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Section 1: 10-Q (10-Q)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________________________________________________________________________________
FORM 10-Q
________________________________________________________________________________________________________________
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2019
OR 
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission file number:001-36097
 ________________________________________________________________
New Media Investment Group Inc.
(Exact name of registrant as specified in its charter)
 ________________________________________________________________
Delaware
 
38-3910250
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
1345 Avenue of the Americas 45th floor,
New York, New York
 
10105
(Address of principal executive offices)
 
(Zip Code)
Telephone: (212) 479-3160
(Registrant’s telephone number, including area code)
 _________________________________________________________________________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities 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  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit such files).    Yes  ý    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See 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
 
ý
 
Accelerated filer
¨
 
Emerging growth company
¨
 
 
 
 
 
 
 
 
 
Non-accelerated filer
 
¨
 
Smaller reporting 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 Exchange Act.  ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  ý
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class:
Trading Symbol
Name of each exchange on which registered:
Common stock, par value $0.01 per share
NEWM
New York Stock Exchange
As of April 30, 2019, 60,529,861 shares of the registrant’s common stock were outstanding.
 



CAUTIONARY NOTE REGARDING FORWARD LOOKING INFORMATION

Certain statements in this report on Form 10-Q may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect our current views regarding, among other things, our future growth, results of operations, performance and business prospects and opportunities, as well as other statements that are other than historical fact. Words such as “anticipate(s),” “expect(s)”, “intend(s)”, “plan(s)”, “target(s)”, “project(s)”, “believe(s)”, “will”, “aim”, “would”, “seek(s)”, “estimate(s)” and similar expressions are intended to identify such forward-looking statements.
Forward-looking statements are based on management’s current expectations and beliefs and are subject to a number of known and unknown risks, uncertainties and other factors that could lead to actual results materially different from those described in the forward-looking statements. We can give no assurance that our expectations will be attained. Our actual results, liquidity and financial condition may differ from the anticipated results, liquidity and financial condition indicated in these forward-looking statements. These forward looking statements are not a guarantee of future performance and involve risks and uncertainties, and there are certain important factors that could cause our actual results to differ, possibly materially from expectations or estimates reflected in such forward-looking statements, including, among others:
general economic and market conditions;
economic conditions in the various regions of the United States;
the growing shift within the publishing industry from traditional print media to digital forms of publication;
declining advertising revenue and circulation subscribers;
our ability to grow our digital marketing and business services initiatives, and grow our digital audience and advertiser base;
our ability to grow our business organically:
our ability to acquire local media print assets at attractive valuations;
the risk that we may not realize the anticipated benefits of our recent or potential future acquisitions;
the availability and cost of capital for future investments;
our indebtedness may restrict our operations and / or require us to dedicate a portion of cash flow from operations to the payment of principal and interest;
our ability to pay dividends consistent with prior practice or at all;
our ability to reduce costs and expenses;
our ability to realize the benefits of the Management Agreement (as defined below);
the impact of any material transactions with the Manager (as defined below) or one of its affiliates, including the impact of any actual, potential or perceived conflicts of interest;
the competitive environment in which we operate; and
our ability to recruit and retain key personnel.
Additional risk factors that could cause actual results to differ materially from our expectations include, but are not limited to, the risks identified by us under the heading “Risk Factors” in Part II, Item 1A of this report. Such forward-looking statements speak only as of the date on which they are made. Except to the extent required by law, we expressly disclaim any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.




2



 
 
Page
 
 
 
PART I.
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
PART II.
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
Item 5.
 
 
 
Item 6.
 
 
 
 


3




Item 1.
Financial Statements
NEW MEDIA INVESTMENT GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except share data)
 
March 31, 2019
 
December 30, 2018
 
 
 
 
ASSETS
Current assets:
 
 
 
Cash and cash equivalents
$
24,597

 
$
48,651

Restricted cash
4,054

 
4,119

Accounts receivable, net of allowance for doubtful accounts of $8,259 and
$8,042 at March 31, 2019 and December 30, 2018, respectively
153,222

 
174,274

Inventory
24,972

 
25,022

Prepaid expenses
30,155

 
23,935

Other current assets
21,149

 
21,608

Total current assets
258,149


297,609

Property, plant, and equipment, net of accumulated depreciation of $229,268
and $219,256 at March 31, 2019 and December 30, 2018, respectively
347,766

 
339,608

Operating lease right-of-use assets
102,583

 

Goodwill
316,208

 
310,737

Intangible assets, net of accumulated amortization of $110,877 and $101,543
at March 31, 2019 and December 30, 2018, respectively
485,026

 
486,054

Other assets
10,936

 
9,856

Total assets
$
1,520,668


$
1,443,864

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
 
 
 
Current portion of long-term debt
$
11,296

 
$
12,395

Current portion of operating lease liabilities
13,415

 

Accounts payable
28,219

 
16,612

Accrued expenses
90,290

 
113,650

Deferred revenue
116,521

 
105,187

Total current liabilities
259,741


247,844

Long-term liabilities:
 
 
 
Long-term debt
435,426

 
428,180

Long-term operating lease liabilities
96,248

 

Deferred income taxes
7,665

 
8,282

Pension and other postretirement benefit obligations
24,094

 
24,326

Other long-term liabilities
10,498

 
16,462

Total liabilities
833,672


725,094

Redeemable noncontrolling interests
1,298

 
1,547

Stockholders’ equity:
 
 
 
Common stock, $0.01 par value, 2,000,000,000 shares authorized;
60,806,451 shares issued and 60,529,861 shares outstanding at
March 31, 2019; 60,508,249 shares issued and 60,306,286
shares outstanding at December 30, 2018
608

 
605

Additional paid-in capital
699,787

 
721,605

Accumulated other comprehensive loss
(6,911
)
 
(6,881
)
(Accumulated deficit) retained earnings
(5,224
)
 
3,767

Treasury stock, at cost, 276,590 and 201,963 shares at March 31, 2019
and December 30, 2018, respectively
(2,562
)
 
(1,873
)
Total stockholders equity
685,698


717,223

Total liabilities, redeemable noncontrolling interests and
    stockholders’ equity
$
1,520,668


$
1,443,864

See accompanying notes to unaudited condensed consolidated financial statements.

4



NEW MEDIA INVESTMENT GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)
(In thousands, except per share data)
 
Three months ended
 
March 31, 2019
 
April 1, 2018
Revenues:
 
 
 
Advertising
$
178,694

 
$
163,259

Circulation
152,165

 
129,991

Commercial printing and other
56,740

 
47,515

Total revenues
387,599

 
340,765

Operating costs and expenses:
 
 
 
Operating costs
229,495

 
196,389

Selling, general, and administrative
131,508

 
118,819

Depreciation and amortization
20,923

 
19,247

Integration and reorganization costs
4,112

 
2,430

Impairment of long-lived assets
1,207

 

Net loss (gain) on sale or disposal of assets
1,789

 
(3,171
)
Operating (loss) income
(1,435
)
 
7,051

Interest expense
10,134

 
8,352

Other income
(260
)
 
(520
)
Loss before income taxes
(11,309
)
 
(781
)
Income tax benefit
(1,954
)
 
(116
)
Net loss
(9,355
)
 
(665
)
Net loss attributable to redeemable
    noncontrolling interests
(249
)
 

Net loss attributable to New Media
$
(9,106
)
 
$
(665
)
Loss per share:
 
 
 
Basic:
 
 
 
Net loss attributable to New Media
$
(0.15
)
 
$
(0.01
)
Diluted:
 
 
 
Net loss attributable to New Media
$
(0.15
)
 
$
(0.01
)
 
 
 
 
Dividends declared per share
$
0.38

 
$
0.37

 
 
 
 
Comprehensive loss
$
(9,385
)
 
$
(732
)
Comprehensive loss attributable to redeemable noncontrolling interests
(249
)
 

Comprehensive loss attributable to New Media
$
(9,136
)
 
$
(732
)
See accompanying notes to unaudited condensed consolidated financial statements.


5



NEW MEDIA INVESTMENT GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
(In thousands, except share data)
 
Common stock
 
Additional
paid-in capital
 
Accumulated 
other
comprehensive
loss
 
Retained earnings (accumulated deficit)
 
Treasury stock
 
Total
 
Shares
 
Amount
 
Shares
 
Amount
 
Three months ended March 31, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 30, 2018
60,508,249

 
$
605

 
$
721,605

 
$
(6,881
)
 
$
3,767

 
201,963

 
$
(1,873
)
 
$
717,223

Net loss

 

 

 

 
(9,106
)
 

 

 
(9,106
)
Net actuarial loss and prior service cost, net of income taxes of $0

 

 

 
(30
)
 

 

 

 
(30
)
Restricted share grants
298,202

 
3

 
(3
)
 

 

 

 

 

Non-cash compensation expense

 

 
1,136

 

 

 

 

 
1,136

Impact of adoption of ASC 842 - Leases

 

 

 

 
115

 

 

 
115

Restricted share forfeiture

 

 

 

 

 
22,861

 

 

Purchase of treasury stock

 

 

 

 

 
51,766

 
(689
)
 
(689
)
Common stock cash dividend

 

 
(22,951
)
 

 

 

 

 
(22,951
)
Balance at March 31, 2019
60,806,451

 
$
608

 
$
699,787

 
$
(6,911
)
 
$
(5,224
)
 
276,590

 
$
(2,562
)
 
$
685,698

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended April 1, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2017
53,367,853

 
$
534

 
$
683,168

 
$
(5,461
)
 
$
(2,767
)
 
140,972

 
$
(1,081
)
 
$
674,393

Net loss

 

 

 

 
(665
)
 

 

 
(665
)
Net actuarial loss and prior service cost, net of income taxes of $0

 

 

 
(67
)
 

 

 

 
(67
)
Restricted share grants
212,974

 
2

 
223

 

 

 

 

 
225

Non-cash compensation expense

 

 
1,163

 

 

 

 

 
1,163

Restricted share forfeiture

 

 

 

 

 
6,216

 

 

Purchase of treasury stock

 

 

 

 

 
42,726

 
(735
)
 
(735
)
Common stock cash dividend

 

 
(19,749
)
 

 
15

 

 

 
(19,734
)
Balance at April 1, 2018
53,580,827

 
$
536

 
$
664,805

 
$
(5,528
)
 
$
(3,417
)
 
189,914

 
$
(1,816
)
 
$
654,580

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes to unaudited condensed consolidated financial statements.

6



NEW MEDIA INVESTMENT GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
 
Three months ended
 
March 31, 2019
 
April 1, 2018
Cash flows from operating activities:
 
 
 
Net loss
$
(9,355
)
 
$
(665
)
Adjustments to reconcile net loss to net cash
provided by operating activities:
 
 
 
Depreciation and amortization
20,923

 
19,247

Non-cash compensation expense
1,136

 
1,163

Non-cash interest expense
344

 
504

Deferred income taxes
(617
)
 
(92
)
Net loss (gain) on sale or disposal of assets
1,789

 
(3,171
)
Impairment of long-lived assets
1,207

 

Pension and other postretirement benefit obligations
(276
)
 
(369
)
Changes in assets and liabilities:
 
 
 
Accounts receivable, net
24,684

 
19,409

Inventory
988

 
(3,169
)
Prepaid expenses
(5,680
)
 
(3,888
)
Other assets
(103,641
)
 
(1,289
)
Accounts payable
10,803

 
3,030

Accrued expenses
(6,289
)
 
(17,573
)
Deferred revenue
5,327

 
4,027

Other long-term liabilities
90,399

 
1,499

Net cash provided by operating activities
31,742


18,663

Cash flows from investing activities:
 
 
 
Acquisitions, net of cash acquired
(37,953
)
 
(29,409
)
Purchases of property, plant, and equipment
(2,242
)
 
(1,929
)
Proceeds from sale of real estate and other assets
2,465

 
9,207

Net cash used in investing activities
(37,730
)

(22,131
)
Cash flows from financing activities:
 
 
 
Payment of debt issuance costs

 
(500
)
Borrowings under term loans

 
49,750

Repayments under term loans
(2,197
)
 
(1,031
)
Borrowings under revolving credit facility
54,400

 

Repayments under revolving credit facility
(46,400
)
 

Purchase of treasury stock
(689
)
 
(735
)
Payment of dividends
(23,245
)
 
(20,046
)
Net cash (used in) provided by financing activities
(18,131
)

27,438

Net (decrease) increase in cash, cash equivalents and
restricted cash
(24,119
)
 
23,970

Cash, cash equivalents and restricted cash at beginning of period
52,770

 
46,162

Cash, cash equivalents and restricted cash at end of period
$
28,651

 
$
70,132

 
 
 
 
See accompanying notes to unaudited condensed consolidated financial statements.

7


NEW MEDIA INVESTMENT GROUP INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)


(1) Unaudited Financial Statements
The accompanying unaudited condensed consolidated financial statements of New Media Investment Group Inc. and its subsidiaries (together, the “Company” or “New Media”) have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the instructions to Form 10-Q and applicable provisions of Regulation S-X, each as promulgated by the United States Securities and Exchange Commission (the “SEC”). Certain information and note disclosures normally included in comprehensive annual financial statements presented in accordance with GAAP have been condensed or omitted pursuant to SEC rules and regulations.
Management believes that the accompanying condensed consolidated financial statements contain all adjustments (which include normal recurring adjustments) that, in the opinion of management, are necessary to present fairly the Company’s consolidated financial condition, results of operations, changes in stockholders' equity and cash flows for the periods presented. The results of operations for interim periods are not necessarily indicative of the results that may be expected for the full year. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes for the year ended December 30, 2018, included in the Company’s Annual Report on Form 10-K.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The Company’s reporting units (Newspapers and BridgeTower) are aggregated into one reportable business segment.
The newspaper industry and the Company have experienced declining same-store revenue and profitability over the past several years. As a result, the Company has implemented, and continues to implement, plans to reduce costs and preserve cash flow. This includes cost-reduction programs and the sale of non-core assets. The Company believes these initiatives along with cash provided by operating activities will provide it with the financial resources necessary to invest in the business and provide sufficient cash flow to enable the Company to meet its commitments.
Recently Issued Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02 (“ASU 2016-02”), “Leases (Topic 842)”, which revised the accounting related to lease accounting for both lessees and lessors. Under the new guidance, lessees are required to recognize a lease liability and a right-of-use asset on the balance sheet for all leases with terms greater than twelve months. Leases are classified as either finance or operating, with classification affecting the classification of expense recognition in the income statement. As permitted under the transition guidance, we have carried forward the assessment of whether our contracts contain or are leases, classification of our leases and remaining lease terms. Refer to Note 6 for further discussion.
In February 2018, the FASB issued ASU 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (“AOCI”)”. This ASU provides entities the option to reclassify tax effects to retained earnings from AOCI which are impacted by the Tax Cuts and Jobs Act (“TCJA”). The ASU is effective for fiscal years beginning after December 15, 2018 but early adoption is permitted. The Company has a full valuation allowance for all tax benefits related to AOCI, and therefore, there are no tax effects to be reclassified to retained earnings.
All other issued and not yet effective accounting standards are not relevant to the Company.
(2) Acquisitions
2019 Acquisitions
The Company acquired substantially all the assets, properties and business of certain publications and businesses on February 11, 2019, February 2, 2019, January 31, 2019, and December 31, 2018 (“2019 Acquisitions”), which included 10 daily newspapers, 11 weekly publications, eight shoppers, a remnant advertising agency, and an events production business, for an

8



aggregate purchase price of $34,458, including estimated working capital. The acquisitions were financed from cash on hand. The rationale for the acquisitions was primarily due to the attractive nature, as applicable, of the newspaper assets and digital platforms, and their estimated cash flows combined with the cost-saving and revenue-generating opportunities available.
The Company accounted for the 2019 Acquisitions using the acquisition method of accounting for those acquisitions determined to meet the definition of a business. The net assets, including goodwill, have been recorded in the consolidated balance sheet at their fair values in accordance with Accounting Standards Codification ("ASC") 805, “Business Combinations” (“ASC 805”). The fair value determination of the assets acquired and liabilities assumed are preliminary based upon all information currently available to the Company and are subject to working capital and other adjustments and the completion of valuations to determine the fair market value of the tangible and intangible assets. The final calculation of working capital and other adjustments and determination of fair values for tangible and intangible assets may result in different allocations among the various asset classes from those set forth below, and any such differences could be material.
The 2019 Acquisitions that were determined to be asset acquisitions were measured at the fair value of the consideration transferred on the acquisition date. Intangible assets acquired in an asset acquisition have been recognized in accordance with ASC 350 “Intangibles - Goodwill and Other”. Goodwill is not recognized in an asset acquisition.
The following table summarizes the preliminary determination of fair values of the assets and liabilities:
Current assets
$
6,830

Property, plant and equipment
19,572

Noncompete agreements
280

Advertiser relationships
1,930

Subscriber relationships
2,080

Customer relationships
1,370

Trade names
299

Mastheads
2,860

Goodwill
6,627

Total assets
41,848

Current liabilities assumed
7,390

Total liabilities
7,390

Net assets
$
34,458


The Company obtained third party independent valuations or performed similar calculations internally to assist in the determination of the fair values of certain assets acquired and liabilities assumed. Three basic approaches were used to determine value: the cost approach (used for equipment where an active secondary market is not available, building improvements, and software), the direct sales comparison (market) approach (used for land and equipment where an active secondary market is available) and the income approach (used for intangible assets).
The weighted average amortization periods for recently acquired amortizable intangible assets are equal to or similar to the periods presented in Note 5.
The Company expensed approximately $766 of acquisition-related costs for the 2019 Acquisitions during the three months ended March 31, 2019, and these expenses are included in selling, general, and administrative expenses.
For tax purposes, the amount of goodwill that is expected to be deductible is $6,562.
2018 Acquisitions
The Company acquired substantially all the assets, properties and business of certain publications and businesses on November 16, 2018, November 14, 2018, October 1, 2018, August 15, 2018, July 2, 2018, June 18, 2018, June 4, 2018, May 11, 2018, May 1, 2018, April 2, 2018, March 31, 2018, March 6, 2018, February 28, 2018, February 23, 2018, and February 7, 2018 (“2018 Acquisitions”), which included seven business publications, eight daily newspapers, 16 weekly publications, one shopper, a print facility, an events production business, cloud services and digital platforms and related domains, for an aggregate purchase price of $205,786, including estimated working capital. The acquisitions were financed from cash on hand.

9



The rationale for the acquisitions was primarily due to the attractive nature, as applicable, of the newspaper assets and digital platforms, and their estimated cash flows combined with the cost-saving and revenue-generating opportunities available.
In the August 15, 2018 acquisition, the Company acquired an 80% equity interest in the acquiree, and the minority equity owners retained a 20% interest, which have been classified as redeemable noncontrolling interests in the accompanying financial statements. Noncontrolling interests with embedded redemption features, such as put rights, that are not solely within the control of the Company are considered redeemable noncontrolling interests and are presented outside of stockholders’ equity on the Company's Unaudited Condensed Consolidated Balance Sheets.
The Company accounted for the 2018 Acquisitions using the acquisition method of accounting for those acquisitions determined to meet the definition of a business. The net assets, including goodwill, have been recorded in the consolidated balance sheet at their fair values in accordance with ASC 805. The fair value determination of the assets acquired and liabilities assumed are preliminary based upon all information currently available to the Company and are subject to working capital and other adjustments and the completion of valuations to determine the fair market value of the tangible and intangible assets. The final calculation of working capital and other adjustments and determination of fair values for tangible and intangible assets may result in different allocations among the various asset classes from those set forth below and any such differences could be material.
During the three months ended March 31, 2019, the Company recorded adjustments to the recorded fair values of the assets acquired and liabilities assumed in the 2018 acquisitions. The recorded amount of net assets acquired was increased by $66, while the recorded balances of current assets, goodwill and current liabilities were decreased by $8, $1,105 and $1,179, respectively.
(3) Share-Based Compensation
The Company recognized compensation cost for share-based payments of $1,136 and $1,163 during the three months ended March 31, 2019 and April 1, 2018, respectively. The total compensation cost not yet recognized related to non-vested Restricted Stock Grants (“RSGs”) pursuant to the Company’s Nonqualified Stock Option and Incentive Award Plan as of March 31, 2019 was $6,925, which is expected to be recognized over a weighted average period of 2.39 years through February 2022. As of March 31, 2019, the aggregate intrinsic value of unvested RSGs was $5,256.
RSG activity during the three months ended March 31, 2019 was as follows:
 
Number of RSGs
 
Weighted-Average
Grant Date
Fair Value
Unvested at December 30, 2018
384,471

 
$
16.11

Granted
298,202

 
13.65

Vested
(159,273
)
 
15.89

Forfeited
(22,861
)
 
16.16

Unvested at March 31, 2019
500,539

 
$
14.71


Under FASB ASC Topic 718, “Compensation – Stock Compensation”, the Company elected to recognize share-based compensation expense for the number of awards that are ultimately expected to vest. The Company’s estimated forfeitures are based on historical forfeiture rates. Estimated forfeitures are reassessed periodically, and the estimate may change based on new facts and circumstances.
(4) Restructuring
Over the past several years, in furtherance of the Company’s cost-reduction and cash-preservation plans outlined in Note 1, the Company has engaged in a series of individual restructuring programs, designed primarily to right-size the Company’s employee base, consolidate facilities and improve operations, including those of recently acquired entities. These initiatives impact all of the Company’s operations and are often influenced by the terms of union contracts. All costs related to these programs, which primarily include severance expense, are accrued at the time of the program announcement or over the remaining service period.


10



Severance-related expenses
Accrued restructuring costs are included in accrued expenses on the Unaudited Condensed Consolidated Balance Sheets. The activity in accrued restructuring costs for the three months ended March 31, 2019 is as follows:
 
Severance and
Related Costs
 
Other
Costs (1)
 
Total
Balance at December 30, 2018
$
2,554

 
$
346

 
$
2,900

Restructuring provision included in Integration and Reorganization
3,413

 
699

 
4,112

Cash payments
(3,006
)
 
(329
)
 
(3,335
)
Balance at March 31, 2019
$
2,961

 
$
716

 
$
3,677

 
(1) 
Other costs primarily include costs to consolidate operations.
The majority of the accrued restructuring reserve balance is expected to be paid out over the next twelve months.
Facility consolidation charges and accelerated depreciation
During the three months ended March 31, 2019, the Company ceased operations of three print publications and one print facility as part of the ongoing cost reduction programs. As a result, the Company recognized an impairment charge related to retired equipment of $1,207 and a loss on disposal of assets related to retired equipment of $168 and intangibles of $444 during the three months ended March 31, 2019. There were no publication closures or facility consolidations during the three months ended April 1, 2018.

11



(5) Goodwill and Intangible Assets
Goodwill and intangible assets consisted of the following:
 
March 31, 2019
 
Gross carrying
amount
 
Accumulated
amortization
 
Net carrying
amount
Amortized intangible assets:
 
 
 
 
 
Advertiser relationships
$
261,897

 
$
58,006

 
$
203,891

Customer relationships
45,897

 
9,797

 
36,100

Subscriber relationships
155,938

 
34,445

 
121,493

Other intangible assets
13,625

 
8,629

 
4,996

Total
$
477,357


$
110,877


$
366,480

Nonamortized intangible assets:
 
 
 
Goodwill
$
316,208

 
Mastheads
118,546

 
Total
$
434,754

 
 
 
 
December 30, 2018
 
Gross carrying
amount
 
Accumulated
amortization
 
Net carrying
amount
Amortized intangible assets:
 
 
 
 
 
Advertiser relationships
$
260,142

 
$
53,477

 
$
206,665

Customer relationships
44,630

 
8,704

 
35,926

Subscriber relationships
153,923

 
31,560

 
122,363

Other intangible assets
13,046

 
7,802

 
5,244

Total
$
471,741


$
101,543


$
370,198

Nonamortized intangible assets:
 
 
 
Goodwill
$
310,737

 
Mastheads
115,856

 
Total
$
426,593

 

As of March 31, 2019, the weighted average amortization periods for amortizable intangible assets are 14.5 years for advertiser relationships, 12.3 years for customer relationships, 13.6 years for subscriber relationships and 5.2 years for other intangible assets. The weighted average amortization period in total for all amortizable intangible assets is 13.7 years.
Amortization expense for the three months ended March 31, 2019 and April 1, 2018 was $9,450 and $7,155, respectively. Estimated future amortization expense as of March 31, 2019, is as follows:
For the following fiscal years:
 
2019 (nine months remaining)
$
27,033

2020
35,470

2021
35,275

2022
34,407

2023
34,169

Thereafter
200,126

Total
$
366,480



12



The changes in the carrying amount of goodwill for the period from December 30, 2018 to March 31, 2019 are as follows:
Balance at December 30, 2018, net of accumulated impairments of $25,641
$
310,737

Goodwill acquired in business combinations
6,627

Measurement period adjustments
(1,109
)
Goodwill from disposal
(47
)
Balance at March 31, 2019, net of accumulated impairments of $25,641
$
316,208


The Company’s annual impairment assessment is made on the last day of its fiscal second quarter.
The carrying value of goodwill and indefinite-lived intangible assets are evaluated for possible impairment on an annual basis or between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit or indefinite-lived intangible asset below its carrying value. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.
As of March 31, 2019, the Company performed a review of potential impairment indicators noting that its financial results and forecast have not changed materially since the annual impairment assessment, and it was determined that no indicators of impairment were present. However, the Company’s closing per share stock price was $10.50 on March 29, 2019, the last day of trading for the quarter ended March 31, 2019. At that price, the market value of the Company’s stock, including an estimated control premium of 20%, exceeded the carrying value of stockholders’ equity by less than 10%.
The newspaper industry and the Company have experienced declining same-store revenue and profitability over the past several years. Should general economic, market or business conditions decline and have a negative impact on estimates of future cash flow and market transaction multiples, the Company may be required to record impairment charges in the future.
(6) Leases
Adoption
Effective December 31, 2018, the Company adopted FASB ASU 2016-02, “Leases (Topic 842)” using the modified retrospective method at the adoption date. In addition, the Company elected the package of practical expedients permitted under the transition guidance within the new standard. This allowed us to carry-forward the historical lease classification. The Company elected to make the accounting policy election for short-term leases resulting in lease payments being recorded as an expense on a straight-line basis over the lease term. The Company also adopted this approach for individually insignificant operating leases. Also, the Company elected to not separate lease and non-lease components for equipment leases. Adoption of this standard resulted in the recording of net operating lease right-of-use assets of $102,536 and corresponding operating lease liabilities of $109,230. The Company's financial position for reporting periods beginning on or after December 31, 2018 is presented under the new guidance, while prior period amounts are not adjusted and continue to be reported in accordance with previous guidance.
A significant portion of our operating lease portfolio includes office space, distribution centers, press facilities, office equipment, and vehicles. The majority of our leases have remaining lease terms of 1 year to 10 years, some of which include options to extend the leases. As of March 31, 2019, the Company has an additional obligation of approximately $12,000 for future payments related to operating leases that have not yet commenced.
Total lease expense consists of the following:
 
Three months ended
 
March 31, 2019
Operating lease expense related to right-of-use assets
$
5,889

Other operating lease expense
2,740

Sublease income
(524
)
Total lease expense
$
8,105



13



Supplemental information related to leases was as follows:
 
Three months ended
 
March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
 
Operating cash flows for operating leases
$
6,317

Right-of-use assets obtained in exchange for lease obligations:
 
Operating leases
$
106,681


Supplemental balance sheet information related to leases was as follows:
 
March 31, 2019
Operating leases:
 
Operating lease right-of-use assets
$
102,583

Current portion of operating lease liabilities
$
13,415

Long-term operating lease liabilities
96,248

Total operating lease liabilities
$
109,663

 
 
Weighted-average remaining lease term
9 years

Weighted-average discount rate
10.67
%

As of March 31, 2019, maturities of lease liabilities were as follows:
2019 (nine months remaining)
$
18,173

2020
22,788

2021
21,037

2022
17,955

2023
14,658

Thereafter
81,259

Total lease payments
175,870

Less: interest
(66,207
)
Present value of lease liabilities
$
109,663


(7) Indebtedness
New Media Credit Agreement
The Company, through its wholly-owned subsidiary New Media Holdings II LLC (the “New Media Borrower”) maintains secured credit facilities (the “Credit Facilities”) under an agreement (the “New Media Credit Agreement”) with a syndication of lenders, including a term loan facility and a revolving credit facility. The term loan facility expires on July 14, 2022, and the revolving credit facility expires on July 14, 2021. Maximum borrowings under the revolving credit facility, including letters of credit, total $40,000.
As of March 31, 2019, there were outstanding borrowings against the term loan facility and revolving credit facility totaling $435,060 and $8,000, respectively. As of December 30, 2018, there were outstanding borrowings against the term loan facility and revolving credit facility totaling $437,257 and $0, respectively. As of March 31, 2019, there were $495 letters of credit issued against the revolving credit facility. As of March 31, 2019, the Company had $31,505 of borrowing availability under the revolving credit facility.
Borrowings under the term loan facility bear interest, at the New Media Borrower’s option, at a rate equal to either (i) an adjusted Eurodollar rate (subject to a floor of 1.00%), plus an applicable margin equal to 6.25% per annum or (ii) an adjusted base rate (subject to a floor of 2.00%), plus an applicable margin equal to 5.25% per annum. The New Media Borrower currently uses the Eurodollar rate option.

14



Borrowings under the revolving credit facility bear interest, at the New Media Borrower’s option, at a rate equal to either (i) an adjusted Eurodollar rate, plus an applicable margin equal to 5.25% per annum or (ii) an adjusted base rate, plus an applicable margin equal to 4.25% per annum, with a step down based on achievement of a certain total leverage ratio. The New Media Borrower currently uses the Eurodollar rate option.
As of March 31, 2019, the New Media Credit Agreement had a weighted average interest rate of 8.73%.
The Credit Facilities are unconditionally guaranteed by New Media Holdings I LLC (“Holdings I”), a wholly-owned subsidiary of New Media and the parent of the New Media Borrower, as well as by certain subsidiaries of the New Media Borrower (collectively, the “Guarantors”) and are required to be guaranteed by all future material wholly-owned domestic subsidiaries, subject to certain exceptions. All obligations under the Credit Facilities are secured, subject to certain exceptions, by substantially all of the New Media Borrower’s assets and the assets of the Guarantors.
Repayments made under the term loans are equal to 1% annually of the original principal amount in equal quarterly installments for the life of the term loans, with the remainder due at maturity. The New Media Borrower is permitted to make voluntary prepayments at any time without premium or penalty, except in the case of prepayments made in connection with certain repricing transactions with respect to the term loans effected within six months of November 28, 2018, to which a 1.00% prepayment premium applies.
The New Media Credit Agreement contains customary representations and warranties and affirmative covenants and negative covenants applicable to Holdings I, the New Media Borrower and the New Media Borrower's subsidiaries, including, among other things, restrictions on indebtedness, liens, investments, fundamental changes, dispositions, dividends and other distributions, and events of default. The New Media Credit Agreement contains a financial covenant that requires Holdings I, the New Media Borrower and the New Media Borrower’s subsidiaries to maintain a maximum total leverage ratio of 3.25 to 1.00. As of March 31, 2019, the Company is in compliance with all of the covenants and obligations under the New Media Credit Agreement.
Halifax Alabama Credit Agreement
In connection with the purchase of the assets of Halifax Media in 2015, the Company assumed obligations of Halifax Media including the amount owing ($8,000 at that time) under the credit agreement dated June 18, 2013 between Halifax Alabama, LLC and Southeast Community Development Fund V, L.L.C. (the “Halifax Alabama Credit Agreement”).
As of March 31, 2019 and December 30, 2018, the debt outstanding under the Halifax Alabama Credit Agreement had a principal amount of $8,000, bore interest at an annual rate of 2% and had a maturity date of March 31, 2019.
As of March 31, 2019, the Company was in compliance with all of the covenants and obligations under the Halifax Alabama Credit Agreement. The amount outstanding was repaid in full on April 1, 2019.
Fair Value
The fair value of long-term debt was estimated at $451,060 as of March 31, 2019, based on discounted future contractual cash flows and a market interest rate adjusted for necessary risks, including the Company’s own credit risk as there are no rates currently observable in publicly traded debt markets of similar risk, terms and average maturities. Accordingly, the Company’s long-term debt under the Credit Facilities is classified within Level 3 of the fair value hierarchy.

15



Payment Schedule
As of March 31, 2019, scheduled principal payments of outstanding debt are as follows:
 
2019 (nine months remaining)
$
10,198

2020
4,395

2021
12,395

2022
424,072

 
451,060

Less:
 
Current
11,296

Unamortized original issue discount
1,723

Deferred financing costs
2,615

Long-term debt
$
435,426


(8) Related Party Transactions
As of March 31, 2019, the Company’s manager, FIG LLC (the “Manager”), which is an affiliate of Fortress Investment Group LLC ("Fortress"), and its affiliates owned approximately 1.1% of the Company’s outstanding stock and approximately 39.5% of the Company’s outstanding warrants. The Manager and its affiliates hold 2,904,811 stock options of the Company’s common stock as of March 31, 2019. During the three months ended March 31, 2019 and April 1, 2018, Fortress and its affiliates were paid $244 and $252 in dividends, respectively.
In addition, the Company’s Chairman, Wesley Edens, is also a member of the board of directors of the Manager and a Principal, the Co-Chief Executive Officer and a member of the board of directors of Fortress. The Company does not pay Mr. Edens a salary or any other form of compensation.
The Company’s Chief Executive Officer is an employee of Fortress (or one of its affiliates), and his salary is paid by Fortress (or one of its affiliates).
Management Agreement
On November 26, 2013, the Company entered into a management agreement with the Manager (as amended and restated, the “Management Agreement”). The Management Agreement requires the Manager to manage the Company’s business affairs, subject to the supervision of the Company’s board of directors (the “Board of Directors” or "Board"). The Management Agreement had an initial three-year term and will be automatically renewed for one-year terms thereafter unless terminated either by the Company or the Manager. The Manager is (a) entitled to receive from the Company a management fee, (b) eligible to receive incentive compensation that is based on the Company’s performance and (c) eligible to receive options to purchase New Media Common Stock upon the successful completion of an offering of shares of the Company’s Common Stock or any shares of preferred stock with an exercise price equal to the price per share paid by the public or other ultimate purchaser in the offering, see Note 10. In addition, the Company is obligated to reimburse certain expenses incurred by the Manager. The Manager is also entitled to receive a termination fee from the Company under certain circumstances.
The following provides the management and incentive fees recognized and paid to the Manager for the three months ended March 31, 2019 and April 1, 2018:
 
Three months ended
 
March 31, 2019
 
April 1, 2018
Management fee expense
$
2,456

 
$
2,367

Incentive fee expense

 
869

Management fees paid
3,711

 
2,657

Incentive fees paid
5,220

 
8,374

Reimbursement for expenses
550

 
444


The Company had an outstanding liability for all management agreement related fees of $3,006 and $10,696 at March 31, 2019 and December 30, 2018, respectively, included in accrued expenses.
(9) Income Taxes
Income tax expense includes Federal and state income taxes and interest and penalties on uncertain tax positions. Certain income and expenses are not reported in tax returns and financial statements in the same year. The tax effect of such temporary differences is reported as deferred income taxes. Deferred tax assets are reported net of a full valuation allowance since it is more likely than not that a tax benefit will not be realized.
The Company recorded an income tax benefit of $1,954 and $116 for the three months ended March 31, 2019 and April 1, 2018, respectively, using projected effective tax rates of approximately 18% and 20%, respectively. The projected effective tax rates are primarily attributable to indefinite lived deferred tax liabilities which are a source of income to support realization of certain deferred tax assets which are expected to become indefinite lived net operating losses when they reverse in future years.
The Company performs a quarterly assessment of its deferred tax assets and liabilities. ASC Topic 740, “Income Taxes” (“ASC 740”) limits the ability to use future taxable income to support the realization of deferred tax assets when a company has experienced a history of losses even if future taxable income were supported by detailed forecasts and projections.
In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences are projected to become deductible. The Company considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. The Company concluded that during the three months ended March 31, 2019, a net increase to the valuation allowance of $1,755 is necessary to offset additional deferred tax assets (primarily the tax benefit of the net operating loss). All of this amount was recognized through the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss.
The realization of the remaining deferred tax assets is primarily dependent on their scheduled reversals. Any changes to deferred taxes may require an additional valuation allowance. Any increase or decrease in the valuation allowance could result in an increase or decrease in income tax expense in the period of adjustment.
The computation of the annual expected effective tax rate at each interim period requires certain estimates and assumptions including, but not limited to, the expected operating (loss) income for the year, projections of the proportion of income or loss, permanent and temporary differences, and an assessment of the likelihood of recovering deferred tax assets generated in the current year. The accounting estimates used to compute the provision for income taxes may change as new events occur, more experience is acquired, or as additional information is obtained.
For the three months ended March 31, 2019, the difference between the expected tax benefit (excluding the minority interest) at the statutory rate of 21% ($2,323) and the recorded tax benefit of $1,954 is primarily attributable to the tax effect of the federal valuation allowance, state taxes and non-deductible expenses.
The Company and its subsidiaries file a U.S. federal consolidated income tax return. The U.S. federal and state statute of limitations generally remains open for the 2015 tax year and beyond.

16



(10) Equity
Loss Per Share
The following table sets forth the computation of basic and diluted loss per share (“EPS”):
 
Three months ended
 
March 31, 2019
 
April 1, 2018
Numerator for loss per share calculation:
 
 
 
Net loss attributable to New Media
$
(9,106
)
 
$
(665
)
Denominator for loss per share calculation:
 
 
 
Basic weighted average shares outstanding
59,965,036

 
52,934,640

Effect of dilutive securities:
 
 
 
Stock Options and Restricted Stock

 

Diluted weighted average shares outstanding
59,965,036

 
52,934,640


The Company excluded the following securities from the computation of diluted loss per share because their effect would have been antidilutive:
 
Three months ended
 
March 31, 2019
 
April 1, 2018
Stock warrants
1,362,479

 
1,362,479

Stock options
2,904,811

 
2,214,811

Unvested restricted stock
500,539

 
377,353


Equity
On May 17, 2017, the Board of Directors authorized the repurchase of up to $100,000 of the Company's common stock (“Share Repurchase Program”) over the next 12 months. On May 1, 2018, the Board of Directors authorized an extension of the Share Repurchase Program through May 18, 2019. Under the Share Repurchase Program, the Company may purchase its shares from time to time in the open market or in privately negotiated transactions.
Pursuant to the anti-dilution provisions of the Incentive Plan, the exercise price on the 652,311 remaining options granted to the Manager in 2014 were equitably adjusted during the three months ended March 31, 2019 from $12.95 to $11.46 as a result of return of capital distributions.
Pursuant to the anti-dilution provisions of the Incentive Plan, the exercise price on the 700,000 options granted to the Manager in 2015 were equitably adjusted during the three months ended March 31, 2019 from $18.94 to $17.45 as a result of return of capital distributions.
Pursuant to the anti-dilution provisions of the Incentive Plan, the exercise price on the 862,500 options granted to the Manager in 2016 were equitably adjusted during the three months ended March 31, 2019 from $13.24 to $11.75 as a result of return of capital distributions.
Pursuant to the anti-dilution provisions of the Incentive Plan, the exercise price on the 690,000 options granted to the Manager in 2018 were equitably adjusted during the three months ended March 31, 2019 from $16.45 to $14.96 as a result of return of capital distributions.

17



The following table includes additional information regarding the Manager stock options:
 
Number of Options
 
Weighted-Average Grant Date Fair Value
 
Weighted-Average Exercise Price
 
Weighted-Average Remaining Contractual Term (Years)
 
Aggregate Intrinsic Value ($000)
Outstanding at December 30, 2018
2,904,811

 
$
3.59

 
$
15.31

 
7.3
 
$

Outstanding at March 31, 2019
2,904,811

 
$
3.59

 
$
13.82

 
7.0
 
$

 
 
 
 
 
 
 
 
 
 
Exercisable at March 31, 2019
2,406,561

 
 
 
$
13.67

 
6.7
 
$


Accumulated Other Comprehensive Loss
The changes in accumulated other comprehensive loss by component for the three months ended March 31, 2019 and April 1, 2018 are outlined below.
 
Net actuarial loss
and prior service
cost (1)
For the three months ended March 31, 2019:
 
Balance at December 30, 2018
$
(6,881
)
Amounts reclassified from accumulated other comprehensive loss
(30
)
Balance at March 31, 2019
$
(6,911
)
For the three months ended April 1, 2018:
 
Balance at December 31, 2017
$
(5,461
)
Amounts reclassified from accumulated other comprehensive loss
(67
)
Balance at April 1, 2018
$
(5,528
)
 
(1) 
This accumulated other comprehensive loss component is included in the computation of net periodic benefit cost. See Note 12.
The following table presents reclassifications out of accumulated other comprehensive loss for the three months ended March 31, 2019 and April 1, 2018.
 
Amounts Reclassified from Accumulated Other Comprehensive Loss
 
Affected Line Item in the
Consolidated Statements of
Operations and Comprehensive Loss
 
Three months ended
 
 
March 31, 2019
 
April 1, 2018
 
Amortization of unrecognized (gain) loss
$
(30
)
 
$
(67
)
(1) 
 
Amounts reclassified from accumulated other comprehensive loss
(30
)
 
(67
)
  
Loss before income taxes
Income tax expense

 

  
Income tax benefit
Amounts reclassified from accumulated other comprehensive loss, net of taxes
$
(30
)
 
$
(67
)
  
Net loss
 
(1) 
This accumulated other comprehensive loss component is included in the computation of net periodic benefit cost. See Note 12.
Dividends
During the three months ended April 1, 2018, the Company paid dividends of $0.37 per share of Common Stock of New Media.

18



During the three months ended March 31, 2019, the Company paid dividends of $0.38 per share of Common Stock of New Media.
(11) Unearned Revenues
Changes in unearned revenue were as follows:
 
Circulation
 
Advertising
 
Other
 
Total
Three months ended March 31, 2019
 
 
 
 
 
 
 
Beginning balance
$
82,645

 
$
9,107

 
$
13,435

 
$
105,187

Acquired deferred revenues
6,378

 

 
917

 
7,295

Cash receipts, net of refunds
94,197

 
13,347

 
14,239

 
121,783

Revenue recognized
(96,038
)
 
(11,689
)
 
(10,017
)
 
(117,744
)
Ending Balance
$
87,182

 
$
10,765

 
$
18,574

 
$
116,521

 
 
 
 
 
 
 
 
Three months ended April 1, 2018
 
 
 
 
 
 
 
Beginning balance
$
73,874

 
$
6,615

 
$
7,675

 
$
88,164

Acquired deferred revenues
3,232

 

 
219

 
3,451

Cash receipts, net of refunds
86,035

 
9,769

 
8,680

 
104,484

Revenue recognized
(85,914
)
 
(8,089
)
 
(6,881
)
 
(100,884
)
Ending Balance
$
77,227

 
$
8,295

 
$
9,693

 
$
95,215


The Company records deferred revenues when cash payments are received in advance of the Company’s performance. The most significant unsatisfied performance obligation is the delivery of publications to subscription customers. The Company expects to recognize the revenue related to unsatisfied performance obligations over the next three to twelve months in accordance with the terms of the subscriptions. The increase in deferred revenue balance for the three months ended March 31, 2019 is primarily driven by acquisitions and the timing of events.
(12) Pension and Postretirement Benefits
As a result of the Enterprise News Media LLC (in 2005), Copley Press, Inc. (in 2007), and Times Publishing Company (in 2016) acquisitions, the Company maintains two pension and several postretirement medical and life insurance plans which cover certain employees. The Company uses the accrued benefit actuarial method and best estimate assumptions to determine pension costs, liabilities and other pension information for defined benefit plans. Amounts related to the postretirement benefit plans are immaterial.
The George W. Prescott Company pension plan, assumed in the Enterprise News Media, LLC acquisition, was amended to freeze all future benefit accruals by December 31, 2008, except for a select group of union employees whose benefits were frozen during 2009. The Times Publishing Company pension plan was frozen prior to the acquisition.
The following provides information on the pension plans for the three months ended March 31, 2019 and April 1, 2018:
 
Three months ended
 
March 31, 2019
 
April 1, 2018
Components of net periodic benefit costs:
 
 
 
Service cost
$
159

 
$
150

Interest cost
736

 
700

Expected return on plan assets
(967
)
 
(1,062
)
Amortization of unrecognized loss
39

 
67

     Net periodic credit cost
$
(33
)
 
$
(145
)

The service cost component of net periodic benefit cost is included within Operating Costs and the other components are included within Other Income in the Company’s Condensed Consolidated Statements of Operations and Comprehensive Loss. During the three months ended March 31, 2019, the Company paid $112 into the pension plans. The Company is expected to pay an additional $940 in employer contributions to the pension plans during the remainder of 2019.

19



(13) Fair Value Measurement
The Company measures and records in the accompanying condensed consolidated financial statements certain assets and liabilities at fair value on a recurring basis. ASC Topic 820 “Fair Value Measurements and Disclosures” establishes a fair value hierarchy for those instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs).
These inputs are prioritized as follows:
 
Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities;
Level 2: Inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities or market corroborated inputs; and
Level 3: Unobservable inputs for which there is little or no market data and which require the Company to develop their own assumptions about how market participants price the asset or liability.
The valuation techniques that may be used to measure fair value are as follows:
 
Market approach – Uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities;
Income approach – Uses valuation techniques to convert future amounts to a single present amount based on current market expectation about those future amounts;
Cost approach – Based on the amount that currently would be required to replace the service capacity of an asset (replacement cost).
The following table provides information for the Company’s major categories of financial assets and liabilities measured or disclosed at fair value on a recurring basis:
 
Fair Value Measurements at Reporting Date Using
 
 
 
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total 
Fair Value
Measurements
As of March 31, 2019
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
Cash and cash equivalents
$
24,597

 
$

 
$

 
$
24,597

Restricted cash
4,054

 

 

 
4,054

Total
$
28,651

 
$

 
$

 
$
28,651

 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
Contingent consideration
$

 
$

 
$
1,963

 
$
1,963

 
 
 
 
 
 
 
 
Redeemable noncontrolling interests
$

 
$

 
$
1,298

 
$
1,298

As of December 30, 2018
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
Cash and cash equivalents
$
48,651

 
$

 
$

 
$
48,651

Restricted cash
4,119

 

 

 
4,119

Total
$
52,770

 
$

 
$

 
$
52,770

 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
Contingent consideration
$

 
$

 
$
3,256

 
$
3,256

 
 
 
 
 
 
 
 
Redeemable noncontrolling interests
$

 
$

 
$
1,547

 
$
1,547


Contingent consideration relates to certain of the Company’s 2018 Acquisitions and are primarily payable to the sellers based on the passage of time or as a component of earnings above an agreed-upon target as detailed in the applicable purchase agreements. The decrease in contingent consideration since December 30, 2018, is the result of a measurement period adjustment.
Redeemable Noncontrolling Interests

20



The Company accounts for the redeemable noncontrolling interests in accordance with ASC 480-10-S99-3A, “Distinguishing Liabilities from Equity”, because the exercise is outside the control of the Company. The redeemable noncontrolling interests recorded at fair value are put arrangements held by the noncontrolling interests in the Company’s majority-owned events business.
The changes in redeemable noncontrolling interests classified as Level 3 measurements were as follows:
 
 
Three months ended
 
Year Ended
 
March 31, 2019
 
December 30, 2018
Beginning balance
$
1,547

 
$

Purchases (1)

 
1,636

Net loss
(249
)
 
(89
)
Ending balance
$
1,298

 
$
1,547



(1)
Refer to Note 2 “Acquisitions”.
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 only in certain circumstances (for example, when there is evidence of impairment).
For the 2019 acquisitions and 2018 acquisitions, the Company recorded the assets and liabilities under the acquisition method of accounting. Accordingly, the assets acquired and liabilities assumed were recorded at their fair value. Property, plant and equipment was valued using Level 2 inputs, and intangible assets were valued using Level 3 inputs. Refer to Note 2 for discussion of the valuation techniques, significant inputs, assumptions utilized, and the fair value recognized.
Refer to Note 7 for the discussion on the fair value of the Company’s total long-term debt.
(14) Commitments and Contingencies
The Company is and may become involved from time to time in legal proceedings in the ordinary course of its business, including but not limited to with respect to such matters as libel, invasion of privacy, intellectual property infringement, wrongful termination actions and complaints alleging employment discrimination, and regulatory investigations and inquiries. In addition, the Company is involved from time to time in governmental and administrative proceedings concerning employment, labor, environmental and other claims. Insurance coverage mitigates potential loss for certain of these matters. Historically, such claims and proceedings have not had a material adverse effect on the Company’s condensed consolidated results of operations or financial position. Although the Company is unable to predict with certainty the eventual outcome of any litigation, regulatory investigation or inquiry, in the opinion of management, the Company does not expect its current and any threatened legal proceedings to have a material adverse effect on the Company’s business, financial position or consolidated results of operations.  Given the inherent unpredictability of these types of proceedings, however, it is possible that future adverse outcomes could have a material effect on the Company’s financial results.
Restricted cash of $4,054 and $4,119 at March 31, 2019 and December 30, 2018, respectively, was primarily held as cash collateral for certain business operations.
(15) Subsequent Events
Indebtedness
On April 1, 2019, the Company paid the outstanding balance under the Halifax Alabama Credit Agreement in the amount of $8,000 with cash on hand.
Dividends
On May 2, 2019, the Company announced a first quarter 2019 cash dividend of $0.38 per share of Common Stock, par value $0.01 per share, of New Media. The dividend will be paid on May 22, 2019, to shareholders of record as of the close of business on May 13, 2019.


21