Form 10-K tronc, Inc. For: Dec 31

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Form 10-K tronc, Inc. For: Dec 31

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March 16, 2018 9:32 AM

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 31, 2017



[ ]	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, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:



Large accelerated filer ____		Accelerated filer X
Non-accelerated filer		Smaller reporting company ____
		Emerging growth company _____

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Ex-change Act. ___

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 $316,671,076 based upon the closing market price of $13.38 per share of Common Stock on the Nasdaq Global Select Market as of June 25, 2017.

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 12, 2018
Common Stock, par value $0.01 per share		35,702,740

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 2018 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.	Business	2

Item 1A.	Risk Factors	7

Item 1B.	Unresolved Staff Comments	24

Item 2.	Properties	24

Item 3.	Legal Proceedings	25

Item 4.	Mine Safety Disclosures	26

PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	26

Item 6.	Selected Financial Data	28

Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	28

Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	43

Item 8.	Financial Statements and Supplementary Data	44

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	44

Item 9A.	Controls and Procedures	44

Item 9B.	Other Information	47

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	47

Item 11.	Executive Compensation	48

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	48

Item 13.	Certain Relationships and Related Transactions, and Director Independence	48

Item 14.	Principal Accountant Fees and Services	48

PART IV

Item 15.	Exhibits and Financial Statement Schedules	48

	SIGNATURES	53

	Financial Statements	F-1

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 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; factors impacting the ability to close our recently announced agreement to sell our California properties; economic and market conditions that could impact the level of our required contributions to the defined benefit pension plans to which we contribute; decisions by trustees under rehabilitation plans (if applicable) or other contributing employers with respect to multiemployer plans to which we contribute which could impact the level of our contributions; 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 principal stockholders whose interest 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, in fact occur 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., and its subsidiaries (collectively, the “Company” or “tronc”) is a media company rooted in award-winning journalism. Headquartered in Chicago, tronc operates newsrooms in ten of the nation’s largest markets with titles including the Chicago Tribune, The Baltimore Sun, Orlando Sentinel, South Florida’s Sun Sentinel, Newport News, Virginia’s Daily Press, Allentown, Pennsylvania’s The Morning Call, Hartford Courant, Los Angeles Times, and The San Diego Union Tribune. On September 3, 2017, the Company completed the purchase of the New York Daily News, New York City’s “Hometown Newspaper”. tronc’s legacy of brands, including the New York Daily News, has earned a combined 105 Pulitzer Prizes and is committed to informing, inspiring and engaging local communities.

On February 7, 2018, tronc entered into a Membership Interest Purchase Agreement (the “MIPA”), by and between the Company and Nant Capital, LLC (“Nant Capital”), pursuant to which the Company will sell the Los Angeles Times, The San Diego Union-Tribune and various other of the Company’s California titles to Nant Capital for an aggregate purchase price of $500 million in cash plus the assumption of $90 million in underfunded pension liabilities (the “Nant Transaction”). The Nant Transaction is expected to close in the late first quarter or early second quarter of 2018.

Since these properties were not assets held for sale or discontinued operations as of December 31, 2017, any discussions of the business of the Company and all reported financial and operating results and metrics reflect inclusion of the Los Angeles Times and The San Diego Union-Tribune.

tronc’s brands create and distribute content across its media portfolio, offering integrated marketing, media, and business services to consumers and advertisers, including digital solutions and advertising opportunities.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.

tronc manages 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”) and forsalebyowner.com.

troncM

troncM’s media groups include the Chicago Tribune Media Group, the New York Daily News Media Group, the Sun Sentinel Media Group, the Orlando Sentinel Media Group, The Baltimore Sun Media Group, the Hartford Courant Media Group, the Morning Call Media Group, the Daily Press Media Group, the Los Angeles Times Media Group, and the San Diego Media Group. tronc’s major daily newspapers have served their respective communities with local, regional, national and international news and information for more than 150 years. The Hartford Courant is the nation’s oldest continuously published newspaper and celebrated its 250^th anniversary in October 2014.

In the year ended December 31, 2017, 44.9% 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 39.5% of operating revenues for the year ended December 31, 2017 were generated from the sale of newspapers and other owned 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 31, 2017 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 some of its local markets under multiple agreements. Additionally, in Chicago, New York, Hartford, Fort Lauderdale and Los Angeles, 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 Revenue:	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 31, 2017, 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	Weekly	Free
New York Daily News Media Group
	New York, NY	New York Daily News	Daily	Paid
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
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

troncM Acquisitions

troncX

troncX is comprised of the Company’s digital revenues and related digital expenses from local tronc websites, third party websites, mobile applications, digital only subscriptions, TCA and forsalebyowner.com.

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 1,700 media and digital information publishers in over 70 countries. Tribune News Service delivers the best material from 70 leading companies, including Los Angeles Times, Chicago Tribune, Bloomberg News, Miami Herald, The Dallas Morning News, Seattle Times and The Philadelphia Inquirer. Tribune Premium Content syndicates columnists such as 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”).

In the year ended December 31, 2017, 80.9% 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 19.1% of operating revenues for the year ended December 31, 2017 were generated from the sale of digital content and other related activities.

troncX Products and Services

As of December 31, 2017, the Company’s prominent websites include:



Websites
www.tronc.com	www.carrollcountytimes.com
www.chicagotribune.com	www.courant.com
www.chicagomag.com	www.dailypress.com
www.vivelohoy.com	www.themorningcall.com
www.redeyechicago.com	www.forsalebyowner.com
www.NYDailyNews.com	www.TheDailyMeal.com
www.sun-sentinel.com	www.TheActiveTimes.com
www.sun-sentinel/elsentinel.com	www.latimes.com
www.orlandosentinel.com	www.la.com
www.orlandosentinel/elsentinel.com	www.hoylosangeles.com
www.baltimoresun.com	www.sandiegouniontribune.com
www.capitalgazette.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 other immaterial properties. For further information regarding the Company’s acquisitions, see Note 5 of the Consolidated Financial Statements.

Competition

Each of the Company’s ten 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, including the ubiquity of mobile platforms, 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, tablets and e-readers; on websites and blogs; in niche online publications and in e-mail newsletters.

Raw Materials

As a publisher of newspapers, tronc utilizes substantial quantities of various types of paper. During 2017, we consumed approximately 137 thousand metric tons of newsprint. We currently obtain substantially all of our newsprint from one North American supplier, primarily under a long-term contract. Substantially all of our paper purchasing is done through a national purchasing aggregator who then draws upon Canadian and U.S. based newsprint producers. We believe that our current source of paper supply is adequate. Our earnings are sensitive to changes in newsprint prices. Newsprint and ink expense accounted for 6.5% of total operating expenses in fiscal year 2017.

Employees

As of December 31, 2017, we had approximately 6,581 full-time and part-time employees, including approximately 1,097 employees represented by various employee unions. We believe our relations with our employees are satisfactory. Subsequent to 2017 year-end approximately 400 editorial employees at the Los Angeles Times voted to be represented by a union and will soon begin negotiating a collective bargaining agreement.

Intellectual Property

Currently, our operations are generally not reliant on 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 Chicago Tribune, New York Daily News and The Hartford Courant. Generally, the duration of a trademark registration is perpetual if it is renewed on a timely basis and continues to be used properly as a trademark. We also own a large number of copyrights, none of which individually is material to the business. We maintain certain licensing and content sharing relationships with third-party content providers that allow us to produce the particular content mix we provide to our customers in our markets. The Company entered into a number of agreements with Tribune Media Company, formerly Tribune Company (“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 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 in major metropolitan markets, affect the levels of retail, national and classified newspaper advertising revenue. Changes in gross domestic product, consumer spending, auto sales, fuel prices, 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.

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. 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 have invested, and expect to continue to invest, in digital technologies. However, 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 often times 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 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, or even maintain prices 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.

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 a 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.

The recently announced sale of our California properties may or may not be consummated and no assurances can be given how either event could impact our results of operations and financial condition.

On February 7, 2018, we entered into the MIPA with Nant Capital, pursuant to which we agreed to the Nant Transaction. We will retain certain liabilities associated with the California properties. The Nant Transaction, which is expected to close in the late first quarter or early second quarter of 2018, is subject to customary closing conditions, many of which are beyond our control. We are currently considering the best use of the after-tax proceeds of the Nant Transaction.

There can be no assurances whether all of the required closing conditions will be satisfied or waived or if other uncertainties may arise, that there will not be a delay in the closing of the Nant Transaction, or that the transaction will close at all. If the Nant Transaction does not close, we will continue to be the sponsor of the San Diego Pension Plan, which has a $90 million unfunded liability. A failure to complete the Nant Transaction on a timely basis or at all could result in negative publicity and which could impact the price of our common stock.

If the Nant Transaction does close on the terms currently contemplated, we expect our revenues and net income will decrease. For the year ended December 31, 2017, the California properties accounted for 33.0% of our total revenues. In addition, without the California properties, the scale and geographic scope of our operations will be substantially decreased, which could negatively impact our negotiating power in connection with both advertising sales rates as well as newsprint purchasing prices. Further, even if we do consummate the Nant Transaction, we may or may not be able to execute on our planned digital growth strategy through additional acquisitions. Each of these events could adversely affect our results of operations, financial condition and profitability.

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 reduced consumer demand for print circulation and decreased 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, or even maintain current pricing, for our print products. As a result, 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 a certain level of 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 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 2017, we generated approximately 8.7% of our revenue from printing and distributing third-party publications. 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.

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.

We continually assess our operations in an effort to identify opportunities to enhance operational efficiencies and reduce expenses. These activities have in the past included, and could include in the future, outsourcing of various functions or operations, additional abandonment of leased space, offering employee buyouts, amending retirement benefits and other activities that may result in changes to employee headcount. See Note 3 to the Consolidated Financial Statements for more information on changes in operations during 2017. The Company expects to continue to take actions deemed appropriate to control expenses and enhance profitability but does not currently know whether or when any such actions will occur or the potential costs and expected savings. 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. Finally, depending on the actions taken and the timing of any such actions, the anticipated cost savings could be recognized in fiscal periods that do not correspond to the fiscal period(s) in which the charges are recognized. As a result, our net income trends could be impacted and more difficult to predict.

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 6.5% of our total operating expenses in 2017. 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.

In addition, the United States Department of Commerce has announced the initiation of an anti-dumping and countervailing duty investigation of Canadian imports of uncoated groundwood paper, which includes newsprint. The Department of Commerce reached its preliminary determination on countervailing duties on January 9, 2018, which resulted in tariffs on certain Canadian-manufactured papers, including newsprint. These tariffs range from approximately 4.4% to 9.9%. The Department of Commerce reached its preliminary determination on anti-dumping duties on March 13, 2018, which resulted in tariffs on certain Canadian-manufactured papers, including newsprint. These anti-dumping tariffs will range from 0% to 22.16% for most Canadian manufacturers and will be assessed on top of the countervailing tariffs. The Department of Commerce’s final determination is expected in August 2018. Such tariffs are expected to increase the prices we pay for newsprint. The International Trade Commission (the “ITC”) made a preliminary determination in September 2017 on such tariffs but a final decision is expected in late summer of 2018. There can be no assurances as to the Department of Commerce’s final determination on these duties. In addition, there can be no assurances whether the ITC’s final decision will uphold or eliminate the tariffs imposed by the Department of Commerce. Any increase to us of the cost of newsprint would increase our operating costs and it is unlikely we could fully recoup any such increases through increased subscription rates to our customers.

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 may 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 could be disruptive to our business as we seek to replace the service provider or remedy the inadequate level of service. This disruption may adversely affect our operating results.

Significant problems with our key systems or those of our third-party service providers could have a material adverse effect on our operating results.

The systems underlying the operations of each of our businesses are complex and diverse, and must efficiently integrate with third-party systems, such as wire feeds, video playout systems and credit card processors. Key systems include, without limitation, billing, website and database management, customer support, editorial content management, advertisement and circulation serving and management systems, 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. These technologies and systems also help us manage many of our internal controls over financial reporting, disclosure controls and procedures and financial systems. 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 and various controls, automated procedures and financial systems could be compromised.

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 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 are party to litigation, including matters relating to alleged libel or defamation, breaches of fiduciary duties by our Board of Directors, 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. The coverage, if any, and limits of our insurance policies may not be adequate to reimburse us for all costs and/or losses associated with lawsuits or investigations. If we are not successful in our defense of any claims that may be asserted against us and/or 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 any claims that may be filed against us, defending 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.

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. If such third parties were to fail to indemnify us, we would be responsible for the monetary damages, which could adversely affect our financial condition and cash flow. See Note 5 to the Consolidated 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, was appealed and remanded to the trial court with directions to redetermine the amount of the judgment to the class and prejudgment interest. The court of appeal further directed the trial court to redetermine attorneys’ fees. The trial is currently scheduled to begin in April 2018. The original judgment would have resulted in a final minimum damages award in excess of $12 million, which increases as interest accrues on the unpaid judgment. It is anticipated that in the next trial, the trial court will reduce the amount of the original judgment, including attorney’s fees, but the amount of the reduction is uncertain and interest continues to accrue. Interest accrual could impact the amount of any reduction by the trial court such that the amount owed is not materially altered. If the seller in The San Diego-Tribune acquisition were to fail to indemnify us, we would be responsible for the monetary damages, which could adversely affect our financial condition.

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 Company incurring debt and contingent liabilities, pension obligations, 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) the challenges in achieving strategic objectives, cost savings and other anticipated benefits; (ii) potential adverse short-term effects on operating results through increased costs or otherwise; (iii) diversion of management’s attention and failure to recruit new, and retain existing, key personnel of the acquired business; (iv) stockholder dilution if an acquisition is consummated (in whole or in part) through an issuance of our securities; (v) failure to successfully implement systems integration; (vi) potential future impairments of goodwill associated with the acquired business; (vii) 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 (viii) exceeding the capability of our systems; ; (ix) problems implementing disclosure controls and procedures for the newly acquired business; and (x) unforeseen difficulties extending internal control over financial reporting and performing the required assessment at the newly acquired business.

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 candidates with whom we are permitted to proceed or may impose transaction execution 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 the 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 that 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.

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.

Part of our strategy is to expand through both organic and inorganic growth. For example, we expanded the geographic scope of our business in 2017 through the acquisition of the New York Daily News. Our future financial results will depend in part on our ability to profitably manage our business in that and any other new markets that we may enter. 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 do so, 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 underfunded pension liabilities as part of both The San Diego Union-Tribune and New York Daily News acquisitions and our pension obligations under these plans, or other pension plans we may assume in future acquisitions, could increase.

In connection with acquisitions, we have in the past assumed, and may in the future assume, single-employer and/or multi-employer pension obligations of the acquired entity(ies) which may or may not be fully funded at the time of acquisition. For example, in connection with our acquisitions of The San Diego Union-Tribune and the New York Daily News, we assumed both The San Diego Union-Tribune, LLC Retirement Plan (the “San Diego Pension Plan”) and the Daily News Retirement Plan (the “NYDN Pension Plan”). Both of these single-employer plans are currently underfunded. The Company’s contributions to the San Diego Pension Plan and the NYDN Pension Plan were $13.3 million and $1.0 million, respectively, in fiscal 2017. The unfunded status of the San Diego Pension Plan and NYDN Pension Plan are $90.2 million and $21.4 million, respectively as actuarially determined as of December 31, 2017. As a result, our pension funding requirements could increase due to a reduction in the plan’s funded status. The extent of underfunding of each of these plans is directly affected by a variety of factors, including performance of financial markets, changing 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.

As part of the Nant Transaction, Nant Capital agreed to assume our liabilities relating to the San Diego Pension Plan. As discussed above under the risk factor entitled “The recently announced sale of our California properties may or may not be consummated and no assurances can be given how either event could impact our results of operations and financial condition,” the closing of that transaction is subject to many closing conditions, many of which are beyond our control. If that transaction is not consummated, we would continue to remain obligated under the San Diego Pension Plan.

Our annual pension funding obligations could also further increase if we assume additional pension plans (whether or not unfunded) in connection with future acquisitions. For example, in our 2017 acquisition of the partnership interests of DNLP, the owner of the New York Daily News, we acquired the DNLP’s contribution history and obligation to make future contributions pursuant to collective bargaining agreements relating to five additional multiemployer plans, and increased our funding obligations for two other multiemployer pension plans to which we were previously contributing. No assurances can be made regarding whether we will assume other pension plan obligations and, if we do, the level of any underfunded status, if any.

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.

As of December 31, 2017, we contributed to ten multiemployer defined benefit pension plans under the terms of collective bargaining agreements that cover our union-represented employees. Our contributions in connection with such plans include, without limitation, contributions to the Chicago Newspaper Publishers Drivers’ Union Pension Plan (the “Drivers’ Plan”), the GCIU Employer Retirement Benefit Plan (the “GCIU Plan”) and the Communications Workers of America International Typographical Union Negotiated Pension Plan (the “CWA/ITU Plan”).

The trustees of each of the Drivers’ Plan, GCIU Plan and CWA/ITU Plan have implemented rehabilitation plans in 2011, 2009 and 2010, 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; to forestall insolvency, in the case of the GCIU Plan; and to exit critical status, in the case of the CWA/ITU Plan. The Drivers’ Plan, GCIU Plan and CWA/ITU Plan have each been certified by their respective actuaries to be in critical and declining status, with projected insolvency in 2025, 2027 and 2030 respectively. As of December 31, 2017, assuming our contributions from December 26, 2016 through 2025 in the case of the Drivers’ Plan, which is the expiration of its rehabilitation plan’s term, through the projected insolvency date of 2027 in the case of the GCIU Plan and through the projected insolvency date of 2030 in the case of the CWA/ITU Plan, it is estimated that the Company’s contributions to these plans will total $56.4 million, $7.6 million and $2.4 million, respectively, based on the actuarial assumptions utilized to develop the rehabilitation plans and assuming our staffing levels as of December 31, 2017 remain unchanged. Four of the multiemployer pension plans to which we are obligated to contribute have implemented

rehabilitation plans as of March 1, 2018, but no assurances can be given whether rehabilitation plans could impact any other of our multiemployer pension plans in the future.

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, GCIU Plan and CWA/ITU Plan, and their projected insolvency in 2025, 2027 and 2030, 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. With respect to four of the ten multiemployer defined benefit pension plans to which we are obligated to contribute, we are among only a limited number of participating employers. As a result, if one or more of the other contributing employers withdraws from, or ceases to contribute to, such plans, our required contributions to such plans could increase. 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. We are not currently able to quantify such potential increased contributions or liabilities.

Labor strikes, lockouts and protracted negotiations can lead to business interruptions and increased operating costs.

As of December 31, 2017 and January 31, 2018, union employees comprised approximately 16.7% and 22.7%, respectively, of our workforce. In January 2018, approximately 400 editorial employees at the Los Angeles Times voted to be represented by a union and will soon begin negotiating a labor contract. 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.

Our ability to operate effectively could be impaired if we fail to attract, integrate and retain our senior management team.

We rely heavily on the skills and expertise of our senior management team and therefore, our success depends, in part, upon the services they provide us. In addition, in 2017, we hired additional senior leaders, including our President as well as many executives at the newly reorganized Tribune Interactive division, including the new CEO. If we are unable to assimilate these new senior managers, if they or our other leaders 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 of tronc’s shares by TCO described below 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 spun-off essentially all of its publishing business into an independent company (the “Distribution”). 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.

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, fuel prices and uncertainty regarding the national and state governments’ ability to resolve 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.

On August 4, 2014, we entered into (1) 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 and (2) along with certain subsidiary guarantors, 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. As of December 31, 2017, the Company has $353.4 million outstanding under the Senior Term Facility. The Company has no borrowings under the Senior ABL Facility. Under the Senior ABL Facility, up to $75 million of commitments are available for letters of credit, of which $54.0 million of the commitments have been used.

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 as of a pre-set determination 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.

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. On December 31, 2017, the 30 day LIBOR rate was 1.569%. While interest rates have been at or near historically low levels, they have risen in the near-term. If interest rates continue to increase, our future debt service obligations on the variable rate portion of our indebtedness would increase even though the amount borrowed remains the same, and our net income and cash flows, including cash available for servicing our indebtedness, will correspondingly decrease. Assuming all revolving loans are fully drawn under our Senior Credit Facilities and LIBOR exceeds 1.00%, each quarter point change in interest rates would result in a $1.0 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 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 March 1, 2018, 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.

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 31, 2017, only the appeals filed by Law Debenture Trust Company of New York (“Law Debenture”) and Deutsche Bank Trust Company Americas (“Deutsche Bank”) remain pending. Those appeals have been fully briefed before the Delaware District Court. See Item 3, Legal Proceedings 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, and Delaware law may discourage takeovers.

Our amended and restated certificate of incorporation and amended and restated by-laws contain certain provisions that may discourage, delay or prevent a change in our management or control over us. For example, our amended and restated certificate of incorporation and amended and restated by-laws, collectively:


•	authorize the issuance of “blank check” preferred stock that could be issued by our Board of Directors to thwart a takeover attempt;


•	provide that vacancies on our Board of Directors, including vacancies resulting from an enlargement of our Board of Directors, may be filled only by a majority vote of directors then in office;


•	prohibit stockholders from calling special meetings of stockholders;


•	prohibit stockholder action by written consent;


•	establish advance notice requirements for nominations of candidates for elections as directors or to bring other business before an annual meeting of our stockholders; and


•	require the approval of holders of at least 66 2/3% of the outstanding shares of our common stock to amend certain provisions of our amended and restated certificate of incorporation or to amend our amended and restated by-laws.

These provisions could discourage potential acquisition proposals and could delay or prevent a change in control, even though a majority of stockholders may consider such proposal, if effected, desirable. Such provisions could also make it more difficult for third parties to remove and replace the members of the Board of Directors. Moreover, these provisions may inhibit increases in the trading price of our common stock that may result from takeover attempts or speculation.

Concentration of ownership among our existing directors and principal stockholders may prevent new investors from influencing significant corporate decisions.

As of March 12, 2018, our two largest shareholders are (1) Merrick Media, LLC (“Merrick Media”) and its affiliate Merrick Venture Management, LLC (“Merrick Venture” and together with Merrick Media, the “Merrick Entities”) which beneficially owned approximately 26.7% of our outstanding common stock, and (2) Nant Capital, together with Dr. Patrick Soon-Shiong, which beneficially owned approximately 24.5% 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, a former member 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; provided, however, that pursuant to a Consulting Agreement with the Company, Mr. Ferro and Merrick Ventures have agreed to certain non-compete covenants in favor of the Company.

Due to their significant stockholdings, 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, subject in the case of the Merrick Entities, to certain voting requirements and subject in the case of each of the Merrick Entities and Nant Capital, to other restrictions and covenants set forth in the purchase agreements pursuant to which each acquired their respective shares. For additional information on the purchase agreements under which each of the Merrick Entities and Nant Capital acquired their shares, see Note 16 to the Consolidated Financial Statements as well as certain information contained in our most recent Proxy Statement filed with the SEC and our Form 8-K filed with the SEC on December 22, 2017.

Mr. Ferro was elected to the Board of Directors and named the non-executive chairman in connection with the initial investment by Merrick Media, and Merrick Media has the right to designate a replacement individual for election as a director in the event Mr. Ferro is unable to continue to serve. Mr. Ferro, is able to influence 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, or stock issuances by us, of our common stock or the perception that such sales or issuances 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. Pursuant to the purchase agreement under which Nant Capital acquired shares from us, certain of the restrictions on its resales of those shares expired and, therefore, it could sell a significant number of shares either in the open market or in privately negotiated transactions. There is no assurance that there will be sufficient buying interest to offset any such public market sales, and, accordingly, the price of our common stock may be depressed by those sales and have periods of volatility.

In addition, we could from time to time issue new securities (debt or equity) to fund potential acquisitions. Any issuance of common stock by us could dilute the ownership of current stockholders and could impact the price per share of our common stock. For example, we issued 1,913,438 shares of our common stock on February 6, 2018 in connection with an acquisition. In addition, if we were to issue debt and/or preferred equity, the holders of such securities would have rights senior to those of our common stockholders. There can be no assurances whether we will issue additional securities in the future and, if so, how many and how such issuance could impact our current stockholders and our share price.

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. 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 do not currently pay cash dividends on our outstanding common stock, and our ability to pay dividends in the future is subject to limitations.

We currently do not pay quarterly common stock cash dividends. 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

None.

Item 2. Properties

Our leased facilities are approximately 6.2 million square feet in the aggregate, of which approximately 5.0 million square feet is leased from third parties and approximately 1.2 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.

The Company currently has newspaper production facilities in Connecticut, Florida, Illinois, Maryland, New Jersey, New York, Pennsylvania and California. Although the facilities are leased, tronc owns substantially all of the production equipment. There are 14 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. The Company has signed a new lease in Chicago for approximately 137,000 square feet with a 10 year and 11 month term for one floor and a 12 year term for four floors, expiring in 2028 and 2030, respectively. The Company expects to relocate all personnel from the Tribune Tower by the expiration of the lease in June of 2018. At Los Angeles Times Square, tronc leases approximately 277,000 square feet under leases that provide for an initial term of 5 years, which expire in 2018. The Company expects to transfer such leases to Nant Capital as part of the Nant Transaction.

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 18 of the Consolidated 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. 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 sought 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.

On September 2, 2016, plaintiffs filed a consolidated complaint. The defendants filed motions to dismiss on October 3, 2016. On May 15, 2017, the plaintiffs voluntarily dismissed the consolidated complaint without prejudice.

Tribune Company Bankruptcy

On December 31, 2012, TCO 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 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 (“tronc Debtors”).

Notices of appeal of the Bankruptcy Court's order confirming the Plan (the "Confirmation Order") were filed by (i) Aurelius Capital Management L.P. on behalf of its managed entities that were holders of TCO's senior notes and Exchangeable Subordinated Debentures due 2029 ("PHONES"), (ii) Law Debenture Trust Company of New York ("Law Debenture") and Deutsche Bank Trust Company Americas ("Deutsche Bank"), each successor trustees under the respective indentures for Tribune Company's senior notes; (iii) Wilmington Trust Company, as successor indenture trustee for the PHONES, and (iv) EGI-TRB, L.L.C., a Delaware limited liability company wholly-owned by Sam Investment Trust (a trust established for the benefit of Samuel Zell and his family) (the "Zell Entity"). The appellants sought, among other relief, to overturn the Confirmation Order and certain prior orders of the Bankruptcy Court embodied in the Plan, including the settlement of certain claims and causes of action related to the series of transactions (collectively, the "Leveraged ESOP Transactions") consummated by TCO, the TCO employee stock ownership plan, the Zell Entity and Samuel Zell in 2007. As of June 25, 2017, each of the Confirmation Order appeals have been dismissed or otherwise resolved by a final order, with the exception of the appeals of Law Debenture and Deutsche Bank, which remain pending before the U. S. District Court for the District of Delaware. There is no stay of the Confirmation Order in place pending resolution of the confirmation related appeals.

certain claims asserted against various of the Debtors (including the tronc Debtors) in the Chapter 11 cases remain unresolved. The remaining Chapter 11 cases continue to be administered under the caption “In re: Tribune Media Company, et al.,” Case No 08-13141.

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.

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 for the periods indicated. No dividends were declared during the two years ended December 31, 2017.



	High		Low
Year Ended December 31, 2017
Fourth Quarter	$	18.27	$	13.13
Third Quarter	$	15.04	$	11.97
Second Quarter	$	15.73	$	10.80
First Quarter	$	15.90	$	12.79

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

On March 12, 2018, the closing price for the Company’s common stock as reported on Nasdaq was $15.49. The approximate number of stockholders of record of the common stock at the close of business on such date was 20. 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 terminated the Company’s quarterly 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.

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 29, 2017 (the last trading day of fiscal 2017) with the cumulative total return

on the Standard & Poor’s 500 Stock Index (the “S&P 500”) and the Standard & Poor’s Publishing Stock Index (the “S&P Publishing Index”).

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.

Item 6. Selected Financial Data



	As of and for the years ended
	December 31, 2017			December 25, 2016			December 27, 2015			December 28, 2014			December 29, 2013
(In thousands, except per share data)
Statement of Operations Data:
Operating revenues	$	1,524,018		$	1,606,378		$	1,672,820		$	1,707,978		$	1,795,107
Operating expenses	1,457,429			1,553,265			1,647,853			1,621,276			1,628,578
Income from operations	66,589			53,113			24,967			86,702			166,529
Income/(loss) on equity investments, net	3,139			(690		)	(1,164		)	(1,180		)	(1,187		)
Premium on stock buyback	(6,031		)	—			—			—			—
Gain (loss) on investment transactions	—			—			—			1,484			—
Interest income (expense), net	(26,481		)	(26,703		)	(25,972		)	(9,801		)	14
Reorganization items, net	—			(259		)	(1,026		)	(464		)	(270		)
Income (loss) before income tax expense (benefit)	37,216			25,461			(3,195		)	76,741			165,086
Income tax expense (benefit)	31,681			18,924			(430		)	34,453			70,992
Net income (loss)	$	5,535		$	6,537		$	(2,765	)	$	42,288		$	94,094
Basic net income (loss) per common share	$	0.16		$	0.19		$	(0.11	)	$	1.66		$	3.70
Diluted net income (loss) per common share	$	0.16		$	0.19		$	(0.11	)	$	1.66		$	3.70
Weighted average shares outstanding - basic	33,996			33,788			25,990			25,429			25,424
Weighted average shares outstanding - diluted	34,285			33,935			25,990			25,543			25,424
Dividends declared per common share	$	—		$	—		$	0.700		$	0.175		$	—

Balance Sheet Data:
Total assets	$	865,133		$	888,766		$	832,966		$	677,703		$	514,366
Total debt	353,738			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 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 Financial Statements included in this Annual Report are reasonable. However, the Consolidated Financial Statements may not necessarily reflect our results of operations, financial position and cash flows for future periods or what they would have been had 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, the “Company,” or “tronc”) is a media company rooted in award-winning journalism, in ten of the nation’s largest markets. tronc develops unique and valuable content across its vast media portfolio, which has earned a combined 105 Pulitzer Prizes and is committed to informing, inspiring, and engaging local communities. The Company’s diverse portfolio of iconic news and information brands are in markets including Chicago, Il.; Fort

Lauderdale and Orlando, Fl.; Baltimore, Md.; Hartford, Ct.; Allentown, Pa.; Newport News, Va; Los Angeles and San Diego, Ca. During the third quarter of 2017, the Company expanded its portfolio with the completion of its purchase of the New York Daily News, New York City’s “Hometown Newspaper”.

The Company continually assesses its operations in an effort to identify opportunities to enhance operational efficiencies and reduce expenses. These activities have in the past included, and could include in the future, outsourcing of various functions or operations, additional abandonment of leased space and other activities which may result in changes to employee headcount. See Note 3 to the Consolidated Financial Statements for more information on changes in operations during fiscal year 2017. The Company expects to continue to take actions deemed appropriate to enhance profitability but does not currently know whether or when any such actions will occur or the potential costs and expected savings. Depending on the actions taken and the timing of any such actions, the anticipated cost savings could be recognized in fiscal periods that do not correspond to the fiscal period(s) in which the charges are recognized. As a result, the Company’s net income trends could be impacted and more difficult to predict. During fiscal 2017, the Company went through several operating changes.

2017 Highlights and Recent Events


•	In July 2017, the Company sold its investment in CIPS Marketing Group, Inc. (“CIPS”) for proceeds of $7.3 million.


•	In September 2017, the Company purchased the New York Daily News for one dollar and assumption of various liabilities, subject to a post-closing working capital adjustment. See Note 5 to the Consolidated Financial Statements for more information about the acquisition.


•	On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Act”) was signed into law making significant changes to the Internal Revenue Code. Accordingly, the Company has recorded $10.8 million as additional income tax expense in the fourth quarter of 2017. See Note 11 to the Consolidated Financial Statements for more information about the tax law change.

•

On January 29, 2018, the Company and Cars.com announced an agreement to convert tronc's eight affiliate markets into Cars.com's retail channel, effective February 1, 2018. The agreement also includes a multi-year advertising and marketing agreement between Cars.com and tronc. Effective as of that date, the Company will no longer resell Cars.com products and will only record advertising revenue for placements by Cars.com under the agreement.


•	On February 6, 2018, the Company, acquired a 60% membership interest in BestReviews LLC (“BestReviews”), a company engaged in the business of testing, researching and reviewing consumer products. See Note 21 to the Consolidated Financial Statements for more information about the acquisition.


•	On February 7, 2018, the Company entered into the MIPA, with Nant Capital, pursuant to which the Company will sell the Los Angeles Times, The San Diego Union-Tribune and various other of the Company’s California titles. See Note 21 to the Consolidated Financial Statements for more information about the sale.

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.

Consolidated

Operating results for the years ended December 31, 2017, December 25, 2016 and December 27, 2015 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 31, 2017			December 25, 2016			% Change		December 25, 2016			December 27, 2015			% Change

Operating revenues	$	1,524,018		$	1,606,378		(5.1	%)	$	1,606,378		$	1,672,820		(4.0	%)

Compensation	549,363			597,293			(8.0	%)	597,293			649,905			(8.1	%)
Newsprint and ink	94,340			103,906			(9.2	%)	103,906			122,339			(15.1	%)
Outside services	468,044			494,478			(5.3	%)	494,478			513,896			(3.8	%)
Other operating expenses	288,986			300,089			(3.7	%)	300,089			307,080			(2.3	%)
Depreciation and amortization	56,696			57,499			(1.4	%)	57,499			54,633			5.2	%
Operating expenses	1,457,429			1,553,265			(6.2	%)	1,553,265			1,647,853			(5.7	%)
Income from operations	$	66,589		$	53,113		25.4	%	$	53,113		$	24,967		*
Interest expense, net	(26,481		)	(26,703		)	(0.8	%)	(26,703		)	(25,972		)	2.8	%
Premium on stock buyback	(6,031		)	—			*		—			—			*
Income/(loss) on equity investments, net	3,139			(690		)	*		(690		)	(1,164		)	(40.7	%)
Reorganization items, net	—			(259		)	*		(259		)	(1,026		)	(74.8	%)
Income (loss) before income taxes	37,216			25,461			46.2	%	25,461			(3,195		)	*
Income tax expense (benefit)	31,681			18,924			67.4	%	18,924			(430		)	*
Net income (loss)	$	5,535		$	6,537		(15.3	%)	$	6,537		$	(2,765	)	*

* Represents positive or negative change in excess of 100%

Year ended December 31, 2017 compared to the year ended December 25, 2016

Operating Revenues—Operating revenues decreased 5.1%, or $82.4 million, in the year ended December 31, 2017 compared to the prior year period due to an $101.8 million decrease in advertising revenues and a $13.9 million decrease in other revenues, partially offset by an increase of $33.3 million in circulation revenues. Overall decreases in circulation volume were generally offset by rate increases. Included in operating revenues for the year ended December 31, 2017 are revenues for the New York Daily News since the September 2017 acquisition. The New York Daily News contributed $16.4 million in advertising revenues, $17.3 million in circulation revenues and $6.5 million in other revenues.

Compensation Expense—Compensation expense decreased 8.0%, or $47.9 million, in the year ended December 31, 2017 due primarily to a decrease in incentive compensation of $25.4 million; a decrease in health care expense of $10.4 million; and a decrease in salary expense and payroll tax expense of $8.2 million as a result of the Company’s initiatives to right-size headcount. Additionally, severance charges recorded in fiscal 2017 related to such initiatives were $4.5 million less than severance charges recorded in fiscal 2016. These decreases in expenses in 2017 were partially offset by an increase in stock-based compensation of $2.8 million. The New York Daily News contributed $28.6 million to compensation expense in the year ended December 31, 2017.

Newsprint and Ink Expense—Newsprint and ink expense decreased 9.2%, or $9.6 million, in the year ended December 31, 2017 due mainly to a 15.7% decrease in consumption, partially offset by a 1.3% increase in the average cost per ton of newsprint. The New York Daily News contributed $4.6 million to newsprint and ink expense in the year ended December 31, 2017.

Outside Services Expense—Outside services expense decreased 5.3%, or $26.4 million, in the year ended December 31, 2017 due to decreases in production and distribution expenses. The New York Daily News contributed $7.2 million to outside services expense in the year ended December 31, 2017.

Other Expenses—Other expenses include occupancy costs, promotion and marketing costs, affiliate fees and other miscellaneous expenses. These expenses decreased 3.7%, or $11.1 million, in the year ended December 31, 2017 due to decreases in occupancy, promotion and marketing costs, and supplies. In 2016, the 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. The New York Daily News contributed $6.1 million to other expenses in the year ended December 31, 2017.

Depreciation and Amortization Expense—Depreciation and amortization expense decreased 1.4%, or $0.8 million, for the year ended December 31, 2017 primarily due to decrease in amortization of intangible assets as some intangibles are fully amortized. The New York Daily News contributed $1.2 million to depreciation and amortization expenses in the year ended December 31, 2017.

Gain (Loss) on Equity Investments, net—Gain (loss) on equity investments, net, increased by $3.8 million for the year ended December 31, 2017 primarily due to a gain of $5.7 million related to the sale of the Company’s interest in CIPS, partially offset by to the Company’s share of operating losses from its equity investment in Nucleus Marketing Solutions, LLC.

Interest Expense—Interest expense was consistent with the prior year.

Income Tax Expense (Benefit)—Income tax expense increased $12.8 million for the year ended December 31, 2017, over the prior year period. On December 22, 2017, the Tax Cuts and Jobs Act of 2017 was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017. The effects of the changes in tax rates are required to be recognized in the period enacted and as a result, the Company has recorded $10.8 million as additional income tax expense in the fourth quarter of 2017, the period in which the legislation was enacted. The additional provision resulted from the remeasurement of certain deferred tax assets and liabilities, based on the rates at which they are expected to reverse in the future. See Note 11 to the Consolidated Financial Statements for further explanation of the tax law change.

The effective tax rate on pretax income was 85.1% and 74.3% in the years ended December 31, 2017 and December 25, 2016, respectively. The effective tax rate increased in 2017 as compared with 2016 primarily due to a $10.8 million adjustment to the Company’s deferred taxes to reflect the new tax law changes, premium on stock buyback expense being a nondeductible permanent difference for the calculation of income taxes, state taxes, net of federal benefit, and nondeductible expenses.

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 a $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.

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 declined 15.1%, or $18.4 million, in the year ended December 25, 2016 due mainly to an 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 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 the 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 8 to the Consolidated 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 11 to the Consolidated 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 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.

Segments

The Company manages its business as two distinct segments, troncM and troncX. 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 31, 2017 as compared to the year ended December 25, 2016, as well as the year ended December 27, 2015 (in thousands). Fiscal year 2017 is a 53-week year and each of fiscal years 2016 and 2015 consists of 52 weeks.



	troncM				troncX				Corporate and Eliminations						Consolidated
	Year ended				Year ended				Year ended						Year ended
	Dec. 31, 2017		Dec. 25, 2016		Dec. 31, 2017		Dec. 25, 2016		Dec. 31, 2017			Dec. 25, 2016			Dec. 31, 2017		Dec. 25, 2016
Total revenues	$	1,287,217	$	1,378,028	$	239,979	$	236,171	$	(3,178	)	$	(7,821	)	$	1,524,018	$	1,606,378
Operating expenses	1,191,072		1,257,265		215,149		210,620		51,208			85,380			1,457,429		1,553,265
Income from operations	96,145		120,763		24,830		25,551		(54,386		)	(93,201		)	66,589		53,113
Depreciation and amortization	23,727		23,656		15,560		11,563		17,409			22,280			56,696		57,499
Adjustments ⁽¹⁾	28,740		15,147		4,067		3,978		22,719			50,804			55,526		69,929
Adjusted EBITDA	$	148,612	$	159,566	$	44,457	$	41,092	$	(14,258	)	$	(20,117	)	$	178,811	$	180,541



	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

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

troncM

troncM’s media groups include the Chicago Tribune Media Group, the Sun Sentinel Media Group, the Orlando Sentinel Media Group, The Baltimore Sun Media Group, the Hartford Courant Media Group, the Morning Call Media Group, the Daily Press Media Group, the Los Angeles Times Media Group and the San Diego 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. In September 2017, the Company acquired the New York Daily News.



	Year Ended						Year Ended
(in thousands)	December 31, 2017		December 25, 2016		% Change		December 25, 2016		December 27, 2015		% Change
Operating revenues:
Advertising	$	577,380	$	680,842	(15.2	%)	$	680,842	$	764,025	(10.9	%)
Circulation	508,247		482,877		5.3	%	482,877		459,761		5.0	%
Other	201,590		214,309		(5.9	%)	214,309		224,463		(4.5	%)
Total revenues	1,287,217		1,378,028		(6.6	%)	1,378,028		1,448,249		(4.8	%)
Operating expenses	1,191,072		1,257,265		(5.3	%)	1,257,265		1,345,564		(6.6	%)
Income from operations	96,145		120,763		(20.4	%)	120,763		102,685		17.6	%
Depreciation and amortization	23,727		23,656		0.3	%	23,656		21,338		10.9	%
Adjustments	28,740		15,147		89.7	%	15,147		18,071		(16.2	%)
Adjusted EBITDA	$	148,612	$	159,566	(6.9	%)	$	159,566	$	142,094	12.3	%

Year ended December 31, 2017 compared to the year ended December 25, 2016

Advertising Revenues—Total advertising and marketing services revenues decreased 15.2%, or $103.5 million, in the year ended December 31, 2017 compared to the prior year period. Retail advertising revenues fell 15.6%, or $79.1 million, due to declines in all categories. The categories with the largest declines were department stores, furniture and home furnishings, specialty merchandise, food and drug stores, car dealerships and lots, personal services and financial services categories. National advertising revenues fell 18.6%, or $18.5 million, due to declines in several categories, most notably movies, advertising agencies, wireless, packaged goods and media categories. Classified advertising revenues decreased 8.0%, or $5.9 million, compared to the prior year period, primarily due to decreases in the legal and recruitment categories. The New York Daily News contributed $8.6 million to troncM advertising revenues in the year ended December 31, 2017.

Circulation Revenues—Circulation revenues increased 5.3%, or $25.4 million, in the year ended December 31, 2017 due primarily to the acquisition of the New York Daily News in September 2017, which contributed $17.2 million in circulation revenue, and increases in rates which exceeded volume decreases by $8.2 million.

Other Revenues—Other revenues decreased 5.9%, or $12.7 million, in the year ended December 31, 2017 primarily due to declines of $7.0 million in direct mail and marketing and $4.8 million in content syndication and other revenues. The New York Daily News contributed $5.6 million to troncM other revenues in the year ended December 31, 2017.

Operating Expenses—Operating expenses decreased 5.3%, or $66.2 million, in the year ended December 31, 2017, due to decreases in all categories partially offset by corporate allocations. The New York Daily News contributed $42.2 million to troncM operating expenses in the year ended December 31, 2017.

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 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 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 lease space discussed above 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 and forsalebyowner.com.

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.



	Year Ended						Year Ended
(in thousands)	December 31, 2017		December 25, 2016		% Change		December 25, 2016		December 27, 2015		% Change
Operating revenues:
Advertising	$	194,237	$	193,997	0.1	%	$	193,997	$	191,831	1.1	%
Content	45,742		42,174		8.5	%	42,174		41,674		1.2	%
Total revenues	239,979		236,171		1.6	%	236,171		233,505		1.1	%
Operating expenses	215,149		210,620		2.2	%	210,620		194,697		8.2	%
Income from operations	$	24,830	$	25,551	(2.8	%)	25,551		38,808		(34.2	%)
Depreciation and amortization	15,560		11,563		34.6	%	11,563		2,329		*
Adjustments	4,067		3,978		2.2	%	3,978		1,769		*
Adjusted EBITDA	$	44,457	$	41,092	8.2	%	$	41,092	$	42,906	(4.2	%)

* Represents positive or negative change in excess of 100%

Year ended December 31, 2017 compared to the year ended December 25, 2016

Advertising Revenues—Total advertising revenues increased 0.1%, or $0.2 million, in the year ended December 31, 2017. National advertising revenue increased $11.7 million, primarily due to increases in the general category. Other advertising revenue increased $1.7 million primarily due to increases in revenue shares received from advertising partners due to increased volume. Retail advertising revenue increased $1.3 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. These increases were offset by decreases in classified advertising revenue which decreased $14.5 million primarily due to decreases in the real estate and recruitment categories. The New York Daily News contributed $7.8 million to troncX advertising revenues in the year ended December 31, 2017.

Content Revenues—Content revenues increased 8.5%, or $3.6 million, in the year ended December 31, 2017, with increases in digital subscription revenue partially offset by decreases in content syndication revenue. The New York Daily News contributed $1.0 million to troncX content revenues in the year ended December 31, 2017.

Operating Expenses—Operating expenses increased 2.2%, or $4.5 million, in the year ended December 31, 2017, primarily due to contributions of $5.5 million from the New York Daily News.

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, primarily 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 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.

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 and other operating requirements through a combination of cash flows from operations and from the sale of certain properties, including the Los Angeles Times and The San Diego Union-Tribune, if and when the sale of such properties closes. 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.

The table below summarizes the total operating, investing and financing activity cash flows for the years ended December 31, 2017, December 25, 2016 and December 27, 2015 (in thousands):



	Year Ended
	December 31, 2017			December 25, 2016			December 27, 2015

Net cash provided by operating activities	$	91,284		$	85,690		$	65,481
Net cash used for investing activities	(15,782		)	(14,107		)	(91,005		)
Net cash provided by (used for) financing activities	(84,198		)	85,934			29,681
Net increase in cash	$	(8,696	)	$	157,517		$	4,157

Cash flow generated by operating activities is the Company’s primary source of liquidity. Net cash provided by operating activities was $91.3 million for the year ended December 31, 2017, an increase of $5.6 million from $85.7 million for the year ended December 25, 2016. The increase was primarily driven by improved operating results offset by lower working capital contributions and higher pension contributions. Net cash provided by operating activities was $85.7 million in the year ended December 25, 2016, an increase of $20.2 million from $65.5 million in the year ended December 27, 2015. The increase was primarily driven by improved operating results with lower cash paid for income taxes partially offset by higher pension contributions.

Net cash used for investing activities totaled $15.8 million in the year ended December 31, 2017 and included $24.3 million used for capital expenditures partially offset by $7.3 million received from the sale of CIPS and $2.6 million cash acquired in the acquisition of the New York Daily News. 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. We anticipate that capital expenditures for the year ended December 30, 2018 will be approximately $70 million to $74 million although approximately $15.0 million of leasehold improvements will be funded by tenant improvement allowances provided by the facility landlord.

Net cash used for financing activities totaled $84.2 million in the year ended December 31, 2017. During the year the Company repurchased shares of common stock for a total price of $56.2 million and made $26.4 million of principal payments on senior debt. Net cash provided by financing activities totaled $85.9 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. In the year ended December 27, 2015, net cash used for financing activities totaled $29.7 million 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.

Stock Repurchases

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 16 to the Company’s Consolidated Financial Statements for more information on the private placements.

Acquisitions

See Note 5 to the Company’s Consolidated Financial Statements for more information on acquisitions.

Acquisitions — 2017

On September 3, 2017, the Company completed the acquisition of 100% of the partnership interests in DNLP, the owner of the New York Daily News in New York City, pursuant to the Partnership Interest Purchase Agreement dated September 3, 2017, for a cash purchase price of one dollar and assumption of various liabilities, subject to a post-closing working capital adjustment. Following of the acquisition, DNLP’s assets and liabilities are in the process of being valued at fair value.

Acquisitions — 2016

In December 2016, the Company completed the acquisitions totaling $7.6 million including Spanfeller Media, a digital platform which includes The Daily Meal and The Active Times, and other immaterial properties. The results of the acquisitions and the related transaction costs were not material to the Company’s Consolidated Financial Statements and are included in the Consolidated Statements of Income (Loss) since the date 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.

Debt

Refer to Note 8 of the Consolidated 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.

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 31, 2017, $99.7 million was available for borrowings under the Senior ABL Facility and $54.0 million of the availability supported outstanding undrawn letters of credit in the same amount. As of December 31, 2017, 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 Employee Voluntary Separation Program (“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 pretax charge of $44.2 million and $10.3 million for all related severance, benefits and taxes in connection with the EVSP for the years ended December 27, 2015 and December 25, 2016, respectively. Amounts recorded in 2017 were immaterial.

During the first quarter of 2016, the Company began the process to outsource its information technology function (“ITO”), which was substantially completed by the end of 2016. The related salary continuation payments started in the first quarter of 2016 and continue through the third quarter of 2018. The Company recorded a pretax charge of $4.6 million for severance, benefits and taxes in connection with the ITO for the year ended December 25, 2016. The amounts recorded in 2017 were immaterial.

During the second quarter of 2017, the Company contracted with a third party to outsource the printing, packaging and delivery of the Orlando Sentinel. The services were fully transitioned to the third party by the end of the third quarter. The change in operations resulted in staff reductions of 112 positions and a pretax charge related to those reductions of $2.2 million which was recorded in the second quarter of 2017. The related salary continuation payments began in the third quarter of 2017 and are expected to continue through the third quarter of 2018.

Additionally, during the second quarter of 2017, the Company offered enhanced severance benefits to certain eligible non-union employees of the Los Angeles Times with a length of service with the organization of over 15 years. This offering resulted in net staff reductions of 25 positions with a total charge of $2.6 million recognized in the third quarter of 2017. The related salary continuation payments began in the third quarter of 2017 and are expected to continue through the fourth quarter of 2018. Any unpaid liability for severance payments at the close of the Nant Transaction, if and when it happens, will be assumed by Nant Capital.

During the fourth quarter of 2017, the Company identified reductions in staffing levels of 86 positions at the New York Daily News. The Company recorded pretax charges of $2.3 million in the year ended December 31, 2017. The related

salary continuation payments started in the fourth quarter of 2017 with the majority being completed by the end of the second quarter of 2018.

In addition to the initiatives mentioned above, the Company implemented additional reductions in staffing levels in its operations of 361, 218 and 323 positions in the years ended December 31, 2017, December 25, 2016 and December 27, 2015, respectively. The Company recorded pretax charges related to these reductions and executive separations totaling $15.7 million, $12.3 million and $6.8 million in the years ended December 31, 2017, December 25, 2016 and December 27, 2015, respectively.

Contractual Obligations

The table below represents tronc’s contractual obligations as of December 31, 2017 (in thousands):



Contractual Obligations	Total		2018		2019		2020		2021		2022		Thereafter

Long-term debt (principal only)	$	353,253	$	15,817	$	21,090	$	21,090	$	295,256	$	—	$	—
Long-term capital lease	8,650		768		724		359		6,701		93		5
Interest on long-term debt (1)	72,152		22,059		20,289		18,979		10,825		—		—
Operating leases (2)	201,697		45,818		33,983		30,382		28,278		24,499		38,737
Other purchase obligations (3)	1,125		1,125		—		—		—		—		—
Total	$	636,877	$	85,587	$	76,086	$	70,810	$	341,060	$	24,592	$	38,742

(1) Represents the annual interest on the variable rate debt which bore interest at 5.94% per annum at December 31, 2017.


(2)	The Company leases certain equipment and office and production space under various operating leases. Net lease expense for tronc was $56.6 million, $57.5 million and $60.5 million for the years ended December 31, 2017, December 25, 2016 and December 27, 2015, respectively.

(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 or the NYDN 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 and the NYDN Pension Plan for 2018, under current regulations, are estimated to be $15.0 million and $4.0 million, respectively. Further contributions are currently projected for 2019 through 2025, but amounts cannot be reasonably estimated. If the Nant Transaction closes in the second quarter as expected, the Company would only be required to contribute $2.6 million to the San Diego Pension Plan for 2018.

As of December 31, 2017, tronc had standby letters of credit outstanding in the amount of $54.0 million.

Critical Accounting Policies

The Company’s significant accounting policies are summarized in Note 2 to the Consolidated Financial Statements. These policies conform with U.S. GAAP and reflect practices appropriate to tronc’s businesses. The preparation of the Company’s Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying Notes 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.

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 Company will adopt this standard effective January 1, 2018 utilizing the modified retrospective method.

During 2016, in preparation for the adoption of the new standard, we began a review of the various types of customer contract arrangements for each of our businesses. These reviews included 1) accumulating customer contractual arrangements; 2) identifying individual performance obligations pursuant to each type of arrangement; 3) quantifying consideration under each arrangement; 4) allocating consideration among the identified performance obligations; and 5) determining the timing of revenue recognition pursuant to each arrangement. We have substantially completed our analysis of the new guidance and have not identified any material changes to the timing or amount of revenue to be recognized in future periods, except as discussed below. The disclosures related to revenue recognition will be significantly expanded under the new standard, specifically around the quantitative and qualitative information about performance obligations, changes in contract assets and liabilities, and disaggregation of revenue. We continue to evaluate these requirements.

As discussed in Note 5 to the Consolidated Financial Statements, in September 2017 the Company acquired the New York Daily News, which was not within the scope of our assessment. We believe the customer contract arrangements for the New York Daily News are consistent with those of our other publications. We will complete our assessment with respect to the New York Daily News during the first quarter of our fiscal 2018.

The new standard does result in the Company recording certain digital advertising revenue placed on non-tronc websites, net of the cost of the third-party website as the Company will be acting as an agent as defined under the new standard. Currently, such revenues are generally recorded gross. Historically, these revenues were primarily associated with our arrangement with Cars.com. As discussed in Note 21 to the Consolidated Financial Statements, the Company revised the terms of its operating agreement with Cars.com effective February 1, 2018, and will no longer resell Cars.com products. If the Company had not revised the terms of the agreement, the expected impact of the adoption of the new standard would be to decrease revenues and the related costs by $50.0 million to $60.0 million annually compared to the current year. With the revised agreement, the expected impact of the adoption of the new standard is not expected to be material based on the terms or our remaining agreements

Goodwill and Other Intangible Assets—Goodwill and other intangible assets are summarized in Note 7 to the Consolidated 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 ten newspaper media groups, TCA, forsalebyowner.com 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 24, 2017, 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 the San Diego Media Group for

which the percentage was approximately 12.6%. As discussed in Note 5 to the Consolidated 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 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 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 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. Under the terms of the MIPA, the carrying value of goodwill related to the San Diego Union-Tribune would be fully realized upon close of the transaction.

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 Plans—With the acquisitions of The San Diego Union-Tribune and the New York Daily News, the Company became the sponsor of those publications’ pension plans (the “San Diego Pension Plan” and the “NYDN Pension Plan” respectively). The Company follows accounting guidance under ASC Topic 715, “Compensation—Retirement Benefits” for single employer defined benefit plans. Plan assets and the projected benefit obligation are measured each December 31, and the Company records as an asset or liability the net funded or underfunded position of the plans. Certain changes in actuarial valuations related to returns on plan assets and projected benefit obligations are recorded to other comprehensive income (loss) and are amortized to net periodic pension expense over the weighted average remaining life of plan participants. Net periodic pension expense is recognized each period by accruing interest expense on the projected benefit obligation and accruing a return on assets associated with the plan assets.

The Company recognizes the overfunded or underfunded status of its postretirement benefit plans as an asset or liability in its Consolidated Balance Sheets and recognizes changes in that funded status in the year in which changes occur through comprehensive income. The amounts included within these Consolidated Financial Statements were actuarially determined based on amounts 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 13 to the Consolidated Financial Statements for further information.

New Accounting Standards

See Note 2 to the Consolidated Financial Statements for a description of new accounting standards issued and/or adopted in the year ended December 31, 2017.

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 31, 2017			% Change		December 25, 2016		% Change		December 27, 2015
Net income (loss)	$	5,535		(15.3	%)	$	6,537	*		$	(2,765	)

Income tax expense (benefit)	31,681			67.4	%	18,924		*		(430		)
Interest expense (income), net	26,481			(0.8	%)	26,703		2.8	%	25,972
Premium on stock buyback	6,031			*		—		*		—
Loss on equity investments, net	(3,139		)	*		690		(40.7	%)	1,164
Reorganization items, net	—			*		259		(74.8	%)	1,026

Income from operations	66,589			25.4	%	53,113		*		24,967

Depreciation and amortization	56,696			(1.4	%)	57,499		5.2	%	54,633
Restructuring and transaction costs ⁽¹⁾	40,897			(10.9	%)	45,916		9.7	%	41,859
Litigation settlement ⁽²⁾	3,000			*		—		*		2,145
Stock-based compensation ⁽³⁾	11,228			33.3	%	8,424		23.5	%	6,822
Employee voluntary separation program	401			(97.4	%)	15,589		(65.8	%)	45,586

Adjusted EBITDA	$	178,811		(1.0	%)	$	180,541	14.9	%	$	157,184

* Represents positive or negative change in excess of 100%


(1) -	Restructuring and transaction costs include costs related to tronc’s internal restructuring, such as severance related to the IT outsourcing efforts, charges associated with abandoned space, the distribution and separation from TCO and transaction costs related to completed and potential acquisitions.


(2) -	Adjustment to litigation settlement reserve.


(3) -	Stock-based compensation is due to tronc's and TCO's equity compensation plans and is included for comparative purposes.

Adjusted EBITDA is a financial measure that is not calculated in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Management believes that because Adjusted EBITDA excludes (i) certain non-cash expenses (such as depreciation, amortization, stock-based compensation, and gain/loss on equity investments) and (ii) expenses that are not reflective of the Company’s core operating results over time (such as restructuring costs, including the employee voluntary separation program and gain/losses on employee benefit plan terminations, litigation or dispute settlement charges or gains, and transaction-related costs), this measure provides investors with additional useful information to measure the Company’s financial performance, particularly with respect to changes in performance from period to period. The Company's management uses Adjusted EBITDA (a) as a measure of operating performance; (b) for planning and forecasting in future periods; and (c) in communications with the Company's Board of Directors concerning the Company's financial performance. In addition, Adjusted EBITDA, or a similarly calculated measure, is used as the basis for certain financial maintenance covenants that the Company is subject to in connection with certain credit facilities. Since not all companies use identical calculations, the Company's presentation of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies and should not be used by investors as a substitute or alternative to net income or any measure of financial performance calculated and presented in accordance with U.S. GAAP. Instead, management believes Adjusted EBITDA should be used to supplement the Company's financial measures derived in accordance with U.S. GAAP to provide a more complete understanding of the trends affecting the business.

Although Adjusted EBITDA is frequently used by investors and securities analysts in their evaluations of companies, Adjusted EBITDA has limitations as an analytical tool, and investors should not consider it in isolation or as a substitute for, or more meaningful than, amounts determined in accordance with U.S. GAAP. Some of the limitations to using non-GAAP measures as an analytical tool are:


•	they do not reflect the Company's interest income and expense, or the requirements necessary to service interest or principal payments on the Company's debt;


•	they do not reflect future requirements for capital expenditures or contractual commitments; and


•	although depreciation and amortization charges are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and non-GAAP measures do not reflect any cash requirements for such replacements.

Reorganization Items, Net

ASC Topic 852, “Reorganizations,” requires that the financial statements for periods subsequent to the filing of the Chapter 11 Petitions distinguish transactions and events that are directly associated with the reorganization from the operations of the business. Accordingly, revenues, expenses, realized gains and losses, and provisions for losses directly associated with the reorganization and restructuring of the business are reported in reorganization items, net in the Consolidated Statements of Income (Loss) included herein. Reorganization costs generally include provisions and adjustments to reflect the carrying value of certain prepetition liabilities at their estimated allowable claim amounts.

Reorganization items, net included in tronc’s Consolidated Statements of Income (Loss) consisted of the following (in thousands):




	December 25, 2016			December 27, 2015
Reorganization costs, net:
Contract rejections and claim settlements	$	(75	)	$	(15	)
Trustee fees and other, net	(184		)	(1,011		)
Total reorganization items, net	$	(259	)	$	(1,026	)

See Note 10 to the Consolidated Financial Statements for additional information regarding these reorganization items.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The market risk inherent in the financial instruments issued by the Company represents the potential loss arising from adverse changes in interest rates. See Note 8 to the Consolidated Financial Statements for information concerning the contractual interest rates of tronc’s debt. At December 31, 2017, the fair value of the Company’s variable-rate debt was estimated to be $353.8 million using quoted market prices with observable inputs in non-active markets and yields obtained through independent pricing sources. The carrying amount of the variable-rate debt was $353.4 million at December 31, 2017.

Various financial instruments issued by the Company are sensitive to changes in interest rates. If interest rates increase, the Company’s future debt service obligations on the variable rate portion of its indebtedness would increase even though the amount borrowed remains the same, and its net income and cash flows, including cash available for servicing its indebtedness, will correspondingly decrease. With respect to the Company’s variable-rate debt at December 31, 2017, each hypothetical 100 basis point change in interest rates would result in a $3.7 million change in annual interest expense on its indebtedness.

Item 8. Financial Statements and Supplementary Data

The Consolidated Financial Statements, together with the Reports of Independent Registered Public Accounting Firm, are included elsewhere in this Annual Report on Form 10-K. Financial statement schedules have been omitted because the required information is contained in the Consolidated Financial Statements or related Notes, or because such information is not applicable.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company conducted an evaluation under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report.

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Internal control over financial reporting is a process designed by, or under the supervision of, the Chief Executive Officer and the Chief Financial Officer, to provide reasonable assurance regarding the reliability of the Company’s financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of change in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management, including our Chief Executive Officer and our Chief Financial Officer, assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2017 based on the framework established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Management’s assessment excludes any evaluation of the internal control over financial reporting of Daily News, L.P., which was acquired September 3, 2017 and constituted $66.0 million of total assets and $40.2 million of total operating revenues as of and for the year ended December 31, 2017, respectively. Management has concluded that the Company’s internal control over financial reporting was effective as of December 31, 2017.

The effectiveness of our internal control over financial reporting as of December 31, 2017, has been audited by Ernst & Young LLP, the independent registered public accounting firm that has also audited the Company’s consolidated financial statements as of and for the year ended December 31, 2017. Ernst & Young’s report on the Company’s internal control over financial reporting appears below.

Changes in Internal Control Over Financial Reporting

During the fourth quarter of the fiscal year covered by this report, there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of tronc, Inc.

Opinion on Internal Control Over Financial Reporting

We have audited the internal control over financial reporting of tronc, Inc. (the Company) as of December 31, 2017, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on the COSO criteria.

As indicated in the accompanying Management’s Report on Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Daily News, L.P., which is included in the 2017 consolidated financial statements of the Company and constituted $66.0 million of total assets and $40.2 million of total operating revenues as of and for the year ended December 31, 2017, respectively. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Daily News, L.P.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2017 consolidated financial statements of the Company, and our report dated March 16, 2018 expressed an unqualified opinion thereon.

Basis for Opinion

The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Dallas, Texas

March 16, 2018

Item 9B. Other Information

On March 13, 2018, Tribune Publishing Company, LLC (“TPC”), a wholly owned subsidiary of tronc, Inc. (the “Company”), entered into new employment agreements with each of Justin Dearborn, the Company’s Chief Executive Officer, and Terry Jimenez, the Company’s Chief Financial Officer, in connection with the expiration of their current employment agreements on February 21, 2018 and April 3, 2018, respectively. Messrs. Dearborn’s and Jimenez’s new employment agreements are effective February 22, 2018 and April 4, 2018, respectively.

Pursuant to the new employment agreements, Messrs. Dearborn and Jimenez will receive an annual base salary of $600,000 and $475,000, respectively, subject to periodic adjustment as determined by the Board, and each is eligible to receive an annual cash bonus, with a target of 100% and 75%, respectively, of base salary.

The new employment agreements provide that if the Company terminates the employment of the applicable executive without cause, as defined in the agreement (and other than due to death or disability) or he resigns for good reason, as defined in the agreement, subject to his execution and non-revocation of a release of claims, the Company will pay him, in addition to his previously-accrued compensation, the following severance:

in the case of Mr. Dearborn (i) the lump sum amount equal to the greater of (x) base salary remaining due under the Employment Term or (y) 52 weeks of base salary, (ii) any unpaid annual bonus with respect to the calendar year immediately preceding the calendar year of termination of employment, and (iii) a pro-rata amount of the annual bonus based on actual performance with respect to the calendar year of termination of employment; and

in the case of Mr. Jimenez (i) an amount equal to the greater of (x) his base salary remaining due under the Employment Term, payable in bi-weekly installments over the remainder of the Employment Term or (y) his base salary for a 52 week period, payable in bi-weekly installments, (ii) any unpaid annual bonus with respect to the calendar year immediately preceding the calendar year of termination of employment, and (iii) a pro-rata amount of the annual bonus based on actual performance with respect to the calendar year of termination of employment.

Both new employment agreements also contain certain restrictive covenants for the Company’s benefit and require the executives to maintain the confidentiality of the Company’s confidential information.

The foregoing descriptions of the new employment agreements are qualified in their entirety by reference to the text of the employment agreements, copies of which are attached to and filed with this Form 10-K.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information required by this item is incorporated by reference to information under the captions “Corporate Governance,” “Board Composition,” “Executive Officers,” “Section 16(a) Beneficial Ownership Reporting Compliance,” and “Consideration of Stockholder-Recommended Director Nominees” in our definitive proxy statement relating to the 2018 annual meeting of stockholders. The definitive proxy statement will be filed with the SEC within 120 days after the end of the 2017 fiscal year.

tronc has a Code of Ethics and Business Conduct that applies to all directors, officers and employees, and a Code of Ethics and Business Conduct for CEO and Senior Financial Officers which can be found at the Company's website, www.tronc.com. The Company will post any amendments to the Code of Ethics and Business Conduct, as well as any waivers that are required to be disclosed by the rules of either the SEC or Nasdaq, on the Company’s website. Information on tronc’s website is not incorporated by reference to the Annual Report on Form 10-K.

The Company’s Board of Directors has adopted Corporate Governance Guidelines and charters for the Audit and Compensation, Nominating and Corporate Governance Committees of the Board of Directors. These documents can be found at the Company’s website, www.tronc.com.

A stockholder can also obtain, without charge, a printed copy of any of the materials referred to above by contacting the Company at the following address:

tronc, Inc.

435 North Michigan Avenue

Chicago, Illinois 60611

Attn: Corporate Secretary

Telephone: (312) 222-9100

Item 11. Executive Compensation

The information required by this item is incorporated by reference to information under the captions “Compensation Discussion and Analysis,” “Compensation, Nominating and Corporate Governance Committee Report,” “Compensation Committee Interlocks and Insider Participation,” “Named Executive Officer Compensation,” and “Director Compensation” in our definitive proxy statement relating to the 2018 annual meeting of stockholders. The definitive proxy statement will be filed with the SEC within 120 days after the end of the 2017 fiscal year.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this item is incorporated by reference to information under the caption “Security Ownership of Certain Beneficial Owners, Directors, and Management” in our definitive proxy statement relating to the 2018 annual meeting of stockholders. The definitive proxy statement will be filed with the SEC within 120 days after the end of the 2017 fiscal year.

Securities Authorized for Issuance under Equity Compensation Plans

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by this item is incorporated by reference to information under the captions “Policies and Procedures for the Review and Approval or Ratification of Transactions with Related Persons” and “Corporate Governance” in our definitive proxy statement relating to the 2018 annual meeting of stockholders. The definitive proxy statement will be filed with the SEC within 120 days after the end of the 2017 fiscal year.

Item 14. Principal Accountant Fees and Services

The information required by this item is incorporated by reference to information under the caption “Independent Registered Public Accounting Firm’s Fees Report” in our definitive proxy statement relating to the 2018 annual meeting of stockholders. The definitive proxy statement will be filed with the SEC within 120 days after the end of the 2017 fiscal year.

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a) The following documents are filed as part of this Form 10-K:

(1) Index and Consolidated Financial Statements

The list of Consolidated Financial Statements set forth in the accompanying Index to Financial Statements at page F-1 herein is incorporated herein by reference. Such Consolidated Financial Statements are filed as part of this Form 10-K.


(2)	The financial schedules required by Regulation S-X are either not applicable or are included in the information provided in the Consolidated Financial Statements or related Notes, which are filed as part of this Form 10-K.

(b) Exhibits

Exhibits marked with an asterisk (*) are incorporated by reference to documents previously filed by the Company with the Securities and Exchange Commission, as indicated. All other documents are filed as part of this Form 10-K. Exhibits marked with a tilde (~) are management contracts, compensatory plan contracts or arrangements filed pursuant to Item 601(b)(10)(iii)(A) of Regulation S-K.

Exhibit Description

Number


2.1*	Separation and Distribution Agreement, by and between Tribune Media Company and Tribune Publishing Company, dated as of August 3, 2014 (incorporated by reference to Exhibit 2.1 to the Form 8-K filed on August 7, 2014).


2.2*	Membership Interest Purchase Agreement, by and among Tribune Publishing Company, LLC, MLIM Holdings, LLC, the Papa Doug Trust u/a/d January 11, 2010, Douglas F. Manchester, Douglas W. Manchester and MLIM, LLC, dated as of May 7, 2015 (incorporated by reference to Exhibit 2.1 to the Quarterly Report on Form 10-Q for the quarterly period ended June 28, 2015 filed on August 12, 2015).

2.3*

Amendment No. 1 to Membership Interest Purchase Agreement, by and among Tribune Publishing Company, LLC, MLIM Holdings, LLC, the Papa Doug Trust u/a/d January 11, 2010, Douglas F. Manchester, Douglas W. Manchester, and MLIM, LLC, dated as of May 7, 2015 (incorporated by reference to Exhibit 2.2 to the Quarterly Report on Form 10-Q for the quarterly period ended June 28, 2015 filed on August 12, 2015).

2.4*

Partnership Interest Purchase Agreement, dated September 3, 2017, by and among Daily News, L.P., TRX Pubco, LLC, Tribune Publishing Company, LLC, Mortimer B. Zuckerman, New DN Company, The Mortimer B. Zuckerman 1983 Family Trust, New DN Company (as the Sellers’ Representative) and the Management Trust defined in the Purchase Agreement (incorporated by reference to Exhibit 2.1 to the Form 8-K filed on September 5, 2017).


2.5*	Acquisition Agreement, dated February 6, 2018, by and among Best Reviews Inc., Best Reviews LLC, Tribune Publishing Company, LLC, and Tronc, Inc., and Denis Grosz (as the Sellers’ Representative), and the Stockholders defined in the Purchase Agreement (incorporated by reference to Exhibit 2.1 to the Form 8-K filed on February 7, 2018).


2.6*	Membership Interest Purchase Agreement, dated February 7, 2018, by and among Nant Capital, LLC, and Tronc, Inc. (incorporated by reference to Exhibit 2.1 to the Form 8-K filed on February 7, 2018).


3.1*	Amended and Restated Certificate of Incorporation of tronc, Inc., as amended (incorporated by reference to Exhibit 3.1 of the Registration Statement on Form 8-A filed on June 17, 2016).


3.2*	Amended and Restated By-laws of tronc, Inc. (incorporated by reference to Exhibit 3.2 to the Registration Statement on Form 8-A filed on June 17, 2016).


10.1*	Transition Services Agreement, by and between Tribune Media Company and Tribune Publishing Company, dated as of August 4, 2014 (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on August 7, 2014).


10.2*	Tax Matters Agreement, by and between Tribune Media Company and Tribune Publishing Company, dated as of August 4, 2014 (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on August 7, 2014).


10.3*	Employee Matters Agreement, by and between Tribune Media Company and Tribune Publishing Company, dated as of August 4, 2014 (incorporated by reference to Exhibit 10.3 to the Form 8-K filed on August 7, 2014).


10.4*	Registration Rights Agreement, among Tribune Publishing Company and the Stockholders party thereto, dated as of August 4, 2014 (incorporated by reference to Exhibit 10.4 to the Form 8-K filed on August 7, 2014).


10.5*	Securities Purchase Agreement, by and among Tribune Publishing Company, Merrick Media, LLC and Michael W. Ferro, Jr., dated as of February 3, 2016 (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on February 4, 2016).


10.6*	Amendment No. 1 to Securities Purchase Agreement, dated as of March 23, 2017, by and among tronc, Inc., Merrick Media, LLC and Michael W. Ferro, Jr. (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on March 23, 2017).


10.7*	Consulting Agreement, dated December 20, 2017, by and among Tribune Publishing Company, LLC, Merrick Ventures LLC and, solely for certain sections thereof, Michael W. Ferro, Jr., Merrick Media, LLC and tronc, Inc. (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on December 22, 2017.)


10.8*	Registration Rights Agreement, by and between Tribune Publishing Company and Merrick Media, LLC, dated as of February 3, 2016 (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on February 4, 2016).


10.9*	Confidentiality and Recusal Agreement, by and between Tribune Publishing Company and Michael W. Ferro, Jr., dated as of February 3, 2016 (incorporated by reference to Exhibit 10.3 to the Form 8-K filed on February 4, 2016).

10.10*


10.11*	Securities Purchase Agreement, by and among Tribune Publishing Company, Nant Capital, LLC and Dr. Patrick Soon-Shiong, dated as of May 22, 2016 (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on May 23, 2016).


10.12*	Registration Rights Agreement, by and between Tribune Publishing Company and Nant Capital, LLC, dated as of May 22, 2016 (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on May 23, 2016).


10.13*~	tronc, Inc. 2014 Omnibus Incentive Plan, as amended (incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q for the quarterly period ended June 26, 2016 filed on August 5, 2016).


10.14*~	Form of Restricted Stock Unit Award Agreement (Non-Employee Director Form) for awards made in 2016 (incorporated by reference to Exhibit 10.7 to the Quarterly Report on Form 10-Q/A for the quarterly period ended September 28, 2014 filed November 19, 2014).


10.15*	Form of Restricted Stock Award Agreement (Non-Employee Director) for awards made beginning in 2017 (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q for the quarterly period ended September 24, 2017 filed November 3, 2017).


10.16*~	Form of Stock Option Agreement (Employee Form) (incorporated by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q for the quarterly period ended June 26, 2016 filed on August 5, 2016).


10.17*~	Form of Restricted Stock Unit Award Agreement (Employee Form) (incorporated by reference to Exhibit 10.5 to the Quarterly Report on Form 10-Q for the quarterly period ended June 26, 2016 filed on August 5, 2016).


10.18*~	Form of Annual Performance Incentive Award Notice (incorporated by reference to Exhibit 10.9 to the Annual Report on Form 10-K for the fiscal year ended December 28, 2014 filed March 25, 2015).


10.19*~	Form of Annual Performance Incentive Award Notice (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q for the fiscal quarter ended March 26, 2017 filed May 3, 2017).


10.20*~	Form of Director Compensation Conversion Election Form (incorporated by reference to Exhibit 10.13 to the Annual Report on Form 10-K filed on March 14, 2016).


10.21*~	Employment Agreement, by and between Tribune Publishing Company, LLC and Timothy E. Ryan, dated as of September 7, 2015 (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q for the quarterly period ended September 27, 2015 filed on November 12, 2015).


10.22*~	Executive Employment Agreement by and between Justin Dearborn and Tribune Publishing Company, LLC, effective February 22, 2016 through February 21, 2018 (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on February 23, 2016).


10.23*~	Executive Employment Agreement by and between Justin C. Dearborn and Tribune Publishing Company, LLC, effective February 22, 2018.


10.24*~	Executive Employment Agreement by and between Terry Jimenez and Tribune Publishing Company, LLC, dated March 25, 2016 and effective through April 3, 2018 (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on March 28, 2016).


10.25*~	Executive Employment Agreement by and between Terry Jimenez and Tribune Publishing Company, LLC, effective April 4, 2018.


10.26*~	Executive Employment Agreement by and between Timothy Knight and Tribune Interactive, LLC, effective February 23, 2017 (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on February 27, 2017.)


10.27*~	Executive Employment Agreement by and between Ross Levinsohn and Tribune Interactive, LLC, effective August 21, 2017, (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on August 23, 2017)


10.28*~	Executive Employment Agreement by and between Julie K. Xanders and Tribune Publishing Company, LLC, dated December 20, 2017 and effective January 4, 2018 (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on December 22, 2017).


10.29*~	Form of Executive Employment Agreement (incorporated by reference to Exhibit 10.26 to the Annual Report on Form 10-K filed on March 14, 2016).


10.30*~	Form of Indemnification Agreement (Directors) (incorporated by reference to Exhibit 10.6 to the Quarterly Report on Form 10-Q for the quarterly period ended March 27, 2016 filed on May 5, 2016).


10.31*	Term Loan Credit Agreement, among Tribune Publishing Company, JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, and the lenders party thereto, dated as of August 4, 2014 (incorporated by reference to Exhibit 10.11 to the Form 8-K filed on August 7, 2014).


10.30*	Term Loan Guaranty, among Tribune Publishing Company, the Subsidiaries party thereto and JPMorgan Chase Bank, N.A., as collateral agent, dated as of August 4, 2014 (incorporated by reference to Exhibit 10.12 to the Form 8-K filed on August 7, 2014).


10.31*	Term Loan Security Agreement, among Tribune Publishing Company, the Subsidiaries party thereto and JPMorgan Chase Bank, N.A., as collateral agent, dated as of August 4, 2014 (incorporated by reference to Exhibit 10.13 to the Form 8-K filed on August 7, 2014).


10.32*	Term Loan Pledge Agreement, among Tribune Publishing Company, the Subsidiaries party thereto and JPMorgan Chase Bank, N.A., as collateral agent, dated as of August 4, 2014 (incorporated by reference to Exhibit 10.14 to the Form 8-K filed on August 7, 2014).


10.33*	ABL Credit Agreement, among Tribune Publishing Company, the Subsidiaries party thereto, Bank of America, N.A., as administrative agent, collateral agent, swing line lender and l/c issuer, and the lenders party thereto, dated as of August 4, 2014 (incorporated by reference to Exhibit 10.15 to the Form 8-K filed on August 7, 2014).


10.34*	ABL Guaranty, among Tribune Publishing Company, the Subsidiaries party thereto and Bank of America, N.A., as collateral agent, dated as of August 4, 2014 (incorporated by reference to Exhibit 10.16 to the Form 8-K filed on August 7, 2014).


10.35*	ABL Security Agreement, among Tribune Publishing Company, the Subsidiaries party thereto and Bank of America, N.A., as collateral agent, dated as of August 4, 2014 (incorporated by reference to Exhibit 10.17 to the Form 8-K filed on August 7, 2014).


10.36*	ABL Pledge Agreement, among Tribune Publishing Company, the Subsidiaries party thereto and Bank of America, N.A., as collateral agent, dated as of August 4, 2014 (incorporated by reference to Exhibit 10.18 to the Form 8-K filed on August 7, 2014).


10.37*	Continuing Agreement for Standby Letters of Credit, between Tribune Publishing Company and JPMorgan Chase Bank, N.A., as l/c issuer, dated as of August 4, 2014 (incorporated by reference to Exhibit 10.19 to the Form 8-K filed on August 7, 2014).


10.38*	Lender Joinder Agreement, by and among Tribune Publishing Company, Citicorp North America, Inc. and JPMorgan Chase Bank, N.A., dated as of May 21, 2015 (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q for the quarterly period ended June 28, 2015 filed on August 12, 2015).


10.39*	Registration Rights Agreement, by and between Tribune Publishing Company and MLIM Holdings, LLC, dated as of May 21, 2015 (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q for the quarterly period ended June 28, 2015 filed on August 12, 2015).


10.40*	Amended and Restated Limited Liability Company Agreement of Best Reviews LLC, dated February 6, 2018 (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on February 7, 2018).


21.1	Subsidiaries.


23.1	Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.


23.2	Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm.


24.1	Power of Attorney (see signature page to this Annual Report on Form 10-K).


31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.


31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.


32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


101.INS	XBRL Instance Document


101.SCH	XBRL Taxonomy Extension Scheme Document


101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document


101.DEF	XBRL Taxonomy Extension Definition Linkbase Document


101.LAB	XBRL Taxonomy Extension Labels Linkbase Document


101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.



		TRONC, INC.

March 16, 2018	By:	/s/ Terry Jimenez
		Terry Jimenez
		Chief Financial Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENT, that each person whose signature appears below constitutes and appoints Justin C. Dearborn and Terry Jimenez, as his or her attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any amendment to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Form 10-K has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.



Name	Capacity	Date

/s/ Justin C. Dearborn	Chief Executive Officer and Director	March 16, 2018
Justin C. Dearborn	(Principal Executive Officer)

/s/ Terry Jimenez	Chief Financial Officer	March 16, 2018
Terry Jimenez	(Principal Financial and Accounting Officer)

/s/ Michael W. Ferro, Jr.	Chairman and Director	March 16, 2018
Michael W. Ferro, Jr.

/s/ Carol Crenshaw	Director	March 16, 2018
Carol Crenshaw

/s/ David Dreier	Director	March 16, 2018
David Dreier

/s/ Philip G. Franklin	Director	March 16, 2018
Philip G. Franklin

/s/ Eddy W. Hartenstein	Director	March 16, 2018
Eddy W. Hartenstein

/s/ Richard A. Reck	Director	March 16, 2018
Richard A. Reck

INDEX TO FINANCIAL STATEMENTS



		Page
tronc, Inc. Consolidated Financial Statements:
Reports of Independent Registered Public Accounting Firms		F-2
Consolidated Financial Statements:
Statements of Income (Loss)		F-4
Statements of Comprehensive Income (Loss)		F-5
Balance Sheets		F-6
Statements of Equity (Deficit)		F-8
Statements of Cash Flows		F-9
Notes to the Consolidated Financial Statements		F-11

F-1

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of tronc, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of tronc, Inc. (the Company) as of December 31, 2017 and December 25, 2016, the related consolidated statements of income (loss), comprehensive income (loss), equity (deficit) and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company at December 31, 2017 and December 25, 2016, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 16, 2018 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2016.

Dallas, Texas

March 16, 2018

F-2

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of tronc, Inc.

In our opinion, the consolidated statements of loss, comprehensive loss, deficit and cash flows for the year ended December 27, 2015 present fairly, in all material respects, the results of operations and cash flows of tronc, Inc. and its subsidiaries (formerly known as Tribune Publishing Company) for the year ended December 27, 2015, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Dallas, TX

March 14, 2016, except for Note 18 to the consolidated financial statements, as to which the date is March 8, 2017

F-3

TRONC, INC.

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(In thousands, except per share data)



	Year ended
	December 31, 2017			December 25, 2016			December 27, 2015

Operating revenues	$	1,524,018		$	1,606,378		$	1,672,820

Operating expenses:
Compensation	549,363			597,293			649,905
Newsprint and ink	94,340			103,906			122,339
Outside services	468,044			494,478			513,896
Other operating expenses	288,986			300,089			307,080
Depreciation and amortization	56,696			57,499			54,633
Total operating expenses	1,457,429			1,553,265			1,647,853

Income from operations	66,589			53,113			24,967
Interest expense, net	(26,481		)	(26,703		)	(25,972		)
Premium on stock buyback	(6,031		)	—			—
Income (loss) on equity investments, net	3,139			(690		)	(1,164		)
Reorganization items, net	—			(259		)	(1,026		)
Income (loss) before income taxes	37,216			25,461			(3,195		)
Income tax expense (benefit)	31,681			18,924			(430		)
Net income (loss)	$	5,535		$	6,537		$	(2,765	)

Net income (loss) per common share:
Basic	$	0.16		$	0.19		$	(0.11	)

Diluted	$	0.16		$	0.19		$	(0.11	)

Weighted average shares outstanding:
Basic	33,996			33,788			25,990

Diluted	34,285			33,935			25,990

Dividends declared per common share	$	—		$	—		$	0.70

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

F-4

TRONC, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)



	Year ended
	December 31, 2017			December 25, 2016			December 27, 2015
Net income (loss)	$	5,535		$	6,537		$	(2,765	)
Other comprehensive loss, net of taxes:
Unrecognized benefit plan gains (losses):
Change in unrecognized benefit plan gain (loss) arising during the period, net of taxes of $2,305, $3,021 and $4,556, respectively	(5,988		)	(4,627		)	(6,978		)
Amortization of items to periodic pension cost during the period, net of taxes of $628, $186 and $1,921, respectively	(1,094		)	(284		)	(2,942		)
Plan amendments, net of taxes of $1,623, $0 and $2,908, respectively	4,215			—			(4,453		)
Adjustment for new tax law rate change	(1,847		)	—			—
Foreign currency translation, net of taxes	1			3			(15		)
Other comprehensive loss, net of taxes	(4,713		)	(4,908		)	(14,388		)
Comprehensive income (loss)	$	822		$	1,629		$	(17,153	)

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

F-5

TRONC, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)



	December 31, 2017			December 25, 2016
Assets
Current assets
Cash	$	189,653		$	198,349
Accounts receivable (net of allowances of $16,377 and $17,230)	180,679			195,519
Inventories	10,798			10,950
Prepaid expenses	22,389			12,879
Other current assets	3,186			5,984
Total current assets	406,705			423,681

Property, plant and equipment
Machinery, equipment and furniture	127,988			123,530
Buildings and leasehold improvements	42,635			13,388
	170,623			136,918
Accumulated depreciation	(72,647		)	(70,082		)
	97,976			66,836
Advance payments on property, plant and equipment	9,064			1,030
Property, plant and equipment, net	107,040			67,866

Other assets
Goodwill	121,907			122,469
Intangible assets, net	125,178			132,161
Software, net	42,793			54,565
Deferred income taxes	29,911			63,977
Other long-term assets	31,599			24,047
Total other assets	351,388			397,219

Total assets	$	865,133		$	888,766

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

F-6

TRONC, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)



	December 31, 2017			December 25, 2016
Liabilities and stockholders’ equity
Current liabilities
Current portion of long-term debt	$	21,857		$	21,617
Accounts payable	78,365			70,148
Employee compensation and benefits	63,761			72,311
Deferred revenue	76,353			82,778
Other current liabilities	20,568			18,033
Total current liabilities	260,904			264,887

Non-current liabilities
Long-term debt	331,881			349,128
Deferred revenue	5,142			4,938
Pension and postretirement benefits payable	113,593			101,674
Other obligations	84,451			60,258
Total non-current liabilities	535,067			515,998

Commitments and contingencies (Notes 11 and 12)

Stockholders' equity
Preferred stock, $.01 par value. Authorized 30,000 shares; no shares issued or outstanding at December 31, 2017 and December 25, 2016	—			—
Common stock, $.01 par value. Authorized 300,000 shares, 37,551 shares issued and 33,684 shares outstanding at December 31, 2017; 36,549 shares issued and 36,428 shares outstanding at December 25, 2016	376			365
Additional paid-in capital	150,229			139,623
Accumulated deficit	(16,390		)	(21,925		)
Accumulated other comprehensive loss	(13,527		)	(8,814		)
Treasury stock, at cost - 3,867 shares at December 31, 2017 and 121 shares at December 25, 2016	(51,526		)	(1,368		)
Total stockholders' equity	69,162			107,881

Total liabilities and stockholders’ equity	$	865,133		$	888,766

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

F-7

TRONC, INC.

CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)

(In thousands)



	Common Stock
	Shares	Amount		Additional Paid in Capital			Accumulated Deficit			AOCI			Treasury Stock			Total Equity (Deficit)
Balance at December 28, 2014	25,444	$	254	$	2,370		$	(6,937	)	$	10,482		$	—		$	6,169
Comprehensive loss	—	—		—			(2,765		)	(14,388		)	—			(17,153		)
Dividends declared to common stockholders	—	—		—			(18,937		)	—			—			(18,937		)
Issuance of common stock for acquisition	701	7		11,032			—			—			—			11,039
Issuance of stock from restricted stock unit conversions	192	3		(3		)	—			—			—			—
Exercise of stock options	20	—		281			—			—			—			281
Share-based compensation	—	—		6,822			—			—			—			6,822
Excess tax benefit from long-term incentive plan	—	—		653			—			—			—			653
Withholding for taxes on RSU conversions	—	—		(1,904		)	—			—			—			(1,904		)
Purchase of treasury stock	—	—		—			—			—			(1,368		)	(1,368		)
Balance at December 27, 2015	26,357	264		19,251			(28,639		)	(3,906		)	(1,368		)	(14,398		)
Comprehensive income (loss)	—	—		—			6,537			(4,908		)	—			1,629
Dividends declared to common stockholders	—	—		—			177			—			—			177
Issuance of common stock	9,920	99		113,219			—			—			—			113,318
Issuance of stock from RSU conversions	258	2		(2		)	—			—			—			—
Exercise of stock options	14	—		205			—			—			—			205
Share-based compensation	—	—		8,424			—			—			—			8,424
Excess tax benefit from long-term incentive plan	—	—		(653		)	—			—			—			(653		)
Withholding for taxes on RSU conversions	—	—		(821		)	—			—			—			(821		)
Balance at December 25, 2016	36,549	365		139,623			(21,925		)	(8,814		)	(1,368		)	107,881
Comprehensive income (loss)	—	—		—			5,535			(4,713		)	—			822
Issuance of stock from restricted stock and restricted stock unit conversions	887	9		(9		)	—			—			—			—
Exercise of stock options	115	2		1,656			—			—			—			1,658
Share-based compensation	—	—		11,282			—			—			—			11,282
Withholding for taxes on RSU conversions	—	—		(2,323		)	—			—			—			(2,323		)
Purchase of treasury stock	—	—		—			—			—			(50,158		)	(50,158		)
Balance at December 31, 2017	37,551	$	376	$	150,229		$	(16,390	)	$	(13,527	)	$	(51,526	)	$	69,162

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

F-8

TRONC, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)

	Year ended
	December 31, 2017			December 25, 2016			December 27, 2015
Operating Activities
Net income (loss)	$	5,535		$	6,537		$	(2,765	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	56,696			57,499			54,633
Stock-based compensation expense	11,282			8,424			6,822
Excess tax benefits (expense) realized from exercise of stock-based awards	—			(653		)	653
Premium on stock buyback	6,031			—			—
Gain on sale of investments	(6,398		)	—			—
Loss on equity investments, net	3,259			690			1,164
Loss on fixed asset sales	—			1,451			1,346
Gain on postretirement plan amendment	—			—			(18,828		)
Deferred income taxes	32,697			21,552			(2,654		)
Non-current deferred revenue	203			(2,022		)	(1,815		)
Other non-cash, net	7,752			9,259			2,252
Pension contribution	(14,295		)	(10,813		)	(2,983		)
Postretirement benefit expense	(5,502		)	(3,235		)	(4,944		)
Changes in working capital items, excluding acquisitions:
Accounts receivable, net	31,439			46,518			5,993
Prepaid expenses, inventories and other current assets	(300		)	10,497			13,822
Accounts payable, employee compensation and benefits, deferred revenue and other current liabilities	(38,469		)	(58,098		)	11,194
Other, net	1,354			(1,916		)	1,591
Net cash provided by operating activities	91,284			85,690			65,481

Investing Activities
Capital expenditures, including software additions	(24,315		)	(21,021		)	(32,275		)
Proceeds from the sale of investments	8,420			—			—
Acquisitions, net of cash acquired	2,556			(7,603		)	(67,825		)
Restricted cash	—			17,003			10,502
Other, net	(2,443		)	(2,486		)	(1,407		)
Net cash used for investing activities	$	(15,782	)	$	(14,107	)	$	(91,005	)

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

F-9

TRONC, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)

	Year ended
	December 31, 2017			December 25, 2016			December 27, 2015
Financing Activities
Proceeds from issuance of common stock	$	—		$	113,318		$	—
Purchase of treasury stock	(56,189		)	—			(1,368		)
Repayment of long-term debt	(26,362		)	(21,090		)	(19,776		)
Repayments of capital lease obligations	(832		)	(811		)	—
Withholding for taxes on RSU vesting	(2,323		)	(821		)	(1,904		)
Proceeds from exercise of stock options	1,658			205			281
Dividends paid to common stockholders	—			(4,867		)	(13,742		)
Proceeds from issuance of debt	—			—			68,950
Payment of debt issuance costs	—			—			(2,760		)
Proceeds from revolving debt	—			—			10,000
Repayment of revolving debt	—			—			(10,000		)
Other	(150		)	—			—
Net cash provided by (used for) financing activities	(84,198		)	85,934			29,681

Net increase in cash	(8,696		)	157,517			4,157
Cash, beginning of period	198,349			40,832			36,675
Cash, end of period	$	189,653		$	198,349		$	40,832

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

F-10

TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Description of Business—tronc, Inc., formerly Tribune Publishing Company, was formed as a Delaware corporation on November 21, 2013. tronc, Inc. together with its subsidiaries (collectively, the “Company,” or “tronc”) is a media company rooted in award-winning journalism. Headquartered in Chicago, tronc operates newsrooms in ten markets with titles including the Chicago Tribune, The Baltimore Sun, Orlando Sentinel, South Florida’s Sun Sentinel, Newport News, Virginia’s Daily Press, Allentown Pennsylvania’s The Morning Call, Hartford Courant, Los Angeles Times, and The San Diego Union Tribune. On September 3, 2017, the Company completed the purchase of the New York Daily News, New York City’s “Hometown Newspaper”. tronc’s legacy of brands, including the New York Daily News, has earned a combined 105 Pulitzer Prizes and is committed to informing, inspiring and engaging local communities.

As discussed in Note 21, on February 7, 2018, tronc, Inc. entered into an agreement (the “MIPA”) to sell the Los Angeles Times, The San Diego Union-Tribune and various other titles in the Company’s California news group for an aggregate purchase price of $500 million in cash, plus the assumption of $90 million in underfunded pension liabilities and indemnified liabilities related to certain litigation (the “Nant Transaction”). These properties were not assets held for sale or discontinued operations as of December 31, 2017 and are therefore reflected in these financial statements and related notes as continuing operations.

Basis of Presentation—The accompanying Consolidated Financial Statements and notes of the Company have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Actual results could differ from these estimates. All intercompany accounts within tronc have been eliminated in consolidation.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Fiscal Year—The Company's fiscal year ends on the last Sunday in December. Fiscal year 2017 ended on December 31, 2017 and consisted of 53 weeks with 13 weeks in each of the first three quarters and 14 weeks in the fourth quarter. Fiscal year 2016 ended on December 25, 2016 and fiscal year 2015 ended on December 27, 2015. Each of fiscal 2016 and 2015 was a 52 week year with 13 weeks in each quarter.

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

Segment Presentation—The Company assesses its operating segments in accordance with ASC Topic 280, “Segment Reporting.” The Company is managed by its chief operating decision maker, as defined by ASC Topic 280, in two reportable 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 tronc websites, third party websites, mobile applications, digital only subscriptions, Tribune Content Agency (“TCA”), and forsalebyowner.com. See Note 18 for additional segment information.

Business Combinations—The allocation of the purchase consideration for acquisitions requires extensive use of accounting estimates and judgments to allocate the purchase consideration to the identifiable tangible and intangible assets acquired and liabilities assumed based on their respective fair values. The excess of the fair value of purchase consideration over the values of the identifiable assets and liabilities is recorded as goodwill. Critical estimates in valuing certain

F-11

TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

identifiable assets include but are not limited to expected long term revenues; future expected operating expenses; cost of capital; appropriate attrition and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.

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. See New Accounting Standards below for a description of the effect the adoption of ASC 606 will have on the Company’s revenue recognition policy.

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

Accounts Receivable and Allowance for Doubtful Accounts—tronc’s accounts receivable are primarily due from advertisers and circulation-related accounts. Credit is extended based on an evaluation of each customer’s financial condition, and generally collateral is not required. The Company maintains an allowance for uncollectible accounts, rebates and volume discounts. The allowance for uncollectible accounts is determined based on historical write-off experience and any known specific collectability exposures.

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



Accounts receivable allowance balance at December 28, 2014	$	16,664
2015 additions	31,805
2015 deductions	(30,879		)
Accounts receivable allowance balance at December 27, 2015	17,590
2016 additions	33,559
2016 deductions	(33,919		)
Accounts receivable allowance balance at December 25, 2016	17,230
2017 additions	34,622
2017 deductions	(35,475		)
Accounts receivable allowance balance at December 31, 2017	$	16,377

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

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

F-12

TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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



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

Leasehold improvements are amortized over the shorter of the useful life or the term of the lease. Expenditures for repairs and maintenance of existing assets are charged to expense as incurred. Property, plant and equipment assets that are financed under a capital lease are amortized over the shorter of the term of the lease or the useful lives of the assets.

Goodwill and Other Intangible Assets—Goodwill and other intangible assets are summarized in Note 7. tronc reviews goodwill and other indefinite-lived intangible assets, which include only newspaper mastheads, for impairment annually, or more frequently if events or changes in circumstances indicate that an asset may be impaired, in accordance with ASC Topic 350, “Intangibles–Goodwill and Other.” Under ASC Topic 350, the impairment review of goodwill and other intangible assets not subject to amortization must be based on estimated fair values. Impairment would occur when the carrying amount of the goodwill or mastheads is greater than its fair value. The Company has determined that the reporting units at which goodwill will be evaluated are the ten newspaper media groups, TCA, forsalebyowner.com and the aggregate of its other digital businesses.

The Company evaluates goodwill and indefinite-lived intangibles for impairment annually as of the first day of the fiscal fourth quarter, or when an indicator of impairment exists. For the 2017 annual impairment test, the Company did a full quantitative analysis of both goodwill and mastheads. For both goodwill and mastheads, the calculated fair value exceeded the carrying value. For goodwill, the calculated fair value was determined using the income approach. Estimates of fair value include Level 3 inputs as they are subjective in nature, involve uncertainties and matters of significant judgment and are made at a specific point in time. Thus, changes in key assumptions from period to period could significantly affect the estimates of fair value. Significant assumptions used in the fair value estimates include projected revenues and related growth rates over time (for 2017, the perpetuity growth (decline) rates used ranged from (0.6%) to 2.7%), forecasted revenue growth rates (for 2017, forecasted revenue growth (decline) ranged from (10.9%) to 5.6%), projected operating cash flow margins, estimated tax rates, depreciation expense, capital expenditures, required working capital needs, and an appropriate risk-adjusted weighted-average cost of capital (for 2017, the weighted average cost of capital used was 9.5% for print and 11.0% for digital). 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 San Diego Media Group for which the fair value exceeded the carrying value by more than 12.6%. As discussed in Note 5, the Company acquired San Diego Union-Tribune and nine community weeklies in May 2015. Subsequent to the acquisition, revenues of the San Diego 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 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 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 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. Under the terms of the MIPA, the carrying value of goodwill related to the San Diego Union-Tribune would be fully realized upon close of the transaction.

For mastheads, the calculated fair value includes Level 3 inputs and was determined using the royalty savings method. The key assumptions used in the fair value estimates under the royalty savings method are revenue and market growth, royalty rates for newspaper mastheads (for 2017, the royalty rate used ranged from 2.5% to 6.4%), estimated tax rates, an appropriate risk-adjusted weighted-average cost of capital (for 2017, the weighted average cost of capital used was 9.5%). These assumptions reflect tronc’s best estimates, but these items involve inherent uncertainties based on market conditions generally outside of tronc’s control. For mastheads as of the measurement date, the calculated fair value exceeded the carrying value by more than 100% for all reporting units except the San Diego Union-Tribune. For the San Diego Union-

F-13

TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Tribune, the calculated fair value exceeded the carrying value by 43%. Under the terms of the MIPA, the carrying value of the mastheads related to the San Diego Union-Tribune would be fully realized upon close of the transaction.

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

Impairment Review of Long-Lived Assets—In accordance with ASC Topic 360, “Property, Plant and Equipment,” 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. The Company measures impairment based on the amount by which the carrying value exceeds the estimated fair value of the long-lived asset or asset group. The fair value is determined primarily by using the projected future cash flows discounted at a rate commensurate with the risk involved as well as market valuations. Losses on long-lived assets to be disposed of are determined in a similar manner, except that the fair values are reduced for an estimate of the cost to dispose or abandon. There were no impairments recorded in any of the periods presented.

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

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


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


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


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

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

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

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

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

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

F-14

TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Leases—Operating lease rentals are expensed on a straight-line basis over the life of the lease. The lease term is determined at lease inception by excluding renewal options that are not reasonably assured. The lease term is used to determine whether a lease is capital or operating and is used to calculate straight-line rent expense.

Pension Plans—The Company is the sponsor of pension plans for The San Diego Union-Tribune and the New York Daily News (the “San Diego Pension Plan” and the “NYDN Pension Plan”, respectively). The Company follows accounting guidance under ASC Topic 715, “Compensation—Retirement Benefits” for single employer defined benefit plans. Plan assets and the projected benefit obligation are measured each December 31, and the Company records as an asset or liability the net funded or underfunded position of the plans. Certain changes in actuarial valuations related to returns on plan assets and projected benefit obligations are recorded to other comprehensive income (loss) and are amortized to net periodic pension expense over the weighted average remaining life of plan participants. Net periodic pension expense is recognized each period by accruing interest expense on the projected benefit obligation and accruing a return on assets associated with the plan assets. For the San Diego Pension Plan participation in and accrual of new benefits to participants has been frozen since 2009 and, accordingly, on-going service costs are not a component of net periodic pension expense. The NYDN Pension Plan is frozen to any new participants. In measuring the funded status of the plans, the Company has elected to measure the single employer defined benefit plan assets and obligations as of the end of the month closest to the Company’s fiscal year-end. See Note 13 for more information on the Company’s pension plans.

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

Other Postretirement Benefits—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. In measuring the funded status of the plan, the Company has elected to measure the single employer defined benefit plan assets and obligations as of the end of the month closest to the Company’s fiscal year-end.

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

Contributions made to union-sponsored plans are based upon collective bargaining agreements. See Note 13 for further information.

Self-Insurance—The Company self-insures for certain employee medical and disability income benefits, and insures with a high deductible for workers’ compensation, automobile and general liability claims. The recorded liabilities for self-insured risks are calculated using actuarial methods and are not discounted. The Company carries insurance coverage to limit exposure for self-insured workers’ compensation costs and automobile and general liability claims. The Company’s deductibles for the insured coverages are generally $1.0 million per occurrence, depending on the applicable policy period. The recorded liabilities for self-insured risks at December 31, 2017 and December 25, 2016 totaled $51.8 million and $35.2 million, respectively.

Prior to the Distribution Date, tronc employees were covered under TCO plans. The portion of the expense related to these self-insurance and insurance plans that related to tronc employees have been presented within these consolidated financial statements for periods prior to the Distribution Date.

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

F-15

TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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

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

New Accounting Standards—In March 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-07, Topic 715, Compensation - Retirement Benefits; Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. ASU 2017-07 requires the disaggregation of the service cost component from other components of net periodic benefit cost, clarifies how to present the service cost component and other components of net benefit costs in the financial statements and allows only the service cost component of net benefit costs to be eligible for capitalization. ASU 2017-07 is effective for interim and annual reporting periods beginning after December 15, 2017. The Company will adopt the standard on January 1, 2018. Adoption will have no effect on the Company’s overall results of operations.

In January 2017, the Financial Accounting Standards Board (“FASB”) “ASU” 2017-04, Topic 350, Intangibles-Goodwill and Other; Simplifying the Test for Goodwill Impairment, which eliminates Step 2 from the goodwill impairment test standardizing the impairment assessment to measure a reporting unit’s carrying value against its fair value and eliminate the calculation of an implied fair value of goodwill. ASU 2017-04 is effective for interim and annual reporting periods beginning after December 15, 2019 and should be applied prospectively. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently evaluating how the adoption of this standard will impact the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01, Topic 805, Clarifying the Definition of a Business, which establishes criteria to determine when an integrated set of assets and activities is not a business. ASU 2017-01 is effective for interim and annual reporting periods beginning after December 15, 2017 and should be applied prospectively. The Company will adopt the standard effective January 1, 2018 and will apply the standard to acquisitions or dispositions after that date.

In November 2016, the FASB issued ASU 2016-18, Topic 230, Statement of Cash Flows, which clarifies how companies present and classify restricted cash in the statement of cash flows. ASU 2016-18 is effective for interim and annual reporting periods beginning after December 15, 2017. The Company will adopt this standard on January 1, 2018. Adoption will have no effect on the Company’s consolidated financial statements as the Company has no restricted cash.

In August 2016, the FASB issued ASU 2016-15, Topic 230, Statement of Cash Flows, which clarifies how companies present and classify certain cash receipts and cash payments in the statement of cash flows. ASU 2016-15 is effective for interim and annual reporting periods beginning after December 15, 2017. The Company will adopt the standard effective January 1, 2018 and will apply the standard to the consolidated financial statements on a prospective basis.

In March 2016, the FASB issued ASU 2016-09, Topic 718, Compensation—Stock Compensation; Improvements to Employee Shared-Based Payment Accounting. This standard makes several modifications to Topic 718 related to the accounting for forfeitures, employer tax withholding on share-based compensation and the financial statement presentation of excess tax benefits or deficiencies. ASU 2016-09 also clarifies the statement of cash flows presentation for certain components of share-based awards. The Company adopted this ASU as of the beginning of fiscal 2017. As part of the adoption, the Company made an accounting policy election to recognize forfeitures as they occur which had no effect on the Company’s financial statements. The Company has elected to present the cash flow statement changes retrospectively and

F-16

TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

the prior periods have been adjusted to present excess tax benefits (expense) as part of cash flows from operating activities and the cash paid by the Company for withholding shares from stock awards as part of cash flows from financing activities. The other portions of ASU 2016-09 either were not applicable or had no effect on the financial statements.

In February 2016, the FASB issued ASU 2016-02, Topic 842, Leases. This standard will require the recognition of lease assets and lease liabilities by lessees for operating leases. This ASU is effective for reporting periods beginning after December 15, 2018, with early adoption permitted. The Company is currently in the process of assessing the impact of ASU 2016-02 on the Company’s results of operations, financial condition or cash flows.

As discussed in Note 5, in September 2017 the Company acquired the New York Daily News, which was not within the scope of our assessment. We believe the customer contract arrangements for the New York Daily News are consistent with those of our other publications. We will complete our assessment with respect to the New York Daily News during the first quarter of our fiscal 2018.

The new standard does result in the Company recording certain digital advertising revenue placed on non-tronc websites, net of the cost of the third-party website as the Company will be acting as an agent as defined under the new standard. Currently, such revenues are generally recorded gross. Historically, these revenues were primarily associated with our arrangement with Cars.com. As discussed in Note 21, the Company revised the terms of its operating agreement with Cars.com effective February 1, 2018, and will no longer resell Cars.com products. If the Company had not revised the terms of the agreement, the expected impact of the adoption of the new standard would be to decrease revenues and the related costs by $50.0 million to $60.0 million annually compared to the current year. With the revised agreement, the expected impact of the adoption of the new standard is not expected to be material based on the terms or our remaining agreements

NOTE 3: CHANGES IN OPERATIONS

Employee Reductions—In the fourth quarter of 2015, the Company offered an Employee Voluntary Separation Program (“EVSP”), which provided enhanced separation benefits to eligible non-union employees with more than one year of service. The 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 pretax charge of $44.2 million and $10.3 million for all related severance, benefits and taxes in connection with the EVSP for the years ended December 27, 2015 and December 25, 2016, respectively. Amounts recorded in 2017 were immaterial.

F-17

TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

severance, benefits and taxes in connection with the ITO for the year ended December 25, 2016. The amounts recorded in 2017 were immaterial.

During the fourth quarter of 2017, the Company identified reductions in staffing levels of 86 positions at the New York Daily News. The Company is expected to take a total pretax charge of $4.0 million of which $2.3 million was recorded in the year ended December 31, 2017. The related salary continuation payments started in the fourth quarter of 2017 with the majority being completed by the end of the second quarter of 2018.

A summary of the activity with respect to tronc’s severance accrual for the years ended December 31, 2017 and December 25, 2016 is as follows (in thousands):



Balance at December 27, 2015	$	43,737
2016 Provision	27,151
2016 Payments	(59,248		)
Balance at December 25, 2016	11,640
2017 Provision	22,793
2017 Payments	(20,439		)
Balance at December 31, 2017	$	13,994

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

Lease Abandonment—In the first quarter of 2017, the Company permanently vacated approximately 15,000 sq. ft. of office space in San Diego and took a charge of $2.0 million related to the abandonment. In the second quarter of 2017, the Company permanently vacated approximately 33,629 sq. ft. of office space in the Chicago area, 30,000 sq. ft. of office space in South Florida, and 11,614 sq. ft. of office space in Los Angeles and took a charge of $1.4 million, $0.6 million, and $0.3 million, respectively, related to the abandonments.

In the third quarter of 2016, the 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 abandonments. These charges are included in other operating expenses in the accompanying Consolidated Statements of Income (Loss).

F-18

TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A summary of the activity with respect to the Company’s lease abandonment accrual for the years ended December 31, 2017 and December 25, 2016 is as follows (in thousands):



Balance at December 27, 2015	$	—
Provision	8,534
Payments and other	(1,840		)
Balance at December 25, 2016	$	6,694
Provision	4,324
Payments and other	(5,601		)
Balance at December 31, 2017	$	5,417

These charges are included in other operating expenses in the accompanying Consolidated Statements of Income (Loss).

Other Charges—Additionally, as a result of the printing, packaging and delivery outsourcing in Orlando discussed above, certain assets required to print and package the Orlando Sentinel will no longer be used as of the transition date. The first piece of equipment was idled June 12, 2017. As a result, the company recognized $1.9 million in accelerated depreciation in the second quarter of 2017. These charges are included in depreciation and amortization expenses in the accompanying Consolidated Statements of Income (Loss).

NOTE 4: RELATED PARTY TRANSACTIONS

Merrick Consulting Agreement

On December 20, 2017, Tribune Publishing Company, LLC (“TPC”), and solely for certain sections thereof, the Company, entered into a Consulting Agreement with Merrick Ventures LLC (“Merrick Ventures”) and solely for certain sections thereof, Michael W. Ferro, Jr. and Merrick Media, LLC (“Merrick Media”). Mr. Ferro is (1) Chairman and Chief Executive Officer of Merrick Ventures and (2) the manager of Merrick Venture Management, LLC which is the sole manager of Merrick Media. The Consulting Agreement provides for the engagement of Merrick Ventures on a non-exclusive basis to provide certain management expertise and technical services for an annual fee of $5 million in cash, payable in advance on the first business day of each calendar year. During the term of the Agreement, Merrick Ventures and Mr. Ferro agreed to certain non-competition covenants relating to engaging in certain other daily printed newspaper businesses, subject to certain exceptions.

The Consulting Agreement provides for a rolling three-year term, with the initial term continuing through December 31, 2020. The consulting Agreement also provides that the Aircraft Dry Sublease Agreement described below terminated as of December 31, 2017 and after such time, Merrick Ventures and Mr. Ferro are responsible for all travel expenses (including private plane expenses) incurred by them in performance of their services for TPC rather than TPC reimbursing them for such expenses.

In addition, the Agreement amends certain terms of the Securities Purchase Agreement (“Merrick Purchase Agreement”), by and among the Company, Merrick Media and Mr. Ferro to provide for:


(i)	an extension of the restriction on acquiring more than 30% of the Company’s outstanding shares by Merrick Media or its affiliates to the later of (x) February 4, 2019 or (y) 30 days following the termination of the Agreement;


(ii)	the application of the transfer restrictions set forth in Section 10.2 of the Merrick Purchase Agreement to all shares held by Merrick Media and its affiliates and the extension of such restriction until the later of (x) February 4, 2019 or (y) 30 days following the termination of the Consulting Agreement;


(iii)	the removal of the restriction on transfers of shares of common stock of the Company by Merrick Media or its affiliates to any party that would, as a result, hold more than 4.9% of the Company’s outstanding shares; and

F-19

TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)


(iv)	the application to all shares owned by Merrick Media and its affiliates (rather than to only the shares purchased under the Merrick Purchase Agreement) of the right of first offer in favor of the Company on proposed transfers of at least 2% of the then-outstanding number of shares of the Company’s common stock, subject to certain notice provisions.

See Note 16 for more information concerning the Merrick Purchase Agreement.

Aircraft Dry Sublease

One of the Company’s subsidiaries, Tribune Publishing Company, LLC (“TPC”), entered into an Aircraft Dry Sublease Agreement, which became effective as of February 4, 2016, with Merrick Ventures. Under the agreement, TPC subleased on a non-exclusive basis, a Bombardier aircraft leased by Merrick Ventures, at a cost, including TPC’s proportionate share of the insurance premiums and maintenance expenses, of $8,500 per flight hour flown. TPC also was responsible for charges attributable to the operation of the aircraft by TPC during the lease term. The initial term of the sublease was one year, which term automatically renewed on an annual basis. Either party had the right to terminate the agreement upon 30 days written notice to the other. During the year ended December 31, 2017, the Company incurred $3.0 million related to the aircraft sublease, of which $2.1 million has been paid to Merrick Ventures and $0.5 million to an outside party for pilot services, and the balance remains payable to such parties. During the year ended December 25, 2016, the Company incurred $2.7 million of which $1.8 million has been paid to Merrick Ventures and $0.4 million to an outside party for pilot services. The balance was paid in 2017. The Consulting Agreement described above terminated the Aircraft Dry Sublease as of December 31, 2017.

Event tickets

In April 2017, the Company acquired Merrick Ventures’ interest and obligations in connection with the license of a suite and tickets to certain sporting events. The aggregate cost of the suite and regular season tickets was expected to approximate $0.3 million annually. During the first quarter of 2017, the Company paid Merrick Ventures $0.2 million for the face value of the suite and tickets for events in the fourth quarter of 2016 and the first and second quarters of 2017. There are no further obligations to Merrick Ventures for these tickets. The suite and tickets are utilized in the Company’s sales and marketing efforts and for other corporate purposes.

Nant Capital, LLC

In connection with the private placement described in Note 16, the Company entered into a term sheet with NantWorks, LLC pursuant to which the Company would receive access to certain patents as well as studio space, subject to definitive documentation and approval from Tribune Media Company. If the transactions contemplated by the term sheet were consummated, the Company would issue to NantStudio, LLC 333,333 shares of common stock and in exchange, would be entitled to retain the first $80 million in revenues derived from the licensed patents royalty free, after which the Company would pay to NantWorks a 6% royalty on subsequent revenues. Presently, there is no agreement on definitive documentation and there can be no assurance that an agreement on binding, definitive documentation will be reached, that the transactions contemplated by the term sheet will be consummated, or that Tribune Media Company’s approval will be provided for the transaction. As described in Note 21, the Company entered into a MIPA with Nant Capital. Pursuant to the terms of this MIPA, the term sheet will terminate upon the consummation of the Nant Transaction.

CIPS Marketing Group Inc.

The Company utilizes the services of CIPS Marketing Group, Inc. (“CIPS”) for local marketing efforts such as distribution, door-to-door marketing and total market coverage. Prior to July 2017, the Company owned 50% of CIPS, which was recorded as an equity investment. In July 2017, the Company sold its interest in CIPS for approximately $7.3 million, resulting in a gain of $5.7 million which is recorded in Gain (Loss) on Equity Investments in the Consolidated Statement of Income (Loss), and entered into a long-term agreement with the buyer to utilize CIPS for certain distribution efforts. During the year ended December 31, 2017, the Company recorded $0.6 million in revenue and $4.2 million in other operating expenses related to such marketing services. During the year ended December 25, 2016, the Company recorded $1.0 million in revenue and $11.5 million in other operating expenses. During the year ended December 27, 2015, the Company recorded $1.0 million in revenue and $10.6 million in other operating expenses related to such marketing services.

F-20

TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Nucleus Marketing Solutions, LLC

In April 2016, tronc, along with other leading media companies McClatchy, Gannett and Hearst, formed Nucleus Marketing Solutions, LLC (“Nucleus”). This network will connect national advertisers to audiences across existing and emerging digital platforms. Nucleus works with its marketing partners to address their goals by offering integrated services across all platforms. The Company owns 25% of Nucleus . The Company’s interest in Nucleus is recorded as an equity method investment. During the years ended December 31, 2017 and December 25, 2016, the Company recorded $7.1 million and $3.8 million, respectively, on a net basis for revenue related to the Nucleus agreement.

Separation from Tribune Media Company

On August 4, 2014 (the “Distribution Date”), Tribune Media Company, formerly Tribune Company (“TCO”), completed the spin-off of its principal publishing operations into an independent company (“Distribution”), Tribune Publishing Company (renamed tronc, Inc.). In connection with the separation and distribution, tronc entered into a transition services agreement (the “TSA”) and certain other agreements with TCO that govern the relationships between tronc and TCO following the separation and distribution. The term of the TSA is from the Distribution date through August 4, 2016. Under the TSA, the providing company generally is allowed to fully recover all out-of-pocket costs and expenses it actually incurs in connection with providing the services, plus, in some cases, the allocated direct costs of providing the services, generally without profit. Pursuant to the TSA, TCO provided tronc with certain specified services on a transitional basis and during the year ended December 27, 2015, incurred $1.3 million in charges payable to TCO under the TSA. In addition, the TSA outlined the services that tronc provided TCO on a transitional basis, and for the year ended December 27, 2015, TCO's charges payable to tronc were $0.8 million under the TSA. There were no charges related to the TSA for either tronc or TCO during the years ended December 31, 2017 or December 25, 2016.

NOTE 5: ACQUISITIONS

2017 Acquisitions

On September 3, 2017, the Company completed the acquisition of 100% of the partnership interests in Daily News, L. P. (“DNLP”), the owner of the New York Daily News in New York City, pursuant to the Partnership Interest Purchase Agreement dated September 3, 2017, for a cash purchase price of one dollar and assumption of various liabilities, subject to a post-closing working capital adjustment. Following of the acquisition, DNLP’s assets and liabilities are in the process of being valued at fair value. DNLP’s assets include, among others, (1) the assets associated with the New York Daily News brand (including mastheads, resources, technology and archives), (2) net working capital, (3) plant and equipment assets and (4) certain real property rights (as described below). DNLP’s liabilities that remain with the acquired entity include, among others, (1) an existing single employer defined benefit pension obligation that provides benefits to certain current and former employees of the New York Daily News, (2) certain multi-employer pension obligations, (3) workers’ compensation and automobile insurance liabilities and (4) various outstanding letters of credit in the aggregate amount of approximately $18.7 million (the majority of which relates to DNLP’s workers’ compensation and auto liabilities).

DNLP retained its lease with the New Jersey Economic Development Authority with respect to approximately 18 acres of real property on which its printing facilities are located (the “New Jersey Lease”). Under the New Jersey Lease, DNLP is required to purchase the real property at the end of the lease term in 2021 (and may acquire it prior to such date at any time) for up to $6.9 million. The sellers in the DNLP transaction may, at any time, require DNLP to exercise the real property purchase option. Upon the exercise of the real property purchase option , the real property will be held by a partnership (the “Real Estate Partnership”) owned 49.9% by DNLP and 50.1% by New DN Company, an affiliate of the sellers in the DNLP transaction. New DN Company will control the management of the partnership. Due to the ownership structure of the Real Estate Partnership, DNLP’s net portion of the real property purchase price is approximately 49.9% (or up to $3.5 million), after reimbursement from New DN Company of its 50.1% portion of the real property purchase price. After the exercise of the real property purchase option and transfer of such property to the Real Estate Partnership, DNLP: (1) will have the option to lease it for one dollar per year, compared to the current lease rate of $100,000 per year under the New Jersey Lease, for up to 15 years and (2) may at any time, at its option, require sellers to acquire DNLP’s interest in the property based on its then-current fair market value. Should the Company discontinue printing operations on the property, the rent for the property would increase to a fair market rate and the sellers could purchase the Company’s 49.9% share of the Real Estate Partnership based on its then-current fair market value.

F-21

TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Additionally, DNLP owns approximately four acres of real property contiguous to the New Jersey Lease property, currently used as parking facilities. Prior to or concurrent with exercise of the real property purchase option, DNLP will transfer ownership of that land to the Real Estate Partnership.

The allocation of the purchase price presented below is based upon management’s preliminary estimates using all information available to us at the present time and is subject to a working capital adjustment and the completion of a fair market valuation of the assets acquired and liabilities assumed, particularly, intangible assets and property, plant and equipment. The inputs for fair value are level 3. The acquired property and equipment is depreciated on a straight-line basis over its estimated remaining useful lives. As of the filing date of this report, the determination of the fair value of the assets acquired and liabilities assumed have not been completed.

At the acquisition date, the purchase price assigned to the acquired assets and assumed liabilities is as follows (in thousands):



Allocated Fair Value of Acquired Assets and Assumed Liabilities
Cash acquired as part of the purchase	$	2,555
Accounts receivable and other current assets	21,531
Property, plant and equipment, including assets under capital leases	45,961
Mastheads and intangible assets not subject to amortization	2,732
Other long-term assets	9,466
Accounts payable and other current liabilities	(20,309		)
Pension and postemployment benefits liability	(25,445		)
Workers compensation and auto insurance liability	(25,902		)
Other long-term liabilities	(10,589		)
Total net assets acquired	$	—

The results of operations of DNLP have been included in the Consolidated Financial Statements beginning on the closing date of the acquisition and are reported in the Company’s two operating segments consistent with the Company’s other media groups as discussed in Note 18. For the year ended December 31, 2017, reported revenues from DNLP were approximately $40.2 million and reported operating expenses were approximately $47.8 million.

The pro forma results of operations have been prepared for comparative purposes only, and they do not purport to be indicative of the results of operations that actually would have resulted had the acquisition occurred on the date indicated or that may result in the future. The following pro forma consolidated results of operations have been prepared as if the DNLP acquisition occurred as of December 27, 2015 (amounts in thousands, except per share data):



	Year ended
	December 31, 2017			December 25, 2016

Total operating revenues	$	1,612,059		$	1,751,155
Income from operations	$	52,186		$	26,281
Basic net income per common share:	$	(0.27	)	$	(0.22	)
Diluted net income per common share:	$	(0.27	)	$	(0.22	)

F-22

TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2016 Acquisitions

In December 2016, the Company completed acquisitions totaling $7.6 million, including Spanfeller Media, a digital platform which includes The Daily Meal and The Active Times, and other immaterial properties. The results of the acquisitions and the related transaction costs were not material to the Company’s Consolidated Financial Statements and are included in the Consolidated Statements of Income (Loss) since their respective dates of acquisition.

2015 Acquisitions

The San Diego Union-Tribune

On May 21, 2015, the Company completed the acquisition of MLIM, LLC (“MLIM”), the indirect owner of The San Diego Union-Tribune (f/k/a the U-T San Diego) and nine community weeklies and related digital properties in San Diego County, California, pursuant to the Membership Interest Purchase Agreement (the “San Diego Agreement”), dated May 7, 2015, among the Company, MLIM Holdings, LLC, the Papa Doug Trust under agreement dated January 11, 2010, Douglas F. Manchester and Douglas W. Manchester, and MLIM, as amended effective May 21, 2015. As of the closing of the transaction, the Company acquired 100% of the equity interests in MLIM.

The stated purchase price was $85 million, consisting of $73 million in cash, subject to a working capital adjustment, and $12 million in tronc common stock. 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 defined in Note 8, as well as the net proceeds of the term loan increase as further described in Note 8.

Prior to the closing of the acquisition, certain assets and liabilities of MLIM related to the business and the operation of The San Diego Union-Tribune, including real property used by the business, were distributed to the seller or its affiliates. Upon the close of the acquisition, MLIM became a wholly-owned subsidiary of the Company, and retained certain liabilities, including certain legal matters and its existing pension obligations, and entered into a lease to use certain real property from the seller.

The seller has provided the Company a full indemnity with respect to certain legal matters which were at various states of adjudication at the date of the acquisition. Inasmuch as such judgments represent a liability of the acquired entity which is subject to indemnification, the initial purchase price allocation reflects the assignment of $11.2 million to both the litigation judgment liability and the seller indemnification asset and is reflected in the Consolidated Balance Sheet in current assets, other long-term assets, current liabilities and other obligations for the year ended December 27, 2015.

In one such matter, a consolidated class action against a predecessor entity to MLIM which asserts various claims on behalf of home delivery newspaper carriers alleged to have been misclassified as independent contractors, the plaintiffs have been granted a judgment comprised of unreimbursed business expenses, interest and attorney's fees totaling approximately $10 million. During the years ended December 31, 2017 and December 25, 2016, the Company increased the accrued litigation judgment liability and the seller indemnification asset by $1.0 million and $2.0 million, respectively, to reflect estimated interest accumulating on the judgment.

On the closing of the acquisition, the Company entered into a registration rights agreement with the seller, whereby the seller would be entitled to certain registration rights with respect to the shares of common stock of the Company acquired in connection with the San Diego Agreement. Pursuant to the registration rights agreement, the Company filed a registration statement on Form S-3 on August 12, 2015 to register the shares issued to the seller.

As part of the acquisition, the Company became the sponsor of a single-employer defined benefit plan, The San Diego Union-Tribune, LLC Retirement Plan (the “San Diego Pension Plan”). The San Diego Pension Plan provides benefits to certain current and former employees of The San Diego Union-Tribune. Future benefits under the plan have been frozen since January 31, 2009. See Note 12 for more information concerning the San Diego Pension Plan.

The allocation of the purchase price presented below is based upon fair values. The inputs for fair value are level 3. The definite-lived intangible assets are amortized over a total weighted average period of eight years that includes a three to nine year life for subscriber relationships, a three to eight year life for advertiser relationships and a one year life for other

F-23

TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

customer relationships. The acquired property and equipment is depreciated on a straight-line basis over its estimated remaining useful lives. Goodwill is calculated as the excess of the consideration transferred over the fair value of the identifiable net assets acquired and represents the future economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, including assembled workforce and non-contractual relationships, as well as expected future cost and revenue synergies. The entire amount of purchase price allocated to intangible assets and $23.2 million of goodwill will be deductible for tax purposes pursuant to Internal Revenue Code Section 197 over a 15 year period. The Company has recorded measurement period adjustments which include a $23.7 million reduction in the unfunded pension liability and a $4.4 million reduction in intangible assets.

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



Consideration
Consideration for acquisition, less cash acquired and working capital adjustments	$	78,864
Less: Shares issued for acquisition	(11,039		)
Cash consideration for acquisition	$	67,825

Allocated Fair Value of Acquired Assets and Assumed Liabilities
Accounts receivable and other current assets	$	12,408
Property, plant and equipment	1,869
Intangible assets subject to amortization:
Subscriber relationships (useful life of 3 to 9 years)	17,320
Advertiser relationships (useful life of 3 to 8 years)	15,571
Other customer relationships (useful life of 1 year)	432
Mastheads and intangible assets not subject to amortization	31,204
Deferred taxes	34,156
Other long-term assets	10,799
Accounts payable and other current liabilities	(20,808		)
Pension and postemployment benefits liability	(85,389		)
Other long-term liabilities	(13,026		)
Total identifiable net assets (liabilities)	4,536
Goodwill	74,328
Total net assets acquired	$	78,864

During the second quarter of 2016, the Company completed the determination of the fair value of the intangible assets and liabilities. As a result, the fair value for the intangible assets for subscriber relationships was increased by $8.0 million from the original value of $9.3 million to $17.3 million. A corresponding decrease in goodwill was also recorded, adjusting goodwill from the original value of $82.3 million to $74.3 million. The cumulative impact of the change on amortization expense was not material.

The Company included the results of operations of MLIM in the Consolidated Financial Statements beginning on the closing date of the acquisition. For the year ended December 27, 2015, the revenues from MLIM were $82.6 million and the total operating expenses were approximately $71.2 million.

F-24

NOTE 6: INVENTORIES

Inventories at December 31, 2017 and December 25, 2016 consisted of the following (in thousands):



	December 31, 2017		December 25, 2016

Newsprint	$	10,381	$	10,462
Supplies and other	417		488
Total inventories	$	10,798	$	10,950

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

NOTE 7: GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill and other intangible assets at December 31, 2017 and December 25, 2016 consisted of the following (in thousands):



	December 31, 2017							December 25, 2016
	Gross Amount		Accumulated Amortization			Net Amount		Gross Amount		Accumulated Amortization			Net Amount
Other intangible assets subject to amortization
Subscribers (useful life of 2 to 10 years)	$	24,632	$	(9,064	)	$	15,568	$	25,814	$	(7,229	)	$	18,585
Advertiser relationships (useful life of 2 to 13 years)	42,252		(15,357		)	26,895		44,271		(11,883		)	32,388
Trade names (useful life of 20 years)	15,100		(2,583		)	12,517		15,100		(1,816		)	13,284
Other (useful life of 1 to 20 years)	5,379		(2,243		)	3,136		5,540		(1,940		)	3,600
Total other intangible assets subject to amortization	$	87,363	$	(29,247	)	58,116		$	90,725	$	(22,868	)	67,857

Software (useful life of 2 to 10 years)	134,794		(92,001		)	42,793		125,780		(71,215		)	54,565

Goodwill and other intangible assets not subject to amortization
Goodwill						121,907							122,469
Newspaper mastheads						67,062							64,304
Total goodwill and intangible assets						$	289,878						$	309,195

F-25

TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The changes in the carrying amounts of intangible assets excluding goodwill during the years ended December 31, 2017 and December 25, 2016 were as follows (in thousands):



	Intangible assets subject to amortization			Other intangible assets not subject to amortization		Total

Balance at December 27, 2015	$	70,858		$	63,004	$	133,862
Purchase price allocation adjustment	7,995			—		7,995
Acquisitions	334			1,300		1,634
Amortization expense	(11,330		)	—		(11,330		)
Balance at December 25, 2016	$	67,857		$	64,304	$	132,161
Acquisitions	—			2,758		2,758
Dispositions	(78		)	—		(78		)
Amortization expense	(9,663		)	—		(9,663		)
Balance at December 31, 2017	$	58,116		$	67,062	$	125,178

The changes in the carrying amounts of software during the years ended December 31, 2017 and December 25, 2016 were as follows (in thousands):



	Software

Balance at December 27, 2015	$	67,089
Purchases and capitalized development costs	14,526
Retirements	(1,259		)
Amortization expense	(25,791		)
Balance at December 25, 2016	54,565
Purchases and capitalized development costs	14,773
Retirements	239
Amortization expense	(26,784		)
Balance at December 31, 2017	42,793

The changes in the carrying amounts of goodwill during the years ended December 31, 2017 and December 25, 2016 were as follows (in thousands):



	troncM			troncX		Total

Balance at December 27, 2015	$	—		$	—	$	123,992
Purchase price allocation adjustment	—			—		(7,995		)
Goodwill allocated in segment change	102,327			13,670		—
Acquisitions	334			6,138		6,472
Balance at December 25, 2016	102,661			19,808		122,469
Acquisitions	—			171		171
Dispositions	(733		)	—		(733		)
Balance at December 31, 2017	$	101,928		$	19,979	$	121,907

See Note 5 for further information on the acquisitions and the additions related to goodwill, as well as the adjustment to the purchase price of The San Diego Union-Tribune.

F-26

TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In February 2016, the Company purchased the domain name LA.com for $1.2 million and has classified this purchase as an indefinite-lived asset.

As disclosed in Note 2, tronc reviews goodwill and other indefinite-lived intangible assets for impairment annually on the first day of the fourth quarter, or more frequently if events or changes in circumstances indicate that an asset may be impaired, in accordance with ASC Topic 350, “Intangibles-Goodwill and Other.” In the year ended December 31, 2017, no impairment charges were recorded.

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



Year Ended	Intangible assets subject to amortization		Software

2018	$	8,491	$	26,041
2019	8,397		10,099
2020	8,142		4,790
2021	7,855		1,374
2022	7,685		444
Total	$	40,570	$	42,748

NOTE 8: DEBT

At December 31, 2017, tronc had $353.4 million in variable-rate debt outstanding under the Term Loan Credit Agreement, as defined below. The weighted average interest rate for the variable-rate debt at December 31, 2017 is 5.94%. At December 31, 2017, the fair value of the Term Loan Credit Agreement was estimated to be $353.8 million based on Level 2 inputs, because the fair value for these instruments is determined using observable inputs in non-active markets.

Senior Term Facility

On May 21, 2015, the Company entered into a lender joinder agreement (“Joinder Agreement”) with Citicorp North America, Inc. (“Citi”) and JPMorgan Chase Bank, N.A. to partially finance the acquisition of The San Diego Union-Tribune. See Note 5. This Joinder Agreement expanded the borrowings under the Senior Term Facility, described below, by $70 million issued at a discount of $1.1 million. This borrowing bears the same interest rate and has the same maturity date as the existing loans under the Senior Term Facility.

On August 4, 2014, the Company entered into a credit agreement (as amended, amended and restated or supplemented, the “Term Loan Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent and collateral agent (in such capacity, the “Term Collateral Agent”), and the lenders party thereto (the “Senior Term Facility”). The Senior Term Facility originally provided for secured loans (the “Term Loans”) in an aggregate principal amount of $350.0 million, which were issued at a discount of $3.5 million. Subject to certain conditions, without the consent of the then existing lenders (but subject to the receipt of commitments), the Senior Term Facility initially provided that it could be expanded (or a new term loan facility, revolving credit facility or letter of credit facility added) by an amount up to (i) the greater of $100.0 million, of which $70.0 million was used related to the acquisition of The San Diego Union Tribune, and an amount as will not cause the net senior secured leverage ratio (i.e., consolidated total senior secured debt (net of certain cash and cash equivalents) to consolidated EBITDA, all as defined in the Term Loan Credit Agreement) after giving effect to such incurrence to exceed 2:1, plus (ii) an amount equal to all voluntary prepayments of the term loans borrowed under the Senior Term Facility on the Distribution Date and refinancing debt in respect of such loans, subject to certain conditions. As of December 31, 2017, $21.1 million of the principal balance is included in current liabilities, the unamortized balance of the discount was $2.4 million and the unamortized balance of the fees associated with the term loans was $5.9 million.

The Senior Term Facility will mature on August 4, 2021 (the “Term Loan Maturity Date”). The Term Loans amortize in equal quarterly installments equal to 1.25% of the original principal amount of the Senior Term Facility with the

F-27

TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

balance payable on the Term Loan Maturity Date. No principal payments were due through the year ended December 28, 2014. The first installment was paid on December 31, 2014. Additionally, the Senior Term Facility provides for the right of individual lenders to extend the maturity date of their loans upon the request of the Company without the consent of any other lender. The Term Loans may be prepaid, in whole or in part, without premium or penalty, except that (a) prepayments and certain refinancings of the Senior Term Facility prior to August 4, 2015 will be subject to a prepayment premium of 1.0% of the principal amount prepaid and (b) lenders will be compensated for redeployment costs, if any. Subject to certain exceptions and provisions for the ratable sharing with indebtedness secured on a pari passu basis with the Senior Term Facility, the Senior Term Facility will be subject to mandatory prepayment in an amount equal to:


•	100% of the net proceeds (other than those that are used to purchase certain assets within a specified time period) of certain asset sales and certain insurance recovery events;


•	100% of the net proceeds of the issuance or incurrence of indebtedness (other than indebtedness permitted to be incurred under the Senior Term Facility unless specifically incurred to refinance a portion of the Senior Term Facility); and

•

50% of annual excess cash flow for any fiscal year (beginning with the fiscal year ending December 27, 2015), such percentage to decrease to 25% on the attainment of a net senior secured leverage ratio of 1.25:1.00 and to 0% on the attainment of a net senior secured leverage ratio of 0.75:1.00. In addition the Company will not be required to make an excess cash flow prepayment if such payment would result in available liquidity being less than $75.0 million. The Company does not expect to make an excess cash flow prepayment in 2018 for the 2017 fiscal year.

tronc is the borrower under the Senior Term Facility. Each of tronc’s wholly-owned domestic subsidiaries, subject to certain exceptions (collectively, the “Subsidiary Guarantors”), guarantee the payment obligations under the Senior Term Facility. All obligations of tronc and each Subsidiary Guarantor under the Senior Term Facility are secured by the following: (a) a perfected security interest in substantially all present and after-acquired property consisting of accounts receivable, inventory and other property constituting the borrowing base (the “ABL Priority Collateral”), which security interest will be junior to the security interest in the foregoing assets securing the Senior ABL Facility (defined below); and (b) a perfected security interest in substantially all other assets of tronc and the Subsidiary Guarantors (other than the ABL Priority Collateral and with certain other exceptions) (the “Term Loan Priority Collateral” and, together with the ABL Priority Collateral, the “Collateral”), which security interest will be senior to the security interest in the foregoing assets securing the Senior ABL Facility.

The interest rates applicable to the Term Loans will be based on a fluctuating rate of interest measured by reference to either, at the Company’s option, (i) the greater of (x) an adjusted London inter-bank offered rate (adjusted for reserve requirements) and (y) 1.00%, plus a borrowing margin of 4.75%, or (ii) an alternate base rate, plus a borrowing margin of 3.75%. Customary fees will be payable in respect of the Senior Term Facility. The Senior Term Facility contains a number of covenants that, among other things, limit the ability of tronc and its restricted subsidiaries, as described in the Term Loan Credit Agreement, to: incur more indebtedness; pay dividends; redeem stock or make other distributions in respect of equity; make investments; create restrictions on the ability of tronc’s restricted subsidiaries that are not Subsidiary Guarantors to pay dividends to tronc or make other intercompany transfers; create negative pledges; create liens; transfer or sell assets; merge or consolidate; enter into sale leasebacks; enter into certain transactions with the Company’s affiliates; and prepay or amend the terms of certain indebtedness. The Senior Term Facility also contains certain affirmative covenants, including financial and other reporting requirements. The Senior Term Facility provides for customary events of default, including: non-payment of principal, interest or fees; violation of covenants; material inaccuracy of representations or warranties; specified cross payment default and cross acceleration to other material indebtedness; certain bankruptcy events; certain ERISA events; material invalidity of guarantees or security interests; asserted invalidity of intercreditor agreements; material judgments; and change of control. As of December 31, 2017, the Company was in compliance with the covenants of the Senior Term Facility.

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 (in such capacity, the “ABL Administrative Agent”), collateral agent (in such capacity, the “ABL Collateral Agent”), swing line lender and letter of

F-28

TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

credit issuer and the lenders party thereto (the “Senior ABL Facility”). The Senior ABL Facility provides for senior secured revolving loans and letters of credit of up to a maximum aggregate principal amount of $140.0 million (subject to availability under a borrowing base). Extensions of credit under the Senior ABL Facility will be limited by a borrowing base calculated periodically and described below. Up to $75.0 million of availability under the Senior ABL Facility is available for letters of credit and up to $15.0 million of availability under the Senior ABL Facility is available for swing line loans. The Senior ABL Facility also permits tronc to increase the commitments under the Senior ABL Facility by up to $75.0 million. The “borrowing base” is defined in the ABL Credit Agreement as, at any time, the sum of (i) 85% of eligible accounts receivable (with such percentage reduced under certain circumstances), plus (ii) the lesser of (x) 10% of aggregate commitments and (y) 70% of the lower of cost or market value (determined based on the RISI index) of eligible inventory, plus (iii) qualified cash, minus (iv) availability reserves, which may include such availability reserves as the ABL Administrative Agent, in its permitted discretion, deems appropriate at such time. As of December 31, 2017, $99.7 million was available for borrowings under the Senior ABL Facility and $54.0 million of the availability supported outstanding undrawn letters of credit in the same amount.

The Senior ABL Facility will mature on August 4, 2019. In addition, however, the Senior ABL Facility provides for the right of individual lenders to extend the termination date of their commitments upon the request of tronc without the consent of any other lender. The Senior ABL Facility may be prepaid at tronc’s option at any time without premium or penalty (except for lender’s redeployment costs, if any) and will be subject to mandatory prepayment if the outstanding Senior ABL Facility exceeds either the aggregate commitments with respect thereto or the current borrowing base, in an amount equal to such excess. Mandatory prepayments do not result in a permanent reduction of the lenders’ commitments under the Senior ABL Facility.

tronc and the Subsidiary Guarantors are the borrowers under the Senior ABL Facility. tronc and the Subsidiary Guarantors guarantee the payment obligations under the Senior ABL Facility. All obligations of tronc and each Subsidiary Guarantor under the Senior ABL Facility are secured by the following: (a) a perfected security interest in the ABL Priority Collateral, which security interest will be senior to the security interest in such collateral securing the Senior Term Facility; and (b) a perfected security interest in the Term Loan Priority Collateral, which security interest will be junior to the security interest in such collateral securing the Senior Term Facility.

Until the date that is one day before the maturity date of the Senior ABL Facility, at the option of the applicable borrower, the interest rates applicable to the loans under the Senior ABL Facility will be based on either (i) an adjusted London inter-bank offered rate (adjusted for reserve requirements), plus a borrowing margin of 1.50% or (ii) an alternate base rate, plus a borrowing margin of 0.50%. Customary fees will be payable in respect of the Senior ABL Facility, including commitment fees of 0.25% and letter of credit fees. The Senior ABL Facility contains a number of covenants that, among other things, limit or restrict the ability of tronc and its restricted subsidiaries as described in the ABL Credit Agreement to: incur more indebtedness; pay dividends; redeem stock or make other distributions in respect of equity; make investments; create restrictions on the ability of the Company’s restricted subsidiaries that are not Subsidiary Guarantors to pay dividends to tronc or make other intercompany transfers; create negative pledges; enter into certain transactions with the Company’s affiliates; and prepay or amend the terms of certain indebtedness. In addition, if tronc’s availability (as defined in the ABL Credit Agreement) under the Senior ABL Facility falls below the greater of $14.0 million and 10% of the lesser of the aggregate revolving commitments and the borrowing base, tronc will be required to maintain a fixed charge coverage ratio of at least 1.0:1.0, as defined in the Senior ABL Facility. The Senior ABL Facility also contains certain affirmative covenants, including financial and other reporting requirements. The Senior ABL Facility also provides for customary events of default, including: non-payment of principal, interest or fees; violation of covenants; material inaccuracy of representations or warranties; specified cross default and cross acceleration to other material indebtedness; certain bankruptcy events; certain ERISA events; material invalidity of guarantees or security interest; asserted invalidity of intercreditor agreements; material judgments and change of control. As of December 31, 2017, the Company was 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 of $30.0 million. The Letter of Credit Agreement permits tronc, at the sole discretion of L/C Issuer, to request to increase the amount available to be issued under the Letter of Credit Agreement up to an aggregate maximum face amount of $50.0 million. The Letter of Credit Agreement is scheduled

F-29

TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

to terminate on August 4, 2019, provided that the L/C Issuer may, in its sole discretion, extend the scheduled termination date. tronc’s obligations under the Letter of Credit Agreement are secured in favor of the L/C Issuer by a first priority security interest in a specified cash collateral account. Customary fees will be payable in respect of the Letter of Credit Agreement. The Letter of Credit Agreement contains certain affirmative covenants, including financial and other reporting requirements. The Letter of Credit Agreement also provides for customary events of default, including: non-payment; violation of covenants; material inaccuracy of representations and warranties; specified cross-default to other material indebtedness; certain bankruptcy events; material invalidity of credit documents, and failure to satisfy the minimum collateral condition. During the year ended December 27, 2015, the Company was notified that an outstanding undrawn letter of credit was reduced from $27.5 million to $17.0 million. Accordingly, the Company received $10.5 million released from the restricted cash collateral account during 2015. 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. This transaction allowed for the release of the remaining $17.0 million held as restricted cash.

Capital Leases

The Company has capital leases on land, technology licenses and trucks. The total balance as of December 31, 2017 for capital leases was $8.7 million, of which $0.8 million is in short-term debt.

Future Commitments

The Company's long-term debt and long-term capital leases maturities are as follows (in thousands):



	Long Term Debt		Long Term Capital Leases

2018	$	15,817	$	768
2019	21,090		724
2020	21,090		359
2021	295,256		6,701
2022	—		93
Thereafter	—		5
Total	$	353,253	$	8,650

NOTE 9: COMMITMENTS

The table below summarizes the Company’s specified future commitments as of December 31, 2017 (in thousands):



	Total		2018		2019		2020		2021		2022		Thereafter

Interest on long-term debt⁽¹⁾	$	72,152	$	22,059	$	20,289	$	18,979	$	10,825	$	—	$	—
Operating leases⁽²⁾	201,697		45,818		33,983		30,382		28,278		24,499		38,737
Other purchase obligations⁽³⁾	1,125		1,125		—		—		—		—		—
Total	$	274,974	$	69,002	$	54,272	$	49,361	$	39,103	$	24,499	$	38,737

(1) Represents the annual interest on the variable rate debt which bore interest at 5.94% per annum at December 31, 2017.


(2)	The Company leases certain equipment and office and production space under various operating leases. Net lease expense for tronc was $56.6 million, $57.5 million and $60.5 million for the years ended December 31, 2017, December 25, 2016 and December 27, 2015, respectively. These non-cancelable leases are for periods of 1 to 26 years and some have optional renewal periods.


(3)	Other purchase obligations relates to the purchase of transportation and news and market data services.

F-30

TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 10: CONTINGENT LIABILITIES

Legal Proceedings

The Company is subject to various legal proceedings and claims that have arisen in the ordinary course of business. The legal entities comprising the Company’s operations are defendants from time to time in actions for matters arising out of their business operations. In addition, the legal entities comprising our operations are involved from time to time as parties in various regulatory, environmental and other proceedings with governmental authorities and administrative agencies.

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 sought 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.

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 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 (“tronc Debtors”).

Notices of appeal of the Bankruptcy Court's order confirming the Plan (the "Confirmation Order") were filed by (i) Aurelius Capital Management L.P. on behalf of its managed entities that were holders of Tribune Company's senior notes and Exchangeable Subordinated Debentures due 2029 ("PHONES"), (ii) Law Debenture Trust Company of New York ("Law Debenture") and Deutsche Bank Trust Company Americas ("Deutsche Bank"), each successor trustees under the respective indentures for Tribune Company's senior notes; (iii) Wilmington Trust Company, as successor indenture trustee for the PHONES, and (iv) EGI-TRB, L.L.C., a Delaware limited liability company wholly-owned by Sam Investment Trust (a trust established for the benefit of Samuel Zell and his family) (the "Zell Entity"). The appellants sought, among other relief, to overturn the Confirmation Order and certain prior orders of the Bankruptcy Court embodied in the Plan, including the settlement of certain claims and causes of action related to the series of transactions (collectively, the "Leveraged ESOP Transactions") consummated by Tribune Company, the Tribune Company employee stock ownership plan, the Zell Entity and Samuel Zell in 2007. As of June 25, 2017, each of the Confirmation Order appeals have been dismissed or otherwise resolved by a final order, with the exception of the appeals of Law Debenture and Deutsche Bank, which remain pending before the U. S. District Court for the District of Delaware. There is no stay of the Confirmation Order in place pending resolution of the confirmation related appeals.

F-31

TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 various of the Debtors (including the tronc Debtors) in the Chapter 11 cases remain unresolved. The remaining Chapter 11 cases continue to be administered under the caption “In re: Tribune Media Company, et al.,” Case No 08-13141.

Reorganization Items, Net—Reorganization items, net, generally includes provisions and adjustments to reflect the carrying value of certain prepetition liabilities at their estimated allowable claim amounts and, pursuant to ASC Topic 852, “Reorganizations,” is reported separately in the Company’s Consolidated Statements of Income (Loss). Reorganization items, net may also include professional advisory fees and other costs directly associated with the Debtors’ Chapter 11 cases.

Specifically identifiable reorganization provisions, adjustments and other costs directly related to the Company have been included in the Consolidated Statements of Income (Loss) for the years ended December 31, 2017, December 25, 2016 and December 27, 2015 and consisted of the following (in thousands):



	Year ended
	December 25, 2016			December 27, 2015
Reorganization costs, net:
Contract rejections and claim settlements	$	(75	)	$	(15	)
Trustee fees and other, net	(184		)	(1,011		)
Total reorganization items, net	$	(259	)	$	(1,026	)

NOTE 11: INCOME TAXES

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Act”) was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21%, effective for tax years beginning after December 31, 2017. Under Staff Accounting Bulletin 118, the Company has included the estimated impact of the Act in the year end income tax provision in accordance with its understanding of the Act and guidance available as of the date of this filing. Accordingly, the Company has recorded $10.8 million as additional income tax expense in the fourth quarter of 2017, the period in which the legislation was enacted. The additional provision amount results from the remeasurement of certain deferred tax assets and liabilities, based on the rates at which they are expected to reverse in the future. The Company continues to analyze the impact of the Act, which could result in additional adjustments in future periods.

F-32

TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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



	Year ended
	December 31, 2017			December 25, 2016			December 27, 2015
Income (loss) before income taxes	$	37,216		$	25,461		$	(3,195	)
Federal income taxes at the statutory tax rate (35%)	13,026			8,911			(1,118		)
State and local income taxes, net of federal tax benefit	2,581			1,511			(380		)
Impact of U.S. tax reform	10,815			—			—
Tax on stock buyback premium	2,111			—			—
Tax on stock-based equity exercised	1,307			414			—
Nondeductible entertainment expenses	996			901			1,043
Tax basis adjustment	—			7,063			—
Other, net	845			124			25
Income tax expense (benefit)	$	31,681		$	18,924		$	(430	)
Effective tax rate	85.1		%	74.3		%	13.5		%

The effective tax rate on pretax income (loss) was 85.1%, 74.3% and 13.5%in the years ended December 31, 2017, December 25, 2016, and December 27, 2015 respectively. For 2017, the rate differs from the U.S. federal statutory rate of 35% primarily due to a $10.8 million adjustment to the Company’s deferred taxes to reflect the new tax law changes as described above, premium on stock buyback expense being a nondeductible permanent difference for the calculation of income taxes, state taxes, net of federal benefit, and nondeductible expenses. For 2016, the rate differs from the U.S. federal statutory rate of 35% primarily due to a $7.1 million charge to adjust the Company’s deferred taxes, as described below, state income taxes, net of federal benefit, and nondeductible expenses. For 2015, the rate differs from the U.S. federal statutory rate of 35% primarily due to the pretax loss in 2015. In the case of a pretax 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.

Historical Tax Information—The Company filed an election effective December 30, 2013 to be taxed as a C corporation and has computed income taxes as a separate return filing group for 2014. Prior to the spin-off, current income taxes payable were settled with TCO through the equity (deficit) account.

During September 2016, TCO reached a resolution with the Internal Revenue Service (“IRS”) regarding a pre-spin tax issue. In connection with the resolution and in conjunction with the tax rules applicable to emergence from bankruptcy, TCO has adjusted the previously determined tax basis of its assets as of December 31, 2012. This adjustment affected the tax basis of the assets and liabilities, including the deferred tax liability, transferred to the Company as part of TCO’s August 4, 2014 spin-off of its publishing operations. As a result of the IRS resolution, the Company recorded a reduction in the tax basis of the shares in the Company transferred from TCO against the basis in TPC stock, a subsidiary of the Company, by $17.7 million, which resulted in an additional $7.1 million deferred tax liability and a $7.1 million charge to tax expense during the year ended December 25, 2016.

F-33

TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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



	Year ended
	December 31, 2017			December 25, 2016			December 27, 2015
Current:
U.S. federal	$	(1,190	)	$	(2,853	)	$	(808	)
State and local	115			(852		)	431
Foreign	59			67			108
Sub-total	(1,016		)	(3,638		)	(269		)
Deferred:
U.S. federal	29,204			17,948			854
State and local	3,493			4,614			(1,015		)
Sub-total	32,697			22,562			(161		)
Total income tax expense (benefit)	$	31,681		$	18,924		$	(430	)

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



	December 31, 2017		December 25, 2016
Deferred tax assets:
Employee compensation and benefits	$	22,795	$	33,554
Pension	29,938		37,472
Other future deductible items	4,475		6,148
Accounts receivable	4,615		6,834
Net operating loss carryforwards	1,006		2,277
Postretirement and postemployment benefits other than pensions	501		3,859
Investments	95		1,160
Total deferred tax assets	63,425		91,304
Deferred tax liabilities:
Net properties	24,550		16,378
Net intangibles	4,055		3,886
Tax basis in TCP, LLC	4,909		7,063
Total deferred tax liabilities	33,514		27,327
Net deferred tax assets	$	29,911	$	63,977

Accounting for Uncertain Tax Positions—tronc accounts for uncertain tax positions in accordance with ASC Topic 740, “Income Taxes,” which addresses the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Under ASC Topic 740, a company may recognize the tax benefit of an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. ASC Topic 740 requires the tax benefit recognized in the financial statements to be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. ASC Topic 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, and disclosure. The Company has no uncertain tax positions at December 31, 2017 and December 25, 2016.

NOTE 12: DEFINED BENEFIT PENSION PLANS

San Diego Pension Plan—The Company is the sponsor of the San Diego Pension Plan, a single-employer defined benefit plan. The San Diego Pension Plan provides benefits to certain current and former employees of The San Diego Union-Tribune. Future benefits under the San Diego Pension Plan have been frozen since January 31, 2009. Subsequent to

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TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

December 31, 2017, the Company entered an MIPA to sell The San Diego Union-Tribune. As part of the MIPA, the buyer will assume the liabilities related to the San Diego Pension Plan. See Note 21 for more information on the sale of The San Diego Union-Tribune.

Summarized information for the San Diego Pension Plan is provided below (in thousands):



	December 31, 2017			December 25, 2016
Change in benefit obligations:
Projected benefit obligations, beginning of year	$	231,680		$	235,609
Interest cost	7,251			7,500
Actuarial loss	20,938			3,225
Settlement	(9,972		)	—
Benefits paid	(6,962		)	(14,654		)
Projected benefit obligations, end of year	242,935			231,680
Change in plans' assets:
Fair value of plan assets, beginning of year	137,966			139,421
Return on plan assets	18,494			2,386
Employer contributions	13,255			10,813
Settlement	(9,972		)	—
Benefits paid	(6,962		)	(14,654		)
Fair value of plans' assets, end of year	152,781			137,966
Underfunded status of the plans	$	(90,154	)	$	(93,714	)

The Company expects to contribute $15.0 million to the pension plans during the year ending December 30, 2018. The expected contribution will decrease if the Nant Transaction closes.

The amounts recognized in the Company’s Consolidated Balance Sheets for the San Diego Pension Plan as of December 31, 2017 and December 25, 2016 consist of (in thousands):



	December 31, 2017			December 25, 2016
Pension and postretirement benefits payable	$	(90,154	)	$	(93,714	)
Accumulated other comprehensive loss, net of tax	25,326			15,156

The components of net periodic benefit cost (credit) for the San Diego Pension Plan was as follows (in thousands):



	December 31, 2017			December 25, 2016			December 27, 2015
Interest cost	$	7,251		$	7,500		$	5,534
Expected return on plan assets	(9,256		)	(9,800		)	(6,164		)
Amortization of actuarial losses	132			—			—
Recognition of losses due to settlements	1,444			—			—
Net periodic benefit cost (credit)	$	(429	)	$	(2,300	)	$	(630	)

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

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TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

At December 31, 2017 and December 25, 2016, the San Diego Pension Plan investments are in commingled funds which are recorded at fair value as determined by the sponsor of the respective funds primarily based upon closing market quotes of the underlying assets.

The following table sets forth by level, within the fair value hierarchy, the San Diego Pension Plan’s assets at fair value as of December 31, 2017 (in thousands):



	Level 1		Level 2		Level 3		Total

Global public equity	$	60,467	$	—	$	—	$	60,467
Fixed income	18,883		—		—		18,883
Real assets	5,164		—		—		5,164
	$	84,514	$	—	$	—
Investments valued at net asset value:
Cash and cash equivalents							3,637
Global public equity							22,729
Absolute return							15,127
Real assets							9,443
Pending trades and other receivables							17,331
Total assets at fair value							$	152,781

At the time of the MLIM acquisition, as discussed in Note 5, the San Diego Pension Plan held an investment in the Platinum Partners Credit Opportunities Fund (TE) LLC (“Platinum”), a hedge fund. The San Diego Pension Plan sought to redeem its investment from Platinum in September 2015. Its current estimated net asset value is $17.3 million. Prior to redemption, the Department of Justice brought criminal charges in June 2016 against individuals associated with Platinum and no proceeds have yet been received. The SEC appointed a receiver for Platinum in December 2016. The amount of the redemption is reflected in Pending trades and other receivables on the schedule of assets. The amount of such asset which may eventually be received by the San Diego Pension Plan is not determinable at this time.

The following table sets forth by level, within the fair value hierarchy, the San Diego Pension Plan’s assets at fair value as of December 25, 2016 (in thousands):



	Level 1		Level 2		Level 3		Total

Global public equity	$	44,245	$	—	$	—	$	44,245
Fixed income	10,317		—		—		10,317
Real assets	3,980		—		—		3,980
	$	58,542	$	—	$	—
Investments valued at net asset value:
Cash and cash equivalents							2,303
Global public equity							17,631
Absolute return							31,745
Real assets							10,269
Pending trades and other receivables							17,476
Total assets at fair value							$	137,966

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TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

For the investments in the San Diego Pension Plan valued at net asset value, the Company has one unfunded commitment of $0.2 million under the Real Assets category for the year ended December 31, 2017. See the table below for the redemption information:



	Redemption Frequency	Redemption Notice Period
Cash and cash equivalents	Daily	—
Global public equity	Monthly	10-30 days
Absolute return	Quarterly	90 days
Real assets	Monthly	30 days

The San Diego Pension Plan-weighted average target allocation and actual allocations at December 31, 2017 and December 25, 2016 by asset category are as follows:



			2017		2016
Asset category:	Target Allocation		Actual Allocation		Actual Allocation
Global public equity	52.0	%	54.4	%	44.8	%
Absolute return	10.0	%	9.9	%	23.0	%
Fixed income	12.0	%	12.4	%	7.5	%
Real assets	10.0	%	9.6	%	10.3	%
Pending trades and other receivables	12.0	%	11.3	%	12.7	%
Cash	4.0	%	2.4	%	1.7	%
	100.0	%	100.0	%	100.0	%

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

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

Fixed Income - The bond portfolio will contribute to the income needs of the Plan. Fixed income generally provides a diversified portfolio with deflation protection during periods of financial duress. Bonds dampen the overall volatility of total Plan results, which is important to help mitigate losses in periods of falling equity markets. Bond markets suffer declines, but they are generally not as severe as those experienced in the equity market. Bond returns are steadier than those of equities because of income received and because bonds have greater precedence in a company’s capital structure. Bonds typically do not fare well in periods of rising inflation.

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

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TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Assumptions—The weighted average assumptions used to determine the defined benefit obligations for the San Diego Pension Plan are as follows:

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



	December 31, 2017		December 25, 2016
Discount rate	4.0	%	4.2	%
Interest rate for interest cost	3.2	%	3.3	%
Rate of return on assets	7.0	%	7.0	%

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



2018	$	17,273
2019	19,909
2020	19,709
2021	20,700
2022	20,429
2023-2027	80,613

NYDN Pension Plan—As part of the acquisition of the New York Daily News, the Company became the sponsor of the NYDN Pension Plan, a single-employer defined benefit plan. The NYDN Pension Plan provides benefits to certain current and former employees of the New York Daily News. The unfunded status of the NYDN Pension Plan was $25.4 million, as actuarially determined as of September 3, 2017, the closing date for the New York Daily News acquisition.

Summarized information for the NYDN Pension Plan is provided below as of December 31, 2017 (in thousands):

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TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)



	December 31, 2017
Change in benefit obligations:
Projected benefit obligations, beginning of year	$	—
Service cost	142
Interest cost	1,249
Business combination	109,581
Actuarial gain	(1,792		)
Curtailment gain	(51		)
Net loans/trust repayment	4
Benefits paid	(2,687		)
Projected benefit obligations, end of year	106,446
Change in plans' assets:
Fair value of plan assets, beginning of year	—
Business combination	84,136
Return on plan assets	2,539
Employer contributions	1,040
Net loans/trust repayment	4
Benefits paid	(2,687		)
Fair value of plans' assets, end of year	85,032
Underfunded status of the plans	$	(21,414	)

The Company expects to contribute $4.0 million to the NYDN Pension Plan during the year ending December 30, 2018.

The amounts recognized in the Company’s Consolidated Balance Sheets for the NYDN Pension Plan as of December 31, 2017 and December 25, 2016 consist of (in thousands):



	December 31, 2017
Pension and postretirement benefits payable	$	(21,414	)
Accumulated other comprehensive loss, net of tax	(1,965		)

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



	December 31, 2017
Interest cost	$	1,249
Service cost	142
Expected return on plan assets	(1,602		)
Curtailment gain	(51		)
Net periodic benefit cost (credit)	$	(262	)

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

F-39

TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

At December 31, 2017, the NYDN Pension Plan investments are in commingled funds which are recorded at fair value as determined by the sponsor of the respective funds primarily based upon closing market quotes of the underlying assets.

The following table sets forth by level, within the fair value hierarchy, the NYDN Pension Plan’s assets at fair value as of December 31, 2017 (in thousands):



	Level 1		Level 2		Level 3		Total

Global public equity	$	11,758	$	—	$	—	$	11,758
Fixed income	15,966		—		—		15,966
Group annuity contract	—		—		13		13
	$	27,724	$	—	$	13
Investments valued at net asset value:
Cash and cash equivalents							5,975
Global public equity							32,719
Absolute return							9,300
Real assets							9,261
Pending trades and other receivables							40
Total assets at fair value							$	85,032

For the investments in the NYDN Pension Plan valued at net asset value, there are no unfunded commitments for the year ended December 31, 2017. See the table below for the redemption information:



	Redemption Frequency	Redemption Notice Period
Cash and cash equivalents	Daily	—
Global public equity	Monthly	10-30 days
Absolute return	Quarterly	90-95 days
Real assets	Monthly	30-90 days

The NYDN Pension Plan-weighted average target allocation and actual allocations at December 31, 2017 by asset category are as follows:



			2017
Asset category:	Target Allocation		Actual Allocation
Global public equity	50.0	%	52.3	%
Absolute return	11.0	%	10.9	%
Fixed income	22.0	%	18.8	%
Real assets	15.0	%	10.9	%
Cash	2.0	%	7.0	%
Other	—	%	0.1	%
	100.0	%	100.0	%

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TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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



	December 31, 2017
Discount rate	3.6	%
Rate of compensation increase	2.0	%

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



	December 31, 2017
Discount rate	3.5	%
Rate of return on assets	5.8	%
Rate of compensation increase	2.0	%

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



2018	$	8,311
2019	8,173
2020	7,965
2021	7,773
2022	7,568
2023-2027	34,525

NOTE 13: OTHER RETIREMENT BENEFITS

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

Obligations and Funded Status—The funded status and the related service costs and comprehensive income has been actuarially determined based on eligible employees and is reflected in these Consolidated Financial Statements. Prior to the Distribution Date, tronc recognized its portion of the overfunded or underfunded status of the TCO other postretirement

F-41

TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

plans as an asset or liability in its Consolidated Balance Sheets and recognized changes in that funded status in the year in which changes occur through comprehensive income.

Summarized information for the Company’s other postretirement plans is provided below (in thousands):



	December 31, 2017			December 25, 2016
Change in benefit obligations:
Projected benefit obligations, beginning of year	$	9,648		$	13,933
Service cost	11			6
Interest cost	189			205
Plan amendments	(5,838		)	—
Actuarial gain	(681		)	(2,993		)
Benefits paid	(1,598		)	(1,503		)
Projected benefit obligations, end of year	1,731			9,648
Change in plans' assets:
Employer contributions	1,598			1,503
Benefits paid	(1,598		)	(1,503		)
Fair value of plans' assets, end of year	—			—
Underfunded status of the plans	$	(1,731	)	$	(9,648	)

During 2017, the Company made the decision to split the post-retirement medical plan into two separate plans, one for union employees and one for non-union employees. Additionally, the non-union medical plan will be terminated as of December 31, 2018. The plan split and termination are reflected in the year-end valuation with $5.8 million of prior service cost credit recorded to AOCI, of which $1.7 million was subsequently amortized as a credit to net periodic benefit cost (credit) for the year ended, December 31, 2017.

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



	December 31, 2017			December 25, 2016
Liabilities:
Employee compensation and benefits	$	(881	)	$	(1,688	)
Pension and postretirement benefits payable	(850		)	(7,960		)
Total liabilities	$	(1,731	)	$	(9,648	)

Accumulated other comprehensive income:
Unrecognized prior service credit (cost), net of tax	$	7,950		$	4,794
Unrecognized net actuarial gains (losses), net of tax	1,970			1,580
Total accumulated other comprehensive income	$	9,920		$	6,374

F-42

TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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



	Year Ended
	December 31, 2017			December 25, 2016			December 27, 2015
Service cost	$	11		$	6		$	264
Interest cost	189			205			718
Amortization of gain	(553		)	—			(31		)
Amortization of prior service credits	(2,745		)	(470		)	(2,804		)
Net periodic benefit cost (credit)	(3,098		)	(259		)	(1,853		)
Plan amendments and curtailment gain	—			—			(20,652		)
Net periodic benefit cost (credit) after curtailment gain	$	(3,098	)	$	(259	)	$	(22,505	)

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

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



	December 31, 2017		December 25, 2016		December 27, 2015
Discount rate	3.23	%	3.23	%	2.96	%

For purposes of measuring postretirement health care costs for the year ended December 31, 2017, tronc assumed an 8.1% annual rate of increase in the per capita cost of covered health care benefits. The rate was assumed to increase to 7.8% in 2018 and decrease gradually to 4.5% for 2029 and remain at that level thereafter. For purposes of measuring postretirement health care obligations at December 31, 2017, tronc assumed a 7.8% annual rate of increase in the per capita cost of covered health care benefits. The rate was assumed to decrease gradually to 4.5% for 2029 and remain at that level thereafter.

Assumed health care cost trend rates have a significant effect on the amounts reported for health care plans. As of December 31, 2017, a 1% change in assumed health care cost trend rates would have an immaterial effect on tronc’s post retirement benefits service and interest cost and the following effect on tronc’s projected benefit obligation (in thousands):



	1% Increase		1% Decrease
Projected benefit obligation	$	35	$	33

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



2018	$	890
2019	83
2020	79
2021	69
2022	60
2023-2026	352

F-43

TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Employees’ Defined Contribution Plan—The Company sponsors defined contribution plans that were established effective June 13, 2014. The defined contribution plans cover substantially all full-time employees of the Company. Participants may elect to contribute a portion of their pretax compensation as provided by the plans and Internal Revenue Service (“IRS”) regulations. The maximum pretax contribution an employee can make is 100% of his or her annual eligible compensation (less required withholdings and deductions) up to the statutory limit which was $18,000 for 2017. The Company matches contributions to its defined contribution plan at a rate of 100% of salary deferrals for the first 2% of compensation and 50% of salary deferrals that exceed 2% of compensation up to 6% of compensation for each participating employee. The Company’s contributions to its defined contribution plans totaled $14.3 million in 2017.

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

F-44

TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company’s participation in these multiemployer pension plans at December 31, 2017, December 25, 2016 and December 27, 2015, is outlined in the table below. Unless otherwise noted, the most recent Pension Protection Act (“PPA”) Zone Status available in 2017 and 2016 is for the plan’s year-end at December 25, 2016 and December 27, 2015, respectively. The PPA Zone Status is based on information that tronc received from the plan and is certified by the plan’s actuary. Among other factors, plans in the Critical and Declining Zone are generally less than 65 percent funded and projected to become insolvent within 20 years; plans in the Critical Zone are generally less than 65 percent funded (but not projected to become insolvent within 20 years), plans in the Endangered Zone are less than 80 percent but greater than 65 percent funded, and plans in the Healthy Zone are at least 80 percent funded (as determined in accordance with the PPA). The “FIP/RP Status Pending/Implemented” column indicates plans for which a financial improvement plan (“FIP”) or a rehabilitation plan (“RP”) is either pending or has been implemented.



					tronc Contributions
		PPA Zone Status			(in thousands)
Pension Fund	EIN/Pension Plan Number	2017	2016	FIP/RP Status Pending/ Implemented	2017		2016		2015		Surcharge Imposed	Expiration Dates of Collective Bargaining Agreements
GCIU—Employer Retirement Benefit Plan	91-6024903	Critical and declining	Critical and declining	Implemented	$	781	$	858	$	868	Yes (1)	May 31, 2017 to April 30, 2018 (1)
Chicago Newspaper Publishers Drivers' Union Pension Plan	36-6019539	Critical and declining	Critical and declining	Implemented	3,607		3,244		3,174		No	June 14, 2016
Truck Drivers and Helpers Local No. 355 Pension Plan	52-6043608	Healthy	Endangered	Implemented	134		147		133		No	Dec. 31, 2017 to April 30, 2018 (2)
Newspaper and Mail Deliverers' - Publishers' Pension Fund	13-6122251	Healthy	Healthy	N/A	259		—		—		No	January 1, 2021
Pressmen's Publishers' Pension Fund	13-6121627	Healthy	Healthy	N/A	134		—		—		No	July 11, 2020
Paper Handlers' - Publishers' Pension Fund	13-6104795	Critical and declining	Critical	Implemented	19		—		—		No	May, 11 2016
IAM National Pension Fund, National Pension Plan	51-6031295	Healthy	Healthy	N/A	52		—		—		No	March 31, 2020
CWA/ITU Negotiated Pension Plan	13-6212879	Critical and declining	Critical	Implemented	61		—		—		No	March 31, 2017 to March 31, 2018 (3)
Pension Hospitalization & Benefit Plan of the Electrical Industry - Pension Trust Account	13-6123601	Healthy	Healthy	N/A	146		—		—		No	April 30, 2020
Other Plans	—	—	—	—	480		506		447		—	—
					$	5,673	$	4,755	$	4,622


(1)	tronc is party to two collective bargaining agreements that require contributions to the GCIU—Employer Retirement Benefit Plan, one of which expires May 31, 2017 and the other April 30, 2018.


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


(3)	The Company is party to three collective bargaining agreements requiring contributions to this plan, New York Mailers Union No. 6 expire March 31, 2017, New York Typographical Union (Reflex) expire March 31, 2018 and New York Typographical Union (Control Room) expire July 31, 2017.

For the plan years ended December 25, 2016 and December 27, 2015, Tribune Company was listed in the Chicago Newspaper Publishers Drivers’ Union Pension Plan’s (the “Drivers’ Plan”) Form 5500 as providing more than five percent of the total contributions for the plan. In addition, Chicago Tribune Company was listed in the GCIU Employer Retirement Benefit Plan’s (the “GCIU Plan”) Form 5500 as contributing more than five percent of the total contributions to the plan for the plan year ended December 25, 2016, Daily News L.P. was listed in the Newspaper and Mail Deliverer’s Publishers’

F-45

TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Pension Fund’s Form 5500 as contributing more than five percent of the total contributions to the plan for the plan year ended December 25, 2016, and the New York Daily News was listed in the Pressmans Publishers Pension Fund and the Paper Handlers’ Publishers’ Pension Fund Form 5500s as contributing more than five percent of the total contributions to the plans for the plan year ended December 25, 2016. The Company did not provide more than five percent of the total contributions for any of the other multiemployer pension plans in which it participated in those years. At the date the financial statements were issued, Forms 5500 were not available for the plan years ending in 2017.

In 2009, the Drivers’ Plan was certified by its actuary to be in critical status (within the meaning of section 432 of the IRC) as of its plan year beginning January 1, 2009. However, pursuant to the Worker, Retiree, and Employer Recovery Act of 2008, the trustees of the Drivers’ Plan elected to apply the 2008 actuarial certification for the plan year beginning January 1, 2009. As a result, the Drivers’ Plan was not in critical status (or in endangered or seriously endangered status) for its plan year beginning January 1, 2009. On March 31, 2010, the Drivers’ Plan was certified by its actuary to be in critical status for the plan year beginning January 1, 2010. As a result, the trustees of the Drivers’ Plan were required to adopt and implement a rehabilitation plan as of January 1, 2011 designed to enable the Drivers’ Plan to cease being in critical status within the period of time stipulated by the IRC. The terms of the rehabilitation plan adopted by the trustees require tronc to make increased contributions beginning on January 1, 2011 through December 31, 2025, and the trustees of the Drivers’ Plan projected that it would emerge from critical status on January 1, 2026. As of its 2016 plan year, the actuary for the Drivers’ Plan certified the plan to be in critical and declining status with projected insolvency in 2035. As of December 31, 2017, assuming tronc’s contributions from January 1, 2018 through 2025, the expiration of the rehabilitation plan’s term, it is estimated that tronc’s contributions to the plan will total $56.4 million, based on the actuarial assumptions utilized to develop the rehabilitation plan and assuming tronc’s staffing levels as of December 31, 2017 remain unchanged. The funding obligation is subject to change based on a number of factors, including the outcome of collective bargaining with the unions, actual returns on plan assets as compared to assumed returns, actions taken by trustees who manage the plan, changes in the number of plan participants, changes in the rate used for discounting future benefit obligations, as well as changes in legislation or regulations impacting funding and payment obligations.

In 2009, the GCIU Plan was certified by its actuary to be in critical status (within the meaning of section 432 of the IRC) as of its plan year beginning January 1, 2009. As a result, the trustees of the GCIU Plan implemented a rehabilitation plan on November 1, 2009 and amended it in May 2012 to cease the plan’s critical status within the period of time stipulated by the IRC. However, the GCIU Plan was unable to adopt a rehabilitation plan that would enable the GCIU Plan to emerge from critical status and avoid insolvency using reasonable assumptions. Therefore, the GCIU Plan adopted a rehabilitation plan that reflects reasonable measures to forestall insolvency. As of its 2016 plan year, the GCIU Plan has been certified by its actuary to be in critical and declining status with projected insolvency in 2027. As of December 31, 2017, assuming tronc’s contributions from January 1, 2018 through the projected insolvency date of 2027, it is estimated that tronc’s contributions to the plan will total $7.6 million, based on the actuarial assumptions utilized to develop the rehabilitation plan and assuming tronc’s staffing levels as of December 31, 2017 remain unchanged. The funding obligation is subject to change based on a number of factors, including the outcome of collective bargaining with the unions, actual returns on plan assets as compared to assumed returns, actions taken by trustees who manage the plan, changes in the number of plan participants, changes in the rate used for discounting future benefit obligations, as well as changes in legislation or regulations impacting funding and payment obligations.

In 2010, the CWA/ITU Negotiated Pension Plan was certified by its actuary to be in critical status (within the meaning of section 432 of the IRC) as of its plan year beginning January 1, 2010. As a result, the trustees of the CWA/ITU Negotiated Pension Plan implemented a rehabilitation plan on March 8, 2010. However, the CWA/ITU Negotiated Pension Plan was unable to adopt a rehabilitation plan that would enable the CWA/ITU Negotiated Pension Plan to emerge from critical status and avoid insolvency using reasonable assumptions. Therefore, the CWA/ITU Negotiated Pension Plan adopted a rehabilitation plan that reflects reasonable measures to forestall insolvency. As of its 2016 plan year, the CWA/ITU Negotiated Pension Plan has been certified by its actuary to be in critical and declining status with projected insolvency in 2030. As of December 31, 2017, assuming tronc’s contributions from January 1, 2018 through the projected insolvency date of 2030, it is estimated that tronc’s contributions to the plan will total $2.4 million, based on the actuarial assumptions utilized to develop the rehabilitation plan and assuming tronc’s staffing levels as of December 31, 2017 remain unchanged. The funding obligation is subject to change based on a number of factors, including the outcome of collective bargaining with the unions, actual returns on plan assets as compared to assumed returns, actions taken by trustees who manage the plan, changes in the number of plan participants, changes in the rate used for discounting future benefit obligations, as well as changes in legislation or regulations impacting funding and payment obligations.

F-46

TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 14: STOCK-BASED COMPENSATION

The Company has the 2014 Omnibus Incentive Plan (together with amendments “tronc Equity Plan”). The tronc Equity Plan is a long-term incentive plan under which awards may be granted to employees and outside directors in the form of stock options (“Options”), stock appreciation rights, restricted stock units (“RSU”), performance share units, restricted and unrestricted stock awards, dividend equivalents and cash awards. The Company measures stock-based compensation costs based on the estimated grant date fair value of the award and recognizes compensation costs on a straight-line basis over the requisite service period for the entire award. The tronc Equity Plan permits the Company to withhold shares of vested common stock upon vesting of employee stock awards or at the time they exercise their Options in lieu of their payment of the required withholdings for employee taxes. The Company does not withhold taxes in excess of minimum required statutory requirements. Shares of common stock reserved for future grants under the tronc Equity Plan were 788,786 at December 31, 2017.

Stock-based compensation expense under both plans related to tronc’s employees during the years ended December 31, 2017, December 25, 2016 and December 27, 2015 totaled $11.2 million, $8.4 million and $6.8 million, respectively.

Options

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

The following table provides the weighted average assumptions used to determine the fair value of Options and converted NSO awards granted to tronc employees during the years ended December 31, 2017, December 25, 2016 and December 27, 2015.



	2017			2016			2015
Weighted average grant date fair value	$	6.53		$	5.93		$	4.16
Weighted average assumptions used:
Expected volatility	53.8		%	48.0		%	39.4		%
Expected lives (in years)	4.5			4.5			4.8
Risk Free interest rates	1.7		%	1.0		%	1.6		%
Expected dividend yields	—		%	—		%	4.1		%

F-47

TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A summary of activity related to tronc employees for Options under the tronc Equity Plan and TCO NSOs converted to Options for the years ended December 31, 2017, December 25, 2016 and December 27, 2015 is included in the following table:



	2017				2016				2015
	Number of Options (in thousands)		Weighted Average Exercise Price		Number of Options (in thousands)		Weighted Average Exercise Price		Number of Options (in thousands)		Weighted Average Exercise Price
Outstanding, beginning of year	1,328		$	15.93	969		$	16.80	737		$	16.73
Granted	730		$	14.32	546		$	14.71	465		$	17.20
Exercised	(115	)	$	14.40	(15	)	$	14.02	(20	)	$	14.02
Canceled/forfeited	(914	)	$	15.48	(172	)	$	17.10	(213	)	$	17.69
Outstanding, end of year	1,029		$	14.56	1,328		$	15.93	969		$	16.80
Vested and exercisable at end of year	195		$	14.90	440		$	16.77	205		$	16.02
Weighted average remaining contractual term (in years)	6.8				4.2				6.0

For Options granted under the tronc Equity Plan the exercise price of options granted equals the closing stock price on the day of grant. For each of the years ended December 31, 2017, December 25, 2016, and December 27, 2015, the intrinsic value of options exercised was negligible. The grant date fair value of options vested during the year ended December 31, 2017 was $1.2 million.

The following table summarizes information (net of estimated forfeitures) related to stock options outstanding at December 31, 2017:



Range of Exercises Prices	Number of Options Outstanding (in thousands)	Weighted Average Remaining Life (years)	Weighted Average Exercise Price		Number of Options Exercisable (in thousands)	Weighted Average Exercise Price
$13.38-14.02	266	6.3	$	13.54	66	$	14.02
$14.65-14.76	293	6.8	$	14.70	—	$	—
$14.87-14.87	337	5.6	$	14.87	113	$	14.87
$14.89-19.20	133	5.6	$	15.47	16	$	18.80
$13.38-19.20	1,029		$	14.56	195	$	14.90

Restricted Stock Units (RSUs)

The RSUs granted to directors, officers and employees under the tronc Equity Plan have service conditions and generally vest over three to four years. Upon vesting, the RSUs are redeemed with common stock. The RSUs do not have voting rights. The fair value of the RSU is determined on the grant date using the closing trading price of the Company's shares. The weighted average grant date fair value of the RSUs granted during the years ended December 31, 2017, December 25, 2016, and December 27, 2015 was $14.24, $14.60, and $17.47, respectively.

F-48

TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A summary of activity related to tronc employees for RSUs under the tronc Equity Plan and TCO RSUs converted to RSUs for the years ended December 31, 2017, December 25, 2016, and December 27, 2015 is included in the following table:



	2017				2016				2015
	Number of RSUs (in thousands)		Weighted Average Grant Date Fair Value		Number of RSUs (in thousands)		Weighted Average Grant Date Fair Value		Number of RSUs (in thousands)		Weighted Average Grant Date Fair Value
Outstanding, beginning of year	1,452		$	15.44	982		$	17.34	924		$	17.14
Granted	1,438		$	14.24	1,071		$	14.60	514		$	17.47
Vested	(561	)	$	15.23	(356	)	$	16.85	(282	)	$	17.13
Canceled/forfeited	(316	)	$	15.70	(245	)	$	17.35	(174	)	$	17.43
Outstanding, end of year	2,013		$	14.60	1,452		$	15.44	982		$	17.34
Vested at end of year	2		$	11.02	6		$	7.91	—		$	—

As of December 31, 2017, tronc had unrecognized compensation cost on nonvested awards as follows (in thousands):

NOTE 15: EARNINGS PER SHARE

Basic earnings per common share is calculated by dividing net income attributable to tronc common stockholders by the weighted average number of shares of common stock outstanding. Diluted earnings per common share is similarly calculated, except that the calculation includes the dilutive effect of the assumed issuance of common shares under equity-based compensation plans except where the inclusion of such common shares would have an anti-dilutive impact.

For the years ended December 31, 2017, December 25, 2016 and December 27, 2015, basic and diluted earnings per common share were as follows (in thousands, except per share amounts):



	Year Ended
	December 31, 2017		December 25, 2016		December 27, 2015
Income (Loss) - Numerator:
Net income (loss) available to tronc stockholders plus assumed conversions	$	5,535	$	6,537	$	(2,765	)

Shares - Denominator:
Weighted average number of common shares outstanding (basic)	33,996		33,788		25,990
Dilutive effect of employee stock options and RSUs	289		147		—
Adjusted weighted average common shares outstanding (diluted)	34,285		33,935		25,990

Net income (loss) per common share:
Basic	$	0.16	$	0.19	$	(0.11	)
Diluted	$	0.16	$	0.19	$	(0.11	)

F-49

TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Potential dilutive common shares were anti-dilutive as a result of the Company’s net loss for the year ended December 27, 2015. As a result, basic weighted average shares were used in the calculations of basic net earnings per share and diluted earnings per share for that period.

The number of stock options that were excluded from the computation of diluted earnings per share because their inclusion would result in an anti-dilutive effect on per share amounts for the years ended December 31, 2017, December 25, 2016 and December 27, 2015 was 946,033, 1,118,074 and 968,526, respectively. The number of RSUs that were excluded from the computation of diluted earnings per share because their inclusion would result in an anti-dilutive effect on per share amounts was 9,445, 87,525 and 982,073 for the years ended December 31, 2017, December 25, 2016 and December 27, 2015.

NOTE 16: STOCKHOLDERS' EQUITY

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

Private Placements

Merrick Media, LLC

On February 3, 2016, the Company completed a $44.4 million private placement, pursuant to which the Company sold to Merrick Media, LLC (“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 $42.9 million net proceeds from the sale to execute further on its growth strategy, including acquisitions and digital initiatives. The shares of common stock acquired by Merrick Media (the “Merrick Shares”) are subject to certain lockup provisions that, subject to the terms and conditions set out in the purchase agreement (the “Merrick Purchase Agreement”) dated February 3, 2016 among the Company, Merrick Media and Michael W. Ferro, Jr. (as amended by Amendment No. 1 to the Merrick Purchase Agreement, dated as of March 23, 2017, and by the Consulting Agreement described in Note 2), prohibit certain transfers of the Merrick Shares for the first three years following the date of issuance (extended by the Consulting Agreement (1) to the later of three years from issuance of the Merrick Shares or 30 days after termination of the Consulting Agreement and (2) to apply to all shares owned by Merrick Media or its affiliates) and, thereafter, any transfers of the Merrick Shares that would result in a transfer of more than 25% of the Merrick Shares purchased under the Merrick Purchase Agreement in any 12-month period. The Merrick Purchase Agreement also includes covenants prohibiting the transfer of the Merrick Shares if the transfer would result in a person beneficially owning more than 4.9% of the Company’s then outstanding shares of common stock following the transfer (which prohibition was eliminated pursuant to the Consulting Agreement), as well as transfers to a material competitor of the Company in any of the then-existing primary geographical markets. Merrick Media and Mr. Ferro and their respective affiliates are also prohibited, without the prior written approval of the Board of Directors, from acquiring additional equity if the acquisition could result in their beneficial ownership of more than 25% of the Company’s then outstanding shares of common stock. Amendment No. 1 to the Merrick Purchase Agreement increased from 25% to 30% the maximum percentage of the Company’s outstanding shares of common stock that Merrick Media and its affiliates may acquire. Pursuant to the Consulting Agreement, this ownership limitation was extended to the later of three years from the date of issuance of the Merrick Shares and 30 days after termination of the Consulting Agreement.

In connection with the private placement, Mr. Ferro was elected to fill a newly-created vacancy on the Company’s Board of Directors and was named non-executive Chairman of the Board. The Company granted Merrick Media the right to designate a replacement individual for election as a director at each annual and special meeting of stockholders at which directors are to be elected as part of the slate of nominees recommended by the Board of Directors, subject to the reasonable prior approval of the Board’s Nominating and Corporate Governance Committee, in the event that Mr. Ferro is unable to continue to serve as a director. Merrick Media’s right to appoint a replacement director representative will expire either (a) on the date that Mr. Ferro or his replacement is not nominated for reelection as a director, is removed as a director, or is not reelected as a director if the Company has not recommended his or his replacement’s reelection or (b) at such time as Merrick Media, Mr. Ferro and their respective affiliates no longer beneficially own at least 75% of the Merrick Shares originally acquired pursuant to the Merrick Purchase Agreement.

F-50

TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Finally, the Merrick Purchase Agreement provides a right of first offer in favor of the Company on proposed transfers by Merrick Media and its affiliates of that represent at least 1% of the then-outstanding number of shares of the Company’s common stock, subject to certain notice provisions. This right of first offer applied only to shares purchased under the Merrick Purchase Agreement, but the Consulting Agreement described in Note 4 expanded the Company’s right of first offer to all shares held by Merrick Media and its affiliates (regardless of when purchased) and increased the threshold for transfers subject to the right of first offer to 2% of then-outstanding shares.

Additionally, in connection with the private placement, the Company entered into a registration rights agreement (the “Merrick Rights Agreement”) with Merrick Media. Pursuant to the Merrick Rights Agreement, Merrick Media will be entitled to certain registration rights under the Securities Act, with respect to the Merrick Shares. The Merrick Rights Agreement provides that the Company will use its reasonable best efforts to cause a registration statement with respect to the Merrick Shares to be declared effective no later than the earlier of (a) February 3, 2019 and (b) 60 days after the termination of the voting covenants of the Merrick Purchase Agreement as described above. The Company will pay all of its own costs and expenses, including all fees and expenses of counsel for the Company, relating to the Merrick Rights Agreement.

Mr. Ferro is the manager of Merrick Venture Management, LLC, which is the sole manager of Merrick Media. Because Merrick Venture Management, LLC serves as the sole manager of Merrick Media, Mr. Ferro may be deemed to indirectly control all of the shares of the Company’s common stock owned by Merrick Media. Mr. Ferro, together with his affiliated entities, beneficially owned 9,521,529 shares of tronc common stock, which represented 28.2% of tronc common stock, as of December 31, 2017.

Nant Capital, LLC

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. The shares of common stock acquired by Nant Capital (the “Nant Shares”) are subject to certain lockup provisions that, subject to the terms and conditions set out in the purchase agreement dated May 22, 2016, among the Company, Nant Capital and Dr. Patrick Soon-Shiong (the “Nant Purchase Agreement”) prohibit certain transfers of the Nant Shares for the first three years following the date of issuance and, thereafter, any transfers of the Nant Shares that would result in a transfer of more than 25% of the Nant Shares in any 12-month period. The Nant Purchase Agreement also includes covenants prohibiting the transfer of shares of the Company’s common stock if the transfer would result in a person beneficially owning more than 4.9% of the Company’s then-outstanding shares of common stock following the transfer, as well as transfers to a material competitor of the Company in any of the Company’s then-existing primary geographical markets. Nant Capital and Dr. Patrick Soon-Shiong, and their respective affiliates, are also prohibited, without the prior written approval of the Board of Directors, from acquiring additional equity of the Company if the acquisition could result in their beneficial ownership of more than 25% of the Company’s then-outstanding shares of common stock.

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. Dr. Soon-Shiong did not stand for reelection at the Company’s 2017 Annual Meeting of Stockholders on April 18, 2017 and is no longer a director of the Company.

Additionally, in connection with the private placement, the Company entered into a registration rights agreement (the “Nant Rights Agreement”) with Nant Capital. Pursuant to the Nant Rights Agreement, Nant Capital will be entitled to certain registration rights under the Securities Act of 1933, as amended (the “Securities Act”), with respect to the Nant Shares. The Nant Rights Agreement provides that the Company shall use its reasonable best efforts to cause a registration statement with respect to the Nant Shares to be declared effective no later than the earlier to occur of (a) May 22, 2019 and (b) 60 days after the termination of the voting covenants of the Nant Purchase Agreement as described above. The Company will pay all of its own costs and expenses, including all fees and expenses of counsel for the Company, relating to the Nant Rights Agreement.

California Capital Equity, LLC (“CalCap”) directly owns all of the equity interests of Nant Capital and CalCap may be deemed to have beneficial ownership of the shares held by Nant Capital. Dr. Patrick Soon-Shiong directly owns all of the equity interests of CalCap and may be deemed to beneficially own, and share voting power and investment power with Nant

F-51

TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Capital over all shares of tronc common stock beneficially owned by Nant Capital. Dr. Soon-Shiong, together with Nant Capital, beneficially owned 8,743,619 shares of tronc common stock, which represented 26.0% of tronc common stock, as of December 31, 2017.

Dividends

The declaration of dividends is subject to the discretion of tronc’s Board of Directors. Unless otherwise specified, dividends are payable to holders of the Company’s common stock and dividend equivalents are payable to holders of outstanding RSUs as and when the RSUs vest. Cash dividends per share recorded during 2015 were $0.70 totaling $18.9 million.

On February 11, 2016, the Company paid a dividend of $0.175 per share on common stock outstanding, to stockholders of record on January 11, 2016. In February 2016, the Company’s Board of Directors suspended the payment of cash dividends on the Company’s outstanding common stock. 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.

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. 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 authorization expired in August 2017.

On March 23, 2017, the Company entered into a purchase agreement with investment funds associated with Oaktree Capital Management, L.P. (“Oaktree”), pursuant to which the Company acquired 3,745,947 shares of the Company’s common stock for $15.00 per share or a total purchase price of $56.2 million. In the event that the Company undergoes a change of control on or before March 23, 2018, or enters into a definitive agreement concerning a change of control on or before March 23, 2018, whereby the transaction is ultimately consummated and the consideration per share payable to stockholders is greater than $15.00 per share, the Company will pay Oaktree additional consideration per share equal to the difference between the consideration per share payable to the Company’s stockholders in such change of control transaction and $15.00. The purchase agreement contains a “standstill” covenant prohibiting Oaktree from acquiring, directly or indirectly, any of the Company’s common stock, soliciting proxies to vote shares of the Company’s common stock or taking certain actions with respect to any business combination, asset acquisition or disposition or similar transaction involving the Company through March 22, 2019 (the “Standstill Period”). The parties also agreed to a mutual non-disparagement covenant applicable during the Standstill Period and to a mutual release of claims. On March 22, 2017, the Company’s stock price closed at $13.39. The $6.0 million difference between the aggregate purchase price and the fair value of the acquired stock at the transaction date was expensed as a premium on stock buyback in the Consolidated Statements of Income (Loss).

The Company has not recorded any amount associated with its agreement to pay Oaktree additional consideration because management concluded the fair value of such obligation is not material. ln the event the fair value of the Company's obligation becomes material in a future period, the Company would record additional premium on stock buyback in the Consolidated Statement of Income (Loss).

F-52

TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 17: ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

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



	Foreign Currency			OPEB			Pension			Total
Balance at December 28, 2014	$	(20	)	$	10,502		$	—		$	10,482
Other comprehensive income before reclassifications	(15		)	3,836			(8,718		)	(4,897		)
Amounts reclassified from AOCI	—			(9,491		)	—			(9,491		)
Balance at December 27, 2015	(35		)	4,847			(8,718		)	(3,906		)
Other comprehensive income (loss) before reclassifications	3			1,811			(6,438		)	(4,624		)
Amounts reclassified from AOCI	—			(284		)	—			(284		)
Balance at December 25, 2016	(32		)	6,374			(15,156		)	(8,814		)
Other comprehensive income (loss) before reclassifications	1			5,778			(9,398		)	(3,619		)
Amounts reclassified from AOCI	—			(2,220		)	1,126			(1,094		)
Balance at December 31, 2017	$	(31	)	$	9,932		$	(23,428	)	$	(13,527	)

The following table presents the amounts and line items in the Consolidated Statements of Income (Loss) where adjustments reclassified from accumulated other comprehensive income (loss) were recorded during the years ended December 31, 2017, December 25, 2016 and December 27, 2015 (in thousands):



	Year ended
Accumulated Other Comprehensive Income (Loss) Components	December 31, 2017			December 25, 2016			December 27, 2015			Affected Line Items in the Consolidated Statements of Income (Loss)
Pension and postretirement benefit adjustments:
Prior service cost recognized	(2,745		)	(470		)	(10,825		)	Compensation
Amortization of actuarial gains	(421		)	—			(4,863		)	Compensation
Loss recognized due to settlements	1,444			—			—			Compensation
Total before taxes	(1,722		)	(470		)	(15,688		)
Tax effect	(628		)	(186		)	(6,197		)	Income tax expense (benefit)
Total reclassifications for the period	$	(1,094	)	$	(284	)	$	(9,491	)

The Company expects to recognize $2.2 million in net gains and $10.5 million in prior service costs to be amortized from accumulated other comprehensive income in the year ended December 30, 2018.

NOTE 18: SEGMENT INFORMATION

The Company’s business segments are based on the organization structure used by management for making operating and investment decisions and for assessing performance. tronc manages 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 sold 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”) and forsalebyowner.com. Assets are not presented to or used by management at a segment level for making operating and investment decisions and therefore are not reported.

troncM’s media groups include the Chicago Tribune Media Group,the New York Daily News, the Sun Sentinel Media Group, the Orlando Sentinel Media Group, The Baltimore Sun Media Group, the Hartford Courant Media Group, the Morning Call Media Group,the Daily Press Media Group, the Los Angeles Times Media Group, and the San Diego Media

F-53

TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Group. tronc’s major daily newspapers have served their respective communities with local, regional, national and international news and information for more than 150 years.

troncX consists of the Company’s digital revenues and related digital expenses from local tronc websites, third party websites, mobile applications, digital only subscriptions, TCA, and forsalebyowner.com.

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

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

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

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



	Year Ended
	December 31, 2017			December 25, 2016			December 27, 2015
Operating revenues:
troncM	$	1,287,217		$	1,378,028		$	1,448,249
troncX	239,979			236,171			233,505
Corporate and eliminations	(3,178		)	(7,821		)	(8,934		)
	$	1,524,018		$	1,606,378		$	1,672,820
Income (loss) from operations:
troncM	$	96,145		$	120,763		$	102,685
troncX	24,830			25,551			38,808
Corporate and eliminations	(54,386		)	(93,201		)	(116,526		)
Income from operations	66,589			53,113			24,967
Gain (loss) on equity investments, net	3,139			(690		)	(1,164		)
Premium on stock buyback	(6,031		)	—			—
Interest expense, net	(26,481		)	(26,703		)	(25,972		)
Reorganization items, net	—			(259		)	(1,026		)
Income (loss) before income taxes	$	37,216		$	25,461		$	(3,195	)

Depreciation and amortization
troncM	$	23,727		$	23,656		$	21,338
troncX	15,560			11,563			2,329
Corporate and eliminations	17,409			22,280			30,966
	$	56,696		$	57,499		$	54,633

F-54

TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 19: SUPPLEMENTAL CASH FLOW INFORMATION

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



	Year ended
	December 31, 2017			December 25, 2016			December 27, 2015
Cash paid during the period for:
Interest	$	24,492		$	23,637		$	22,931
Income taxes, net of refunds	(819		)	(3,189		)	14,194
Non-cash items in investing activities:
Additions to property plant and equipment under capital leases	(890		)	(722		)	—
Non-cash items in financing activities:
Shares issued for acquisitions	—			—			11,039
New capital leases	890			722			—

NOTE 20: UNAUDITED QUARTERLY FINANCIAL INFORMATION

The following table sets forth certain unaudited quarterly financial information for the fiscal years ended December 31, 2017 and December 25, 2016 (in thousands, except per share amounts). The unaudited quarterly financial information includes all normal recurring adjustments that management considers necessary for a fair presentation of the information shown.



Fiscal Year Ended December 31, 2017	1st Quarter			2nd Quarter			3rd Quarter			4th Quarter
Total operating revenues	$	366,116		$	369,791		$	353,091		$	435,020
Operating expenses:
Compensation	132,717			126,897			135,045			154,704
Newsprint and ink	23,524			22,848			20,941			27,027
Outside services	114,310			114,879			111,109			127,746
Other operating expenses	69,887			72,041			65,584			81,474
Depreciation and amortization	13,178			14,660			14,158			14,700
Total operating expenses	353,616			351,325			346,837			405,651
Income from operations	12,500			18,466			6,254			29,369
Interest expense, net	(6,477		)	(6,404		)	(6,544		)	(7,056		)
Premium on stock buyback	(6,031		)	—			—			—
Gain (loss) on equity investments, net	(688		)	(584		)	4,993			(582		)
Income tax expense	2,293			4,637			2,647			22,104
Net income (loss)	$	(2,989	)	$	6,841		$	2,056		$	(373	)
Basic net income (loss) per common share	$	(0.08	)	$	0.21		$	0.06		$	(0.01	)
Diluted net income (loss) per common share	$	(0.08	)	$	0.21		$	0.06		$	(0.01	)

F-55

TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)



Fiscal Year Ended December 25, 2016	1st Quarter			2nd Quarter			3rd Quarter			4th Quarter
Total operating revenues	$	398,219		$	404,501		$	378,236		$	425,422
Operating expenses:
Compensation	162,100			150,493			140,760			143,940
Newsprint and ink	25,978			26,095			25,101			26,732
Outside services	127,709			122,964			118,060			125,745
Other operating expenses	72,213			76,317			79,104			72,455
Depreciation and amortization	14,124			14,300			14,375			14,700
Total operating expenses	402,124			390,169			377,400			383,572
Income (loss) from operations	(3,905		)	14,332			836			41,850
Interest expense, net	(6,744		)	(6,699		)	(6,673		)	(6,587		)
Loss on equity investments, net	(129		)	(168		)	(190		)	(203		)
Reorganization items, net	(94		)	(49		)	(93		)	(23		)
Income tax expense (benefit)	(4,409		)	3,360			4,352			15,621
Net income (loss)	$	(6,463	)	$	4,056		$	(10,472	)	$	19,416
Basic net income (loss) per common share	$	(0.22	)	$	0.12		$	(0.29	)	$	0.53
Diluted net income (loss) per common share	$	(0.22	)	$	0.12		$	(0.29	)	$	0.53

NOTE 21: SUBSEQUENT EVENTS

Sale of the Los Angeles Times and The San Diego Union-Tribune

On February 7, 2018, the Company entered into a MIPA by and between the Company and Nant Capital, pursuant to which the Company will sell the Los Angeles Times, The San Diego Union-Tribune and various other titles of the Company’s California properties to Nant Capital for an aggregate purchase price of $500 million in cash plus the assumption of $90 million in unfunded pension liabilities (the “Nant Transaction”). Nant Capital has received an equity commitment from Dr. Patrick Soon-Shiong for the full amount of the cash purchase price.

The Nant Transaction has been unanimously approved by the board of directors of the Company.

The Company will retain certain liabilities associated with the Company’s California properties. The Nant Transaction, which is expected to close in the late first quarter or early second quarter of 2018, is subject to customary closing conditions. The Agreement contains other provisions, covenants, representations and warranties made by the Company and Nant Capital that are typical in transactions of this size, type and complexity. In addition, the Agreement provides that the parties will indemnify each other for breaches of these representations, warranties and covenants, subject to certain limitations, and for certain other matters.

At the Closing, the Company and Nant Capital will enter into a transition services agreement providing for up to twelve months of transition services between the parties.

Purchase of majority interest in BestReviews.com

Acquisition Agreement

On February 6, 2018, the Company acquired a 60% membership interest in BestReviews LLC (“BestReviews”), a company engaged in the business of testing, researching and reviewing consumer products, pursuant to an Acquisition Agreement, entered into on the same date (the “Acquisition Agreement”), among the Company, TPC, BestReviews Inc., a Delaware corporation (“Parent”), BestReviews and the stockholders of Parent named therein.

F-56

TRONC, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Upon the terms and subject to the conditions set forth in the Acquisition Agreement, the Company acquired (the “Acquisition”) 60% of Parent’s membership interest in BestReviews for a total purchase price of $66 million, consisting of $30.6 million in cash, subject to a post-closing working capital adjustment, and $36 million in common stock of the Company, based on a 30-day volume-weighted average sales price of the Company’s common stock as specified in the Acquisition Agreement. The Company issued 1,913,438 shares of common stock in connection with the closing (the “Stock Consideration”). The Stock Consideration is subject to lock-up provisions that prohibit certain transfers of the shares and standstill provisions based upon the following schedule: 25% of the Stock Consideration will cease to be subject to the lock-up provisions on the 6-month anniversary of the closing date of the Acquisition, 50% of the Stock Consideration will cease to be subject to the lock-up provisions on the 9-month anniversary of the closing date of the Acquisition and 25% of the Stock Consideration will cease to be subject to the lock-up provisions on the 12-month anniversary of the closing date of the Acquisition. The Acquisition Agreement also contains representations, warranties, covenants, and indemnities of the parties thereto.

Limited Liability Company Agreement

In connection with the Acquisition, the Company and Parent also entered into an amended and restated limited liability company agreement of BestReviews (the “LLC Agreement”). Subject to the terms of the LLC Agreement, the Company has the right (the “Call Option”), beginning six months after the closing of the Acquisition, to purchase all (but not less than all) of the remaining 40% of the membership interests of BestReviews using, at the Company’s election, cash, shares of common stock of the Company, or a combination thereof at a purchase price to be based on a pre-determined multiple of BestReviews’ trailing 12-month EBITDA, with such purchase priced capped per the LLC Agreement if the Call is exercised prior to the third anniversary of the closing of the Acquisition. In addition, beginning six months after closing the Acquisition, the Company is entitled to exercise a one-time right to purchase 25% of the units of membership interest of BestReviews retained by Parent (10% of the issued and outstanding equity) with terms identical to those applicable to the Call Option.

Parent also has the right (the “Put Option”), beginning three years after closing of the Acquisition, to cause the Company to purchase all (but not less than all) of the remaining 40% of the membership interests of BestReviews using, at the Company’s election, cash, shares of common stock of the Company, or a combination thereof at a purchase price to be determined in the same manner as if the Call Option were exercised.

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

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

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

Sale of Forsalebyowner.com

In the first quarter of 2018, the Company entered an agreement to sell the forsalebyowner.com business as it no longer fits within the Company’s digital strategy. The transaction is expected to close in the second quarter of 2018.

Cars.com agreement conversion

On January 29, 2018, the Company and Cars.com Inc. agreed to convert the Company’s affiliate markets into Cars.com's direct retail channel. The agreement, which will see more than 2,000 car deal customers move from the Company to Cars.com, will take effect February 1, 2018. The Company’s sales and support teams will also join Cars.com to help with the transition. The deal also includes a multi-year advertising and marketing agreement between the Company and Cars.com.

F-57

EXECUTION VERSION

EXECUTIVE EMPLOYMENT AGREEMENT

This Executive Employment Agreement (this “Agreement”) is entered into by and between Justin Dearborn (“Executive”), an individual, and Tribune Publishing Company, LLC (the “Company”), a Delaware limited liability company. In consideration of the mutual promises and covenants contained herein, and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Executive and the Company (collectively the “Parties” and as to each or either, a “Party”) agree as follows:

1.EMPLOYMENT TERM.

The term of Executive’s employment hereunder shall commence on February 22, 2018 (the “Effective Date”) and, unless terminated pursuant to Section 8 below, shall continue through February 21, 2021 (the “Employment Term”).

2. FREEDOM TO ENTER INTO THIS AGREEMENT.

Executive represents and covenants that: (a) the execution, delivery and performance of this Agreement by Executive does not and will not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Executive is a party or by which Executive is bound; and (b) Executive is not a party to or bound by any employment agreement, noncompetition agreement, non-solicitation agreement, confidentiality agreement or other agreement or obligation with any other person or entity that would in any way restrict or otherwise affect Executive’s performance of this Agreement.

3. TITLE AND EMPLOYMENT DUTIES.

During the Employment Term and subject to the terms of this Agreement:

(a) Executive’s title will be Chief Executive Officer. Executive will have such duties and responsibilities as are customarily exercised by someone serving in such a capacity as well as such other duties commensurate with Executive’s title and position as the Company may assign Executive from time to time.

(b) Executive agrees to devote Executive’s full business time, attention, and energies to the business of the Company and further agrees that Executive will perform Executive’s duties in a diligent, lawful and trustworthy manner, that Executive will act in accordance with Executive’s title and responsibilities and that Executive will act in accordance with the written business and employee policies and practices of the Company as applicable.

4. COMPENSATION. During the Employment Term and subject to the terms of this Agreement:

(a) Base Salary. For the services rendered by Executive under this Agreement, the Company will pay Executive a gross base salary of Six-Hundred Thousand Dollars and Zero Cents ($600,000) per annum (the “Base Salary”). Executive’s Base Salary shall be payable, less all authorized or required deductions, in accordance with the Company’s then-effective payroll practices. The Company will periodically review Executive’s salary and

99999-6718/129967600.1

may provide for salary increases during the Employment Term, such increases to be given, if given, in the discretion of the Company. In the event that Executive’s Base Salary is increased by the Company in its discretion at any time during the Employment Term, such increased amount shall thereafter constitute the Base Salary.

(b) Bonus. Subject to Section 8 below, Executive shall have the opportunity to earn a discretionary annual management incentive bonus (“Annual Bonus”), with a target bonus opportunity of one hundred percent (100%) of Executive’s Base Salary (the “Target Bonus”) under a bonus plan established by the Company, and based upon the achievement of annual Company and individual performance objectives as established by the Company. The Annual Bonus payable for any calendar year shall be paid, if paid, less all required or authorized deductions, at the time and in the manner such bonuses are paid to other similarly situated executives receiving annual bonus payments, in the calendar year following the year for which the bonus was earned, but in no event later than June 30 of the year following the year for which the bonus was earned.

5. BENEFITS.

(a) While employed by the Company, Executive shall be entitled to participate in the benefit plans and programs (including without limitation such medical, dental, vision, life, disability, retirement and other health and welfare plans), as the Company may have or establish from time to time for its employees in which Executive would be entitled to participate pursuant to their then-existing terms, in accordance with the terms and requirements of such plans. The foregoing, however, is not intended and shall not be construed to require the Company to establish any such plans or to prevent the modification or termination of such plans once established, and no such action or failure thereof shall affect this Agreement. It is further understood and agreed that all benefits Executive may be entitled to while employed by the Company shall be based upon Executive’s Base Salary and not upon any bonus, incentive or equity compensation due, payable, or paid to Executive, except where, if at all, the benefit plan provides otherwise.

(b) Executive will be eligible to receive time off to be scheduled and approved in advance and taken in accordance with the Company’s policies and practices.

6. BUSINESS EXPENSES.

During the Employment Term, the Company shall reimburse Executive for reasonable travel and other expenses incurred in the performance of Executive’s duties hereunder as are customarily reimbursed to employees in accordance with the then-applicable expense reimbursement policies of the Company.

7. RESTRICTIVE AGREEMENTS.

(a) No Conflicting Activities. During Executive’s employment with the Company (whether or not such employment continues beyond the Employment Term), Executive agrees that Executive’s employment is on an exclusive basis and that Executive: i) will not engage in any activity which is in conflict with Executive’s duties and obligations hereunder, whether or not such activity is pursued for gain, profit, or other pecuniary advantage;

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and ii) will not engage in any other activities which could harm the business or reputation of the Company or any of its affiliates.

(b) Employee Non-Solicitation and Non-Interference. Executive agrees that during Executive’s employment with the Company (whether or not such employment continues beyond the Employment Term) and for twelve (12) months after the date on which Executive’s employment with the Company ends for any or no reason (whether terminated by Executive or by the Company), except as required in the performance of Executive’s duties for the Company, Executive will not: i) solicit, either directly or indirectly, any person employed by, or previously employed by, the Company or any of its affiliates unless at such time such person is not then and has not been employed by the Company or any of its subsidiaries, business units, or other affiliates for at least six (6) months, to terminate or refrain from renewing or extending their employment with the Company or any of its subsidiaries, business units, or other affiliates; or ii) use Confidential Information to, directly or indirectly, interfere with the relationship of the Company with any person or entity who or which is a customer, client, supplier, developer, subcontractor, licensee or licensor or other business relation of the Company, or assist any other person or entity in doing so.

(c) Confidentiality. As a consequence of Executive’s employment by the Company, Executive will be privy to the highest level of confidential and proprietary business information of the Company and its affiliates, not generally known by the public or within the industry and which, thereby, gives the Company and its affiliates a competitive advantage and which has been the subject of reasonable efforts by the Company and its affiliates to maintain such confidentiality. Except as required by law or as expressly authorized by the Company in furtherance of Executive’s employment duties, Executive shall not at any time, during Executive’s employment with the Company (whether or not such employment continues beyond the Employment Term) or thereafter, directly or indirectly use, disclose, or take any action which may result in the use or disclosure of, any Confidential Information. “Confidential Information” as used in this Agreement, includes all non-public confidential competitive, pricing, marketing, proprietary and other information or materials relating or belonging to the Company or any of its affiliates (whether or not reduced to writing), including without limitation all confidential or proprietary information furnished or disclosed to or otherwise obtained by Executive in the course of Executive’s employment, and further includes without limitation: computer programs; patented or unpatented inventions, discoveries and improvements; marketing, organizational, operating and business plans; strategies; research and development; policies and manuals; sales forecasts; personnel information (including without limitation the identity of Company employees, their responsibilities, competence and abilities, and compensation); medical information about employees; pricing and nonpublic financial information; current and prospective customer lists and information on customers or their employees; information concerning planned or pending acquisitions, investments or divestitures; and information concerning purchases of major equipment or property. Confidential Information does not include information that lawfully is or becomes generally and publicly known outside of the Company and its affiliates other than through Executive’s breach of this Agreement or breach by any person of some other obligation. Nothing herein prohibits Executive from disclosing Confidential Information as legally required pursuant to a validly issued subpoena or order of a court or administrative agency of competent jurisdiction, provided that Executive shall first promptly notify the Company if Executive receives a subpoena, court order or other order

99999-6718/129967600.1

requiring any such disclosure, to allow the Company to seek protection therefrom in advance of any such legally compelled disclosure.

(d) Inventions. Executive hereby acknowledges and agrees that the Company owns the sole and exclusive right, title and interest in and to any and all Works (as defined below), including without limitation all copyrights, trademarks, service marks, trade names, slogans, inventions (whether patentable or not), patents, trade secrets and other intellectual property and/or proprietary rights therein, including without limitation all rights to sue for infringement thereof (collectively, “IP Rights”). The Company’s right, title and interest in and to the Works includes, without limitation, the sole and exclusive right to secure and own copyrights and maintain renewals throughout the world, the right to modify and create derivative works of or from the Works without any payment of any kind to Executive, and the right to exclusively register or record any IP Rights in the Works in the Company’s name. Executive agrees that all Works shall be “works made for hire” for the Company as that term is defined in the copyright laws of the United States or other applicable laws. To the extent that any of the Works is determined not to constitute a work made for hire, or if any rights in any of the Works do not accrue to the Company as a work made for hire, Executive agrees that Executive’s signature on this Agreement constitutes an assignment (without any further consideration) to the Company of any and all of Executive’s respective IP Rights and other rights, title and interest in and to any and all Works. “Works” means any inventions, invention disclosures, developments, improvements, trade secrets, brands, logos, drawings, trademarks, service marks, trade names, documents, memoranda, data, software programs, object code, source code, ideas, original works of authorship, or other information that Executive conceives, creates, develops, discovers, makes or acquires, in whole or in part, either solely or jointly with another or others, during or pursuant to the course of Executive’s employment by the Company or its affiliates, and that relate directly or indirectly to the Company or any of its affiliates or their respective businesses, or to the Company’s or any of its affiliates’ actual or demonstrably anticipated research or development, and that are made through the use of any of the Company’s or any of its affiliates’ equipment, facilities, supplies, trade secrets or time, or that result from any work performed for the Company or any of its affiliates, or that is based on any information of, or provided to Executive by, the Company or any of its affiliates. Executive hereby is and has been notified by the Company, and understands that the foregoing provisions of this Section 7(d), shall not apply to an invention that Executive developed entirely on Executive’s own time without using the Company’s equipment, supplies, facilities, or trade secret information except for those inventions that either: (1) relate at the time of conception or reduction to practice of the invention to the Company’s business, or actual or demonstrably anticipated research or development of the Company; or (2) result from any work performed by Executive for the Company or any of its affiliates.

(e) Reasonableness of Restrictions. It is mutually agreed and stipulated between Executive and the Company that the covenants set forth in Sections 7(a) through 7(d) of this Agreement are necessary to protect the legitimate business interests of the Company and its affiliates and are reasonable, including without limitation in time and scope.

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provision of Section 7(a) through 7(d) of this Agreement will result in immediate and irreparable injury and harm to the Company and its affiliates for which the Company and its affiliates will have no adequate remedy at law. The Company and/or its affiliates, thus, will be entitled to temporary, preliminary and permanent injunctive relief to prevent any such actual or threatened breach, without posting a bond or other security. The Company’s and/or its affiliates’ resort to such equitable relief will not waive any other rights that any of them may have to damages or other relief, and the Company and/or its affiliates shall be entitled to reasonable attorney’s fees and costs incurred in such an action.

8. TERMINATION/POST-TERMINATION PAYMENTS.

Either Executive or the Company may terminate Executive’s employment with the Company (the effective date of separation being the “Termination Date”) for any reason or no reason, subject to the following:

(a) Death. This Agreement, except for Section 7(d) above and this Section 8(a), will automatically terminate if Executive dies. In such case, (i) the benefits available to Executive’s estate, heirs and beneficiaries shall be determined in accordance with the applicable benefit plans and programs then in effect; and (ii) within sixty (60) days of the date of death, the Company shall pay Executive any unpaid Base Salary and any other amounts due under this Agreement through the date of death. Except as set forth above, the Company shall not have any further obligations under this Agreement. This Agreement, except for Section 7(d) above and this Section 8(a), will not survive Executive’s death, and will not inure to the benefit of Executive’s heirs, assigns and/or designated beneficiaries.

(b) Termination by the Company for Cause or Termination by Executive Without Good Reason. Upon termination for Cause, or termination by Executive without Good Reason, except for such other obligations as may be required by law, the Company shall have no obligation to Executive other than the payment of Executive’s earned and unpaid Base Salary as of the Termination Date. For purposes of this Agreement, “Cause” shall be determined by the Company in its unfettered good faith discretion, but shall mean the occurrence of any one or more of the following (it being acknowledged and agreed that a Disability of the Executive shall not be deemed to be Cause):

i. a material failure by Executive to perform Executive’s duties of employment in a manner reasonably satisfactory to the Company after having been notified in writing of such specific performance deficiencies and having not less than thirty (30) days to correct the deficiencies;

¹ “Disability” means Executive would be entitled to long-term disability benefits under the Company’s long term disability plan as in effect from time to time, without regard to any waiting or elimination period under such plan and assuming for the purpose of such determination that Executive is actually participating in such plan at such time. If the Company does not maintain a long-term disability plan, “Disability” means Executive’s inability to perform Executive’s duties and responsibilities hereunder due to physical or mental illness or incapacity that is expected to last for a consecutive period of 90 days or for a collective period of 120 days in any 365 day period as determined by the Company in its good faith judgment.

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ii. failure or refusal to implement or follow reasonable and lawful directives of the Company, if such breach is not cured (if curable) within 20 days after written notice thereof to the Executive by the Company;

iii. a material breach of any material provisions of this Agreement, or a material violation of the then existing policies, procedures or rules of the Company, as applicable, if such breach is not cured (if curable) within 20 days after written notice thereof to the Executive by the Company;

iv. the commission of an act of fraud, embezzlement, theft, material misappropriation (whether or not related to employment with the Company) or the commission of or nolo contendere or guilty plea to any felony; or

v. intentional misconduct materially injurious to the Company, its affiliates or subsidiaries, either monetarily or otherwise.

(c) Termination By the Company Without Cause or Termination by Executive With Good Reason. Executive’s employment may be terminated at any time by the Company with or without Cause, or by the Executive with or without Good Reason as defined in Exhibit A. If during (and not after) the Employment Term, i) the Company terminates Executive’s employment other than for Cause or Disability or if Executive resigns for Good Reason, the Company will provide Executive within ten (10) days after the date on which Executive’s employment terminates with a Waiver and General Release of any and all legally-waivable claims against the Company and its past, present, and future parents, divisions, subsidiaries, partnerships, other affiliates, and other related entities (whether or not they are wholly owned); and the past, present, and future owners, trustees, fiduciaries, administrators, shareholders, directors, officers, partners, agents, representatives, members, associates, employees, and attorneys of each entity listed above in a form reasonably acceptable to the Company (a “Waiver”), and provided that on or within twenty one (21) days after the date on which Executive receives the Waiver or such longer period as may be applicable under the Age Discrimination in Employment Act, as amended (“ADEA”), Executive: i) signs, dates and returns the Waiver to the Company; and ii) then does not revoke the Waiver in accordance with its terms, the Company will, as liquidated damages, pay Executive as consideration not later than 15 days following the expiration (without revocation) of the revocation period applicable to Executive’s release of ADEA claims: (x) a lump sum amount equal to the greater of (i) Executive’s Base Salary remaining due under the Employment Term or (ii) 52 weeks of Executive’s Base Salary, in each case less all required or authorized deductions, (y) any unpaid Annual Bonus with respect to the calendar year immediately preceding the calendar year of termination of employment; and (z) a pro-rata amount of the Annual Bonus based on actual performance with respect to the calendar year of termination of employment, based on the number of days worked in such calendar year, said pro-rated Annual Bonus payment to be made at the time and in the same manner as other executive officers of the of the Company (collectively, the “Severance Benefits”).

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to any benefits that may be vested under the terms of applicable benefit plans in which Executive participates. Notwithstanding any other provision of this Agreement, Executive shall not participate in or be eligible under (and Executive hereby waives participation in) any other severance or severance-related plan or program of the Company or any of its affiliates in effect at any time (whether Executive’s employment terminates or is terminated with or without Cause during the Employment Term).

(e) Notwithstanding the preceding, if the review and revocation period for the Waiver following Executive’s termination of employment spans two calendar years, the Severance Benefits shall be paid within the first 10 calendar days in the calendar year following the year of termination of employment rather than the calendar year of termination of employment to the extent necessary to have such amounts comply with or be exempt from the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).

9. COMPLIANCE WITH IRS CODE SECTION 409A.

It is intended that any amounts and benefits payable under this Agreement will be exempt from or comply with Section 409A of the Code, so as not to subject Executive to the payment of any interest and tax penalty which may be imposed under Section 409A of the Code, and this Agreement shall be interpreted and construed accordingly, provided, however, that the Company and its affiliates shall not be responsible for any such interest and tax penalties. All references in this Agreement to Executive’s termination of employment shall mean a separation from service within the meaning of Section 409A of the Code. The timing of the payments or benefits provided herein may be modified to so comply with Section 409A of the Code. Any reimbursement payable to Executive pursuant to this Agreement shall be conditioned on the submission by Executive of all expense reports reasonably required by the Company under any applicable expense reimbursement policy, and shall be paid to Executive in accordance with Company practices following receipt of such expense reports (or invoices), but in no event later than the last day of the calendar year following the calendar year in which Executive incurred the reimbursable expense. Notwithstanding any other provision in this Agreement, if on the date of Executive’s separation from service (as defined in Section 409A of the Code) (i) the Company or any of its affiliates is a publicly traded corporation and (ii) Executive is a “specified employee,” as defined in Section 409A of the Code, then to the extent any amount payable under this Agreement upon Executive’s separation from service constitutes the payment of nonqualified deferred compensation, within the meaning of Section 409A of the Code, that under the terms of this Agreement would be payable prior to the six (6) month anniversary of Executive’s separation from service, such payment shall be delayed until the earlier to occur of (x) the first day of the month following the six (6) month anniversary of Executive’s separation from service or (y) the date of Executive’s death.

10. NOTICES.

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requests, or other communications shall be sufficient if made in writing either (i) by personal delivery to the party entitled thereto, (ii) by certified mail, return receipt requested, or (iii) by express courier service with proof of delivery, and shall be effective upon personal delivery, upon the fourth (4th) day after mailing by certified mail, or upon the second (2nd) day after sending by express courier service.

11. COMPANY PROPERTY.

Except as required in furtherance of Executive’s employment, Executive will not remove from the Company’s premises any property of the Company or its affiliates, including without limitation any documents or things containing any Confidential Information, computer programs and drives or storage devices of any kind (portable or otherwise), files, forms, notes, records, charts, or any copies thereof (collectively, “Property”). Upon any termination at any time by either party of Executive’s employment for any or no reason, Executive shall return to the Company, and shall not alter, delete or destroy, any and all Property, including without limitation any and all laptops and other computer equipment, iPhones, iPads, laptops, blackberries and similar devices, cellphones, credit cards, keys and other access cards, and electronic and hardcopy files.

Executive further agrees that, upon termination, Executive will conduct a diligent search of all of the electronic documents and information, electronic devices (including, without limitation, computers, hard drives, flash drives, and mobile devices), remote and virtual storage and file systems, emails and email accounts, voicemails, text messages, instant messaging conversations and systems, and any other devices, facilities, systems, accounts, or media that has electronic data storage or saving capabilities, in Executive’s possession, custody, or control, for any copies or iterations of confidential information, and forward a copy of the same to the Company, and then delete any copies of any such items from Executive’s accounts, systems, or devices.

12. NON-DISPARAGEMENT.

Executive agrees that Executive will not at any time during Executive’s employment with the Company (whether or not such employment continues beyond the Employment Term) or thereafter take (directly or indirectly, individually or in concert with others) any actions or make any communications calculated or likely to have the effect of materially undermining, disparaging or otherwise reflecting negatively upon the reputation, goodwill, or standing in the community of the Company, or any of its respective subsidiaries, business units, other affiliates, officers, directors, employees and/or agents, provided that nothing herein shall prohibit Executive from giving truthful testimony or evidence to a governmental entity, or if properly subpoenaed or otherwise required to do so under applicable law.

13. ASSIGNMENT.

This is an Agreement for the performance of personal services by Executive and may not be assigned by Executive. This Agreement may be assigned or transferred to, and shall be binding upon and shall inure to the benefit of: (a) the Company, or its subsidiaries, business units, or other affiliates and its/their respective legal successors; and (b) any person or entity that

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at any time (whether by merger, purchase or otherwise) acquires any of the assets, ownership interests, or business of the Company.

14. CERTAIN CHANGE IN CONTROL PAYMENTS.

Notwithstanding any provision of this Agreement to the contrary, if any payments or benefits Executive would receive from the Company under this Agreement or otherwise in connection with the Change in Control (the “Total Payments”) (a) constitute “parachute payments” within the meaning of Section 280G of the Code, and (b) but for this Section 14, would be subject to the excise tax imposed by Section 4999 of the Code, then Executive will be entitled to receive either i) the full amount of the Total Payments or ii) a portion of the Total Payments having a value equal to $1 less than three (3) times such individual’s “base amount” (as such term is defined in Section 280G(b)(3)(A) of the Code), whichever of i) and ii), after taking into account applicable federal, state, and local income taxes and the excise tax imposed by Section 4999 of the Code, results in the receipt by such Executive on an aftertax basis, of the greatest portion of the Total Payments. Any determination required under this Section 14 shall be made in writing by the accountant or tax counsel selected by the Executive. If there is a reduction pursuant to this Section 14 of the Total Payments to be delivered to the applicable Executive and to the extent that an ordering of the reduction other than by the Executive is required by Section 9 or other tax requirements, the payment reduction contemplated by the preceding sentence shall be implemented by determining the “Parachute Payment Ratio” (as defined below) for each “parachute payment” and then reducing the “parachute payments” in order beginning with the “parachute payment” with the highest Parachute Payment Ratio. For “parachute payments” with the same Parachute Payment Ratio, such “parachute payments” shall be reduced based on the time of payment of such “parachute payments,” with amounts having later payment dates being reduced first. For “parachute payments” with the same Parachute Payment Ratio and the same time of payment, such “parachute payments” shall be reduced on a pro rata basis (but not below zero) prior to reducing “parachute payments” with a lower Parachute Payment Ratio. For purposes hereof, the term “Parachute Payment Ratio” shall mean a fraction the numerator of which is the value of the applicable “parachute payment” for purposes of Section 280G of the Code and the denominator of which is the actual present value of such payment.

15. GOVERNING LAW; INTERPRETATION OF THE AGREEMENT; ARBITRATION.

This Agreement shall be construed and interpreted in accordance with the laws of the State of California (without giving effect to the choice of law principles thereof). Executive and the Company acknowledge that each party had an equal opportunity to review and/or modify the provisions set forth in this Agreement. Thus, in the event of any misunderstanding, ambiguity or dispute concerning this Agreement’s provisions or their interpretation, no rule of construction shall be applied that would result in having this Agreement interpreted against either party. The language of all parts in this Agreement shall be construed as a whole, according to fair meaning, and not strictly for or against any party. The headings provided in boldface are inserted for the convenience of the parties and shall not be construed to limit or modify the text of this Agreement. The Parties agree that any disputes concerning, relating to, or arising out of this Agreement or its interpretation, Executive’s employment with or termination

99999-6718/129967600.1

from the Company, or any other dispute between the Parties (except as excluded pursuant to this Section), shall be resolved by arbitration in accordance with the Company’s arbitration policy as may be in effect from time to time. Notwithstanding the foregoing, Executive and the Company understand and agree that nothing shall prevent the Company from seeking and obtaining injunctive relief in federal or state court (or any court corresponding to Executive’s residence) in the event of a breach or threatened breach of any of Executive’s obligations under Section 7 of this Agreement.

16. COMPLETE AGREEMENT.

This Agreement embodies the entire agreement and understanding of the Parties hereto with regard to the matters described herein and supersedes any and all prior and/or contemporaneous agreements and understandings, oral or written, actual or alleged, between said Parties regarding such matters, including without limitation concerning Executive’s compensation arrangements or other terms and conditions of employment (if any), and any actual or alleged prior employment agreements with or involving the Company or any of its affiliates. This Agreement cannot be amended, modified, supplemented, or altered except by written amendment signed by Executive and another authorized officer of the Company. Effective as of the Effective Date, the Consulting Agreement between Executive and Tribune Publishing Company, LLC, dated February 1, 2016, shall terminate and be of no further force or effect as of the Effective Date.

17. SEVERABILITY/REFORMATION.

Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law. If any provision of this Agreement is found by a court of competent jurisdiction to be unreasonable or otherwise unenforceable, it is the purpose and intent of the parties that any such provision be deemed modified or limited so that, as modified or limited, such provision may be enforced to the fullest extent possible. If any provision of this Agreement is held to be prohibited by or invalid under applicable law (notwithstanding any attempted modification or limitation pursuant to the preceding sentence), such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

18. SURVIVAL.

Except as provided in Section 8(a) above, the provisions of Section 2 and of Sections 7 through 18 (inclusive) of this Agreement shall survive any expiration of the Employment Term and any termination of Executive’s employment at any time (whether during or after the Employment Term) by either party with or without Cause, and shall not be limited or discharged by any alleged breach or misconduct on the part of the Company.

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19. MISCELLANEOUS.

This Agreement may be executed in two or more counterparts, or by facsimile transmission, each of which shall be deemed to be an original and all of which taken together shall constitute one and the same instrument. The headings contained in this Agreement are for reference purposes only, and shall not affect the meaning or interpretation of this Agreement.

ACCEPTED AND AGREED:

JUSTIN DEARBORN TRIBUNE PUBLISHING COMPANY, LLC


/s/ Justin Dearborn	By: tronc, Inc., its sole member

By: /s/ Michael W. Ferro, Jr.

Name: Michael W. Ferro, Jr.

Its: Chairman of the Board

Date: March 13, 2018 Date: March 13, 2018

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EXHIBIT A

“Change in Control” means the occurrence of the following events:

the consummation of a merger, consolidation, or other reorganization of the Company with or into (a “Business Combination”), the sale of securities representing a majority of the voting equity securities of the Company in a tender offer, equity placement, or other transaction, or the sale of all or substantially all of the Company or business and/or assets as an entirety to (“Sale”), one or more entities that are not subsidiaries or affiliates of the Company; unless immediately following such Business Combination or Sale, (i) 50% or more of the total voting power of (x) the entity resulting from such Business Combination or the entity that has acquired all or substantially all of the business or assets of the Company or Business Unit in a Sale (in either case, the “Surviving Company”), or (y) if a Sale, the ultimate parent entity that directly or indirectly has beneficial ownership of sufficient voting securities eligible to elect a majority of the board of directors (or the analogous governing body) of the Surviving Company (the “Parent Company”), is represented by the outstanding common voting securities of the Company, that were outstanding immediately prior to such Business Combination or Sale (or, if applicable, is represented by shares into which the outstanding common voting securities of the Company or the Business Unit were converted or exchanged pursuant to such Business Combination or Sale), (ii) no Person or entity is or becomes the Beneficial Owner, directly or indirectly, of more than 50% of the total voting power of the outstanding voting securities eligible to elect members of the board of directors (or the analogous governing body) of the Surviving Company (if a Business Combination) or the Parent Company (if a Sale), and (iii) at least a majority of the members of the board of directors (or the analogous governing body) of the Surviving Company (if a Business Combination) or the Parent Company (if a Sale) following the consummation of the Business Combination or Sale were members of the board of directors (or the analogous governing body) at the time of such board’s approval of the execution of the definitive agreement providing for such Business Combination or Sale or recommendation or approval of such tender offer, equity placement, or other transaction (terms capitalized but not otherwise defined in this subsection have the meaning set forth in Tribune Publishing Company’s 2014 Omnibus Incentive Plan).

“Good Reason” means one or more of the following events:

(a) a material reduction in the Base Salary or a material reduction in the Target Bonus;

(b) a material failure by the Company to pay Executive in accordance with the terms of this Agreement;

(c) a material diminution or adverse change in Executive’s duties, authority, responsibilities, reporting line or positions without Executive’s prior written consent;

A-1

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(d) in the case of a Change in Control, Executive either i) does not receive an offer of employment from the Surviving Company or Parent Company thereof or ii) receives such an offer of employment from the Surviving Company or Parent Company thereof but such offer of employment (x) does not provide at least the same Base Salary and at least other compensation and benefits substantially comparable in the aggregate to those the Executive had immediately prior to the Change in Control or (y) requires the Executive to locate Executive more than 50 miles from the Company’s office from which Executive was based immediately prior to the Change in Control;

provided, however, that to constitute Good Reason, Executive prior to resigning for Good Reason shall give written notice to the Company of the facts and circumstances claimed to provide a basis for such resignation not more than thirty (30) days following Executive’s knowledge of such facts and circumstances, and, if curable, the Company shall have thirty (30) days after receipt of such notice to cure such facts and circumstances (and if so cured, then Executive shall not be permitted to resign with Good Reason in respect thereof). Any resignation with Good Reason shall be communicated to the Company by written notice, which shall include Executive’s date of termination of employment which shall be a date at least ten (10) days after delivery of such notice and the expiration of such cure period and not later than 60 days thereafter.

A-2

99999-6718/129967600.1

EXECUTION VERSION

EXECUTIVE EMPLOYMENT AGREEMENT

This Executive Employment Agreement (this “Agreement”) is entered into by and between Terry Jimenez (“Executive”), an individual, and Tribune Publishing Company, LLC (the “Company”), a Delaware limited liability company. In consideration of the mutual promises and covenants contained herein, and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Executive and the Company (collectively the “Parties” and as to each or either, a “Party”) agree as follows:

1.EMPLOYMENT TERM.

The term of Executive’s employment hereunder shall commence on April 4, 2018 (the “Effective Date”) and, unless terminated pursuant to Section 8 below, shall continue through April 3, 2021 (the “Employment Term”).

2. FREEDOM TO ENTER INTO THIS AGREEMENT.

3. TITLE AND EMPLOYMENT DUTIES.

During the Employment Term and subject to the terms of this Agreement:

(a) Executive’s title will be Executive Vice President and Chief Financial Officer. Executive will have such duties and responsibilities as are customarily exercised by someone serving in such a capacity as well as such other duties commensurate with Executive’s title and position as the Company may assign Executive from time to time.

(c) Executive will be based in and will work out of the Company’s office in Chicago, Illinois. Executive acknowledges that significant travel will be required.

4. COMPENSATION. During the Employment Term and subject to the terms of this Agreement:

(a) Base Salary. For the services rendered by Executive under this Agreement, the Company will pay Executive a gross base salary of Four Hundred Seventy-Five

Thousand Dollars and Zero Cents ($475,000) per annum (the “Base Salary”). Executive’s Base Salary shall be payable, less all authorized or required deductions, in accordance with the Company’s then-effective payroll practices. The Company will periodically review Executive’s salary and may provide for salary increases during the Employment Term, such increases to be given, if given, in the discretion of the Company. In the event that Executive’s Base Salary is increased by the Company in its discretion at any time during the Employment Term, such increased amount shall thereafter constitute the Base Salary.

(b) Bonus. Subject to Section 8 below, Executive shall have the opportunity to earn a discretionary annual management incentive bonus (“Annual Bonus”), with a target bonus opportunity of seventy-five percent (75%) of Executive’s Base Salary (the “Target Bonus”) under a bonus plan established by the Company, and based upon the achievement of annual Company and individual performance objectives as established by the Company. The Annual Bonus payable for any calendar year shall be paid, if paid, less all required or authorized deductions, at the time and in the manner such bonuses are paid to other similarly situated executives receiving annual bonus payments, in the calendar year following the year for which the bonus was earned, but in no event later than June 30 of the year following the year for which the bonus was earned.

5. BENEFITS.

(b) Executive will be eligible to receive time off to be scheduled and approved in advance and taken in accordance with the Company’s policies and practices.

6. BUSINESS EXPENSES.

7. RESTRICTIVE AGREEMENTS.

concerning purchases of major equipment or property. Confidential Information does not include information that lawfully is or becomes generally and publicly known outside of the Company and its affiliates other than through Executive’s breach of this Agreement or breach by any person of some other obligation. Nothing herein prohibits Executive from disclosing Confidential Information as legally required pursuant to a validly issued subpoena or order of a court or administrative agency of competent jurisdiction, provided that Executive shall first promptly notify the Company if Executive receives a subpoena, court order or other order requiring any such disclosure, to allow the Company to seek protection therefrom in advance of any such legally compelled disclosure.

(e) Reasonableness of Restrictions. It is mutually agreed and stipulated between Executive and the Company that the covenants set forth in Sections 7(a) through 7(d) of

this Agreement are necessary to protect the legitimate business interests of the Company and its affiliates and are reasonable, including without limitation in time and scope.

(f) Remedies. The amount of actual or potential damages resulting from Executive’s breach of any provision of Section 7(a) through 7(d) of this Agreement will be inherently difficult to determine with precision and, further, any breach could not be reasonably or adequately compensated in money damages. Accordingly, any breach by Executive of any provision of Section 7(a) through 7(d) of this Agreement will result in immediate and irreparable injury and harm to the Company and its affiliates for which the Company and its affiliates will have no adequate remedy at law. The Company and/or its affiliates, thus, will be entitled to temporary, preliminary and permanent injunctive relief to prevent any such actual or threatened breach, without posting a bond or other security. The Company’s and/or its affiliates’ resort to such equitable relief will not waive any other rights that any of them may have to damages or other relief, and the Company and/or its affiliates shall be entitled to reasonable attorney’s fees and costs incurred in such an action.

8. TERMINATION/POST-TERMINATION PAYMENTS.

v. intentional misconduct materially injurious to the Company, its affiliates or subsidiaries, either monetarily or otherwise.

(c) Termination By the Company Without Cause or Termination by Executive With Good Reason. Executive’s employment may be terminated at any time by the Company with or without Cause, or by the Executive with or without Good Reason as defined in Exhibit A. If during (and not after) the Employment Term, i) the Company terminates Executive’s employment other than for Cause or Disability or if Executive resigns for Good Reason, the Company will provide Executive within ten (10) days after the date on which Executive’s employment terminates with a Waiver and General Release of any and all legally-waivable claims against the Company and its past, present, and future parents, divisions, subsidiaries, partnerships, other affiliates, and other related entities (whether or not they are wholly owned); and the past, present, and future owners, trustees, fiduciaries, administrators, shareholders, directors, officers, partners, agents, representatives, members, associates, employees, and attorneys of each entity listed above in a form reasonably acceptable to the Company (a “Waiver”), and provided that on or within twenty one (21) days after the date on which Executive receives the Waiver or such longer period as may be applicable under the Age Discrimination in Employment Act, as amended (“ADEA”), Executive: i) signs, dates and returns the Waiver to the Company; and ii) then does not revoke the Waiver in accordance with its terms, the Company will, as liquidated damages, pay (or commence paying, as the case may be) Executive as consideration not later than fifteen (15) days following the expiration (without revocation) of the revocation period applicable to Executive’s release of ADEA claims: (x) shall be the greater of (i) an amount equal to Executive’s Base Salary paid via salary continuance over the remaining term of the Agreement or (ii) Executive’s Base Salary paid via salary continuance for a 52 week period from Executive’s date of termination, less all required or authorized deductions, and payable in in accordance with the Company’s then-effective payroll practices;

last for a consecutive period of 90 days or for a collective period of 120 days in any 365 day period as determined by the Company in its good faith judgment.

(y) any unpaid Annual Bonus with respect to the calendar year immediately preceding the calendar year of termination of employment; and (z) a pro-rata amount of the Annual Bonus based on actual performance with respect to the calendar year of termination of employment, based on the number of days worked in such calendar year, said pro-rated Annual Bonus payment to be made at the time and in the same manner as other executive officers of the of the Company (collectively, the “Severance Benefits”).

(d) The Parties further agree that the Company’s payment of Severance Benefits pursuant to Section 8(c) precludes Executive from eligibility for or entitlement to any and all other payments, including but not limited to compensation, benefits or perquisites, subject to any benefits that may be vested under the terms of applicable benefit plans in which Executive participates. Notwithstanding any other provision of this Agreement, Executive shall not participate in or be eligible under (and Executive hereby waives participation in) any other severance or severance-related plan or program of the Company or any of its affiliates in effect at any time (whether Executive’s employment terminates or is terminated with or without Cause during the Employment Term).

9. COMPLIANCE WITH IRS CODE SECTION 409A.

day of the month following the six (6) month anniversary of Executive’s separation from service or (y) the date of Executive’s death.

10. NOTICES.

Any notice, request, or other communication required or permitted to be given hereunder shall be made to the following addresses or to any other address designated by either of the parties hereto by notice similarly given: (a) if to the Company, to Tribune Publishing Company, c/o Chief Executive Officer, 435 N. Michigan Avenue, Chicago, IL 60611; and (b) if to Executive, to Executive’s last known home address in the Company’s records. All such notices, requests, or other communications shall be sufficient if made in writing either (i) by personal delivery to the party entitled thereto, (ii) by certified mail, return receipt requested, or (iii) by express courier service with proof of delivery, and shall be effective upon personal delivery, upon the fourth (4th) day after mailing by certified mail, or upon the second (2nd) day after sending by express courier service.

11. COMPANY PROPERTY.

12. NON-DISPARAGEMENT.

business units, other affiliates, officers, directors, employees and/or agents, provided that nothing herein shall prohibit Executive from giving truthful testimony or evidence to a governmental entity, or if properly subpoenaed or otherwise required to do so under applicable law.

13. ASSIGNMENT.

14. CERTAIN CHANGE IN CONTROL PAYMENTS.

15. GOVERNING LAW; INTERPRETATION OF THE AGREEMENT; ARBITRATION.

This Agreement shall be construed and interpreted in accordance with the laws of the State of Illinois (without giving effect to the choice of law principles thereof). Executive and the Company acknowledge that each party had an equal opportunity to review and/or modify the provisions set forth in this Agreement. Thus, in the event of any misunderstanding, ambiguity or dispute concerning this Agreement’s provisions or their interpretation, no rule of construction shall be applied that would result in having this Agreement interpreted against either party. The language of all parts in this Agreement shall be construed as a whole, according to fair meaning, and not strictly for or against any party. The headings provided in boldface are inserted for the convenience of the parties and shall not be construed to limit or modify the text of this Agreement. The Parties agree that any disputes concerning, relating to, or arising out of this Agreement or its interpretation, Executive’s employment with or termination from the Company, or any other dispute between the Parties (except as excluded pursuant to this Section), shall be resolved by arbitration in accordance with the Company’s arbitration policy as may be in effect from time to time. Notwithstanding the foregoing, Executive and the Company understand and agree that nothing shall prevent the Company from seeking and obtaining injunctive relief in federal or state court (or any court corresponding to Executive’s residence) in the event of a breach or threatened breach of any of Executive’s obligations under Section 7 of this Agreement.

16. COMPLETE AGREEMENT.

17. SEVERABILITY/REFORMATION.

18. SURVIVAL.

19. MISCELLANEOUS.

ACCEPTED AND AGREED:

TERRY JIMENEZ TRIBUNE PUBLISHING COMPANY, LLC


/s/ Terry Jimenez	By: /s/ Justin Dearborn

Name: Justin Dearborn

Its: Chief Executive Officer

Date: March 13, 2018 Date: March 13, 2018

EXHIBIT A

“Change in Control” means the occurrence of the following events:

“Good Reason” means one or more of the following events:

(a) a material reduction in the Base Salary or a material reduction in the Target Bonus;

(b) a material failure by the Company to pay Executive in accordance with the terms of this Agreement;

(c) a material diminution or adverse change in Executive’s duties, authority, responsibilities, reporting line or positions without Executive’s prior written consent;

A-1

A-2

Exhibit 21.1

List of Subsidiaries of tronc, Inc. as of February 28, 2018



Name of Subsidiary	Jurisdiction of Organization	Ownership Percentage (%)
Blue Lynx Media, LLC	Delaware	100
Builder Media Solutions, LLC	Delaware	100
California Community News, LLC	Delaware	100
Capital-Gazette Communications, LLC	Maryland	100
Carroll County Times, LLC	Maryland	100
Chicago Tribune Company, LLC	Delaware	100
Chicagoland Publishing Company, LLC	Delaware	100
Daily News, L.P.	Delaware	100
ForSaleByOwner Services, Inc.	Delaware	100
ForSaleByOwner.com Referral Services, LLC	Delaware	100
forsalebyowner.com, LLC	Delaware	100
High School Cube, LLC	Delaware	100
Hoy Publications, LLC	Delaware	100
Internet Foreclosure Service, LLC	Delaware	100
Kearney Property Corp.	New Jersey	100
Local Pro Plus Realty, LLC	Delaware	100
Los Angeles Times Communications LLC	Delaware	100
Los Angeles Times Network, LLC	Delaware	100
MLIM, LLC	Delaware	100
Orlando Sentinel Communications Company, LLC	Delaware	100
Park Land Corp.	New Jersey	100
Project Jewel Holdings, LLC	Delaware	100
Splash Publications, LLC	Delaware	100
Sun-Sentinel Company, LLC	Delaware	100
TCA News Service, LLC	Delaware	100
The Baltimore Sun Company, LLC	Delaware	100
The Daily Meal Ventures, Inc.	Delaware	100
The Daily Press, LLC	Delaware	100
The Hartford Courant Company, LLC	Delaware	100
The Morning Call, LLC	Delaware	100
The San Diego Union-Tribune, LLC	Delaware	100
Tribune 365, LLC	Delaware	100
Tribune Content Agency London, LLC	Delaware	100
Tribune Content Agency, LLC	Delaware	100
Tribune Direct Marketing, LLC	Delaware	100
Tribune DPS, LLC	Delaware	100
Tribune Interactive, LLC	Delaware	100
Tribune Publishing Company, LLC	Delaware	100
Tribune Washington Bureau, LLC	Delaware	100
troncx, Inc.	Delaware	100
TRX Pubco GP, LLC	Delaware	100
TRX Pubco, LLC	Delaware	100
EatSeeHear, Inc.	California	100
NantMedia Holdings, LLC	Delaware	100
BestReviews, LLC	Delaware	60



Name of Subsidiary	Jurisdiction of Organization	Ownership Percentage (%)
HF Wind-Up, LLC	Delaware	33.33
Nucleus Marketing Solutions, LLC	Delaware	25
Third Base Skybox, LLC	Illinois	25
Speciate AI, LLC	Delaware	20
Jean Knows Cars, LLC	Delaware	20
Matter Ventures Fund II, L.P.	Delaware	13.35
SolidOpinion, Inc.	Delaware	9.26
Moonlighting, LLC	Virginia	4.73
Datavisual, Inc.	Delaware	2.92
Optimera Inc.	Delaware	2.5

AFFILIATED CHARITABLE ORGANIZATIONS

Name

Chicago Tribune Foundation

Chicago Tribune Charities

LA Times Foundation

Orlando Sentinel Family Fund Inc.

Sun-Sentinel Children’s Fund Inc.

Daily News Charities Inc.

Newspaper in Education Foundation

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements (Form S-3 No. 333-208023, Form S-3 No. 333-206327, Form S-8 No. 333-212478 and Form S-8 No. 333-197932) of tronc, Inc. and in the related Prospectuses of our reports dated March 16, 2018 with respect to the consolidated financial statements and effectiveness of internal control over financial reporting of tronc, Inc. included in this Annual Report on Form 10-K for the year ended December 31, 2017.

/s/ Ernst & Young LLP

Dallas, Texas

March 16, 2018

Exhibit 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 333-208023 and 333-206327) and in the Registration Statements on Form S-8 (Nos. 333-197932 and 333-212478) of tronc, Inc. (formerly known as Tribune Publishing Company) of our report dated March 14, 2016, except with respect to our opinion on the consolidated financial statements insofar as it relates to Note 18 as to which the date is March 8, 2017, relating to the financial statements, which appears in this Form 10‑K.

/s/ PricewaterhouseCoopers LLP

Dallas, Texas

March 16, 2018

Exhibit 31.1

SECTION 302 CERTIFICATION

I, Justin C. Dearborn, Chief Executive Officer of tronc, Inc., certify that:


1.	I have reviewed this annual report on Form 10-K of tronc, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a.	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b.	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c.	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d.	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


a.	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b.	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

By: /s/ Justin C. Dearborn ___________________________________________

Justin C. Dearborn

Chief Executive Officer

Date: March 16, 2018

Exhibit 31.2

SECTION 302 CERTIFICATION

I, Terry Jimenez, Chief Financial Officer of tronc, Inc., certify that:


1.	I have reviewed this annual report on Form 10-K of tronc, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a.	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b.	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c.	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d.	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


a.	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b.	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

By: /s/ Terry Jimenez________________________________

Terry Jimenez

Chief Financial Officer

Date: March 16, 2018

Exhibit 32

CERTIFICATION PURSUANT TO THE 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of tronc, Inc. (the “Company”) on Form 10-K for the fiscal year ended December 31, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Justin C. Dearborn, Chief Executive Officer of the Company, and Terry Jimenez, Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C §1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:


1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By: /s/ Justin C. Dearborn______________________________________

Justin C. Dearborn

Chief Executive Officer

Date: March 16, 2018

By: /s/ Terry Jimenez________________________________________

Terry Jimenez

Chief Financial Officer

Date: March 16, 2018

December 31, 2017

December 25, 2016

Discount rate