UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
For the quarterly period ended:
OR
Commission file no.
(Exact name of registrant as specified in its charter)
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Former name, former address and former fiscal year, if changed since last report. | ||
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:
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Large Accelerated Filer: ¨ |
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| Emerging Growth Company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No
Shares of Common Stock outstanding at April 21, 2022: 5,352,490 shares (consisting of
DALLASNEWS CORPORATION
FORM 10-Q
TABLE OF CONTENTS
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Item 1. |
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Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 4. |
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Item 1. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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PART I
Item 1. Financial Information
DallasNews Corporation and Subsidiaries
Consolidated Statements of Operations
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| Three Months Ended March 31, | ||||
In thousands, except share and per share amounts (unaudited) |
| 2022 |
| 2021 | ||
Net Operating Revenue: |
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Advertising and marketing services |
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Circulation |
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Printing, distribution and other |
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Total net operating revenue |
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Operating Costs and Expense: |
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Employee compensation and benefits |
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Other production, distribution and operating costs |
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Newsprint, ink and other supplies |
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Depreciation |
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Amortization |
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Gain on sale/disposal of assets, net |
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Total operating costs and expense |
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Operating loss |
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Other income, net |
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Loss Before Income Taxes |
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Income tax provision |
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Net Loss |
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Per Share Basis |
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Net loss |
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Basic and diluted (1) |
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Number of common shares used in the per share calculation: |
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Basic and diluted (1) |
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(1)
See the accompanying Notes to the Consolidated Financial Statements.
DallasNews Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
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| Three Months Ended March 31, | ||||
In thousands (unaudited) |
| 2022 |
| 2021 | ||
Net Loss |
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Other Comprehensive Income (Loss), Net of Tax: |
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Amortization of actuarial losses |
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Total other comprehensive income, net of tax |
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Total Comprehensive Loss |
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See the accompanying Notes to the Consolidated Financial Statements.
DallasNews Corporation and Subsidiaries
Consolidated Balance Sheets
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| March 31, |
| December 31, | ||
In thousands, except share amounts (unaudited) |
| 2022 |
| 2021 | ||
Assets |
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Current assets: |
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Cash and cash equivalents |
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Accounts receivable (net of allowance of $ and December 31, 2021, respectively) |
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Notes receivable |
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Inventories |
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Prepaids and other current assets |
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Total current assets |
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Property, plant and equipment, at cost |
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Less accumulated depreciation |
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Property, plant and equipment, net |
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Operating lease right-of-use assets |
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Deferred income taxes, net |
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Other assets |
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Total assets |
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Liabilities and Shareholders’ Equity |
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Current liabilities: |
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Accounts payable |
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Accrued compensation and benefits |
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Other accrued expense |
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Contract liabilities |
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Total current liabilities |
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Long-term pension liabilities |
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Long-term operating lease liabilities |
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Other post-employment benefits |
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Other liabilities |
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Total liabilities |
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Shareholders’ equity: |
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Preferred stock, $ |
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Common stock, $ |
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Series A: issued |
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Series B: issued |
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Treasury stock, Series A, at cost; |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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Accumulated deficit |
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Total shareholders’ equity |
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Total liabilities and shareholders’ equity |
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See the accompanying Notes to the Consolidated Financial Statements.
DallasNews Corporation and Subsidiaries
Consolidated Statements of Shareholders’ Equity
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| Three Months Ended March 31, 2022 and 2021 | |||||||||||||||
| Common Stock |
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In thousands, except share and per share amounts (unaudited) | Shares | Shares | Amount | Additional |
| Shares | Amount | Accumulated | Accumulated | Total | ||||||
Balance at December 31, 2020 | | | $ | | $ | |
| ( | $ | ( | $ | ( | $ | ( | $ | |
Net loss | — | — |
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Other comprehensive income | — | — |
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Conversion of Series B to Series A (1) | | ( |
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Dividends declared ($ | — | — |
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Balance at March 31, 2021 (1) | | | $ | | $ | |
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Balance at December 31, 2021 | | | $ | | $ | |
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Net loss | — | — |
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Other comprehensive income | — | — |
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Dividends declared ($ | — | — |
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Balance at March 31, 2022 | | | $ | | $ | |
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(1)Share and per share amounts have been retroactively adjusted to reflect the reverse stock split effective June 8, 2021. See Note 1 – Basis of Presentation and Recently Issued Accounting Standards for additional information.
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See the accompanying Notes to the Consolidated Financial Statements.
DallasNews Corporation and Subsidiaries
Consolidated Statements of Cash Flows
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| Three Months Ended March 31, | ||||
In thousands (unaudited) |
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Operating Activities |
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Net loss |
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Adjustments to reconcile net loss to net cash used for operating activities: |
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Depreciation and amortization |
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Net periodic pension and other post-employment expense (benefit) |
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Bad debt expense |
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Deferred income taxes |
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Gain on sale/disposal of assets, net |
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Changes in working capital and other operating assets and liabilities: |
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Accounts receivable |
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Inventories, prepaids and other current assets |
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Other assets |
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Accounts payable |
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Compensation and benefit obligations |
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Other accrued expenses |
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Contract liabilities |
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Other post-employment benefits |
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Net cash used for operating activities |
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Investing Activities |
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Purchases of assets |
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Sales of assets |
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Net cash used for investing activities |
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Financing Activities |
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Dividends paid |
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Net cash used for financing activities |
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Net decrease in cash and cash equivalents |
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Cash and cash equivalents, beginning of period |
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Cash and cash equivalents, end of period |
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Supplemental Disclosures |
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Income tax paid, net (refund) |
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Noncash investing and financing activities: |
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Dividends payable |
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See the accompanying Notes to the Consolidated Financial Statements.
DallasNews Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
The Company operates The Dallas Morning News (dallasnews.com), Texas’ leading newspaper and winner of nine Pulitzer Prizes, and various niche publications targeting specific audiences. These operations generate revenue from sales of advertising within the Company’s newspaper and digital platforms, subscriptions and retail sales of its newspapers, commercial printing and distribution services primarily related to national newspapers, and preprint advertising.
In addition, the Company has a full-service agency, Medium Giant, with capabilities including strategy, creative and media management with a focus on strategic and digital marketing, and data intelligence that provide a measurable return on investment to its clients.
Name Change and Stock Exchange Listing. The Company transferred its stock exchange listing from the New York Stock Exchange (“NYSE”) to The Nasdaq Stock Market LLC (“Nasdaq”) and changed its corporate name to DallasNews Corporation. The listing and trading of the Company’s Series A common stock on the NYSE ceased trading at market close on June 28, 2021, and began trading on Nasdaq at market open on June 29, 2021, under the ticker symbol “DALN.”
Use of Estimates. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and (iii) the reported amount of net operating revenues and expenses recognized during the periods presented. Adjustments made with respect to the use of estimates often relate to improved information not previously available. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of financial statements; accordingly, actual results could differ from these estimates.
The COVID-19 pandemic has caused increased uncertainty in management’s estimates and assumptions affecting these interim consolidated financial statements. Areas where significant estimates are used include valuation allowances for doubtful accounts, fair value measurements, pension plan assets, pension and other post-employment benefit obligation assumptions, income taxes, leases, self-insured liabilities, and assumptions related to long-lived assets impairment review.
In June 2016, the FASB issued Accounting Standards Update 2016-13 – Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This update requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount. Since June 2016, the FASB issued clarifying updates to the new standard including changing the effective date for smaller reporting companies. The guidance will be effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the requirements of this update and has not yet determined its impact on the Company’s consolidated financial statements.
Revenue Recognition
Revenue is recognized when obligations under the terms of a contract with our customer are satisfied. This occurs when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services, typically at contract price or determined by stand-alone selling price. The Company has an estimated allowance for credits, refunds and similar obligations. Sales tax collected concurrent with revenue-producing activities are excluded from revenue.
Accounts receivable are reported net of a valuation reserve that represents an estimate of amounts considered uncollectible. The Company estimates the allowance for doubtful accounts based on historical write-off experience and the Company’s knowledge of the customers’ ability to pay amounts due. Accounts are written-off after all collection efforts fail; generally, after one year has expired. Expense for such uncollectible amounts is included in other production, distribution and operating costs. Credit terms are customary.
The table below sets forth revenue disaggregated by revenue source.
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| Three Months Ended March 31, | ||||
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Advertising and Marketing Services |
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Print advertising |
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Digital advertising and marketing services |
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Total | $ | |
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Circulation |
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Print circulation |
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Digital circulation |
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Total | $ | |
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Printing, Distribution and Other |
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Total Revenue |
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Advertising and Marketing Services
Print advertising is comprised of display, classified and preprint advertising revenue. Display revenue results from sales of advertising space within the Company’s core newspapers and niche publications to local, regional or national businesses with local operations, affiliates or resellers. Classified revenue, which includes automotive, real estate, employment, obituaries and other, results from sales of advertising space in the classified and other sections of the Company’s newspapers. Preprint revenue results from sales of preprinted advertisements or circulars inserted into the Company’s core newspapers, niche publications, and distributed to publications in other markets, or distributed by mail or third-party distributors to households in targeted areas in order to provide total market coverage for advertisers. The Company’s capabilities allow its advertisers to target preprint distribution selectively at the sub-zip code level in order to optimize coverage for the advertisers’ locations. Preprint advertising also includes other services revenue related to the Company’s niche publications.
Digital advertising and marketing services revenue consists of strategic marketing management, consulting, creative services, targeted and multi-channel (programmatic) advertising placed on third-party websites, digital sales of banner, classified and native advertisements on the Company’s news and entertainment-related websites and mobile apps, social media management, search optimization, direct mail and the sale of promotional materials.
Advertising and marketing services revenue is primarily recognized at a point in time when the ad or service is complete and delivered, based on the customers’ contract price. Barter advertising transactions are recognized at estimated fair value based on the negotiated contract price and the range of prices for similar advertising from customers unrelated to the barter transaction. The Company expenses barter costs as incurred, which is independent from the timing of revenue recognition. In addition, certain digital advertising revenue related to website access is recognized over time, based on the customers’ monthly rate. The Company typically extends credit to advertising and marketing services customers, although for certain advertising campaigns the customer may pay in advance.
For ads placed on certain third-party websites, the Company must evaluate and use judgment to determine whether it is acting as the principal, where revenue is reported on a gross basis, or acting as the agent, where revenue is reported on a net basis. Generally, the Company reports advertising revenue for ads placed on third-party websites on a net basis, meaning the amount recorded to revenue is the amount billed to the customer net of amounts paid to the publisher of the third-party website. The Company is acting as the agent because the publisher controls the advertising inventory. The Company will record certain arrangements gross when it has latitude in establishing price or it determines the placement of the ads as a value added service to the customer.
Circulation
Print circulation revenue is generated primarily by selling home delivery subscriptions, including premium publications, and from single copy sales to non-subscribers. Home delivery revenue is recognized over the subscription period based on the days of actual delivery over the total subscription days and single copy revenue is recognized at a point in time when the paper is purchased. Revenue is directly reduced for any non-payment for the grace period of home delivery subscriptions where the Company recorded revenue for newspapers delivered after a subscription expired.
Digital circulation revenue is generated by digital-only subscriptions and is recognized over the subscription period based on daily or monthly access to the content in the subscription period.
Payment of circulation fees is typically received in advance and deferred over the subscription period. There is little judgment required for valuation or timing of circulation revenue recognition.
Printing, Distribution and Other
Printing, distribution and other revenue is primarily generated from printing and distribution of other newspapers, as well as production of preprinted advertisements for other newspapers. Printing, distribution and other revenue is recognized at a point in time when the product or service is delivered, which requires little judgment to determine. The Company typically extends credit to printing and distribution customers.
Deferred Revenue
Deferred revenue is recorded when cash payments are received in advance of the Company’s performance, including amounts which are refundable. The Company’s primary sources of deferred revenue are from circulation subscriptions and advertising paid in advance of the service provided. These up-front payments are recorded upon receipt as contract liabilities in the Consolidated Balance Sheets and the revenue is recognized when the Company’s obligations under the terms of the contract are satisfied. In the three months ended March 31, 2022, the Company recognized $