Shareholders’ equity

At December 31, 2017, and 2016, our authorized capital was comprised of 800 million shares of common stock and 2 million shares of preferred stock. At December 31, 2017, shareholders’ equity of TEGNA included 214.9 million shares that were outstanding (net of 109.5 million shares of common stock held in treasury). At December 31, 2016, shareholders’ equity of TEGNA included 214.5 million that were outstanding (net of 109.9 million shares of common stock held in treasury). No shares of preferred stock were issued and outstanding at December 31, 2017, or 2016.

Capital stock and earnings per share

We report earnings per share on two bases, basic and diluted. All basic income per share amounts are based on the weighted average number of common shares outstanding during the year. The calculation of diluted earnings per share also considers the assumed dilution from the exercise of stock options and from performance shares and restricted stock units.

Our earnings per share (basic and diluted) for 2017, 2016, and 2015 are presented below (in thousands, except per share amounts):



	2017			2016 (recast)			2015 (recast)
Income from continuing operations	$	447,962		$	309,120		$	229,606
(Loss) income from discontinued operations, net of tax	(232,916		)	178,879			293,080
Net loss (income) attributable to noncontrolling interests from discontinued operations	58,698			(51,302		)	(63,164		)
Net income attributable to TEGNA Inc.	$	273,744		$	436,697		$	459,522

Weighted average number of common shares outstanding - basic	215,587			216,358			224,688
Effect of dilutive securities
Restricted stock	659			1,424			2,236
Performance share units	550			997			1,867
Stock options	682			902			930
Weighted average number of common shares outstanding - diluted	217,478			219,681			229,721

Earnings from continuing operations per share - basic	$	2.08		$	1.43		$	1.02
Earnings from discontinued operations per share - basic	(0.81		)	0.59			1.02
Earnings per share - basic	$	1.27		$	2.02		$	2.04

Earnings from continuing operations per share - diluted	$	2.06		$	1.41		$	1.00
Earnings from discontinued operations per share - diluted	(0.80		)	0.58			1.00
Earnings per share - diluted	$	1.26		$	1.99		$	2.00

Our calculation of diluted earnings per share includes the dilutive effects for the assumed vesting of outstanding restricted stock units, performance share units, and exercises of outstanding stock options based on the treasury stock method. The diluted earnings per share amounts exclude the effects of approximately 190 thousand stock awards for 2017, 150 thousand for 2016, and 200 thousand for 2015, as their inclusion would be accretive to earnings per share.

Share repurchase program

In the third quarter of 2017, our Board of Directors approved a new share repurchase program for up to $300.0 million of our common stock over the next three years. During 2017, 1.5 million shares were repurchased for $23.5 million. In 2016, 7.0 million shares were purchased for $161.9 million, and in 2015, 9.6 million shares were purchased for $271.0 million. Repurchased shares are included in the Consolidated Balance Sheets as Treasury Stock. As of December 31, 2017, the value of shares that may be repurchased under the existing program is $285.0 million.

The shares may be repurchased at management’s discretion, either in the open market or in privately negotiated block transactions. Management’s decision to repurchase shares will depend on price and other corporate needs. Purchases may occur from time to time and no maximum purchase price has been set. Certain of the shares we previously acquired have been reissued in settlement of employee stock awards.

Stock-Based Compensation Plans

In May 2001, our shareholders approved the adoption of the 2001 Omnibus Incentive Compensation Plan (the Plan). The Plan is administered by the Executive Compensation Committee of the Board of Directors and was amended and restated as of May 4, 2010, to increase the number of shares reserved for issuance to 60.0 million shares of our common stock. The Plan provides for the granting of stock options, stock appreciation rights, restricted stock, restricted stock units (RSUs), performance share units (PSUs) and other equity-based and cash-based awards. Awards may be granted to our employees and members of the Board of Directors. The Plan provides that shares of common stock subject to awards granted become available again for issuance if such awards are canceled or forfeited.

In 2011, we established a performance share award plan for senior executives pursuant to which awards were first made with a grant date of January 1, 2012. Pursuant to the terms of this award, we may issue shares of our common stock (performance shares) to senior executives following the completion of a three-year period beginning on the grant date. Generally, if an executive remains in continuous employment with us during the full three-year incentive period, the number of PSUs that an executive will receive will be determined based upon how our total shareholder return (TSR) compares to the TSR of a peer group of companies during the three-year period.

We recognize the grant date fair value of each PSU, less estimated forfeitures, as compensation expense ratably over the incentive period. Fair value is determined by using a Monte Carlo valuation model. Each PSU is equal to and paid in one share of our common stock, but carries no voting or dividend rights. The number of shares ultimately issued for each PSU award may range from 0% to 200% of the award’s target.

We also issue stock-based compensation to employees in the form of RSUs. These awards generally entitle employees to receive at the end of a specified vesting period one share of common stock for each RSU granted, conditioned on continued employment for the relevant vesting period. RSUs granted prior to 2015 “cliff vested” at the end of a four-year vesting period. RSUs granted in 2015 and 2016 vest 25% per year over a four-year vesting period and are settled in common stock at the end of the four-year vesting period. RSUs granted since 2016 vest 25% per year and settle annually. RSUs do not pay dividends or confer voting rights in respect of the underlying common stock during the vesting period. RSUs are valued based on the fair value of our common stock on the date of grant less the present value of the expected dividends not received during the relevant vesting period. The fair value of the RSU, less estimated forfeitures, is recognized as compensation expense ratably over the vesting period. We have generally granted both RSUs and PSUs to employees on January 1, however, beginning in 2018, awards will be granted on March 1.

The Plan also permits us to issue restricted stock. Restricted Stock is an award of common stock that is subject to restrictions and such other terms and conditions determined by the Executive Compensation Committee.

Determining fair value of PSUs

Valuation and amortization method – We determined the fair value of PSUs using the Monte Carlo valuation model. This model considers the likelihood of the share prices of our peer group companies’ and our shares ending at various levels subject to certain price caps at the conclusion of the three-year incentive period. Key inputs into the Monte Carlo valuation model include expected term, expected volatility, risk-free interest rate and expected dividend yield. Each assumption is discussed below.

Expected term – The expected term represents the period that our stock-based awards are expected to be outstanding. The expected term for PSU awards is based on the incentive period.

Expected volatility – The fair value of stock-based awards reflects volatility factors calculated using historical market data for our common stock and also our peer group when the Monte Carlo method is used. The time frame used is equal to the expected term.

Risk-free interest rate – We base the risk-free interest rate on the yield to maturity at the time of the award grant on zero-coupon U.S. government bonds having a remaining life equal to the award’s expected life.

Expected dividend – The dividend assumption is based on our expectations about our dividend policy on the date of grant.

Estimated forfeitures – When estimating forfeitures, we consider voluntary termination behavior as well as analysis of actual forfeitures.

The following assumptions were used to estimate the fair value of PSUs:



PSU Activity	2017	2016	2015
Expected term	3 yrs.	3 yrs.	3 yrs.
Expected volatility	29.90%	39.60%	32.00%
Risk-free interest rate	1.47%	1.31%	1.10%
Expected dividend yield	2.62%	2.19%	2.51%

Impact from Cars.com Spin on Equity Awards: In connection with the spin-off of our Cars.com business, and in accordance with our equity award Plan, the number of stock options, RSUs and target PSUs outstanding on May 31, 2017 (the Cars.com Distribution Date), and the exercise prices of such stock options were adjusted with the intention of preserving the intrinsic value of the awards prior to the separation. Employees with outstanding restricted stock and RSUs granted prior to 2016 received one share of an equivalent Cars.com stock award for every three shares of TEGNA stock award then outstanding. Employees with outstanding PSUs granted prior to 2017 received one share of an equivalent Cars.com stock award for every three shares of TEGNA stock award then outstanding. For restricted stock and RSUs granted in 2016 and 2017 and for PSUs granted in 2017 prior to the Cars.com Distribution Date, adjustments were determined by comparing the fair value of such awards immediately prior to the spin-off to the fair value of such awards immediately after (the Cars.com Adjustments).

Accordingly, each restricted stock and RSU granted in 2016 and 2017 and each PSU granted in 2017 and outstanding as of the Cars.com Distribution Date was increased by multiplying the size of such award by a factor of 1.59. The Cars.com Adjustments resulted in an aggregate increase of approximately 785 thousand equity awards (comprised of 606 thousand RSUs and 179 thousand target PSUs) and are included in the line item “Adjustment due to spin-off of Cars.com” in the tables that follow. These adjustments to our stock-based compensation awards did not have a material impact on compensation expense.

Impact from Publishing Spin on Equity Awards: In connection with the spin-off of our publishing businesses in 2015, and in accordance with our equity award Plan, the number of stock options, RSUs and target PSUs outstanding (collectively, stock awards) on June 29, 2015 (the Publishing Distribution Date), and the exercise prices of such stock options were adjusted with the intention of preserving the intrinsic value of the awards prior to the separation. Employees with outstanding stock awards granted prior to 2015 received one share of an equivalent Gannett stock award for every two shares of TEGNA stock award then outstanding. For RSUs and PSUs granted in 2015 but prior to the Publishing Distribution Date, adjustments were determined by comparing the fair value of such awards immediately prior to the spin-off to the fair value of such awards immediately after (the Publishing Adjustments).

Accordingly, each stock award granted in 2015 and outstanding as of the Distribution Date was increased by multiplying the size of such award by a factor of 1.18. The Adjustments resulted in an aggregate increase of approximately 125 thousand equity awards (comprised of 75 thousand RSUs and 50 thousand target PSUs) and are included in the line item “Adjustment due to spin-off of Publishing” in the tables that follow. These adjustments to our stock-based compensation awards did not have a material impact on compensation expense.

Stock-based Compensation Expense: The following table shows the stock-based compensation related amounts recognized in the Consolidated Statements of Income for equity awards pertaining to continuing operations (in thousands):



	2017		2016		2015
			(recast)		(recast)
Restricted stock and RSUs	$	9,408	$	9,957	$	7,788
PSUs	6,234		6,341		10,038
Stock options	427		—		857
Total stock-based compensation	16,069		16,298		18,683
Total income tax benefit	7,442		12,677		7,264
Stock-based compensation net of tax	$	8,627	$	3,621	$	11,419

Restricted Stock and RSUs: As of December 31, 2017, there was $15.6 million of unrecognized compensation cost related to non-vested restricted stock and RSUs. This amount will be adjusted for future changes in estimated forfeitures and recognized on a straight-line basis over a weighted average period of 2.3 years.

A summary of restricted stock and RSU awards is presented below:



	2017				2016				2015
Restricted Stock and RSU Activity	Shares		Weighted average fair value		Shares		Weighted average fair value		Shares		Weighted average fair value
Unvested at beginning of year	1,143,421		$	25.66	2,126,526		$	21.55	3,577,598		$	16.97
Granted	989,443		19.41		616,743		25.08		491,690		31.78
Vested	(1,162,231	)	25.18		(1,277,444	)	19.22		(1,485,735	)	14.66
Canceled	(514,460	)	21.49		(322,404	)	22.27		(532,524	)	19.28
Adjustment due to spin-off of Publishing ^(a)	—				—				75,497
Adjustment due to spin-off of Cars.com ^(b)	606,377				—				—
Unvested at end of year ^{(a) (b)}	1,062,550		$	21.29	1,143,421		$	25.66	2,126,526		$	21.55

(a) The weighted-average grant date fair value of the RSUs included in the line item “Adjustment due to spin-off of Publishing” is equal to the weighted-average grant date fair value of the awards at their respective grant date divided by a factor of approximately 1.18. The weighted-average grant date fair value of the unvested RSUs as of Dec. 31, 2015 reflect the adjustment.

(b) The weighted-average grant date fair value of the RSUs included in the line item “Adjustment due to spin-off of Cars.com” is equal to the weighted-average grant date fair value of the awards at their respective grant date divided by a factor of approximately 1.59. The weighted-average grant date fair value of the unvested RSUs as of Dec. 31, 2017 reflect the adjustment.

PSUs: As of December 31, 2017, there was $4.2 million of unrecognized compensation cost related to non-vested performance shares. This amount will be adjusted for future changes in estimated forfeitures and recognized over a weighted average period of 1.7 years.

A summary of our performance shares awards is presented below:



	2017				2016				2015
PSUs Activity	Target number of shares		Weighted average fair value		Target number of shares		Weighted average fair value		Target number of shares		Weighted average fair value
Unvested at beginning of year	1,018,950		$	35.60	1,385,940		$	29.21	2,100,115		$	20.95
Granted	307,950		23.92		392,589		30.69		285,458		39.47
Vested	(774,267	)	36.94		(687,125	)	20.12		(925,640	)	14.23
Canceled	(68,573	)	31.80		(72,454	)	34.96		(123,621	)	29.84
Adjustment due to spin-off of Publishing ^(a)	—				—				49,628
Adjustment due to spin-off of Cars.com ^(b)	178,775				—				—
Unvested at end of year ^{(a) (b)}	662,835		$	25.87	1,018,950		$	35.60	1,385,940		$	29.21

(a) The weighted-average grant date fair value of the PSUs included in the line item “Adjustment due to spin-off of Publishing” is equal to the weighted-average grant date fair value of the awards at their respective grant date divided by a factor of approximately 1.18. The weighted-average grant date fair value of the unvested PSUs as of Dec. 31, 2015 reflect the adjustment.

(b) The weighted-average grant date fair value of the PSUs included in the line item “Adjustment due to spin-off of Cars.com” is equal to the weighted-average grant date fair value of the awards at their respective grant date divided by a factor of approximately 1.59. The weighted-average grant date fair value of the unvested PSUs as of Dec. 31, 2017 reflect the adjustment.

Stock Options: No stock options were granted in 2017, 2016 or 2015. All outstanding options were fully vested as of December 2016, which we previously recognized as compensation cost ratably over the four-year incentive period. At December 31, 2017 and 2016, there were 1.3 million (weighted average exercise price of $8.25) and 1.3 million (weighted average exercise price of $12.95) stock options outstanding. Due to the Cars.com spin, stock options outstanding had no change from 2016 to 2017 as stock option exercises during the year were offset by additional shares given as a result of the Cars.com spin adjustment (as described above). Stock options outstanding at December 31, 2017, have a weighted average remaining contractual life of approximately 0.76 years and an aggregate intrinsic value of $7.3 million.

Stock options exercised totaled 0.8 million in 2017, 0.2 million in 2016, and 0.7 million in 2015. The weighted average exercise price was $9.07 in 2017, $11.03 in 2016, and $16.17 in 2015. The grant-date fair value of stock options that vested in 2015 was $1.0 million. No stock options vested in 2017 and 2016. The intrinsic value of all stock options exercised was $5.3 million in 2017, $2.3 million in 2016 and $11.4 million in 2015.

Accumulated other comprehensive loss

The elements of our Accumulated Other Comprehensive Loss (AOCL) principally consisted of pension, retiree medical and life insurance liabilities and foreign currency translation. The following tables summarize the components of, and changes in AOCL, net of tax and noncontrolling interests (in thousands):



2017	Retirement Plans			Foreign Currency Translation (1)			Other			Total
Balance at beginning of year	$	(124,978	)	$	(28,560	)	$	(8,035	)	$	(161,573	)
Other comprehensive income (loss) before reclassifications	12,496			6,649			(1,707		)	17,438
Amounts reclassified from AOCL	5,445			22,025			9,742			37,212
Balance at end of year	$	(107,037	)	$	114		$	—		$	(106,923	)

(1) Our entire foreign currency translation adjustment is related to our CareerBuilder investment. As a result of deconsolidating the investment due to the sale of our majority ownership, we reclassified the translation adjustment from AOCL to the Consolidated Statement of Income as of the date of sale, July 31, 2017. Due to the noncontrolling ownership stake that we retained in CareerBuilder, we will continue to record our share of foreign currently translation adjustments through our equity method investment.



2016	Retirement Plans			Foreign Currency Translation			Other			Total
Balance at beginning of year	$	(114,133	)	$	(20,129	)	$	3,311		$	(130,951	)
Other comprehensive (loss) before reclassifications	(13,143		)	(8,431		)	(11,346		)	(32,920		)
Spin-off publishing businesses	(2,642		)	—			—			(2,642		)
Amounts reclassified from AOCL	4,940			—			—			4,940
Balance at end of year	$	(124,978	)	$	(28,560	)	$	(8,035	)	$	(161,573	)



2015	Retirement Plans			Foreign Currency Translation			Other		Total
Balance at beginning of year	$	(1,169,882	)	$	391,113		$	—	$	(778,769	)
Other comprehensive income (loss) before reclassifications	23,094			(1,966		)	3,311		24,439
Spin-off publishing businesses	1,012,745			(409,276		)	—		603,469
Amounts reclassified from AOCL	19,910			—			—		19,910
Balance at end of year	$	(114,133	)	$	(20,129	)	$	3,311	$	(130,951	)

AOCL components are included in the computation of net periodic post-retirement costs which include pension costs discussed in Note 7 and our other post-retirement benefits (health care and life insurance benefits). Reclassifications out of AOCL related to these post-retirement plans include the following (in thousands):



	2017			2016			2015
Amortization of prior service cost	$	63		$	96		$	1,176
Amortization of actuarial loss	8,774			7,972			31,357
Total reclassifications, before tax	8,837			8,068			32,533
Income tax effect	(3,392		)	(3,128		)	(12,623		)
Total reclassifications, net of tax	$	5,445		$	4,940		$	19,910

Adjustments related to spin-off of publishing businesses

During 2016, we reduced retained earnings in our Consolidated Statements of Equity by $42.5 million related to two adjustments pertaining to the spin-off of our publishing businesses. The first adjustment reduced retained earnings by $7.7 million related to discrepancies in participant data in our post-retirement plans as disclosed in Note 7.

The second adjustment reduced retained earnings by $34.8 million as a result of adjusting the deferred tax assets and liabilities that were previously transferred to Gannett on June 29, 2015. The adjustments were identified as part of our annual procedure to true-up the 2015 tax provision estimates to the actual 2015 federal corporate income tax returns filed during the third quarter of 2016 and the state corporate income tax returns filed in the fourth quarter of 2016. These changes in estimates primarily relate to the deferred tax liability associated with depreciable assets and other 2015 tax provision to tax return adjustments impacting the previously estimated deferred taxes for Gannett.