Goodwill & Intangible Assets

9 Months Ended

Sep. 30, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill & Intangible Assets

NOTE 6 — Goodwill & Intangible Assets

Goodwill and intangible assets consisted of the following:

	September 30, 2020
In thousands	Gross carrying amount		Accumulated amortization		Net carrying amount
Amortized intangible assets(a):
Advertiser relationships	$	496,062	$	111,782	$	384,280
Other customer relationships	112,704		24,561		88,143
Subscriber relationships	265,218		67,469		197,749
Other intangible assets	70,317		23,141		47,176
Total	$	944,301	$	226,953	$	717,348
Non-amortized intangible assets:
Goodwill	$	560,215
Mastheads(a)	176,373
Total	$	736,588
	December 31, 2019
	Gross carrying amount		Accumulated amortization		Net carrying amount
Amortized intangible assets:
Advertiser relationships	$	534,161	$	75,363	$	458,798
Other customer relationships	109,674		14,303		95,371
Subscriber relationships	259,391		44,878		214,513
Other intangible assets	76,552		11,229		65,323
Total	$	979,778	$	145,773	$	834,005
Non-amortized intangible assets:
Goodwill	$	914,331
Mastheads	$	178,559
Total	$	1,092,890

^(a)  Includes measurement period adjustments for the Legacy Gannett and other 2019 acquisitions.

The balances and changes in the carrying amount of goodwill by segment are as follows:

In thousands	Publishing(a)			Marketing Solutions			Consolidated
Gross balance at December 31, 2019	$	800,606		$	201,646		$	1,002,252
Accumulated impairments	(84,272		)	(3,649		)	(87,921		)
Net balance at December 31, 2019	$	716,334		$	197,997		$	914,331
Activity during the nine months ended September 30, 2020:
Goodwill impairment	$	(321,851	)	$	(40,499	)	$	(362,350	)
Measurement period adjustments	70,558			(58,788		)	11,770
Foreign currency exchange rate changes	(3,536		)	—			(3,536		)
Total	$	(254,829	)	$	(99,287	)	$	(354,116	)
Gross balance at September 30, 2020	$	869,439		$	142,858		$	1,012,297
Accumulated impairments	(407,934		)	(44,148		)	(452,082		)
Net balance at September 30, 2020	$	461,505		$	98,710		$	560,215

^(a)  The Publishing segment includes the Domestic Publishing and Newsquest reporting units.

Consistent with the Company’s past practice, the Company performed its annual goodwill and indefinite-lived intangible (masthead) impairment assessment in the second quarter of 2020 with the assistance of third-party valuation specialists. Within

the impairment analyses performed, the Company considered the current and expected future economic and market conditions and the impact on the fair value of each of the reporting units. The primary factor that impacted the decrease in fair value was the impact of the COVID-19 pandemic on the Company’s operations. The most significant assumptions utilized in the determination of the estimated fair values include revenue and EBITDA projections, discount rates and long-term growth rates. The long-term growth rates are dependent on overall market growth rates, the competitive environment, inflation and relative currency exchange rates and could be adversely impacted by a sustained decrease in any of these measures, all of which the Company considered in determining the long-term growth rates used in the analysis, which ranged from negative 0.5% to 3%. The discount rate, which is consistent with a weighted average cost of capital that is likely to be expected by a market participant, is based upon industry required rates of return, including consideration of both debt and equity components of the capital structure. The discount rate may be impacted by adverse changes in the macroeconomic environment and volatility in the equity and debt markets. The Company considered these factors in determining the discount rates used in the analysis, which ranged from 10.0% to 15.5%.

For mastheads, the Company applied a “relief from royalty” approach, a discounted cash flow model, reflecting current assumptions, to fair value the indefinite-lived intangible assets. We compared the fair value of each indefinite-lived asset to its carrying amount, and accordingly, the Company recorded impairments of $4.0 million in both our Domestic Publishing and Newsquest reporting units during the second quarter of 2020.

During the second quarter of 2020, the Company considered the impact of the COVID-19 pandemic on the Company’s operations to be an indicator of impairment under ASC 360. As such, during the second quarter the Company performed a recoverability test for the long-lived asset groups, reflecting current assumptions, to determine whether an impairment loss should be measured. The undiscounted cash flows used in the recoverability test for the Newsquest long-lived asset group were less than the long-lived asset group carrying amount. The Company calculated the fair value of the long-lived asset group and recorded a $23.0 million impairment to advertiser and other customer relationships intangible assets during the second quarter of 2020. The discount rate and long-term growth rate assumptions were consistent with the Goodwill assumptions discussed above. Refer Note 7 — Integration and reorganization costs and impairments of property, plant and equipment, for further details on the impairment of property, plant and equipment.

For goodwill, the Company primarily utilized a discounted cash flow method to calculate the fair value of each reporting unit. Market-based metrics were reviewed to evaluate the reasonableness of the Company’s calculation. The Company compared the fair value of each reporting unit to its carrying amount, which resulted in the carrying value of all the reporting groups being in excess of the fair value. As a result, during the second quarter of 2020, we recorded goodwill impairment charges of $256.5 million, $65.4 million and $40.5 million in our Domestic Publishing, Newsquest and Marketing Solutions reporting units, respectively.

The severity and length of the COVID-19 pandemic, the duration and extent of the mitigation measures and governmental actions designed to combat the pandemic, as well as the changes in customer behavior as a result of the pandemic, all of which are highly uncertain and difficult to predict at the current time, could negatively impact the Company’s future assessment of its results of operations and the underlying assumptions utilized in the determination of the estimated fair values of the reporting units and related mastheads.

The newspaper industry and the Company have experienced declining same-store revenue and profitability over the past several years. Should general economic, market or business conditions continue to decline and have a negative impact on estimates of future cash flow and market transaction multiples, the Company may be required to record additional impairment charges in the future.

As of September 30, 2020, the Company performed a review of potential impairment indicators noting that its financial results and forecast have not changed materially since the annual impairment assessment, and it was determined that no indicators of impairment were present.