NOTES TO UNAUDITED CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

NOTE 1 — Basis of presentation and summary of significant accounting policies

Description of business: Gannett Co., Inc. (“Gannett,” “our,” “us” and “we”) is a leading international, multi-platform news and information company delivering high-quality, trusted content where and when consumers want to engage with it on virtually any device or platform. As of June 26, 2016, our operations are comprised of 127 daily publications and related digital platforms in the U.S. and the U.K., more than 600 non-daily local publications in the U.S., and more than 150 such titles in the U.K. Our 108 U.S. daily publications include USA TODAY.

Separation from former parent: On June 29, 2015, the separation of Gannett from our former parent, TEGNA Inc., was completed pursuant to a Separation and Distribution Agreement (the “Separation Agreement”) dated June 26, 2015. On June 29, 2015, our former parent completed the pro rata distribution of 98.5% of the outstanding shares of Gannett common stock to its stockholders (also referred to herein as the “spin-off” or “separation”), and Gannett common stock began trading “regular way” on the New York Stock Exchange. Each holder of our former parent’s common stock received one share of Gannett common stock for every two shares of our former parent’s common stock held on June 22, 2015, the record date for the distribution. Following the distribution, our former parent owns 1.5% of Gannett’s outstanding common stock, and our former parent will continue to own our shares for a period of time not to exceed five years after the distribution. Our former parent structured the distribution to be tax free to its U.S. stockholders for U.S. federal income tax purposes.

Basis of presentation: Our accompanying unaudited condensed consolidated and combined financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and the instructions for Form 10-Q. Therefore, the accompanying statements do not include all information and footnotes which are normally included in the Form 10-K and annual report to shareholders. These unaudited condensed consolidated and combined financial statements should be read in conjunction with the consolidated and combined financial statements and notes thereto included in our annual report on Form 10-K for fiscal year 2015 (“2015 Annual Report on Form 10-K”). In our opinion, the financial statements reflect all adjustments of a normal recurring nature necessary for a fair presentation of results for the interim periods presented. Results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. All intercompany accounts have been eliminated in consolidation.

Prior to the spin-off, we did not prepare separate financial statements. The accompanying unaudited condensed consolidated and combined financial statements for periods prior to the spin-off were derived from the condensed and consolidated financial statements and accounting records of our former parent and present our combined financial position, results of operations, and cash flows as of and for the periods presented as if we were a separate entity.

Through the date of the spin-off and in preparing these unaudited condensed consolidated and combined financial statements, management has made certain assumptions or implemented methodologies to allocate various expenses from our former parent to us and from us back to our former parent in the form of cost recoveries. These allocations represent services provided between the two entities and are more fully detailed in Note 13 — Relationship with our former parent . We believe the assumptions and methodologies used in these allocations are reasonable; however, such allocated costs, net of cost recoveries, may not be indicative of the actual level of expense that would have been incurred had we been operating on a stand-alone basis, and, accordingly, may not necessarily reflect our combined financial position, results of operations, and cash flows had we operated as a stand-alone entity during the periods presented.

For periods subsequent to the spin-off, our financial statements are presented on a consolidated basis as we became a separate consolidated entity.

In the second quarter of 2016 , we identified an error relating to certain participant data that had resulted in an overstatement of the postretirement benefits liabilities transferred from our former parent at separation. Based on our assessments of qualitative and quantitative factors, the error and the related impacts were not considered material to the consolidated financial statements for the quarter ended June 26, 2016 or the prior periods. The error was corrected in the quarter ended June 26, 2016 by decreasing postretirement medical and life insurance liabilities by $2.8 million and pension liabilities by $20.1 million , increasing former parent investment, net, which is now reflected in additional paid-in capital, by $15.9 million , increasing accumulated other comprehensive loss, net by $2.1 million , decreasing deferred tax assets by $8.7 million , and decreasing net periodic postretirement cost by $0.4 million .

Use of estimates: The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates, judgments, and assumptions that affect the amounts reported in the unaudited condensed consolidated and combined financial statements and footnotes thereto. Actual results could differ from those estimates. Significant estimates inherent in the preparation of such financial statements include accounting for asset impairments, reserves established for doubtful accounts, equity-based compensation, depreciation and amortization, business combinations, income taxes, litigation matters, and contingencies.

Segment presentation : In the second quarter of 2016, we determined, based on the way we manage our businesses and the nature of those businesses, our prior operating segments and goodwill reporting units of U.S. Community Publishing and the USA TODAY group will now be combined into a single operating segment and goodwill reporting unit, Domestic Publishing. Our operating segments and goodwill reporting units are now Domestic Publishing and the U.K. group. Our operating segments meet the criteria under the Financial Accounting Standards Board’s ("FASB") guidance in Accounting Standards Codification (“ASC”) Topic 280, Segment Reporting , to be aggregated into one reportable segment.

Business combinations: We allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed, and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the value of these identifiable assets and liabilities is recorded as goodwill. When determining the fair value of assets acquired and liabilities assumed, management makes significant estimates and assumptions, especially with respect to intangible assets.

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

Revenue recognition: Our revenues include amounts charged to customers for space purchased in our newspapers, digital ads placed on our digital platforms, advertising and marketing service fees, advertising products, and commercial printing. Revenues also include circulation revenues for newspapers (both print and digital) purchased by readers or distributors, reduced by the amount of any discounts taken.

Circulation revenues, including online subscriptions, are recognized when purchased newspapers are distributed or made available on our digital platforms. Advertising revenues are recognized net of agency commissions in the period when advertising is printed or placed on digital platforms. Marketing services revenues are generally recognized when advertisements or services are delivered. Commercial printing revenues are recognized when the product is delivered to the customer.

We have various advertising agreements which have both print and digital deliverables. Revenue from sales agreements containing multiple deliverable elements is allocated to each element based on the relative best estimate of selling price. Elements are treated as separate units of accounting if there is standalone value upon delivery.

Amounts received from customers in advance of revenue recognition are deferred as liabilities.

Recent accounting standards updates adopted: We adopted various accounting standards updates in the first quarter of 2016, none of which had a material effect on our consolidated financial results.

Recent accounting standards issued but not yet adopted: In July 2015, the FASB delayed the effective date for ASU 2014-09, Revenue from Contracts with Customers (“Topic 606”). The core principle contemplated by ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount reflecting the consideration the entity expects to be entitled in exchange for those goods or services. New disclosures about the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers are also required.

In April 2016, the FASB issued ASU 2016-10 to clarify and amend the identification of performance obligations and licensing implementation guidance contained within Topic 606. Further, the FASB issued ASU 2016-12 in May 2016 to clarify certain core principles of Topic 606 related to assessing the collectability criterion, presenting taxes collected from customers, noncash considerations, contract modifications, and completed contracts at transition. We are required to adopt the standard and its associated amendments in the first quarter of 2018 and retroactively apply it to our 2016 and 2017 financial results at the time of adoption. Under the new rules, we are permitted to adopt the new standard and amendments in 2017. We can also choose to apply the standard and amendments using either the full retrospective approach or a modified retrospective approach which recognizes a cumulative catch up adjustment to the opening balance of retained earnings. We have not yet selected a

transition method, and we are currently evaluating the effect the updated guidance will have on our consolidated financial statements and related disclosures.

In July 2015, the FASB issued ASU 2015-11, Inventory (“Topic 330”): “Simplifying the Measurement of Inventory,” which requires entities using the first-in, first-out inventory costing method to subsequently value inventory at the lower of cost or net realizable value. Topic 330 defines net realizable value as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Topic 330 is effective for fiscal years and interim periods within those years beginning after December 15, 2016, with early adoption permitted. We are currently evaluating the provisions of Topic 330 and assessing the impact on our consolidated financial results.

In February 2016, the FASB issued ASU 2016-02, Leases (“Topic 842”), which modifies lease accounting for both lessees and lessors to increase transparency and comparability by recognizing lease assets and lease liabilities by lessees for those leases classified as operating leases under previous accounting standards and disclosing key information about leasing arrangements. This guidance is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. We are currently evaluating the provisions of Topic 842 and assessing the impact on our consolidated financial results.

In March 2016, the FASB issued ASU 2016-09, Stock Compensation, which simplifies certain aspects of the accounting for share-based payment transactions, including income taxes, classification of awards, and classification in the statement of cash flows. This guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2016, with early adoption permitted. We are currently evaluating the provisions of ASU 2016-09 and assessing the impact on our consolidated financial results.

NOTE 2 — Acquisitions

Journal Media Group: On April 8, 2016, we completed the acquisition of 100% of the outstanding common stock of Journal Media Group, Inc. (“JMG”) for approximately $261 million in cash, net of cash acquired. Further, approximately $2 million of the purchase price paid was treated as post-acquisition expense for accounting purposes. We financed the transaction by borrowing $250 million under our credit facility as well as with available cash, and we have incurred $12.6 million in expenses related to the acquisition, $10.1 million of which have been incurred for the six months ended June 26, 2016 .

JMG is a media company with print and digital publishing operations serving 15 U.S. markets in 9 states, including the Milwaukee Journal Sentinel, the Knoxville News Sentinel, and The Commercial Appeal in Memphis . The acquisition expanded our print and digital publishing operations domestically.

The purchase price, based on management's preliminary estimates, was allocated to the tangible assets and identified intangible assets acquired based on their estimated fair values. The allocation of the preliminary purchase price is primarily pending the finalization of the fair value of acquired deferred income tax assets and liabilities and assumed income and non-income based tax liabilities. As of the acquisition date, the purchase price assigned to the acquired assets and assumed liabilities is summarized as follows:

Acquired property, plant, and equipment will be depreciated on a straight-line basis over the assets’ respective estimated remaining useful lives. Goodwill is calculated as the excess of the consideration transferred over the fair value of the identifiable net assets acquired and represents the future economic benefits expected to arise from other intangible assets

acquired that do not qualify for separate recognition, including assembled workforce and non-contractual relationships as well as expected future synergies. We expect the purchase price allocated to goodwill and mastheads will not be deductible for tax purposes.

Since the acquisition date, revenues for JMG were $92.6 million and operating losses were $8.8 million .

Texas-New Mexico Partnership: On June 1, 2015, we completed the acquisition of the remaining 59.4% interest in the Texas-New Mexico Partnership (“TNP”) that we did not own from Digital First Media. We completed the acquisition through the assignment of our 19.5% interest in the California Newspapers Partnership (“CNP”), valued at $34.4 million , additional cash consideration, net of cash acquired, of $5.2 million , and $1.9 million in deferred consideration. As a result, we own 100% of TNP and no longer have any ownership interest or continuing involvement in CNP. Through the transaction, we acquired news organizations in Texas ( El Paso Times ), New Mexico ( Alamogordo Daily News ; Carlsbad Current-Argus ; The Daily Times in Farmington; Deming Headlight ; Las Cruces Sun-News ; and Silver City Sun-News ) and Pennsylvania ( Chambersburg Public Opinion; Hanover Evening Sun; Lebanon Daily News; and The York Daily Record ).

The purchase price was allocated to the tangible assets and identified intangible assets acquired based on their estimated fair values. As of the acquisition date, the purchase price assigned to the acquired assets and assumed liabilities is summarized as follows:

On the acquisition date, the fair value of our 40.6% interest in TNP was $26.6 million , and the fair value of our 19.5% interest in CNP was $34.4 million . The pre-acquisition carrying value of TNP and CNP was $39.2 million . We recognized a  $21.8 million pre-tax non-cash gain on the transaction in the second quarter of 2015.

Acquired property, plant, and equipment will be depreciated on a straight-line basis over the assets’ respective estimated remaining useful lives. Goodwill is calculated as the excess of the consideration transferred over the fair value of the identifiable net assets acquired and represents the future economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, including assembled workforce and non-contractual relationships as well as expected future synergies. We expect the purchase price allocated to goodwill and mastheads will be deductible for tax purposes.

Romanes Media Group: On May 26, 2015, our U.K. subsidiary, Newsquest Media Group Ltd. ("Newsquest"), paid $23.4 million , net of cash acquired, to purchase 100% of the shares of Romanes Media Group (“RMG”). RMG publishes local newspapers in Scotland, Berkshire, and Northern Ireland, and its portfolio comprises one daily newspaper, 28 weekly newspapers, and their associated websites.

NOTE 3 — Restructuring activities

Severance-related expenses: We have initiated various cost reducing actions that are severance-related.

In the second quarter of 2015, we initiated an Early Retirement Opportunity Program (“EROP”) for our USA TODAY employees. Since its announcement, we have recorded severance-related expenses of $7.8 million for the three and six months ended June 28, 2015 in accordance with Accounting Standards Codification (“ASC”) Topic 712.

In August 2015, we announced an EROP for employees in certain corporate departments and publishing sites. Since its announcement, we have recorded severance-related expenses of $35.4 million in accordance with ASC Topic 712. Related to

this action, there was $1.1 million of additional expense recorded in the first quarter of 2016 and no expense recorded for the three and six months ended June 28, 2015.

We also had other employee termination actions associated with our facility consolidation and other cost efficiency efforts, including various one-time termination actions and terminations related to an ongoing severance plan. We recorded severance-related expenses of $18.2 million and $20.9 million for the three and six months ended June 26, 2016, respectively, and $7.6 million and $19.5 million for the three and six months ended June 28, 2015, respectively, related to these other actions.

These charges are presented in our statements of income. We recorded $15.2 million and $18.2 million in costs of sales and operating expenses and $3.0 million and $3.7 million in selling, general, and administrative expenses during the three and six months ended June 26, 2016, respectively, related to our employee termination actions. We recorded $12.3 million and $21.9 million in costs of sales and operating expenses and $3.1 million and $5.4 million in selling, general, and administrative expenses during the three and six months ended June 28, 2015, respectively, related to such actions.

A summary of our liabilities related to employee termination actions for the six months ended June 26, 2016 is as follows:

Facility consolidation and impairment charges: We evaluated and revised the carrying values and useful lives of property, plant, and equipment at certain sites to reflect the use of those assets over a shortened period because of facility consolidation efforts. Certain assets classified as held-for-sale according to ASC Topic 360 resulted in us recognizing non-cash charges in both 2016 and 2015 as we reduced the carrying values to equal the fair value less cost to dispose. The fair values were based on the estimated prices of similar assets. We recorded pre-tax charges for facility consolidations and asset impairments of $3.9 million and $5.1 million for the three months ended June 26, 2016 and June 28, 2015 , respectively, and $4.5 million and $6.6 million for the six months ended June 26, 2016 and June 28, 2015 , respectively.

Customer relationships include subscriber lists and advertiser relationships and are amortized on a straight-line basis over their useful lives. Other intangibles are primarily amortizable trade names and are amortized on a straight-line basis over their useful lives.

The following table summarizes the changes in our net goodwill balance through June 26, 2016:

NOTE 5 — Revolving credit facility

On June 29, 2015, we entered into a new five -year secured revolving credit facility pursuant to which we may borrow from time to time up to an aggregate principal amount of $500.0 million (“Credit Facility”). Under the Credit Facility, we may borrow at an applicable margin above the Eurodollar base rate (“LIBOR loan”) or the higher of the Prime Rate, the Federal Funds Effective Rate plus 0.50% , or the one month LIBOR rate plus 1.00% (“ABR loan”). The applicable margin is determined based on our total leverage ratio but differs between LIBOR loans and ABR loans. For LIBOR-based borrowing, the margin varies from 2.00% to 2.50% . For ABR-based borrowing, the margin varies from 1.00% to 1.50% . Up to $50.0 million of the Credit Facility is available for issuance of letters of credit.

Customary fees are payable related to the Credit Facility, including commitment fees on the undrawn commitments of between 0.30% and 0.40% per annum, payable quarterly in arrears, based on our total leverage ratio. Borrowings under the Credit Facility are guaranteed by our wholly-owned material domestic subsidiaries. All obligations of Gannett and each subsidiary guarantor under the Credit Facility are or will be secured by first priority security interests in our equipment, inventory, accounts receivable, fixtures, general intangibles and other personal property, mortgages on certain material real property, and pledges of the capital stock of each subsidiary guarantor.

Under the Credit Facility, our consolidated interest coverage ratio cannot be less than 3.00 :1.00, and our total leverage ratio cannot exceed 3.00 :1.00 as of the last day of the test period consisting of the last four fiscal quarters. We were in compliance with these financial covenants as of June 26, 2016 . 

The Credit Facility also contains a number of covenants that, among other things, limit or restrict our ability, subject to certain exceptions, to: (i) permit certain liens on current or future assets, (ii) enter into certain corporate transactions, (iii) incur additional indebtedness, (iv) make certain payments or declare certain dividends or distributions, (v) dispose of certain property, (vi) make certain investments, (vii) prepay or amend the terms of other indebtedness, or (viii) enter into certain transactions with our affiliates. We were in compliance with these covenants as of June 26, 2016 . 

On April 8, 2016, we borrowed $250 million under our Credit Facility to complete the acquisition of JMG, which is described in Note 2 — Acquisitions . As of June 26, 2016 , we had $200.0 million in outstanding borrowings under the Credit Facility and $15.4 million of letters of credit outstanding, leaving $284.6 million of availability remaining.

NOTE 6 — Retirement plans

Defined benefit retirement plans: We, along with our subsidiaries, have various defined benefit retirement plans, including plans established under collective bargaining agreements. Our principal retirement plan is the Gannett Retirement Plan (“GRP”). Our retirement plans also include the Gannett 2015 Supplemental Retirement Plan (“SERP”), the Newsquest Pension Scheme in the U.K. (“Newsquest Plan”), and the Newspaper Guild of Detroit Pension Plan. We use a December 31 measurement date convention for our retirement plans.

Our retirement plan costs include costs for all of our qualified plans and our allocated portions of former parent-sponsored qualified and non-qualified plans and are presented in the following table:

Beginning in 2016, in addition to any other contributions that may be required, we will make contributions of $25 million in each of the next five fiscal years through 2020 and $15 million in 2021 for the GRP. In March 2016, we made our 2016 $25 million contribution to the GRP.

During the six months ended June 26, 2016 , we contributed $ 11.3 million (£ 7.9 million ) to the Newsquest Plan. We expect to contribute approximately £ 28.8 million to the Newsquest Plan throughout the remainder of 2016 .

Defined contribution plans: Our U.S. employees participate in qualified 401(k) savings plans, permitting eligible employees to make voluntary contributions on a pre-tax basis subject to certain limits. Substantially all of our employees (other than those covered by certain collective bargaining agreements) scheduled to work at least 1,000 hours during each year of employment are eligible to participate. The plans allow participants to invest their savings in various investments. For most participants, the matching formula is 100% of the first 5% of employee contributions, and the employer match obligation is settled by buying our stock in the open market and depositing it in the participants’ accounts.

In connection with our acquisition of JMG as discussed in Note 2 — Acquisitions , we assumed JMG's 401(k) savings plan, which continues to cover former JMG employees. For most participants in this plan, the matching formula is 50% of the first 7% of employee contributions, and the employer match obligation is settled in cash.

Amounts charged to expense for employer contributions to the 401(k) savings plans totaled $6.7 million and $6.8 million in the three months ended June 26, 2016 and June 28, 2015 , respectively. Amounts charged to expense for employer contributions to the 401(k) savings plans totaled $14.1 million and $14.6 million in the six months ended June 26, 2016 and June 28, 2015 , respectively. These amounts are recorded in “Cost of sales and operating expenses” and “Selling, general and administrative expenses,” as appropriate, in the unaudited condensed consolidated and combined statements of income.

NOTE 7 — Postretirement benefits other than pension

We provide health care and life insurance benefits to certain retired employees who meet age and service requirements. Most of our retirees contribute to the cost of these benefits, and retiree contributions are increased as actual benefit costs increase. The cost of providing retiree health care and life insurance benefits is actuarially determined. Our policy is to fund benefits as claims and premiums are paid.

Our postretirement benefit costs and our allocated portions of former parent-sponsored postretirement plans for health care and life insurance are presented in the following table:

Certain of our employees also participated in postretirement benefit plans sponsored by our former parent. Health care and life insurance benefit obligations pursuant to the former parent-sponsored postretirement plans and related to our current and former employees were transferred to us at the separation date and, accordingly, have been allocated to us in our unaudited condensed consolidated and combined financial statements for periods prior to the separation date by determining the projected benefit obligation of participants for which the liability was transferred. Subsequent to the separation, no further costs were allocated to us.

NOTE 8 — Income taxes

Our reported effective income tax rate on pre-tax income was 41.8% for the three months ended June 26, 2016 , compared to 30.2% for the three months ended June 28, 2015 . Our reported effective income tax rate on pre-tax income was 33.4% for the six months ended June 26, 2016 , compared to 22.0% for the six months ended June 28, 2015 . The tax rate for the three and six months ended June 26, 2016 was higher than the comparable rate in 2015 due to a one-time tax benefit in 2015 from a change in accounting method to amortize previously non-deductible intangible assets, interest expense disallowance in the U.K. in 2016, and non-deductible transaction costs in 2016.

The total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate was approximately $ 10.5 million as of June 26, 2016 and $ 11.3 million as of December 27, 2015 . The amount of accrued interest and penalties payable related to unrecognized tax benefits was $ 3.6 million as of June 26, 2016 and $ 3.4 million as of December 27, 2015 .

It is reasonably possible the amount of unrecognized benefits with respect to certain of our unrecognized tax positions will increase or decrease within the next 12 months. These changes may be the result of settlement of ongoing audits, lapses of statutes of limitations, or other regulatory developments. At this time, we estimate the amount of gross unrecognized tax positions may be reduced by up to approximately $ 1.7 million within the next 12 months primarily due to lapses of statutes of limitations and settlement of ongoing audits in various jurisdictions.

In connection with the spin-off, we entered into a tax matters agreement with our former parent which states each company’s rights and responsibilities with respect to payment of taxes, tax return filings, and control of tax examinations. We are generally responsible for taxes allocable to periods (or portions of periods) beginning after the spin-off. Although any changes with regards to additional income tax liabilities related to periods prior to the spin-off may impact our effective tax rate in the future, we may be entitled to seek indemnification for these items from our former parent under the tax matters agreement.

The following table summarizes the components of, and the changes in, “Accumulated other comprehensive loss” (net of tax):

Accumulated other comprehensive loss components are included in computing net periodic postretirement costs as outlined in Note 6 — Retirement plans and Note 7 — Postretirement benefits other than pension . Reclassifications out of accumulated other comprehensive loss related to these postretirement plans include the following:

NOTE 10 — Fair value measurement

In the accompanying unaudited condensed consolidated and combined financial statements, we measure and record certain assets and liabilities at fair value. ASC Topic 820, Fair Value Measurement, establishes a hierarchy for those instruments measured at fair value that distinguishes between market data (observable inputs) and our own assumptions (unobservable inputs). The hierarchy consists of three levels:

Level 1 - Quoted market prices in active markets for identical assets or liabilities;

Level 2 - Inputs other than Level 1 inputs that are either directly or indirectly observable; and

Level 3 - Unobservable inputs developed using our own estimates and assumptions, which reflect those a market participant would use.

As of June 26, 2016 and December 27, 2015 , assets held at fair value measured on a recurring basis primarily consist of pension plan assets.

We also have certain assets requiring fair value measurement on a non-recurring basis. Our assets measured on a nonrecurring basis are assets held for sale, which are classified as Level 3 assets and evaluated using executed purchase agreements or third party valuation experts when certain circumstances arise. Assets held for sale total $ 7.5 million as of June 26, 2016 and $12.3 million as of December 27, 2015 .

NOTE 11 — Commitments, contingencies and other matters

Telephone Consumer Protection Act (“TCPA”) litigation: On January 2, 2014, a class action lawsuit was filed against Gannett in the U.S. District Court for the District of New Jersey (Casagrand et al v. Gannett Co., Inc., et al) alleging various violations of the TCPA arising from allegedly improper telemarketing calls made to consumers by one of our vendors. The plaintiffs sought to certify a class that would include all telemarketing calls made by the vendor or us. The TCPA provides for statutory damages of $500 per violation ( $1,500 for willful violations). In April 2016, we agreed to settle all of the claims raised. The settlements are reflected, net of insurance recoveries, in our financial statements as of June 26, 2016 and were not material to our results of operations, financial position, or cash flows.

Environmental contingency: In March 2011, the Advertiser Company, a subsidiary that publishes the Montgomery Advertiser , was notified by the U.S. Environmental Protection Agency ("EPA") that it had been identified as a potentially responsible party (“PRP”) for the investigation and remediation of groundwater contamination in downtown Montgomery, Alabama. The Advertiser is a member of the Downtown Environmental Alliance, which has agreed to jointly fund and conduct all required investigation and remediation. The U.S. EPA has approved the work plan for the investigation and remediation and has transferred responsibility for oversight of this work to the Alabama Department of Environmental Management. The investigation and remediation are underway. In the third quarter of 2015, the Advertiser and other members of the Downtown Environmental Alliance also reached a settlement with the U.S. EPA regarding the costs the U.S. EPA spent to investigate the site. The Advertiser’s final costs cannot be determined until the cleanup work is completed and contributions from other PRPs are finalized.

Other litigation: We are defendants in judicial and administrative proceedings involving matters incidental to our business.

While the ultimate results of these proceedings cannot be predicted with certainty, we expect the ultimate resolution of all pending or threatened claims and litigation will not have a material effect on our consolidated results of operations, financial position, or cash flows.

NOTE 12 — Earnings per share

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

On June 29, 2015, our former parent distributed 98.5% of our total shares outstanding and retained the remaining 1.5% . The total number of shares outstanding at that date, which was approximately 115 million, was used for the calculation of both basic and diluted earnings per share for the six months ended June 28, 2015 .

Our Board of Directors announced in July 2015 a share repurchase program authorizing us to repurchase shares with an aggregate value of up to $150 million over a three -year period. 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 a number of factors, including share price and other corporate liquidity requirements. We expect share repurchases may occur from time to time over the three years. As of June 26, 2016 , no shares have been repurchased under this program.

For the three and six months ended June 26, 2016 and June 28, 2015 , basic and diluted earnings per share were as follows:

The impact of anti-dilutive equity awards excluded from the computation of diluted earnings per share for the three and six months ended June 26, 2016 was not material.

On July 19, 2016, we declared a dividend of $0.16 per share of common stock, payable on September 19, 2016, to shareholders of record as of the close of business on September 6, 2016.

NOTE 13 — Relationship with our former parent

Subsequent to the spin-off

Transition services agreement: In connection with the spin-off, we entered into a transition services agreement with our former parent, pursuant to which we and our former parent will provide to each other certain specified services on a transitional basis, including various information technology, financial, and administrative services. The charges for the transition services generally are expected to allow the providing entity to fully recover all out-of-pocket costs and expenses it actually incurs in connection with providing the service plus, in some cases, the allocated indirect costs of providing the services, generally without profit. The transition services agreements will terminate on the expiration of the term of the last service provided under it but not later than 24 months following the distribution date. Subsequent to separation, we provided certain IT, payroll, and other services to our former parent in the amount of $1.6 million and $4.3 million for the three and six months ended June 26, 2016 , respectively. Our former parent provided certain services to us in the amount of $1.7 million and $3.5 million for the three and six months ended June 26, 2016 , respectively.

Employee matters agreement: In connection with the spin-off, we entered into an employee matters agreement with our former parent prior to the separation to allocate liabilities and responsibilities relating to employment matters, employee compensation and benefit plans, and programs and other related matters. The employee matters agreement governs certain compensation and employee benefit obligations with respect to the current and former employees and non-employee directors of each company.