 29, 2019, we have Internal Revenue Code §382 limited net operating loss carryforwards totaling approximately $ i 1.2 million, which expire in 2033 if not used. In the normal course of business, the Company is subject to examination by taxing authorities. The tax years that are open to examination are: U.S. Federal taxes - 2016 to current, and State taxes - 2015 to current.

Accounting for Uncertain Tax Positions—Tribune accounts for uncertain tax positions in accordance with ASC Topic 740, “Income Taxes,” which addresses the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Under ASC Topic 740, a company may recognize the tax benefit of an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. ASC Topic 740 requires the tax benefit recognized in the financial statements to be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. ASC Topic 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, and disclosure.

The following table summarizes the activity related to unrecognized tax benefits, excluding the federal tax benefit of state tax deductions (in thousands):


	December 29, 2019
Balance at December 30, 2018	$	i —
Additions based on tax positions of prior years	i 679
Balance at December 29, 2019	$	i 679

We recognize interest related to unrecognized tax benefits as a component of income tax expense. We also recognize interest income attributable to overpayment of income taxes and from the reversal of interest expense previously recorded for uncertain tax positions which are subsequently released as a component of income tax expense. The amount of accrued interest and payables related to unrecognized tax benefits was immaterial for the year ended December 29, 2019.

F-33

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

There were i i no / uncertain tax positions for the years ended December 30, 2018 and December 31, 2017.

NOTE 14: DEFINED BENEFIT PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS

Defined Benefit Plans—The Company is the sponsor of a single-employer defined benefit plan, the NYDN Pension Plan, which provides benefits to certain current and former employees of the New York Daily News. The NYDN Pension Plan is frozen to any new participants and effective in March 2018 the accrual of new benefits to participants was frozen. i Summarized information for the NYDN Pension Plan is provided below (in thousands):

Change in benefit obligations:

Projected benefit obligations, beginning of year

i 96,407

i 106,446

Service cost

i —

i 72

Interest cost

i 3,516

i 3,272

Actuarial (gain) loss

i 7,841

( i 5,442)

Benefits paid

( i 19,479)

( i 7,941)

Projected benefit obligations, end of year

i 88,285

i 96,407

Change in plan assets:

Fair value of plan assets, beginning of year

i 77,177

i 85,032

Return on plan assets

i 8,683

( i 3,832)

Employer contributions

i 2,484

i 3,918

Benefits paid

( i 19,479)

( i 7,941)

Fair value of plan assets, end of year

i 68,865

i 77,177

Underfunded status of the plan

i 19,420

i 19,230

The Company contributed $ i 2.5 million to the NYDN Pension Plan during the year ending December 29, 2019, and expects to contribute $ i 3.2 million during the year ending December 27, 2020.

As part of a pension de-risking strategy for the NYDN Pension Plan, the Company offered lump sum settlements to all participants who were current retirees or vested terminated employees and had a monthly annuity of $ i 500 or less. Approximately i 34.3% of the total eligible participants accepted the offer. The NYDN Pension Plan paid out $ i 11.8 million in lump sum payments and the Company recorded a settlement charge of $ i 0.5 million.

The amounts recognized in the Company’s Consolidated Balance Sheets for the NYDN Pension Plan as of December 29, 2019, and December 30, 2018, consist of (in thousands):

Pension and postretirement benefits payable

i 19,420

i 19,230

Accumulated other comprehensive loss, net of tax

i 2,334

i 236

/ /

F-34

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Year ended

Affected Line Items in the Consolidated Statements of Income

Service cost

i —

i 72

i 142

Compensation

Interest cost

i 3,516

i 3,272

i 1,249

Other non-operating income (expense)

Expected return on plan assets

( i 4,212)

( i 4,667)

( i 1,602)

Other non-operating income (expense)

Curtailment gain

i —

( i 51)

Other non-operating income (expense)

Settlement charge

i 466

i —

Other non-operating income (expense)

Net periodic benefit cost (credit)

( i 230)

( i 1,323)

( i 262)

Pension Assets - The primary investment objective of the NYDN Pension Plan is to ensure, over the long-term life of the plan, an adequate pool of assets to support the benefit obligations to participants, retirees and beneficiaries. A secondary objective of the plan is to achieve a level of investment return consistent with the prudent level of portfolio risk that will minimize the financial effect of the pension plans on the Company. The investments in the pension plans largely consist of low-cost, broad-market index funds to mitigate risks of concentration within market sectors. Each of the funds is diversified across a wide number of securities within its stated asset class.

At December 29, 2019, the NYDN Pension Plan investments are in commingled funds which are recorded at fair value as determined by the sponsor of the respective funds primarily based upon closing market quotes of the underlying assets. i The following table sets forth by level, within the fair value hierarchy, the NYDN Pension Plan’s assets at fair value as of December 29, 2019 (in thousands):

Level 1

Level 2

Level 3

Total

Global public equity

i 2,269

i —

i 2,269

Fixed income

i 1,769

i —

i 1,769

Group annuity contract

i —

i 13

i 4,038

i —

i 13

Investments valued at net asset value:

Cash and cash equivalents

i 755

Global public equity

i 34,990

Fixed income

i 14,072

Absolute return

i 8,986

Real assets

i 6,006

Pending trades and other receivables

i 5

Total assets at fair value

i 68,865

F-35

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table sets forth by level, within the fair value hierarchy, the NYDN Pension Plan’s assets at fair value as of December 30, 2018 (in thousands):

Level 1

Level 2

Level 3

Total

Global public equity

i 19,399

i —

i 19,399

Fixed income

i 19,103

i —

i 19,103

Group annuity contract

i —

i 13

i 38,502

i —

i 13

Investments valued at net asset value:

Cash and cash equivalents

i 817

Global public equity

i 19,896

Absolute return

i 8,474

Real assets

i 8,993

Pending trades and other receivables

i 482

Total assets at fair value

i 77,177

For the investments in the NYDN Pension Plan valued at net asset value, there are no unfunded commitments for the year ended December 29, 2019. i See the table below for the redemption information:

Redemption Frequency

Redemption Notice Period

Cash and cash equivalents

Daily

i 0 days

Global public equity

Monthly

i 16 days

Absolute return

Quarterly

i 90 days

Real assets

Quarterly

i 30 - i 90 days

The NYDN Pension Plan’s weighted average target allocation and actual allocations at December 29, 2019, by asset category are as follows:

Asset category:

Target Allocation

2019 Actual Allocation

2018 Actual Allocation

Global public equity

i 52.0

i 54.2

i 50.9

Absolute return

i 12.0

i 13.0

i 11.0

Fixed income

i 23.5

i 23.0

i 24.8

Real assets

i 10.0

i 8.7

i 11.7

Cash

i 2.5

i 1.1

Other

i —

i 0.5

i 100.0

Global Public Equity - Equity investments that will have a global orientation and may include U.S., international, emerging market and global mandates. Convertible securities may also be a component, as well as absolute return strategies that invest in equities.

Absolute Return - Commonly known as “hedge funds,” these controlled market risk strategies seek to exploit inefficiencies in the equity markets that may be outside of the universe of traditional long only public equity managers. Absolute return strategies attempt to generate attractive risk-adjusted returns relative to the total equity market, with lower risk of large drawdown and lower volatility.

Fixed Income - The bond portfolio will contribute to the income needs of the Plan. Fixed income generally provides a diversified portfolio with deflation protection during periods of financial duress. Bonds dampen the overall volatility of total Plan results, which is important to help mitigate losses in periods of falling equity markets. Bond markets suffer declines, but they are generally not as severe as those experienced in the equity market. Bond returns are steadier than

F-36

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

those of equities because of income received and because bonds have greater precedence in a company’s capital structure. Bonds typically do not fare well in periods of rising inflation.

Real Assets - Real Assets are assets that provide investors with a better hedge against loss of purchasing power than equities and fixed income, and moderate long-term growth. Real Assets can include TIPS, private real estate, REITs, commodities, floating rate loans, currencies, Master Limited Partnerships (MLPs), timber, infrastructure and other inflation protection assets. These assets are included to provide protection against inflation, thus preserving the real value of the portfolio over the long term. These assets may exhibit low correlations to other asset classes, thus diversifying the total portfolio.

Assumptions - The weighted average assumptions used to determine the NYDN Pension Plan defined benefit obligations are as follows:

Discount rate

i 3.0

i 4.1

The weighted average assumptions used to determine the NYDN Pension Plan net periodic benefit cost are as follows:

Discount rate

i 4.1

i 3.6

i 3.5

Rate of return on assets

i 5.7

i 5.8

Rate of compensation increase

i —

i 2.0

/ i

Expected Future Benefit Payments - Benefit payments expected to be paid under the NYDN Pension Plan are summarized below (in thousands):


2020	$	i 7,099
2021	i 6,907
2022	i 6,731
2023	i 6,522
2024	i 6,318
2025-2029	$	i 28,029

Postretirement Benefits Other Than Pensions - The Company provides postretirement health care and life insurance benefits to Tribune employees under a number of plans. There is some variation in the provisions of these plans, including different provisions for lifetime maximums, prescription drug coverage and certain other benefits.

F-37

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Obligations and Funded Status - The funded status and the related service costs and comprehensive income has been actuarially determined based on eligible employees and is reflected in these Consolidated Financial Statements. i Summarized information for the Company’s other postretirement plans is provided below (in thousands):

Change in benefit obligations:

Projected benefit obligations, beginning of year

i 1,032

i 1,731

Service cost

i 14

i 13

Interest cost

i 38

i 37

Actuarial gain

i 34

i 181

Benefits paid

( i 90)

( i 930)

Projected benefit obligations, end of year

i 1,028

i 1,032

Change in plan assets:

Employer contributions

i 90

i 930

Benefits paid

( i 90)

( i 930)

Fair value of plan assets, end of year

i —

Underfunded status of the plans

( i 1,028)

( i 1,032)

During 2017, the Company made the decision to split the post-retirement medical plan into two separate plans, one for union employees and one for non-union employees. Additionally, the non-union medical plan was terminated as of December 31, 2018. The plan split and termination resulted in $ i 5.8 million of prior service cost credit. During the years ended December 30, 2018 and December 31, 2017, $ i 4.1 million and $ i 1.7 million, respectively, was amortized as a credit to net periodic benefit cost (credit) and recorded in other non-operating income in the Consolidated Statement of Income.

Amounts recognized in Tribune’s Consolidated Balance Sheets for other postretirement plans consisted of (in thousands):

Liabilities:

Employee compensation and benefits

( i 74)

( i 112)

Pension and postretirement benefits payable

( i 954)

( i 920)

Total liabilities

( i 1,028)

( i 1,032)

Accumulated other comprehensive income:

Unrecognized prior service credit (cost), net of tax

( i 112)

( i 344)

Unrecognized net actuarial gains (losses), net of tax

i 70

i 45

Total accumulated other comprehensive income

( i 42)

( i 299)

F-38

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The components of net periodic benefit cost (credit) for the Company’s other postretirement plans were as follows (in thousands):

Year ended

Affected Line Items in the Consolidated Statements of Income

Service cost

i 14

i 13

i 11

Compensation

Interest cost

i 38

i 37

i 189

Other non-operating income (expense)

Amortization of (gain) loss

i 1

( i 2,621)

( i 553)

Other non-operating income (expense)

Amortization of prior service credits

( i 328)

( i 10,534)

( i 2,745)

Other non-operating income (expense)

Net periodic benefit cost (credit)

( i 275)

( i 13,105)

( i 3,098)

/ i

Assumptions - The weighted average assumptions used to determine other postretirement benefit obligations are as follows:

Discount rate

i 3.13

i 4.23

The weighted average assumptions used to determine net periodic benefit cost are as follows:

Discount rate

i 4.23

i 2.47

i 3.23

For purposes of measuring postretirement health care costs for the year ended December 29, 2019, Tribune assumed a i 7.5% annual rate of increase in the per capita cost of covered health care benefits. The rate was assumed to decrease to i 7.2% in 2020 and decrease gradually to i 4.5% for 2029 and remain at that level thereafter. For purposes of measuring postretirement health care obligations at December 29, 2019, Tribune assumed a i 7.5% annual rate of increase in the per capita cost of covered health care benefits. The rate was assumed to decrease gradually to i 4.5% for 2030 and remain at that level thereafter.

Assumed health care cost trend rates have a significant effect on the amounts reported for health care plans. As of December 29, 2019, a 1% change in assumed health care cost trend rates would have an immaterial effect on Tribune’s postretirement benefits service and interest cost and the following effect on Tribune’s projected benefit obligation (in thousands):

1% Increase

1% Decrease

Projected benefit obligation

i 37

i 34

/ i

Expected Future Benefit Payments - Benefit payments expected to be paid under other postretirement benefit plans are summarized below (in thousands):


2020	$	i 75
2021	i 78
2022	i 83
2023	i 85
2024	i 79
2025-2029	$	i 434

Employees’ Defined Contribution Plan—The Company sponsors defined contribution plans that were established effective June 13, 2014. The defined contribution plans cover substantially all full-time employees of the Company. Participants may elect to contribute a portion of their pretax compensation as provided by the plans and Internal Revenue Service (“IRS”) regulations. The maximum pretax contribution an employee can make is i 100% of his or her annual eligible

F-39

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

compensation (less required withholdings and deductions) up to the statutory limit which was $ i 19,000 for 2019. The Company matches contributions to its defined contribution plan at a rate of i 100% of salary deferrals for the first i 2% of compensation and i 50% of salary deferrals that exceed i 2% of compensation up to i 6% of compensation for each participating employee. The Company’s contributions to its defined contribution plans totaled $ i 7.5 million, $ i 8.1 million and $ i 8.5 million in the years ended December 29, 2019, December 30, 2018, and December 31, 2017, respectively.

Multiemployer Pension Plans— i The Company’s participation in multiemployer pension plans at December 29, 2019, December 30, 2018, and December 31, 2017, is outlined in the table below. Unless otherwise noted, the most recent Pension Protection Act (“PPA”) Zone Status available in 2019 and 2018 is for the plan’s year-end at December 30, 2018 and December 31, 2017, respectively. The PPA Zone Status is based on information that Tribune received from the plan and is certified by the plan’s actuary. Among other factors, plans in the Critical and Declining Zone are typically projected to have a funding deficiency as defined in the Internal Revenue Code (“IRC”) within four years and projected to become insolvent within 20 years; plans in the Critical Zone are typically projected to have a funding deficiency as defined in IRC within four years (but not projected to become insolvent within 20 years), plans in the Endangered Zone are less than 80% funded (but not the Critical or Critical and Declining zones), and plans in the Healthy Zone are at least 80% funded (as determined in accordance with the PPA). The “FIP/RP Status Pending/Implemented” column indicates plans for which a financial improvement plan (“FIP”) or a rehabilitation plan (“RP”) is either pending or has been implemented.

(in thousands)

EIN/Pension Plan Number

PPA Zone Status

FIP/RP Status Pending/ Implemented

Tribune Contributions

Surcharge Imposed

Expiration Dates of Collective Bargaining Agreements

Pension Fund

2019

2018

2019

2018

2017

Teamsters Local Union No. 727 Pension Fund

36-6012397

Healthy

N/A

i 12,595

i —

June 14, 2021

Chicago Newspaper Publishers Drivers Union Pension Plan ⁽¹⁾

36-6019539

N/A

Critical and declining

Implemented

i —

i 3,568

i 3,607

Yes

N/A

GCIU—Employer Retirement Benefit Plan

91-6024903

Critical and declining

Implemented

i 664

i 637

i 781

Yes

May 31, 2017 to April 30, 2018 ⁽²⁾

Truck Drivers and Helpers Local No. 355 Pension Plan

52-6043608

Healthy

Implemented

i 165

i 152

i 134

Yes

January 1, 2018 to December 31, 2022 ⁽³⁾

Newspaper and Mail Deliverers’ - Publishers’ Pension Fund

13-6122251

Healthy

N/A

i 475

i 787

i 259

November 15, 2024

Pressmen’s Publishers’ Pension Fund

13-6121627

Healthy

N/A

i 440

i 430

i 134

July 11, 2020

Paper Handlers’ - Publishers' Pension Fund

13-6104795

Critical and declining

Implemented

i 46

i 53

i 19

Yes

July 11, 2020

IAM National Pension Fund, National Pension Plan

51-6031295

Critical

Healthy

Implemented

i 554

i 428

i 458

Yes

March 31, 2020

CWA/ITU Negotiated Pension Plan

13-6212879

Critical and declining

Implemented

i 169

i 252

i 135

March 31, 2017 to July 31, 2017 ⁽⁴⁾

Pension Hospitalization & Benefit Plan of the Electrical Industry - Pension Trust Account

13-6123601

Healthy

N/A

i 303

i 428

i 146

April 30, 2020

i 15,411

i 6,735

i 5,673

(1) The previous Chicago Newspaper Publishers Drivers’ Union Pension Plan merged into the Teamsters Local Union No. 727 Pension Fund effective August 1, 2019. All contributions to both plans are presented under the Teamsters Plan.

(2) Tribune is party to i two collective bargaining agreements that require contributions to the GCIU—Employer Retirement Benefit Plan, one of which expired May 31, 2017 and the other April 30, 2018. The parties are operating under the terms of these agreements while the terms of successor collective bargaining agreements are negotiated.

(3) The collective bargaining agreement expired on June 14, 2016. The parties are operating under the terms of this agreement while the terms of a

F-40

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

successor collective bargaining agreement are negotiated.

(4) The Company is party to i two collective bargaining agreements requiring contributions to this plan, New York Mailers Union No. 6 which expired March 31, 2017 and New York Typographical Union (Control Room) which expired July 31, 2017. The parties are operating under the terms of these agreements while the terms of successor collective bargaining agreements are negotiated.

For the plan year ended December 30, 2018, the Chicago Tribune Company was listed in the GCIU Employer Retirement Benefit Plan’s (“GCIU Plan”) Form 5500 as contributing more than i five percent of the total contributions to the plan, Daily News L.P. was listed in the Newspaper and Mail Deliverer’s Publishers’ Pension Fund’s Form 5500 as contributing more than i five percent of the total contributions to the plan for the plan year ended March 31, 2018. The New York Daily News was listed in the Pressman’s Publishers Pension Fund and the Paper Handlers’ Publishers’ Pension Fund Form 5500s as contributing more than i i five / percent of the total contributions to the plans for the plans’ year ended March 31, 2018. The Company did not provide more than i five percent of the total contributions for any of the other multiemployer pension plans in which it participated in those years. At the date the financial statements were issued, Forms 5500s were not available for the plan years ending in 2019.

On March 31, 2010, the Chicago Newspaper Publishers Drivers’ Union Pension Plan (“Drivers’ Plan”) was certified by its actuary to be in critical status for the plan year beginning January 1, 2010. As a result, the trustees of the Drivers’ Plan were required to adopt and implement a rehabilitation plan as of January 1, 2011, designed to enable the Drivers’ Plan to cease being in critical status within the period of time stipulated by the IRC. The terms of the rehabilitation plan adopted by the trustees required Tribune to make increased contributions beginning on January 1, 2011, through December 31, 2025, and the trustees of the Drivers’ Plan projected that it would emerge from critical status on January 1, 2026. As of its 2017 plan year, the actuary for the Drivers’ Plan certified the plan to be in critical and declining status with projected insolvency in 2026. During 2018, the Board of Trustees of the Drivers’ Plan agreed to a plan merger with the Teamsters Local Union No. 727 Pension Fund (“Teamsters Fund”), a plan with a healthy status. On December 13, 2018, the Drivers’ Plan adopted an amendment to its prior rehabilitation plan where the Company will make future payments of $ i 68.4 million paid over seven years, beginning in April of 2019 through June of 2025. The merger with the Teamsters Plan became effective on August 1, 2019, after approval by the Pension Benefit Guaranty Corporation (“PBGC”). In addition to the committed future payments 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.

In 2009, the GCIU Plan was certified by its actuary to be in critical status (within the meaning of section 432 of the IRC) as of its plan year beginning January 1, 2009. As a result, the trustees of the GCIU Plan implemented a rehabilitation plan on November 1, 2009, and amended it in May 2012 to cease the plan’s critical status within the period of time stipulated by the IRC. However, the GCIU Plan was unable to adopt a rehabilitation plan that would enable the GCIU Plan to emerge from critical status and avoid insolvency using reasonable assumptions. Therefore, the GCIU Plan adopted a rehabilitation plan that reflects reasonable measures to forestall insolvency. As of its 2019 plan year, the GCIU Plan has been certified by its actuary to be in critical and declining status with projected insolvency in 2030. As of December 29, 2019, assuming Tribune’s contributions from January 1, 2020, through the projected insolvency date of 2030, it is estimated that Tribune’s contributions to the plan will total $ i 6.4 million, based on the actuarial assumptions utilized to develop the rehabilitation plan and assuming Tribune’s staffing levels as of December 29, 2019, remain unchanged. The funding obligation is 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.

In 2010, the CWA/ITU Negotiated Pension Plan was certified by its actuary to be in critical status (within the meaning of section 432 of the IRC) as of its plan year beginning January 1, 2010. As a result, the trustees of the CWA/ITU Negotiated Pension Plan implemented a rehabilitation plan on March 8, 2010. However, the CWA/ITU Negotiated Pension Plan was unable to adopt a rehabilitation plan that would enable the CWA/ITU Negotiated Pension Plan to emerge from critical status and avoid insolvency using reasonable assumptions. Therefore, the CWA/ITU Negotiated Pension Plan adopted a rehabilitation plan that reflects reasonable measures to forestall insolvency. As of its 2019 plan year, the CWA/ITU Negotiated Pension Plan has been certified by its actuary to be in critical and declining status with projected insolvency in 2028. As of December 29, 2019, assuming Tribune’s contributions from January 1, 2020 through the projected insolvency

F-41

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

date of 2028, it is estimated that Tribune’s contributions to the plan will total $ i 2.0 million, based on the actuarial assumptions utilized to develop the rehabilitation plan and assuming Tribune’s staffing levels as of December 29, 2019, remain unchanged. The funding obligation is 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.

In 2016, the Paper Handlers’ - Publishers’ Pension Fund was certified by its actuary to be in critical status (within the meaning of section 432 of the IRC) as of its plan year beginning January 1, 2010. As a result, the trustees of the Paper Handlers’ - Publishers’ Pension Fund implemented a rehabilitation plan on February 25, 2016. As of its 2019-2020 plan year, the Paper Handlers’ - Publishers’ Pension Fund has been certified by its actuary to be in critical and declining status with projected insolvency in the 2024-2025 plan year. As of December 29, 2019, assuming Tribune’s contributions from January 1, 2020 through the projected insolvency date of 2033, it is estimated that Tribune’s contributions to the plan will total $ i 0.7 million, based on the actuarial assumptions utilized to develop the rehabilitation plan and assuming Tribune’s staffing levels as of December 29, 2019, remain unchanged. The funding obligation is 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.

In 2019, the IAM National Pension Fund was certified by its actuary to be in critical status (within the meaning of section 432 of the IRC) as of its plan year beginning January 1, 2019. As a result, the trustees of the IAM National Pension Fund implemented a rehabilitation plan on April 17, 2019. The Rehabilitation Plan is designed to allow the plan to exit critical status within the period of time stipulated by the IRC.

NOTE 15: NONCONTROLLING INTEREST

Noncontrolling interest represents the i 40.0% membership interest in BestReviews not owned by the Company and is presented between liabilities and stockholders’ equity within the Company’s consolidated balance sheet because the Put Option described in Note 7 could, upon exercise, have required the Company, under certain circumstances, to pay cash to purchase the noncontrolling interest. Each quarter, if the amount the Company would have been required to pay the noncontrolling interest holders as if the Put Option had been exercised as of the balance sheet date exceeded the carrying value of the noncontrolling interest, the carrying value was adjusted to that amount, 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 year ended December 29, 2019, the Company recorded carrying value adjustments of $ i 25.5 million.

In the year ended December 29, 2019, BestReviews declared $ i 16.5 million in dividends to its shareholders. The Company’s portion of these dividends was $ i 9.9 million and the noncontrolling shareholders portion was $ i 6.6 million. In the year ended December 30, 2018, BestReviews declared a $ i 5.0 million dividend to its shareholders. The Company’s portion of this dividend was $ i 3.0 million and the noncontrolling shareholders’ portion was $ i 2.0 million.

F-42

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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


Balance at December 31, 2017	$	i —
Acquisition of BestReviews	i 40,900
Dividends paid to noncontrolling interest	( i 2,000)
Income attributable to noncontrolling interest	i 856
Balance at December 30, 2018	i 39,756
Dividends paid to noncontrolling interest	( i 6,600)
Carrying value adjustment	i 25,520
Income attributable to noncontrolling interest	i 4,825
Balance at December 29, 2019	$	i 63,501

On February 3, 2020, subsequent to the end of the year, the Company and the BR Parent amended the LLC Agreement to, among other things, remove the Put Option and Call Option sections of the LLC Agreement. This amendment eliminates the requirement in fiscal 2020 and future periods to adjust the carrying value of the noncontrolling interest to the amount the Company would be required to pay to acquire the noncontrolling interest.

NOTE 16: STOCK-BASED COMPENSATION

In 2014, the tronc, Inc. 2014 Omnibus Incentive Plan (together with amendments, the “Tribune Equity Plan”) was approved. The Tribune Equity Plan is a long-term incentive plan under which awards may be granted to employees and outside directors in the form of stock options (“Options”), stock appreciation rights, restricted stock units (“RSU”), performance share units, restricted and unrestricted stock awards, dividend equivalents and cash awards. The Company measures stock-based compensation costs based on the estimated grant date fair value of the award and recognizes compensation costs on a straight-line basis over the requisite service period for the entire award. The Tribune Equity Plan permits the Company to withhold shares of vested common stock upon vesting of employee stock awards or at the time they exercise their Options in lieu of their payment of the required withholdings for employee taxes. The Company does not withhold taxes in excess of minimum required statutory requirements. Shares of common stock reserved for future grants under the Tribune Equity Plan were i 1,550,103 at December 29, 2019.

Stock-based compensation expense related to Tribune’s employees during the years ended December 29, 2019, December 30, 2018, and December 31, 2017, totaled $ i 13.2 million, $ i 10.5 million and $ i 9.3 million, respectively.

Options

The non-qualified stock options (“NSO’s”) granted to directors, officers and employees under the Tribune Equity Plan generally become exercisable in cumulative installments over a period of either i 3 or i 4 years and expire between i 7 and i 10 years. Under the Tribune Equity Plan, the exercise price of an Option cannot be less than the market price of Tribune common stock at the time the Option is granted and the maximum contractual term cannot exceed i 10 years. The fair value of each Option is estimated on the date of grant using the Black-Scholes-Merton valuation model that uses the assumptions noted in the following table. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. Expected volatility is calculated based on a blended method using historical and implied volatility of a select peer group of entities operating in similar industry sectors as the Company. Expected life was calculated using the simplified method, as described under Staff Accounting Bulletin Topic 14, “Share-Based Payment,” as the Tribune Equity Plan wasn’t in existence for a sufficient period of time for the use of company-specific historical experience in the calculation.

F-43

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table provides the weighted average assumptions used to determine the fair value of Options granted to Tribune employees during the years ended December 30, 2018, and December 31, 2017. There were i no Options granted during the year ended December 29, 2019.

2018

2017

Weighted average grant date fair value

i 17.36

i 6.53

Weighted average assumptions used:

Expected volatility

i 55.2

i 53.8

Expected lives (in years)

i 4.8

i 4.5

Risk Free interest rates

i 2.2

i 1.7

/ i

A summary of activity related to Tribune employees for Options under the Tribune Equity Plan for the years ended December 29, 2019, December 30, 2018, and December 31, 2017, is included in the following table:

2019

2018

2017

Number of Options (in thousands)

Weighted Average Exercise Price

Number of Options (in thousands)

Weighted Average Exercise Price

Number of Options (in thousands)

Weighted Average Exercise Price

Outstanding, beginning of period

i 925

i 14.51

i 1,029

i 14.56

i 1,328

i 15.93

Granted

i —

i 20

i 17.36

i 730

i 14.32

Exercised

i —

( i 7)

i 19.20

( i 115)

i 14.40

Canceled/Forfeited

( i 112)

i 13.94

( i 117)

i 15.11

( i 914)

i 15.48

Outstanding, end of year

i 813

i 14.59

i 925

i 14.51

i 1,029

i 14.56

Vested and exercisable at end of year

i 746

i 14.57

i 467

i 14.61

i 195

i 14.90

Weighted average remaining contractual term (in years)

i 1.9

i 5.1

i 6.8

For Options granted under the Tribune Equity Plan the exercise price of options granted equals the closing stock price on the day of grant. For each of the years ended December 29, 2019, December 30, 2018, and December 31, 2017, the intrinsic value of options exercised was negligible. The grant date fair value of options vested during the year ended December 29, 2019, was $ i 1.7 million.

The following table summarizes information related to stock options outstanding at December 29, 2019:

Range of Exercises Prices

Number of Options Outstanding (in thousands)

Weighted Average Remaining Life (years)

Weighted Average Exercise Price

Number of Options Exercisable (in thousands)

Weighted Average Exercise Price

i 13.38- i 14.02

i 199

i 1.2

i 13.59

i 199

i 13.59

i 14.65- i 14.76

i 150

i 2.1

i 14.72

i 120

i 14.73

i 14.87- i 14.87

i 338

i 1.3

i 14.87

i 338

i 14.87

i 14.89- i 17.41

i 119

i 4.0

i 15.04

i 82

i 15.11

i 19.2- i 19.20

i 7

i 1.7

i 19.20

i 7

i 19.20

i 13.38- i 19.20

i 813

i 1.9

i 14.59

i 746

i 14.57

Restricted Stock Units (RSUs)

The RSUs granted to directors, officers and employees under the Tribune Equity Plan have service conditions and generally vest over i 1 to i 4 years. Upon vesting, the RSUs are redeemed with common stock. The RSUs do not have voting rights. The fair value of the RSU is determined on the grant date using the closing trading price of the Company’s shares. The weighted average grant date fair value of the RSUs granted during the years ended December 29, 2019, December 30, 2018, and December 31, 2017 was $ i 11.92, $ i 17.41, and $ i 14.24, respectively.

F-44

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A summary of activity related to Tribune employees for RSUs under the Tribune Equity Plan for the years ended December 29, 2019, December 30, 2018, and December 31, 2017 is included in the following table:

2019

2018

2017

Number of RSUs (in thousands)

Weighted Average Grant Date Fair Value

Number of RSUs (in thousands)

Weighted Average Grant Date Fair Value

Number of RSUs (in thousands)

Weighted Average Grant Date Fair Value

Outstanding, beginning of year

i 1,254

i 14.83

i 2,013

i 14.60

i 1,452

i 15.44

Granted

i 469

i 11.92

i 286

i 17.41

i 1,438

i 14.24

Vested

( i 636)

i 14.87

( i 685)

i 14.86

( i 561)

i 15.23

Canceled/forfeited

( i 253)

i 14.43

( i 360)

i 15.48

( i 316)

i 15.70

Outstanding, end of year

i 834

i 13.41

i 1,254

i 14.83

i 2,013

i 14.60

Vested at end of year

i 1

i 12.05

i 1

i 12.31

i 2

i 11.02

/ i

As of December 29, 2019, Tribune had unrecognized compensation cost on nonvested awards as follows (in thousands):

Unrecognized Compensation Cost

Weighted Average Remaining Recognition Period (in years)

Nonvested stock options

i 230

i 0.9

Nonvested restricted stock units

i 6,071

i 1.7

NOTE 17: EARNINGS PER SHARE

Basic earnings per common share is calculated by dividing net income 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. If there is loss from continuing operations, all potential common shares are considered anti-dilutive.

F-45

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the years ended December 29, 2019, December 30, 2018, and December 31, 2017, basic and diluted earnings per common share were as follows (in thousands, except per share amounts):

Year ended

Income (Loss) - Numerator:

Income (loss) from continuing operations

i 3,093

( i 39,863)

( i 29,813)

Less: Net income from continuing operations attributable to noncontrolling interest

i 4,825

i 856

i —

Less: Noncontrolling interest carrying value adjustment

i 25,520

i —

Income (loss) available to common shareholders, before discontinued operations

( i 27,252)

( i 40,719)

( i 29,813)

Income (loss) from discontinued operations

( i 3,337)

i 289,510

i 35,348

Net income available to Tribune stockholders

( i 30,589)

i 248,791

i 5,535

Shares - Denominator:

Weighted average number of common shares outstanding (basic)

i 35,810

i 35,268

i 33,996

Dilutive effect of employee stock options and RSUs

i —

Adjusted weighted average common shares outstanding (diluted)

i 35,810

i 35,268

i 33,996

Net income (loss) attributable to Tribune per common share Basic:

Continuing operations

( i 0.76)

( i 1.15)

( i 0.88)

Discontinued operations

( i 0.09)

i 8.20

i 1.04

Net income (loss) attributable to Tribune per common share Basic

( i i 0.85 / )

i i 7.05 /

i i 0.16 /

Net income (loss) attributable to Tribune per common share Diluted:

Continuing operations

( i 0.76)

( i 1.15)

( i 0.88)

Discontinued operations

( i 0.09)

i 8.20

i 1.04

Net income (loss) attributable to Tribune per common share Diluted

( i 0.85)

i i 7.05 /

i i 0.16 /

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 for the years ended December 29, 2019, December 30, 2018, and December 31, 2017, was i 813,219, i 924,887, and i 1,031,887, respectively. 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 i 1,007,733, i 1,273,268, and i 2,457,305 for the years ended December 29, 2019, December 30, 2018, and December 31, 2017.

NOTE 18: STOCKHOLDERS’ EQUITY

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

Significant Shareholders

Merrick Media, LLC

On February 3, 2016, the Company completed a $ i 44.4 million private placement, pursuant to which the Company sold to Merrick Media, LLC (“Merrick Media”) i 5,220,000 shares of the Company’s common stock at a purchase price of

F-46

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

$ i 8.50 per share. Michael W. Ferro, Jr., 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 i 9,071,529 shares of Tribune common stock, which represented i 25.2% of Tribune common stock. Mr. Ferro served as Chairman of the Company’s Board of Directors from February 3, 2016, through May 18, 2018. On November 15, 2019, Mr. Ferro sold all of the shares he controlled to funds Alden Global Opportunities Master Fund, L.P. and Alden Global Value Recovery Master Fund, L.P.

Alden Funds

During November 2019, Alden Global Opportunities Mast Fund, L.P. and Alden Global Value Recovery Master Fund, L.P. (together, the “Alden Funds”) acquired i 11,544,213 shares, or i 32.0%, of the Company’s common stock. Of those shares, i 9,071,529 shares were purchased from Merrick Media and Michael W. Ferro, in a private transaction and the remaining shares were purchased on the open market. As of December 29, 2019, Alden funds beneficially owned i 32.0% of Tribune common stock.

On December 1, 2019, the Company entered into a Cooperation Agreement (“Cooperation Agreement”) with the Alden Funds pursuant to which the Board of Directors of the Company (“Board”) agreed to increase the size of the Board to eight directors and promptly appoint two designees from the Alden Funds (“Alden Designees”) as directors of the Company.

The Cooperation Agreement further provides, among other things, that:

•Subject to certain conditions, the Board will nominate each of the Alden Designees for election to the Board at the Company’s 2020 annual meeting of stockholders, which will be held on or before June 15, 2020;

•Until June 30, 2020 (“Cooperation Period”), the size of the Board will not be increased above i 8 members;

•During the Cooperation Period, the Alden Funds and their affiliates will be subject to customary standstill restrictions, including (among others) refraining from (i) acquiring securities of the Company if it would result in their ownership of more than i 33.0% of the Company’s outstanding shares of common stock, $ i 0.01 par value (“Common Stock”); (ii) soliciting proxies to vote any securities of the Company; (iii) forming or participating in a “group” in connection with the Company’s voting securities or (iv) otherwise acting alone, or in concert with others, to seek to control or knowingly influence the management, Board or policies of the Company; provided that such prohibitions terminate if (a) a person or group that owns more than i 15.0% of the issued and outstanding Common Stock (a “Related Party Investor”) (x) makes any proposal (other than a precatory proposal) at a meeting of the Company’s stockholders or otherwise acts alone, or in concert with others, to seek to control or knowingly influence the management, Board or policies of the Company, (y) cooperates or otherwise acts in concert with the Board to nominate or elect a director that is proposed by, or is an employee or affiliate of, such Related Party Investor, or (z) acquires beneficial ownership of shares of Common Stock representing an additional i 5.0% or more of the issued and outstanding Common Stock; (b) the Company enters into a material agreement with any Related Party Investor, other than on arms’ length terms (a “Related Party Agreement”) or alters, amends or modifies in any way a Related Party Agreement, other than on terms no less favorable to the Company than would be obtainable through arms’-length negotiations with a hypothetically similarly situated bona fide third-party; (c) the Company amends, waives or fails to enforce, the terms of any voting agreement or standstill agreement between the Company and a Related Party Investor other than such amendments or waivers that, taken as a whole, make the agreement more restrictive on the Related Party Investor or (d) the Alden Designees are not nominated for election at, or are not elected at, the Company’s 2020 stockholder meeting; and

•During the Cooperation Period, the Alden Funds and their respective affiliates will vote their shares of Common Stock in favor of any of the Board’s director nominees and against the removal of any such directors.

F-47

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Nant Capital, LLC

On June 1, 2016, the Company completed a $ i 70.5 million private placement, pursuant to which the Company sold to Nant Capital, LLC (“Nant Capital”) i 4,700,000 unregistered shares of the Company’s common stock at a purchase price of $ i 15.00 per share. The Company used the $ i 70.4 million net proceeds from the sale to further execute on its growth strategy, including acquisitions and digital initiatives. The shares of common stock acquired by Nant Capital (“Nant Shares”) are subject to certain lockup provisions that, subject to the terms and conditions set out in the purchase agreement dated May 22, 2016, among the Company, Nant Capital and Dr. Patrick Soon-Shiong (“Nant Purchase Agreement”) prohibit any transfers of the Nant Shares that would result in a transfer of more than i 25.0% of the Nant Shares in any 12-month period. The Nant Purchase Agreement also includes covenants prohibiting the transfer of shares of the Company’s common stock if the transfer would result in a person beneficially owning more than i 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. Nant Capital and Dr. Patrick Soon-Shiong, and their respective affiliates, are also 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 i 25.0% of the Company’s then-outstanding shares of common stock. Dr. Soon-Shiong served as the Vice Chairman of the Company’s Board of Directors from June 2, 2016, through April 18, 2017.

On January 17, 2019, Dr. Patrick Soon-Shiong, NantMedia and Nant Capital, LLC (“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 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.

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. Patrick 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. Dr. Soon-Shiong, together with Nant Capital, beneficially owned i 8,743,619 shares of Tribune common stock, which represented i 24.2% of Tribune common stock, as of December 29, 2019.

Dividends

On May 29, 2019, the Board of Directors declared a special cash dividend of $ i 1.50 per share of common stock outstanding. The cash dividend totaling $ i 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 $ i 1.9 million for RSUs outstanding as of the record date.

On November 13, 2019, the Board of Directors declared a cash dividend of $ i 0.25 per share of common stock. The cash dividend totaling $ i 9.0 million was paid on December 10, 2019, to shareholders of record as of November 25, 2019. Additionally, the Company accrued dividend equivalents of $ i 0.3 million for RSUs outstanding as of the record date.

On February 19, 2020, the Company declared a cash dividend of $ i 0.25 per share of common stock to be paid on March 16, 2020, to shareholders of record as of March 2, 2020.

Stock Repurchases

On March 23, 2017, the Company entered into a purchase agreement with investment funds associated with Oaktree Capital Management, L.P. (“Oaktree”), pursuant to which the Company acquired i 3,745,947 shares of the Company’s common stock for $ i 15.00 per share or a total purchase price of $ i 56.2 million. The purchase agreement contains a “standstill”

F-48

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

covenant prohibiting Oaktree from acquiring, directly or indirectly, any of the Company’s common stock, soliciting proxies to vote shares of the Company’s common stock or taking certain actions with respect to any business combination, asset acquisition or disposition or similar transaction involving the Company through March 22, 2019 (“Standstill Period”). The parties also agreed to a mutual non-disparagement covenant applicable during the Standstill Period and to a mutual release of claims. On March 22, 2017, the Company’s stock price closed at $ i 13.39. The $ i 6.0 million difference between the aggregate purchase price and the fair value of the acquired stock at the transaction date was expensed as a premium on stock buyback in the Consolidated Statements of Income.

On March 13, 2019, the Company announced that the Company’s Board of Directors authorized a stock repurchase program. Under the program, the Company may purchase up to $ i 25.0 million of its outstanding common stock over the next i 24 months. The purchases may be made in open-market transactions or privately negotiated transactions and may be made from time to time depending on market conditions, share price, trading volume, cash needs and other business factors.

NOTE 19: ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

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

Foreign Currency

OPEB

Pension

Total

Balance at December 25, 2016

( i 32)

i 6,374

( i 15,156)

( i 8,814)

Other comprehensive income before reclassifications

i 1

i 5,778

i 1,969

i 7,748

Amounts reclassified from AOCI

i —

( i 2,220)

i —

( i 2,220)

AOCI recognized in discontinued operations

i —

( i 10,241)

Balance at December 31, 2017

( i 31)

i 9,932

( i 23,428)

( i 13,527)

Other comprehensive loss before reclassifications

( i 8)

( i 131)

( i 2,206)

( i 2,345)

Amounts reclassified from AOCI

i —

( i 9,498)

i —

( i 9,498)

AOCI recognized in discontinued operations

i —

i 25,397

Balance at December 30, 2018

( i 39)

i 303

( i 237)

i 27

Other comprehensive income (loss) before reclassifications

( i 21)

( i 24)

( i 2,434)

( i 2,479)

Amounts reclassified from AOCI

i —

( i 237)

i 337

i 100

Balance at December 29, 2019

( i 60)

i 42

( i 2,334)

( i 2,352)

/ i

The following table presents the amounts and line items in the Consolidated Statements of Income where adjustments reclassified from accumulated other comprehensive income (loss) were recorded during the years ended December 29, 2019, December 30, 2018 and December 31, 2017 (in thousands):

Year ended

Accumulated Other Comprehensive Income (Loss) Components

Affected Line Items in the Consolidated Statements of Income

Pension and postretirement benefit adjustments:

Prior service cost recognized

i 139

( i 10,534)

( i 2,745)

Other non-operating income (expense), net

Amortization of actuarial gains

i —

( i 2,621)

( i 553)

Other non-operating income (expense), net

Total before taxes

i 139

( i 13,155)

( i 3,298)

Tax effect

i 39

( i 3,657)

( i 1,078)

Income tax expense (benefit)

Total reclassifications for the period

i 100

( i 9,498)

( i 2,220)

The Company expects to recognize $ i 0.1 million in prior service costs to be amortized from accumulated other comprehensive income in the year ended December 27, 2020.

F-49

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 20: 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. Tribune manages its business as i 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 sold 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. Assets are not presented to or used by management at a segment level for making operating and investment decisions and therefore are not reported.

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 (which includes the Daily Press and The Virginian-Pilot). Tribune’s major daily newspapers have served their respective communities with local, regional, national and international news and information for more than i 150 years.

Segment X consists of 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 derives the segment results directly from the internal management reporting system. The accounting policies that the Company uses in deriving the segment results are the same as those used in the consolidated results. Management measures the performance of each segment based on several metrics, including segment income (loss) from operations. Segment income from operations is defined as income from operations before net interest expense, gain on investment transactions, reorganization items and income taxes. Management uses these results, in part, to evaluate the performance of, and allocate resources to, each segment.

Segment operating revenue includes revenue from sales to external customers and intersegment revenues that reflect transactions between the segments on an arm’s-length basis. Intersegment revenues primarily consist of advertising revenue and marketing services. No single customer represented 10% or more of the Company’s net revenue in any fiscal year presented.

The Company incurs overhead expenses related to advertising operations, technology, finance and other functions that are centralized. These overhead expenses are allocated to the segments, generally on the basis of revenue or headcount. Management believes this method of allocation is representative of the value of the related services provided to the segments. The Company evaluates the performance of the segments based on income from operations after allocated overhead expenses.

F-50

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Disaggregated operating revenues and income (loss) from continuing operations by operating segment were as follows for the periods indicated (in thousands):

Year Ended

Corporate and Eliminations

Consolidated

(Print)

(Digital)

Advertising

i 307,138

i 355,790

i 92,158

i 98,023

i 4

i 30

i 399,300

i 453,843

Circulation

i 336,823

i 349,975

i —

( i 5)

i 336,823

i 349,970

Commercial print and delivery

i 93,944

i 102,668

i —

i 93,944

i 102,668

Direct mail

i 35,613

i 32,354

i —

( i 6)

i 35,613

i 32,348

Content syndication and other

i 8,983

i 10,282

i 90,561

i 67,589

i 17,925

i 13,969

i 117,469

i 91,840

Other

i 138,540

i 145,304

i 90,561

i 67,589

i 17,925

i 13,963

i 247,026

i 226,856

Operating revenues

i 782,501

i 851,069

i 182,719

i 165,612

i 17,929

i 13,988

i 983,149

i 1,030,669

Operating expenses

i 738,293

i 846,122

i 167,141

i 152,698

i 70,558

i 78,061

i 975,992

i 1,076,881

Income from operations

i 44,208

i 4,947

i 15,578

i 12,914

( i 52,629)

( i 64,073)

i 7,157

( i 46,212)

Interest income (expense), net

i 499

( i 11,353)

Loss on early extinguishment of debt

i —

( i 7,666)

Loss on equity investments, net

( i 2,988)

( i 1,868)

Other non-operating income (expense)

i 45

i 14,513

Income (loss) from continuing operations before income taxes

i 4,713

( i 52,586)

Depreciation and amortization

i 21,222

i 17,419

i 11,274

i 19,819

i 14,818

i 16,024

i 47,314

i 53,262

Impairment

i 14,496

i 1,872

i —

i 14,496

i 1,872

F-51

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Year Ended

Corporate and Eliminations

Consolidated

(Print)

(Digital)

Advertising

i 355,790

i 380,214

i 98,023

i 130,376

i 30

( i 174)

i 453,843

i 510,416

Circulation

i 349,975

i 319,727

i —

( i 5)

i —

i 349,970

i 319,727

Commercial print and delivery

i 102,668

i 105,516

i —

i 102,668

i 105,516

Direct mail

i 32,354

i 36,874

i —

( i 6)

i —

i 32,348

i 36,874

Content syndication and other

i 10,282

i 12,509

i 67,589

i 33,601

i 13,969

( i 3,190)

i 91,840

i 42,920

Other

i 145,304

i 154,899

i 67,589

i 33,601

i 13,963

( i 3,190)

i 226,856

i 185,310

Operating revenues

i 851,069

i 854,840

i 165,612

i 163,977

i 13,988

( i 3,364)

i 1,030,669

i 1,015,453

Operating expenses

i 846,122

i 792,665

i 152,698

i 161,783

i 78,061

i 52,075

i 1,076,881

i 1,006,523

Income (loss) from operations

i 4,947

i 62,175

i 12,914

i 2,194

( i 64,073)

( i 55,439)

( i 46,212)

i 8,930

Interest income (expense), net

( i 11,353)

( i 26,334)

Loss on early extinguishment of debt

( i 7,666)

i —

Premium on stock buyback

i —

( i 6,031)

Loss on equity investments, net

( i 1,868)

( i 2,725)

Other non-operating income (expense)

i 14,513

i 3,535

Income (loss) from operations

( i 52,586)

( i 22,625)

Depreciation and amortization

i 17,419

i 16,415

i 19,819

i 15,299

i 16,024

i 15,592

i 53,262

i 47,306

Impairment

i 1,872

i —

i 1,872

i —

NOTE 21: SUPPLEMENTAL CASH FLOW INFORMATION

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

Year ended

Cash paid during the period for:

Interest

i 895

i 15,546

i 24,492

Income taxes, net of refunds

i 9,797

i 3,407

( i 892)

Non-cash items in investing activities:

Additions to property plant and equipment under capital leases

i —

( i 890)

Non-cash items in financing activities:

Shares issued for acquisitions

i —

i 34,595

i —

New capital leases

i —

i 890

/ /

F-52

TRIBUNE PUBLISHING COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

i i

The following table provides a reconciliation of cash, cash equivalents, and restricted cash as reported within the Consolidated Balance Sheets to the cash, cash equivalents and restricted cash as reported in the Consolidated Statement of Cash Flows (in thousands):

As of