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EX-32 - EXHIBIT 32 - Tribune Publishing Coa2016q410kexhibit32.htm
EX-31.2 - EXHIBIT 31.2 - Tribune Publishing Coa2016q410kexhibit312.htm
EX-31.1 - EXHIBIT 31.1 - Tribune Publishing Coa2016q410kexhibit311.htm
EX-23.2 - EXHIBIT 23.2 - Tribune Publishing Coa2016q410kexhibit232.htm
EX-23.1 - EXHIBIT 23.1 - Tribune Publishing Coa2016q410kexhibit231.htm
EX-21.1 - EXHIBIT 21.1 - Tribune Publishing Coa2016q410kexhibit211.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 25, 2016 
 
OR
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 
Commission File No. 001-36230 
TRONC, INC.
(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
 
The NASDAQ Stock Market LLC
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 $354,462,039 based upon the closing market price of $13.64 per share of Common Stock on the Nasdaq Global Select Market as of June 24, 2016.
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 6, 2017
Common Stock, par value $0.01 per share
 
36,441,443
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 2017 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K.




 
 
TRONC, INC.
 
 
 
 
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: changes in advertising demand, circulation levels and audience shares; competition and other economic conditions; our ability to develop and grow our online businesses; changes in newsprint price; our ability to maintain effective internal control over financial reporting; concentration of stock ownership among our existing directors and principal stockholders whose interests may differ from those of other stockholders; and other events beyond our control that may result in unexpected adverse operating results, including those discussed in 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
tronc, Inc., formerly Tribune Publishing Company, was formed as a Delaware corporation on November 21, 2013. tronc, Inc. together with its subsidiaries (collectively, “tronc,” or the “Company”) is a media company rooted in award-winning journalism, which operates over 150 titles in nine of the nation’s largest markets. tronc develops unique and valuable content across its vast media portfolio, which has earned a combined 93 Pulitzer Prizes and is committed to informing and inspiring a growing average monthly audience of 57 million. The Company’s diverse portfolio of iconic news and information brands are in markets including Los Angeles and San Diego, Ca.; Chicago, Il.; Fort Lauderdale and Orlando, Fl.; Baltimore, Md.; Hartford, Ct.; Allentown, Pa.; and Newport News, Va. tronc also offers an array of customized marketing solutions, and publishes a number of niche products, including Hoy and El  Sentinel, making tronc the country’s largest Spanish-language publisher.
The Company’s results of operations, when examined on a quarterly basis, reflect the seasonality of tronc’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.
During the second quarter of fiscal 2016, tronc began managing its business as two distinct segments, troncM and troncX. troncM is comprised of the Company’s media groups excluding their digital revenues and related digital expenses, except digital subscription revenues when bundled with a print subscription. troncX includes the Company’s digital revenues and related digital expenses from local websites and mobile applications, digital only subscriptions, as well as Tribune Content Agency (“TCA”), forsalebyowner.com and Motiv8. Accordingly, the Company changed its segment reporting to two reportable segments. The prior periods have been revised to reflect the change in reportable segments. Prior to the second quarter of fiscal 2016, tronc was managed by its chief operating decision maker, as defined by ASC Topic 280, as one business and one reportable segment. For further information regarding the Company’s segments, see Item 7-Management’s Discussion and Analysis of Financial Condition and Results of Operations-Results of Operations-Segments.
troncM
troncM’s media groups include the Chicago Tribune Media Group, the Los Angeles Times Media Group, the San Diego Media Group, the Sun Sentinel Media Group, the Orlando Sentinel Media Group, The Baltimore Sun Media Group, the Hartford Courant Media Group, the Morning Call Media Group and the Daily Press Media Group. tronc’s major daily newspapers have served their respective communities with local, regional, national and international news and information

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for more than 150 years. The Hartford Courant is the nation’s oldest continuously published newspaper and celebrated its 250th anniversary in October 2014.
In the year ended December 25, 2016, 49.4% of troncM’s operating revenues were derived from advertising. These revenues were generated from the sale of advertising space in published issues of the newspapers and from the delivery of preprinted advertising supplements. Approximately 35.0% of operating revenues for the year ended December 25, 2016 were generated from the sale of newspapers and other publications to individual subscribers or to sales outlets that re-sell the newspapers. The remaining 15.6% of operating revenues for the year ended December 25, 2016 were generated from the provision of commercial printing and delivery services to other newspapers, direct mail advertising and services, and other related activities.
Newspaper print advertising is typically in the form of display, classified or preprint advertising. Advertising and marketing services revenues are comprised of three basic categories: retail, national and classified. Retail is a category of customers who tend to do business directly with the 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.
Circulation revenue results from the sale of print editions of newspapers to individual subscribers and the sale of print editions of newspapers to sales outlets that re-sell the newspapers.
Other revenues are derived from commercial printing and delivery services provided to other newspapers, direct mail advertising and services and other related activities. The Company contracts with a number of national and local newspapers to both print and distribute their respective publications in local markets where it is a newspaper publisher. In some instances where it prints publications, it also manages and procures newsprint, ink and plates on their behalf. These arrangements allow the Company to leverage its investment in infrastructure utilized for its own publications. As a result, these arrangements tend to contribute incremental profitability and revenues. The Company currently distributes national newspapers (including The New York Times, USA Today, and The Wall Street Journal) in its local markets under multiple agreements. Additionally, in Los Angeles, Chicago, Hartford and Fort Lauderdale, the Company provides some or all of these services to other local publications.
troncM Products and Services
troncM’s product mix consists of three publication types: (i) daily newspapers, (ii) weekly newspapers and (iii) niche publications and direct mail. The key characteristics of each of these types of publications are summarized in the table below.
 
Daily Newspapers
 
Weekly Newspapers
 
Niche Publications
 
 
 
 
 
 
Consumer 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
tronc Income:
Revenue from advertisers, subscribers, rack/box sales
 
Paid: Revenue from advertising, subscribers, rack/box sales
 
Paid: Revenue from advertising, rack/box sales
 
 
 
Free: Advertising revenue only
 
Free: Advertising revenue only
As of December 25, 2016, troncM’s prominent print publications included:
Media Group
 
City
 
Masthead
 
Circulation Type
 
Paid or Free
Chicago Tribune Media Group
 
 
 
 
 
 
Chicago, IL
 
Chicago Tribune
 
Daily
 
Paid
 
 
Chicago, IL
 
Chicago Magazine
 
Monthly
 
Paid
 
 
Chicago, IL
 
Hoy
 
Weekly
 
Free
 
 
Chicago, IL
 
RedEye
 
Daily
 
Free
 
 
 
 
 
 
 
 
 

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Media Group
 
City
 
Masthead
 
Circulation Type
 
Paid or Free
Los Angeles Times Media Group
 
 
 
 
 
 
Los Angeles, CA
 
Los Angeles Times
 
Daily
 
Paid
 
 
Los Angeles, CA
 
Hoy Los Angeles
 
Weekly
 
Free
San Diego Media Group
 
 
 
 
 
 
San Diego, CA
 
The San Diego Union-Tribune
 
Daily
 
Paid
 
 
San Diego, CA
 
Hoy San Diego
 
Weekly
 
Free
Sun Sentinel Media Group
 
 
 
 
 
 
Broward County, FL, Palm Beach County, FL
 
Sun Sentinel
 
Daily
 
Paid
 
 
Broward County, FL, Palm Beach County, FL
 
el Sentinel

 
Weekly
 
Free
Orlando Sentinel Media Group
 
 
 
 
 
 
Orlando, FL
 
Orlando Sentinel
 
Daily
 
Paid
 
 
Orlando, FL
 
el Sentinel
 
Weekly
 
Free
The Baltimore Sun Media Group
 
 
 
 
 
 
Baltimore, MD
 
The Baltimore Sun
 
Daily
 
Paid
 
 
Annapolis, MD
 
The Capital
 
Daily
 
Paid
 
 
Westminster, MD
 
Carroll County Times
 
Daily
 
Paid
Hartford Courant Media Group
 
 
 
 
 
 
Middlesex County, CT, Tolland County, CT, Hartford County, CT
 
The Hartford Courant
 
Daily
 
Paid
Daily Press Media Group
 
 
 
 
 
 
Newport News, VA (Peninsula)
 
Daily Press
 
Daily
 
Paid
The Morning Call Media Group
 
 
 
 
 
 
Lehigh Valley, PA
 
The Morning Call
 
Daily
 
Paid
troncM Acquisitions
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 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 7 of the Consolidated and Combined Financial Statements.
troncX
troncX is comprised of the Company’s digital revenues and related digital expenses from more than 130 digital platforms online and mobile applications, which collectively attracted more than 57 million average monthly unique visitors during the fourth quarter of 2016 based on the comScore Multi-platform Media Report for such period. troncX also includes digital only subscriptions to the Company’s newspapers as well as TCA, forsalebyowner.com and Motiv8.
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 news and information sources, TCA delivers a daily news service and syndicated premium content to 2,100 media and digital information publishers in over 75 countries. Tribune News Service delivers the best material from 70 leading companies, including Los Angeles Times, Chicago Tribune, Bloomberg News,

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Miami Herald, The Dallas Morning News, Seattle Times and The Philadelphia Inquirer. Tribune Premium Content syndicates columnists such as Leonard Pitts, 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, Inc. and many more. TCA traces its roots to 1918.
forsalebyowner.com is a national consumer-to-consumer focused real estate website. The majority of the revenue generated by forsalebyowner.com is generated through its website. but approximately one-third is generated through a 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 list their homes with other national websites such as Zillow and Realtor.com as well as their local multiple listing service (“MLS”).
Motiv8 is a full-service direct response, content solution and performance marketing agency. Motiv8 services include direct response advertising, marketing strategy, DRTV, direct response radio, creative production, printing and fulfillment, custom websites, landing pages, interactive advertising, outdoor advertising, email marketing and marketing optimization.
In the year ended December 25, 2016, 82.1% of troncX’s operating revenues were derived from advertising. These revenues were generated from the sale of advertising space on interactive websites and from digital marketing services. Digital advertising can be in the form of display, banner ads, advertising widgets, coupon ads, video, search advertising and linear ads placed on tronc and affiliated websites. Digital marketing services include development of mobile websites, search engine marketing and optimization, social media account management and content marketing for its customers’ web presence for small to medium size businesses.
The remaining 17.9% of operating revenues for the year ended December 25, 2016 were generated from the sale of digital content and other related activities.
troncX Products and Services
As of December 25, 2016, the Company’s prominent websites include:
Websites
www.tronc.com
www.orlandosentinel/elsentinel.com
www.chicagotribune.com
www.baltimoresun.com
www.chicagomag.com
www.capitalgazette.com
www.vivelohoy.com
www.carrollcountytimes.com
www.redeyechicago.com
www.courant.com
www.latimes.com
www.dailypress.com
www.la.com
www.themorningcall.com
www.hoylosangeles.com
www.forsalebyowner.com
www.sandiegouniontribune.com
www.TheDailyMeal.com
www.sun-sentinel.com
www.TheActiveTimes.com
www.sun-sentinel/elsentinel.com
www.TheCube.com
www.orlandosentinel.com
 
troncX Acquisitions
In December 2016, the Company completed acquisitions totaling $7.6 million of Spanfeller Media, a digital platform which includes The Daily Meal and The Active Times, and The Cube, an on-line site for high school sports videos. For further information regarding the Company’s acquisitions, see Note 7 of the Consolidated and Combined Financial Statements.

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In May 2014, tronc’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, which was subsequently sold back to Contend in March 2016.
Competition
Each of the Company’s nine 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. The Company faces competition for both advertising dollars and consumers’ dollars and attention.
The competition for advertising dollars comes from local, regional, and national newspapers, digital platforms that have content, search, aggregation and social media functionalities, magazines, broadcast, cable and satellite television, radio, direct mail, yellow pages, outdoor, 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, the Company provides editorial content on a wide variety of platforms and formats - from the printed daily newspaper to leading local websites; on social network sites such as Facebook, Apple News and Twitter; on smartphones and e-readers; on websites and blogs; in niche online publications and in e-mail newsletters. In fiscal year 2016, the Company continued to make significant progress in our digital transformation including:
Ensuring we have a solid, flexible and agile technology platform and product development approach;
Developing 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, tronc utilizes substantial quantities of various types of paper. During 2016, we consumed approximately 164 thousand metric tons of newsprint. We currently obtain the majority of our newsprint from three 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 6.7% of total operating expenses in fiscal year 2016.
Employees
As of December 25, 2016, we had approximately 6,458 full-time and part-time employees, including approximately 802 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

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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 of the common stock of the Company by Tribune Media Company, formerly Tribune Company (“TCO”), 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.
Restructuring and Spin-off from Tribune Media Company
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”). A joint plan of reorganization for the Debtors (the “Plan”) became effective and the Debtors emerged from Chapter 11 on December 31, 2012 (the “Effective Date”). Certain of the legal entities included in the Consolidated and Combined Financial Statements of tronc were Debtors or, as a result of the restructuring transactions undertaken pursuant to the Plan, are successor legal entities to legal entities that were Debtors (collectively, the “tronc Debtors”). As of August 12, 2016, all of the tronc Debtor cases have been closed by final decree issued by the Bankruptcy Court. The remaining Chapter 11 cases relate to Debtors and successor legal entities that are subsidiaries of TCO and the cases continue to be administered under the caption “In re: Tribune Media Company, et al.,” Case No. 08-13141.
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 and was organized as a new company. On August 4, 2014 (“Distribution Date”), TCO completed the spin-off of its principal publishing operations into tronc, by distributing 98.5% of the outstanding shares of tronc common stock to holders of TCO common stock and warrants. 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 tronc common stock were distributed to the TCO stockholders and holders of TCO warrants and TCO retained 381,354 shares of tronc common stock, representing 1.5% of outstanding common stock of tronc. In connection with the spin-off, tronc paid a $275.0 million cash dividend to TCO from a portion of the proceeds of a senior secured credit facility entered into by the Company.
Available Information
tronc maintains its corporate website at www.tronc.com. The Company makes available free of charge on www.tronc.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”).
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. The following risks relate to the Company’s business, the separation from TCO, indebtedness, the securities markets and ownership of the Company’s common stock. 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 largest 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

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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, websites, including news aggregation websites, social media websites and search engines, broadcasters, cable systems and networks, satellite television and radio, 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 one of many factors in determining advertising rates. For example, circulation levels for our newspapers have been declining.
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. Our advertising revenues may decline or may decline at a faster rate than anticipated.
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.
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 significant role in the advertising marketplace, which may cause 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.

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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 depends on market acceptance, consumer habits, pricing, 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 may 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, fraudulent traffic generated by “bots,” or malware proliferate.
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.
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 a portion of their advertising revenue from automotive, employment, and real estate classified advertising. In recent years, websites dedicated to automotive, employment, and real estate advertising have become 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 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, including news aggregation websites, social media websites and search engines, magazines, broadcast, cable and satellite television, radio, direct mail, yellow pages, outdoor billboards, and other media. Free daily newspapers are available 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. 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.

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Our primary strategy is to transition from a print-focused media company to a digital platform media company, and if we are not successful in our transition, our business, financial condition and prospects will be adversely affected.
Our ability to successfully transition from a print-focused media company to a digital platform media company depends on various factors, including, among other things, the ability to:
increase digital audiences;
increase the amount of time spent on our websites, the likelihood of users returning to our websites, and their level of engagement;
attract advertisers to our websites;
tailor our products for mobile and tablet devices;
maintain or increase online advertising rates;
exploit new and existing technologies to distinguish our products and services from those of competitors and develop new content, products and services; and
invest funds and resources in digital opportunities.
There are no assurances that we will be able to attract and retain employees with skill sets and knowledge base needed to successfully operate in digital business structure, that our sales force will be able to effectively sell advertising in the digital advertising arena versus our historical print advertising business, or that we will be able to effect the operational changes necessary to transition to from a print-focused business to a digital-focused business. We may be limited in our ability to invest funds and resources in digital products, services or opportunities, and we may incur research and development costs in building, maintaining and evolving our technology infrastructure.
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. Our print circulation and circulation revenue may decline or may decline at a faster rate than anticipated.
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 2016, we generated approximately 8.3% 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, which may adversely impact our results of operations.

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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. We plan to continue our cost management efforts. If we do not achieve expected savings, are unable to implement additional cost-control measures, 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 6.7% of our total operating expenses in 2016. The price of newsprint has historically been subject to change, 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 have had and could continue to 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

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include, without limitation, billing, website and database management, customer support, editorial content management, advertisement and circulation serving and management systems, information technology and communications systems, print and insert production systems, and internal financial systems. Some of these systems and/or support thereof are 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.
Our business, operating results and reputation may be negatively impacted and we may be subject to legal and regulatory claims if there is a loss, destruction, disclosure, misappropriation or alteration of or unauthorized access to data owned or maintained by us, or if we are the subject of a significant data breach or cyberattack.
We rely on our information technology and communications systems to manage our business data, including communications, news and advertising content, digital products, order entry, fulfillment and other business processes. Attempts to compromise information technology and communications systems occur regularly across many industries and sectors, and we may be vulnerable to security breaches beyond our control. Moreover, the techniques used to attempt attacks are constantly changing. As cyberattacks become increasingly sophisticated, and as tools and resources become more readily available to malicious third parties, there can be no guarantee that our actions, security measures and controls designed to prevent, detect or respond to intrusion, to limit access to data, to prevent destruction, alteration, or exfiltration of data, or to limit the negative impact from such attacks, can provide absolute security against compromise. As a result, our business data, communications, news and advertising content, digital products, order entry, fulfillment and other business processes may be lost, destroyed, disclosed, misappropriated, altered or accessed without consent.
A significant breach or successful attack could result in significant remediation costs, including repairing system damage, engaging third-party experts, deploying additional personnel, training employees, and compensation or incentives offered to third parties whose data has been compromised. Breaches of information security may lead to lost revenues resulting from a loss in competitive advantage due to the unauthorized disclosure, alteration, destruction or use of business data, the failure to retain or attract customers, the disruption of critical business processes or information technology systems, and the diversion of management’s attention and resources. Moreover, such disruptions and breaches may result in adverse media coverage, which may harm our reputation. We may be subject to legal claims or legal proceedings, including regulatory investigations and actions, and related legal fees, as well as potential settlements, judgments and fines. We maintain insurance, but the coverage and limits of our insurance policies may not be adequate to reimburse us for losses caused by security breaches.
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, employee and other sensitive data, such as names, email addresses, addresses, personal health information, social security numbers, 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, users or employees, cause interruption in our operations, or damage our computers or those of our customers or users. As a result of any such breaches, we may be subject to legal claims, and these events may 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

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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.
Our brands and reputation are key assets, and negative perceptions or publicity could adversely affect our business, financial condition and results of operations.
Our brands are key assets of the Company, and our success depends on our ability to preserve, grow and leverage the value of our brands. We believe that our brands are trusted by consumers and have excellent reputations for high-quality journalism and content. To the extent consumers perceive the quality of our products to be less reliable or our reputation is damaged, our business, financial condition or results of operations may be adversely affected.
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, employment-related matters, or claims that may provide for statutory damages, in addition to regulatory, environmental and other proceedings with governmental authorities and administrative agencies. Furthermore, the coverage, if any, and limits of our insurance policies may not be adequate to reimburse us for losses associated with lawsuits or investigations. 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.

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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 7 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 in excess of $12 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. These 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 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 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.
Strategic investments are an important component of our business strategy as well. Investments in other companies expose us to the risk that we may not be able to control the operations of the companies we have invested in, which could decrease the benefits we realize from a particular relationship. The success of these investments is dependent on companies we invest in, as well as other investors. We also are exposed to the risk that a company in which we have made an investment may encounter financial difficulties, which could lead to disruption of the company’s business or operations. Further, our ability to monetize the investments and/or the value we may receive upon any disposition may depend on the actions of the companies we have invested in and other investors. As a result, our ability to control the timing or process relating to a disposition may be limited, which could adversely affect the liquidity of these investments or the value we may ultimately attain upon disposition. If the value of the companies in which we invest declines, we may be required to record a charge to earnings. There can be no assurances that we will receive a return on these investments or that they will result in revenue growth or will produce equity income or capital gains in future years.

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If we are unable to successfully operate our business in new markets we may enter, our business, financial condition, and results of operations could be adversely affected.
Our future financial results will depend in part on our ability to profitably manage our business in new markets that we may enter. We plan to grow troncX’s revenues through digital news and content verticals, including through organic growth of our existing properties and acquisitions of and investments in related businesses. We have dedicated internal resources and effort to this business strategy. Furthermore, we have expended, and may in the future expend, significant resources and effort acquiring and implementing digital news and content verticals. We believe that digital news and content verticals offer opportunities for revenue growth but there can be no assurances that this business strategy will be successful. In order to successfully execute on our growth initiatives, we will need to, among other things, anticipate and react to market conditions and develop expertise in areas outside of our business’s traditional core competencies. If we are unable to manage and grow our business in new markets such as digital news and content verticals, our business, financial condition, and results of operations could be adversely affected.
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 and our pension obligations could increase.
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 a variety of factors, including weak performance of financial markets, declining interest rates, changes in assumptions or investments that do not achieve adequate or expected returns, and liquidity of the plan’s investments. 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 contributions represent more than 5% of the total contributions to each of the Chicago Newspaper Publishers Drivers’ Union Pension Plan (the “Drivers’ Plan”) and the GCIU Employer Retirement Benefit Plan (the “GCIU Plan”).
The trustees of the Drivers’ Plan and the GCIU Plan implemented rehabilitation plans in 2011 and 2009, respectively, as a result of the critical status of their respective plans. The rehabilitation plans were designed to exit critical status, in the case of the Drivers’ Plan, and forestall insolvency, in the case of the GCIU Plan. The Drivers’ Plan and the GCIU Plan have been certified by their respective actuaries to be in critical and declining status, with projected insolvency in 2035 and 2027, respectively. As of December 25, 2016, assuming our contributions from January 1, 2017 through 2025 in the case of the Drivers’ Plan, which is the expiration of its rehabilitation plan’s term, and through the projected insolvency date of 2027 in the case of the GCIU Plan, it is estimated that the Company’s contributions to these plans will total $69.6 million and $10.1 million, respectively, based on the actuarial assumptions utilized to develop the rehabilitation plans and assuming our staffing levels as of December 25, 2016 remain unchanged.

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The funding obligations under the rehabilitation plans described above are subject to change based on a number of factors, including the outcome of collective bargaining with the unions, actual returns on plan assets as compared to assumed returns, actions taken by trustees who manage the plan, changes in the number of plan participants, changes in the rate used for discounting future benefit obligations, as well as changes in legislation or regulations impacting funding and payment obligations. There can be no assurances that the funding obligations under the rehabilitation plans will not increase in the future or that the rehabilitation plans will be successful in preventing or forestalling the projected insolvency of the multiemployer plans. Trustees are required to review rehabilitation plans annually and, if necessary, revise them. Given the critical and declining status of the Drivers’ Plan and the GCIU Plan, and their projected insolvency in 2035 and 2027, respectively, the trustees may amend the current, or adopt new, rehabilitation plans with increased funding obligations. Trustees also may decide to terminate a multiemployer plan rather than permit it to become insolvent, and a termination would result in withdrawal liabilities for the participating employers.
The risks of participating in 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 or one of our multiemployer plans merges with another plan, we may incur a liability based on the unfunded status of the plan.
Labor strikes, lockouts and protracted negotiations can lead to business interruptions and increased operating costs.
As of December 25, 2016, 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 and members of our board of directors and certain of their affiliates have been named as defendants in a consolidated stockholder derivative lawsuit, and could be named in additional related litigation, all of which may require significant management time and attention, and result in significant legal expenses and may result in an unfavorable outcome, which could have a material adverse effect on our business, operating results and financial condition.
On June 1, 2016, Capital Structures Realty Advisors LLC, which purports to be a stockholder in the Company, filed a derivative lawsuit in the Delaware Court of Chancery against the members of the Company’s Board of Directors as of June 1, 2016, Dr. Patrick Soon-Shiong and Nant Capital LLC (“Nant Capital”).  The complaint has named the Company as a nominal defendant. The complaint alleges in relevant part that the Board breached its fiduciary duties by “refusing to negotiate with Gannett in good faith” and by “going forward with the stock sale” to Dr. Soon-Shiong and Nant Capital.  The complaint further alleges that Nant Capital and Dr. Soon-Shiong aided and abetted the Board’s breaches of fiduciary duty.  On June 6, 2016, a second derivative complaint was filed in the Delaware Court of Chancery by Monroe County Employees Retirement System, which purports to be a stockholder in the Company.  On June 15, 2016, a third, mirror image, derivative complaint was filed in the Delaware Court of Chancery on behalf of an individual named John Solak, who purports to be a stockholder in the Company.  All three cases were consolidated on June 17, 2016, under the caption In re Tribune Publishing Co. Stockholder Litigation, Consolidated C.A. No. 12401-VCS.  On June 20, 2016, a fourth, mirror image derivative

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complaint was filed in the Delaware Court of Chancery on behalf of an individual named B.W. Tomasino, who purports to be a stockholder in the Company.  That case was consolidated with the other three derivative cases on July 7, 2016.  On September 2, 2016, plaintiffs filed a consolidated complaint. The plaintiffs seek equitable and injunctive relief, including, without limitation, rescission of the stock sale to Dr. Patrick Soon-Shiong and Nant Capital, implementation of a special committee to consider Gannett and any other offer for the Company, money damages, and costs and disbursements, and such other relief deemed just and proper. The defendants deny any and all allegations of wrongdoing and intend to defend vigorously against the lawsuits.
Due to the inherent uncertainty in litigation, the Company can provide no assurance as to the outcome of the consolidated lawsuit or reasonably estimate a range of possible loss at this time.  Additionally, the Company maintains liability insurance for its directors and officers, which we expect to provide coverage for this litigation. However, there is no assurance that the Company will be successful in its defense of the consolidated lawsuit, and there is no assurance that the Company’s insurance coverage will be sufficient or that the Company’s insurance carriers will cover all claims in that litigation.
If we are not successful in our defense of the claims asserted in the consolidated lawsuit and those claims are not covered by insurance or exceed our insurance coverage, we may have to pay damage awards, indemnify our officers and directors from damage awards that may be entered against them and pay the costs and expenses incurred in defense of, or in any settlement of, such claims. Any such payments or settlement arrangements could be significant and have a material adverse effect on our business, financial condition, results of operations, or cash flows if the claims are not covered by our insurance carriers or if damages exceed the limits of our insurance coverage. Furthermore, regardless of the outcome of these claims, defending the litigation itself could result in substantial costs and divert management’s attention and resources, which could have a material adverse effect on our business, operating results, financial condition and ability to finance our operations.
Our ability to operate effectively could be impaired if we fail to attract, integrate and retain our senior management team.
We have, since the beginning of 2016, restructured our senior management, including appointing a new non-executive chairman and hiring a new chief executive officer, a new chief financial officer and a new chief technology officer. Our success depends, in part, upon the services of our senior management team. If we are unable to assimilate these new senior managers, if they fail to perform effectively, if we are unable to retain them, or if we are unable to attract additional qualified senior managers as needed, our strategic initiatives could be adversely impacted which could adversely affect our business, financial condition and results of operations.
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.
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 tronc, then TCO may be required to pay substantial U.S. federal income taxes, and tronc 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, tronc 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 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 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.

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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 tronc, 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 tronc 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.
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 in some cases, continue to be 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.
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 tronc 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.
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, such as high unemployment rates, weakness in housing and uncertainty regarding the national and state governments’ ability to resolve

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fiscal issues, may adversely impact advertiser and subscriber sentiment. These types of conditions could impair our ability to maintain and grow our advertiser and subscriber bases.
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, natural disasters and Internet outages. Such events can quickly result in significant declines in advertising revenue and significant increases in newsgathering costs. There are no assurances that our business continuity or disaster recovery plans are adequate or that they will be implemented successfully if any such events were to occur.
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, tronc 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. Under the Senior ABL Facility, up to $75 million of commitments are available for letters of credit and up to $15 million of commitments are available for swing line loans. 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 the ability of our Board of Directors to declare dividends;
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.

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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 our stockholders losing some or all of the value of their 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 declare 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.
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

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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 $0.3 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 favorably 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 tronc 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. As of December 30, 2016, the Bankruptcy Court entered final decrees collectively closing 106 of the Debtors’ Chapter 11 cases, including each of the tronc Debtors’ cases. See Note 2 to the Consolidated and Combined Financial Statements for further information.
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 were filed. As of December 30, 2016, only the appeals filed by Law Debenture and Deutsche Bank remain pending. Those appeals have been fully briefed before the Delaware District Court. See Item 3, Legal Proceedings and Note 2 to the Consolidated and Combined Financial Statements for further information. If Law Debenture and Deutsche Bank are successful in overturning the Confirmation Order, in whole or in part, our financial condition may be adversely affected.
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.

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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.
Concentration of ownership among our existing directors and principal stockholders may prevent new investors from influencing significant corporate decisions.
As of March 6, 2017, Merrick Media, LLC (“Merrick Media”) and its affiliate Merrick Venture Management, LLC (“Merrick Venture” and together with Merrick Media, the “Merrick Entities”) beneficially owned approximately 24.8% of our outstanding common stock, and Nant Capital, together with Dr. Patrick Soon-Shiong, beneficially owned approximately 15.9% of our outstanding common stock. Michael W. Ferro, Jr., the chairman of our Board of Directors, is the sole managing member of Merrick Venture, which is the sole manager of Merrick Media. Dr. Patrick Soon-Shiong, the vice chairman of our Board of Directors, is the indirect sole owner of Nant Capital. The interests of the Merrick Entities and Nant Capital may differ from those of the Company’s other stockholders. The Merrick Entities and Nant Capital are in the business of making investments in companies and maximizing the return on those investments. They currently may 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.
Subject to certain restrictions and covenants set forth in the purchase agreements pursuant to which certain of their respective shares were acquired, the Merrick Entities and Nant Capital and their affiliates may be able to significantly influence matters requiring approval of stockholders, including the election of directors, amendment of our certificate of incorporation and approval of significant corporate transactions. For additional information on the purchase agreements, see Note 17 to the Consolidated and Combined Financial Statements. The directors elected by these stockholders are able to make decisions affecting our capital structure, including decisions to issue additional capital stock, implement stock repurchase programs and incur indebtedness. This influence may have the effect of deterring hostile takeovers, delaying or preventing changes in control or changes in management, or limiting the ability of our other stockholders to approve transactions that they may deem to be in their best interest. In addition, our certificate of incorporation, as amended, provides that the provisions of Section 203 of the Delaware General Corporate Law, which relate to business combinations with interested stockholders, do not apply to us.
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 may be subject to the actions of activist shareholders, which could adversely impact our business.
Activist shareholders and other third parties have made, or may in the future make, strategic proposals, including unsolicited takeover proposals, suggestions or requested changes concerning the Company’s operations, strategy, governance, management, business or other matters. For example, in April 2016, the Company received an unsolicited proposal from Gannett Co., Inc. to acquire all outstanding shares of the Company common stock, and eventually the Company engaged in

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substantive discussions and due diligence with Gannett regarding a potential transaction. On November 1, 2016, the Company was informed that Gannett decided to terminate discussions regarding a potential business combination.
Responding to these campaigns or proposals can be costly and time-consuming, disrupt our operations, and divert the attention of management and our employees from our strategic initiatives. These activities can create perceived uncertainties as to our future direction, strategy, or leadership and may result in the loss of potential business opportunities, harm our ability to attract new investors and customers, and cause the price of our common stock to be depressed and have periods of volatility. We cannot predict, and no assurances can be given, as to the outcome or timing of any matters relating to the foregoing, and such matters may adversely affect our ability to effectively and timely implement our current initiatives, retain and attract key employees, and execute on our business strategy.
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.
Item 2. Properties
Our leased facilities are approximately 6.1 million square feet in the aggregate, of which approximately 4.6 million square feet is leased from third parties and approximately 1.5 million square feet is leased from subsidiaries of TCO pursuant to lease agreements containing arm’s-length terms, which were determined based on the recommendations of an independent licensed real estate appraiser.

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The Company currently has newspaper production facilities in California, Connecticut, Florida, Illinois, Maryland and Pennsylvania. Although the facilities are leased, tronc owns substantially all of the production equipment. There are 17 net leases for tronc’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, tronc leases approximately 318,000 square feet under a gross lease with a 5 year term, expiring in 2018. At Los Angeles Times Square, tronc leases approximately 277,000 square feet under a gross lease that provides for an initial term of 5 years, which expires in 2018, 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. As discussed in Note 19 of the Consolidated and Combined Financial Statements, we do not manage our assets at a segment level.
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.
Stockholder Derivative Lawsuits
On June 1, 2016, Capital Structures Realty Advisors LLC, which purports to be a stockholder in the Company, filed a derivative lawsuit in the Delaware Court of Chancery against the members of the Company’s Board of Directors as of June 1, 2016, Dr. Patrick Soon-Shiong and Nant Capital LLC (“Nant Capital” and, together with Dr. Soon-Shiong, the “Nant Defendants”). The complaint has named the Company as a nominal defendant (together with the Company’s Board of Directors, the “Tribune Defendants”).  The complaint alleges in relevant part that the Board breached its fiduciary duties by “refusing to negotiate with Gannett in good faith” and by “going forward with the stock sale” to Dr. Soon-Shiong and Nant Capital.  The complaint further alleges that Nant Capital and Dr. Soon-Shiong aided and abetted the Board’s breaches of fiduciary duty.  On June 6, 2016, a second derivative complaint was filed in the Delaware Court of Chancery by Monroe County Employees Retirement System, which purports to be a stockholder in the Company.  On June 15, 2016, a third, mirror image, derivative complaint was filed in the Delaware Court of Chancery on behalf of an individual named John Solak, who purports to be a stockholder in the Company.  All three cases were consolidated on June 17, 2016, under the caption In re Tribune Publishing Co. Stockholder Litigation, Consolidated C.A. No. 12401-VCS.  On June 20, 2016, a fourth, mirror image derivative complaint was filed in the Delaware Court of Chancery on behalf of an individual named B.W. Tomasino, who purports to be a stockholder in the Company.  That case was consolidated with the other three derivative cases on July 7, 2016.  The plaintiffs seek equitable and injunctive relief, including, without limitation, rescission of the stock sale to Dr. Patrick Soon-Shiong and Nant Capital, implementation of a special committee to consider Gannett and any other offer for the Company, money damages, and costs and disbursements, and such other relief deemed just and proper. The consolidated case is pending before Vice Chancellor Slights.
On September 2, 2016, plaintiffs filed a consolidated complaint. The defendants filed motions to dismiss on October 3, 2016.  The Tribune Defendants and Nant Defendants each filed a brief in support of their respective motions to dismiss under seal on December 21, redacted versions of which were made public on December 29, 2016. On January 4, 2017, plaintiffs filed a motion to strike all exhibits to the Tribune Defendants’ brief filed in support of their motion to dismiss as well as all references to those exhibits, and separately filed a motion to stay further briefing on the motions to dismiss pending the resolution of plaintiffs’ motion to strike. The motion to stay was granted by the court. The Tribune Defendants’ opposition to the motion to strike was filed on January 26, 2017, and plaintiffs’ reply to that opposition was filed on February 2, 2017. On March 3, 2017, the Court heard argument on the motion to strike, which was granted in part and denied in part.

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The Court further lifted the stay on briefing for the motions to dismiss and ordered the Tribune Defendants to file a revised brief in support of their motion to dismiss, which eliminates reference to certain documents appended an exhibits to the Tribune Defendants’ December 21 brief in support of their motion to dismiss. Additionally, the Court ordered the parties to discuss a new scheduling stipulation for the timing of briefing on the motions to dismiss. The defendants deny any and all allegations of wrongdoing and intend to defend vigorously against the lawsuits.  Due to the inherent uncertainty in litigation, however, the Company can provide no assurance as to the outcome of the matter or reasonably estimate a range of possible loss at this time.  Additionally, the Company maintains liability insurance for its directors and officers, which we expect to provide coverage for this litigation; however, there can be no guarantees as to coverage or whether any such policies will be adequate to cover all costs associated with this litigation. 
Tribune Company Bankruptcy
On December 31, 2012, Tribune Media Company, formerly Tribune Company, and 110 of its direct and indirect wholly-owned subsidiaries that had filed voluntary petitions for relief under Chapter 11 of title 11 of the United States Code in the United States Bankruptcy Court for the District of Delaware on December 8, 2008 (or on October 12, 2009, in the case of Tribune CNLBC, LLC) emerged from Chapter 11. Certain of the legal entities included in the Consolidated and Combined Financial Statements of tronc 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 were filed. The appellants sought, 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. Those appeals have been fully briefed before the Delaware District Court. 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 was denied on March 31, 2016.
As of August 12, 2016, the Bankruptcy Court had entered final decrees collectively closing 106 of the Debtors’ Chapter 11 cases, including the last one of the tronc Debtors’ cases. The remaining Chapter 11 cases relate to Debtors and successor legal entities that are subsidiaries of TCO. These cases have not yet been closed by the Bankruptcy Court, and certain claims asserted against the Debtors in the Chapter 11 cases remain unresolved. The cases continue to be administered under the caption “In re: Tribune Media Company, et al.,” Case No 08-13141.
The Company does not believe that any matters or proceedings presently pending will have a material adverse effect, individually or in the aggregate, on our consolidated financial position, results of operations or liquidity. However, legal matters and proceedings are inherently unpredictable and subject to significant uncertainties, some of which are beyond our control. As such, there can be no assurance that the final outcome of these matters and proceedings will not materially and adversely affect our consolidated financial position, results of operations or liquidity.
Item 4. Mine Safety Disclosures
Not applicable.

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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
The common stock of tronc, formerly Tribune Publishing, is traded on the The Nasdaq Global Select Market (“Nasdaq”) under the symbol “TRNC.” The Company transferred its stock exchange listing from the NYSE to Nasdaq in 2016. The common shares of the Company ceased trading on the NYSE on June 17, 2016 at the end of the day and begun trading the morning of June 20, 2016 on Nasdaq under the ticker symbol “TRNC.”
The following table sets forth the high and low sales prices of the common stock as reported by the NYSE and Nasdaq and dividends declared for the periods indicated:
 
 
High
 
Low
 
Dividends Declared
Year Ended December 25, 2016
 
 
 
 
 
 
Fourth Quarter
 
$
17.93

 
$
8.76

 
$

Third Quarter
 
$
17.80

 
$
12.59

 
$

Second Quarter
 
$
14.30

 
$
6.74

 
$

First Quarter
 
$
9.86

 
$
5.45

 
$

 
 
 
 
 
 
 
Year Ended 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

On March 6, 2017, the closing price for the Company’s common stock as reported on Nasdaq was $13.70. The approximate number of stockholders of record of the common stock at the close of business on such date was 13. A substantially greater number of holders of tronc’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.
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 25, 2016, and the Company has $28.6 million remaining authorization under the stock repurchase plan as of December 25, 2016.
tronc 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 23, 2016 (the last trading day of fiscal 2016) with the cumulative total return on the (1) Standard & Poor’s 500 Stock Index (the “S&P 500”), (2) the Standard & Poor’s Publishing Stock Index (the “S&P Publishing Index”) and (3) the 2015 group of peer companies selected on a line-of-business basis and weighted for market capitalization. In future periods, the Company will compare stock performance to the S&P Publishing Stock Index rather than a peer group. The 2015 group of peer companies, which includes A. H. Belo Corporation, The E. W. Scripps Company, Lee Enterprises, Incorporated, New Media Investment Group Inc. and The New York Times Company, is presented for comparative purposes. tronc is not included in the calculation of peer group cumulative total shareholder return on investment.




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 Index 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.
a2016q410k_chart-22465.jpg

27



Item 6. Selected Financial Data
 
 
Successor
 
 
Predecessor
 
 
As of and for the years ended
 
 
As of and for
 
As of and for the year ended
 
 
December 25, 2016
 
December 27, 2015
 
December 28, 2014
 
December 29, 2013
 
 
December 31, 2012
 
December 30, 2012
(In thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
Statement of Operations Data:
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating revenues
 
$
1,606,378

 
$
1,672,820

 
$
1,707,978

 
$
1,795,107

 
 
$

 
$
1,913,814

Operating expenses
 
1,553,265

 
1,647,853

 
1,621,276

 
1,628,578

 
 

 
1,872,158

Income from operations
 
53,113

 
24,967

 
86,702

 
166,529

 
 

 
41,656

Loss on equity investments, net
 
(690
)
 
(1,164
)
 
(1,180
)
 
(1,187
)
 
 

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

 

 
1,484

 

 
 

 

Write-down of investment
 

 

 

 

 
 

 
(6,141
)
Interest income (expense), net
 
(26,703
)
 
(25,972
)
 
(9,801
)
 
14

 
 

 
(31
)
Reorganization items, net
 
(259
)
 
(1,026
)
 
(464
)
 
(270
)
 
 
2,754,553

 
(1,446
)
Income (loss) before income tax expense (benefit)
 
25,461

 
(3,195
)
 
76,741

 
165,086

 
 
2,754,553

 
31,689

Income tax expense (benefit)
 
18,924

 
(430
)
 
34,453

 
70,992

 
 
(87,773
)
 
3,294

Net income (loss)
 
$
6,537

 
$
(2,765
)
 
$
42,288

 
$
94,094

 
 
$
2,842,326

 
$
28,395

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic net income (loss) per common share
 
$
0.19

 
$
(0.11
)
 
$
1.66

 
$
3.70

 
 
$
111.80

 
$
1.12

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted net income (loss) per common share
 
$
0.19

 
$
(0.11
)
 
$
1.66

 
$
3.70

 
 
$
111.80

 
$
1.12

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average shares outstanding - basic
 
33,788

 
25,990

 
25,429

 
25,424

 
 
25,424

 
25,424

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average shares outstanding - diluted
 
33,935

 
25,990

 
25,543

 
25,424

 
 
25,424

 
25,424

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividends declared per common share
 
$

 
$
0.700

 
$
0.175

 
$

 
 
$

 
$

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance Sheet Data:
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
888,766

 
$
832,966

 
$
677,703

 
$
514,366

 
 
$
897,797

 
$
951,232

Total debt
 
370,745

 
389,673

 
339,733

 

 
 

 

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

28



our results of operations, financial position and cash flows for future periods or what they would have been had tronc been a separate, stand-alone company during all the periods presented.
OVERVIEW
tronc, Inc., formerly Tribune Publishing Company, was formed as a Delaware corporation on November 21, 2013. tronc, Inc. and its subsidiaries (collectively, “tronc,” or the “Company”) is a media company rooted in award-winning journalism, which operates over 150 titles in nine of the nation’s largest markets. tronc develops unique and valuable content across its vast media portfolio, which has earned a combined 93 Pulitzer Prizes and is committed to informing and inspiring a growing average monthly audience of 57 million. The Company’s diverse portfolio of iconic news and information brands are in markets including Los Angeles and San Diego, Ca.; Chicago, Il.; Fort Lauderdale and Orlando, Fl.; Baltimore, Md.; Hartford, Ct.; Allentown, Pa.; and Newport News, Va. tronc also offers an array of customized marketing solutions, and publishes a number of niche products, including Hoy and El  Sentinel, making tronc the country’s largest Spanish-language publisher. During fiscal 2016, the Company went through several operating changes.
2016 Highlights
On February 3, 2016, the Company completed a $44.4 million private placement of the Company’s common stock to Merrick Media, LLC (“Merrick Media”).
In February 2016, Homefinder.com LLC (“Homefinder”) sold substantially all of its operating assets and liabilities, excluding cash, to Placester, Inc. (“Placester”) for cash and stock representing 0.75% of outstanding Placester stock.
In March 2016, Contend, LLC (“Contend”) exercised its option to repurchase its Class A units from the Company. The Company received $1.2 million for the units and recorded a gain of $0.4 million on the transaction.
On April 12, 2016, the Company received an unsolicited proposal from Gannett Co., Inc. (NYSE: GCI) to acquire all outstanding shares of the Company’s common stock for $12.25 per share in cash. The Company engaged in substantive discussions and due diligence with Gannett regarding a potential transaction. The parties agreed to a purchase price in mid-September and on November 1, the Company was informed that Gannett decided to terminate discussions regarding a potential business combination. The Company incurred approximately $5.0 million in costs related to the potential transaction.
On June 1, 2016, the Company completed a $70.5 million private placement of the Company’s common stock to Nant Capital, LLC (“Nant Capital”).
On June 17, 2016, the Company changed its name from Tribune Publishing Company to tronc, Inc.
During the second quarter of fiscal 2016, tronc began managing its business as two distinct segments, troncM and troncX.
In December 2016, the Company completed acquisitions totaling $7.6 million of Spanfeller Media, a digital platform which includes The Daily Meal and The Active Times, and The Cube, an online site for high school sports videos.
For the year ended December 25, 2016, the Company recorded a charge of $10.3 million for severance, benefits and taxes in connection with the Employee Voluntary Separation Program (“EVSP”) offered by the Company in the fourth quarter of 2015.
2016 Private Placements
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. 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. As of December 25, 2016, Mr. Ferro owns approximately 24.8% of tronc common stock either directly or beneficially.
On June 1, 2016, the Company completed a $70.5 million private placement, pursuant to which the Company sold to Nant Capital, LLC (“Nant Capital”) 4,700,000 unregistered shares of the Company’s common stock at a purchase price of $15.00 per share. The Company intends to use the $70.4 million net proceeds from the sale to further execute on its growth strategy, including acquisitions and digital initiatives. In connection with the private placement, Dr. Soon-Shiong was elected to fill a newly-created position on the Company’s Board of Directors and was named non-executive Vice Chairman of the Board as of the date of the Company’s 2016 Annual Meeting of Stockholders on June 2, 2016.

29



See Note 17 to the Company’s Consolidated and Combined Financial Statements for more information on the private placements, including certain rights and restrictions relating to the common stock acquired in such transactions.
2016 name change and exchange listing change
On June 17, 2016, the Company changed its name from Tribune Publishing Company to tronc, Inc. The Company transferred its stock exchange listing from the NYSE to Nasdaq. The common shares of the Company ceased trading on the NYSE under the ticker symbol “TPUB” on June 17, 2016 at the end of the day and began trading the morning of June 20, 2016 on Nasdaq under the ticker symbol “TRNC.”
Segment change
Beginning with the second quarter of fiscal 2016, tronc began managing its business as two distinct segments, troncM and troncX. troncM is comprised of the Company’s media groups excluding their digital revenues and related digital expenses, except digital subscription revenues when bundled with a print subscription. troncX includes the Company’s digital revenues and related digital expenses from local websites and mobile applications, digital only subscriptions, as well as Tribune Content Agency (“TCA”), forsalebyowner.com and Motiv8. Accordingly, the Company changed its segment reporting to two reportable segments. The prior periods have been revised to reflect the change in reportable segments. Prior to the second quarter of fiscal 2016, tronc was managed by its chief operating decision maker, as defined by ASC Topic 280, as one business and one reportable segment.
troncM
troncM is comprised of the Company’s media groups excluding their digital revenues and related digital expenses, except digital subscription revenues when bundled with a print subscription. troncM’s media groups include the Chicago Tribune Media Group, the Los Angeles Times Media Group, the San Diego Media Group, the Sun Sentinel Media Group, the Orlando Sentinel Media Group, The Baltimore Sun Media Group, the Hartford Courant Media Group, the Morning Call Media Group and the Daily Press Media Group. In May 2015, the Company acquired The San Diego Union-Tribune newspaper (f/k/a the U-T San Diego) and nine community weeklies.
troncX
troncX consists of the Company’s digital revenues and related digital expenses from local websites and mobile applications, digital only subscriptions, as well as TCA, forsalebyowner.com and Motiv8.
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 news and information sources, TCA delivers a daily news service and syndicated premium content to 2,100 media and digital information publishers in more than 75 countries.
forsalebyowner.com is a national consumer-to-consumer focused real estate website. The majority of the revenue generated by forsalebyowner.com is e-commerce, but approximately one-third is generated through a 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.
Motiv8 is a full-service direct response, content solution and performance marketing agency. Motiv8 services include direct response advertising, marketing strategy, DRTV, direct response radio, creative production, printing and fulfillment, custom websites, landing pages, interactive advertising, outdoor advertising, email marketing and marketing optimization.
Results of Operations
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.

30



Consolidated
Operating results for the years ended December 25, 2016, 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
 
 
 
Year Ended
 
 
 
 
December 25, 2016
 
December 27, 2015
 
% Change
 
December 27, 2015
 
December 28, 2014
 
% Change
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating revenues
 
$
1,606,378

 
$
1,672,820

 
(4.0
%)
 
$
1,672,820

 
$
1,707,978

 
(2.1
%)
 
 
 
 
 
 
 
 
 
 
 
 
 
Compensation
 
597,293

 
649,905

 
(8.1
%)
 
649,905

 
596,366

 
9.0
%
Newsprint and ink
 
103,906

 
122,339

 
(15.1
%)
 
122,339

 
139,634

 
(12.4
%)
Outside services
 
494,478

 
513,896

 
(3.8
%)
 
513,896

 
519,646

 
(1.1
%)
Other operating expenses
 
300,089

 
307,080

 
(2.3
%)
 
307,080

 
333,541

 
(7.9
%)
Depreciation and amortization
 
57,499

 
54,633

 
5.2
%
 
54,633

 
32,089

 
70.3
%
Operating expenses
 
1,553,265

 
1,647,853

 
(5.7
%)
 
1,647,853

 
1,621,276

 
1.6
%
Income from operations
 
$
53,113

 
$
24,967

 
*
 
$
24,967

 
$
86,702

 
(71.2
%)
Loss on equity investments, net
 
(690
)
 
(1,164
)
 
(40.7
%)
 
(1,164
)
 
(1,180
)
 
(1.4
%)
Gain on investment transaction
 

 

 
*
 

 
1,484

 
*
Interest expense, net
 
(26,703
)
 
(25,972
)
 
2.8
%
 
(25,972
)
 
(9,801
)
 
*
Reorganization items, net
 
(259
)
 
(1,026
)
 
(74.8
%)
 
(1,026
)
 
(464
)
 
*
Income tax expense (benefit)
 
18,924

 
(430
)
 
*
 
(430
)
 
34,453

 
*
Net income (loss)
 
$
6,537

 
$
(2,765
)
 
*
 
$
(2,765
)
 
$
42,288

 
*
* Represents positive or negative change in excess of 100%
Year ended December 25, 2016 compared to the year ended December 27, 2015
Operating Revenues—Operating revenues decreased 4.0%, or $66.4 million, in the year ended December 25, 2016 compared to the prior year period due to an $81.0 million decrease in advertising revenues and a $13.0 million decrease in other revenues, partially offset by an increase of $27.6 million in circulation revenues. Overall decreases in circulation volume were generally offset by rate increases. Operating revenues include revenues from acquisitions from the date the transaction closes. Operating revenues for the year ended December 25, 2016 include a full year of revenue from the May 2015 acquisition of The San Diego Union-Tribune. The 2016 acquisitions had minimal impact on revenue.
Compensation Expense—Compensation expense decreased 8.1%, or $52.6 million, in the year ended December 25, 2016 due primarily to a decrease in salary expense of $54.1 million as a result of the reduction in headcount due to the employee voluntary severance program (“EVSP”) implemented in the fourth quarter of 2015, and the information technology outsourcing (“ITO”) implemented in the first quarter of 2016. Additionally, the severance charges recorded in fiscal 2016 related to the EVSP and ITO were $19.0 million less than severance charges recorded in fiscal 2015 for the EVSP. These decreases in expenses in 2016 were partially offset by the recognition of $18.8 million in gains related to termination of certain post-retirement benefits in 2015 and an increase in self-insured medical expenses of $4.0 million.
Newsprint and Ink Expense—Newsprint and ink expense decreased 15.1%, or $18.4 million, in the year ended December 25, 2016 due mainly to a 0.2% decrease in the average cost per ton of newsprint and a 11.0% decline in newsprint consumption due primarily to less advertising space and lower commercial printing revenue.
Outside Services Expense—Outside services expense decreased 3.8%, or $19.4 million, in the year ended December 25, 2016 due to decreases in production and distribution expenses.
Other Expenses—Other expenses include occupancy costs, promotion and marketing costs, affiliate fees and other miscellaneous expenses. These expenses decreased 2.3%, or $7.0 million, in the year ended December 25, 2016 due to decreases in promotion and marketing costs, supplies and electricity offset by increases in occupancy costs. In 2016, the

31



Company permanently vacated approximately 200,000 sq. ft. of office space in the Chicago Tribune and Los Angeles Times buildings and recorded a charge of $8.5 million related to the abandonment.
Depreciation and Amortization Expense—Depreciation and amortization expense increased 5.2%, or $2.9 million, for the year ended December 25, 2016 primarily as a result of depreciation on prior year fixed asset additions.
Loss on Equity Investments, net—Loss on equity investments decreased $0.5 million for the year ended December 25, 2016 compared to the year ended December 27, 2015 as the Company’s investments have remained relatively stable.
Interest Expense—Interest expense increased 2.8%, or $0.7 million, for the year ended December 25, 2016 primarily due to the full year impact of the increase in the principal balance of the Senior Term Facility related to the acquisition of The San Diego Union-Tribune in May 2015. See Note 10 to the Consolidated and Combined Financial Statements for more information on the Senior Term Facility.
Income Tax Expense (Benefit)—Income tax expense increased $19.4 million for the year ended December 25, 2016, over the prior year period, primarily due to an increase in taxable income and a $7.1 million charge to adjust the Company’s deferred taxes. See Note 13 to the Consolidated and Combined Financial Statements for further explanation of the charge.
The effective tax rate on pretax income (loss) was 74.3% and 13.5% in the years ended December 25, 2016 and December 27, 2015, respectively. The effective tax rate increased in 2016 as compared with 2015 primarily due to a $7.1 million charge to adjust the Company’s deferred taxes and the shift from pre-tax loss in 2015 to a pre-tax earnings in 2016. 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, decreases the effective tax rate.
Year ended December 27, 2015 compared to the year ended December 28, 2014
Operating Revenues—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 $29.2 million decline in advertising revenues and a $37.6 million decrease in other revenues, partially offset by an increase of $31.7 million in circulation revenues. Operating revenues include revenues from acquisitions from the date the transaction closes. In May 2015 the Company acquired of The San Diego Union-Tribune.
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, previously allocated from TCO, in the third quarter 2014, 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.
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 decrease in consumption related to a 10.7% decline in commercial printing revenue.
Outside Services Expense—Outside services expense decreased 1.1%, or $5.8 million in the year ended December 27, 2015. Prior to the Distribution TCO allocated $53.5 million in service center support costs, including technology, which are recorded in outside services in 2014. Subsequent to the Distribution the Company formed its own departments for these functions and such costs are included in the operating categories based on type. This decrease was partially offset by outside services expenses associated with The San Diego Union-Tribune, corporate post-spin initiatives, internal control remediation efforts and expense recognition related to the correction from net revenue recognition to gross revenue recognition on certain contracts in 2015.
Other Expenses—Other expenses include occupancy costs, promotion and marketing costs, affiliate fees and other miscellaneous expenses. These expenses decreased 7.9%, or $26.5 million, in the year ended December 27, 2015. Prior to the Distribution TCO allocated $21.9 million in corporate management fees, a $11.7 million fee for use of certain capitalized software and $3.4 million on other support costs. Subsequent to the Distribution the Company created its own corporate function and such costs are included in the operating categories based on type. This decrease was partially offset by expenses associated with The San Diego Union-Tribune, increased digital-focused marketing and general advertising, an increase in

32



Classified Ventures auto fees beginning in the fourth quarter of 2014, and a $4.2 million decrease in bad debt expense resulting from the Company recording a reserve for certain commercial delivery defaults in 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 the depreciation generated from technology assets that were transferred to the Company as part of the Distribution.
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.
Gain on Investment Transaction—In the year ended December 28, 2014, the Company purchased McClatchy’s 50% interest in MCT increasing the Company’s interest to 100%. In accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805, “Business Combinations,” as part of the Company’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.
Interest Expense—Interest expense increased $16.2 million for the year ended December 27, 2015, primarily due to the increase in the principal balance of the Senior Term Facility related to the acquisition of The San Diego Union-Tribune in May 2015. The Senior Term Facility originated in August 2014. See Note 10 of the Consolidated and Combined Financial Statements for additional information on the Senior Term Facility.
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 ended 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, 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.

33



Segments
As discussed above, the Company began managing its business as two distinct segments, troncM and troncX in 2016. The prior periods have been revised to reflect the change in reportable segments. The Company measures segment profit using income from operations, which is defined as net income before net interest expense, gain on investment transactions, reorganization items and income taxes. The tables below show the segmentation of income and expenses for the year ended December 25, 2016 as compared to the year ended December 27, 2015, as well as the year ended December 27, 2015 compared to the year ended December 28, 2014 (in thousands). Each year consists of 52 weeks.
 
troncM
 
troncX
 
Corporate and Eliminations
 
Consolidated
 
Year ended
 
Year ended
 
Year ended
 
Year ended
 
Dec. 25, 2016
 
Dec. 27, 2015
 
Dec. 25, 2016
 
Dec. 27, 2015
 
Dec. 25, 2016
 
Dec. 27, 2015
 
Dec. 25, 2016
 
Dec. 27, 2015
Total revenues
$
1,378,028

 
$
1,448,249

 
$
236,171

 
$
233,505

 
$
(7,821
)
 
$
(8,934
)
 
$
1,606,378

 
$
1,672,820

Operating expenses
1,257,265

 
1,345,564

 
210,620

 
194,697

 
85,380

 
107,592

 
1,553,265

 
1,647,853

Income from operations
120,763

 
102,685

 
25,551

 
38,808

 
(93,201
)
 
(116,526
)
 
53,113

 
24,967

Depreciation and amortization
23,656

 
21,338

 
11,563

 
2,329

 
22,280

 
30,966

 
57,499

 
54,633

Adjustments (1)
15,147

 
18,071

 
3,978

 
1,769

 
50,804

 
57,744

 
69,929

 
77,584

Adjusted EBITDA
$
159,566

 
$
142,094

 
$
41,092

 
$
42,906

 
$
(20,117
)
 
$
(27,816
)
 
$
180,541

 
$
157,184

 
troncM
 
troncX
 
Corporate and Eliminations
 
Consolidated
 
Year ended
 
Year ended
 
Year ended
 
Year ended
 
Dec. 27, 2015
 
Dec. 28, 2014
 
Dec. 27, 2015
 
Dec. 28, 2014
 
Dec. 27, 2015
 
Dec. 28, 2014
 
Dec. 27, 2015
 
Dec. 28, 2014
Total revenues
$
1,448,249

 
$
1,473,524

 
$
233,505

 
$
242,047

 
$
(8,934
)
 
$
(7,593
)
 
$
1,672,820

 
$
1,707,978

Operating expenses
1,345,564

 
1,381,599

 
$
194,697

 
166,136

 
107,592

 
73,541

 
1,647,853

 
1,621,276

Income from operations
102,685

 
91,925

 
$
38,808

 
75,911

 
(116,526
)
 
(81,134
)
 
24,967

 
86,702

Depreciation and amortization
21,338

 
19,786

 
$
2,329

 
771

 
30,966

 
11,532

 
54,633

 
32,089

Adjustments (1)
18,071

 
26,042

 
$
1,769

 
1,623

 
57,744

 
40,975

 
77,584

 
68,640

Adjusted EBITDA
$
142,094

 
$
137,753

 
$
42,906

 
$
78,305

 
$
(27,816
)
 
$
(28,627
)
 
$
157,184

 
$
187,431

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

34



troncM
troncM’s media groups include the Chicago Tribune Media Group, the Los Angeles Times Media Group, the San Diego Media Group, the Sun Sentinel Media Group, the Orlando Sentinel Media Group, The Baltimore Sun Media Group, the Hartford Courant Media Group, the Morning Call Media Group and the Daily Press Media Group. In May 2015, the Company acquired The San Diego Union-Tribune newspaper (f/k/a the U-T San Diego) and nine community weeklies.
 
 
Year Ended
 
Year Ended
(in thousands)
 
December 25, 2016

December 27, 2015
 
% Change
 
December 27, 2015
 
December 28, 2014
 
% Change
Operating revenues:
 
 
 
 
 
 
 
 
 
 
 
 
Advertising
 
$
680,842

 
$
764,025

 
(10.9
%)
 
$
764,025

 
$
783,326

 
(2.5
%)
Circulation
 
482,877

 
459,761

 
5.0
%
 
459,761

 
419,395

 
9.6
%
Other
 
214,309

 
224,463

 
(4.5
%)
 
224,463

 
270,803

 
(17.1
%)
Total revenues
 
1,378,028

 
1,448,249

 
(4.8
%)
 
1,448,249

 
1,473,524

 
(1.7
%)
Operating expenses
 
1,257,265

 
1,345,564

 
(6.6
%)
 
1,345,564

 
1,381,599

 
(2.6
%)
Income from operations
 
120,763

 
102,685

 
17.6
%
 
102,685

 
91,925

 
11.7
%
Depreciation and amortization
 
23,656

 
21,338

 
10.9
%
 
21,338

 
19,786

 
7.8
%
Adjustments
 
15,147

 
18,071

 
(16.2
%)
 
18,071

 
26,042

 
(30.6
%)
Adjusted EBITDA
 
$
159,566

 
$
142,094

 
12.3
%
 
$
142,094

 
$
137,753

 
3.2
%
Year ended December 25, 2016 compared to the year ended December 27, 2015
Advertising Revenues—Total advertising and marketing services revenues decreased 10.9%, or $83.2 million, in the year ended December 25, 2016 compared to the prior year period. Retail advertising revenues fell 9.4%, or $52.5 million, due to declines in most categories, partially offset by an increase in the real estate and clubs and organizations categories. The categories with the largest declines were specialty merchandise, auto, department stores, personal services and financial services categories. National advertising revenues fell 16.9%, or $20.2 million, due to declines in several categories, most notably movies and soft goods categories. Classified advertising revenues decreased 12.4%, or $10.5 million, compared to the prior year period, primarily due to decreases in the recruitment category.
Circulation Revenues—Circulation revenues increased 5.0%, or $23.1 million, in the year ended December 25, 2016 due primarily to the acquisition of The San Diego Union-Tribune in May 2015. Overall decreases in volume were generally offset by rate increases.
Other Revenues—Other revenues decreased 4.5%, or $10.2 million, in the year ended December 25, 2016 primarily due to declines in commercial print and delivery revenues of $8.8 million for third-party publications.
Operating Expenses—Operating expenses decreased 6.6%, or $88.3 million, in the year ended December 25, 2016, due primarily to decreases in compensation expense, a prior year litigation matter, newsprint and ink expense and outside services expense, partially offset by increases in occupancy costs related to the vacated leased space discussed above and corporate allocations.
Year ended December 27, 2015 compared to the year ended December 28, 2014
Advertising Revenues—Total advertising revenues decreased 2.5%, or $19.3 million, in the year ended December 27, 2015 compared to the prior year period. Retail advertising fell 3.0%, or $17.3 million, due to declines in most categories. The categories with the largest declines were furniture and home furnishings, car dealerships, department stores and general merchandise. National advertising revenues fell 5.6%, or $7.0 million, due to declines in several categories, most notably movies, wireless/telecom, and technology. Classified advertising revenues increased 6.3%, or $5.0 million, primarily due to acquisitions. The declines in advertising revenues were partially offset by contributions from the acquisition of The San Diego Union Tribune in 2015 and year-to-date-contributions from the Baltimore and Chicago properties acquired during 2014.

35



Circulation Revenues—Circulation revenues increased 9.6%, or $40.4 million, in the year ended December 27, 2015 compared to the prior year due largely to an increase from acquisitions. This increase was partially offset by decreases in print edition volumes.
Other Revenues—Other revenues decreased 17.1%, or $46.3 million, in year ended December 27, 2015 primarily due to declines in commercial print and delivery revenues of $28.9 million for third-party publications, including certain publications of the (Chicago) 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 $17.5 million due to general decreases in the direct mail marketplace.
Operating Expenses—Operating expenses decreased 2.6%, or $36.0 million, in the year ended December 27, 2015, due primarily to decreases in compensation expense, newsprint and ink expense and outside services expense, partially offset by increases in other operating expenses and corporate allocations.
troncX
troncX is comprised of the Company’s digital revenues and related digital expenses from local websites and mobile applications, digital only subscriptions, TCA, forsalebyowner.com and Motiv8.
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 news and information sources, TCA delivers a daily news service and syndicated premium content to 2,100 media and digital information publishers in more than 75 countries.
forsalebyowner.com is a national consumer-to-consumer focused real estate website. The majority of the revenue generated by forsalebyowner.com is e-commerce, but approximately one-third is generated through a 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.
Motiv8 is a full-service direct response, content solution and performance marketing agency. Motiv8 services include direct response advertising, marketing strategy, DRTV, direct response radio, creative production, printing and fulfillment, custom websites, landing pages, interactive advertising, outdoor advertising, email marketing and marketing optimization.
 
 
Year Ended
 
Year Ended
(in thousands)
 
December 25, 2016
 
December 27, 2015
 
% Change
 
December 27, 2015
 
December 28, 2014
 
% Change
Operating revenues:
 
 
 
 
 
 
 
 
 
 
 
 
Advertising
 
$
193,997

 
$
191,831

 
1.1
%
 
$
191,831

 
$
202,635

 
(5.3
%)
Content
 
42,174

 
41,674

 
1.2
%
 
41,674

 
39,412

 
5.7
%
Total revenues
 
236,171

 
233,505

 
1.1
%
 
233,505

 
242,047

 
(3.5
%)
Operating expenses
 
210,620

 
194,697

 
8.2
%
 
194,697

 
166,136

 
17.2
%
Income from operations
 
$
25,551

 
$
38,808

 
(34.2
%)
 
38,808

 
75,911

 
(48.9
%)
Depreciation and amortization
 
11,563

 
2,329

 
*
 
2,329

 
771

 
*
Adjustments
 
3,978

 
1,769

 
*
 
1,769

 
1,623

 
9.0
%
Adjusted EBITDA
 
$
41,092

 
$
42,906

 
(4.2
%)
 
$
42,906

 
$
78,305

 
(45.2
%)
* Represents positive or negative change in excess of 100%
Year ended December 25, 2016 compared to the year ended December 27, 2015
Advertising Revenues—Total advertising revenues increased 1.1%, or $2.2 million, in the year ended December 25, 2016. Retail advertising revenue increased $2.7 million, primarily due to increases in the furniture and home furnishings, food and drug stores and amusements categories, partially offset by a decrease in the personal services category. National advertising revenue increased $2.2 million, primarily due to increases in the general category. Other advertising revenue increased $2.3

36



million primarily due to increases in revenue shares received from advertising partners due to increased volume. These increases were partially offset by decreases in classified advertising revenue which decreased $5.1 million primarily due to decreases in the real estate and recruitment categories.
Content Revenues—Content revenues increased 1.2%, or $0.5 million, in the year ended December 25, 2016, with decreases in content syndication partially offset by increases in digital subscription revenue.
Operating Expenses—Operating expenses increased 8.2%, or $15.9 million, in the year ended December 25, 2016, due primarily to increases in corporate allocations, affiliate fees, promotion expense, and depreciation and amortization, partially offset by decreases in compensation and outside services.
Year ended December 27, 2015 compared to the year ended December 28, 2014
Advertising Revenues—Total advertising revenues decreased 5.3%, or $10.8 million, in the year ended December 27, 2015. Retail advertising revenue increased $6.6 million, primarily due to contributions from acquisitions and increases in real estate, specialty merchandise and healthcare categories. National advertising revenue increased $4.7 million, primarily due to increases in movies and general categories. Classified advertising revenue decreased $19.9 million, primarily due to decreases in the recruitment category which includes a correction in revenue recognition of certain CareerBuilder contracts from gross revenue recognition to net recognition.
Content Revenues—Content revenues increased 5.7%, or $2.3 million, in the year ended December 27, 2015, with increases in content syndication partially offset by decreases in digital subscription revenue.
Operating Expenses—Operating expenses increased 17.2%, or $28.6 million, in the year ended December 27, 2015, due primarily to increases in corporate allocations, compensation expense and affiliate fees expenses, partially offset by decreases in outside services.
Liquidity and Capital Resources
The Company 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. The Company’s access to, and the availability of, financing in the future will be impacted by many factors, including its credit rating, the liquidity of the overall capital markets, the current state of the economy and other risks described in Part 1, Item 1A of this report. There can be no assurances that the Company will have access to capital markets on acceptable terms.
Sources and Uses
The Company expects to fund capital expenditures, interest, principal and pension payments due in 2017 and other operating requirements through cash flows from operations. The Company also has available borrowing capacity under the Company’s revolving credit facility. The Company’s financial and operating performance remains subject to prevailing economic and industry conditions and to financial, business and other factors, some of which are beyond the control of the Company and, despite the Company’s current liquidity position, no assurances can be made that cash flows from operations, future borrowings under the revolving credit facility, and any refinancings thereof, or dispositions of assets or operations will be sufficient to satisfy the Company’s future liquidity needs.

37



The table below summarizes the total operating, investing and financing activity cash flows for the years ended December 25, 2016, December 27, 2015 and December 28, 2014 (in thousands):
 
 
Year Ended
 
 
December 25, 2016
 
December 27, 2015
 
December 28, 2014
 
 
 
 
 
 
 
Net cash provided by operating activities
 
$
85,522

 
$
62,924

 
$
130,574

Net cash used for investing activities
 
(14,107
)
 
(91,005
)
 
(102,926
)
Net cash provided by (used for) financing activities
 
86,102

 
32,238

 
(667
)
Net increase in cash
 
$
157,517

 
$
4,157

 
$
26,981

Cash flow generated by operating activities is the Company’s primary source of liquidity. Net cash provided by operating activities was $85.5 million for the year ended December 25, 2016, an increase of $22.6 million from $62.9 million for the year ended December 27, 2015. The increase was primarily driven by higher operating results and cash paid for income taxes less than the recorded income tax provision offset by higher pension contributions. Net cash provided by operating activities was $62.9 million in the year ended December 27, 2015, down $67.7 million from $130.6 million in 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 used for investing activities totaled $14.1 million in the year ended December 25, 2016 and included $21.0 million used for capital expenditures and $7.6 million used for acquisitions partially offset by $17.0 million provided by a release of restricted cash. Net cash used for investing activities totaled $91.0 million in the year ended December 27, 2015 primarily due to $67.8 million used for the acquisition of The San Diego Union-Tribune and $32.3 million used for capital expenditures, partially offset by $10.5 million provided by a release of restricted cash. See Note 7 to the Consolidated and Combined Financial Statements for further information. Net cash used for investing activities totaled $102.9 million in the year ended December 28, 2014 and included $52.3 million used for acquisitions, $27.5 million used to establish restricted cash in connection with the Letter of Credit Agreement described below, and $22.3 million used for capital expenditures. We anticipate that capital expenditures for the year ended December 31, 2017 will be approximately $26 million to $32 million.
Net cash provided by financing activities totaled $86.1 million in the year ended December 25, 2016 and included $113.3 million received from private placement of 9.9 million shares of the Company’s stock, partially offset by $21.1 million used for principal payments on senior debt and $4.9 million used for payment of stockholder dividends. Net cash provided by financing activities totaled $32.2 million in the year ended December 27, 2015 and included $69.0 million in proceeds from the issuance of senior debt, net of discount, $19.8 million used for principal 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, and included $346.5 million in proceeds from the issuance 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.
Private Placements
On February 3, 2016 and June 1, 2016, the Company completed a $44.4 million and a $70.5 million private placement, pursuant to which the Company sold 5,220,000 shares and 4,700,000 shares of the Company’s common stock at a purchase price of $8.50 per share and $15.00 per share, respectively. See Note 17 to the Company’s Consolidated and Combined Financial Statements for more information on the private placements.
Dividends
On February 4, 2016, the Board of Directors suspended the Company’s cash dividend program. 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.
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. The Company paid such previously declared fourth quarter dividend on February 11, 2016. The Company declared a total of $0.70 per share in dividends in 2015, totaling

38



payments of approximately $13.7 million for the year. 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.
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 25, 2016.
Acquisitions
See Note 7 to the Company’s Consolidated and Combined Financial Statements for more information on acquisitions.
Acquisitions 2016
In December 2016, the Company completed acquisitions totaling $7.6 million of Spanfeller Media, a digital platform which includes The Daily Meal and The Active Times, and The Cube, an online site for high school sports videos. The results of the acquisitions and the related transaction costs were not material to the Company’s Consolidated and Combined Financial Statements and are included in the Consolidated and Combined Statements of Income (Loss) since their respective dates of acquisition.
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 the Company’s common stock (700,869 shares). The Company financed the $73 million cash portion of the purchase price, less a $4.6 million working capital adjustment, 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. As part of the acquisition, the Company became the sponsor of a single employer defined benefit plan. See Note 14 to the Consolidated and Combined Financial Statements for more information on the Company’s pension plan.
Acquisitions 2014
On October 31, 2014, the Company announced the acquisition of six daily and 32 weekly suburban Chicago 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, which operates the Chicago Tribune, RedEye, Chicago magazine, Hoy and other Chicago-based media brands.
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.
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

39



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 (Loss) for the year ended December 27, 2015.
Debt
Refer to Note 10 of the Consolidated and Combined Financial Statements for detailed information related to the Company’s Term Loan Credit Agreement, Senior Term Facility, ABL Credit Agreement, Senior ABL Facility and Letter of Credit Agreement.
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 will mature on August 4, 2021. 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 maturity date.
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 25, 2016, the weighted average interest rate for the variable-rate debt outstanding was 5.75%. As of December 25, 2016, the unamortized balance of the discount was $3.1 million. As of December 25, 2016, the unamortized balance of the debt issuance costs associated with the Term Loans was $7.5 million.
Senior ABL Facility
On August 4, 2014, tronc 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 will mature on August 4, 2019. 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%. The weighted average interest rate for the variable rate debt is 5.75%. As of December 25, 2016, $126.7 million was available for borrowings under the Senior ABL Facility and $34.8 million of the availability supported outstanding undrawn letters of credit in the same amount. As of December 25, 2016, we were in compliance with the covenants of the Senior ABL Facility.
Letter of Credit Agreement
On August 4, 2014, tronc 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 is scheduled to terminate on August 4, 2019. During the year ended December 25, 2016, the Company closed its outstanding letter of credit agreement and moved the letter of credit to Bank of America, N.A. under the Senior ABL facility.
Employee Reductions
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.  The Company is funding the EVSP ratably over the payout period through salary continuation instead of lump sum severance payments. The salary continuation started in the fourth quarter of 2015 and continues through the first half of 2018. The Company recorded a net reduction of 505 positions and a charge of $44.2 million for all related severance, benefits and taxes in connection with the EVSP for the year ended December 27, 2015. For the year ended December 25, 2016, the Company recorded an additional charge of $10.3 million for related severance, benefits and taxes in connection with the EVSP. The 2015 charge excludes payout of previously accrued vacation of $1.4 million which is recorded in an accrued vacation liability.

40



During the first quarter of 2016, the Company began the process to outsource its information technology function (“ITO”). The ITO is expected to result in a net reduction of 142 positions. During the year ended December 25, 2016, the Company recorded a pretax charge of $4.6 million for severance, benefits and taxes in connection with the ITO, and expects a total estimated cost of $7.0 million.
In addition to the EVSP and ITO, the Company implemented additional reductions in staffing levels in its operations of 218, 323 and 486 positions in the years ended December 25, 2016, December 27, 2015 and December 28, 2014, respectively. The Company recorded pretax charges related to these reductions and executive separations totaling $12.3 million, $6.8 million and $5.9 million in the years ended December 25, 2016, December 27, 2015 and December 28, 2014, respectively.
Contractual Obligations
The table below represents tronc’s contractual obligations as of December 25, 2016 (in thousands):
Contractual Obligations
Total
2017
2018
2019
2020
2021
Thereafter
 
 
 
 
 
 
 
 
Long-term debt (principal only)
$
379,615

$
21,090

$
21,090

$
21,090

$
21,090

$
295,255

$

Long-term capital lease
1,713

527

371

319

259

139

98

Interest on long-term debt (1)
89,850

21,462

20,230

18,951

17,876

11,331


Operating leases (2)
244,356

53,695

43,880

32,137

30,610

24,695

59,339

Other purchase obligations (3)
6,622

3,339

2,121

1,162







Total
$
722,156

$
100,113

$
87,692

$
73,659

$
69,835

$
331,420

$
59,437

(1)    Represents the annual interest on the variable rate debt which bore interest at 5.75% per annum at December 25, 2016.
(2)
The Company leases certain equipment and office and production space under various operating leases. Net lease expense for tronc was $57.5 million, $60.5 million and $64.4 million for the years ended December 25, 2016, December 27, 2015 and December 28, 2014, respectively. Prior to the Distribution Date, net lease expense excludes lease costs incurred by TCO and its subsidiaries and allocated to tronc.
(3)    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 2017, under current regulations, are estimated to be $13.3 million. Further contributions are currently projected for 2018 through 2025, but amounts cannot be reasonably estimated.
The contractual obligations table does not include newsprint agreements. The Company is a party to various arrangements with third party suppliers to purchase newsprint. Under these arrangements, tronc agreed to purchase 150,000 metric tons of newsprint in 2017, 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 25, 2016, tronc had standby letters of credit outstanding in the amount of $34.8 million.
Critical Accounting Policies
The Company’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 tronc’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—tronc’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, tronc; 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 when delivered. Commercial printing and delivery services revenues, which are included in 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. The Company records rebates when earned as a reduction of advertising revenue.
In May 2014, the FASB issued ASU 2014-09, Topic 606, Revenue from Contracts with Customers and issued subsequent amendments to the initial guidance in August 2015, March 2016, April 2016, May 2016, and December 2016 within ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-12 and ASU 2016-20, respectively. 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. The amended effective date of ASU 2014-09 is for reporting periods beginning after December 15, 2017. Companies are permitted to voluntarily adopt the new standard as of the original effective date which was reporting periods beginning after December 15, 2016.
The Company expects to adopt this standard on January 1, 2018 utilizing the modified retrospective method, and has initiated efforts to assess the impact of this new standard on the Company’s future reported results, operating and accounting processes and systems. The Company expects adoption of the standard will not significantly impact reported results for print advertising and circulation and digital circulation. The new standard may result in the Company recording digital advertising revenue placed on non-tronc websites net of the cost of the third-party website as the Company may be acting as an agent as defined under the new standard. Currently, such revenues are generally recorded gross where the Company is acting as a principal in these transactions under the current standard. The new standard is not expected to significantly impact revenues related to commercial printing and delivery services provided to other newspapers, direct mail advertising and services and other related activities.
Goodwill and Other Intangible AssetsGoodwill and other intangible assets are summarized in Note 9 to the Consolidated and Combined Financial Statements. The Company 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 at which goodwill will be evaluated are the nine newspaper media groups, TCA, forsalebyowner.com, Motiv8 and the aggregate of its other digital businesses.
The Company’s annual impairment review measurement date is in the beginning of 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 tronc’s best estimates, but these items involve inherent uncertainties based on market conditions generally outside of tronc’s control.
Based on the assessments performed as of September 26, 2016, the estimated fair value of all the Company’s reporting units and newspaper mastheads exceeded their carrying amounts. For goodwill as of the measurement date, the calculated fair value exceeded the carrying value by more than 100% for all reporting units except the Baltimore Sun Media Group for which the fair value exceeded the carrying value by more than 85% and the San Diego Media Group for which the percentage was approximately 14%. As discussed in Note 7 Consolidated and Combined Financial Statements, the Company acquired San Diego Union-Tribune and nine community weeklies in May 2015. Subsequent to the acquisition, revenues of the San Diego newspaper Media Group have continued to decline, as have revenues of the Company’s other newspaper media groups. In estimating the fair value of the San Diego newspaper Media Group reporting unit, the Company has assumed that the rate of revenue decline will decrease over time and tronc has assumed that the Company will implement

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additional cost savings measures that will partially offset such revenue declines. Changes in assumptions could materially affect the estimation of the fair value of the San Diego newspaper Media Group and could result in goodwill impairment. Events and conditions that could affect assumptions and indicate impairment include revenue declines continuing at the rate the Company has experienced subsequent to the acquisition for which tronc is unable to successfully implement additional offsetting cost savings measures.
Impairment Review of Long-Lived Assets—tronc evaluates the carrying value of long-lived assets to be held and used whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset or asset group may be impaired. The carrying value of a long-lived asset or asset group may be impaired when the projected future undiscounted cash flows to be generated from the asset or asset group over its remaining depreciable life are less than its current carrying value.
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—tronc provides certain health care and life insurance benefits for retired tronc 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.
The Company recognizes the overfunded or underfunded status of its postretirement benefit plans as an asset or liability in its Consolidated Balance Sheets and recognizes changes in that funded status in the year in which changes occur through comprehensive income. The amounts included within these Consolidated and Combined Financial Statements were actuarially determined based on amounts for eligible tronc employees.
Multiemployer Pension Plans—Contributions made to union-sponsored plans are based upon collective bargaining agreements and are accounted for under guidance related to multiemployer plans. See Note 14 to the Consolidated and Combined Financial Statements for further information.
New Accounting Standards
See Note 3 to the Consolidated and Combined Financial Statements for a description of new accounting standards issued and/or adopted in the year ended December 25, 2016.

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Non-GAAP Measures
Adjusted EBITDA—The Company defines Adjusted EBITDA as net income (loss) before equity in earnings of unconsolidated affiliates, income taxes, interest expense, other (expense) income, realized gain (loss) on investments, reorganization items, depreciation and amortization, and other items that the Company does not consider in the evaluation of ongoing operating performance. These items include stock-based compensation expense, restructuring charges, transaction expenses, and certain other charges and gains that the Company does not believe reflects the underlying business performance, as detailed below.
 
 
Year Ended
(In thousands)
 
December 25, 2016
 
% Change
 
December 27, 2015
 
% Change
 
December 28, 2014
Net income (loss)
 
$
6,537

 
*
 
$
(2,765
)
 
*
 
$
42,288

 
 
 
 
 
 
 
 


 
 
Income tax expense (benefit)
 
18,924

 
*
 
(430
)
 
*
 
34,453

Loss on equity investments, net
 
690

 
(40.7
%)
 
1,164

 
(1.4
%)
 
1,180

Gain on investment transaction
 

 
*
 

 
*
 
(1,484
)
Interest expense (income), net
 
26,703

 
2.8
%
 
25,972

 
*
 
9,801

Reorganization items, net
 
259

 
(74.8
%)
 
1,026

 
*
 
464

 
 
 
 
 
 
 
 

 
 
Income from operations
 
53,113

 
*
 
24,967

 
(71.2
%)
 
86,702

 
 
 
 
 
 
 
 

 
 
Depreciation and amortization
 
57,499

 
5.2
%
 
54,633

 
70.3
%
 
32,089

Allocated depreciation (1)
 

 
*
 

 
*
 
11,707

Allocated corporate management fee
 

 
*
 

 
*
 
21,871

Restructuring and transaction costs (2)