[March 26, 2019] |
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Gannett Files Definitive Proxy Statement and Mails Letter to Shareholders
Gannett Co., Inc. (NYSE: GCI (News - Alert)) ("Gannett" or "company") today announced
that it has filed definitive proxy materials with the U.S. Securities
and Exchange Commission and will be mailing the proxy materials and a
letter to shareholders in connection with the company's 2019 Annual
Meeting. The Gannett board of directors unanimously recommends that
shareholders vote "FOR ALL" of the company's highly qualified, fully
independent director nominees on the WHITE proxy card today.
The Annual Meeting will be held at 8:30 a.m. ET on May 16, 2019 at
Gannett's corporate headquarters, located at 7950 Jones Branch Drive,
McLean, VA 22107. Shareholders of record as of the close of business on
March 18, 2019 will be entitled to vote at the Annual Meeting. Admission
to the Annual Meeting will begin at 8:00 a.m. ET.
The full text of the letter follows below:
March 26, 2019
Dear Fellow Shareholder,
At Gannett's Annual Meeting of Stockholders on May 16, 2019, you will be
asked to make an important decision regarding the composition of the
company's board of directors that we believe will impact the future of
the company and the value of your investment in Gannett.
This year's meeting is particularly significant because MNG Enterprises,
Inc. ("MNG"), also known as Digital First Media, a competing news media
company majority-owned by the New York based hedge fund Alden Global
Capital ("Alden"), is attempting to take control of Gannett through a
problematic, two-pronged approach: first, it demanded that Gannett sell
itself to MNG and, second, MNG nominated a control slate of candidates,
all of whom are affiliated with MNG and/or Alden, to stand for election
to the Gannett board.
Your board unanimously rejected the unsolicited proposal from MNG to
acquire Gannett after careful review and consideration in consultation
with our financial and legal advisors. We determined that MNG's proposal
undervalues the company and is not credible or actionable, particularly
given MNG's failure to produce committed financing and its persistent
refusal to answer basic questions regarding how it would overcome likely
antitrust and pension issues, among other important matters.
Your board believes that MNG's nominees would not bring any additive
skills or experience to the Gannett board. Additionally, your board is
cognizant of Alden's history of engaging in transactions that have
destroyed value while lining the pockets of Alden and its affiliates,
including, at MNG, stripping newspapers of certain assets while paying
Alden generous management fees. Your board believes that MNG's nominees
are being put forward simply to advance Alden's goal: to enrich itself
at the expense of Gannett's shareholders.
Underscoring this concern, we believe all six candidates nominated by
MNG exhibit obvious and significant conflicts of interest. Gannett
believes that if MNG's nominees were to be elected to the Gannett board,
it would effectively transfer control of the board to MNG and Alden -
without any control premium - at which point MNG and Alden would be able
to advance a self-serving agenda at yet another American news media
company.
Your vote is very important. We encourage you to protect the value of
your investment in Gannett by voting "FOR ALL" of your board's eight
independent nominees today - online, by telephone or by signing, dating
and returning the enclosed WHITE proxy card in the postage-paid envelope
provided. Please simply discard and do NOT vote using any Blue proxy
cards you may receive from MNG.
GANNETT'S STRATEGIC TRANSFORMATION IS DEMONSTRATING RESULTS THAT WILL
DELIVER GROWTH AND ENHANCE SHAREHOLDER VALUE
Under the direction of the company's board and management team, Gannett
is executing a digital transformation that, combined with the company's
USA TODAY NETWORK strategy, will enable Gannett to serve as a trusted,
comprehensive digital marketing partner to local and national businesses
while also defining, strengthening and growing our communities through
digital engagement.
During 2018, while this transformation was ongoing, your board and
management team drove significant progress, as underscored by the strong
digital growth and the Pulitzer Prize-winning coverage provided through
the USA TODAY NETWORK. Your board is confident that Gannett has
significant value creation potential through the continued digital
transformation and execution of the company's strategic plan. We have
made progress by:
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Creating a Best-In-Class Digital Marketing Services Organization: Through
a combination of organic investment and disciplined acquisitions of
marketing services businesses, Gannett now offers best-in-class
digital marketing solutions, which continue to position the company as
an important partner that businesses trust with their marketing spend.
Since acquiring ReachLocal in 2016, we have succeeded in transforming
an unprofitable business into a healthy and growing digital leader -
in 2018, we grew ReachLocal revenues 15% and increased their adjusted
EBITDA margins to 12%, achieving double-digit adjusted EBITDA margin
targets several quarters ahead of expectations.1 We
continued to grow our client base and average revenue per client in
2018 and, driven by the strength of our digital marketing services
offerings, 36% of Gannett's total revenue and 47% of the company's
advertising revenue is now digital. Gannett's marketing services
organization has demonstrated its potential as a major growth engine,
meaningfully contributing to overall profitability, with strong
operating leverage driving continued margin expansion.
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Launching USA TODAY NETWORK: By combining local and national
news organizations in the U.S. under the USA TODAY NETWORK and
introducing new, innovative experiences such as the company's video
franchises and virtual and augmented reality products, Gannett has
consistently increased its overall readership and meaningfully grown
digital engagement, enhancing monetization opportunities. The USA
TODAY NETWORK has grown monthly unique visitors as measured by
comScore (News - Alert) from an average of 110 million in 2016 to 126 million in
2018. Furthermore, Gannett ranked first in mobile web unique visitors
in comScore's News and Information category in 2018. Gannett now has
more than 500,000 paid digital-only subscribers and, given the 2018
growth rate of 46% for digital subscriptions Gannett is on track to
reach the company's goal of one million digital subscribers in the
next two years.
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Enhancing and Growing Digital Advertising: Based on the USA
TODAY NETWORK's trusted audiences of scale, our national sales team
delivered strong digital advertising revenue growth in 2018 for the
second year in a row, up 19% from 2017, led by gains across both our
premium and programmatic sales channels. In addition, our USA TODAY
operations achieved total advertising revenue growth in the fourth
quarter of 2018 due to gains in digital advertising, and more than 75%
of its advertising revenue is now digital. In an effort to drive more
robust digital advertising and marketing services revenue growth at
the local level, in 2018, we better aligned our local sales
organization based on our customers' spending and marketing
objectives, with strategies tailored to individual client accounts
rather than a "one size fits all" approach.
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Carefully Managing Cost Base to Maintain Profitability: Gannett
has and will continue to thoughtfully and strategically rationalize
its cost base and align its legacy printing operation costs with print
revenue trends, while ensuring publications are sufficiently staffed
to drive continued consumer engagement and deliver on our commitment
to the highest journalistic standards. Since the spin-off - and
including acquisitions - we have reduced our annual operating expenses
by over $820 million, including consolidating 13 production facilities.
These strategic actions by your board and
management team have enabled Gannett to deliver solid performance and
value creation despite the challenging industry environment, including:
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Delivering total shareholder returns in excess of peers: While
sector challenges have pressured returns across Gannett's peer group,
since 2015, Gannett has delivered a higher and more stable total
shareholder return than the majority of the company's broader peer set.2
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Returning capital to shareholders via quarterly dividends: Since
the spin-off, Gannett has returned $324 million to shareholders
via quarterly dividends and share repurchases.
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Maintaining a strong balance sheet: Given the industry
pressures, we have prioritized a strong balance sheet, and our current
debt to adjusted EBITDA ratio of 0.7x provides the financial
flexibility to invest in our business and accretive acquisitions
consistent with our balanced approach to capital allocation.
In short, we are executing a strategy that we are confident will
continue to generate value for our shareholders in the near term with
additional upside. As these actions and results underscore, we have
a clear strategic plan to deliver value for shareholders, and under the
leadership of the Gannett board and management team, we have already
made significant progress in our transformation to a digitally-based
business model.
Your board and management team understand that the decision to vote for
Gannett's nominees will be determined by who can deliver greater value
to shareholders. Given the collective operational expertise of your
current board and management team, our focus on executing our strategic
digital transformation and our unwavering commitment to remaining a
trusted source of news, we believe the board's nominees are best
positioned to grow Gannett and its valuable assets and will drive
greater value than MNG's nominees. In contrast, we have grave
concerns that under MNG's control, the board would be repurposed for
siphoning value - including potentially from Gannett's pensions - to
deliver generous management fees and profits to Alden, while destroying
value for other Gannett shareholders.
Your board, as evidenced by our actions and the tremendous progress
achieved to date, will continue to act in the best interests of all
Gannett shareholders.
MNG HAS DELIVERED NO FINANCING COMMITMENT FOR ITS PROPOSED
TRANSACTION AND HAS EVADED BASIC QUESTIONS ABOUT OTHER CLOSING RISKS,
UNDERSCORING THAT ITS UNSOLICITED PROPOSAL IS NOT CREDIBLE AND CALLING
INTO QUESTION MNG'S TRUE MOTIVES
Following receipt of MNG's unsolicited proposal, your board carefully
reviewed and considered the proposal in consultation with the company's
financial and legal advisors, and unanimously determined to reject the
proposal because it undervalues Gannett, its key assets and its
prospects, and is not in the best interests of the company and its
shareholders. Your board further determined that the MNG proposal,
lacking requisite financial resources and any assurances that it could
ultimately be closed, was not credible. In reaching its decision, the
Gannett board and management team acted in your best interests by
offering to engage in discussions with MNG. After receiving MNG's
unsolicited proposal, your board twice offered to meet MNG to address
critical questions related to the credibility of its proposal, an offer
that MNG initially refused.
At a meeting that MNG finally agreed to join on February 7, 2019, and
despite having 15 representatives in attendance, including financial and
legal advisors, MNG continued to evade Gannett's basic questions
concerning MNG's unsolicited proposal. MNG also repeatedly stated its
desire for a "combination" or "merger" with Gannett, and never made
specific mention of its unsolicited, all-cash proposal to acquire
Gannett. While MNG later stated that it continues to pursue an
acquisition of Gannett, MNG's posture in the February 7 meeting further
supported Gannett's view that MNG is ultimately seeking to be acquired
by Gannett. In fact, in the past, MNG has repeatedly approached Gannett
seeking to be acquired, which Gannett has declined in all instances. We
believe MNG is using its proposal as a ploy to open discussions for such
a transaction. Given these facts, Gannett continues to question whether
MNG is in fact a buyer or a seller.
Further calling into question MNG's credibility, MNG has failed to
address - adequately or at all - basic questions relating to details
such as:
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Financing Risks: At the February 7 meeting, MNG confirmed it
had not secured financing for a potential transaction or even reached
out to potential financing sources three weeks after having made an
unsolicited proposal to acquire Gannett. Furthermore, the letter that
MNG recently procured from Oaktree Capital Management, L.P.'s
distressed debt fund, Oaktree Strategic Credit, more than two
months after MNG launched its unsolicited proposal and more than a
month following this meeting, does not represent a contractual
commitment for financing or a legal obligation, and is highly
conditional. The letter does not indicate that Oaktree Strategic
Credit itself was confident in its own ability to arrange committed
financing or otherwise suggest it would even play a role in the
financing, as would be customary in a letter of this kind. The letter
continues to propose financing a transaction exclusively with
debt. Based on MNG's current debt levels and EBITDA, as
indicated by MNG, to complete a transaction with Gannett, we believe
pro forma leverage would likely exceed 4.0x, or would require
synergies in the hundreds of millions of dollars, well in excess of
Gannett's own cash flow today.
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Regulatory Risks - Antitrust and Pensions: MNG offered only
vague assurances with respect to antitrust regulatory concerns and its
capacity to fund Gannett's pension liabilities in a potentially highly
leveraged transaction. No substantive proposal on these issues was
made, other than to make clear that MNG would expect Gannett to share
in any regulatory risk to the transaction (as opposed to signaling a
willingness to bear the risk itself, as the buyer often does).
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Leadership and Combined Operating Plan: MNG failed to provide
any credible plan for the management or operations of Gannett going
forward and did not explain how MNG would intend to maintain value
during the pendency of any transaction. Gannett can only conclude that
MNG would apply the same type of decimating cost-cutting measures to
Gannett that it has to its other acquired papers.
MNG has still not obtained a financing commitment and has refused to
provide any substantive answers to basic questions that are routinely
addressed by parties making a public, unsolicited, but potentially
credible, takeover proposal.
CAN MNG'S CANDIDATES, ALL OF WHOM ARE AFFILIATED WITH MNG AND/OR ITS
MAJORITY SHAREHOLDER ALDEN, FULFILL THEIR FIDUCIARY DUTY TO GANNETT
SHAREHOLDERS?
After reviewing the qualifications and backgrounds of MNG's nominees,
the Gannett board concluded that MNG's nominees would not bring
incremental skills or expertise to the board. Further, given MNG's own
statements and the affiliated nature of all of its nominees, Gannett
questions whether MNG's nominees could reasonably be expected to act in
the best interests of all Gannett shareholders, rather than being
beholden to or unduly influenced by MNG and Alden. Specifically, Gannett
believes MNG's clearly conflicted nominees are not in a position to
fairly, and in a disinterested way, evaluate and advise on the actions
the board takes on behalf of all Gannett shareholders. Considering these
clear and irreconcilable conflicts of interest, were the MNG candidates
to be elected to the Gannett board, Gannett believes the consequence
would be to transfer control of the board to MNG and Alden with no
control premium, at which point MNG would be in a position to advance
any agenda it wants - at Gannett shareholders' expense.
In addition, at least three of MNG's candidates may be legally incapable
of serving on the Gannett board under applicable antitrust laws, given
their roles with MNG, and Mr. Joseph Fuchs exceeds Gannett's age limit
applicable to all directors, as clearly set forth in Gannett's bylaws.
MNG and its nominees have a record of value destruction: At Fred's,
Inc., Alden's largest single holding, the stock has declined 87% since
Alden announced its investment.3 Another of Alden's
investments, Payless ShoeSource, has filed for bankruptcy twice during
the past two years.
In contrast to the candidates put forth by Alden-backed MNG, Gannett has
a highly qualified board, and its eight nominees - all of whom are
independent - bring broad and diverse backgrounds, professional
experience and skills in areas that are critical to Gannett's business
and future success, including finance, business development and
strategic planning, mergers and acquisitions, digital media, journalism,
marketing and advertising, technology and human resources. The company's
Nominating and Public Responsibility Committee takes its duties
seriously, and our directors were selected based on their collective
experience, backgrounds and other attributes, which we believe makes
them the best candidates to serve on the Gannett board. Your directors
remain actively engaged in working with management to oversee and
execute Gannett's strategy and business transformation and regularly
engage with shareholders on these topics.
SUPPORT THE BOARD THAT IS ALIGNED WITH YOUR INTERESTS. VOTE
"FOR ALL" OF GANNETT'S HIGHLY QUALIFIED DIRECTOR NOMINEES ON (News - Alert)
THE WHITE PROXY CARD TODAY
All of us at Gannett understand we still have more work to do to achieve
our objectives and continue creating value for shareholders. This is a
critical time for Gannett and the industry, and your board and
management team are laser-focused on executing our digital
transformation: leveraging our nationwide scale and local presence to
expand and deepen our relationships with consumers and businesses,
accelerating the growth of our digital revenue through innovative
consumer experiences and new marketing and advertising solutions and
continuing to pursue accretive growth through disciplined, selective
acquisitions that provide synergies with our customer base and markets.
We believe the path to the greatest value opportunity for shareholders
is through the continued execution of the company's digital
transformation and a continued commitment to journalistic excellence -
and through electing your board's superior director nominees. We urge
shareholders to vote "FOR ALL" of the company's independent director
nominees using the WHITE proxy card today. Please simply follow the easy
instructions to submit your proxy by telephone, by Internet or by
signing, dating and returning the enclosed WHITE proxy card in the
postage-paid envelope provided.
We thank you for your continued support.
Sincerely,
/s/
J. Jeffry Louis, Chairman of the Gannett board of directors
Gannett shareholders who have questions or would like additional
information should contact the company's proxy solicitor, Innisfree M&A
Incorporated, toll-free at 1-877-456-3507.
Greenhill & Co., LLC and Goldman Sachs & Co. LLC are acting as financial
advisors and Skadden, Arps, Slate, Meagher & Flom LLP is acting as legal
advisor to Gannett.
If you have any questions, or need assistance in voting your shares,
please call our proxy solicitor:
INNISFREE M&A INCORPORATED TOLL-FREE at
1-877-456-3507
About Gannett
Gannett Co., Inc. (NYSE: GCI) is an innovative, digitally focused
media and marketing solutions company committed to strengthening
communities across our network. With an unmatched local-to-national
reach, Gannett touches the lives of more than 125 million people monthly
with our Pulitzer-Prize winning content, consumer experiences and
benefits, and advertiser products and services. Gannett brands include
USA TODAY NETWORK with the iconic USA TODAY and more than 100 local
media brands, digital marketing services companies ReachLocal,
WordStream and SweetIQ, and U.K. media company Newsquest. To connect
with us, visit www.gannett.com.
Forward-Looking Statements
This communication contains certain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include all statements that are not
historical facts. The words "believe," "expect," "estimate," "could,"
"should," "intend," "may," "plan," "seek," "anticipate," "project" and
similar expressions, among others, generally identify forward-looking
statements, which speak only as of the date the statements were made and
are not guarantees of future performance. Where, in any forward-looking
statement, an expectation or belief as to future results or events is
expressed, such expectation or belief is based on the current plans and
expectations of our management and expressed in good faith and believed
to have a reasonable basis, but there can be no assurance that the
expectation or belief will result or be achieved or accomplished.
Whether or not any such forward-looking statements are in fact achieved
will depend on future events, some of which are beyond our control. The
matters discussed in these forward-looking statements are subject to a
number of risks, trends, uncertainties and other factors that could
cause actual results or events to differ materially from those
projected, anticipated or implied in the forward-looking statements,
including the matters described under the heading "Risk Factors" and
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" in the company's annual report on Form 10-K for fiscal
year 2018 and in the company's other SEC (News - Alert) filings.
Additional Information
On March 26, 2019, Gannett filed a definitive proxy statement and WHITE
proxy card with the U.S. Securities and Exchange Commission (the "SEC")
in connection with its solicitation of proxies for its 2019 Annual
Meeting of Stockholders (the "2019 Annual Meeting"). The definitive
proxy statement is also being mailed to Gannett's stockholders beginning
on or about March 26, 2019. INVESTORS AND SECURITY HOLDERS OF
GANNETT ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT (INCLUDING ANY
AMENDMENTS OR SUPPLEMENTS THERETO) AND ACCOMPANYING WHITE PROXY CARD AS
THEY CONTAIN IMPORTANT INFORMATION. Investors and security holders
may obtain free copies of the definitive proxy statement (including any
amendments or supplements thereto) and other documents filed with the
SEC through the web site maintained by the SEC at www.sec.gov.
Copies will also be available at no charge in the "Investor Relations"
section of Gannett's website, www.gannett.com.
Appendix A - Non-GAAP Financial Measures
Consolidated
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($ in millions)
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Fiscal Year
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2018
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2017
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2016
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Net income (GAAP basis)
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$15
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$7
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$53
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Provision for income taxes
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15
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34
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14
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Interest expense
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25
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17
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13
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Other non-operating items, net
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(26)
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10
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10
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Operating income (loss) (GAAP basis)
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$29
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$68
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$89
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Depreciation and amortization
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158
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192
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133
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Restructuring costs
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68
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44
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56
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Asset impairment charges
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50
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47
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46
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Acquisition-related items
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8
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5
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33
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Other items
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9
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4
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3
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Adjusted EBITDA (non-GAAP basis)
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$322
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$360
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$360
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ReachLocal Segment
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($ in millions)
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Fiscal Year
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2018
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2017
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2016
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Operating income (loss) (GAAP basis)
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($1)
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($19)
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($19)
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Depreciation and amortization
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42
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34
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12
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Restructuring costs
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5
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1
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0
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Asset impairment charges
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0
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0
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1
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Acquisition-related items
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0
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0
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0
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Other items
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1
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1
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0
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Adjusted EBITDA (non-GAAP basis)
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$48
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$17
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($6)
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1 See Appendix A for a reconciliation of Adjusted EBITDA to
Operating Income. 2 Peers include The New York Times
Company, New Media Investment Group Inc., Tribune Publishing Company,
News Corporation, McClatchy and Lee Enterprises, Incorporated. 3
Based on closing stock prices on March 25, 2019, and December 21, 2016
(the day prior to the filing of Alden's initial 13D).
View source version on businesswire.com: https://www.businesswire.com/news/home/20190326005560/en/
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