Document


	Three months ended						Nine months ended
In thousands	September 30, 2020		September 29, 2019		Change		September 30, 2020		September 29, 2019		Change
Operating revenues:
Advertising and marketing services	$	329,508	$	178,491	$	151,017	$	1,025,396	$	566,526	$	458,870
Circulation	336,152		146,254		189,898		1,053,517		449,246		604,271
Other	66,566		41,514		25,052		207,355		123,003		84,352
Total operating revenues	732,226		366,259		365,967		2,286,268		1,138,775		1,147,493
Operating expenses:
Operating costs	438,588		214,315		224,273		1,390,366		669,585		720,781
Selling, general and administrative expenses	186,000		94,332		91,668		592,856		317,596		275,260
Depreciation and amortization	52,481		23,840		28,641		175,990		64,439		111,551
Integration and reorganization costs	5,120		2,608		2,512		39,049		9,067		29,982
Asset impairments	868		—		868		7,727		2,469		5,258
Goodwill and intangible impairments	—		—		—		352,947		—		352,947
Loss on sale or disposal of assets	1,731		568		1,163		1,876		2,746		(870)
Total operating expenses	684,788		335,663		349,125		2,560,811		1,065,902		1,494,909
Operating income (loss)	$	47,438	$	30,596	$	16,842	$	(274,543)	$	72,873	$	(347,416)


	Three months ended						Nine months ended
In thousands	September 30, 2020		September 29, 2019		Change		September 30, 2020		September 29, 2019		Change
Local and national print	$	132,012	$	93,454	$	38,558	$	422,849	$	304,023	$	118,826
Classified print	76,210		45,589		30,621		240,888		143,867		97,021
Total Print advertising	208,222		139,043		69,179		663,737		447,890		215,847

Digital media	84,054		23,101		60,953		235,865		67,220		168,645
Digital marketing services	25,499		10,219		15,280		79,677		32,021		47,656
Digital classified	11,733		6,128		5,605		46,117		19,395		26,722
Total Digital advertising and marketing services	121,286		39,448		81,838		361,659		118,636		243,023

Advertising and marketing services	329,508		178,491		151,017		1,025,396		566,526		458,870

Print circulation	312,644		140,877		171,767		989,482		433,636		555,846
Digital circulation	23,508		5,377		18,131		64,035		15,610		48,425
Total Circulation	336,152		146,254		189,898		1,053,517		449,246		604,271

Other	66,566		41,514		25,052		207,355		123,003		84,352

Total operating revenues	$	732,226	$	366,259	$	365,967	$	2,286,268	$	1,138,775	$	1,147,493

The increase in Local and National print advertising revenues and Classified print advertising revenues was due to acquired revenues related to Legacy Gannett of $74.6 million and $41.7 million, respectively, for the three months ended September 30, 2020, and $232.9 million and $132.1 million, respectively, for the nine months ended September 30, 2020. Excluding the acquisition of Legacy Gannett, Local and National print advertising revenues and Classified print advertising revenues decreased $36.0 million and $11.1 million, respectively, for the three months ended September 30, 2020 and $116.9 million and $35.8 million, respectively, for the nine months ended September 30, 2020. The decline in print advertising was driven by the secular industry trends and the negative impact COVID-19 pandemic had on all categories. The decline in Local and National print advertising revenues was driven by fewer advertising spots sold and a decline in advertiser inserts. Classified print advertising revenues declined due to reduced legal, automotive and real estate listings.

For the three months ended September 30, 2020, the increase in Digital media, Digital marketing services and Digital classified revenues was due to acquired revenues related to Legacy Gannett of $66.5 million, $18.3 million and $6.9 million, respectively, and for the nine months ended September 30, 2020 was $179.8 million, $55.8 million and $30.9 million, respectively. Excluding the acquisition of Legacy Gannett, Digital media, Digital marketing services and Digital classified revenues decreased $5.5 million, $3.0 million and $1.3 million, respectively, for the three months ended September 30, 2020 and $11.4 million, $8.1 million and $4.2 million, respectively, for the nine months ended September 30, 2020 due to the negative impact of the COVID-19 pandemic, which contributed to lower local digital media spend, lower client counts for Digital Marketing Services and a reduction in the volume of automotive and employment classified advertisements.

The increase in Print circulation revenues and Digital circulation revenues, which contains digital only subscriptions, was due to acquired revenues related to Legacy Gannett of $189.4 million and $17.1 million, respectively, for the three months ended September 30, 2020, and $599.1 million and $45.8 million, respectively, for the nine months ended September 30, 2020. Excluding the acquisition of Legacy Gannett, for the three and nine months ended September 30, 2020, Print circulation revenues decreased $17.6 million $45.8 million, respectively, due to declines driven by a reduction in the volume of home delivery due to subscriber declines and single copy sales, reflecting secular industry trends and the impact of COVID-19 on businesses that buy and sell copies of our publications and Digital circulation revenues increased $1.0 million and $2.6 million, respectively, due to an increase in digital only subscribers of 31.1%.

For the three and nine months ended September 30, 2020, the increase in Other revenues was due to acquired revenues related to Legacy Gannett of $37.0 million and $112.7 million, respectively. Excluding the acquisition of Legacy Gannett, Other revenues decreased $12.0 million and $28.3 million due to declines in the commercial print and delivery business, as a result of the overall secular trends and the COVID-19 pandemic.


	Three months ended						Nine months ended
In thousands	September 30, 2020		September 29, 2019		Change		September 30, 2020		September 29, 2019		Change
Newsprint and ink	$	31,250	$	20,179	$	11,071	$	101,097	$	67,706	$	33,391
Distribution	99,189		37,053		62,136		306,768		114,208		192,560
Compensation and benefits	153,643		70,936		82,707		478,996		222,728		256,268
Outside services	74,207		42,515		31,692		252,046		129,825		122,221
Other	80,299		43,632		36,667		251,459		135,118		116,341
Total operating costs	$	438,588	$	214,315	$	224,273	$	1,390,366	$	669,585	$	720,781

For the three and nine months ended September 30, 2020, Newsprint and ink costs increased $11.1 million and $33.4 million, respectively, as a result of acquired newsprint and ink costs related to Legacy Gannett operations. The Company’s newsprint and ink costs benefited $8.0 million and $26.1 million, respectively, from the declines in print circulation and lower print advertising volumes, lower paper prices, and page count reductions driven by efficiency initiatives in printing operations.

For the three and nine months ended September 30, 2020, Distribution costs increased $62.1 million and $192.6 million, respectively, due to higher acquired hauling and delivery costs. The Company’s Distribution costs benefited $3.7 million and $10.5 million, respectively, from declines in print circulation and print advertising volumes.

For the three and nine months ended September 30, 2020, Compensation and benefit costs increased $82.7 million and $256.3 million, respectively, due to costs related to Legacy Gannett operations. The Company’s Compensation and benefit costs benefited $17.6 million and $48.9 million, respectively, from cost containment initiatives implemented in connection with the COVID-19 pandemic and ongoing integration efforts, including headcount reductions.

For the three and nine months ended September 30, 2020, Outside services, which includes outside printing, professional services, paid search and ad serving and credit card fees increased $31.7 million and $122.2 million, respectively, due to acquired costs associated with the Legacy Gannett operations. Outside services benefited $23.4 million and $40.1 million, respectively, as a result of declines in activity driven by lower revenues and cost containment initiatives as well as a decline in third-party printing activity driven by lower volume.

For the three and nine months ended September 30, 2020, Selling, general, and administrative expenses increased by $91.7 million and $275.3 million, respectively. The following table provides the breakout of the increases in Selling, general and administrative expenses:


	Three months ended						Nine months ended
In thousands	September 30, 2020		September 29, 2019		Change		September 30, 2020		September 29, 2019		Change
Compensation and benefits	$	96,377	$	58,663	$	37,714	$	295,569	$	181,514	$	114,055
Outside services	10,805		7,446		3,359		33,858		24,670		9,188
Other	78,818		28,223		50,595		263,429		111,412		152,017
Total Selling, general and administrative expenses	$	186,000	$	94,332	$	91,668	$	592,856	$	317,596	$	275,260

For the three and nine months ended September 30, 2020, Compensation and benefits costs increased $37.7 million and $114.1 million, respectively, due to acquired costs associated with the acquisition of Legacy Gannett. Overall Compensation and benefits benefited $12.1 million and $40.9 million, respectively, from cost containment initiatives, including employee furloughs and headcount reductions as a result of ongoing integration efforts.

For the three and nine months ended September 30, 2020, Outside services costs, which include outside printing, professional and outside services and credit card fees, increased $3.4 million and $9.2 million, respectively, due to acquired costs. Outside services benefited $2.3 million and $8.1 million, respectively, from declines in activity and cost containment initiatives.

For the three and nine months ended September 30, 2020, Depreciation and amortization expenses increased due to the acquired property and intangibles and an increase in accelerated depreciation of $7.1 million and $40.2 million, respectively, due to the continued consolidation of operations resulting from ongoing cost reduction programs.

For the three and nine months ended September 30, 2020, Integration and reorganization costs increased due to the continued consolidation of operations resulting from the ongoing implementation of our plans to reduce costs and preserve cash flow and for the nine months ended an increase in severance costs of $29.3 million.


	Three months ended						Nine months ended
In thousands	September 30, 2020		September 29, 2019		Change		September 30, 2020		September 29, 2019		Change
Net income (loss) attributable to Gannett	$	67,726	$	31,362	$	36,364	$	(213,490)	$	74,690	$	(288,180)
Interest expense	17		21		(4)		127		99		28
Non-operating pension income	(18,262)		(208)		(18,054)		(54,215)		(625)		(53,590)
Gain on sale of investments	—		—		—		(195)		—		(195)
Other non-operating income, net	(1,855)		(74)		(1,781)		(5,190)		(337)		(4,853)
Depreciation and amortization	52,481		23,840		28,641		175,990		64,439		111,551
Integration and reorganization costs	5,120		2,608		2,512		39,049		9,067		29,982
Asset impairments	868		—		868		7,727		2,469		5,258
Goodwill and intangible impairments	—		—		—		352,947		—		352,947
Loss on sale or disposal of assets	1,731		568		1,163		1,876		2,746		(870)
Other items	926		838		88		7,141		3,339		3,802
Adjusted EBITDA (non-GAAP basis)	$	108,752	$	58,955	$	49,797	$	311,767	$	155,887	$	155,880

Adjusted EBITDA for our Publishing segment was $108.8 million for the three months ended September 30, 2020, an increase of $49.8 million compared to the three months ended September 30, 2019 and was $311.8 million for the nine months ended September 30, 2020, an increase of $155.9 million compared to the nine months ended September 29, 2019. The increase for both the three and nine months ended September 30, 2020 was primarily attributable to acquired Adjusted EBITDA for Legacy Gannett and ongoing operating efficiencies, offset by lower demand during the third quarter of 2020, which was impacted by the ongoing economic effects of COVID-19.