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EX-32 - 2015 10K EXHIBIT 32 - Tribune Publishing Coa2015q410kexhibit32.htm
EX-31.2 - 2015 10K EXHIBIT 31.2 - Tribune Publishing Coa2015q410kexhibit312.htm
EX-31.1 - 2015 10K EXHIBIT 31.1 - Tribune Publishing Coa2015q410kexhibit311.htm
EX-21.1 - 2015 10K EXHIBIT 21.1 - Tribune Publishing Coa2015q410kexhibit211.htm
EX-23.1 - 2015 10K EXHIBIT 23.1 - Tribune Publishing Coa2015q410kexhibit231.htm
EX-10.26 - 2015 10K EXHIBIT 10.26 - Tribune Publishing Coex1026executiveemployment.htm
EX-10.13 - 2015 10K EXHIBIT 10.13 - Tribune Publishing Coex1013deferralelectionform.htm
EX-10.24 - 2015 10K EXHIBIT 10.24 - Tribune Publishing Coex1024executiveemploymenta.htm




UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 FORM 10-K
[ X ]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 27, 2015 
 
OR
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 
Commission File No. 001-36230 
Tribune Publishing Company
(Exact name of registrant as specified in its charter) 
Delaware
 
38-3919441
(State or other jurisdiction
of incorporation or organization)
 
(I.R.S. employer
identification no.)
 
 
 
435 North Michigan Avenue
 
 
Chicago Illinois
 
60611
(Address of principal executive offices)
 
(Zip code)
Registrant’s telephone number, including area code: (312) 222-9100
Securities registered pursuant to Section 12(b) of the Act:
(Title of Class)
 
(Name of Exchange on Which Registered)
Common Stock, par value $.01 per share
 
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No X
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes   No  X
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  X  No 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  X   No   
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this form 10-K or any amendment to the Form 10-K [X]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer ____
 
Accelerated filer   X
Non-accelerated filer       
 
Smaller reporting company ____
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes __  No  X
The aggregate market value of the voting and non-voting stock held by non-affiliates of the registrant was approximately $422,770,157 based upon the closing market price of $16.10 per share of Common Stock on the New York Stock Exchange as of June 26, 2015.
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class
 
Outstanding at March 10, 2016
Common Stock, par value $0.01 per share
 
31,657,676
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement of the registrant to be filed pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, for the 2016 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K.





 
 
TRIBUNE PUBLISHING COMPANY
 
 
 
 
FORM 10-K
 
 
 
 
TABLE OF CONTENTS
 
 
 
 
 
 
Page
 
 
 
 
 
PART I
 
 
 
 
 
 
 
 
 
Item 1.
 
 
 
 
 
 
 
Item 1A.
 
 
 
 
 
 
 
Item 1B.
 
 
 
 
 
 
 
Item 2.
 
 
 
 
 
 
 
Item 3.
 
 
 
 
 
 
 
Item 4.
 
 
 
 
 
 
 
PART II
 
 
 
 
 
 
 
 
 
Item 5.
 
 
 
 
 
 
 
Item 6.
 
 
 
 
 
 
 
Item 7.
 
 
 
 
 
 
 
Item 7A.
 
 
 
 
 
 
 
Item 8.
 
 
 
 
 
 
 
Item 9.
 
 
 
 
 
 
 
Item 9A.
 
 
 
 
 
 
 
Item 9B.
 
 
 
 
 
 
 
PART III
 
 
 
 
 
 
 
 
 
Item 10.
 
 
 
 
 
 
 
Item 11.
 
 
 
 
 
 
 
Item 12.
 
 
 
 
 
 
 
Item 13.
 
 
 
 
 
 
 
Item 14.
 
 
 
 
 
 
 
PART IV
 
 
 
 
 
 
 
 
 
Item 15.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial Statements
 

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PART I
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
The statements contained in this Annual Report on Form 10-K, as well as the information contained in the notes to our Consolidated and Combined Financial Statements, include certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that are based largely on our current expectations and reflect various estimates and assumptions by us. Forward-looking statements are subject to certain risks, trends and uncertainties that could cause actual results and achievements to differ materially from those expressed in such forward-looking statements. Such risks, trends and uncertainties, which in some instances are beyond our control, include: competition and other economic conditions including fragmentation of the media landscape and competition from other media alternatives; changes in advertising demand, circulation levels and audience shares; our ability to develop and grow our online businesses; our reliance on revenue from printing and distributing third-party publications; changes in newsprint prices; macroeconomic trends and conditions; our ability to adapt to technological changes; our ability to realize benefits or synergies from acquisitions or divestitures or to operate our businesses effectively following acquisitions or divestitures; our success in implementing expense mitigation efforts; changes in newsprint prices; our reliance on third-party vendors for various services; adverse results from litigation, governmental investigations or tax-related proceedings or audits; our ability to attract and retain employees; our ability to satisfy pension and other postretirement employee benefit obligations; changes in accounting standards; the effect of labor strikes, lockouts and labor negotiations; regulatory and judicial rulings; our indebtedness and ability to comply with debt covenants applicable to our debt facilities; our adoption of fresh-start reporting which has caused our consolidated and combined financial statements for periods subsequent to December 31, 2012 to not be comparable to prior periods; our ability to satisfy future capital and liquidity requirements; and our ability to access the credit and capital markets at the times and in the amounts needed and on acceptable terms. For more information about these and other risks, see Item 1A. - Risk Factors in this filing.
The words “believe,” “expect,” “anticipate,” “estimate,” “could,” “should,” “intend,” “may,” “will,” “plan,” “seek” and similar expressions generally identify forward-looking statements. However, such words are not the exclusive means for identifying forward-looking statements, and their absence does not mean that the statement is not forward looking. Whether or not any such forward-looking statements are, in fact, achieved will depend on future events, some of which are beyond our control. Readers are cautioned not to place undue reliance on such forward-looking statements, which are being made as of the date of this Annual Report on Form 10-K. Except as required by law, we undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.
Item 1.    Business
Overview
Tribune Publishing Company (collectively with its subsidiaries, Tribune Publishing,” “we,” “us,” “our,” or the “Company”) was formed as a Delaware corporation on November 21, 2013. Tribune Media Company, formerly Tribune Company (“TCO”), owned all of Tribune Publishing until August 4, 2014, when TCO distributed 98.5% of the shares of common stock TCO held in Tribune Publishing to TCO’s stockholders on a prorata basis. Prior to August 4, 2014, Tribune Publishing had no separate operations. Tribune Publishing’s historical financial information is derived from the accounting records of TCO on a carve-out basis.
Tribune Publishing is a multiplatform media and marketing solutions company that delivers innovative experiences for audiences and advertisers. The Company's diverse portfolio of iconic news and information brands includes award-winning daily and weekly titles, substantial digital properties and key verticals in major markets across the country. The Company’s brands are leading sources of local news and information across all platforms - print, online, mobile and social - in the markets they serve.
Tribune Publishing’s award-winning media groups include the Chicago Tribune Media Group, the California News 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 and the Daily Press Media Group. The Company’s diverse offerings also include a suite of digital, custom content, and direct mail services and solutions for marketers, including: Tribune Content Agency, a syndication and licensing business that delivers daily news service, video and syndicated premium content to more than 3,000 media and digital publishers in 92 countries; Tribune Direct, a one-stop direct-marketing solution that works with advertisers to create and execute various direct mail campaigns; and Tribune Content Solutions, the Company’s in-house digital marketing services group, which partners with local and regional businesses to develop and execute online strategies and custom-content solutions. The Company operates as one reportable segment.

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In March 2014, The Baltimore Sun Media Group acquired the Baltimore City Paper and its related publications. In April 2014, the Hartford Courant Media Group acquired Reminder Media and its related publications in eastern and northern Connecticut. In May 2014, The Baltimore Sun Media Group acquired The Capital and the Carroll County Times and their related publications. In May 2014, Tribune Publishing’s subsidiary, TCA News Service, LLC, acquired the outstanding 50% interest in McClatchy/Tribune Information Services (“MCT”), making the subsidiary wholly-owned. In August 2014, the Company acquired a 20% equity interest in Contend, LLC (“Contend”), a content creation company. In October 2014, the Chicago Tribune Media Group acquired six daily and 32 weekly suburban news and information brands from Wrapports, LLC (“Wrapports”). In May 2015, the Company acquired The San Diego Union-Tribune (f/k/a the U-T San Diego) and nine community weeklies and related digital properties in San Diego County, California. For further information regarding the Company’s acquisitions, see Note 6 and Note 9 of the Consolidated and Combined Financial Statements.
Tribune Publishing’s core products include:
11 major daily newspapers in 9 major markets with total Sunday circulation of approximately 2.4 million copies;
160 community/niche publications and products, primarily published weekly or monthly;
More than 120 digital platforms online and on mobile, collectively attracting more than 51.2 million unique visitors during the month of December 2015 based on the comScore Multi-platform Media Report for such period; and
A robust suite of digital marketing services for local, regional and national marketers.
Tribune Publishing’s major daily newspapers have served their respective communities with local, regional, national and international news and information for more than 150 years. In fact, the Hartford Courant is the nation’s oldest continuously published newspaper and celebrated its 250th anniversary in October 2014.
The Company’s three primary revenue streams are advertising and marketing services, circulation and third-party printing and distribution. Our advertising and marketing services are delivered to customers through three main channels: run of press (“ROP”), preprint and digital. ROP advertising is comprised of advertisements that are printed in the newspapers while preprint advertising primarily consists of glossy, color inserts that are delivered as part of the newspaper, in the mail or by carrier. Digital advertising is primarily related to advertising revenue sold on our owned and operated newspaper websites. Circulation revenue results from the sale of print and digital editions of newspapers to individual subscribers and the sale of print editions of newspapers to sales outlets, which re-sell the newspapers. The Company generates third-party print and distribution revenue by printing and distributing a number of national and local newspapers.
Restructuring and Spin-off from TCO
On December 8, 2008 (the “Petition Date”), TCO and 110 of its direct and indirect wholly-owned subsidiaries (each a “Debtor” and, collectively, the “Debtors”), filed voluntary petitions for relief under Chapter 11 (“Chapter 11”) of title 11 of the United States Code in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). On March 16, 2015, the Chapter 11 estates of 88 of the Debtors were closed by a final decree issued by the Bankruptcy Court. On July 24, 2015, the Chapter 11 estates of an additional 8 of the Debtors were closed by a final decree. The remaining Debtors’ Chapter 11 cases, including several of the Tribune Publishing Debtors’ cases, have not yet been closed by the Bankruptcy Court and continue to be jointly administered under the caption “In re: Tribune Media Company, et al.,” Case No. 111-08-13141. Certain of the legal entities included in the Consolidated and Combined Financial Statements of Tribune Publishing were Debtors or, as a result of the restructuring transactions described below, are successor legal entities to legal entities that were Debtors (collectively, the “Tribune Publishing Debtors”). A joint plan of reorganization for the Debtors (the “Plan”), including the Tribune Publishing Debtors, became effective and the Debtors emerged from Chapter 11 on December 31, 2012 (the “Effective Date”). For details of the proceedings under Chapter 11 and the terms of the Plan, see Note 2 of the Consolidated and Combined Financial Statements included elsewhere in this report.
On July 10, 2013, TCO announced its plan to spin-off essentially all of its publishing business into an independent company (the “Distribution”). The business represented the principal publishing operations of TCO and certain other entities wholly-owned by TCO, as described below, and was organized as a new company, Tribune Publishing. On August 4, 2014 (“Distribution Date”), TCO completed the spin-off of its principal publishing operations into an independent company, Tribune Publishing, by distributing 98.5% of the outstanding shares of Tribune Publishing common stock to holders of TCO

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common stock and warrants. In the Distribution, each holder of TCO Class A common stock, Class B common stock and warrants received 0.25 of a share of Tribune Publishing common stock for each share of TCO common stock or TCO warrant held as of the record date of July 28, 2014. Based on the number of shares of TCO common stock and TCO warrants outstanding as of 5:00 P.M. Eastern time on July 28, 2014 and the distribution ratio, 25,042,263 shares of Tribune Publishing common stock were distributed to the TCO stockholders and holders of TCO warrants and TCO retained 381,354 shares of Tribune Publishing common stock, representing 1.5% of outstanding common stock of Tribune Publishing. Subsequent to the Distribution, Tribune Publishing became a separate publicly-traded company with its own board of directors and senior management team. Shares of Tribune Publishing common stock are listed on the New York Stock Exchange under the symbol “TPUB.” In connection with the spin-off, Tribune Publishing paid a $275.0 million cash dividend to TCO from a portion of the proceeds of a senior secured credit facility entered into by Tribune Publishing.
Products and Services
Our product mix consists of three publication types: (i) daily newspapers, (ii) weekly newspapers and (iii) niche publications. Most of these publications also have a digital presence. The key characteristics of each of these types of publications are summarized in the table below.
 
Daily Newspapers
 
Weekly Newspapers
 
Niche Publication
 
 
 
 
 
 
Cost:
Paid
 
Paid and free
 
Paid and free
Distribution:
Distributed four to seven days per week
 
Distributed one to three days per week
 
Distributed weekly, monthly or on an annual basis
Income:
Revenue from advertisers, subscribers, rack/box sales
 
Paid: Revenue from advertising, subscribers, rack/box sales
 
Paid: Revenue from advertising, rack/box sales
 
 
 
Free: Advertising revenue only
 
Free: Advertising revenue only
Internet availability:
Maintain locally oriented websites, mobile sites and mobile apps, for select locations
 
Major publications maintain locally oriented websites and mobile sites for select locations
 
Selectively available online
As of December 27, 2015, Tribune Publishing’s prominent publications included:
Media Group
 
City
 
Masthead
 
Circulation Type
 
Paid or Free
Chicago Tribune Media Group
 
 
 
 
 
 
Chicago, IL
 
Chicago Tribune
www.chicagotribune.com
 
Daily
 
Paid
 
 
Chicago, IL
 
Chicago Magazine
www.chicagomag.com
 
Monthly
 
Paid
 
 
Chicago, IL
 
Hoy
www.vivelohoy.com
 
Daily
 
Free
 
 
Chicago, IL
 
Redeye
www.redeyechicago.com
 
Daily
 
Free
California News Group
 
 
 
 
 
 
Los Angeles, CA
 
Los Angeles Times
www.latimes.com
 
Daily
 
Paid
 
 
Los Angeles, CA
 
Hoy Los Angeles www.hoylosangeles.com
 
Weekly
 
Free
 
 
San Diego, CA
 
The San Diego Union-Tribune www.sandiegouniontribune.com
 
Daily
 
Paid
Sun Sentinel Media Group
 
 
 
 
 
 
Broward County, FL, Palm Beach County, FL
 
Sun Sentinel
www.SunSentinel.com
 
Daily
 
Paid
 
 
Broward County, FL, Palm Beach County, FL
 
el Sentinel
www.ElSentinel.com
 
Weekly
 
Free

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Media Group
 
City
 
Masthead
 
Circulation Type
 
Paid or Free
Orlando Sentinel Media Group
 
 
 
 
 
 
Orlando, FL
 
Orlando Sentinel
www.OrlandoSentinel.com
 
Daily
 
Paid
 
 
Orlando, FL
 
el Sentinel
www.ElSentinel.com
 
Weekly
 
Free
The Baltimore Sun Media Group
 
 
 
 
 
 
Baltimore, MD
 
The Baltimore Sun
www.baltimoresun.com
 
Daily
 
Paid
 
 
Annapolis, MD
 
The Capital
www.capitalgazette.com
 
Daily
 
Paid
 
 
Westminster, MD
 
Carroll County Times
www.carrollcountytimes.com
 
Daily
 
Paid
Hartford Courant Media Group
 
 
 
 
 
 
Middlesex County, CT, Tolland County, CT, Hartford County, CT
 
The Hartford Courant
www.courant.com
 
Daily
 
Paid
Daily Press Media Group
 
 
 
 
 
 
Newport News, VA (Peninsula)
 
Daily Press
www.dailypress.com
 
Daily
 
Paid
The Morning Call Media Group
 
 
 
 
 
 
Lehigh Valley, PA
 
The Morning Call
www.themorningcall.com
 
Daily
 
Paid
ForSaleByOwner.com is a national consumer-to-consumer focused real estate website. The site has been the largest “by owner” website in the country since 1999. The majority of the revenue generated by ForSaleByOwner.com is e-commerce, but approximately one third of its revenue is generated through an in-house call center and strategic partnerships with service providers in the real estate industry. The business generates the majority of its revenue by selling listing packages directly to home sellers who receive online advertising, home pricing tools, marketing advice, yard signs and technical support. ForSaleByOwner.com also sells packages that allow home sellers to syndicate to other national websites such as Zillow and Realtor.com as well as their local multiple listing service.
Tribune Content Agency (“TCA”) is a syndication and licensing business providing quality content solutions for publishers around the globe.  Working with a vast collection of the world’s best sources, we deliver a daily news service and syndicated premium content to over 3,000 media and digital information publishers in 92 countries. Tribune News Service delivers the best material from 70 leading companies, including Los Angeles Times, Chicago Tribune, Bloomberg News, Miami Herald, The Dallas Morning News, Seattle Times and The Philadelphia Inquirer. Tribune Premium Content syndicates columnists such as Arianna Huffington, Cal Thomas, Clarence Page, Ask Amy, Mario Batali and Rick Steves. TCA manages the licensing of premium content from publications such as Rolling Stone, The Atlantic, Fast Company, Mayo Clinic, Variety and many more. TCA Originals is a new service that matches remarkable journalism with Hollywood movie and TV producers for video storytelling. TCA traces its roots to 1918.
We contract with a number of national and local newspapers to both print and distribute their respective publications in local markets where we are a newspaper publisher. In some instances where we print publications, we also manage and procure newsprint, ink and plates on their behalf. These arrangements allow us to leverage our investment in infrastructure in those markets to support our own publications. As a result, these arrangements tend to contribute significant incremental profitability relative to the underlying revenues. We currently distribute national newspapers (including USA Today, The New York Times, and The Wall Street Journal) in our local markets under multiple agreements. Additionally, both in Los Angeles and Chicago, we provide some or all of these services to other local publications.
Revenue Sources
In 2015, 57.1% of Tribune Publishing operating revenues were derived from advertising and marketing services. These revenues were generated from the sale of advertising space in published issues of the newspapers and on interactive

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websites, from the delivery of preprinted advertising supplements and providing print and digital marketing services. Approximately 27.9% of operating revenues for 2015 were generated from the sale of newspapers, digital subscriptions and other publications to individual subscribers or to sales outlets, which re-sell the newspapers. The remaining 15.1% of operating revenues for 2015 were generated from the provision of commercial printing and delivery services to other newspapers, direct mail advertising and services, the distribution of syndicated content, and other related activities.
Advertising revenue includes newspaper print advertising, digital advertising and marketing services. Newspaper print advertising is typically in the form of display or preprint advertising whereas digital advertising can be in the form of display, banner ads, coupon ads, video, search advertising and linear ads placed on Tribune Publishing and affiliated websites. Advertising services include development of mobile websites, search engine marketing and optimization, social media account management and content marketing for its customers’ web presence for small to medium size businesses. In the fourth quarter of 2015, the Company reclassified digital marketing services previously reported in Other revenue to Advertising revenue. Prior periods have been adjusted to reflect this reclassification. Advertising and marketing services revenues are comprised of three basic categories: retail, national and classified. Retail is a category of customers who tend to do business directly with the general public. National is a category of customers who tend to do business directly with other businesses. Classified is a type of advertising which is other than display or preprint.
Changes in advertising revenues are heavily correlated with changes in the level of economic activity in the United States. Changes in gross domestic product, consumer spending levels, auto sales, housing sales, unemployment rates, job creation, circulation levels and rates all impact demand for advertising in Tribune Publishing’s newspapers and websites. Tribune Publishing’s advertising revenues are subject to changes in these factors both on a national level and on a local level in its markets.
Circulation revenue results from the sale of print and digital editions of the Company’s newspapers to individual subscribers and the sale of print editions of the Company’s newspapers to sales outlets, which re-sell the newspapers.
Other revenues are derived from direct mail services, commercial printing and delivery services provided to other newspapers, direct mail advertising and other related activities.
Tribune Publishing uses operating revenues, income from operations and Adjusted EBITDA to measure financial performance. In addition, Tribune Publishing uses average net paid circulation for its newspapers, together with other factors, to measure its market share and performance. Net paid circulation includes both individually paid copy sales (home delivery, single copy and digital copy sales) and other paid copy sales (education, sponsored and hotel copy sales).
Tribune Publishing’s results of operations, when examined on a quarterly basis, reflect the seasonality of Tribune Publishing’s revenues. Second and fourth quarter advertising revenues are typically higher than first and third quarter revenues. Results for the second quarter reflect spring advertising revenues, while the fourth quarter includes advertising revenues related to the holiday season.
Competition
Each of our 11 major daily newspapers holds a leading market position in their respective DMAs, or designated market areas, as determined by Nielsen, and competes for readership and advertising with both local or community newspapers as well as national newspapers and other traditional and web-based media sources. We face competition for both advertising dollars and consumers’ dollars and attention.
The competition for advertising dollars comes from local, regional, and national newspapers, the Internet, magazines, broadcast, cable and satellite television, radio, direct mail, yellow pages, and other media as advertisers adjust their spending based on the perceived value of the audience reached and the cost to reach that audience.
The secular shift impacting how content is consumed has led to increased competition from a wide variety of new digital content offerings, many of which are often free to users. Besides price, variables impacting customer acquisition and retention include the quality and nature of the user experience and the quality of the content offered.
To address the structural shift to digital media, our daily newspapers provide editorial content on a wide variety of platforms and formats - from our printed daily newspaper to our leading local websites; on social network sites such as

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Facebook and Twitter; on smartphones and e-readers; on websites and blogs; in niche online publications and in e-mail newsletters. In fiscal year 2015, the Company has made significant progress in our digital transformation including:
Ensuring we have a solid, flexible and agile technology platform and product development approach;
Developing consumer-led and data-driven local and national product platforms;
Growing audience reach and engagement across the portfolio;
Optimizing our digital consumer, advertising and alternative revenue streams, and
Laying the groundwork for a mobile-first development culture.
Raw Materials
As a publisher of newspapers, Tribune Publishing utilizes substantial quantities of various types of paper. During 2015, we consumed approximately 185 thousand metric tons of newsprint. We currently obtain the majority of our newsprint from six North American suppliers, primarily under long-term contracts. Substantially all of our paper purchasing is done on a regional, volume purchase basis, and draws upon Canadian and U.S. based suppliers. We believe that our current sources of paper supply are adequate. Our earnings are sensitive to changes in newsprint prices. Newsprint and ink expense accounted for 7.4% of total operating expenses in fiscal year 2015.
Employees
As of December 27, 2015, we had approximately 7,165 full-time and part-time employees, including approximately 842 employees represented by various employee unions. We believe our relations with our employees are satisfactory.
Intellectual Property
Currently, we do not face major barriers to our operations from patents owned by third parties. However, because we operate a large number of websites and mobile applications in high-visibility markets, we do defend patent litigation, from time to time, brought primarily by non-practicing entities, as opposed to marketplace competitors. We have sought patent protection in certain instances; however, we do not consider patents to be material to our business as a whole. Of greater importance to our overall business are the federal, international and state trademark registrations and applications that protect, along with our common law rights, our brands, certain of which are long-standing and well known, such as Los Angeles Times, Chicago Tribune and The Hartford Courant. Generally, the duration of a trademark registration is perpetual, if it is renewed on a timely basis and continues to be used properly as a trademark. We also own a large number of copyrights, none of which individually is material to the business. We maintain certain licensing and content sharing relationships with third-party content providers that allow us to produce the particular content mix we provide to our customers in our markets. In connection with the Distribution, we entered into a number of agreements with TCO or its subsidiaries that provide for licenses to certain intellectual property, and in particular, we entered into a license agreement with TCO that provides a non-exclusive, royalty-free license for us to use certain trademarks, service marks and trade names, including the Tribune name. Other than the foregoing and commercially available software licenses, we do not believe that any of our licenses to third-party intellectual property are material to our business as a whole.
Available Information
Tribune Publishing maintains its corporate website at www.tribpub.com. Tribune Publishing makes available free of charge on www.tribpub.com this Annual Report on Form 10-K, the Company’s Quarterly Reports on Form 10-Q, the Company’s Current Reports on Form 8-K, and amendments to all those reports, all as filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after the reports are electronically filed with or furnished to the Securities and Exchange Commission (“SEC”).

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Item 1A.    Risk Factors
Investors should carefully consider each of the following risks, together with all of the other information in this Annual Report on Form 10-K, in evaluating an investment in the Company’s common stock. Some of the following risks relate to the Company’s business, indebtedness, the securities markets and ownership of the Company’s common stock. Other risks relate to the separation from TCO and the effect of the separation from TCO. If any of the following risks and uncertainties develop into actual events, the Company could be materially and adversely affected. If this occurs, the trading price of the Company’s common stock could decline, and investors may lose all or part of their investment.
Risks Relating to Our Business
Advertising demand is expected to continue to be affected by changes in economic conditions and fragmentation of the media landscape.
Advertising revenue is our primary source of revenue. Expenditures by advertisers tend to be cyclical, reflecting overall economic conditions, as well as budgeting and buying patterns. National and local economic conditions, particularly in major metropolitan markets, affect the levels of retail, national and classified newspaper advertising revenue. Changes in gross domestic product, consumer spending, auto sales, housing sales, unemployment rates, job creation, and circulation levels and rates, as well as federal, state and local election cycles, all affect demand for advertising.
A decline in the economic prospects of advertisers or the economy in general could alter current or prospective advertisers’ spending priorities. Consolidation across various industries, such as large department store and telecommunications companies, may also reduce overall advertising revenue.
Competition from other media, including other metropolitan, suburban and national newspapers, broadcasters, cable systems and networks, satellite television and radio, websites, magazines, direct marketing and solo and shared mail programs, affects our ability to retain advertising clients and maintain or raise rates. In recent years, Internet sites devoted to recruitment, automotive and real estate have become significant competitors of our newspapers and websites for classified advertising, and retaining our historical share of classified advertising revenue remains a significant ongoing challenge.
Seasonal variations in consumer spending cause our quarterly advertising revenue to fluctuate. Second and fourth quarter advertising revenue is typically higher than first and third quarter advertising revenue, reflecting the slower economic activity in the winter and summer and the stronger fourth quarter holiday season.
Demand for our products is also a factor in determining advertising rates. For example, circulation levels for our newspapers, which have been declining, are a factor in determining advertising rates.
All of these factors continue to contribute to a difficult advertising sales environment and may further adversely affect our ability to grow or maintain our advertising revenue.
Increasing popularity of digital media and the shift in newspaper readership demographics, consumer habits and advertising expenditures from traditional print to digital media have adversely affected and may continue to adversely affect our operating revenues and may require significant capital investments due to changes in technology.
Technology in the media industry continues to evolve rapidly. Advances in technology have led to an increasing number of methods for delivery of news and other content and have resulted in a wide variety of consumer demands and expectations, which are also rapidly evolving. If we are unable to exploit new and existing technologies to distinguish our products and services from those of our competitors or adapt to new distribution methods that provide optimal user experiences, our business and financial results may be adversely affected.
The increasing number of digital media options available on the Internet, through social networking tools and through mobile and other devices distributing news and other content, is expanding consumer choice significantly. Faced with a multitude of media choices and a dramatic increase in accessible information, consumers may place greater value on when, where, how and at what price they consume digital content than they do on the source or reliability of such content. Further, as existing newspaper readers get older, younger generations may not develop similar readership habits. News aggregation websites and customized news feeds (often free to users) may reduce our traffic levels by driving interaction away from our websites or our digital applications. If traffic levels stagnate or decline, we may not be able to create sufficient advertiser interest in our digital businesses or to maintain or increase the advertising rates of the inventory on our digital platforms.

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In addition, the range of advertising choices across digital products and platforms and the large inventory of available digital advertising space have historically resulted in significantly lower rates for digital advertising than for print advertising. Digital advertising networks and exchanges, real-time bidding and other programmatic buying channels that allow advertisers to buy audiences at scale are also playing a more significant role in the advertising marketplace and causing downward pricing pressure. In addition, evolving standards for delivery of digital advertising, such as viewability, could adversely affect advertising revenues. Consequently, our digital advertising revenue may not be able to replace print advertising revenue lost as a result of the shift to digital consumption. A decrease in our customers’ advertising expenditures, reduced demand for our offerings or a surplus of advertising inventory could lead to a reduction in pricing and advertising spending, which could have an adverse effect on our businesses and assets. Our inability to maintain and/or improve the performance of our customers’ advertising results on our digital properties may negatively influence rates we achieve in the marketplace for our advertising inventory.
Paywalls on our newspaper websites require users to pay for content after accessing a limited number of pages or news articles for free each month. Our ability to build a subscriber base on our digital platforms through these packages depends on market acceptance, consumer habits, pricing, an adequate online infrastructure, terms of delivery platforms and other factors. In addition, the paywall may result in fewer page views or unique visitors to our websites if digital viewers are unwilling to pay to gain access to our digital content. Stagnation or a decline in website traffic levels may adversely affect our advertiser base and advertising rates and result in a decline in digital revenue. In order to retain and grow our digital subscription base and audience, we may have to further evolve our digital subscription model, address changing consumer requirements and develop and improve our digital products while continuing to deliver high-quality journalism and content that is interesting and relevant to our audience. There can be no assurance that we will be able to successfully maintain and increase our digital subscription base and audience or that we will be able to do so without taking steps such as reducing pricing or increasing costs that would affect our financial condition and results of operations.
Technological developments also pose other challenges that could adversely affect our operating revenues and competitive position. New delivery platforms may lead to pricing restrictions, the loss of distribution control and the loss of a direct relationship with consumers. Our advertising and circulation revenues have declined, reflecting general trends in the newspaper industry, including declining newspaper buying (by young people in particular) and the migration to other available forms of media for news. We may also be adversely affected if the use of technology developed to block the display of advertising on websites and mobile devices proliferates.
Any changes we make to our business model to address these challenges may require significant capital investments. We may be limited in our ability to invest funds and resources in digital products, services or opportunities and we may incur costs of research and development in building and maintaining the necessary and continually evolving technology infrastructure. Some of our competitors may have greater operational, financial and other resources or may otherwise be better positioned to compete for opportunities and as a result, our digital businesses may be less successful, which may adversely affect our business and financial results.
Macroeconomic trends may adversely impact our business, financial condition and results of operations.
Our operating revenues are sensitive to discretionary spending available to advertisers and subscribers in the markets we serve, as well as their perceptions of economic trends and uncertainty. Weak economic indicators in various regions across the nation, such as high unemployment rates, weakness in housing and continued uncertainty caused by national and state governments’ inability to resolve fiscal issues in a cost efficient manner to taxpayers may adversely impact advertiser and subscriber sentiment. These conditions could impair our ability to maintain and grow our advertiser and subscriber bases.
Our business operates in highly competitive markets and our ability to maintain market share and generate operating revenues depends on how effectively we compete with our competition.
Our business operates in highly competitive markets. Our newspapers compete for audiences and advertising revenue with other newspapers as well as with other media such as the Internet, magazines, broadcast, cable and satellite television, radio, direct mail, and yellow pages. Some of our competitors have greater financial and other resources than we do.
Our newspaper publications generate significant percentages of their advertising revenue from a few categories, including automotive, employment, and real estate classified advertising. In recent years, websites dedicated to automotive, employment, and real estate advertising have become significant competitors of our newspapers and websites. As a result, even in the absence of a recession or economic downturn, technological, industry, or other changes specifically affecting

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these advertising sources could reduce advertising revenues and adversely affect our financial condition and results of operations.
Our operating revenues primarily consist of advertising and paid circulation. Competition for advertising expenditures and paid circulation comes from a variety of sources, including local, regional and national newspapers, the Internet, magazines, broadcast, cable and satellite television, radio, direct mail, yellow pages, outdoor billboards, and other media. Free daily newspapers have been recently introduced in several metropolitan markets, and there can be no assurance that free daily publications, or other publications, will not be introduced in any markets in which we publish newspapers. The National Do Not Call Registry has affected the way newspapers solicit home-delivery circulation, particularly for larger newspapers that historically have relied on telemarketing. Competition for newspaper advertising revenue is based largely upon advertiser results, advertising rates, readership, demographics, and circulation levels. Competition for circulation is based largely upon the content of the newspaper, its price, editorial quality, customer service, and other sources of news and information. Circulation revenue and our ability to achieve price increases for our print products may be affected by competition from other publications and other forms of media available in our various markets, declining consumer spending on discretionary items like newspapers, decreasing amounts of free time, and declining frequency of regular newspaper buying among certain demographics. We may incur higher costs competing for advertising dollars and paid circulation. If we are not able to compete effectively for advertising dollars and paid circulation, our operating revenues may decline and our financial condition and results of operations may be adversely affected.
Decreases, or slow growth, in circulation may adversely affect our circulation and advertising revenues.
Our newspapers, and the newspaper industry as a whole, are experiencing challenges to maintain or grow print circulation and circulation revenue. This results from, among other factors, increased competition from other media, particularly the Internet (which are often free to users), changing newspaper readership demographics and shifting preferences among some consumers to receive all or a portion of their news other than from a newspaper. These factors could affect our ability to implement circulation price increases for our print products.
In addition, our circulation revenue is sensitive to discretionary spending available to subscribers in the markets we serve, as well as their perceptions of economic trends and uncertainty. Weak economic indicators in various regions across the nation may adversely impact subscriber sentiment and therefore impair our ability to maintain and grow our circulation.
A prolonged decline in circulation could affect the rate and volume of advertising revenue. To maintain our circulation base, we may incur additional costs, and may not be able to recover these costs through circulation and advertising revenue. To address declining circulation, we may increase spending on marketing designed to retain our existing subscriber base and continue or create niche publications targeted at specific market groups. We may also increase marketing efforts to drive traffic to our proprietary websites.
We anticipate that readership analyses will become increasingly important now that the Alliance for Audited Media has agreed to publish readership statistics and recognize Internet use in addition to circulation information. We believe this is a positive industry development but we cannot predict its effect on advertising revenue.
We rely on revenue from the printing and distribution of publications for third parties that may be subject to many of the same business and industry risks that we are.
In 2015, we generated approximately 8.5% of our revenue from printing and distributing third-party publications, and our relationships with these third parties are generally pursuant to short-term contracts. As a result, if the macroeconomic and industry trends described herein such as the sensitivity to perceived economic weakness of discretionary spending available to advertisers and subscribers, circulation declines, shifts in consumer habits and the increasing popularity of digital media affect those third parties, we may lose, in whole or in part, a substantial source of revenue.
A decision by any of the three largest national publications or the major local publications to cease publishing and distribution in those markets, or seek alternatives to their current business practice of partnering with us, could materially impact our profitability.

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If we are unable to execute cost-control measures successfully, our total operating costs may be greater than expected, which would adversely affect our profitability.
Commencing in 2014, we have taken steps to reduce operating costs by implementing general cost-control measures across the Company, which include offering employee buyouts and amending retirement benefits, and we plan to continue these cost management efforts. If we do not achieve expected savings or our operating costs increase as a result of investments in strategic initiatives, our total operating costs would be greater than anticipated. In addition, if we do not manage our costs properly, such efforts may affect the quality of our products and our ability to generate future revenues. Reductions in staff and employee benefits and changes to our compensation structure could also adversely affect our ability to attract and retain key employees.
Significant portions of our expenses are fixed costs that neither increase nor decrease proportionately with revenues. If we are not able to implement further cost-control efforts or reduce our fixed costs sufficiently in response to a decline in our revenues, this could adversely affect our results of operations.
Newsprint prices may continue to be volatile and difficult to predict and control.
Newsprint and ink expense was 7.4% of our total operating expenses in 2015. The price of newsprint has historically been volatile and the consolidation of North American newsprint mills over the years has reduced the number of suppliers. We have historically been able to realize favorable newsprint pricing by virtue of our company-wide volume and a long-term contract with a significant supplier. Failure to maintain our current consumption levels, further supplier consolidation or the inability to maintain our existing relationships with our newsprint suppliers may adversely affect newsprint prices in the future.
We may not be able to adapt to technological changes.
Advances in technologies or alternative methods of content delivery or changes in consumer behavior driven by these or other technologies could have a negative effect on our business. We cannot predict the effect such technologies will have on our operations. In addition, the expenditures necessary to implement these new technologies could be substantial and other companies employing such technologies before we are able to do so could aggressively compete with our business.
Technological developments may increase the threat of content piracy and limit our ability to protect intellectual property rights.
We seek to limit the threat of content piracy; however, policing unauthorized use of our products and services and related intellectual property is often difficult and the steps taken by us may not prevent the infringement by unauthorized third parties. Developments in technology increase the threat of content piracy by making it easier to duplicate and widely distribute pirated material. Protection of our intellectual property rights is dependent on the scope and duration of our rights as defined by applicable laws in the U.S. and abroad and the manner in which those laws are construed. If those laws are drafted or interpreted in ways that limit the extent or duration of our rights, or if existing laws are changed, our ability to generate revenue from intellectual property may decrease, or the cost of obtaining and maintaining rights may increase. There can be no assurance that our efforts to enforce our rights and protect our products, services and intellectual property will be successful in preventing content piracy.
We rely on third-party service providers for various services.
We rely on third-party service providers for various services. We do not control the operation of these service providers. If any of these third-party service providers terminate their relationship with us, or do not provide an adequate level of service, it would be disruptive to our business as we seek to replace the service provider or remedy the inadequate level of service. This disruption may adversely affect our operating results.
Significant problems with our key systems or those of our third-party service providers could have a material adverse effect on our operating results.
The systems underlying the operations of each of our businesses are complex and diverse, and must efficiently integrate with third-party systems, such as wire feeds, video playout systems and credit card processors. Key systems include, without limitation, billing, website and database management, customer support, editorial content management, advertisement and circulation serving and management systems, and internal financial systems. Some of these systems are

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outsourced to third parties. We or our third-party service providers may experience problems with these systems. All information technology and communication systems are subject to reliability issues, integration and compatibility concerns, and security-threatening intrusions. The continued and uninterrupted performance of our key systems is critical to our success. Unanticipated problems affecting these systems could cause interruptions in our services. In addition, if our third-party service providers face financial or other difficulties, our business could be adversely impacted. Any significant errors, damage, failures, interruptions, delays, or other problems with our systems, our backup systems or our third-party service providers or their systems could adversely impact our ability to satisfy our customers or operate our businesses, and could have a material adverse effect on our operating results.
We may not be able to adequately protect our intellectual property and other proprietary rights that are material to our business, or to defend successfully against intellectual property infringement claims by third parties.
Our ability to compete effectively depends in part upon our intellectual property rights, including our trademarks, copyrights and proprietary technology. Our use of contractual provisions, confidentiality procedures and agreements, and trademark, copyright, unfair competition, trade secret and other laws to protect our intellectual property rights and proprietary technology may not be adequate. Litigation may be necessary to enforce our intellectual property rights and protect our proprietary technology, or to defend against claims by third parties that the conduct of our businesses or our use of intellectual property infringes upon such third party’s intellectual property rights. Any intellectual property litigation or claims brought against us, whether or not meritorious, could result in substantial costs and diversion of our resources, and there can be no assurances that favorable final outcomes will be obtained in all cases. The terms of any settlement or judgment may require us to pay substantial amounts to the other party or cease exercising our rights in such intellectual property. In addition, we may have to seek a license to continue practices found to be in violation of a third party’s rights, which may not be available on reasonable terms, or at all. Our business, financial condition or results of operations may be adversely affected as a result.
Adverse results from litigation or governmental investigations can impact our business practices and operating results.
From time to time, we could be party to litigation, including matters relating to alleged libel or defamation or employment-related matters, in addition to regulatory, environmental and other proceedings with governmental authorities and administrative agencies. Adverse outcomes in lawsuits or investigations may result in significant monetary damages or injunctive relief that may adversely affect our operating results, financial condition and cash flows as well as our ability to conduct our businesses as we are presently conducting them.
In some instances, third parties may have an obligation to indemnify us for liabilities related to litigation or governmental investigations, and may be unable to, or fail to fulfill such obligations.  For example, in connection with The San Diego Union-Tribune acquisition, the seller agreed to indemnify us for certain outstanding legal matters, including the carrier litigation matter (see Note 6 to the Consolidated and Combined Financial Statements for further information). It is possible that the resolution of one or more such legal matters could result in significant monetary damages. The carrier litigation matter, for example, is being appealed and if adversely determined against us, could result in a final minimum damages award of $10 million, which increases as interest accrues on the unpaid judgment. If the seller in The San Diego Union-Tribune acquisition were to fail to indemnify us, we would be responsible for the monetary damages, which could adversely affect our financial condition and cash flow.
We may not achieve the acquisition component of our business strategy, or successfully complete strategic acquisitions, investments or divestitures.
We continuously evaluate our businesses and make strategic acquisitions, investments and divestitures as part of our strategic plan. For example, in May 2015, we acquired The San Diego Union-Tribune (f/k/a the U-T San Diego) and nine community weeklies and related digital properties in San Diego, California. This and other transactions involve challenges and risks in negotiation, execution, valuation and integration. There can be no assurance that any such acquisitions, investments or divestitures can be completed.
Acquisitions are an important component of our business strategy; however, there can be no assurance that we will be able to grow our business through acquisitions, that any businesses acquired will perform in accordance with expectations or that business judgments concerning the value, strengths and weaknesses of businesses acquired will prove to be correct. Future acquisitions may result in the incurrence of debt and contingent liabilities, an increase in interest and amortization expense and significant charges relative to integration costs. Our strategy could be impeded if we do not identify suitable acquisition candidates and our financial condition and results of operations will be adversely affected if we overpay for

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acquisitions. Even if successfully negotiated, closed and integrated, certain acquisitions may prove not to advance our business strategy and may fall short of expected returns.
Acquisitions involve a number of risks, including, (i) problems implementing disclosure controls and procedures for the newly acquired business; (ii) the challenges in achieving strategic objectives, cost savings and other anticipated benefits; (iii) unforeseen difficulties extending internal control over financial reporting and performing the required assessment at the newly acquired business; (iv) potential adverse short-term effects on operating results through increased costs or otherwise; (v) potential future impairments of goodwill associated with the acquired business; (vi) diversion of management’s attention and failure to recruit new, and retain existing, key personnel of the acquired business; (vii) failure to successfully implement systems integration; (viii) exceeding the capability of our systems; (ix) the risks inherent in the systems of the acquired business and risks associated with unanticipated events or liabilities, any of which could have a material adverse effect on our business, financial condition and results of operations; and (x) stockholder dilution if an acquisition, such as The San Diego Union-Tribune acquisition, is consummated (in whole or in part) through an issuance of our securities.
Our ability to execute an acquisition strategy may also encounter limitations in completing transactions.  Among other considerations, we may not be able to obtain necessary financing on attractive terms or at all, and we may face regulatory considerations that limit the identity of candidates with whom we are permitted to proceed or impose delays.
Continued economic uncertainty and the impact on our business or changes to our business and operations may result in goodwill and masthead impairment charges.
Because we have grown in part through acquisitions, goodwill and other acquired intangible assets represent a substantial portion of our assets. We also have long-lived assets consisting of property and equipment and other identifiable intangible assets which we review both on an annual basis as well as when events or circumstances indicate that the carrying amount of an asset may not be recoverable. Erosion of general economic, market or business conditions could have a negative impact on our business and stock price, which may require that we record impairment charges in the future, which negatively affects our results of operations. If a determination is made that a significant impairment in value of goodwill, other intangible assets or long-lived assets has occurred, such determination could require us to impair a substantial portion of our assets. Asset impairments could have a material adverse effect on our financial condition and results of operations.
We assumed an underfunded pension liability as part of The San Diego Union-Tribune acquisition.
The San Diego Union-Tribune, LLC Retirement Plan is currently underfunded. As a result, our pension funding requirements could increase due to a reduction in the plan’s funded status. The extent of underfunding is directly affected by changes in interest rates and asset returns in the securities markets. It also is affected by the rate and age of employee retirements, along with actual experience compared to actuarial projections. These items affect pension plan assets and the calculation of pension obligations and expenses. Such changes could increase the cost to our obligations, which could have a material adverse effect on our results and our ability to meet those obligations. In addition, changes in the law, rules, or governmental regulations with respect to pension funding could also materially and adversely affect cash flow and our ability to meet our pension obligations.
We may be obligated to make greater contributions to multiemployer defined benefit pension plans that cover our union-represented employees in the next several years than previously required, placing greater liquidity needs upon our operations.
We contribute to a number of multiemployer defined benefit pension plans under the terms of collective bargaining agreements that cover our union-represented employees. We are the only employer whose employees represent more than 5% of the total participation of each of the Chicago Newspaper Publishers Drivers’ Union Pension Plan (the “Drivers’ Plan”) and the GCIU Employer Retirement Benefit Plan.
On March 31, 2010, the 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 Internal Revenue Code (the “IRC”). The terms of the rehabilitation plan adopted by the trustees require Tribune Publishing to make increased contributions beginning on January 1, 2011 through December 31, 2025, and the trustees of the Drivers’ Plan project that it will emerge from critical status on January 1, 2026. Based on the actuarial assumptions utilized as of January 1, 2010 to develop the rehabilitation plan, it is estimated that Tribune Publishing’s remaining share of the funding obligations to the Drivers’ Plan during the rehabilitation plan period is approximately $76.5 million as of December 27, 2015.

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The funding obligation is subject to change based on a number of factors, including actual returns on plan assets as compared to assumed returns, changes in the number of plan participants and changes in the rate used for discounting future benefit obligations.
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 we stop participating in one of our multiemployer plans, we may incur a withdrawal liability based on the unfunded status of the plan.
Our ability to operate effectively could be impaired if we fail to attract and retain our senior management team.
Our success depends, in part, upon the continuing contributions of our senior management team. There is no guarantee that they will not leave. The loss of the services of any member of our senior management team or the failure to attract qualified persons to our senior management team may have a material adverse effect on our business or our business prospects.
Our possession and use of personal information and the use of payment cards by our customers present risks and expenses that could harm our business. Unauthorized access to or disclosure or manipulation of such data, whether through breach of our network security or otherwise, could expose us to liabilities and costly litigation and damage our reputation.
Our online systems store and process confidential subscriber and other sensitive data, such as names, email addresses, addresses, personal health information, and other personal information. Therefore, maintaining our network security is critical. Additionally, we depend on the security of our third-party service providers. Unauthorized use of or inappropriate access to our, or our third-party service providers’ networks, computer systems and services could potentially jeopardize the security of confidential information, including payment card (credit or debit) information, of our customers. Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and often are not recognized until launched against a target, we or our third-party service providers may be unable to anticipate these techniques or to implement adequate preventative measures. Non-technical means, for example, actions by an employee, can also result in a data breach. A party that is able to circumvent our security measures could misappropriate our proprietary information or the information of our customers or users, cause interruption in our operations, or damage our computers or those of our customers or users. As a result of any such breaches, customers or users may assert claims of liability against us and these activities may subject us to legal claims, adversely impact our reputation, and interfere with our ability to provide our products and services, all of which may have a material adverse effect on our business, financial condition and results of operations. The coverage and limits of our insurance policies may not be adequate to reimburse us for losses caused by security breaches.
A significant number of our customers authorize us to bill their payment card accounts directly for all amounts charged by us. These customers provide payment card information and other personally identifiable information which, depending on the particular payment plan, may be maintained to facilitate future payment card transactions. Under payment card rules and our contracts with our card processors, if there is a breach of payment card information that we store, we could be liable to the banks that issue the payment cards for their related expenses and penalties. In addition, if we fail to follow payment card industry data security standards, even if there is no compromise of customer information, we could incur significant fines or lose our ability to give our customers the option of using payment cards. If we were unable to accept payment cards, our business would be seriously harmed.
There can be no assurance that any security measures we, or our third-party service providers, take will be effective in preventing a data breach. We may need to expend significant resources to protect against security breaches or to address problems caused by breaches. If an actual or perceived breach of our security occurs, the perception of the effectiveness of our security measures could be harmed and we could lose customers or users. Failure to protect confidential customer data or to provide customers with adequate notice of our privacy policies could also subject us to liabilities imposed by United States federal and state regulatory agencies or courts. We could also be subject to evolving state laws that impose data breach notification requirements, specific data security obligations, or other consumer privacy-related requirements. Our failure to comply with any of these laws or regulations may have an adverse effect on our business, financial condition and results of operations.

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Labor strikes, lockouts and protracted negotiations can lead to business interruptions and increased operating costs.
As of December 27, 2015, union employees comprised approximately 12% of our workforce. We are required to negotiate collective bargaining agreements across our business units on an ongoing basis. Complications in labor negotiations can lead to work slowdowns or other business interruptions and greater overall employee costs. If we or our suppliers are unable to renew expiring collective bargaining agreements, it is possible that the affected unions or others could take action in the form of strikes or work stoppages. Such actions, higher costs in connection with these agreements or a significant labor dispute could adversely affect our business by disrupting our ability to provide customers with our products or services. Depending on its duration, any lockout, strike or work stoppage may have an adverse effect on our operating revenues, cash flows or operating income or the timing thereof.
Our revenues and operating results fluctuate on a seasonal basis and may suffer if revenues during the peak season do not meet our expectations.
Our advertising business is seasonal, and our quarterly revenues and operating results typically exhibit seasonality. Our revenues and operating results tend to be higher in the second and fourth quarters than the first and third quarters. Results for the second quarter reflect spring advertising revenues, while the fourth quarter includes advertising revenues related to the holiday season. Our operating results may suffer if advertising revenues during the second and fourth quarters do not meet expectations. Our working capital and cash flows also fluctuate as a result of this seasonality. Moreover, the operational risks described elsewhere in these risk factors may be significantly exacerbated if those risks were to occur during the fourth quarter.
We may not be able to access the credit and capital markets at the times and in the amounts needed and on acceptable terms.
From time to time we may need to access the long-term and short-term capital markets to obtain financing. Our access to, and the availability of, financing on acceptable terms and conditions in the future will be impacted by many factors, including: (1) our financial performance, (2) our credit ratings or absence of a credit rating, (3) the liquidity of the overall capital markets and (4) the state of the economy. There can be no assurance that we will have access to the capital markets on terms acceptable to us.
We may incur significant costs to address contamination issues at certain sites operated or used by our publishing businesses.
In connection with the Distribution, we agreed to indemnify TCO for any claims or expenses related to certain identified environmental issues. The identified issues generally relate to sites previously owned, operated or used by TCO’s publishing businesses and now used for our publishing businesses at which contamination was identified. Historically, TCO’s publishing business was obligated to investigate and remediate contamination at certain of these sites. TCO was also required to contribute to cleanup costs at certain of these sites that were third-party waste disposal facilities at which it disposed of its wastes. We could have additional investigation and remediation obligations and be required to contribute to cleanup costs at these facilities. Environmental liabilities, including investigation and remediation obligations, could adversely affect our operating results or financial condition.
Changes in accounting standards can significantly impact reported earnings and operating results.
Generally accepted accounting principles and accompanying pronouncements and implementation guidelines for many aspects of our business, including those related to revenue recognition, intangible assets, pensions, income taxes and stock-based compensation are complex and involve significant judgment. Changes in these rules or their interpretation may significantly change our reported earnings and operating results.
Events beyond our control may result in unexpected adverse operating results.
Our results could be affected in various ways by global or domestic events beyond our control, such as wars, political unrest, acts of terrorism, and natural disasters. Such events can quickly result in significant declines in advertising revenue and significant increases in newsgathering costs.

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Risks Relating to the Distribution
We have limited operating history as a separate public company and may be unable to operate profitably as a stand-alone company.
We have limited operating history as a separate, stand-alone public company. Historically, because the publishing and the broadcasting businesses that comprised TCO had been under one ultimate parent, they had been able to rely, to some degree, on the earnings, assets, and cash flow of each other for capital requirements. Since the Distribution, we are able to rely only on the publishing business for such requirements. We cannot assure you that, as a separate public company, operating results will continue at historical levels, or that we will be profitable. Additionally, prior to the Distribution, we relied on TCO for various financial, administrative and managerial services in conducting our operations. Following the Distribution, we maintain our own credit and banking relationships and perform our own financial and investor relations functions. We cannot assure you that we will be able to successfully maintain the financial functions, administration and management necessary to operate as a separate company or that we will not incur additional costs operating as a separate public company. Any such additional or increased costs may have a material adverse effect on our business, financial condition, or results of operations.
Our historical financial information may not be indicative of our future results as a separate public company.
The historical financial information we have included in this report for the period prior to the Distribution may not reflect what our results of operations, financial position and cash flows would have been had we been a separate public company during the periods presented or be indicative of what our results of operations, financial position, and cash flows may be in the future as a separate public company. The historical financial information for the periods prior to the Distribution does not reflect the increased costs associated with being a separate public company, including changes in our cost structure, personnel needs, financing, and operations of our business as a result of the Distribution. Our historical financial information for the periods prior to the Distribution reflects allocations for services historically provided by TCO, and we expect these allocated costs to be different from the actual costs we incur for these services as a separate public company. In some instances, the costs incurred for these services as a separate public company may be higher than the share of total TCO expenses allocated to our business historically.
For additional information about our past financial performance and the basis of presentation of our financial statements, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our Consolidated and Combined Financial Statements and the notes thereto in this report.
We may incur increased costs after the Distribution or as a result of the separation from TCO that may cause our profitability to decline.
Prior to the Distribution, our business operated as one of TCO’s segments, and TCO performed many corporate functions for our operations, including managing financial and human resources systems, internal auditing, investor relations, treasury services, select accounting functions, finance and tax administration, benefits administration, legal, governmental relations and regulatory functions. Following the Distribution, TCO provided transitional support to us with respect to certain of these functions for the periods specified in the transition services agreement and various other agreements. We have been replicating certain systems, infrastructure and personnel to which we no longer have access from TCO. However, we may misjudge our requirements for these services and systems on a stand-alone basis, and may incur greater than expected capital and other costs associated with developing and implementing our own support functions in these areas. These costs may exceed the costs we pay to TCO during the transition period.
In addition, there may be an adverse operational effect on our business as a result of the significant time our management and other employees and internal resources will need to dedicate to building these capabilities during the first few years following the Distribution that otherwise would be available for other business initiatives and opportunities. As we operate these functions independently, if we have not developed adequate systems and business functions, or obtained them from other providers, we may not be able to operate the company effectively and our profitability may decline.

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Fulfilling our obligations incident to being a public company, including with respect to the requirements of and related rules under the Sarbanes-Oxley Act of 2002, is expensive and time-consuming, and our accounting, management and financial reporting systems may not be adequately prepared to comply with public company reporting, disclosure controls and internal control over financial reporting requirements.
Prior to the Distribution, we operated as a subsidiary of TCO and were not subject to the same financial and other reporting and corporate governance requirements as a public company. As a public company, we are required, among other things, to: (i) prepare and file periodic and current reports, and distribute other stockholder communications, in compliance with the federal securities laws, SEC reporting requirements and New York Stock Exchange rules; (ii) institute comprehensive compliance, investor relations and internal audit functions under the Sarbanes-Oxley Act of 2002; and (iii) evaluate and maintain our system of internal control over financial reporting, and report on management’s assessment thereof, in compliance with rules and regulations of the SEC and the Public Company Accounting Oversight Board. The changes necessitated by becoming a public company require a significant commitment of additional resources and management oversight, which have increased our operating costs. These changes also place significant additional demands on our finance and accounting staff and on our financial accounting and information systems and may require us to upgrade our systems, implement additional financial and management controls, reporting systems, IT systems and procedures, and hire additional accounting, legal and finance staff. Other expenses associated with being a public company include increases in auditing, accounting and legal fees and expenses, investor relations expenses, increased directors’ fees and director and officer liability insurance costs, registrar and transfer agent fees and listing fees, as well as other expenses.
In particular, beginning with the year ended December 27, 2015, we are required to perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting, as required by Section 404(a) of the Sarbanes-Oxley Act of 2002. Likewise, our independent registered public accounting firm is required to provide an attestation report on the effectiveness of our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002. In addition, following the Distribution, we are required under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), to maintain disclosure controls and procedures and internal control over financial reporting. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations. If we are unable to conclude that we have effective internal control over financial reporting, or if our independent registered public accounting firm is unable to provide us with an unqualified report regarding the effectiveness of our internal control over financial reporting, investors could lose confidence in the reliability of our financial statements. This could result in a decrease in the value of our common stock. Failure to comply with the Sarbanes-Oxley Act of 2002 could potentially subject us to sanctions or investigations by the SEC or other regulatory authorities. If we are unable to upgrade our systems, implement additional financial and management controls, reporting systems, IT systems and procedures, and hire additional accounting, legal and finance staff in a timely and effective fashion, our ability to comply with our financial reporting requirements and other rules that apply to reporting companies under the Exchange Act and the Sarbanes-Oxley Act could be impaired.
As discussed in Item 9A - Controls and Procedures of this Annual Report on Form 10-K, we identified material weaknesses in our internal control over financial reporting related to an ineffective control environment which contributed to material weaknesses related to review and approval of insert volume forecasts and variance analysis for preprint advertising, documentation of approval of rates for circulation and other revenue, and the review of compensation expense, including sales commissions and bonus plans. As a result of the identified material weaknesses, we concluded that our internal control over financial reporting was not effective as of December 27, 2015. Although we have taken steps to remediate the material weaknesses (see Item 9A for a description of the identified material weaknesses and related remediation plans), we have not fully remediated the material weaknesses. If we do not complete our remediation in a timely manner or if the remediation measures that we have implemented and intend to implement are inadequate to address our existing material weaknesses or to identify or prevent additional material weaknesses, there will continue to be an increased risk of future material misstatements in our annual or interim financial statements.
If the Distribution does not qualify as a tax-free distribution under Section 355 of the IRC, including as a result of subsequent acquisitions of stock of TCO or Tribune Publishing, then TCO may be required to pay substantial U.S. federal income taxes, and Tribune Publishing may be obligated to indemnify TCO for such taxes imposed on TCO as a result thereof.
TCO received a private letter ruling (the “IRS Ruling”) from the Internal Revenue Service (the “IRS”) to the effect that the Distribution and certain related transactions qualify as tax-free to TCO, Tribune Publishing and the TCO stockholders and warrantholders for U.S. federal income tax purposes. Although a private letter ruling from the IRS generally is binding on the IRS, the IRS Ruling does not rule that the Distribution satisfies every requirement for a tax-free

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distribution, and the parties rely solely on the opinion of counsel described below for comfort that such additional requirements are satisfied.
In connection with the Distribution, TCO received an opinion of Debevoise & Plimpton LLP, special tax counsel to TCO, to the effect that the Distribution and certain related transactions qualify as tax-free to TCO and the stockholders and warrantholders of TCO. The opinion of TCO’s special tax counsel relied on the IRS Ruling as to matters covered by it.
The IRS Ruling and the opinion of TCO’s special tax counsel are based on, among other things, certain representations and assumptions as to factual matters made by TCO and certain of the TCO stockholders. The failure of any factual representation or assumption to be true, correct and complete in all material respects could adversely affect the validity of the IRS Ruling or the opinion of TCO’s special tax counsel. An opinion of counsel represents counsel’s best legal judgment, is not binding on the IRS or the courts, and the IRS or the courts may not agree with the opinion. In addition, the IRS Ruling and the opinion of TCO’s special tax counsel are based on then current law, and cannot be relied upon if the law changes with retroactive effect.
Among other reasons, the Distribution would be taxable to TCO pursuant to Section 355(e) of the IRC if there is a 50% or more change in ownership of either TCO or Tribune Publishing, directly or indirectly, as part of a plan or series of related transactions that include the Distribution. Section 355(e) might apply if other acquisitions of stock of TCO before or after the Distribution, or of Tribune Publishing after the Distribution, are considered to be part of a plan or series of related transactions that include the Distribution. If Section 355(e) applied, TCO might recognize a very substantial amount of taxable gain.
Under the tax matters agreement, in certain circumstances, and subject to certain limitations, we are required to indemnify TCO against taxes on the Distribution that arise as a result of our actions or failures to act after the Distribution. See “-Risks Relating to the Distribution-We will be unable to take certain actions after the Distribution because such actions could jeopardize the tax-free status of the Distribution, and such restrictions could be significant.” In some cases, however, TCO might recognize gain on the Distribution without being entitled to an indemnification payment under the tax matters agreement.
We may be unable to take certain actions because such actions could jeopardize the tax-free status of the Distribution, and such restrictions could be significant.
In connection with the Distribution, we entered into a tax matters agreement, which prohibits us from taking actions that could reasonably be expected to cause the Distribution to be taxable or to jeopardize the conclusions of the IRS Ruling or opinions of counsel received by us or TCO. In particular, for two years after the Distribution, we may not:
enter into any agreement, understanding or arrangement or engage in any substantial negotiations with respect to any transaction involving the acquisition, issuance, repurchase or change of ownership of our capital stock, or options or other rights in respect of our capital stock, subject to certain exceptions relating to employee compensation arrangements and open market stock repurchases;
cease the active conduct of our business; or
voluntarily dissolve, liquidate, merge or consolidate with any other person, unless we survive and the transaction otherwise complies with the restrictions in the tax matters agreement.
Nevertheless, we are permitted to take any of the actions described above if we obtain TCO’s consent, or if we obtain a supplemental IRS private letter ruling (or an opinion of counsel that is reasonably acceptable to TCO) to the effect that the action will not affect the tax-free status of the Distribution. However, the receipt by us of any such consent, opinion or ruling does not relieve us of any obligation we have to indemnify TCO for an action we take that causes the Distribution to be taxable to TCO.
Because of these restrictions, for two years after the Distribution, we may be limited in the amount of capital stock that we can issue to make acquisitions or to raise additional capital. Also, our indemnity obligation to TCO may discourage, delay or prevent a third party from acquiring control of us during this two-year period in a transaction that our stockholders might consider favorable.

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Following the Distribution, certain members of management, directors and stockholders may face actual or potential conflicts of interest.
Following the Distribution, our management and directors and the management and directors of TCO may own both TCO common stock and our common stock. This ownership overlap could create, or appear to create, potential conflicts of interest when our management and directors and TCO’s management and directors face decisions that could have different implications for us and TCO. For example, potential conflicts of interest could arise in connection with the resolution of any dispute between us and TCO regarding the terms of the agreements governing the Distribution and our relationship with TCO thereafter. These agreements include the separation and distribution agreement, the tax matters agreement, the employee matters agreement, the transition services agreement and any commercial agreements between the parties or their affiliates. Potential conflicts of interest may also arise out of any commercial arrangements that we or TCO may enter into in the future.
Direct or indirect ownership of our securities could result in the violation of the media ownership rules of the Federal Communications Commission ("FCC") by investors with “attributable interests” in certain broadcast stations in the same market as one or more of our daily newspapers.
In connection with the Distribution, stockholders of TCO received shares of our common stock. The FCC’s “Newspaper Broadcast Cross Ownership Rule” (the “NBCO Rule”) prohibits a person or entity from having an “attributable” ownership or positional interest in a broadcast station and a daily newspaper published in the same market. Under FCC rules, the following relationships and interests are considered “attributable” for purposes of applying the NBCO Rule: (i) all officers and directors of a corporate licensee and its direct or indirect parent(s); (ii) voting stock interests of at least 5%; (iii) voting stock interests of at least 20%, if the holder is a passive institutional investor (such as an investment company, as defined in 15 U.S.C. 80a-3, bank, or insurance company); (iv) any equity interest in a limited partnership or limited liability company, unless “insulated” from day-to-day operational activities; and (v) equity and/or debt interests that in the aggregate exceed 33% of a media company’s total assets, if the holder supplies more than 15% of a broadcast station’s total weekly programming or is a same-market broadcast company or daily newspaper publisher. Holders of attributable interests in broadcast stations and daily newspapers may have the effect of limiting the strategic business opportunities available to the broadcast company as a result of also holding an attributable interest in the newspaper company, including limiting the current ability of TCO to acquire or to continue to be licensed to operate broadcast stations in markets where Tribune Publishing publishes a daily newspaper. If an investor holds attributable ownership interests in both TCO and Tribune Publishing, for example, because TCO operates television stations and Tribune Publishing publishes daily newspapers in the same market, the FCC may require the common holder of attributable interests in both properties to reduce or eliminate one of their attributable interests as part of its action on any application filed by TCO.
TCO’s existing Chicago market radio/television/newspaper combination has been permanently grandfathered by the FCC, and its television/newspaper combinations in the New York, Los Angeles, Miami-Fort Lauderdale and Hartford-New Haven markets are subject to temporary waivers of the NBCO Rule granted on November 16, 2012, in connection with the FCC’s approval of TCO’s plan of reorganization (the “Exit Order”). The temporary waivers, among other things, required TCO to come into compliance with the NBCO Rule within one year from the release date of the Exit Order, September 16, 2013. TCO filed with the FCC a request for extension of the temporary NBCO Rule waivers granted in the Exit Order on November 12, 2013 (in New York, Los Angeles, Miami-Fort Lauderdale and Hartford-New Haven). On September 4, 2014, the request was amended to reflect the spin-off of Tribune Publishing, with an indication that three current stockholders of TCO also hold attributable interests in Tribune Publishing.
Under the current policies of the FCC in applying the NBCO Rule, if a publisher of a daily newspaper such as Tribune Publishing acquires a daily newspaper giving rise to prohibited common cross-ownership with a broadcast licensee, such as TCO, the broadcast licensee generally is given until the date of its next renewal application to resolve the prohibited common ownership. Entities seeking FCC approval to acquire broadcast licensees are required to demonstrate compliance with the media ownership rules, including the NBCO Rule, or obtain waivers of those rules. On March 31, 2014, the FCC initiated its Congressionally-mandated 2014 Quadrennial Review proceeding, in which it is requesting comment on whether its media ownership rules, including the NBCO Rule, are necessary in the public interest as a result of competition. As part of this proceeding, the FCC may revisit the time provided for broadcast licensees to come into compliance with the NBCO Rule as the result of the acquisition of an attributable interest in a daily newspaper. The FCC has indicated it does not intend to act on the 2014 Quadrennial Review before June 30, 2016 at the earliest. We cannot predict the outcome of this proceeding or whether or the extent to which the FCC will reauthorize TCO’s existing temporary waivers or grant permanent or temporary waivers in the future.

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Federal and state fraudulent transfer laws and Delaware corporate law may permit a court to void the Distribution and related transactions, which would adversely affect our financial condition and our results of operations.
In connection with the Distribution, TCO undertook a series of internal corporate reorganization transactions which, along with the contribution of TCO’s publishing businesses, the distribution of Tribune Publishing shares and the cash dividend paid to TCO, may be subject to challenge under federal and state fraudulent conveyance and transfer laws as well as under Delaware corporate law. Under applicable laws, any transaction, contribution or distribution contemplated as part of the Distribution could be voided as a fraudulent transfer or conveyance if, among other things, the transferor received less than reasonably equivalent value or fair consideration in return and was insolvent or rendered insolvent by reason of the transfer.
We cannot be certain as to the standards a court would use to determine whether or not any entity involved in the Distribution was insolvent at the relevant time. In general, however, a court would look at various facts and circumstances related to the entity in question, including evaluation of whether or not: (i) the sum of its debts, including contingent and unliquidated liabilities, was greater than the fair saleable value of all of its assets; (ii) the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or (iii) it could pay its debts as they become due.
If a court were to find that any transaction, contribution or distribution involved in the Distribution was a fraudulent transfer or conveyance, the court could void the transaction, contribution or distribution. In addition, the Distribution could also be voided if a court were to find that it is not a legal distribution or dividend under Delaware corporate law. The resulting complications, costs and expenses of either finding would materially adversely affect our financial condition and results of operations.
Risks Relating to our Indebtedness
We have significant indebtedness which could adversely affect our financial condition and our operating activities.
In connection with the Distribution, on August 4, 2014 we entered into a credit agreement with JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, and the lenders party thereto (the “Senior Term Facility”), pursuant to which we borrowed $350 million. We used a portion of the proceeds to fund a cash dividend to TCO of $275 million immediately prior to the Distribution. In addition, in connection with the Distribution, on August 4, 2014 Tribune Publishing and the Subsidiary Guarantors, in their capacities as borrowers thereunder, entered into a credit agreement with Bank of America, N.A., as administrative agent, collateral agent, swing line lender and letter of credit issuer and the lenders party thereto (the “Senior ABL Facility”), with aggregate maximum commitments (subject to availability under a borrowing base) of approximately $140 million, and entered into a letter of credit arrangement to allow up to $30 million of cash backed letters of credit, with $17.0 million issued on our behalf as of December 27, 2015. We also had $23.6 million of additional letters of credit issued under the Senior ABL Facility and undrawn as of December 27, 2015. The Senior ABL Facility includes flexibility for additional letters of credit to be issued thereunder. In addition, subject to certain conditions, without the consent of the applicable then existing lenders (but subject to the receipt of commitments), each of the Senior ABL Facility and the Senior Term Facility provided that they could be expanded by certain incremental commitments by an amount up to (i) $75 million in the case of the Senior ABL Facility and (ii) in the case of the Senior Term Facility, (A) the greater of $100 million, of which $70 million was accessed in connection with the acquisition of The San Diego Union-Tribune, and an amount as will not cause the net senior secured leverage ratio after giving effect to such incurrence to exceed 2.00 to 1.00, plus (B) an amount equal to all voluntary prepayments of the term loans borrowed under the Senior Term Facility on the Distribution Date and refinancing debt in respect of such loans. Our level of debt could have important consequences to our stockholders, including:
limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate requirements;
requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, acquisitions and other general corporate purposes;
increasing our vulnerability to general adverse economic and industry conditions;
limiting our ability to pay dividends;

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exposing us to the risk of increased interest rates to the extent that our borrowings are at variable rates of interest;
limiting our flexibility in planning for and reacting to changes in the industry in which we compete;
placing us at a disadvantage compared to other, less leveraged competitors or competitors with comparable debt and more favorable terms and thereby affecting our ability to compete; and
increasing our cost of borrowing.
We may incur additional indebtedness to capitalize on business opportunities which could increase the risks related to our high level of indebtedness.
Our Senior Term Facility and Senior ABL Facility (together, the “Senior Credit Facilities”) allow us and our subsidiaries to incur significant amounts of additional indebtedness in certain circumstances, including the incremental commitments under such facilities, and other debt which may be secured or unsecured. We may incur such additional indebtedness to finance acquisitions or investments. If we incur such additional indebtedness, our interest and amortization obligations would likely increase and the risks related to our high level of debt could intensify.
We may not be able to generate sufficient cash to service our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.
Our ability to make scheduled payments on or refinance our debt obligations will depend on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to financial, business, legislative, regulatory and other factors beyond our control. We might not be able to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness. For information regarding the risks to our business that could impair our ability to satisfy our obligations under our indebtedness, see “-Risks Relating to Our Business.” If our cash flows and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations, seek additional debt or equity capital or restructure or refinance our indebtedness. We may not be able to affect any such alternative measures on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations. The agreements governing our indebtedness restrict our ability to dispose of assets and use the proceeds from those dispositions and also restrict our ability to raise debt capital to be used to repay other indebtedness when it becomes due. We may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations then due. Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, would materially and adversely affect our financial condition and results of operations and our ability to satisfy our obligations under our indebtedness.
If we cannot make scheduled payments on our debt, we will be in default and lenders could declare all outstanding principal and interest to be due and payable, the lenders under our Senior Credit Facilities could terminate their commitments to loan money, the lenders could foreclose against the assets securing their loans and we could be forced into bankruptcy or liquidation. All of these events could result in you losing some or all of the value of your investment.
The terms of the agreements governing our indebtedness restrict our current and future operations, particularly our ability to respond to changes or to take certain actions, which could harm our long-term interests.
The agreements governing our Senior Credit Facilities contain a number of restrictive covenants that impose significant operating and financial restrictions on us and limit our ability to engage in actions that may be in our long-term best interests. These restrictions might hinder our ability to grow in accordance with our strategy. A breach of the covenants under the agreements governing our indebtedness could result in an event of default under those agreements. Such a default may allow certain creditors to accelerate the related debt and may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies. In the event the lenders accelerate the repayment of our borrowings, we and our subsidiaries may not have sufficient assets to repay that indebtedness.
As a result of all of these restrictions, we may be: (i) limited in how we conduct our business; (ii) limited or unable to pay dividends to our stockholders in certain circumstances; (iii) unable to raise additional debt or equity financing to operate during general economic or business downturns; or (iv) unable to compete effectively or to take advantage of new business opportunities.

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Our indebtedness has variable rates of interest, which could subject us to interest rate risk or cause our debt service obligations to increase significantly.
Borrowings under the Senior ABL Facility are at variable rates of interest and, to the extent LIBOR exceeds 1.00%, borrowings under our Senior Term Facility are at variable rates of interest, which could expose us to interest rate risk. Interest rates have been at historically low levels. If interest rates increase, our future debt service obligations on the variable rate portion of our indebtedness would increase even though the amount borrowed remains the same, and our net income and cash flows, including cash available for servicing our indebtedness, will correspondingly decrease. Assuming all revolving loans are fully drawn under our Senior Credit Facilities and LIBOR exceeds 1.00%, each quarter point change in interest rates would result in a $1.2 million change in annual interest expense on our indebtedness. In the future, we may enter into interest rate swaps that involve the exchange of floating for fixed rate interest payments in order to reduce future interest rate volatility. However, due to risks for hedging gains and losses and cash settlement costs, we may elect not to maintain such interest rate swaps with respect to any of our variable rate indebtedness, and any swaps we enter into may not fully mitigate our interest rate risk.
Risks Related to Tribune Media Company’s Emergence from Bankruptcy
We may not be able to settle, on a favorable basis or at all, unresolved claims filed in connection with the Chapter 11 proceedings and resolve the appeals seeking to overturn the order confirming the Plan.
On December 31, 2012, TCO and 110 of its direct and indirect wholly-owned subsidiaries (collectively, the “Debtors”) 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 (the “Bankruptcy Court”) on December 8, 2008 (or on October 12, 2009, in the case of Tribune CNLBC, LLC) emerged from Chapter 11. Certain of the legal entities included in the Consolidated and Combined Financial Statements of Tribune Publishing 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. See Note 2 to the Consolidated and Combined Financial Statements for further information. On March 16, 2015 and July 24, 2015, the Chapter 11 estates of 88 and 8, respectively, of the Debtors were closed by a final decree issued by the Bankruptcy Court. The remainder of the Debtors’ Chapter 11 cases, including several of the Tribune Publishing Debtors’ cases, have not yet been closed by the Bankruptcy Court, and certain claims asserted against the Debtors in the Chapter 11 cases remain unresolved. As a result, we expect to continue to incur certain expenses pertaining to the Chapter 11 proceedings in future periods, which may be material.
On April 12, 2012, the Debtors, the official committee of unsecured creditors and creditors under certain TCO prepetition debt facilities filed the Fourth Amended Joint Plan of Reorganization for Tribune Company and its Subsidiaries (subsequently amended and modified, the “Plan”) with the Bankruptcy Court. On July 23, 2012, the Bankruptcy Court issued an order confirming the Plan (the “Confirmation Order”). Several notices of appeal of the Confirmation Order have been filed. The appellants seek, among other relief, to overturn the Confirmation Order and certain prior orders of the Bankruptcy Court, including the settlement of certain claims and causes of action related to the Leveraged ESOP Transactions that was embodied in the Plan (see Note 2 to the Consolidated and Combined Financial Statements for further information). There is currently no stay of the Confirmation Order in place pending resolution of the confirmation-related appeals. In January 2013, TCO filed a motion before the Delaware District Court to dismiss the appeals as equitably moot, based on the substantial consummation of the Plan. On June 18, 2014 the Delaware District Court entered an order granting in part and denying in part the motion to dismiss. On July 16, 2014, notices of appeal of the Delaware District Court’s order were filed with the U.S. Court of Appeals for the Third Circuit by Aurelius, Law Debenture, and Deutsche Bank. On August 19, 2015, the Third Circuit affirmed the Delaware District Court’s dismissal of Aurelius’s appeal of the Confirmation Order. The Third Circuit, however, reversed the Delaware District Court’s dismissal of Law Debenture’s and Deutsche Bank’s appeals of the Confirmation Order, and remanded those appeals for further proceedings on the merits.  On September 11, 2015, the Third Circuit denied Aurelius’s petition for en banc review of the court’s decision and on January 11, 2016, Aurelius filed a petition for writ of certiorari to the U.S. Supreme Court. That petition remains pending. If the appellants succeed on appeal, including any appeal of the Third Circuit’s order, our financial condition may be adversely affected.

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Risks Relating to our Common Stock and the Securities Market
Certain provisions of our certificate of incorporation, by-laws, the agreements relating to the Distribution, and Delaware law may discourage takeovers.
Our amended and restated certificate of incorporation and amended and restated by-laws contain certain provisions that may discourage, delay or prevent a change in our management or control over us. For example, our amended and restated certificate of incorporation and amended and restated by-laws, collectively:
authorize the issuance of “blank check” preferred stock that could be issued by our Board of Directors to thwart a takeover attempt;
provide that vacancies on our Board of Directors, including vacancies resulting from an enlargement of our Board of Directors, may be filled only by a majority vote of directors then in office;
prohibit stockholders from calling special meetings of stockholders;
prohibit stockholder action by written consent;
establish advance notice requirements for nominations of candidates for elections as directors or to bring other business before an annual meeting of our stockholders; and
require the approval of holders of at least 66 2/3% of the outstanding shares of our common stock to amend certain provisions of our amended and restated certificate of incorporation or to amend our amended and restated by-laws.
These provisions could discourage potential acquisition proposals and could delay or prevent a change in control, even though a majority of stockholders may consider such proposal, if effected, desirable. Such provisions could also make it more difficult for third parties to remove and replace the members of the Board of Directors. Moreover, these provisions may inhibit increases in the trading price of our common stock that may result from takeover attempts or speculation.
Under the tax matters agreement, we have agreed to indemnify TCO for certain tax related matters, and we may be unable to take certain actions after the Distribution. See “Risks Relating to the Distribution.” We will be unable to take certain actions because such actions could jeopardize the tax-free status of the Distribution, and such restrictions could be significant. In addition, the agreements relating to the Distribution, including the separation and distribution agreement, the tax matters agreement, the employee matters agreement and the transition services agreement, cover specified indemnification and other matters that may arise after the Distribution. These agreements may have the effect of discouraging or preventing an acquisition of us or a disposition of our business.
Our largest stockholder may have interests that differ from other stockholders.
Merrick Media, LLC (“Merrick Media”) beneficially owned, as of March 10, 2016, approximately 16.5% of the outstanding common stock of the Company. The interests of Merrick Media and its affiliates may differ from those of the Company’s other stockholders. Merrick Media and its affiliates are in the business of making investments in companies and maximizing the return on those investments. They currently have, and may from time to time in the future acquire, interests in businesses that directly or indirectly compete with certain aspects of our business or that supply us with goods and services.
Michael W. Ferro, Jr., the non-executive Chairman of our Board of Directors, is the manager of Merrick Venture Management, LLC, which is the sole manager of Merrick Media. Mr. Ferro was elected to fill a newly-created vacancy on our Board of Directors in connection with Merrick Media’s purchase in a private placement of $44.4 million of our common stock on February 3, 2016. In connection with the private placement, the Company also granted Merrick Media the right, subject to certain conditions, to designate a replacement individual for election as a director in the event that Mr. Ferro is unable to continue to serve as a director. As a result of its stock ownership and Board representation, Merrick Media may be able to influence corporate actions such as mergers or takeover attempts.

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Substantial sales of our common stock or the perception that such sales might occur, could depress the market price of our common stock.
Any sales of substantial amounts of our common stock in the public market, including resales by our investors such as those to whom we have granted registration rights, or the perception that such sales might occur, could depress the market price of our common stock. There is no assurance that there will be sufficient buying interest to offset any such sales, and, accordingly, the price of our common stock may be depressed by those sales and have periods of volatility.
The market price for our common stock may be volatile.
Many factors could cause the trading price of our common stock to rise and fall, including the following: (i) declining newspaper print circulation; (ii) declining operating revenues derived from our core business; (iii) variations in quarterly results; (iv) announcements regarding dividends; (v) announcements of technological innovations by us or by competitors; (vi) introductions of new products or services or new pricing policies by us or by competitors; (vii) acquisitions or strategic alliances by us or by competitors; (viii) recruitment or departure of key personnel or key groups of personnel; (ix) the gain or loss of significant advertisers or other customers; (x) changes in the estimates of our operating performance or changes in recommendations by any securities analysts that elect to follow our stock; and (xi) market conditions in the newspaper industry, the media industry, the industries of our customers, and the economy as a whole.

We have suspended the payment of cash dividends on our outstanding common stock, and our ability to pay dividends in the future is subject to limitations.

On February 4, 2016, we announced the suspension of our quarterly common stock cash dividend in order to preserve capital to provide us with increased financial flexibility while funding our growth strategy. Any future determination to declare and pay dividends will be made at the discretion of our Board of Directors after taking into account our financial results, capital requirements and other factors the Board may deem relevant. In addition, because we are a holding company with no material direct operations, we are dependent on loans, dividends and other payments from our operating subsidiaries to generate the funds necessary to pay distributions to us in an amount sufficient for us to pay dividends. Our subsidiaries’ ability to make such distributions will be subject to their operating results, cash requirements and financial condition and the applicable provisions of Delaware law that may limit the amount of funds available for distribution to us. Our ability to pay future cash dividends also will be subject to covenants and financial ratios related to existing or future indebtedness, including under our Senior Credit Facilities, and other agreements with third parties.
If securities or industry analysts do not publish research or publish misleading or unfavorable research about our business, our stock price and trading volume could decline.
The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us or our business. If one or more of the security or industry analysts downgrades our stock, ceases coverage of our company, fails to publish reports on us regularly, or publishes misleading or unfavorable research about our business, demand for our stock may decrease, which could cause our stock price or trading volume to decline.
Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed to us or our stockholders by any of our directors, officers, employees or agents, (iii) any action asserting a claim against us arising under the General Corporation Law of the State of Delaware (the “DGCL”), our amended and restated certificate of incorporation or our amended and restated by-laws or (iv) any action asserting a claim against us that is governed by the internal affairs doctrine. By becoming a stockholder in our company, you will be deemed to have notice of and have consented to the provisions of our amended and restated certificate of incorporation related to choice of forum. The choice of forum provision in our amended and restated certificate of incorporation may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.
Item 1B. Unresolved Staff Comments
Not applicable.

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Item 2. Properties
Our facilities occupy approximately 6.4 million square feet in the aggregate, of which approximately 3.1 million square feet is leased from third parties and approximately 3.3 million square feet is leased from subsidiaries of Tribune Real Estate Holdings, LLC pursuant to lease agreements containing arm’s-length terms, which were determined based on the recommendations of an independent licensed real estate appraiser. Tribune Real Estate Holdings, LLC is a subsidiary of TCO.
We currently have newspaper production facilities in California, Connecticut, Florida, Illinois, Maryland and Pennsylvania. These facilities, excluding the Maryland facility, are leased from a subsidiary of TCO; however, we own substantially all of the production equipment. There are 17 net leases for Tribune Publishing’s industrial facilities which include printing plants, distribution facilities and related office space. For printing plants the initial lease term is 10 years with two options to renew for additional 10 year terms. For distribution facilities, the initial lease term is 5 years with either two options to renew for additional 5 year terms or three options to renew for additional 5 year terms.
Our corporate headquarters are in the Tribune Tower located at 435 North Michigan Avenue, Chicago, Illinois. The leases for Tribune Tower in Chicago and Los Angeles Times Square, both of which are large multi-tenant buildings, are gross leases which provide for professional management of the building. At Tribune Tower, Tribune Publishing leases approximately 318,000 square feet, while at Los Angeles Times Square, Tribune Publishing leases approximately 277,000 square feet. The gross leases provide for an initial term of 5 years with renewal options for up to two additional 5 year terms.
Many of our local media organizations have outside news bureaus, sales offices and distribution centers that are leased from third parties.
We believe that our current facilities, including the terms and conditions of the relevant lease agreements, are adequate to operate our businesses as currently conducted.
Item 3. Legal Proceedings
We are subject to various legal proceedings and claims that have arisen in the ordinary course of business. The legal entities comprising our operations are defendants from time to time in actions for matters arising out of their business operations. In addition, the legal entities comprising our operations are involved from time to time as parties in various regulatory, environmental and other proceedings with governmental authorities and administrative agencies.
On December 31, 2012, TCO and 110 of its direct and indirect wholly-owned subsidiaries (collectively, the “Debtors”) 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 (the “Bankruptcy Court”) on December 8, 2008 (or on October 12, 2009, in the case of Tribune CNLBC, LLC) emerged from Chapter 11. Certain of the legal entities included in the Consolidated and Combined Financial Statements of Tribune Publishing 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.
On April 12, 2012, the Debtors, the official committee of unsecured creditors and creditors under certain TCO prepetition debt facilities filed the Plan with the Bankruptcy Court. On July 23, 2012, the Bankruptcy Court issued the Confirmation Order. Several notices of appeal of the Confirmation Order have been filed. The appellants seek, among other relief, to overturn the Confirmation Order and certain prior orders of the Bankruptcy Court, including the settlement of certain claims and causes of action related to the Leveraged ESOP Transactions that was embodied in the Plan. There is currently no stay of the Confirmation Order in place pending resolution of the confirmation-related appeals. In January 2013, TCO filed a motion before the Delaware District Court to dismiss the appeals as equitably moot, based on the substantial consummation of the Plan. On June 18, 2014 the Delaware District Court entered an order granting in part and denying in part the motion to dismiss. On July 16, 2014, notices of appeal of the Delaware District Court’s order were filed with the U.S. Court of Appeals for the Third Circuit by Aurelius, Law Debenture, and Deutsche Bank. On August 19, 2015, the Third Circuit affirmed the Delaware District Court’s dismissal of Aurelius’s appeal of the Confirmation Order. The Third Circuit, however, reversed the Delaware District Court’s dismissal of Law Debenture’s and Deutsche Bank’s appeals of the Confirmation Order, and remanded those appeals for further proceedings on the merits.  On September 11, 2015, the

25




Third Circuit denied Aurelius’s petition for en banc review of the court’s decision and on January 11, 2016, Aurelius filed a petition for writ of certiorari to the U.S. Supreme Court. That petition remains pending.
On March 16, 2015 and July 24, 2015, 88 and 8, respectively, of the Debtors Chapter 11 estates were closed by final decree issued by the Bankruptcy Court. The remaining Debtors’ Chapter 11 cases, including several of the Tribune Publishing Debtors’ cases, have not yet been closed by the Bankruptcy Court, and certain claims asserted against the Debtors in the Chapter 11 cases remain unresolved. As a result, we expect to continue to incur certain expenses pertaining to the Chapter 11 proceedings in future periods, which may be material. See Note 2 to the Consolidated and Combined Financial Statements for further information.
We do not believe that any matters or proceedings presently pending will have a material adverse effect, individually or in the aggregate, on our consolidated and combined financial position, results of operations or liquidity. However, legal matters and proceedings are inherently unpredictable and subject to significant uncertainties, some of which are beyond our control. As such, there can be no assurance that the final outcome of these matters and proceedings will not materially and adversely affect our consolidated and combined financial position, results of operations or liquidity.
Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Tribune Publishing’s common stock is traded on the New York Stock Exchange (“NYSE”) under the symbol “TPUB.” “When issued” trading of the Company’s common stock, par value $0.01 per share, commenced on the NYSE on July 24, 2014. “Regular-way” trading of the Company’s common stock began on the NYSE on August 5, 2014, the first trading day following the completion of the Distribution.
The following table sets forth the high and low sales prices of the common stock as reported by the NYSE and dividends declared for the periods indicated:
 
 
High
 
Low
 
Dividends Declared
Year Ending December 27, 2015
 
 
 
 
 
 
Fourth Quarter
 
$
10.97

 
$
7.33

 
$
0.175

Third Quarter
 
$
16.38

 
$
7.96

 
$
0.175

Second Quarter
 
$
20.00

 
$
14.51

 
$
0.175

First Quarter
 
$
23.53

 
$
16.76

 
$
0.175

 
 
 
 
 
 
 
Year Ending December 28, 2014
 
 
 
 
 
 
Fourth Quarter
 
$
23.73

 
$
15.00

 
$
0.175

Third Quarter
 
$
26.90

 
$
18.03

 
$

On March 10, 2016, the closing price for the Company’s common stock as reported on the NYSE was $8.50. The approximate number of stockholders of record of the common stock at the close of business on such date was 14. A substantially greater number of holders of Tribune Publishing’s common stock are “street name” or beneficial holders, whose shares of record are held by banks, brokers, and other financial institutions.
On February 4, 2016, our Board of Directors suspended the Company’s cash dividend program. On February 11, 2016, the Company paid the dividend previously declared on December 14, 2015. Any future determination to declare and pay dividends will be made at the discretion of the Board, after taking into account the Company’s financial results, capital requirements, debt covenants and other factors it may deem relevant.

26




Purchases of Equity Securities By the Issuer and Affiliated Purchasers
In August 2015, our Board of Directors authorized $30 million to be used for stock repurchases for 24 months from the date of authorization. No repurchases were made in the three months ended December 27, 2015, and the Company has $28.6 million remaining authorization under the stock repurchase plan as of December 27, 2015.
Tribune Publishing Stock Comparative Performance Graph
The following graph compares the cumulative total stockholder return on our common stock for the period commencing August 5, 2014 through December 24, 2015 (the last trading day of fiscal 2015) with the cumulative total return on the Standard & Poor’s 500 Stock Index (the “S&P 500”), the Standard & Poor’s Publishing Stock Index (the “S&P Publishing”) and the 2015 group of peer companies selected on a line-of-business basis and weighted for market capitalization. For 2014, the Company’s peer group includes the following companies: A. H. Belo Corporation, The E. W. Scripps Company, Journal Communications, Inc., Lee Enterprises, Incorporated, New Media Investment Group Inc. and The New York Times Company. For 2015, the Company uses the same peer group with the exception of Journal Communications, Inc., which ceased to be publicly traded during 2015. Total return values were calculated based on cumulative total return assuming (i) the investment of $100 in our common stock, the S&P 500, the S&P Publishing and the 2015 group of peer companies on August 5, 2014 and (ii) reinvestment of dividends.
The following stock performance graph and related information shall not be deemed “soliciting material” or “filed” with the SEC, nor should such information be incorporated by reference into any future filings under the Securities Act or the Exchange Act, except to the extent that we specifically incorporate it by reference in such filing.

27




Item 6. Selected Financial Data
In the fourth quarter of 2015, the Company adopted Accounting Standards Update (“ASU”) 2015-17, Topic 740, Income Taxes - Balance Sheet Classification of Deferred Taxes and ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs. These standards have been applied retroactively to the periods covered in this report and are included in the amounts below. See Note 3 in Notes to the Consolidated and Combined Financial Statements for more information on ASU 2015-17 and ASU 2015-03.
 
 
Successor
 
 
Predecessor
 
 
As of and for the years ended
 
 
As of and for
 
As of and for the years ended
 
 
December 27, 2015
 
December 28, 2014
 
December 29, 2013
 
 
December 31, 2012
 
December 30, 2012
 
December 25, 2011
(In thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
Statement of Operations Data:
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating revenues
 
$
1,672,820

 
$
1,707,978

 
$
1,795,107

 
 
$

 
$
1,913,814

 
$
1,915,932

Operating expenses
 
1,647,853

 
1,621,276

 
1,628,578

 
 

 
1,872,158

 
1,871,363

Income from operations
 
24,967

 
86,702

 
166,529

 
 

 
41,656

 
44,569

Loss on equity investments, net
 
(1,164
)
 
(1,180
)
 
(1,187
)
 
 

 
(2,349
)
 
(900
)
Gain (loss) on investment transactions
 

 
1,484

 

 
 

 

 
(1
)
Write-down of investment
 

 

 

 
 

 
(6,141
)
 

Interest income (expense), net
 
(25,972
)
 
(9,801
)
 
14

 
 

 
(31
)
 
75

Reorganization items, net
 
(1,026
)
 
(464
)
 
(270
)
 
 
2,754,553

 
(1,446
)
 
410

Income (loss) before income tax expense (benefit)
 
(3,195
)
 
76,741

 
165,086

 
 
2,754,553

 
31,689

 
44,153

Income tax expense (benefit)
 
(430
)
 
34,453

 
70,992

 
 
(87,773
)
 
3,294

 
2,539

Net income (loss)
 
$
(2,765
)
 
$
42,288

 
$
94,094

 
 
$
2,842,326

 
$
28,395

 
$
41,614

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic net income (loss) per common share
 
$
(0.11
)
 
$
1.66

 
$
3.70

 
 
$
111.80

 
$
1.12

 
$
1.64

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted net income (loss) per common share
 
$
(0.11
)
 
$
1.66

 
$
3.70

 
 
$
111.80

 
$
1.12

 
$
1.64

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average shares outstanding - basic
 
25,990

 
25,429

 
25,424

 
 
25,424

 
25,424

 
25,424

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average shares outstanding - diluted
 
25,990

 
25,543

 
25,424

 
 
25,424

 
25,424

 
25,424

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividends declared per common share
 
$
0.70

 
$
0.175

 
$

 
 
$

 
$

 
$

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance Sheet Data:
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
832,966

 
$
677,703

 
$
514,366

 
 
$
897,797

 
$
951,232

 
$
1,043,785

Total debt
 
389,673

 
339,733

 

 
 

 

 


28




Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations    
The following discussion and analysis should be read in conjunction with the other sections of this Annual Report on Form 10-K, including the Consolidated and Combined Financial Statements and related Notes thereto and “Cautionary Statement Concerning Forward-Looking Statements.” Management’s Discussion and Analysis of Financial Condition and Results of Operations contains a number of forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and other factors described throughout this Form 10-K, including the factors disclosed under “Item 1A. Risk Factors.”
We believe that the assumptions underlying the Consolidated and Combined Financial Statements included in this Annual Report are reasonable. However, the Consolidated and Combined Financial Statements may not necessarily reflect our results of operations, financial position and cash flows for future periods or what they would have been had Tribune Publishing been a separate, stand-alone company during all the periods presented.
OVERVIEW
Tribune Publishing Company (collectively with its subsidiaries, Tribune Publishing” or the “Company”) is a multiplatform media and marketing solutions company that delivers innovative experiences for audiences and advertisers. The Company’s diverse portfolio of iconic news and information brands includes award-winning daily and weekly titles, digital properties and verticals in major markets across the country. As discussed in Part 1, Item 1 “Business” of this Annual Report on Form 10-K, on August 4, 2014 (“Distribution Date”), the Company completed its separation from Tribune Media Company, formerly Tribune Company (“TCO”). The Company is a separately traded public company.
Prior to the Distribution Date, separate financial statements were not prepared for Tribune Publishing. The accompanying Consolidated and Combined Financial Statements were derived from the historical accounting records of TCO and present Tribune Publishing’s consolidated and combined financial position, results of operations and cash flows as of and for the periods presented as if Tribune Publishing was a separate entity through the Distribution Date. Management believes that assumptions and methodologies underlying the allocation of general corporate expenses are reasonable. However, such expenses prior to the Distribution Date may not be indicative of the actual level of expense that would have been incurred had Tribune Publishing operated as a separate stand-alone entity, and, accordingly, may not necessarily reflect Tribune Publishing’s consolidated and combined financial position, results of operations and cash flows had Tribune Publishing operated as a stand-alone entity during the periods presented. See Note 5 in the Consolidated and Combined Financial Statements included elsewhere in this report for further information on costs allocated from TCO. Subsequent to the Distribution Date, Tribune Publishing's financial statements are presented on a consolidated basis as the Company became a separate consolidated entity.
The Company intends for the following discussion of its financial condition and results of operations to provide information that will assist in understanding the Company’s financial statements, the changes in certain key items in those statements from period to period and the primary factors that accounted for those changes as well as how certain accounting principles, policies and estimates affect the Company’s financial statements.
2015 Highlights and Recent Events
On May 21, 2015, the Company completed the acquisition of The San Diego Union-Tribune (f/k/a the U-T San Diego) and nine community weeklies and related digital properties in San Diego County, California.
Attracted more than 51.2 million unique visitors during December 2015 based on the comScore Multi-platform Media Report.
In August 2015, the Board of Directors authorized $30 million to be used for stock repurchases for 24 months from the date of authorization. Under this authorization the Company repurchased 121,168 shares of common stock for an aggregate purchase price of $1.4 million in 2015.
In the fourth quarter of 2015, the Company offered an Employee Voluntary Separation Program (“EVSP”), which provided enhanced separation benefits to eligible non-union employees with more than one year of service.  The total charge expected to be recognized is $55.8 million with $45.6 million recognized in the year ended December 27, 2015.
On February 3, 2016, the Company completed a $44.4 million private placement of the Company’s common stock to Merrick Media.

29




2016 Private Placement
On February 3, 2016, the Company completed a $44.4 million private placement, pursuant to which the Company sold to Merrick Media 5,220,000 shares of the Company’s common stock at a purchase price of $8.50 per share. The Company intends to use the $42.5 million net proceeds from the sale to execute further on its growth strategy, including acquisitions and digital initiatives. The shares of common stock acquired by Merrick Media (the “Shares”) are subject to certain lockup provisions that, subject to the terms and conditions set out in the purchase agreement dated February 3, 2016 among the Company, Merrick Media and Michael W. Ferro, Jr. (the “Purchase Agreement”), prohibit certain transfers of the Shares for the first three years following the date of issuance and, thereafter, any transfers of the Shares that would result in a transfer of more than 25% of the Shares purchased under the Purchase Agreement in any 12-month period.  The Purchase Agreement also includes covenants prohibiting the transfer of the Shares if the transfer would result in a person beneficially owning more than 4.9% of the Company’s then outstanding shares of common stock following the transfer, as well as transfers to a material competitor of the Company in any of the Company’s then-existing primary geographical markets. Merrick Media and Mr. Ferro and their respective affiliates, are also prohibited from acquiring additional equity if the acquisition could result in their beneficial ownership of more than 25% of the Company’s then outstanding shares of common stock.
 In connection with the private placement, Mr. Ferro was elected to fill a newly-created vacancy on the Company’s Board of Directors and was named non-executive Chairman of the Board. The Company granted Merrick Media the right to designate a replacement individual for election as a director at each annual and special meeting of stockholders at which directors are to be elected as part of the slate of nominees recommended by the Board of Directors, subject to the reasonable prior approval of the Board’s Nominating and Corporate Governance Committee, in the event that Mr. Ferro is unable to continue to serve as a director. Merrick Media’s right to appoint a replacement director representative will expire either (a) on the date that Mr. Ferro or his replacement is not nominated for reelection as a director, is removed as a director, or is not reelected as a director if the Company has not recommended his or his replacement’s reelection or (b) at such time as Merrick Media, Mr. Ferro and their respective affiliates no longer beneficially own at least 75% of the Shares originally acquired pursuant to the Purchase Agreement.
The Company has agreed to use its reasonable best efforts to cause a registration statement with respect to the Shares to be declared effective by the earlier of (a) February 3, 2019 and (b) 60 days after the termination of certain voting covenants made by Merrick Media and Mr. Ferro and their respective affiliates in the Purchase Agreement.
2015 Acquisitions
On May 21, 2015, the Company purchased The San Diego Union-Tribune (f/k/a the U-T San Diego) and nine community weeklies and related digital properties in San Diego County, California. The stated purchase price was $85 million, consisting of $73 million in cash, subject to a working capital adjustment, and $12 million in Tribune Publishing common stock (700,869 shares). The Company financed the $73 million cash portion of the purchase price, less a $2 million preliminary working capital adjustment at close, with a combination of cash-on-hand and funds available under the Company's existing Senior ABL Facility as well as the net proceeds of the Senior Term Loan Facility increase described below. In the year ended December 27, 2015, the Company received the final working capital adjustment of $2.6 million in cash from the seller and the purchase price has been adjusted. As part of the acquisition, the Company became the sponsor of a single employer defined benefit plan that will require approximately $10.8 million in contributions in 2016.
EVSP
In the fourth quarter of 2015, the Company offered an EVSP, which provided enhanced separation benefits to eligible non-union employees with more than one year of service.  Of the employees offered the EVSP, 780 accepted. Of the 780 who accepted, 275 of the positions are expected to be replaced leaving a net reduction of 505 positions. The total charge expected to be recognized is $55.8 million with $45.6 million recognized in the year ended December 27, 2015. The Company plans to fund the EVSP ratably over the payout period through salary continuation that started immediately and continues through the first half of 2018 instead of lump sum severance payments. See Note 4 of the Consolidated and Combined Financial Statements for additional information.

30




Stock Repurchases
In August 2015, the Board of Directors authorized $30 million to be used for stock repurchases for 24 months from the date of authorization. Any stock repurchases under the stock repurchase plan may be made in the open market, through privately negotiated transactions or other means. The stock repurchase plan may be modified or discontinued at any time without prior notice. Repurchased shares become a part of treasury stock.
During the year ended December 27, 2015, the Company repurchased 121,168 shares of common stock for an aggregate purchase price of $1.4 million. The Company has $28.6 million of remaining authorization under the stock repurchase plan at December 27, 2015.
Spin-Off Transaction
On August 4, 2014, TCO completed the spin-off of its principal publishing operations into an independent company, Tribune Publishing, by distributing 98.5% of the outstanding shares of Tribune Publishing common stock to holders of TCO common stock and warrants. In the Distribution, each holder of TCO Class A common stock, Class B common stock and warrants received 0.25 of a share of Tribune Publishing common stock for each share of TCO common stock or TCO warrant held as of the record date of July 28, 2014. Based on the number of shares of TCO common stock and TCO warrants outstanding as of 5:00 P.M. Eastern time on July 28, 2014 and the distribution ratio, 25,042,263 shares of Tribune Publishing common stock were distributed to the TCO stockholders and holders of TCO warrants and TCO retained 381,354 shares of Tribune Publishing common stock, representing 1.5% of outstanding common stock of Tribune Publishing. On August 5, 2014, Tribune Publishing became a separate publicly-traded company with its own board of directors and senior management team. Shares of Tribune Publishing common stock are listed on the New York Stock Exchange under the symbol “TPUB.” In connection with the separation and distribution, Tribune Publishing paid a $275.0 million cash dividend to TCO from a portion of the proceeds of a senior secured credit facility entered into by Tribune Publishing.
In connection with the separation and distribution, TCO entered into a transition services agreement (the “TSA”) and certain other agreements with Tribune Publishing that govern the relationships between Tribune Publishing and TCO following the separation and distribution. Under the TSA, the providing company was generally allowed to fully recover all out-of-pocket costs and expenses it actually incurred in connection with providing the services, plus, in some cases, the allocated direct costs of providing the services, generally without profit. Pursuant to the TSA, TCO provided Tribune Publishing with certain specified services on a transitional basis, including support in areas such as human resources, risk management, treasury, technology, legal, real estate, procurement and advertising and marketing in a single market. Tribune Publishing provided TCO with certain specified services on a transitional basis, including in areas such as human resources, technology, legal, procurement, accounting, digital advertising operations, and advertising, marketing, event management and fleet maintenance in a single market. As of the end of 2015, there were no longer any services being provided under the TSA.
TCO received a private letter ruling (“PLR”) from the Internal Revenue Service (“IRS”) which provides that the Distribution of Tribune Publishing stock and certain related transactions will qualify as tax-free to TCO, Tribune Publishing and TCO's stockholders and warrantholders for U.S. federal income tax purposes. Although a PLR from the IRS generally is binding on the IRS, the PLR does not rule that the Distribution satisfies every requirement for a tax-free distribution, and the parties will rely solely on the opinion of the TCO's special tax counsel that such additional requirements have been satisfied.

31




Results of Operations
Year ended December 27, 2015 compared to the year ended December 28, 2014
In the fourth quarter of 2015, the Company determined digital marketing services had evolved over time and more appropriately should be reflected in Advertising revenue instead of Other revenue. This change has been applied retroactively to all periods covered in this report and are included in the amounts below. See Note 1 in Notes to the Consolidated and Combined Financial Statements for more information on this reclassification.
Consolidated—Operating results for the years ended December 27, 2015 and December 28, 2014 are shown in the table below (in thousands). References in this discussion to individual markets include daily newspapers in those markets and their related businesses.
 
 
Year Ended
 
 
 
 
December 27, 2015
 
December 28, 2014
 
% Change
 
 
 
 
 
 
 
Operating revenues
 
$
1,672,820

 
$
1,707,978

 
(2.1
%)
 
 
 
 
 
 
 
Operating expenses
 
1,647,853

 
1,621,276

 
1.6
%
 
 
 
 
 
 
 
Income from operations
 
$
24,967

 
$
86,702

 
(71.2
%)
Operating revenues decreased 2.1%, or $35.2 million, in the year ended December 27, 2015 compared to the prior year period due to a $31.7 million decline in advertising revenues and a $35.1 million decrease in other revenues, partially offset by an increase of $31.7 million in circulation revenues. Operating revenues include revenues from acquisitions.
Operating expenses increased 1.6%, or $26.6 million, in the year ended December 27, 2015 compared to the prior year period due to a $45.6 million charge related to the EVSP, partially offset by lower newsprint and ink expenses.
Income from operations decreased 71.2%, or $61.7 million, in the year ended December 27, 2015 due mainly to lower revenues and the charge related to the EVSP.





Operating Revenues—Total operating revenues, by classification, for the years ended December 27, 2015 and December 28, 2014 were as follows (in thousands):
 
 
Year Ended
 
 
 
 
December 27, 2015
 
December 28, 2014
 
% Change
Advertising and marketing services
 
 
 
 
 
 
Retail
 
$
509,823

 
$
519,124

 
(1.8
%)
National
 
180,290

 
187,659

 
(3.9
%)
Classified
 
264,577

 
279,610

 
(5.4
%)
Total advertising and marketing services
 
954,690

 
986,393

 
(3.2
%)
Circulation
 
466,281

 
434,623

 
7.3
%
Other revenue
 
 
 
 
 
 
Commercial print and delivery
 
142,441

 
171,760

 
(17.1
%)
Direct mail and marketing
 
61,347

 
73,887

 
(17.0
%)
Content syndication and other
 
48,061

 
41,315

 
16.3
%
Total other revenue
 
251,849

 
286,962

 
(12.2
%)
Total operating revenues
 
$
1,672,820

 
$
1,707,978

 
(2.1
%)
 
 
 
 
 
 
 
ROP
 
$
454,150

 
$
460,826

 
(1.4
%)
Preprints
 
308,569

 
320,604

 
(3.8
%)
Digital
 
191,971

 
204,963

 
(6.3
%)
Total advertising and marketing services
 
$
954,690

 
$
986,393

 
(3.2
%)
Advertising Revenues—Total advertising and marketing services revenues decreased 3.2%, or $31.7 million, in the year ended December 27, 2015 compared to the prior year period. Advertising and marketing services revenues for the year ended December 27, 2015 include $51.6 million of revenues generated by The San Diego Union-Tribune. Retail advertising revenues fell 1.8%, or $9.3 million, due to declines in most categories. The categories with the largest declines were electronics, general merchandise and department stores, partially offset by an increase in the retail healthcare category. Preprint revenues, which are primarily included in retail advertising, decreased 3.8%, or $12.0 million. National advertising revenues fell 3.9%, or $7.4 million, due to declines in several categories, most notably movies, wireless/telecom, and national healthcare categories, partially offset by an increase in the media category. Classified advertising revenues decreased 5.4%, or $15.0 million, compared to the prior year period, primarily due to decreases in the help wanted and automotive categories , partially offset by an increase in the legal category. The declines in retail, national and classified advertising also reflect a decrease in digital advertising revenues, which are included in those categories, and decreased 6.3%, or $13.0 million, in the year ended December 27, 2015.
Circulation Revenues—Circulation revenues increased 7.3%, or $31.7 million, in the year ended December 27, 2015 compared to the prior year period due largely to $28.3 million of revenues generated by The San Diego Union-Tribune.
Other Revenues—Other revenues are derived from commercial printing and delivery services provided to other newspapers; distribution of syndicated content; direct mail advertising and other related activities. Other revenues decreased 12.2%, or $35.1 million, in the year ended December 27, 2015 primarily due to declines in commercial print and delivery revenues of $29.3 million for third-party publications, including certain publications of the Sun-Times Media Group, the Wall Street Journal, the New York Times and the Orange County Register. The decrease in commercial print and delivery is net of a correction from net revenue recognition to gross revenue recognition for certain distribution contracts. Additionally, the Company experienced declines in direct mail and marketing of $12.5 million due to general decreases in the direct mail marketplace.

33




Operating Costs and ExpensesTotal operating expenses, by classification, for the years ended December 27, 2015 and December 28, 2014 were as follows (in thousands):
 
 
Year Ended
 
 
 
 
December 27, 2015
 
December 28, 2014
 
% Change
 
 
 
 
 
 
 
Compensation
 
$
649,905

 
$
596,366

 
9.0
%
Circulation and distribution
 
293,419

 
291,019

 
0.8
%
Newsprint and ink
 
122,339

 
139,634

 
(12.4
%)
Outside services
 
173,023

 
125,848

 
37.5
%
Corporate allocations
 

 
90,497

 
(100.0
%)
Occupancy
 
63,622

 
61,118

 
4.1
%
Promotion and marketing
 
58,725

 
55,438

 
5.9
%
Outside printing and production
 
47,454

 
49,285

 
(3.7
%)
Affiliate fees
 
51,484

 
42,842

 
20.2
%
Other general and administrative
 
133,249

 
137,140

 
(2.8
%)
Depreciation
 
44,700

 
24,537

 
82.2
%
Amortization
 
9,933

 
7,552

 
31.5
%
Total operating expenses
 
$
1,647,853

 
$
1,621,276

 
1.6
%
Tribune Publishing operating expenses increased 1.6%, or $26.6 million, in the year ended December 27, 2015 compared to the prior year period. The increase was due primarily to charges related to the EVSP, operating expenses of The San Diego Union-Tribune, outside services and depreciation expense, partially offset by decreases in corporate allocations and newsprint and ink expense.
Corporate Allocations—Corporate allocations decreased 100.0%, or $90.5 million, in the year ended December 27, 2015. Corporate allocations comprise allocated charges from TCO for certain corporate support services. Subsequent to the Distribution Date, no additional charges were allocated from TCO. The allocated charges include corporate management fees, technology support costs, general insurance costs and occupancy costs, among others. Subsequent to the Distribution Date, these expenses are reflected in Compensation, Outside Services and Other General and Administrative.
Compensation Expense—Compensation expense increased 9.0%, or $53.5 million, in the year ended December 27, 2015 due primarily to a $45.6 million charge taken in the fourth quarter for the EVSP. The remainder of the increase is due primarily to expenses associated with the The San Diego Union-Tribune, the addition of the technology department in the third quarter 2014, which was part of the Corporate Allocations prior to the Distribution, increases in staffing and a decrease in the pension credit allocated from TCO in 2014 prior to the Distribution. These increases were partially offset by decreases in accrued incentive compensation compared to the prior year period and recognition of $18.8 million in gains related to termination of certain post-retirement benefits in 2015.
Circulation and Distribution Expense—Circulation and distribution expense increased 0.8%, or $2.4 million, primarily due to expense recognition related to the correction from net revenue recognition to gross revenue recognition on certain contracts, and increases related to The San Diego Union-Tribune, offset by lower print circulation volumes for the daily newspapers and a decrease in commercial delivery of third party publications. Total daily net paid print circulation in the year ended December 27, 2015 averaged 1.4 million copies, up 9.0%. Total Sunday net paid print circulation in the year ended December 27, 2015 averaged 2.4 million copies, up 3%. The increase in daily and Sunday net paid print circulation is generated by acquired businesses.
Newsprint and Ink Expense—Newsprint and ink expense declined 12.4%, or $17.3 million, in the year ended December 27, 2015 due mainly to an 8.7% decrease in the average cost per ton of newsprint and a 10.7% decline in commercial printing revenue.
Outside Services Expense—Outside services expense increased 37.5%, or $47.2 million, in the year ended December 27, 2015 due primarily to expenses associated with The San Diego Union-Tribune, inclusion of technology costs subsequent to

34




the Distribution that were previously included in Corporate Allocations, corporate post-spin initiatives and internal control remediation efforts.
Occupancy Expense—Occupancy expense increased 4.1%, or $2.5 million, in the year ended December 27, 2015, primarily due to expenses associated with The San Diego Union-Tribune.
Promotion and Marketing Expense—Promotion and marketing expense increased 5.9%, or $3.3 million, in the year ended December 27, 2015 primarily due to increased digital-focused marketing and general advertising.
Outside Printing and Production Expense—Outside printing and production expense includes costs related to niche publications, direct mail and certain preprints. This expense decreased 3.7%, or $1.8 million, in the year ended December 27, 2015 primarily due to decreased activity from client direct mail campaigns, partially offset by expenses associated with The San Diego Union-Tribune.
Affiliate Fees Expense—Affiliate fees expense includes fees paid to Classified Ventures and CareerBuilder. Affiliate fees expense increased 20.2%, or $8.6 million, in the year ended December 27, 2015 due primarily to an increase in Classified Ventures auto fees beginning in the fourth quarter of 2014.
Other General and Administrative Expense—Other general and administrative expense includes repairs and maintenance, bad debt expense, insurance costs and miscellaneous expense. Other general and administrative expense decreased 2.8%, or $3.9 million, in the year ended December 27, 2015 primarily due to a $4.2 million decrease in bad debt expense resulting from the Company recording a reserve for certain commercial delivery defaults in the year ended December 28, 2014.
Depreciation and Amortization Expense—Depreciation and amortization expense increased 70.3%, or $22.5 million, for the year ended December 27, 2015 primarily as a result of depreciation generated from technology assets that were transferred to the Company as part of the Distribution.
Non-operating income and expenses—Total non-operating expenses for the years ended December 27, 2015 and December 28, 2014 were as follows (in thousands):
 
 
Year Ended
 
 
 
 
December 27, 2015
 
December 28, 2014
 
% Change
 
 
 
 
 
 
 
Loss on equity investments, net
 
$
(1,164
)
 
$
(1,180
)
 
(1.4
)%
Gain on investment transaction
 

 
1,484

 
*
Interest expense, net
 
(25,972
)
 
(9,801
)
 
*
Reorganization items, net
 
(1,026
)
 
(464
)
 
*
Income tax expense (benefit)
 
(430
)
 
34,453

 
*
* Represents positive or negative change in excess of 100%
Loss on Equity Investments, net—Loss on equity investments was flat for the year ended December 27, 2015 compared to the year ended December 28, 2014 as the Company’s investments have remained relatively stable.
Interest Expense—Interest expense for the years ended December 27, 2015 and December 28, 2014 is due to interest on the Senior Term Facility described under “Liquidity and Capital Resources” below.
Income Tax Expense (Benefit)—Income tax expense decreased $34.9 million for the year ended December 27, 2015, over the prior year period, primarily due to a decrease in taxable income. Additionally, during the year ended December 27, 2015, the Company increased the estimated deferred tax rate on net deferred tax assets from 39.5% to 40.0%, which resulted in a decrease in the current period income tax expense of $0.5 million.
The effective tax rate on pretax income (loss) was 13.5% and 44.9% in the years December 27, 2015 and December 28, 2014, respectively. The effective tax rate decreased in 2015 as compared with 2014 primarily due to a shift from pre-tax earnings in 2014 to a pre-tax loss in 2015. In the case of a pre-tax loss, the unfavorable permanent differences, such as non-deductible meals and entertainment expense, have the effect of decreasing the tax benefit which, in turn,

35




decreases the effective tax rate. For 2014, the effective tax rate differs from the U.S. federal statutory rate of 35% primarily due to state income taxes, net of federal benefit, non-deductible expenses, and the domestic production activities deduction.
Year ended December 28, 2014 compared to the Year ended December 29, 2013
Consolidated—Operating results for the years ended December 28, 2014 and December 29, 2013 are shown in the table below (in thousands). References in this discussion to individual markets include daily newspapers in those markets and their related businesses.
 
 
Year Ended
 
 
 
 
December 28, 2014
 
December 29, 2013
 
% Change
 
 
 
 
 
 
 
Operating revenues
 
$
1,707,978

 
$
1,795,107

 
(4.9
%)
 
 
 
 
 
 
 
Operating expenses
 
1,621,276

 
1,628,578

 
(0.4
%)
 
 
 
 
 
 
 
Income from operations
 
$
86,702

 
$
166,529

 
(47.9
%)
Operating revenues decreased 4.9%, or $87.1 million, in the year ended December 28, 2014 compared to the prior year period due to an $82.5 million decline in advertising revenues and a $10.6 million decrease in other revenues, partially offset by an increase of $6.0 million in circulation revenues. Advertising revenues, excluding revenues generated by acquired businesses, decreased 10.4%, or $109.7 million, compared to the prior year.
Income from operations decreased $79.8 million, in the year ended December 28, 2014 due mainly to lower advertising revenues and costs associated with the spin-off.
Operating Revenues—Total operating revenues, by classification, for the years ended December 28, 2014 and December 29, 2013 were as follows (in thousands):
 
 
Year Ended
 
 
 
 
December 28, 2014
 
December 29, 2013
 
% Change
Advertising and marketing services
 
 
 
 
 
 
Retail
 
$
519,124

 
$
568,248

 
(8.6
%)
National
 
187,659

 
215,882

 
(13.1
%)
Classified
 
279,610

 
284,806

 
(1.8
%)
Total advertising and marketing services
 
986,393

 
1,068,936

 
(7.7
%)
Circulation
 
434,623

 
428,615

 
1.4
%
Other revenue
 
 
 
 
 
 
Commercial print and delivery
 
171,760

 
189,516

 
(9.4
%)
Direct mail and marketing
 
73,887

 
75,495

 
(2.1
%)
Content syndication and other
 
41,315

 
32,545

 
26.9
%
Total other revenue
 
286,962

 
297,556

 
(3.6
%)
Total operating revenues
 
$
1,707,978

 
$
1,795,107

 
(4.9
%)
 
 
 
 
 
 
 
ROP
 
$
460,826

 
$
508,629

 
(9.4
%)
Preprints
 
320,604

 
351,872

 
(8.9
%)
Digital
 
204,963

 
208,435

 
(1.7
%)
Total advertising and marketing services
 
$
986,393

 
$
1,068,936

 
(7.7
%)
Advertising Revenues—Total advertising revenues decreased 7.7%, or $82.5 million, in the year ended December 28, 2014 compared to the prior year period. Retail advertising fell 8.6%, or $49.1 million, due to declines in most categories. The

36




categories with the largest declines were department stores, specialty merchandise, food/drug stores, general merchandise and electronics categories, which comprised $35.3 million of the year-over-year decline. Preprint revenues, which are primarily included in retail advertising, decreased 8.9%, or $31.3 million, due to declines at all daily newspapers. National advertising revenues fell 13.1%, or $28.2 million, due to declines in several categories, most notably movies, wireless/telecom, financial, and packaged goods which together declined by a total of $27.1 million. Classified advertising revenues decreased 1.8%, or $5.2 million, compared to the prior year period, primarily due to a decrease of $12.2 million related to the CareerBuilder contract amendment and a decrease of $3.3 million related to the Classified Ventures sale of Apartments.com in April 2014, which resulted in the termination of the Apartments.com contract. These declines also resulted in the decrease in digital advertising revenues, which are included in the above categories and decreased 1.7%, or $3.5 million, in the year ended December 28, 2014 compared to the prior year period. The declines in advertising revenues were partially offset by year-to-date-contributions of $18.5 million from the Baltimore and Chicago properties acquired during 2014.
Circulation Revenues—Circulation revenues increased 1.4%, or $6.0 million, in the year ended December 28, 2014 compared to the prior year due largely to an increase of $7.8 million from acquisitions. This increase was partially offset by decreases in print edition sales. Though total daily net paid circulation, including digital editions, averaged 1.8 million copies for the year ended December 28, 2014, up 5.6% from the prior year period, total Sunday net paid circulations, including digital editions, for the year ended December 28, 2014 averaged 2.9 million copies, down 0.7% from the prior year period.
Other Revenues—Other revenues are derived from commercial printing and delivery services provided to other newspapers; distribution of syndicated content; direct mail advertising and other related activities. Other revenues decreased 3.6%, or $10.6 million, in year ended December 28, 2014 primarily due to declines in commercial print and delivery revenues of $17.8 million for third-party publications, including certain publications of the Sun-Times Media Group, the Wall Street Journal, the New York Times and the Orange County Register. These declines were partially offset by a $9.1 million contribution from MCT, a partnership in which the Company purchased the remaining 50% interest during the second quarter 2014.
Operating Costs and ExpensesTotal operating expenses, by classification, for the years ended December 28, 2014 and December 29, 2013 were as follows (in thousands):
 
 
Year Ended
 
 
 
 
December 28, 2014
 
December 29, 2013
 
% Change
 
 
 
 
 
 
 
Compensation
 
$
596,366

 
$
597,882

 
(0.3
%)
Circulation and distribution
 
291,019

 
309,310

 
(5.9
%)
Newsprint and ink
 
139,634

 
162,196

 
(13.9
%)
Outside services
 
125,848

 
99,684

 
26.2
%
Corporate allocations
 
90,497

 
140,786

 
(35.7
%)
Occupancy
 
61,118

 
33,106

 
84.6
%
Promotion and marketing
 
55,438

 
52,007

 
6.6
%
Outside printing and production
 
49,285

 
43,598

 
13.0
%
Affiliate fees
 
42,842

 
31,811

 
34.7
%
Other general and administrative
 
137,140

 
129,767

 
5.7
%
Depreciation
 
24,537

 
21,851

 
12.3
%
Amortization
 
7,552

 
6,580

 
14.8
%
Total operating expenses
 
$
1,621,276

 
$
1,628,578

 
(0.4
%)
Tribune Publishing operating expenses decreased 0.4%, or $7.3 million, in the year ended December 28, 2014 compared to the prior year period. The decrease was due primarily to lower corporate allocations, newsprint and ink and circulation distribution expense, partially offset by higher occupancy, outside services and affiliate fees.
Compensation Expense—Compensation expense decreased 0.3%, or $1.5 million, in the year ended December 28, 2014 due primarily to a decrease in direct pay and benefits realized from continued declines in staffing levels at the newspapers. These declines were partially offset by increases associated with the businesses acquired during the year and a decrease in the pension credit. Before the Distribution Date, Tribune Publishing recorded the portion of TCO’s pension credit that related to

37




the Company’s employees. Subsequent to the Distribution Date, the pension plan remained with TCO and therefore no further credits were recorded by the Company related to the TCO plans.
Circulation and Distribution Expense—Circulation and distribution expense decreased 5.9%, or $18.3 million, primarily due to lower print circulation volumes for the daily newspapers and commercial delivery of third party publications. Total daily net paid print circulation in the year ended December 28, 2014 averaged 1.3 million copies, down 11.5%. Total Sunday net paid print circulation in the year ended December 28, 2014 averaged 2.4 million copies, down 10.8%.
Newsprint and Ink Expense—Newsprint and ink expense declined 13.9%, or $22.6 million, in the year ended December 28, 2014 due mainly to a 13.8% decrease in newsprint consumption as a result of lower print circulation volumes, which decreased 11.5% for daily and 10.8% for Sunday copies of the Company’s newspapers, a 9.1% decline in commercial printing revenue and a 1.2% decrease in the average cost per ton of newsprint.
Outside Services Expense—Outside services expense increased 26.2%, or $26.2 million, in the year ended December 28, 2014 due primarily to inclusion of technology costs subsequent to the Distribution Date that were previously included in corporate allocations.
Corporate Allocations—Corporate allocations comprise allocated charges from TCO for certain corporate support services. The allocated charges include corporate management fees, technology support costs, general insurance costs and occupancy costs, among others. Corporate allocations decreased 35.7%, or $50.3 million, in the year ended December 28, 2014. Corporate allocations comprise allocated charges from TCO for certain corporate support services. Subsequent to the Distribution Date, no additional charges were allocated from TCO. The allocated charges include corporate management fees, technology support costs, general insurance costs and occupancy costs, among others. Subsequent to the Distribution Date, these expenses are reflected in Outside Services and Other General and Administrative.
Occupancy Expense—Occupancy expense increased 84.6%, or $28.0 million, in the year ended December 28, 2014, primarily due to related party rent recognized in connection with the sale-leaseback transaction. See “Transfer of Real Estate” discussed later in this Item 7 for more information on the sale-leaseback transaction.
Promotion and Marketing Expense—Promotion and marketing expense increased 6.6%, or $3.4 million, in the year ended December 28, 2014 due primarily to increased circulation-focused marketing and general advertising.
Outside Printing and Production Expense—Outside printing and production expense increased 13.0%, or $5.7 million, in the year ended December 28, 2014 primarily due to one of the acquired newspapers being printed by a third party vendor.
Affiliate Fees Expense—Affiliate fees expense includes fees paid to Classified Ventures and CareerBuilder. Affiliate fees expense increased 34.7%, or $11.0 million, in the year ended December 28, 2014 due primarily to an increase in Classified Ventures auto rates in the fourth quarter of 2014.
Other General and Administrative Expense—Other general and administrative expense includes repairs and maintenance and other miscellaneous expense. Other general and administrative expense increased 5.7%, or $7.4 million, in the year ended December 28, 2014 due primarily to costs subsequent to the Distribution Date that were previously included in corporate allocations as well as a one-time litigation reserve from outstanding balances due. The litigation reserve related to the termination of a third-party distribution contract and represents the balance due for work performed prior to the expiration of the agreement.
Depreciation and Amortization Expense—Depreciation and amortization expense increased 12.9%, or $3.7 million, in the year ended December 28, 2014 primarily as a result of the adoption of fresh-start reporting on the Effective Date, which lowered the value of depreciable properties.

38




Non-operating income and expenses—Total non-operating income and expenses for the years ended December 28, 2014 and December 29, 2013 were as follows (in thousands):
 
 
Year Ended
 
 
 
 
December 28, 2014
 
December 29, 2013
 
% Change
 
 
 
 
 
 
 
Loss on equity investments, net
 
$
(1,180
)
 
$
(1,187
)
 
(0.6
%)
Gain on investment transaction
 
$
1,484

 
$

 
*
Interest income (expense), net
 
$
(9,801
)
 
$
14

 
*
Reorganization items, net
 
$
(464
)
 
$
(270
)
 
71.9
%
Income tax expense
 
$
34,453

 
$
70,992

 
*
* Represents positive or negative change in excess of 100%
Loss on Equity Investments, net—Loss on equity investments, net totaled $1.2 million which remained flat for the year ended December 28, 2014 compared to the year ended December 29, 2013 as the Company’s investments have remained relatively stable.
Gain on Investment Transaction—Gain on investment transaction for the year ended December 28, 2014 was $1.5 million. In accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805, “Business Combinations,” as part of Tribune Publishing's acquisition of McClatchy's 50% interest in MCT, the Company's preexisting 50% equity interest in MCT was remeasured to its estimated fair value of $2.8 million and the Company recognized a gain of $1.5 million during the year ended December 28, 2014. See Notes 6 and 9 to the Consolidated and Condensed Financial Statements for more information on the MCT acquisition.
Interest Income (Expense)—Interest expense for the year ended December 28, 2014 is due to interest on the $350 million Senior Term Facility described under “Liquidity and Capital Resources” below.
Income Tax Expense—Income tax expense for the year ended December 28, 2014 was $34.5 million with an effective tax rate on pretax income of 44.9%. For the year ended December 29, 2013, Tribune Publishing recorded income tax expense of $71.0 million with an effective tax rate on pretax income of 43.0%. These rates differ from the U.S. federal statutory rate of 35% primarily due to state income taxes, net of federal benefit and the impact of non-deductible expenses.
Liquidity and Capital Resources
Tribune Publishing believes that its working capital, future cash from operations and access to borrowings under the Senior ABL Facility discussed below will provide adequate resources to fund its operating and financing needs for the foreseeable future. Tribune Publishing’s access to, and the availability of, financing in the future will be impacted by many factors, including its credit rating, the liquidity of the overall capital markets, the current state of the economy and other risks described in Part 1, Item 1A of this report. There can be no assurances that Tribune Publishing will have access to capital markets on acceptable terms.
Sources and Uses
The Company expects to fund capital expenditures, interest, principal and pension payments due in 2016 and other operating requirements through a combination of cash flows from operations and investments and available borrowings under the Company’s revolving credit facility. As described in the “Overview” above and in Note 1 of the Consolidated and Combined Financial Statements, on February 3, 2016, the Company completed a $44.4 million private placement of its common stock to Merrick Media. The Company intends to use the $42.5 million net proceeds of the sale to execute further on its growth strategy, including acquisitions and digital initiatives.

39




The table below summarizes the total operating, investing and financing activity cash flows for the years ended December 27, 2015, December 28, 2014 and December 29, 2013 (in thousands):
 
 
Year Ended
 
 
December 27, 2015
 
December 28, 2014
 
December 29, 2013
 
 
 
 
 
 
 
Net cash provided by operating activities
 
$
62,924

 
$
130,574

 
$
147,719

Net cash used for investing activities
 
(91,005
)
 
(102,926
)
 
(19,942
)
Net cash provided by (used for) financing activities
 
32,238

 
(667
)
 
(131,851
)
Net increase (decrease) in cash
 
$
4,157

 
$
26,981

 
$
(4,074
)
Cash flow generated by operating activities is Tribune Publishing’s primary source of liquidity. Net cash provided by operating activities was $62.9 million for the year ended December 27, 2015, down $67.7 million from $130.6 million for the year ended December 28, 2014. The decrease was primarily driven by lower operating results as a result of the decline in advertising revenues as well as payments for interest, taxes and accrued incentive bonuses. Net cash provided by operating activities was $130.6 million in the year ended December 28, 2014, down $17.1 million from $147.7 million in the year ended December 29, 2013. The decrease was primarily driven by lower operating results due to a decline in advertising revenues, partially offset by favorable changes in working capital of $34.3 million due to the timing of payments of amounts due.
Net cash used for investing activities totaled $91.0 million in the year ended December 27, 2015 primarily due to acquisitions and capital expenditures. Net cash used for the acquisition of The San Diego Union-Tribune totaled $67.8 million (see Note 6 to the Consolidated and Combined Financial Statements included elsewhere in this report for further information). Tribune Publishing's capital expenditures in the year ended December 27, 2015 totaled $32.3 million. Net cash used for investing in the year ended December 27, 2015 was partially offset by $10.5 million provided by a reduction in restricted cash. Net cash used for investing activities totaled $102.9 million in the year ended December 28, 2014 primarily due to acquisitions, restricted cash and capital expenditures. Net cash used for the acquisitions totaled $52.3 million in 2014. The restricted cash of $27.5 million is in connection with the Letter of Credit Agreement described below. Tribune Publishing's capital expenditures in the year ended December 28, 2014 totaled $22.3 million. Net cash used for investing activities totaled $19.9 million in the year ended December 29, 2013 and was comprised almost entirely of capital expenditures. We anticipate that capital expenditures for the year ended December 25, 2016 will be approximately $30 million to $35 million.
Net cash provided by financing activities totaled $32.2 million in the year ended December 27, 2015 and included proceeds of $69.0 million from the issuance of senior debt, net of discount, $19.8 million used for loan payments on senior debt, $13.7 million used for payment of stockholder dividends and $2.8 million used for payment of financing costs related to the issuance of senior debt. In the year ended December 28, 2014, net cash used for financing activities totaled $0.7 million, which included issuance of $346.5 million of variable rate debt, net of discount, offset by payment of a $275.0 million dividend to TCO and $57.6 million in transactions with TCO prior to the Distribution Date. Net cash used by financing activities totaled $131.9 million in the year ended December 29, 2013, which primarily represents transactions with TCO.
Dividends
In November 2014, the Board of Directors declared its first quarterly dividend of $0.175 per share of common stock outstanding. The $4.6 million of dividends were paid in December 2014. The Company declared a total of $0.70 per share in dividends in 2015, totaling payments of approximately $13.7 million for the year.
On December 14, 2015, the Board of Directors declared a quarterly cash dividend of $0.175 per common share to stockholders of record as of the close of business on January 11, 2016. On February 4, 2016, the Board of Directors suspended the Company’s cash dividend program. The Company paid its previously declared fourth quarter dividend on February 11, 2016. Any future determination to declare and pay dividends will be made at the discretion of the Board, after taking into account the Company’s financial results, capital requirements and other factors it may deem relevant.
Stock Repurchases
During the year ended December 27, 2015, the Company repurchased 121,168 shares of common stock for an aggregate purchase price of $1.4 million. The Company has $28.6 million of remaining authorization under the stock repurchase plan at December 27, 2015.

40




Acquisitions 2015
On May 21, 2015, the Company purchased The San Diego Union-Tribune (f/k/a the U-T San Diego) and nine community weeklies and related digital properties in San Diego County, California. The stated purchase price was $85 million, consisting of $73 million in cash, subject to a working capital adjustment, and $12 million in Tribune Publishing common stock (700,869 shares). The Company financed the $73 million cash portion of the purchase price, less a $2 million preliminary working capital adjustment at close, with a combination of cash-on-hand and funds available under the Company's existing Senior ABL Facility as well as the net proceeds of the Senior Term Facility increase described below. In the year ended December 27, 2015, the Company received the final working capital adjustment of $2.6 million in cash from the seller and the purchase price has been adjusted. As part of the acquisition, the Company became the sponsor of a single employer defined benefit plan that has and will require approximately $10.8 million in contributions in 2016.
Acquisitions 2014
On October 31, 2014, the Company announced the acquisition of six daily and 32 weekly suburban news and information brands from Wrapports, LLC for a total purchase price of $23.5 million, net of certain working capital and other closing adjustments. The acquired publications - which include the Aurora Beacon-News, The Elgin Courier-News, the Lake County News-Sun, The Naperville Sun, the Post-Tribune in Northwest Indiana, The Southtown Star and the 32 Pioneer Press weekly newspapers - became part of the diversified portfolio of the Chicago Tribune Media Group (CTMG), which operates the Chicago Tribune, RedEye, Chicago magazine, Hoy and other Chicago-based media brands.
In addition to the six daily publications that became part of Chicago Tribune Media Group, the 32 Pioneer Press weeklies include: Barrington Courier Review; Buffalo Grove Countryside; Deerfield Review; The Doings Clarendon Hills Edition; The Doings Hinsdale Edition; The Doings La Grange Edition; The Doings Oak Brook Edition; The Doings Weekly Edition; The Doings Western Springs Edition; Elmwood Park Elm Leaves; Evanston Review; River Forest Forest Leaves; Franklin Park Herald-Journal; Glencoe News; Glenview Announcements; Highland Park News; Lake Forester; Lake Zurich Courier; Libertyville Review; Lincolnshire Review; Lincolnwood Review; Morton Grove Champion; Mundelein Review; Niles Herald-Spectator; Norridge-Harwood Heights News; Northbrook Star; Oak Park Oak Leaves; Park Ridge Herald-Advocate; Skokie Review; Vernon Hills Review; Wilmette Life and Winnetka Talk.
On May 7, 2014, the Company acquired the remaining 50% outstanding general partnership interests of MCT from McClatchy News Services, Inc. and The McClatchy Company (collectively, “McClatchy”) for $1.2 million in cash and non-cash consideration for future services with an estimated fair value of $4.3 million. The fair value of the acquired interests was based upon management’s estimate of the fair values using the income approach. In estimating the fair value of the acquired assets and assumed liabilities, the fair value estimates were based on, but not limited to, expected future revenue and cash flows, expected future growth rates, and estimated discount rates. Prior to May 7, 2014, the Company accounted for its 50% interest in MCT as an equity method investment. In accordance with ASC Topic 805, “Business Combinations,” the Company’s preexisting equity interest was remeasured to its estimated fair value of $2.8 million using the income valuation approach and the Company recognized a gain of $1.5 million in the Consolidated and Combined Statements of Income in the year ended December 28, 2014. The aggregate purchase price of the remaining 50% equity interest in MCT and the estimated fair value of the Company’s preexisting 50% equity interest in MCT have been allocated to the assets acquired and liabilities assumed based upon the estimated fair values of each as of the acquisition date.
On May 1, 2014, the Company completed an acquisition of the issued and outstanding limited liability company interests of Capital-Gazette Communications, LLC and Landmark Community Newspapers of Maryland, LLC from Landmark Media Enterprises, LLC (the “Landmark Acquisition”) for $29.0 million in cash, net of certain working capital and other closing adjustments. The Landmark Acquisition expanded the Company’s breadth of coverage in Maryland and adjacent areas and includes The Capital in the Annapolis region and the Carroll County Times and their related publications. In connection with this acquisition, the Company incurred a total of $0.4 million of transaction costs, which were recorded in the Company’s Consolidated and Combined Statement of Income for the year ended December 28, 2014.
Senior Term Facility
On August 4, 2014, the Company entered into a credit agreement (the “Term Loan Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, and the lenders party thereto (the “Senior Term Facility”). The Senior Term Facility originally provided for loans (the “Term Loans”) in an aggregate principal amount of $350.0 million, which were issued at a discount of $3.5 million. Subject to certain conditions, without the consent of the then existing lenders (but subject to the receipt of commitments), the Senior Term Facility may be expanded (or a new term loan facility, revolving credit facility or letter of credit facility added) by an amount up to (i) the greater of $100.0 million, of which

41




$70.0 million was used related to the acquisition of The San Diego Union Tribune, and an amount as will not cause the net senior secured leverage ratio (i.e., consolidated total senior secured debt (net of certain cash and cash equivalents) to consolidated EBITDA, all as defined in the Term Loan Credit Agreement) after giving effect to such incurrence to exceed 2:1, plus (ii) an amount equal to all voluntary prepayments of the term loans borrowed under the Senior Term Facility on the Distribution Date and refinancing debt in respect of such loans, subject to certain conditions. As of December 27, 2015, the unamortized balance of the discount was $3.7 million. As of December 27, 2015, the unamortized balance of the debt issuance costs associated with the Term Loans was $9.1 million.
The Senior Term Facility will mature on August 4, 2021 (the “Term Loan Maturity Date”). The Term Loans amortize in equal quarterly installments in aggregate annual amounts equal to 1.25% of the original principal amount of the Senior Term Facility with the balance payable on the Term Loan Maturity Date. The first principal installment was due and paid on December 31, 2014. Additionally, the Senior Term Facility provides for the right of individual lenders to extend the maturity date of their loans upon the request of the Company without the consent of any other lender. The Term Loans may be prepaid, in whole or in part, without premium or penalty, except that (a) prepayments and certain refinancing of the Senior Term Facility prior to August 4, 2015 were subject to a prepayment premium of 1.0% of the principal amount prepaid and (b) lenders were compensated for redeployment costs, if any. Subject to certain exceptions and provisions for the ratable sharing with indebtedness secured on a pari passu basis with the Senior Term Facility, the Senior Term Facility will be subject to mandatory prepayment in an amount equal to:
100% of the net proceeds (other than those that are used to purchase certain assets within a specified time period) of certain asset sales and certain insurance recovery events;
100% of the net proceeds of the issuance or incurrence of indebtedness (other than indebtedness permitted to be incurred under the Senior Term Facility unless specifically incurred to refinance a portion of the Senior Term Facility); and
50% of annual excess cash flow for any fiscal year (beginning with the fiscal year ended December 27, 2015), such percentage to decrease to 25% on the attainment of a net senior secured leverage ratio of 1.25:1.00 and to 0% on the attainment of a net senior secured leverage ratio of 0.75:1.00. In addition, the Company will not be required to make an excess cash flow prepayment if such payment would result in available liquidity being less than $75.0 million. The Company does not expect to make an excess cash flow prepayment in 2016 for the 2015 fiscal year.
Tribune Publishing is the borrower under the Senior Term Facility. Each of Tribune Publishing’s wholly-owned domestic subsidiaries, subject to certain exceptions (collectively, the “Subsidiary Guarantors”), guarantee the payment obligations under the Senior Term Facility. All obligations of Tribune Publishing and each Subsidiary Guarantor under the Senior Term Facility are secured by the following: (a) a perfected security interest in substantially all present and after-acquired property consisting of accounts receivable, inventory and other property constituting the borrowing base (the “ABL Priority Collateral”), which security interest will be junior to the security interest in the foregoing assets securing the Senior ABL Facility (defined below); and (b) a perfected security interest in substantially all other assets of Tribune Publishing and the Subsidiary Guarantors (other than the ABL Priority Collateral and with certain other exceptions) (the “Term Loan Priority Collateral” and, together with the ABL Priority Collateral, the “Collateral”), which security interest will be senior to the security interest in the foregoing assets securing the Senior ABL Facility.
The interest rates applicable to the Term Loans will be based on a fluctuating rate of interest 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) 1.00%, plus a borrowing margin of 4.75%, or (ii) an alternate base rate, plus a borrowing margin of 3.75%. At December 27, 2015, the weighted average interest rate for the variable-rate debt outstanding was 5.75%. Customary fees will be payable in respect of the Senior Term Facility. The Senior Term Facility contains a number of covenants that, among other things, limit the ability of Tribune Publishing and its restricted subsidiaries, as described in the Term Loan Credit Agreement, to: incur more indebtedness; pay dividends; redeem stock or make other distributions in respect of equity; make investments; create restrictions on the ability of Tribune Publishing’s restricted subsidiaries that are not Subsidiary Guarantors to pay dividends to Tribune Publishing or make other intercompany transfers; create negative pledges; create liens; transfer or sell assets; merge or consolidate; enter into sale leasebacks; enter into certain transactions with the Company’s affiliates; and prepay or amend the terms of certain indebtedness. As of December 27, 2015, the Company was in compliance with the covenants of the Senior Term Facility. For details of the Senior Term Facility, see Note 11 of the Consolidated and Combined Financial Statements included elsewhere in this report.

42




Senior ABL Facility
On August 4, 2014, Tribune Publishing and the Subsidiary Guarantors, in their capacities as borrowers thereunder, entered into a credit agreement (the “ABL Credit Agreement”) with Bank of America, N.A., as administrative agent, collateral agent, swing line lender and letter of credit issuer, and the lenders party thereto (the “Senior ABL Facility”). The Senior ABL Facility provides for senior secured revolving loans and letters of credit of up to a maximum aggregate principal amount of $140.0 million (subject to availability under a borrowing base). Extensions of credit under the Senior ABL Facility will be limited by a borrowing base calculated periodically and described below. Up to $75.0 million of availability under the Senior ABL Facility is available for letters of credit and up to $15.0 million of availability under the Senior ABL Facility is available for swing line loans. The Senior ABL Facility also permits Tribune Publishing to increase the commitments under the Senior ABL Facility by up to $75.0 million. The “borrowing base” is defined in the ABL Credit Agreement as, at any time, the sum of (i) 85% of eligible accounts receivable (with such percentage reduced under certain circumstances), plus (ii) the lesser of (x) 10% of aggregate commitments and (y) 70% of the lower of cost or market value (determined based on the RISI index) of eligible inventory, plus (iii) qualified cash, minus (iv) availability reserves, which may include such availability reserves as the ABL Administrative Agent, in its permitted discretion, deems appropriate at such time. As of December 27, 2015, $110.0 million was available for borrowings under the Senior ABL Facility and $23.6 million of the availability supported outstanding undrawn letters of credit in the same amount.
The Senior ABL Facility will mature on August 4, 2019. Tribune Publishing and the Subsidiary Guarantors are the borrowers under the Senior ABL Facility. Tribune Publishing and the Subsidiary Guarantors guarantee the payment obligations under the Senior ABL Facility. Until the date that is one day before the maturity date of the Senior ABL Facility, at the option of the applicable borrower, the interest rates applicable to the loans under the Senior ABL Facility will be based on either (i) an adjusted London inter-bank offered rate (adjusted for reserve requirements), plus a borrowing margin of 1.50% or (ii) an alternate base rate, plus a borrowing margin of 0.50%. Customary fees will be payable in respect of the Senior ABL Facility, including commitment fees of 0.25% and letter of credit fees. The Senior ABL Facility contains a number of covenants that, among other things, limit or restrict the ability of Tribune Publishing and its restricted subsidiaries as described in the ABL Credit Agreement to: incur more indebtedness; pay dividends; redeem stock or make other distributions in respect of equity; make investments; create restrictions on the ability of Tribune Publishing’s restricted subsidiaries that are not Subsidiary Guarantors to pay dividends to Tribune Publishing or make other intercompany transfers; create negative pledges; enter into certain transactions with the Company’s affiliates; and prepay or amend the terms of certain indebtedness. As of December 27, 2015, we were in compliance with the covenants of the Senior ABL Facility. The weighted average interest rate for the variable rate debt is 5.75%. For details of the Senior ABL Facility, see Note 11 of the Consolidated and Combined Financial Statements included elsewhere in this report.
Letter of Credit Agreement
On August 4, 2014, Tribune Publishing and JPMorgan Chase Bank, N.A., as letter of credit issuer (the “L/C Issuer”) entered into a letter of credit agreement (the “Letter of Credit Agreement”). The Letter of Credit Agreement provides for the issuance of standby letters of credit of up to a maximum aggregate principal face amount of $30.0 million. The Letter of Credit Agreement permits the Company, at the sole discretion of L/C Issuer, to request to increase the amount available to be issued under the Letter of Credit Agreement up to an aggregate maximum face amount of $50.0 million. The Letter of Credit Agreement is scheduled to terminate on August 4, 2019. During the year ended December 27, 2015, the Company’s outstanding undrawn letter of credit was reduced from $27.5 million to $17.0 million against the Letter of Credit Agreement. As a result, the cash collateral requirement associated with the letter of credit was reduced by and the Company received, $10.5 million during the year from the cash collateral account. As of December 27, 2015, the $17.0 million undrawn letter of credit was outstanding against the Letter of Credit Agreement. The Letter of Credit Agreement was collateralized with $17.0 million of cash held in a specified cash collateral account. The specified cash account is required to remain as long as the undrawn letter of credit remains outstanding and is recorded in restricted cash in the Consolidated and Combined Financial Statements. For details of the Letter of Credit Agreement, see Note 11 of the Consolidated and Combined Financial Statements included elsewhere in this report.

43




Contractual Obligations
The table below represents Tribune Publishing’s contractual obligations as of December 27, 2015 (in thousands):
Contractual Obligations
Total
2016
2017
2018
2019
2020
Thereafter
 
 
 
 
 
 
 
 
Long-term debt (principal only)
$
400,706

$
21,090

$
21,090

$
21,090

$
21,090

$
21,090

$
295,256

Long-term capital lease
1,820

736

372

213

197

199

103

Interest on long-term debt (1)
221,105

22,757

21,462

20,230

18,951

17,876

119,829

TCO operating leases (2)
150,121

33,506

30,768

22,647

13,506

13,921

35,773

Third party operating leases (3)
109,407

23,778

20,598

14,623

11,941

10,503

27,964

Other purchase obligations (4)
14,270

4,195

3,062

2,899

2,667

1,344

103

Total
$
897,429

$
106,062

$
97,352

$
81,702

$
68,352

$
64,933

$
479,028

(1)    Represents the annual interest on the variable rate debt which bore interest at 5.75% per annum at December 27, 2015.
(2)
In 2013, Tribune Publishing entered into related party lease agreements with the newly established TCO real estate holding companies to lease back the land and buildings that were transferred on December 21, 2012. See Note 5 of the Consolidated and Combined Financial Statements for further information regarding the transfer of real estate assets to TCO real estate holding companies and the related party leases.
(3)
The Company leases certain equipment and office and production space under various operating leases. Net lease expense for Tribune Publishing was $60.5 million, $64.4 million and $18.8 million for the years ended December 27, 2015, December 28, 2014 and December 29, 2013, respectively. Prior to the Distribution Date, net lease expense excludes lease costs incurred by TCO and Tribune Affiliates and allocated to Tribune Publishing.
(4)    Other purchase obligations relates to the purchase of transportation and news and market data services.
The contractual obligations table does not include actuarially projected minimum funding requirements of the San Diego Pension Plan. The actuarially projected minimum funding requirements contain significant uncertainties regarding the assumptions involved in making such minimum funding projections, including interest rate levels, asset returns, mortality and cost trends, and what, if any, changes will occur to regulatory requirements. While subject to change, the minimum contribution amounts for the San Diego Pension Plan for 2016, under current regulations, are estimated to be $10.8 million. Further contributions are currently projected for 2017 through 2025, but amounts cannot be reasonably estimated.
The contractual obligations table does not include newsprint agreements. Tribune Publishing is a party to various arrangements with third party suppliers to purchase newsprint. Under these arrangements, Tribune Publishing agreed to purchase 179,000 metric tons of newsprint in 2016, subject to certain limitations, based on market prices at the time of purchase. The price and timing of such purchases is not determinable.
As of December 27, 2015, Tribune Publishing had standby letters of credit outstanding in the amount of $23.6 million.
Critical Accounting Policies
Tribune Publishing’s significant accounting policies are summarized in Note 3 to the Consolidated and Combined Financial Statements. These policies conform with U.S. GAAP and reflect practices appropriate to Tribune Publishing’s businesses. The preparation of the Company’s Consolidated and Combined Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the Consolidated and Combined Financial Statements and accompanying Notes thereto. The Company bases its estimates on past experience and assumptions that management believes are reasonable under the circumstances and evaluates its policies, estimates and assumptions on an ongoing basis.
Revenue Recognition—Tribune Publishing’s primary sources of revenue are from the sales of advertising space in published issues of its newspapers and other publications and on websites owned by, or affiliated with, Tribune Publishing; distribution of preprinted advertising inserts; sales of newspapers, digital subscriptions and other publications to distributors and individual subscribers; and the provision of commercial printing and delivery services to third parties, primarily other newspaper companies. Newspaper advertising revenue is recorded, net of agency commissions, when advertisements are published in newspapers and when inserts are delivered. Website advertising revenue is recognized ratably over the contract period or as services are delivered, as appropriate. Commercial printing and delivery services revenues, which are included in

44




other revenues, are recognized when the product is delivered to the customer or as services are provided, as appropriate. Proceeds from publication subscriptions are deferred and are included in revenue on a pro rata basis over the term of the subscriptions. Tribune Publishing records rebates when earned as a reduction of advertising revenue.
Accounts Receivable and Allowance for Doubtful Accounts—Tribune Publishing’s accounts receivable are primarily due from advertisers and circulation-related accounts. Credit is extended based on an evaluation of each customer’s financial condition, and generally collateral is not required. Tribune Publishing maintains an allowance for uncollectible accounts. The allowance for uncollectible accounts is determined based on historical write-off experience and any known specific collectability exposures. At December 27, 2015 and December 28, 2014, Tribune Publishing’s allowance for accounts receivable was $17.6 million and $16.7 million, respectively.
Inventories—Through December 27, 2015, inventories are stated at the lower of cost or market. Newsprint cost is determined using the first-in, first-out (“FIFO”) basis. Beginning in the first quarter of 2016, upon the adoption of Accounting Standards Update (“ASU”) 2015-11, Topic 330, inventories will be stated at the lower of cost or net realizable value. See “New Accounting Standards” below for more information on ASU 2015-11.
Properties—Property, plant and equipment are stated at cost less accumulated depreciation. The Company computes depreciation using the straight-line method over the following estimated useful lives:
Building and building improvements
8 years - 40 years
Leasehold improvements
3 years - 15 years
Machinery and equipment
2 years - 15 years
Computer software
2 years - 10 years
Computer hardware
3 years - 8 years
Vehicles
2 years - 8 years
Furniture, fixtures and other
3 years - 10 years
Leasehold improvements are amortized over the shorter of the useful life or the 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 capital lease are depreciated over the shorter of the term of the lease or the useful lives of the assets.
Goodwill and Other Intangible AssetsGoodwill and other intangible assets are summarized in Note 8 to the Consolidated and Combined Financial Statements. Tribune Publishing 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. The Company has determined that the reporting units are the nine newspaper media groups and the aggregate of its national businesses.
Tribune Publishing’s annual impairment review measurement date is in the fourth quarter of each year. The estimated fair value of goodwill is determined using many critical factors, including projected future operating cash flows, revenue and market growth, market multiples, discount rates and consideration of market valuations of comparable companies. The estimated fair values of other intangible assets subject to the annual impairment review are calculated based on projected future discounted cash flow analysis. The development of estimated fair values requires the use of assumptions, including assumptions regarding revenue and market growth as well as specific economic factors in the publishing industry such as operating margins and royalty rates for newspaper mastheads. These assumptions reflect Tribune Publishing’s best estimates, but these items involve inherent uncertainties based on market conditions generally outside of Tribune Publishing’s control.
Based on the assessments performed as of December 27, 2015 and December 28, 2014, the estimated fair value of all the Company’s reporting units exceeded their carrying amounts for both years. In years prior to 2014, such assessments were performed by TCO and the estimated fair value exceeded their carrying value.
Impairment Review of Long-Lived AssetsTribune Publishing 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 is considered impaired when the projected future undiscounted cash flows to be generated from the asset or asset group over its remaining depreciable life are

45




less than its current carrying value.
Pension PlansWith the acquisition of The San Diego Union-Tribune, the Company became the sponsor of a pension plan (“San Diego Pension Plan”). 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 position of the plan. 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.
Other Postretirement Benefits—Tribune Publishing provides certain health care and life insurance benefits for retired Tribune Publishing employees through postretirement benefit plans. 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.
Tribune Publishing recognizes the overfunded or underfunded status of its postretirement benefit plans as an asset or liability in its Consolidated and Combined 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 and Combined Financial Statements were actuarially determined based on amounts for eligible Tribune Publishing employees.
Contributions made to union-sponsored plans are based upon collective bargaining agreements. See Note 15 to the Consolidated and Combined Financial Statements for further information.
Self-Insurance—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 self-insured workers’ compensation costs and automobile and general liability claims.
Deferred Revenue—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—In accordance with U.S. GAAP, the Company recognizes stock-based compensation cost in its Consolidated and Combined Statements of Income. Stock-based compensation costs are measured on the grant date based on the estimated fair value of the award and recognized on a straight-line basis over the requisite service period for the entire award.
The Company utilizes the Black-Scholes-Merton option pricing model to estimate the fair value of stock awards and the resulting stock-based compensation expense. The use of the Black-Scholes-Merton model requires the use of estimates such as an expected term of the awards and volatility of the common stock. Furthermore, management is required to estimate future forfeitures when recording the stock-based compensation expense. Although management believes the assumptions used to estimate stock-based compensation expense are reasonable, actual results may be materially different. See Note 16 to the Consolidated and Combined Financial Statements for further discussion.
Income TaxesProvisions 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 from those used previously in determining deferred income tax assets and liabilities. Taxable income reported to the taxing jurisdictions in which Tribune Publishing operates often differs from pretax earnings because some items of income and expense are recognized in different time periods for income tax purposes. Tribune Publishing provides deferred taxes on these temporary differences in accordance with ASC Topic 740, “Accounting for Income Taxes.” 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 consolidated and combined tax provision and related accruals include estimates of the potential taxes and related interest as deemed appropriate. These estimates are reevaluated and adjusted, if appropriate, on a quarterly basis. Although management believes its estimates and judgments are reasonable, the resolution of Tribune Publishing’s tax issues are unpredictable and could result in tax liabilities that are significantly higher or lower than that which has been provided by Tribune Publishing.

46




The Company’s effective tax rate and income tax expense could vary from estimated amounts due to future impacts of various items, including changes in tax laws, tax planning and forecast financial results. Management believes current estimates are reasonable; however, actual results can differ from these estimates.
New Accounting Standards
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Topic 842, Leases. This standard will require the recognition of lease assets and lease liabilities by lessees for operating leases. This ASU is effective for reporting periods beginning after December 15, 2018, with early adoption permitted. The Company is currently in the process of assessing the impact of ASU 2016-02 on the Company’s results of operations, financial condition or cash flows.
In November 2015, the FASB issued ASU 2015-17, Topic 740, Income Taxes – Balance Sheet Classification of Deferred Taxes. This standard was issued to simplify the presentation of deferred income taxes by requiring that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. This ASU is effective for reporting periods beginning after December 15, 2016. Early adoption is permitted as of the beginning of an interim or annual period. The Company adopted ASU 2015-17 as of the beginning of the fourth quarter of 2015 and ASU 2015-17 has been applied retrospectively to all periods presented. The adoption of this standard resulted in a reclassification of $38.2 million of current deferred tax assets and $1.0 million in other obligations to non-current deferred tax assets on the Company’s Consolidated and Combined Balance Sheet for the year ended December 28, 2014, but had no effect on the Company’s results of operations, financial condition or cash flows.
In September 2015, the FASB issued ASU 2015-16, Topic 805, Simplifying the Accounting for Measurement-Period Adjustments, which provides guidance to entities that have provisional amounts for items in a business combination for which the accounting is incomplete by the end of the reporting period in which the combination occurs and during the measurement period have an adjustment to provisional amounts recognized. This ASU is effective for reporting periods beginning after December 15, 2015. The Company adopted ASU 2015-16 in the third quarter of 2015. The adoption of ASU 2015-16 has been immaterial to the Company's consolidated financial statements.
In July 2015, the FASB issued ASU 2015-11, Topic 330, Simplifying the Measurement of Inventory. This ASU requires an entity to measure inventory at the lower of cost or net realizable value, which consists of the estimated selling prices in the ordinary course of business, less reasonably predictable cost of completion, disposal, and transportation. This ASU is effective for reporting periods beginning after December 15, 2016. Early adoption is permitted. The guidance is to be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. The Company will adopt the standard in the first quarter of 2016. The Company believes the adoption of this standard will have no effect on its consolidated financial statements.
In May 2015, the FASB issued ASU 2015-07, Topic 820, Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent). The new standard removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. The Company maintains investments in certain venture capital funds. These venture capital investments are not material to the Company’s financial position or results of operations. This ASU is effective for reporting periods beginning after December 15, 2015. It is to be applied retrospectively and early adoption is permitted. The Company adopted the standard in the fourth quarter of 2015. The standard impacts disclosure only and has no affect on the Company’s consolidated financial statements.
In April 2015, the FASB issued ASU 2015-05, Customer's Accounting for Fees Paid in a Cloud Computing Arrangement, which provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If the arrangement does not include a software license, the customer should account for a cloud computing arrangement as a service contract. This ASU is effective for reporting periods beginning after December 15, 2015. The Company will adopt the standard in the first quarter of 2016. The Company believes that the adoption of this standard will have no effect on its consolidated financial statements.
In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs. This ASU requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. This ASU is effective for reporting periods

47




beginning after December 15, 2015 and interim periods therein. It is to be applied retrospectively and early adoption is permitted. ASU 2015-03 affects presentation only and will have no effect on the Company's financial condition, results of operations or cash flows. The Company adopted the standard as of the fourth quarter of 2015. The adoption of this standard resulted in a reclassification of deferred financing costs which caused a $7.8 million reduction to both debt issuance costs and other long-term assets and long-term debt on the Consolidated and Combined Balance Sheet as of December 28, 2014, but it had no effect on the Company’s results of operations, financial condition or cash flows.
In May 2014, the FASB issued ASU 2014-09, Topic 606, Revenue from Contracts with Customers, concerning revenue recognition. The new standard supersedes a majority of existing revenue recognition guidance under U.S. GAAP, and requires a company to recognize revenue when it transfers goods or services to a customer in an amount that reflects the consideration to which a company expects to be entitled. Companies may need to use more judgment and make more estimates while recognizing revenue, which could result in additional disclosures to the financial statements. ASU 2014-09 allows for either a “full retrospective” adoption or a “modified retrospective” adoption. In August 2015, the FASB issued ASU 2015-14 to defer the effective date of ASU 2014-09 to reporting periods beginning after December 15, 2017 and to permit companies to voluntarily adopt the new standard as of the original effective date. The Company expects to adopt this standard on January 1, 2018. The Company is currently evaluating the impact this guidance will have on revenue recognition once implemented and the implementation approach to be used.





Non-GAAP Measures
Adjusted EBITDAAdjusted EBITDA is defined as net income before income taxes, interest income, interest expense, depreciation and amortization, income and losses from equity investments, corporate management fee from TCO, pension credits, pension expense, stock-based compensation, certain unusual and non-recurring items (including spin-related costs), intercompany rent and reorganization items.
 
 
Year Ended
(In thousands)
 
December 27, 2015
 
% Change
 
December 28, 2014
 
% Change
 
December 29, 2013
Net income (loss)
 
$
(2,765
)
 
*
 
$
42,288

 
(55.1
%)
 
$
94,094

 
 
 
 
 
 
 
 


 
 
Income tax expense (benefit)
 
(430
)
 
*
 
34,453

 
(51.5
%)
 
70,992

Loss on equity investments, net
 
1,164

 
(1.4
%)
 
1,180

 
(0.6
%)
 
1,187

Gain on investment transaction
 

 
*
 
(1,484
)
 
*
 

Interest expense (income), net
 
25,972

 
*
 
9,801

 
*
 
(14
)
Reorganization items, net
 
1,026

 
*
 
464

 
71.9
%
 
270

 
 
 
 
 
 
 
 

 
 
Income from operations
 
24,967

 
(71.2
%)
 
86,702

 
(47.9
%)
 
166,529

 
 
 
 
 
 
 
 

 
 
Depreciation and amortization
 
54,633

 
70.3
%
 
32,089

 
12.9
%
 
28,431

Allocated depreciation (1)
 

 
*
 
11,707

 
(31.6
%)
 
17,127

Allocated corporate management fee
 

 
*
 
21,871

 
(25.7
%)
 
29,450

Spin-related, restructuring and acquisition costs