GANNETT CO., INC. MANAGEMENT REPORT AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS (Form 10-K)

PREVIEW

We are a subscription-led and digitally-focused media and marketing solutions
company committed to empowering communities to thrive. Gannett operates a
scalable, data-driven media platform that aligns with our consumer and digital
marketing trends. We aim to be the premier source for clarity, connections, and
solutions within our communities. Our strategy is focused on driving audience
growth and engagement by delivering deeper content experiences to our consumers,
while offering the products and marketing expertise our advertisers desire. The
execution of this strategy is expected to enable us to continue our evolution
from a more traditional print media business to a digitally-focused content
platform.

Our current portfolio of media assets includes USA TODAY, local media
organizations in 45 states in the U.S., and Newsquest, a wholly-owned subsidiary
operating in the United Kingdom ("U.K.") with more than 120 local media brands.
We also operate a digital marketing solutions company branded LOCALiQ, that
provides a cloud-based platform of products to enable small and medium
businesses ("SMBs") to accomplish their marketing goals. In addition, we run
what we believe is the largest media-owned events business in the U.S., USA
TODAY NETWORK Ventures.

Through USA TODAY, our local property network, and Newsquest, we deliver
high-quality, trusted content with a commitment to balanced, unbiased
journalism, where and when consumers want to engage with it on virtually any
device or platform. Additionally, we have strong relationships with hundreds of
thousands of local and national businesses in both our U.S. and U.K. markets due
to our large local and national sales forces and a robust advertising and
digital marketing solutions product suite. We report in two segments, Publishing
and Digital Marketing Solutions ("DMS"). We also have a Corporate and other
category that includes activities not directly attributable to a specific
reportable segment and includes broad corporate functions such as legal, human
resources, accounting, analytics, finance, and marketing. A full description of
our reportable segments is included in Note 15 - Segment reporting of the notes
to the Consolidated financial statements.

Until November 19, 2019, our corporate name was New Media Investment Group Inc.
("Legacy New Media") and Gannett Co., Inc. was a separate publicly traded
company. On November 19, 2019, New Media completed its acquisition of Gannett
Co., Inc. (which was renamed Gannett Media Corp. and is referred to as "Legacy
Gannett"). In connection with the acquisition, New Media changed its name to
Gannett Co., Inc. and assumed Legacy Gannett's ticker symbol "GCI" (having
previously traded under "NEWM"). In addition, effective at 11:59 p.m. Eastern
Time on December 31, 2020, our former management agreement (the "Former
Management Agreement") with FIG LLC (the "Former Manager") was terminated.

A discussion of our results of operations and changes in financial condition for
2020 as compared to 2019 is included in Part II, Item 7 of our   Annual Report
on Form 10-K for the fiscal year ended December 31,     2020   (the "2020 Form
10-K"), filed with the Securities and Exchange Commission (the "SEC") on
February 26, 2021, and is incorporated by reference herein.

Business trends

We considered several industry trends when evaluating our business strategy:

•Print advertising continues to decline as the audience increasingly moves to
digital platforms. We seek to optimize our print operations to efficiently
manage for this declining print audience. We are focused on converting the
growing digital audience into digital-only subscribers to our publications.
•SMBs are facing an increasingly complex marketing environment and need to
create digital presence to capture audience online. We offer a broad suite of
DMS products that offer a single, unified solution to meet their digital
marketing needs.
•Consumers are looking for experience-based, emotional connections and
communities. USA TODAY NETWORK Ventures was designed to celebrate local
communities and create opportunities for meaningful in-person and virtual
experiences. However, the COVID-19 pandemic continues to negatively impact our
ability to secure necessary permitting for in-person events and consumers'
desire to attend or participate in live events.
•Digital consumer engagement has declined in comparison to such engagement at
the height of the COVID-19 pandemic in the second quarter of 2020, as consumers
have resumed certain pre-pandemic activities. In addition, the overall news
cycle, specifically political coverage, has slowed, driving less consumer
engagement to our sites.
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•Newsprint availability is constrained due to manufacturing facility closures
and on-going capacity shifts between newsprint and specialty paper grades.
Further, transportation and other issues have challenged and continue to
challenge supplier deliveries, including delays that worsened during the fourth
quarter of 2021 with increased seasonal demand associated with the holidays.
Additionally, inflationary pressures are impacting the overall cost of newsprint
and delivery services.

Recent Developments

Modification of the new senior secured term loan

On January 31, 2022, Gannett Holdings LLC ("Gannett Holdings"), our wholly-owned
subsidiary, entered into an amendment (the "Term Loan Amendment") to its New
Senior Secured Term Loan to provide for new incremental senior secured term
loans (the "Incremental Term Loans") in an aggregate principal amount of
$50 million. The Incremental Term Loans have substantially identical terms as
the New Senior Secured Term Loan and are treated as a single tranche with the
New Senior Secured Term Loan. The Term Loan Amendment also amended the New
Senior Secured Term Loan to transition the interest rate base from LIBOR to the
Adjusted Term SOFR and to permit the repurchase of up to $50 million of Common
Stock under the Stock Repurchase Program (defined below) consummated on or prior
to December 31, 2022, in addition to capacity for Gannett Holdings to make
restricted payments, including stock repurchases, currently permitted under
other provisions of the New Senior Secured Term Loan and our other debt
facilities, including the 2026 Senior Secured Notes Indenture and the 2027 Notes
Indenture.

Stock Repurchase Program

On February 1, 2022, the Board of Directors authorized the repurchase of up to
$100 million of our Common Stock (the "Stock Repurchase Program"). Repurchases
may be made from time to time through open market purchases or privately
negotiated transactions, pursuant to one or more plans established pursuant to
Rule 10b5-1 under the Exchange Act or by means of one or more tender offers, in
each case, as permitted by securities laws and other legal requirements. The
amount and timing of the purchases will depend on a number of factors including,
but not limited to, the price and availability of the Company's shares, trading
volume, capital availability, Company performance and general economic and
market conditions. The Stock Repurchase Program may be suspended or discontinued
at any time.

Certain issues affecting comparability

The following items affect period-to-period comparisons and will continue to affect period-to-period comparisons for future results:

Integration and reorganization costs

For the year ended December 31, 2021, we incurred Integration and reorganization
costs of $49.3 million. Of the total costs incurred, $16.5 million were related
to severance activities and $32.8 million were related to other costs, including
those for the purpose of consolidating operations, including costs associated
with systems integrations.

For the year ended December 31, 2020, we incurred Integration and reorganization
costs of $145.7 million. Of the total costs incurred, $86.3 million were related
to severance activities and $59.4 million were related to other costs, including
those for the purpose of consolidating operations and ongoing implementation of
our plans to reduce costs and preserve cash flow, including a $30.4 million
expense related to the early termination of the Former Management Agreement with
the Former Manager.

For the years ended December 31, 2021 and 2020, we ceased operations of 21 and
40 printing operations, respectively, as part of the synergy and ongoing cost
reduction programs. As a result, we recognized accelerated depreciation of $15.3
million and $49.6 million during the years ended December 31, 2021 and 2020,
respectively.

Asset impairments

For the year ended December 31, 2021, we recognized Asset impairments of $4.0
million related to the Publishing segment due primarily to the impairment of
real estate held for sale.

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For the year ended December 31, 2020, we recognized Asset impairments of $11.0
million, primarily related to the Publishing segment as a result of the annual
impairment analysis as well as fixed asset disposals related to the continued
consolidation of operations and as a result of our recoverability test for
long-lived asset groups performed as of June 30, 2020.

Good will and immaterial depreciation

There was none Good will and intangible depreciation for the year ended December 31, 2021.

For the year ended December 31, 2020, we recognized $393.4 million in Goodwill
and intangible impairments primarily due to the impact of the COVID-19 pandemic
on our operations.
Foreign currency

Our U.K. publishing operations are conducted through our Newsquest subsidiary.
In addition, we have foreign operations in regions such as Canada, Australia,
New Zealand and India. Earnings from operations in foreign regions are
translated into U.S. dollars at average exchange rates prevailing during the
period, and assets and liabilities are translated at exchange rates in effect at
the balance sheet date. Currency translation fluctuations may impact revenue,
expense, and operating income results for our international operations.

Outlook for 2022

Strategy

Our areas of strategic focus for 2022 include:

Accelerating digital subscriber growth

The broad reach of our newsroom network, linking leading national journalism at
USA TODAY, our local property network in 45 states in the U.S. and Newsquest in
the U.K. with more than 120 local media brands, gives us the ability to deepen
our relationships with consumers at both the national and local levels. We bring
consumers local news and information that impacts their day-to-day lives while
keeping them informed of the national events that impact their country. We
believe this local content is not readily obtainable elsewhere, and we are able
to deliver that content to our customers across multiple print and digital
platforms. As such, a key element of our consumer strategy is growing our paid
digital-only subscriber base. As part of our digital subscriber growth strategy,
we expect to continue to develop and launch new digital subscription offerings
tailored to specific topics and audiences.

Drive growth in digital marketing services by engaging more customers in a subscriber relationship

We are now of significant digital scale, with unique reach at both the national
and local community levels. We expect to leverage our integrated sales structure
and lead generation strategy to continue to aggressively expand our digital
marketing services business into our local markets, both domestically and
internationally. Given our extensive client base and volume of digital
campaigns, we plan to use data and insights to inform new and dynamic
advertising products, such as our "freemium" offering to complement our sales
structures, that we believe will deliver superior results.

Optimize our traditional activities in printing and advertising

We plan to continue to drive the profitability of our traditional print
operations through the continued evolution of the core print product, economies
of scale, process improvements, and operational focus. We are committed to
improving customer service and delivering high quality products for our print
subscribers. Print advertising continues to offer a compelling branding
opportunity across our network due to our scale and unique reach at both the
national and local community levels.

Prioritize investments in growing businesses that have significant potential and support our vision

Leveraging our unique footprint, trusted brands and media reach, we identify, experiment with and invest in companies with growth potential. USA TODAY NETWORK Companies is a good example of such an experience that has grown considerably since its inception in 2015. In 2021, we organized more than 250 events and maintained 92% of USA TODAY NETWORK Ventures’ turnover compared to 2020.

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————————————————– ——————————

Table of Content Building on our inclusive and diverse culture to focus on meaningful purpose, individual growth and customer centricity

Inclusion, Diversity and Equity are core pillars of our organization and
influence all that we do, from recruiting, development and retention, to
day-to-day operations including hiring, onboarding, education, leadership
training and professional development. We have published our inclusion goals for
2025 and our ongoing efforts to progress toward them, including an annual
workforce diversity report, which was released for the first time in the first
quarter of 2021. We believe aligning our culture around empowering our
communities to thrive and putting our customers at the center of everything we
do will provide the foundation for our broader strategic efforts.

Impacts of the COVID-19 pandemic

As a result of the COVID-19 pandemic, we experienced a significant decline in
Advertising and marketing services revenues, which accelerated the secular
declines that we continue to experience. In addition, we continue to experience
constraints on the sales of single copy newspapers, largely tied to business
travel, and in-person events. While we have seen operating trends improve since
the second quarter of 2020, which represents the quarter that was most
significantly impacted by the pandemic, we expect that the COVID-19 pandemic
will continue to have a negative impact on our business and results of
operations in the near-term, including lower revenues associated with events and
lower sales of single copy newspapers, largely as a result of reduced business
travel. If the COVID-19 pandemic were to revert to conditions that existed
during 2020, including measures to help mitigate and control the spread of the
virus, we would expect to experience further negative impacts in Advertising and
marketing services revenues and Circulation revenues.

In connection with the Coronavirus Aid, Relief and Economic Security Act (the
"CARES Act"), we received Paycheck Protection Program ("PPP") funding in support
of certain of our locations that were meaningfully affected by the COVID-19
pandemic totaling $16.4 million, which was included in Operating activities in
the Consolidated statements of cash flows for the year ended December 31, 2021.
As permitted under the CARES Act, during 2021, we received forgiveness for all
of such loans, which was recognized in earnings in the Consolidated statements
of operations and comprehensive income (loss) as an offset to Operating costs of
$12.1 million and Selling, general, and administrative expenses of $4.3 million.

Seasonality

Our revenues are subject to moderate seasonality, due primarily to fluctuations
in advertising volumes. Advertising and marketing services revenues for our
Publishing segment are typically highest in the fourth quarter, primarily due to
fluctuations in advertising volumes tied to holidays and regional weather and
activity in our various markets, some of which have a high degree of seasonal
residents and tourists.
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RESULTS OF OPERATIONS

Consolidated Summary

The following table summarizes our operating results by segment for the years ended December 31, 2021 and 2020.

                                                                         Year ended December 31,
In thousands, except per share amounts            2021                 2020               Change                % Change
Operating revenues:
Publishing                                   $ 2,886,735          $ 3,080,447          $ (193,712)                     (6  %)
Digital Marketing Solutions                      442,299              428,605              13,694                       3  %
Corporate and other                                8,371               10,960              (2,589)                    (24  %)
Intersegment eliminations                       (129,322)            (114,342)            (14,980)                     13  %
Total operating revenues                       3,208,083            3,405,670            (197,587)                     (6  %)
Operating expenses:
Publishing                                     2,653,855            3,268,911            (615,056)                    (19  %)
Digital Marketing Solutions                      422,506              481,177             (58,671)                    (12  %)
Corporate and other                              151,967              217,812             (65,845)                    (30  %)
Intersegment eliminations                       (129,322)            (114,342)            (14,980)                     13  %
Total operating expenses                       3,099,006            3,853,558            (754,552)                    (20  %)
Operating income (loss)                          109,077             (447,888)            556,965                         ***
Non-operating expense                            196,998              257,959             (60,961)                    (24  %)
Loss before income taxes                         (87,921)            (705,847)            617,926                     (88  %)
Provision (benefit) for income taxes              48,250              (33,450)             81,700                         ***
Net loss                                     $  (136,171)         $  (672,397)         $  536,226                     (80  %)
Net loss attributable to noncontrolling
interests                                         (1,209)              (1,918)                709                     (37  %)
Net loss attributable to Gannett             $  (134,962)         $  (670,479)         $  535,517                     (80  %)
Loss per share attributable to Gannett -
basic                                        $     (1.00)         $     (5.09)         $     4.09                     (80  %)
Loss per share attributable to Gannett -
diluted                                      $     (1.00)         $     (5.09)         $     4.09                     (80  %)


*** Indicates a percent change in absolute value greater than 100.

Intersegment eliminations in the preceding table represent digital advertising
marketing services revenues and expenses associated with products sold by our
U.S. local publishing sales teams but fulfilled by our DMS segment. When
discussing segment results, these revenues and expenses are presented gross but
are eliminated in consolidation.

operating income

Our Publishing segment generates revenues mainly through Advertising and
marketing and Circulation. Advertising and marketing services revenues are
generated by the sale of local, national, and classified print advertising
products, digital advertising offerings such as digital classified
advertisements, digital media such as display advertisements run on our
platforms as well as third-party sites, and digital marketing services delivered
by our DMS segment. Circulation revenues are derived from home delivery, digital
distribution and single copy sales of our publications. Other revenues are
derived mainly from commercial printing, distribution arrangements, revenues
from our events business, digital content syndication and affiliate revenues and
third-party newsprint sales.

Our DMS segment primarily generates revenue through advertising and marketing services through several services, including search advertising, display advertising, search optimization, social media, website development, product web presence management, customer relationship management and software-as-a-service solutions.

Revenue in our Enterprise and Other category is primarily generated from sales of cloud-based products with expert advice and support.

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Operating expenses

Operating expenses mainly consist of the following items:

•Operating costs at the Publishing segment include labor, newsprint and delivery
costs and at the DMS segment include the cost of online media acquired from
third parties and costs to manage and operate our marketing solutions and
technology infrastructure;
•Selling, general and administrative expenses include labor, payroll, outside
services, benefits costs, and bad debt expense;
•Depreciation and amortization;
•Integration and reorganization costs include severance charges and other costs,
including those for the purpose of consolidating our operations (i.e., facility
consolidation expenses and integration-related costs);
•Impairment charges, including costs incurred related to goodwill, intangible
assets and property, plant and equipment;
•Gains or losses on the sale or disposal of assets; and
•Other operating expenses, including third-party debt expenses as well as
acquisition-related costs.

Refer to the Segment results section below for a discussion of operating results by segment.

Non-operating expenses (income)

Interest expense: For the year ended December 31, 2021, Interest expense was
$135.7 million compared to $228.5 million for 2020. The decrease in interest
expense was mainly due to a lower effective interest rate driven by the
refinancing of our five-year, senior-secured 11.5% term loan facility with
Apollo Capital Management, L.P. (the "Acquisition Term Loan") in the first
quarter of 2021 and a lower debt balance compared to the same period in 2020.

Loss on early extinguishment of debt: For the year ended December 31, 2021, Loss
on early extinguishment of debt was $48.7 million mainly due to the refinancing
of our five-year, senior-secured term loan facility with the lenders from time
to time party thereto and Citibank, N.A., as collateral agent and administrative
agent for the lenders, in an aggregate principal amount of $1.045 billion (the
"5-Year Term Loan") in the fourth quarter of 2021 and the refinancing of the
Acquisition Term Loan in the first quarter of 2021. For the year ended December
31, 2020, Loss on early extinguishment of debt was $43.8 million, mainly due to
the retirement of $497.1 million of the Acquisition Term Loan using the proceeds
from the issuance of our 6.0% Senior Secured Convertible Notes due 2027 (the
"2027 Notes") for the same amount.

Non-operating pension income: For the year ended December 31, 2021,
Non-operating pension income was $95.4 million compared to $72.1 million for
2020. The increase in Non-operating pension income was primarily due to the
increased expected return on plan assets held by the Gannett Retirement Plan
(the "GR Plan") and lower interest costs on benefit obligations.

Loss on convertible notes derivative: For the years ended December 31, 2021 and
2020, Loss on convertible notes derivative was $126.6 million and $74.3 million,
respectively, reflecting the increase in the fair value of the derivative
liability as a result of the increase in our stock price.

Other non-operating income, net: Other non-operating income, net, consisted of
certain items that fall outside of our normal business operations. For the year
ended December 31, 2021, Other non-operating income, net, was $18.7 million
compared to $16.5 million in 2020. The increase in Other non-operating income,
net was primarily due to the reversal of an accrual related to a legal matter in
2021, partially offset by the absence of a gain on disposal of a cost method
investment held by the DMS segment in 2020.

Provision (benefit) for income taxes

The following table summarizes our pre-tax loss before income taxes and income
tax accounts.
                                                     Year ended December 31,
          In thousands                                2021             2020
          Loss before income taxes               $    (87,921)     $ 

(705,847)

Provision (profit) for income taxes 48,250 (33,450)

          Effective tax rate                                 NM           

4.7%

NM indicates not significant.

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Our effective tax rate for the year ended December 31, 2021 was not meaningful
given the income tax provision associated with a loss before income taxes. The
tax provision is principally impacted by the derivative revaluation, which is
nondeductible for federal tax purposes, the creation of valuation allowances on
non-deductible interest expense carryforwards, and deemed income from global
intangible low-taxed income inclusion, offset by the change in the deferred tax
rate from 19% to 25% in the U.K. and the income tax impact of PPP loan
forgiveness.

Our effective tax rate for the year ended December 31, 2020 was 4.7%. The rate
was primarily impacted by the tax effect of non-deductible asset impairments,
non-deductible officers' compensation, disallowed Loss on convertible notes
derivative and the increase in valuation allowances against non-deductible
interest expense and capital loss carryforwards. Without the federal and foreign
valuation allowance activity, our effective tax rate would have been 18.5%,
which is lower than the statutory rate primarily due to the reasons above.

Several economic relief bills have been enacted into law in response to the
COVID-19 pandemic. We continue to monitor the applicability of federal and state
legislation to the Company, as well as regulatory interpretations of enacted
legislation that provide economic relief in response to the pandemic, and expect
to utilize these provisions as we determine necessary or desirable.

Net loss attributable to Gannett and diluted loss per share attributable to Gannett

For the year ended December 31, 2021, Net loss attributable to Gannett and
diluted loss per share attributable to Gannett were $135.0 million and $1.00,
respectively, compared to $670.5 million and $5.09 for the year ended December
31, 2020, respectively. The change reflects the various items discussed above.

Segment Results

Publishing segment

A summary of the results of our publishing sector is presented below:

                                                                        Year ended December 31,
In thousands                                     2021                 2020               Change               % Change
Operating revenues:
Advertising and marketing services          $ 1,337,203          $ 1,409,500          $ (72,297)                     (5  %)
Circulation                                   1,249,669            1,391,983           (142,314)                    (10  %)
Other                                           299,863              278,964             20,899                       7  %
Total operating revenues                      2,886,735            3,080,447           (193,712)                     (6  %)
Operating expenses:
Operating costs                               1,722,473            1,842,825           (120,352)                     (7  %)
Selling, general and administrative
expenses                                        736,766              787,770            (51,004)                     (6  %)
Depreciation and amortization                   157,212              221,746            (64,534)                    (29  %)
Integration and reorganization costs             15,960               60,852            (44,892)                    (74  %)
Asset impairments                                 3,976               10,312             (6,336)                    (61  %)
Goodwill and intangible impairments                   -              352,947           (352,947)                   (100  %)
Loss (gain) on sale or disposal of assets,
net                                              17,468               (7,541)            25,009                         ***
Total operating expenses                      2,653,855            3,268,911           (615,056)                    (19  %)
Operating income (loss)                     $   232,880          $  (188,464)         $ 421,344                         ***

*** Indicates a percent change in absolute value greater than 100.

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Operating revenues

The following table provides the breakout of total operating revenues by
category:
                                                                        Year ended December 31,
In thousands                                     2021                 2020               Change                % Change
Local and national print                    $   502,014          $   584,929          $  (82,915)                    (14  %)
Classified print                                290,272              316,392             (26,120)                     (8  %)
Print advertising                               792,286              901,321            (109,035)                    (12  %)

Digital media                                   361,288              341,259              20,029                       6  %
Digital marketing services                      131,733              108,930              22,803                      21  %
Digital classified                               51,896               57,990              (6,094)                    (11  %)
Digital advertising and marketing services      544,917              508,179              36,738                       7  %

Advertising and marketing services            1,337,203            1,409,500             (72,297)                     (5  %)

Print circulation                             1,149,181            1,316,695            (167,514)                    (13  %)
Digital-only circulation                        100,488               75,288              25,200                      33  %
Circulation                                   1,249,669            1,391,983            (142,314)                    (10  %)

Other                                           299,863              278,964              20,899                       7  %

Total operating revenues                    $ 2,886,735          $ 3,080,447          $ (193,712)                     (6  %)



The overall decrease in Print advertising revenues for the year ended December
31, 2021 compared to 2020 was driven primarily by secular industry trends
impacting all categories and the absence of $28.0 million of revenues related to
a business we divested in the fourth quarter of 2020. For the year ended
December 31, 2021, Local and national print advertising revenues decreased
compared to 2020 primarily due to lower advertising volumes, including a
decrease in advertiser inserts. For the year ended December 31, 2021, Classified
print advertising revenues decreased compared to 2020 due to lower spend on
classified advertisements, including legal, real estate, and automotive.

The overall increase in Digital advertising and marketing services revenues for
the year ended December 31, 2021 compared to 2020 was due to continued
improvement in operating trends since the prior year impacts of the COVID-19
pandemic, partially offset by the absence of $5.6 million of revenues associated
with a business we divested in the fourth quarter of 2020. The increase in
Digital media revenues for the year ended December 31, 2021 compared to 2020 was
driven by a higher mix of premium media sold, including premium sports products,
as well as an overall increase in pricing across both owned and operated sites
as well as third-party sites. The increase in Digital marketing services
revenues for the year ended December 31, 2021 compared to 2020 was due to higher
average revenue per customer for digital marketing services sold primarily as a
result of focusing on strategic initiatives across our local marketing sales
force and a realigned product suite. The decrease in Digital classified revenues
for the year ended December 31, 2021 compared to 2020 was due to reduced spend
in automotive advertisements.

For the year ended December 31, 2021, Print circulation revenues decreased
compared to 2020, driven by a reduction in the volume of home delivery
subscribers, a decline in single copy sales reflecting the overall secular
trends impacting the industry, the absence of $10.2 million of revenues related
to a business we divested in the fourth quarter of 2020, and the impact of the
COVID-19 pandemic on business travel and overall consumer activity, partially
offset by an increase in pricing. For the year ended December 31, 2021,
Digital-only circulation revenues increased compared to 2020, driven by an
increase of 49% in paid digital-only subscribers, including those subscribers on
introductory subscription offers, to approximately 1.6 million compared to the
prior year.

For the year ended December 31, 2021, Other revenues increased compared to 2020
primarily due to an increase in digital content syndication volume, an increase
in digital other revenues, as well as commercial print growth in local markets
driven by continued improvement in operating trends since the prior year impacts
of the COVID-19 pandemic and customer retention, partially offset by a decline
in event revenues as a result of the COVID-19 pandemic and the resulting
negative impact on the
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ability to host in-person events, and the absence of $8.8 million of revenues
related to a business we divested in the fourth quarter of 2020.

Operating Expenses

For the year ended December 31, 2021, Operating costs decreased $120.4 million
compared to 2020. The following table provides the breakout of the decrease in
Operating costs:
                                                Year ended December 31,
In thousands                      2021             2020            Change        % Change
Newsprint and ink             $   105,557      $   130,912      $  (25,355)        (19  %)
Distribution                      431,412          406,784          24,628           6  %
Compensation and benefits         553,807          629,643         (75,836)        (12  %)
Outside services                  338,292          333,435           4,857           1  %
Other                             293,405          342,051         (48,646)        (14  %)
Total operating costs         $ 1,722,473      $ 1,842,825      $ (120,352)         (7  %)



For the year ended December 31, 2021, Newsprint and ink costs decreased compared
to 2020, due to lower print circulation driven by the decline in volume of home
delivery and single copy sales, as well as declines in print advertising
volumes, partially offset by an increase in newsprint rates.

For the year ended December 31, 2021, Distribution costs increased compared to
2020, due to an increase in distribution postage costs, as well as activity in
our commercial print business, partially offset by the decline in print
circulation and print advertising volumes.

For the year ended December 31, 2021, Compensation and benefits costs decreased
compared to 2020, due to a reduction in costs associated with ongoing
integration efforts, including headcount reductions, as well as the benefit in
2021 of cost containment initiatives implemented in 2020 in connection with the
COVID-19 pandemic and $12.1 million of PPP loan forgiveness, offset by the
absence of the temporary reduction of expenses in the prior year, such as
furloughs and wage reductions in response to the COVID-19 pandemic.

For the year ended December 31, 2021, Outside services costs, which include
outside printing, professional services fulfilled by third parties, paid search
and ad serving, feature services, and credit card fees, increased compared to
2020, due to higher costs associated with the increase in Digital media and
Digital marketing services revenues, including paid search fees and affiliate
revenue share as well as other related costs, partially offset by a reduction in
costs associated with ongoing integration efforts and the benefit in 2021 of
cost containment initiatives implemented in 2020 in connection with the COVID-19
pandemic.

For the year ended December 31, 2021Other costs, which primarily include travel and installation and equipment costs, decreased compared to 2020, due to reduced costs associated with ongoing integration efforts and cost containment initiatives , including the consolidation of printing facilities.

For the year ended December 31, 2021Selling, general and administrative expenses decreased by $51.0 million compared to 2020. The following table shows the breakdown of the decrease in selling, general and administrative expenses:

                                                                      Year ended December 31,
In thousands                                    2021               2020              Change               % Change
Compensation and benefits                   $ 381,437          $ 396,017          $ (14,580)                     (4  %)
Outside services and other                    355,329            391,753            (36,424)                     (9  %)
Total selling, general and administrative
expenses                                    $ 736,766          $ 787,770          $ (51,004)                     (6  %)



For the year ended December 31, 2021, Compensation and benefits costs decreased
compared to 2020, due to a reduction in costs associated with ongoing
integration efforts, including headcount reductions, the benefit in 2021 of cost
containment initiatives implemented in 2020 in connection with the COVID-19
pandemic, and PPP loan forgiveness of $4.3 million, partially offset by the
impact of higher payroll and commission expenses driven by the growth in
Advertising and marketing services revenues, an increase in costs associated
with employee insurance benefits and the absence of the temporary reduction of
expenses in the prior year, such as furloughs and wage reductions in response to
the COVID-19 pandemic.
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For the year ended December 31, 2021, Outside services and other costs, which
include services fulfilled by third parties, decreased compared to 2020, due to
lower facility related costs, lower bad debt expense, a reduction in costs
associated with ongoing integration efforts, and the benefit in 2021 of cost
containment initiatives implemented in 2020 in connection with the COVID-19
pandemic, partially offset by increases in professional and promotion fees.

For the year ended December 31, 2021, Depreciation and amortization expense
decreased compared to 2020, due to a decrease in accelerated depreciation of
$35.6 million as a result of a decrease in the number of printing facilities
closed in 2021 compared to 2020, along with a decrease in depreciation expense
reflecting the impact of closing and consolidating print facilities in 2020.

For the year ended December 31, 2021, Integration and reorganization costs
decreased compared to 2020, mainly due to a decline in severance costs of $41.1
million. For the year ended December 31, 2021, severance costs were primarily
related to our ongoing integration activities and facility consolidation and for
the year ended December 31, 2020, severance costs were related to our voluntary
severance program and our plan to outsource certain processes to a third party,
as well as continued consolidation of our operations as a result of ongoing
implementation of our plans to reduce costs and preserve cash flow.

For the year ended December 31, 2021, we recorded Asset impairment charges of
$4.0 million due to the impairment of real estate related to disposals. For the
year ended December 31, 2020, we recorded Asset impairment charges of $10.3
million as a result of a recoverability test for long-lived assets, as well as
fixed asset disposals related to the continued consolidation of operations.

There were no Goodwill and intangible impairment charges incurred in 2021. For
the year ended December 31, 2020, we recorded a Goodwill and intangible
impairment charge of $352.9 million due to the impact of the COVID-19 pandemic
on our operations.

For the year ended December 31, 2021, the change in Loss (gain) on sale or
disposal of assets, net compared to 2020 was driven by the loss on the sale of
assets as part of our plan to monetize non-core assets, partially offset by a
gain on sale of real estate previously owned by Newsquest in 2021, compared to
the gain related to the sale of assets in 2020.

Publishing sector adjusted EBITDA

                                                                       Year ended December 31,
In thousands                                     2021               2020               Change               % Change

Net income (loss) attributable to Gannett $336,099 $(108,606)

         $ 444,705                         ***
Interest expense                                     -                 142               (142)                   (100  %)
Non-operating pension income                   (95,357)            (71,858)           (23,499)                     33  %
Depreciation and amortization                  157,212             221,746            (64,534)                    (29  %)
Integration and reorganization costs            15,960              60,852            (44,892)                    (74  %)

Asset impairments                                3,976              10,312             (6,336)                    (61  %)
Goodwill and intangible impairments                  -             352,947           (352,947)                   (100  %)
Loss (gain) on sale or disposal of assets,
net                                             17,468              (7,541)            25,009                         ***
Other items                                     (1,385)              1,201             (2,586)                        ***

Adjusted EBITDA (non-GAAP basis)(a) $433,973 $459,195

         $ (25,222)                     (5  %)
Net income (loss) attributable to Gannett
margin                                            11.6  %             (3.5) %
Adjusted EBITDA margin (non-GAAP
basis)(a)(b)                                      15.0  %             14.9  %


*** Indicates an absolute value percentage change greater than 100.
(a) See "Non-GAAP Financial Measures" below for additional information about
non-GAAP measures.
(b) We define Adjusted EBITDA margin as Adjusted EBITDA divided by total
Operating revenues.

The decline in adjusted EBITDA of our Publishing sector compared to 2020 is mainly attributable to the changes mentioned above.

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Digital Marketing Solutions segment

A summary of our Digital Marketing Solutions segment results is presented below:

                                                                      Year ended December 31,
In thousands                                    2021               2020              Change               % Change
Operating revenues:
Advertising and marketing services          $ 441,394          $ 411,940          $  29,454                       7  %
Other                                             905             16,665            (15,760)                    (95  %)
Total operating revenues                      442,299            428,605             13,694                       3  %
Operating expenses:
Operating costs                               299,014            276,859             22,155                       8  %
Selling, general and administrative
expenses                                       92,325            128,834            (36,509)                    (28  %)
Depreciation and amortization                  30,061             25,878              4,183                      16  %
Integration and reorganization costs            1,710              6,663             (4,953)                    (74  %)

Asset impairments                                   -                717               (717)                   (100  %)
Goodwill and intangible impairments                 -             40,499            (40,499)                   (100  %)
(Gain) loss on sale or disposal of assets,
net                                              (604)             1,727             (2,331)                        ***
Total operating expenses                      422,506            481,177            (58,671)                    (12  %)
Operating income (loss)                     $  19,793          $ (52,572)         $  72,365                         ***

*** Indicates a percent change in absolute value greater than 100.

operating income

For the year ended December 31, 2021, Advertising and marketing services
revenues increased compared to 2020 due to growth in the core direct business as
well as a growth in revenues associated with local markets and a continued
improvement in operating trends since the prior year impacts of the COVID-19
pandemic, partially offset by the absence of revenues in 2021 of $19.6 million
associated with both the change in media rebate programs and a business we
divested in the third quarter of 2020.

For the year ended December 31, 2021Other income decreased compared to 2020 due to the absence of $13.1 million revenue related to a business that we divested in the fourth quarter of 2020.

Operating Expenses

For the year ended December 31, 2021, Operating costs increased $22.2 million
compared to 2020. The following table provides the breakout of the increase in
Operating costs:
                                             Year ended December 31,
In thousands                     2021           2020          Change       % Change
Outside services              $ 260,504      $ 216,847      $ 43,657          20  %
Compensation and benefits        31,136         44,441       (13,305)        (30  %)
Other                             7,374         15,571        (8,197)        (53  %)
Total operating costs         $ 299,014      $ 276,859      $ 22,155           8  %



For the year ended December 31, 2021, Outside services costs, which include
professional services fulfilled by third parties, media fees and other digital
costs, paid search and ad serving and feature services, increased compared to
2020 due to an increase in expenses associated with third-party media fees
driven by a corresponding increase in revenues, partially offset by the absence
of costs associated with a business we divested in the fourth quarter of 2020.

For the year ended December 31, 2021, Compensation and benefits costs decreased
compared to 2020 due to a reduction in costs associated with ongoing integration
efforts, including headcount reductions as well as the benefit in 2021 of cost
containment initiatives implemented in 2020 in connection with the COVID-19
pandemic, partially offset by the absence of the temporary reduction of expenses
in the prior year, such as furloughs and wage reductions in response to the
COVID-19 pandemic.
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For the year ended December 31, 2021Selling, general and administrative expenses decreased $36.5 million compared to 2020. The following table shows the breakdown of the decrease in selling, general and administrative expenses:

                                                                      Year ended December 31,
In thousands                                    2021               2020              Change               % Change
Compensation and benefits                   $  69,749          $ 113,314          $ (43,565)                    (38  %)
Outside services and other                     22,576             15,520              7,056                      45  %
Total selling, general and administrative
expenses                                    $  92,325          $ 128,834          $ (36,509)                    (28  %)



For the year ended December 31, 2021, Compensation and benefits costs decreased
compared to 2020 due to a reduction in costs associated with ongoing integration
efforts, including headcount reductions, the benefit in 2021 of cost containment
initiatives implemented in 2020 in connection with the COVID-19 pandemic, and
the absence of costs associated with businesses we divested in 2020, partially
offset by the absence of the temporary reduction of expenses in the prior year,
such as furloughs and wage reductions in response to the COVID-19 pandemic.

For the year ended December 31, 2021, Outside services and other costs increased
compared to 2020 due to an increase in various miscellaneous expenses, including
higher technology costs, partially offset by lower bad debt expense.

For the year ended December 31, 2021, Depreciation and amortization expense
increased compared to 2020 due to an increase in amortization of capitalized
software and the impact of accelerated depreciation related to assets impacted
by the realignment of our product portfolio which began in the fourth quarter of
2020.

For the year ended December 31, 2021Integration and reorganization costs decreased compared to 2020 due to lower severance payments $6.0 millionpartially offset by an increase in plant consolidation and other expenses related to the restructuring of $1.0 million. For the year ended December 31, 2020severance payments were related to acquisition synergies and business consolidation due to our acquisition of Legacy Gannett in the fourth quarter of 2019.

There were no Goodwill and impairment charges incurred in 2021. For the year
ended December 31, 2020, we recorded a Goodwill and intangible impairment charge
of $40.5 million due to the impact of the COVID-19 pandemic on our operations.

For the year ended December 31, 2021the decrease in loss on sale or disposal of assets is attributable to the sale of a business in the fourth quarter of 2020 compared to the gain on sale or disposal of an asset in 2021.

Digital Marketing Solutions Adjusted EBITDA

                                                                      Year ended December 31,
In thousands                                    2021               2020              Change               % Change

Net income (loss) attributable to Gannett $18,442 ($42,494)

       $  60,936                         ***

Depreciation and amortization                  30,061             25,878              4,183                      16  %
Integration and reorganization costs            1,710              6,663             (4,953)                    (74  %)

Asset impairments                                   -                717               (717)                   (100  %)
Goodwill and intangible impairments                 -             40,499            (40,499)                   (100  %)
(Gain) loss on sale or disposal of assets,
net                                              (604)             1,727             (2,331)                        ***

Other items                                     1,351             (8,629)             9,980                         ***

Adjusted EBITDA (non-GAAP basis)(a) $50,960 $24,361

       $  26,599                         ***
Net income (loss) attributable to Gannett
margin                                            4.2  %            (9.9) %
Adjusted EBITDA margin (non-GAAP
basis)(a)(b)                                     11.5  %             5.7  %


*** Indicates an absolute value percentage change greater than 100.
(a) See "Non-GAAP Financial Measures" below for additional information about
non-GAAP measures.
(b) We define Adjusted EBITDA margin as Adjusted EBITDA divided by total
Operating revenues.

The increase in adjusted EBITDA of our DMS segment compared to 2020 is mainly attributable to the changes discussed above.

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Corporate and other category

For the year ended December 31, 2021Corporate and other income $8.4 million compared to $11.0 million for the year ended December 31, 2020.

For the year ended December 31, 2021Head office and other operating expenses decreased $65.8 million compared to 2020. The following table shows the breakdown of the decrease in head office operating expenses and other:

                                                                       Year ended December 31,
In thousands                                     2021               2020              Change               % Change
Operating expenses:
Operating costs                                  8,780             23,013            (14,233)                    (62  %)
Selling, general and administrative expenses    73,592             89,102            (15,510)                    (17  %)
Depreciation and amortization                   16,685             16,195                490                       3  %
Integration and reorganization costs            31,614             78,216            (46,602)                    (60  %)
Other operating expenses                        20,952             11,152              9,800                      88  %
Loss on sale or disposal of assets, net            344                134                210                         ***
Total operating expenses                     $ 151,967          $ 217,812          $ (65,845)                    (30  %)

*** Indicates a percent change in absolute value greater than 100.

For the year ended December 31, 2021, Corporate and other Operating expenses
decreased compared to 2020 due primarily to a decrease in Integration and
reorganization costs driven by a decrease in severance costs of $22.7 million
and a decrease of $23.9 million in other integration costs, mainly due to the
absence in 2021 of a $30.4 million expense related to the early termination of
the Former Management Agreement with the Former Manager paid in 2020, partially
offset by an increase in costs associated with systems implementation and
outsourcing of corporate functions. In addition, both Selling, general and
administrative expenses and Operating costs decreased, mainly due to cost
containment initiatives, partially offset by the absence of the temporary
reduction of expenses in the prior year such as furloughs and wage reductions in
response to the COVID-19 pandemic. These decreases were partially offset by an
increase in Other operating expenses due to third party fees that were expensed
in 2021 related to the 5-Year Term Loan, the $400 million aggregate principal
amount of 6.00% first lien notes due November 1, 2026 (the "2026 Senior Notes"),
and to a lesser extent the New Senior Secured Term Loan, compared to $11.2
million of acquisition costs incurred in 2020.

CASH AND CAPITAL RESOURCES

Our primary cash requirements are for working capital, debt securities and capital expenditures.

We expect to fund our operations through cash provided by operating activities
and available financing capacity under our credit facility. We expect we will
have adequate capital resources and liquidity to meet our ongoing working
capital needs, borrowing obligations, and all required capital expenditures for
at least the next twelve months.

Details of our cash flows are included in the table below:

                                                                               Year Ended
                                                                   December 31,         December 31,
In thousands                                                           2021                 2020
Cash provided by operating activities                              $  127,453          $    57,770
Cash provided by investing activities                                  70,647              160,136
Cash used for financing activities                                   (261,172)            (201,342)
Effect of currency exchange rate change                                   (35)               1,498

Increase (decrease) in cash, cash equivalents and restricted cash ($63,107) $18,062



Cash flows provided by operating activities: Our largest source of cash provided
by operations is Advertising revenues, primarily generated from Local and
national advertising and marketing services revenues (retail, classified, and
online). Additionally, we generate cash through circulation subscribers,
commercial printing and delivery services to third parties, and events. Our
primary uses of cash from our operating activities include compensation, outside
services, newsprint, and delivery.

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For the year ended December 31, 2021, cash flows provided by operating
activities were $127.5 million compared to $57.8 million for the year ended
December 31, 2020. The increase in cash provided by operating activities was
primarily due to a decrease in interest paid of $114.2 million, a decrease in
severance payments of $51.3 million, $16.4 million in PPP funding received in
support of certain of our locations that were meaningfully affected by the
COVID-19 pandemic and an increase in tax refunds of $4.4 million, partially
offset by a decrease in working capital of $112.8 million due to the overall
timing of payments, including accrued compensation and accounts receivable
collections, an increase in deposits of $12.9 million, and an increase in
contributions to our pension and postretirement benefit plans of $9.5 million.

Cash flows provided by investing activities: For the year ended December 31,
2021, cash flows provided by investing activities were $70.6 million compared to
$160.1 million for the year ended December 31, 2020. The decrease in cash
provided by investing activities was primarily due to a decrease in proceeds
from the sale of real estate and other assets of $84.6 million and an increase
in purchases of property, plant, and equipment of $2.6 million.

Cash flows used for financing activities: For the year ended December 31, 2021,
cash flows used for financing activities were $261.2 million compared to $201.3
million for the year ended December 31, 2020. The increase in cash used for
financing activities was primarily due to an increase in repayments of long-term
debt of $1.475 billion, the absence in 2021 of borrowings of convertible debt of
$497.1 million in 2020, the increase in repurchases of convertible debt of $15.0
million and an increase in payments of debt issuance costs of $18.8 million,
offset by borrowings of long-term debt of $1.935 billion in 2021.

Debt

October debt refinancing

On October 15, 2021, Gannett Holdings, our wholly-owned subsidiary, entered into
the New Senior Secured Term Loan with Citibank N.A., as collateral agent and
administrative agent for the lenders. Also on October 15, 2021, Gannett Holdings
completed a private offering of the 2026 Senior Notes. The proceeds of the New
Senior Secured Term Loan, together with the net proceeds from the 2026 Senior
Notes were applied towards the full repayment of the 5-Year Term Loan.

There were certain lenders that participated in both the 5-Year Term Loan and
the New Senior Secured Term Loan and 2026 Senior Notes and their balances in the
5-Year Term Loan were deemed to be modified. We continue to defer, over the
terms of the 2026 Senior Notes and New Senior Secured Term Loan, the deferred
financing fees and original issue discount from the 5-Year Term Loan of $7.0
million and $25.2 million, respectively, related to those lenders. Further,
certain lenders in the 5-Year Term Loan did not participate in the New Senior
Secured Term Loan and 2026 Senior Notes and their balances in the 5-Year Term
Loan were deemed to be extinguished. Third-party fees of approximately $7.2
million were allocated to the new lenders in the 2026 Senior Notes on a pro-rata
basis, and $5.2 million of original issue discount on the New Senior Secured
Term Loan were capitalized and are being amortized over the respective terms of
the 2026 Senior Notes and New Senior Secured Term Loan using the effective
interest method. For the year ended December 31, 2021, third-party fees of $1.8
million and $7.9 million related to the New Senior Secured Term Loan and 2026
Senior Notes, respectively, which were allocated to the lenders whose balances
were deemed to be modified, were expensed and recorded in Other operating
expenses in the Consolidated statements of operations and comprehensive income
(loss).

Modification of the new senior secured term loan

On January 31, 2022, Gannett Holdings entered into the Term Loan Amendment to
its New Senior Secured Term Loan to provide for Incremental Term Loans in an
aggregate principal amount of $50 million. The Incremental Term Loans have
substantially identical terms as the New Senior Secured Term Loan and are
treated as a single tranche with the New Senior Secured Term Loan. The Term Loan
Amendment also amended the New Senior Secured Term Loan to transition the
interest rate base from LIBOR to the Adjusted Term SOFR and to permit the
repurchase of up to $50 million of Common Stock under the Stock Repurchase
Program consummated on or prior to December 31, 2022, in addition to capacity
for Gannett Holdings to make restricted payments, including stock repurchases,
currently permitted under other provisions of the New Senior Secured Term Loan
and our other debt facilities, including the 2026 Senior Secured Notes Indenture
and the 2027 Notes Indenture.

Term loans

New Senior Secured Term Loan

Prior to the Term Loan Amendment, loans under the New Senior Secured Term Loan
bore interest at a per annum rate equal to LIBOR (which shall not be less than
0.50% per annum) plus a margin of 5.00% or an alternate base rate (which shall
not be less than 1.50% per annum) plus a margin equal to 4.00%. Since the
effectiveness of the Term Loan Amendment, the
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loans under the New Senior Secured Term Loan (including the Incremental Term
Loans) bear interest at a per annum rate equal to the Adjusted Term SOFR (which
shall not be less than 0.50% per annum) plus a margin equal to 5.00% per annum
or an alternate base rate (which shall not be less than 1.50% per annum) plus a
margin equal to 4.00% per annum. Loans under the New Senior Secured Term Loan
may be prepaid, at the option of Gannett Holdings, at any time without premium,
except a premium equal to 1.00% of the aggregate principal amount of the loans
being repaid in connection with certain refinancing or repricing events that
reduce the all-in yield applicable to the loans and occur on or before October
15, 2022. In addition, we are required to repay the New Senior Secured Term Loan
from time to time with (i) the proceeds of non-ordinary course asset sales and
casualty and condemnation events, (ii) the proceeds of indebtedness not
permitted under the New Senior Secured Term Loan, and (iii) the aggregate amount
of cash and cash equivalents on hand at the Company and its restricted
subsidiaries in excess of $100 million at the end of each fiscal year of the
Company (beginning with the fiscal year ending December 31, 2021). The New
Senior Secured Term Loan amortizes in equal quarterly installments, beginning
June 30, 2022, at a rate equal to 10% per annum (or, if the ratio of debt
secured on an equal basis with the New Senior Secured Term Loan less
unrestricted cash of the Company and its restricted subsidiaries to Consolidated
EBITDA (as such terms are defined in the New Senior Secured Term Loan ) (such
ratio, the "First Lien Net Leverage Ratio"), for the most recently ended period
of four consecutive fiscal quarters is equal to or less than 1.20 to 1.00, 5%
per annum. All obligations under the New Senior Secured Term Loan are secured by
all or substantially all of the assets of the Company and the wholly-owned
domestic subsidiaries of the Company (the "Guarantors"). The obligations of
Gannett Holdings under the New Senior Secured Term Loan are guaranteed on a
senior secured basis by the Company and the Guarantors.

The New Senior Secured Term Loan contains usual and customary covenants for
credit facilities of this type, including a requirement to have minimum
unrestricted cash of $30 million as of the last day of each fiscal quarter, and
restricts, among other things, our ability to incur debt, grant liens, sell
assets, and make investments and pay dividends, in each case with customary
exceptions, including an exception that permits dividends and repurchases of
outstanding junior debt or equity in (i) an amount of up to $25 million per
fiscal quarter if the First Lien Net Leverage Ratio for such fiscal quarter is
equal to or less than 2.00 to 1.00, (ii) an amount of up to $50 million per
fiscal quarter if the First Lien Net Leverage Ratio for such fiscal quarter is
equal to or less than 1.50 to 1.00 and (iii) an unlimited amount if First Lien
Net Leverage Ratio for such fiscal quarter is equal to or less than 1.00 to
1.00. As of December 31, 2021, we were in compliance with all of the covenants
and obligations under the New Senior Secured Term Loan.

As of December 31, 2021, the effective interest rate for the New Senior Secured
Term Loan was 6.4%. For the year ended December 31, 2021, we made prepayments,
inclusive of both mandatory and optional prepayments, totaling $35.9 million,
which were classified as financing activities in the Consolidated statements of
cash flows.

5-Year Term Loan

On February 9, 2021, we entered into the 5-Year Term Loan. The 5-Year Term Loan
was to mature on February 9, 2026 and, at our option, bore interest at a rate
equal to LIBOR plus a margin equal to 7.00% per annum or an alternate base rate
plus a margin equal to 6.00% per annum. Interest on the 5-Year Term Loan was
payable at least every three months in arrears, beginning in May 2021.

Proceeds from the 5-year term loan were used to repay the remaining principal balance and accrued interest of $1.043 billion and $13.3 millionrespectively, on the acquisition term loan and to pay the fees and expenses incurred to obtain the 5-year term loan.

There were certain lenders that participated in both the Acquisition Term Loan
and the 5-Year Term Loan and their balances in the Acquisition Term Loan were
deemed to be modified. We continued to defer, over the term, the deferred
financing fees and original issue discount from the Acquisition Term Loan of
$1.5 million and $34.7 million, respectively, related to those lenders. Further,
certain lenders in the Acquisition Term Loan did not participate in the 5-Year
Term Loan and their balances in the Acquisition Term Loan were deemed to be
extinguished. Third-party fees of approximately $13.0 million were allocated to
the new lenders in the 5-Year Term Loan on a pro-rata basis, and $20.9 million
of original issue discount were capitalized and amortized over the term of the
5-Year Term Loan using the effective interest method. For the year ended
December 31, 2021, third-party fees of $10.9 million, which were allocated to
the lenders whose balances were deemed to be modified, were expensed and
recorded in Other operating expenses in the Consolidated statements of
operations and comprehensive income (loss).

Under the 5-Year Term Loan, we were contractually obligated to make prepayments
with the proceeds from asset sales and elected to make optional payments with
excess free cash flow from operations. The 5-Year Term Loan was repaid in full
on October 15, 2021 and the repayment was classified as financing activities in
the Consolidated statements of cash flows.

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Term Loans Summary

We recorded interest expense, paid interest expense, and recognized amortization
of original issue discount and deferred financing fees under the New Senior
Secured Term Loan, the 5-Year Term Loan and the Acquisition Term Loan
(collectively, the "Term Loans"). In connection with the Term Loans, during the
year ended December 31, 2021, we recognized interest expense of $72.8 million,
paid interest expense of $72.8 million and recognized amortization of original
issue discount and deferred financing fees of $10.7 million and $2.6 million,
respectively. Additionally, during the year ended December 31, 2021, we
recognized losses on early extinguishment of $47.9 million, as a result of the
write-off of original issue discount and deferred financing fees, primarily
related to lenders whose debt was deemed extinguished as well as early
prepayments, including $20.7 million related to the 5-Year Term Loan, $17.2
million related to the Acquisition Term Loan and approximately $10.0 million
related to the write-off of original issue discount and deferred financing fees
as a result of early prepayments on the Term Loans.

Senior Secured Notes Due 2026

The 2026 Senior Notes were issued pursuant to an Indenture, dated October 15,
2021 (the "2026 Senior Notes Indenture") among Gannett Holdings, the Company,
the Guarantors from time to time party thereto, U.S. Bank National Association,
as trustee, and U.S. Bank National Association, as collateral agent, registrar,
paying agent and authenticating agent.

Interest on the 2026 Senior Notes is payable semi-annually in arrears, beginning
on May 1, 2022. The 2026 Senior Notes mature on November 1, 2026, unless
redeemed or repurchased earlier pursuant to the 2026 Senior Notes Indenture. The
2026 Senior Notes may be redeemed at the option of Gannett Holdings, in whole or
in part, at any time and from time to time after November 1, 2023, at the
redemption prices set forth in the 2026 Senior Notes Indenture. At any time
prior to such date, Gannett Holdings will be entitled at its option to redeem
all, but not less than all, of the 2026 Senior Notes at the "make-whole"
redemption price set forth in the 2026 Senior Notes Indenture. Additionally, at
any time prior to November 1, 2023, Gannett Holdings may, on one or more
occasions, redeem up to 40% of the aggregate principal amount of the 2026 Senior
Notes at the redemption price set forth in the 2026 Senior Notes Indenture with
the net cash proceeds of certain equity offerings. If certain changes of control
with respect to Gannett Holdings or the Company occur, Gannett Holdings must
offer to purchase the 2026 Senior Notes at a purchase price in cash equal to
101% of the principal amount thereof on the date of purchase, plus accrued and
unpaid interest to, but excluding, the date of purchase. In addition, during any
twelve-month period commencing on or after October 15, 2021 and ending prior to
November 1, 2023, up to 10% of the aggregate principal amount of the 2026 Senior
Notes issued under the 2026 Senior Notes Indenture may be redeemed at a purchase
price equal to 103% of the aggregate principal amount of the 2026 Senior Notes
to be redeemed, plus accrued and unpaid interest, if any, to but excluding, the
redemption date.

The 2026 Senior Notes are unconditionally guaranteed, jointly and severally, on
a senior secured basis by the Guarantors. The 2026 Senior Notes and such
guarantees are secured on a first-priority basis by the collateral, consisting
of substantially all of the assets of Gannett Holdings and the Guarantors,
subject to certain intercreditor arrangements.

The 2026 Senior Notes Indenture limits the Company and its restricted
subsidiaries' ability to, among other things, make investments, loans, advances,
guarantees and acquisitions; incur or guarantee additional debt and issue
certain disqualified equity interests and preferred stock; make certain
restricted payments, including a limit on dividends on equity securities or
payments to redeem, repurchase or retire equity securities or other
indebtedness; dispose of assets; create liens on assets to secure debt; engage
in transactions with affiliates; enter into certain restrictive agreements; and
consolidate, merge, sell or otherwise dispose of all or substantially all of
their or a Guarantor's assets. These covenants are subject to a number of
limitations and exceptions. The 2026 Senior Notes Indenture also contains
customary events of default.

Debt issuance costs of $7.2 million will be amortized over the 5-year
contractual life of the 2026 Senior Notes. Additionally, $4.0 million of debt
issuance costs and $14.3 million of original issue discount were deferred from
the refinancing of the 5-Year Term Loan. The unamortized discount and
unamortized debt issuance costs will be amortized over the remaining contractual
life of the 2026 Senior Notes. In connection with the 2026 Senior Notes, for the
year ended December 31, 2021 we recognized amortization of debt issuance costs
and amortization of the original issue discount of $0.5 million and $0.6
million, respectively, and recognized $5.1 million of interest expense. The
effective interest rate on the 2026 Senior Notes was 7.3% as of December 31,
2021.

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Senior Secured Convertible Notes due 2027

The 2027 Notes were issued pursuant to an Indenture dated as of November 17,
2020, as amended by the First Supplemental Indenture dated as of December 21,
2020 and the Second Supplemental Indenture dated as of February 9, 2021
(collectively, the "2027 Notes Indenture"), between the Company and U.S. Bank
National Association, as trustee.

In connection with the issuance of the 2027 Notes, we entered into an Investor
Agreement (the "Investor Agreement") with the holders of the 2027 Notes (the
"Holders") establishing certain terms and conditions concerning the rights and
restrictions on the Holders with respect to the Holders' ownership of the 2027
Notes. We also entered into an amendment to the Registration Rights Agreement
dated November 19, 2019, with the Former Manager.

Interest on the 2027 Notes is payable semi-annually in arrears. The 2027 Notes
mature on December 1, 2027, unless earlier repurchased or converted. The 2027
Notes may be converted at any time by the holders into cash, shares of Common
Stock or any combination of cash and Common Stock, at our election. The initial
conversion rate is 200 shares of Common Stock per $1,000 principal amount of the
2027 Notes, which is equal to a conversion price of $5.00 per share of Common
Stock (the "Conversion Price").

The conversion rate is subject to customary adjustment provisions as provided in
the 2027 Notes Indenture. In addition, the conversion rate will be subject to
adjustment in the event of any issuance or sale of Common Stock (or securities
convertible into Common Stock) at a price equal to or less than the Conversion
Price in order to ensure that following such issuance or sale, the 2027 Notes
would be convertible into approximately 42% (adjusted for repurchases and
certain other events that reduce the outstanding amount of the 2027 Notes) of
the Common Stock after giving effect to such issuance or sale (assuming the
initial principal amount of the 2027 Notes remains outstanding). After giving
effect to the repurchases of the 2027 Notes described below, such percentage is
approximately 41%.

Upon the occurrence of a "Make-Whole Fundamental Change" (as defined in the 2027
Notes Indenture), we will in certain circumstances increase the conversion rate
for a specified period of time. If a "Fundamental Change" (as defined in the
2027 Notes Indenture) occurs, the Company will be required to offer to
repurchase the 2027 Notes at a repurchase price of 110% of the principal amount
thereof.

Holders of the 2027 Notes will have the right to put up to approximately $100
million of the 2027 Notes at par on or after the date that is 91 days after the
maturity date of the New Senior Secured Term Loan.

Under the 2027 Notes Indenture, we can only pay cash dividends up to an
agreed-upon amount, provided the ratio of consolidated debt to EBITDA (as such
terms are defined in the 2027 Notes Indenture) does not exceed a specified
ratio. In addition, the 2027 Notes Indenture provides that, at any time that the
Company's Total Gross Leverage Ratio (as defined in the 2027 Notes Indenture)
exceeds 1.5 and we approve the declaration of a dividend, we must offer to
purchase a principal amount of 2027 Notes equal to the proposed amount of the
dividend.

Until the four-year anniversary of the issuance date, we will have the right to
redeem for cash up to approximately $99.4 million of the 2027 Notes at a
redemption price of 130% of the principal amount thereof, with such amount
reduced ratably by any principal amount of 2027 Notes that has been converted by
the holders or redeemed or purchased by us.

The 2027 Notes are guaranteed by Gannett Holdings and any subsidiaries of the
Company that guaranteed the 5-Year Term Loan. The 2027 Notes are secured by the
same collateral that secured the 5-Year Term Loan. The 2027 Notes rank as senior
secured debt of the Company and are secured by a second priority lien on the
same collateral package that secured the indebtedness incurred in connection
with the 5-Year Term Loan.

The 2027 Notes Indenture includes affirmative and negative covenants, including
limitations on liens, indebtedness, dispositions, loan, advances and investors,
sale and leaseback transactions, restricted payments, transactions with
affiliates, restrictions on dividends and other payment restrictions affecting
restricted subsidiaries, negative pledges and modifications to certain
agreements. The 2027 Notes Indenture also requires that the Company maintain, as
of the last day of each fiscal quarter, at least $30.0 million of Qualified Cash
(as defined in the 2027 Notes Indenture). The 2027 Notes Indenture includes
customary events of default.

For the year ended December 31, 2021, no shares were issued upon conversion,
exercise, or satisfaction of the required conditions. Refer to Note 13 -
Supplemental equity information for details on the convertible debt's impact to
diluted earnings per share under the if-converted method.

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In November 2021, we entered into separate, privately negotiated agreements with
certain holders of our 2027 Notes and repurchased $11.8 million aggregate
principal of our outstanding 2027 Notes for $15.3 million in cash, including
accrued interest. The repurchase was treated as an extinguishment of a portion
of the 2027 Notes and as a result, for the year ended December 31, 2021 the
Company recognized a Loss on extinguishment of $0.8 million and a write-off of
unamortized original issue discount of $2.3 million and an immaterial write-off
of unamortized deferred financing costs. The repurchase of the 2027 Notes
resulted in a $4.2 million reduction in Additional paid-in capital, net of tax,
in the Consolidated balance sheets. The remaining 2027 Notes are convertible
into 97.1 million shares of Common Stock, based on a conversion price of $5.00
per share.

Senior Convertible Bonds due 2024

The $3.3 million principal value of the remaining 4.75% convertible senior notes
due 2024 (the "2024 Notes") outstanding is reported as convertible debt in the
Consolidated balance sheets. The effective interest rate on the 2024 Notes was
6.05% as of December 31, 2021.

Further information

Shelf Listing Statement

On March 19, 2021, we filed an automatic shelf registration statement with the
SEC, under which we have the ability to offer and sell an indeterminate amount
of various types of securities in the future. This replaced our previous shelf
registration statement dated April 5, 2018. The specific terms of any securities
that may be issued under our shelf registration statement and the timing of any
such offers and sales will depend on a variety of factors, including the
underlying price of our Common Stock and our capital needs. We believe that the
shelf registration statement provides us with additional financing flexibility
to efficiently access the capital markets when desired.

Other information

We continue to evaluate our results of operations, liquidity and cash flows, and
as part of these measures, we have taken steps to manage cash outflow by
rationalizing expenses and implementing various cost containment initiatives. We
presently have no intention to declare or pay a dividend and there can be no
assurance that we will pay dividends in the future. In addition, the terms of
our indebtedness, including our credit facility, the New Senior Secured Term
Loan, and the 2026 Senior Secured Notes Indenture and the 2027 Notes Indenture
have terms that restrict our ability to pay dividends.

At February 1, 2022the Board of Directors authorized the buyback of a maximum of
$100 million under the share buyback program.

The CARES Act, enacted March 27, 2020, provided various forms of relief to
companies impacted by the COVID-19 pandemic. As part of the relief available
under the CARES Act, we deferred remittance of our 2020 Federal Insurance
Contributions Act ("FICA") taxes as allowed by the legislation. We deferred
$41.6 million of the employer portion of FICA taxes for payroll paid between
March 27, 2020 and December 31, 2020. We paid 50% of the FICA deferral during
the year ended December 31, 2021 with the remaining 50% to be remitted on or
before December 31, 2022.

For the GR Plan in the U.S., we have deferred our contractual contribution and
negotiated a contribution payment plan of $5 million per quarter through the end
of September 30, 2022.

We expect our capital expenditures during the year ended December 31, 2022 to
total approximately $45.0 million. These capital expenditures are anticipated to
be primarily comprised of projects related to digital product development, costs
associated with our print and technology systems, and system upgrades.

Our leverage may adversely affect our business and financial performance and
restricts our operating flexibility. The level of our indebtedness and our
ongoing cash flow requirements may expose us to a risk that a substantial
decrease in operating cash flows due to, among other things, continued or
additional adverse economic developments or adverse developments in our
business, could make it difficult for us to meet the financial and operating
covenants contained in our New Senior Secured Term Loan, the 2026 Senior Secured
Notes, and the 2027 Notes. In addition, our leverage may limit cash flow
available for general corporate purposes such as capital expenditures and our
flexibility to react to competitive, technological, and other changes in our
industry and economic conditions generally.

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Although we currently forecast sufficient liquidity, a resurgence of the
COVID-19 pandemic and related counter-measures could have a material negative
impact on our liquidity and our ability to meet our ongoing obligations,
including obligations under the New Senior Secured Term Loan, the 2026 Senior
Secured Notes, and the 2027 Notes. We continue to closely monitor the COVID-19
pandemic and will continue to take the steps necessary to appropriately manage
liquidity.

From December 31, 2021we had no material off-balance sheet arrangements within the meaning of the rules of the SECOND.

Contractual obligations and commitments

We enter into various contractual arrangements as a part of our operations. Many
of these contractual obligations are discussed in the notes to our Consolidated
financial statements. As of December 31, 2021, material obligations discussed in
the notes to our consolidated financial statements included (i) principal
payments on our long-term debt, prior to the impact of the amendment to the New
Senior Secured Term Loan, discussed in Note 9 - Debt, (ii) operating leases
discussed in Note 4 - Leases, and (iii) pension and postretirement benefits
discussed in Note 10 - Pensions and other postretirement benefit plans. We
anticipate interest payments associated with our long-term debt totaling
$79.2 million in 2022, $75.0 million in 2023 and $203.8 million thereafter. Due
to uncertainty with respect to the timing of future cash flows associated with
unrecognized tax benefits at December 31, 2021, we are unable to make reasonably
reliable estimates of the period of cash settlement. See Note 12 - Income taxes
to the Consolidated financial statements for a further discussion of income
taxes.

In addition, we have purchase obligations which include printing contracts,
digital licenses and IT services, professional services, interactive marketing
agreements, and other legally binding commitments. As of December 31, 2021, we
had future purchase obligations totaling $235.8 million due in 2022,
$149.6 million due in 2023, and $173.6 million due thereafter. Amounts for which
we are liable under purchase orders outstanding at December 31, 2021 are
reflected in the Consolidated balance sheets as Accounts payable and accrued
liabilities. We also have other noncurrent liabilities primarily related to IT
leases at Newsquest, a subsidiary in the U.K, totaling $3.9 million due in 2022,
$3.2 million due in 2023, and $8.0 million due thereafter.

NON-GAAP FINANCIAL MEASURES

A non-GAAP financial measure is generally defined as a measure that purports to measure historical or future financial performance, condition or cash flows, but that excludes or includes amounts that would not be so excluded or included in most comparable measures. we Measure in accordance with GAAP.

Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures we
believe offer a useful view of the overall operation of our businesses and may
be different than similarly-titled measures used by other companies. We define
Adjusted EBITDA as Net income (loss) attributable to Gannett before (1) Income
tax expense (benefit), (2) Interest expense, (3) Gains or losses on the early
extinguishment of debt, (4) Non-operating pension income, (5) Loss on
convertible notes derivative, (6) Depreciation and amortization, (7) Integration
and reorganization costs, (8) Other operating expenses, including third-party
debt expenses and acquisition costs, (9) Asset impairments, (10) Goodwill and
intangible impairments, (11) Gains or losses on the sale or disposal of assets,
(12) Share-based compensation, and (13) certain other non-recurring charges. We
define Adjusted EBITDA margin as Adjusted EBITDA divided by total Operating
revenues.

Management’s Use of Adjusted EBITDA and Adjusted EBITDA Margin

Adjusted EBITDA and Adjusted EBITDA margin are not measurements of financial
performance under GAAP and should not be considered in isolation or as an
alternative to income from operations, net income (loss), or any other measure
of performance or liquidity derived in accordance with U.S. GAAP. We believe
these non-GAAP financial measures, as we have defined them, are helpful in
identifying trends in our day-to-day performance because the items excluded have
little or no significance on our day-to-day operations. These measures provide
an assessment of controllable expenses and afford management the ability to make
decisions which are expected to facilitate meeting current financial goals as
well as achieve optimal financial performance.

We use Adjusted EBITDA and Adjusted EBITDA margin as measures of our day-to-day
operating performance, which is evidenced by the publishing and delivery of news
and other media and excludes certain expenses that may not be indicative of our
day-to-day business operating results.

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Limitations of Adjusted EBITDA and Adjusted EBITDA margin

Adjusted EBITDA and Adjusted EBITDA margin have limitations as analytical tools.
They should not be viewed in isolation or as a substitute for U.S. GAAP measures
of earnings or cash flows. Material limitations in making the adjustments to our
earnings to calculate Adjusted EBITDA and Adjusted EBITDA margin and using these
non-GAAP financial measures as compared to U.S. GAAP net income (loss) include:
the cash portion of interest/financing expense, income tax (benefit) provision,
and charges related to asset impairments, which may significantly affect our
financial results.

Management believes these items are important in evaluating our performance,
results of operations, and financial position. We use non-GAAP financial
measures to supplement our U.S. GAAP results in order to provide a more complete
understanding of the factors and trends affecting our business.

Adjusted EBITDA and Adjusted EBITDA margin are not alternatives to net income
(loss) and margin as calculated and presented in accordance with U.S. GAAP. As
such, they should not be considered or relied upon as substitutes or
alternatives for any such U.S. GAAP financial measures. We strongly urge you to
review the reconciliation of Net loss attributable to Gannett to Adjusted EBITDA
and Adjusted EBITDA margin along with our Consolidated financial statements
included elsewhere in this Annual Report on Form 10-K. We also strongly urge you
not to rely on any single financial measure to evaluate our business. In
addition, because Adjusted EBITDA and Adjusted EBITDA margin are not measures of
financial performance under U.S. GAAP and are susceptible to varying
calculations, the Adjusted EBITDA and Adjusted EBITDA margin measures as
presented in this report may differ from and may not be comparable to similarly
titled measures used by other companies.

The table below shows the reconciliation of Net loss attributable to Gannett to
Adjusted EBITDA and Net loss attributable to Gannett margin to Adjusted EBITDA
margin for the periods presented:
                                                     Year ended December 

31,

In thousands                                          2021             2020
Net loss attributable to Gannett                 $  (134,962)      $ 

(670,479)

Provision (benefit) for income taxes                  48,250          

(33,450)

Interest expense                                     135,748          

228,513

Loss on early extinguishment of debt                  48,708           

43,760

Non-operating pension income                         (95,357)         

(72,149)

Loss on convertible notes derivative                 126,600           

74,329

Depreciation and amortization                        203,958          

263,819

Integration and reorganization costs                  49,284          145,731
Other operating expenses                              20,952           11,152
Asset impairments                                      3,976           11,029
Goodwill and intangible impairments                        -          

393,446

Loss (gain) on sale or disposal of assets, net 17,208 (5,680) Stock-based compensation expense

                      18,439           

26,350

Other items                                           (9,092)          

(2,476)

Adjusted EBITDA (non-GAAP basis)                 $   433,712       $  

413,895

Net loss attributable to Gannett margin                 (4.2) %         (19.7) %
Adjusted EBITDA margin (non-GAAP basis)                 13.5  %          12.2  %



CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES

The preparation of financial statements in conformity with GAAP requires
management to make decisions based on estimates, assumptions, and factors it
considers relevant to the circumstances. Such decisions include the selection of
applicable principles and the use of judgment in their application, the results
of which could differ from those anticipated.

Good will and indefinite life intangible assets

We evaluate each of our reporting units annually as of the end of our second
fiscal quarter, as well as when changes in our operating structure occur. We
have the option to qualitatively assess whether it is more likely than not that
the fair value of a
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reporting unit is less than its carrying value. If we elect to perform a
qualitative assessment and conclude it is more likely than not that the fair
value of the reporting unit is equal to or greater than its carrying value, no
further assessment of that reporting unit's goodwill is necessary; otherwise
goodwill must be tested for impairment. In the quantitative test, we are
required to determine the fair value of each reporting unit and compare it to
the carrying amount of the reporting unit. Fair value of the reporting unit is
defined as the price that would be received to sell the unit as a whole in an
orderly transaction between market participants at the measurement date. We
generally determine the fair value of a reporting unit using a combination of a
discounted cash flow analysis and a market-based approach. Estimates of fair
value include inputs that are subjective in nature, involve uncertainties, and
involve matters of significant judgment that are made at a specific point in
time. 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,
projected operating cash flow margins, discount rates, and future economic and
market conditions. If the carrying value of the reporting unit exceeds the
estimate of fair value, we calculate the impairment as the excess of the
carrying value of goodwill over its implied fair value.

Newspaper mastheads (newspaper titles) are not subject to amortization as it has
been determined that the useful lives of such mastheads are indefinite.
Newspaper mastheads are tested for impairment annually, or more frequently if
events or changes in circumstances indicate the asset might be impaired. The
impairment test consists of a comparison of the fair value of each group of
mastheads with their carrying amount. We used a relief from royalty approach,
which utilizes a discounted cash flow model to determine the fair value of
newspaper mastheads. Our judgments and estimates of future operating results in
determining the reporting unit fair values are consistently applied in
determining the fair value of mastheads.

The performance of our annual impairment analyses resulted in no impairments to
goodwill or indefinite-lived intangible assets in fiscal 2021. We have not
subsequently identified any indicators of impairment that would indicate our
reporting units are at risk of failing the goodwill or indefinite-lived
intangible asset impairment tests subsequent to the second quarter of 2021. See
Note 7 - Goodwill and intangible assets for further discussion.

Long-lived assets

We evaluate the carrying value of property, plant and equipment and finite-lived
intangible assets for impairment whenever events or changes in circumstances
indicate that the carrying value of an asset group may not be recoverable. The
evaluation is performed by asset group, which is the lowest level of
identifiable cash flows independent of other assets. The assessment of
recoverability is based on management's estimates by comparing the sum of the
estimated undiscounted cash flows generated by the underlying asset groups to
its carrying value of the asset groups to determine whether an impairment
existed at its lowest level of identifiable cash flows. If the carrying amount
of the asset group is greater than the expected undiscounted cash flows to be
generated by the asset group, an impairment is recognized to the extent the
carrying value of such asset group exceeds its fair value. The market approach
is used in some cases to estimate the fair value of property, plant and
equipment, particularly when there is a change in the use of an asset.

As part of ongoing profitability programs, we have ceased a number of printing activities. As part of these actions, certain assets and properties to be decommissioned were tested for impairment. See Note 8 – Integration and reorganization costs and asset impairments for an analysis of the impairment charges recognized.

Revenue recognition

Our contracts with customers sometimes include promises to transfer multiple
products and services to a customer. Revenue from sales agreements that contain
multiple performance obligations are allocated to each obligation based on the
relative standalone selling price. We determine standalone selling prices based
on observable prices charged to customers.

Income taxes

We are subject to income taxes in the U.S. and various foreign jurisdictions in
which we operate and record our tax provision for the anticipated tax
consequences in our reported results of operations. Tax laws are complex and
subject to different interpretations by the taxpayer and respective government
taxing authorities. Significant judgment is required in determining our tax
expense and in evaluating our tax positions, including evaluating uncertainties
in the application of tax laws and regulations.

We account for income taxes under the provisions of ASC Topic 740, "Income
Taxes" ("ASC 740"). Under ASC 740, deferred tax assets and liabilities are
determined based on the difference between the financial statement and tax basis
of assets and liabilities using tax rates in effect for the year in which the
differences are expected to affect taxable income. The
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assessment of the realizability of deferred tax assets involves a high degree of
judgment and complexity. Valuation allowances are established when necessary to
reduce deferred tax assets to the amounts that are expected to be realized. When
we determine that it is more likely than not that we will be able to realize our
deferred tax assets in the future in excess of our net recorded amount, an
adjustment to the deferred tax asset would be made and reflected either in
income or as an adjustment to goodwill. This determination will be made by
considering various factors, including our expected future results, that in our
judgment will make it more likely than not that these deferred tax assets will
be realized.

Our actual effective tax rate and income tax expense could vary from estimated
amounts due to the future impacts of various items, including changes in income
tax laws, tax planning and our forecasted financial condition, and results of
operations in future periods. Although we believe current estimates are
reasonable, actual results could differ from these estimates.

ASC 740 prescribes a comprehensive model for how a company should recognize,
measure, present and disclose in its financial statements uncertain tax
positions that a company has taken or expects to take on a tax return. Under ASC
740, the financial statements reflect expected future tax consequences of such
positions presuming the taxing authorities' full knowledge of the position and
all relevant facts, but without considering time values. Recognized income tax
positions are measured at the largest amount that has a greater than 50%
likelihood of being realized. Changes in recognition or measurement are
reflected in the period in which the change in judgment occurs.

Retirement and post-retirement liabilities

ASC Topic 715, "Compensation-Retirement Benefits," requires recognition of an
asset or liability in the consolidated balance sheet reflecting the funded
status of pension and other postretirement benefit plans, such as retiree health
and life, with current-year changes in the funded status recognized in the
statement of stockholders' equity.

The determination of pension plan obligations and expense is based on a number
of actuarial assumptions. Two critical assumptions are the expected long-term
rate of return on plan assets and the discount rate applied to pension plan
obligations. For other postretirement benefit plans, which provide for certain
health care and life insurance benefits for qualifying retired employees and
which are not funded, critical assumptions in determining other postretirement
benefit obligations and expense are the discount rate and the assumed health
care cost-trend rates.

Our pension plans have assets valued at $3.2 billion as of December 31, 2021 and
the plans' benefit obligation is $3.0 billion, resulting in the plans being 107%
funded.

For 2021, the assumption used for the funded status discount rate was 2.95% for
our principal retirement plan obligations. As an indication of the sensitivity
of pension liabilities to the discount rate assumption, a 50 basis point
reduction in the discount rate at the end of 2021 would have increased plan
obligations by approximately $84.0 million. A 50 basis point change in the
discount rate used to calculate 2021 benefit would have changed total pension
plan expense for 2021 by approximately $7.0 million. To determine the expected
long-term rate of return on pension plan assets, we consider the current and
expected asset allocations, as well as historical and expected returns on
various categories of plan assets, input from the actuaries and investment
consultants, and long-term inflation assumptions. For our principal retirement
plan, we used an assumption of 6.3% for our expected return on pension plan
assets for 2021. If we were to reduce our expected rate of return assumption by
50 basis points, the benefit for 2021 would have increased by approximately $9.2
million.

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