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)
|
|
|
| ||
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
|
| |
| ( | |
(Address of principal executive offices, including zip code) |
| (Registrant’s telephone number, including area code) |
Former name, former address and former fiscal year, if changed since last report. | ||
None |
Securities registered pursuant to Section 12(b) of the Act:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Title of each class |
| Trading Symbol |
| Name of each exchange on which registered |
|
|
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.:
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
| |||||||
Large Accelerated Filer: ¨ |
| Accelerated Filer: ¨ |
|
| Smaller Reporting Company: |
| 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
|
|
|
| |||
| ||||||
|
|
|
| |||
|
| Page | ||||
Item 1. |
| |||||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
| ||||
Item 4. |
| |||||
|
|
|
| |||
|
| |||||
Item 1. |
| |||||
Item 2. |
| |||||
Item 3. |
| |||||
Item 4. |
| |||||
Item 5. |
| |||||
Item 6. |
| |||||
| ||||||
|
PART I
Item 1. Financial Information
DallasNews Corporation and Subsidiaries
Consolidated Statements of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended March 31, | ||||
In thousands, except share and per share amounts (unaudited) |
| 2022 |
| 2021 | ||
Net Operating Revenue: |
|
|
|
|
|
|
Advertising and marketing services |
| $ | |
| $ | |
Circulation |
|
| |
|
| |
Printing, distribution and other |
|
| |
|
| |
Total net operating revenue |
|
| |
|
| |
Operating Costs and Expense: |
|
|
|
|
|
|
Employee compensation and benefits |
|
| |
|
| |
Other production, distribution and operating costs |
|
| |
|
| |
Newsprint, ink and other supplies |
|
| |
|
| |
Depreciation |
|
| |
|
| |
Amortization |
|
| — |
|
| |
Gain on sale/disposal of assets, net |
|
| — |
|
| ( |
Total operating costs and expense |
|
| |
|
| |
Operating loss |
|
| ( |
|
| ( |
Other income, net |
|
| |
|
| |
Loss Before Income Taxes |
|
| ( |
|
| ( |
Income tax provision |
|
| |
|
| |
Net Loss |
| $ | ( |
| $ | ( |
|
|
|
|
|
|
|
Per Share Basis |
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
Basic and diluted (1) |
| $ | ( |
| $ | ( |
Number of common shares used in the per share calculation: |
|
|
|
|
|
|
Basic and diluted (1) |
|
| |
|
| |
(1)
See the accompanying Notes to the Consolidated Financial Statements.
DallasNews Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended March 31, | ||||
In thousands (unaudited) |
| 2022 |
| 2021 | ||
Net Loss |
| $ | ( |
| $ | ( |
Other Comprehensive Income (Loss), Net of Tax: |
|
|
|
|
|
|
Amortization of actuarial losses |
|
| |
|
| |
Total other comprehensive income, net of tax |
|
| |
|
| |
Total Comprehensive Loss |
| $ | ( |
| $ | ( |
See the accompanying Notes to the Consolidated Financial Statements.
DallasNews Corporation and Subsidiaries
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| March 31, |
| December 31, | ||
In thousands, except share amounts (unaudited) |
| 2022 |
| 2021 | ||
Assets |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash and cash equivalents |
| $ | |
| $ | |
Accounts receivable (net of allowance of $ and December 31, 2021, respectively) |
|
| |
|
| |
Notes receivable |
|
| |
|
| |
Inventories |
|
| |
|
| |
Prepaids and other current assets |
|
| |
|
| |
Total current assets |
|
| |
|
| |
Property, plant and equipment, at cost |
|
| |
|
| |
Less accumulated depreciation |
|
| ( |
|
| ( |
Property, plant and equipment, net |
|
| |
|
| |
Operating lease right-of-use assets |
|
| |
|
| |
Deferred income taxes, net |
|
| |
|
| |
Other assets |
|
| |
|
| |
Total assets |
| $ | |
| $ | |
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
Accounts payable |
| $ | |
| $ | |
Accrued compensation and benefits |
|
| |
|
| |
Other accrued expense |
|
| |
|
| |
Contract liabilities |
|
| |
|
| |
Total current liabilities |
|
| |
|
| |
Long-term pension liabilities |
|
| |
|
| |
Long-term operating lease liabilities |
|
| |
|
| |
Other post-employment benefits |
|
| |
|
| |
Other liabilities |
|
| |
|
| |
Total liabilities |
|
| |
|
| |
Shareholders’ equity: |
|
|
|
|
|
|
Preferred stock, $ |
|
|
|
|
|
|
Common stock, $ |
|
|
|
|
|
|
Series A: issued |
|
| |
|
| |
Series B: issued |
|
| |
|
| |
Treasury stock, Series A, at cost; |
|
| ( |
|
| ( |
Additional paid-in capital |
|
| |
|
| |
Accumulated other comprehensive loss |
|
| ( |
|
| ( |
Accumulated deficit |
|
| ( |
|
| ( |
Total shareholders’ equity |
|
| |
|
| |
Total liabilities and shareholders’ equity |
| $ | |
| $ | |
See the accompanying Notes to the Consolidated Financial Statements.
DallasNews Corporation and Subsidiaries
Consolidated Statements of Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended March 31, 2022 and 2021 | |||||||||||||||
| Common Stock |
|
|
| Treasury Stock |
|
|
|
|
|
| |||||
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 | — | — |
| — |
| — |
| — |
| — |
| — |
| ( |
| ( |
Other comprehensive income | — | — |
| — |
| — |
| — |
| — |
| |
| — |
| |
Conversion of Series B to Series A (1) | | ( |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
Dividends declared ($ | — | — |
| — |
| — |
| — |
| — |
| — |
| ( |
| ( |
Balance at March 31, 2021 (1) | | | $ | | $ | |
| ( | $ | ( | $ | ( | $ | ( | $ | |
Balance at December 31, 2021 | | | $ | | $ | |
| ( | $ | ( | $ | ( | $ | ( | $ | |
Net loss | — | — |
| — |
| — |
| — |
| — |
| — |
| ( |
| ( |
Other comprehensive income | — | — |
| — |
| — |
| — |
| — |
| |
| — |
| |
Dividends declared ($ | — | — |
| — |
| — |
| — |
| — |
| — |
| ( |
| ( |
Balance at March 31, 2022 | | | $ | | $ | |
| ( | $ | ( | $ | ( | $ | ( | $ | |
(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.
.
See the accompanying Notes to the Consolidated Financial Statements.
DallasNews Corporation and Subsidiaries
Consolidated Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended March 31, | ||||
In thousands (unaudited) |
| 2022 |
| 2021 | ||
Operating Activities |
|
|
|
|
|
|
Net loss |
| $ | ( |
| $ | ( |
Adjustments to reconcile net loss to net cash used for operating activities: |
|
|
|
|
|
|
Depreciation and amortization |
|
| |
|
| |
Net periodic pension and other post-employment expense (benefit) |
|
| |
|
| ( |
Bad debt expense |
|
| |
|
| |
Deferred income taxes |
|
| |
|
| ( |
Gain on sale/disposal of assets, net |
|
| — |
|
| ( |
Changes in working capital and other operating assets and liabilities: |
|
|
|
|
|
|
Accounts receivable |
|
| |
|
| |
Inventories, prepaids and other current assets |
|
| ( |
|
| ( |
Other assets |
|
| |
|
| |
Accounts payable |
|
| ( |
|
| ( |
Compensation and benefit obligations |
|
| |
|
| ( |
Other accrued expenses |
|
| |
|
| |
Contract liabilities |
|
| |
|
| |
Other post-employment benefits |
|
| ( |
|
| ( |
Net cash used for operating activities |
|
| ( |
|
| ( |
Investing Activities |
|
|
|
|
|
|
Purchases of assets |
|
| ( |
|
| ( |
Sales of assets |
|
| — |
|
| |
Net cash used for investing activities |
|
| ( |
|
| ( |
Financing Activities |
|
|
|
|
|
|
Dividends paid |
|
| ( |
|
| ( |
Net cash used for financing activities |
|
| ( |
|
| ( |
Net decrease in cash and cash equivalents |
|
| ( |
|
| ( |
Cash and cash equivalents, beginning of period |
|
| |
|
| |
Cash and cash equivalents, end of period |
| $ | |
| $ | |
|
|
|
|
|
|
|
Supplemental Disclosures |
|
|
|
|
|
|
Income tax paid, net (refund) |
| $ | ( |
| $ | |
Noncash investing and financing activities: |
|
|
|
|
|
|
Dividends payable |
|
| |
|
| |
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended March 31, | ||||
|
| 2022 |
| 2021 | ||
Advertising and Marketing Services |
|
|
|
|
|
|
Print advertising |
| $ | |
| $ | |
Digital advertising and marketing services |
|
| |
|
| |
Total | $ | |
| $ | | |
|
|
|
|
|
|
|
Circulation |
|
|
|
|
|
|
Print circulation |
| $ | |
| $ | |
Digital circulation |
|
| |
|
| |
Total | $ | |
| $ | | |
|
|
|
|
|
|
|
Printing, Distribution and Other |
| $ | |
| $ | |
|
|
|
|
|
|
|
Total Revenue |
| $ | |
| $ | |
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 $
Practical Expedients and Exemptions
The Company generally expenses sales commissions and circulation acquisition costs when incurred because the amortization period would have been one year or less. These costs are recorded within employee compensation and benefits expense and other production, distribution and operating costs expense, respectively.
Lease Accounting
The Company has various operating leases primarily for office space and other distribution centers, some of which include escalating lease payments and options to extend or terminate the lease. The Company’s leases have remaining terms of less than
Operating lease right-of-use assets and liabilities are recognized at commencement date of lease agreements greater than
The Company subleases office space to the Denton Publishing Company and additional office space in Dallas, Texas, both with a remaining lease term of approximately
As of March 31, 2022, the Company did not have any significant operating leases that have not yet commenced.
The table below sets forth supplemental Consolidated Balance Sheet information for the Company’s leases.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Classification |
|
| March 31, 2022 |
|
| December 31, 2021 |
Assets |
|
|
|
|
|
|
|
|
|
Operating |
|
| Operating lease right-of-use assets |
| $ | |
| $ | |
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
Operating |
|
|
|
|
|
|
|
|
|
Current |
|
| Other accrued expense |
| $ | |
| $ | |
Noncurrent |
|
| Long-term operating lease liabilities |
|
| |
|
| |
Total lease liabilities |
|
|
|
| $ | |
| $ | |
|
|
|
|
|
|
|
|
|
|
Lease Term and Discount Rate |
|
|
|
|
|
|
|
|
|
Operating leases |
|
|
|
|
|
|
|
|
|
Weighted average remaining lease term (years) |
|
|
|
|
|
|
| ||
Weighted average discount rate (%) |
|
|
|
|
|
|
|
The table below sets forth components of lease cost and supplemental cash flow information for the Company’s leases.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended March 31, | ||||
|
| 2022 |
| 2021 | ||
Lease Cost |
|
|
|
|
|
|
Operating lease cost |
| $ | |
| $ | |
Short-term lease cost |
|
| |
|
| |
Variable lease cost |
|
| |
|
| |
Sublease income |
|
| ( |
|
| ( |
Total lease cost |
| $ | |
| $ | |
|
|
|
|
|
|
|
Supplemental Cash Flow Information |
|
|
|
|
|
|
Cash paid for operating leases included in operating activities |
| $ | |
| $ | |
The table below sets forth the remaining maturities of the Company’s lease liabilities as of March 31, 2022.
|
|
|
|
|
|
|
|
Years Ending December 31, |
| Operating Leases | |
2022 |
| $ | |
2023 |
|
| |
2024 |
|
| |
2025 |
|
| |
2026 |
|
| |
Thereafter |
|
| |
Total lease payments |
|
| |
Less: imputed interest |
|
| |
Total lease liabilities |
| $ | |
The Company calculated the income tax provision for the 2022 and 2021 interim periods using an estimated annual effective tax rate based on its expected annual loss before income taxes, adjusted for permanent differences, which it applied to the year-to-date loss before income taxes and specific events that are discretely recognized as they occur.
The Company recognized an income tax provision of $
The Consolidated Appropriations Act, 2021, which includes the COVID-related Tax Relief Act of 2020 and the Taxpayer Certainty and Disaster Tax Relief Act of 2020, was passed and signed into law the last week of 2020. Among others, the provisions in this act included items such as guidance on expenses associated with forgiven Paycheck Protection Program loans, business meals deductions, individual tax rebates and unemployment benefits. The Company did not avail itself of any of the items contained in this act.
In addition, the American Rescue Plan Act of 2021 (the “ARP Act”), was passed and signed into law on March 11, 2021, and was designed to speed up the United States’ economic recovery. The ARP Act contains many provisions, including direct cash payments to eligible taxpayers below specified income limits, extended unemployment insurance benefits, additional relief designed to prevent layoffs and business closures at small businesses, and pension relief provisions. The pension relief provisions include extending the interest rate relief passed in previous years, permanently adding a floor to funding interest rates, and permanently changing the amortization period for pension underfunding from
Defined Benefit Plans. The Company sponsors the DallasNews Corporation Pension Plans (the “Pension Plans”), formerly the A. H. Belo Pension Plans, which provide benefits to approximately
No contributions are required to the DallasNews Pension Plans in 2022 under the applicable tax and labor laws governing pension plan funding.
Net Periodic Pension Expense (Benefit)
The table below sets forth components of net periodic pension expense (benefit), which are included in other income, net in the Consolidated Statements of Operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended March 31, | ||||
|
| 2022 |
| 2021 | ||
Interest cost |
| $ | |
| $ | |
Expected return on plans' assets |
|
| ( |
|
| ( |
Amortization of actuarial loss |
|
| |
|
| |
Net periodic pension expense (benefit) |
| $ | |
| $ | ( |
Reverse Stock Split. The Company’s board of directors approved a reverse stock split of its issued, outstanding and treasury shares of common stock, par value $
Dividends. On
Outstanding Shares. The Company had Series A and Series B common stock outstanding of
The table below sets forth the changes in accumulated other comprehensive loss, net of tax, as presented in the Company’s consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended March 31, | ||||||||||||||||
|
| 2022 |
| 2021 | ||||||||||||||
|
| Total |
| Defined |
| Other post- |
| Total |
| Defined |
| Other post- | ||||||
Balance, beginning of period |
| $ | ( |
| $ | ( |
| $ | |
| $ | ( |
| $ | ( |
| $ | |
Amortization |
|
| |
|
| |
|
| ( |
|
| |
|
| |
|
| ( |
Balance, end of period |
| $ | ( |
| $ | ( |
| $ | |
| $ | ( |
| $ | ( |
| $ | |
The table below sets forth the net loss available to common shareholders and weighted average shares used for calculating basic and diluted earnings per share (“EPS”). The Company’s Series A and Series B common stock equally share in the distributed and undistributed earnings.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended March 31, | ||||
|
| 2022 |
| 2021 | ||
Earnings (Numerator) |
|
|
|
|
|
|
Net loss available to common shareholders |
| $ | ( |
| $ | ( |
|
|
|
|
|
|
|
Shares (Denominator) |
|
|
|
|
|
|
Weighted average common shares outstanding (basic and diluted) (1) |
|
| |
|
| |
|
|
|
|
|
|
|
Loss Per Share |
|
|
|
|
|
|
Basic and diluted (1) |
| $ | ( |
| $ | ( |
Legal proceedings. From time to time, the Company is involved in a variety of claims, lawsuits and other disputes arising in the ordinary course of business. Management routinely assesses the likelihood of adverse judgments or outcomes in these matters, as well as the ranges of probable losses to the extent losses are reasonably estimable. Accruals for contingencies are recorded when, in the judgment of management, adverse judgments or outcomes are probable and the financial impact, should an adverse outcome occur, is reasonably estimable. The determination of likely outcomes of litigation matters relates to factors that include, but are not limited to, past experience and other evidence, interpretation of relevant laws or regulations and the specifics and status of each matter. Predicting the outcome of claims and litigation and estimating related costs and financial exposure involves substantial uncertainties that could cause actual results to vary materially from estimates and accruals. In the opinion of management, liabilities, if any, arising from other currently existing claims against the Company would not have a material adverse effect on DallasNews’ results of operations, liquidity or financial condition.
In May 2019, the Company finalized a Purchase and Sale Agreement with Charter DMN Holdings, LP (the “Purchaser”) for the sale of the real estate assets in downtown Dallas, Texas, previously used as the Company’s headquarters for a sale price of $
The Promissory Note is secured by a first lien deed of trust covering the property and bears interest payable in quarterly installments that began on July 1, 2019, continuing through its maturity on June 30, 2021, and includes a pre-payment feature. Interest will be accrued at
As a direct result of COVID-19 uncertainties, on April 3, 2020, the Company and the Purchaser entered into an amendment to the Promissory Note deferring the Purchaser’s interest payment of $
On June 29, 2021, the Company’s board of directors approved a second amendment and extension of the maturity date of the Promissory Note to June 30, 2022 (the “Second Modification Agreement”), effective June 30, 2021. In connection with the Second Modification Agreement, the Purchaser paid the Second Promissory Note in full. The unpaid, original principal balance of the Promissory Note will continue to bear interest at the rate of
In the three months ended March 31, 2022 and 2021, the Company recorded $
The Company evaluated the collectability of the note as a result of the Purchaser’s request to extend the maturity date of the Promissory Note and the continuation of the pandemic. Management believes as of March 31, 2022, the Promissory Note is recoverable since the Purchaser is in compliance with the terms, is publicly indicating its intent to develop the property, and management believes that the value of the collateral has not decreased from the sale date. In addition, on April 1, 2022, the Purchaser paid the first quarter 2022 interest payment of $
The timing in general of commercial development may have been impacted by the pandemic, and thus capital constraints in commercial real estate markets may exist. Management continues to closely monitor the collectability of the Promissory Note and the value of the underlying collateral. Continued economic and other effects of the pandemic could impact the timing of payment or realization of the note.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
DallasNews Corporation (“DallasNews” or the “Company”) intends for the discussion of its financial condition and results of operations that follows to provide information that will assist in understanding its financial statements, the changes in certain key items in those statements from period to period, and the primary factors that accounted for those changes, as well as how certain accounting principles, policies and estimates affect its financial statements. The following information should be read in conjunction with the Company’s consolidated financial statements and related notes filed as part of this report. All dollar amounts presented herein, except share and per share amounts, are in thousands, unless the context indicates otherwise.
This section and other parts of this Quarterly Report on Form 10-Q contain certain forward-looking statements. Forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those statements. See Forward-Looking Statements of this Quarterly Report for further discussion.
OVERVIEW
DallasNews Corporation, formerly A. H. Belo Corporation, and its subsidiaries are referred to collectively herein as “DallasNews” or the “Company.” DallasNews was formed in February 2008 through a spin-off from its former parent company and is registered on The Nasdaq Stock Market LLC (Nasdaq trading symbol: DALN). DallasNews is the Dallas-based holding company of The Dallas Morning News and Medium Giant.
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.
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.”
On May 13, 2021, at the Company’s 2021 annual meeting of shareholders, its shareholders approved a reverse stock split at a ratio of not less than one-for-three and not more than one-for-five, with the exact ratio to be determined by the Company’s board of directors. Following the annual meeting, the Company’s board of directors approved a one-for-four reverse stock split of its issued, outstanding and treasury shares of common stock, par value $0.01 per share, which became effective June 8, 2021. As a result, every four shares of the Company’s issued and outstanding Series A common stock and Series B common stock (and any such shares held in treasury) were converted into one share of Series A common stock and Series B common stock, respectively. All fractional shares were settled in cash in connection with the reverse stock split on June 9, 2021. The par value of the Series A and Series B common stock were not adjusted as a result of the reverse stock split and the Company reclassified an amount equal to the reduction in the number of Company shares at par value to additional paid-in capital. All issued and outstanding Series A and Series B common stock and per share amounts in the interim consolidated financial statements and footnotes included herein have been retroactively adjusted to reflect this reverse stock split for all periods presented.
Beginning in early 2020, the COVID-19 pandemic impacted, and may continue to impact, the Company’s customers, distribution partners, advertisers, production facilities, and third parties, and could result in additional loss of advertising revenue or supply chain disruption. Media was designated an essential business, therefore the Company’s operations have continued throughout the pandemic. The Company has been following the recommendations of local government and health authorities to minimize exposure risk for employees. Employees, including financial reporting staff, worked remotely since March 2020. Beginning in June 2021, the Company allowed its employees to return to the office on a voluntary basis and all employees returned to the office in the first quarter of 2022. If the pandemic were to affect a significant number of the workforce employed in printing operations, the Company may experience delays or be unable to produce, print and deliver its publications and other third-party print publications on a timely basis. The Company continues to evaluate for any future material impacts on its consolidated financial statements.
RESULTS OF OPERATIONS
Consolidated Results of Operations (unaudited)
This section contains discussion and analysis of net operating revenue, operating costs and expense and other information relevant to an understanding of results of operations for the three months ended March 31, 2022 and 2021. Based on how the Company’s chief operating decision-maker makes decisions about allocating resources and assessing performance, the Company determined it has one reportable segment.
The table below sets forth the components of the Company’s operating loss.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended March 31, | |||||||
|
| 2022 |
| Percentage |
| 2021 | |||
Advertising and marketing services |
| $ | 16,264 |
| (3.0) | % |
| $ | 16,769 |
Circulation |
|
| 16,096 |
| 0.5 | % |
|
| 16,022 |
Printing, distribution and other |
|
| 3,927 |
| (2.4) | % |
|
| 4,024 |
Total Net Operating Revenue |
|
| 36,287 |
| (1.4) | % |
|
| 36,815 |
|
|
|
|
|
|
|
|
|
|
Total Operating Costs and Expense |
|
| 38,765 |
| (4.3) | % |
|
| 40,515 |
|
|
|
|
|
|
|
|
|
|
Operating Loss |
| $ | (2,478) |
| 33.0 | % |
| $ | (3,700) |
Traditionally, the Company’s primary revenues are generated from advertising within its core newspapers, niche publications and related websites and from subscription and single copy sales of its printed newspapers. As a result of competitive and economic conditions, the newspaper industry has faced a significant revenue decline over the past decade. Therefore, the Company has sought to diversify its revenues through development and investment in new product offerings, increased circulation rates and leveraging of its existing assets to offer cost efficient commercial printing and distribution services. The Company continually evaluates the overall performance of its core products to ensure existing assets are deployed adequately to maximize return.
The Company’s advertising revenue from its core newspapers continues to be adversely affected by the shift of advertiser spending to other forms of media and the increased accessibility of free online news content, as well as news content from other sources, which resulted in declines in advertising and paid print circulation volumes and revenue. Decreases in print display and classified categories are indicative of continuing trends by advertisers towards digital platforms, which are widely available from many sources. In the current environment, companies are allocating more of their advertising spending towards programmatic channels that provide digital advertising on multiple platforms with enhanced technology for targeted delivery and measurement. In addition, the Company did experience declines resulting from the COVID-19 pandemic beginning late in the first quarter of 2020 and continuing into early 2021; however, the Company is beginning to see improvement in certain advertising revenue streams as discussed below, despite recent supply chain issues impacting advertisers.
In response to the decline in print revenue, the Company has developed agency 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. The Company leverages its news content to improve engagement on the Company’s digital platforms that results in increased digital subscriptions and associated revenue. The Company also continues to diversify its revenue base by leveraging the available capacity of its existing assets to provide print and distribution services for newspapers and other customers requiring these services, by introducing new advertising and marketing services products, and by increasing circulation prices.
Because of declining print circulation, the Company has developed broad digital strategies designed to provide readers with multiple platforms for obtaining online access to local news. The Company continues to obtain additional key demographic data from readers, which allows the Company to provide content desired by readers and to modify marketing and distribution strategies to target and reach audiences valued by advertisers. The Company has access to programmatic digital advertising platforms that provide digital ad placement and targeting efficiencies and increases utilization of digital inventory within the Company’s websites. Additionally, in order to optimize owned and operated digital advertising revenue, the Company has adopted a holistic yield management approach powered by real-time bidding technologies and data analysis to ensure the optimal mix of direct sales and programmatic ad sales is achieved.
Advertising and marketing services revenue
Advertising and marketing services revenue was 44.8 percent and 45.5 percent of total revenue for the three months ended March 31, 2022 and 2021, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended March 31, | ||||||||
|
| 2022 |
| Percentage |
|
| 2021 | |||
Print advertising |
| $ | 10,597 |
| (5.6) | % |
|
| $ | 11,226 |
Digital advertising and marketing services |
|
| 5,667 |
| 2.2 | % |
|
|
| 5,543 |
Advertising and Marketing Services | $ | 16,264 |
| (3.0) | % |
|
| $ | 16,769 |
Print advertising
Print advertising is comprised of display, classified and preprint advertising revenue.
Display and classified print revenue primarily represents sales of advertising space within the Company’s core and niche newspapers. Display and classified print revenue increased $266 in the three months ended March 31, 2022, primarily due to a volume increase in employment classified advertisements.
Preprint revenue primarily reflects preprinted advertisements inserted into the Company’s core newspapers, niche publications, and distributed to publications in other markets, or distributed to non-subscribers through the mail. Preprint advertising also includes other services revenue related to the Company’s niche publications. Revenue decreased $895 in the three months ended March 31, 2022, primarily due to a volume decline in home delivery mail advertisements and supply chain issues impacting advertisers.
Digital advertising and marketing services
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. Revenue increased $124 in the three months ended March 31, 2022, primarily due to the Company’s focus on growth of its owned and operated website, which is driving an increase in digital advertising on dallasnews.com.
Circulation revenue
Circulation revenue was 44.4 percent and 43.5 percent of total revenue for the three months ended March 31, 2022 and 2021, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended March 31, | ||||||||
|
| 2022 |
| Percentage |
|
| 2021 | |||
Print circulation |
| $ | 13,119 |
| (6.1) | % |
|
| $ | 13,976 |
Digital circulation |
|
| 2,977 |
| 45.5 | % |
|
|
| 2,046 |
Circulation |
| $ | 16,096 |
| 0.5 | % |
|
| $ | 16,022 |
Print circulation
Revenue decreased primarily driven by volume declines, partially offset by rate increases. Home delivery revenue decreased $684 or 5.4 percent in the three months ended March 31, 2022. Single copy revenue decreased $172 or 13.9 percent in the three months ended March 31, 2022.
Digital circulation
Revenue increased in the three months ended March 31, 2022, due to an increase in digital-only subscriptions of approximately 11,500 or 22.6 percent when compared to March 31, 2021, reflecting the Company’s continued focus on growing its paid digital memberships and improving the member experience.
Printing, distribution and other revenue
Printing, distribution and other revenue was 10.8 percent and 11.0 percent of total revenue for the three months ended March 31, 2022 and 2021, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended March 31, | ||||||||
|
| 2022 |
| Percentage |
|
| 2021 | |||
Printing, Distribution and Other |
| $ | 3,927 |
| (2.4) | % |
|
| $ | 4,024 |
Revenue decreased in the months ended March 31, 2022, primarily due to a decline in commercial printing and distribution revenue.
Operating Costs and Expense
The table below sets forth the components of the Company’s operating costs and expense.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended March 31, | |||||||
|
| 2022 |
| Percentage |
| 2021 | |||
Employee compensation and benefits |
| $ | 16,410 |
| (8.6) | % |
| $ | 17,947 |
Other production, distribution and operating costs |
|
| 19,249 |
| 0.8 | % |
|
| 19,090 |
Newsprint, ink and other supplies |
|
| 2,394 |
| 2.3 | % |
|
| 2,341 |
Depreciation |
|
| 712 |
| (33.7) | % |
|
| 1,074 |
Amortization |
|
| — |
| (100.0) | % |
|
| 64 |
Gain on sale/disposal of assets, net |
|
| — |
| 100.0 | % |
|
| (1) |
Total Operating Costs and Expense |
| $ | 38,765 |
| (4.3) | % |
| $ | 40,515 |
Employee compensation and benefits – The Company continues to implement measures to optimize its workforce and evaluate strategies to reduce risk associated with future obligations for employee benefit plans. Employee compensation and benefits decreased $1,537 in the three months ended March 31, 2022, primarily due to headcount reductions of 51 since March 31, 2021.
Other production, distribution and operating costs – Expense increased $159 in the three months ended March 31, 2022, primarily due to an increase in revenue-related outside services expense, partially offset by a decrease in distribution expense.
Newsprint, ink and other supplies – Expense increased $53 in the three months ended March 31, 2022. Competitive pricing is available under the Company’s paper supply agreement; however, the price of newsprint increased, partially offset by savings from reduced newsprint costs associated with lower circulation volumes. Newsprint consumption for the three months ended March 31, 2022 and 2021, approximated 1,888 and 2,059 metric tons, respectively.
Depreciation – Expense decreased $362 in the three months ended March 31, 2022, due to a lower depreciable asset base as a higher level of in-service assets are now fully depreciated and the Company has reduced capital spending.
Amortization – Expense decreased due to all intangible assets being fully amortized in the first quarter of 2021.
Gain on sale/disposal of assets, net – The Company disposed assets that were no longer in use and from time to time, the Company will sell disposed assets.
Other
The table below sets forth the other components of the Company’s results of operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended March 31, | |||||||
|
| 2022 |
| Percentage |
| 2021 | |||
Other income, net |
| $ | 18 |
| (98.6) | % |
| $ | 1,254 |
|
|
|
|
|
|
|
|
|
|
Income tax provision |
| $ | 184 |
| (42.3) | % |
| $ | 319 |
Other income, net – Other income, net includes net periodic pension and other post-employment expense (benefit) of $227 and $(1,035) for the three months ended March 31, 2022 and 2021, respectively. Interest income (expense) and gain (loss) from investments and are also included in other income, net. In the three months ended March 31, 2022 and 2021, the Company recorded $249 of interest income related to the promissory notes from the sale of the Company’s former headquarters.
Income tax provision – The Company recognized an income tax provision of $184 and $319 for the three months ended March 31, 2022 and 2021, respectively. The income tax provision for the three months ended March 31, 2022 and 2021, was due to the effect of the Texas franchise tax. Effective income tax rates were (7.5) percent and (13.0) percent for the three months ended March 31, 2022 and 2021, respectively.
Legal proceedings – From time to time, the Company is involved in a variety of claims, lawsuits and other disputes arising in the ordinary course of business. Management routinely assesses the likelihood of adverse judgments or outcomes in these matters, as well as the ranges of probable losses to the extent losses are reasonably estimable. Accruals for contingencies are recorded when, in the judgment of management, adverse judgments or outcomes are probable and the financial impact, should an adverse outcome occur, is reasonably estimable. The determination of likely outcomes of litigation matters relates to factors that include, but are not limited to, past experience and other evidence, interpretation of relevant laws or regulations and the specifics and status of each matter. Predicting the outcome of claims and litigation and estimating related costs and financial exposure involves substantial uncertainties that could cause actual results to vary materially from estimates and accruals. In the opinion of management, liabilities, if any, arising from other currently existing claims against the Company would not have a material adverse effect on DallasNews’ results of operations, liquidity or financial condition.
Liquidity and Capital Resources
The Company’s cash balances as of March 31, 2022 and December 31, 2021, were $30,892 and $32,439, respectively.
The Company intends to hold the majority of existing cash for purposes of future investment opportunities, potential return of capital to shareholders and for contingency purposes. Although revenue is expected to continue to decline in future periods, cash flows and other expense reduction measures are expected to be sufficient to fund operating activities and capital spending.
The future approval of dividends is dependent upon available cash after considering future operating and investing requirements and cannot be guaranteed. The Company continues to have a board-authorized repurchase authority. However, the agreement to repurchase the Company’s stock expired and was not renewed.
The Consolidated Appropriations Act, 2021, which includes the COVID-related Tax Relief Act of 2020 and the Taxpayer Certainty and Disaster Tax Relief Act of 2020, was passed and signed into law the last week of 2020. Among others, the provisions in this act included items such as guidance on expenses associated with forgiven Paycheck Protection Program loans, business meals deductions, individual tax rebates and unemployment benefits. The Company did not avail itself of any of the items contained in this act.
In addition, the ARP Act was passed and signed into law on March 11, 2021, and was designed to speed up the United States’ economic recovery. The ARP Act contains many provisions, including direct cash payments to eligible taxpayers below specified income limits, extended unemployment insurance benefits, additional relief designed to prevent layoffs and business closures at small businesses, and pension relief provisions. The pension relief provisions include extending the interest rate relief passed in previous years, permanently adding a floor to funding interest rates, and permanently changing the amortization period for pension underfunding from 7 to 15 years. All provisions are required to be effective for plan years beginning in 2022, but plan sponsors can elect certain provisions to apply to plan years beginning as early as 2019. The Company benefited from the shortfall amortization relief provisions and the segment interest rate relief provisions contained in the ARP Act effective for the 2020 plan year.
As a direct result of COVID-19 uncertainties, on April 3, 2020, the Company and Charter DMN Holdings, LP (the “Purchaser”) entered into an amendment to the two-year seller-financed promissory note of $22,400 (the “Promissory Note”), for the sale of the real estate assets previously used as the Company’s headquarters. The amendment (the “Second Promissory Note”), in the principal amount of $375, included a deferred interest payment of $195 that was due April 1, 2020, and a 2019 real property tax reconciliation payment due from the Purchaser. Subsequently, on June 29, 2021, the Company’s board of directors approved a second amendment and extension of the maturity date of the Promissory Note to June 30, 2022 (the “Second Modification Agreement”), effective June 30, 2021. In connection with the Second Modification Agreement, the Purchaser paid the Second Promissory Note in full. The unpaid, original principal balance of the Promissory Note will continue to bear interest at the rate of 4.5 percent, with interest payable quarterly through June 30, 2022, the maturity date of the Promissory Note. The Promissory Note continues to be secured by a first priority lien on the property.
The Company evaluated the collectability of the note as a result of the Purchaser’s request to extend the maturity date of the Promissory Note and the continuation of the pandemic. Management believes as of March 31, 2022, the Promissory Note is recoverable since the Purchaser is in compliance with the terms, is publicly indicating its intent to develop the property, and management believes that the value of the collateral has not decreased from the sale date. In addition, on April 1, 2022, the Purchaser paid the first quarter 2022 interest payment of $249 due under the Second Modification Agreement.
The timing in general of commercial development may have been impacted by the pandemic, and thus capital constraints in commercial real estate markets may exist. Management continues to closely monitor the collectability of the Promissory Note and the value of the underlying collateral. Continued economic and other effects of the pandemic could impact the timing of payment or realization of the note.
The following discusses the changes in cash flows by operating, investing and financing activities.
Operating Cash Flows
Net cash used for operating activities for the three months ended March 31, 2022 and 2021, was $464 and $2,865, respectively. Cash flows used for operating activities decreased by $2,401 during the three months ended March 31, 2022, when compared to the prior year period, primarily due to changes in working capital and other operating assets and liabilities, and an improvement in net loss.
Investing Cash Flows
Net cash used for investing activities was $227 and $162 for the three months ended March 31, 2022 and 2021, respectively, primarily attributable to capital spending.
Financing Cash Flows
Net cash used for financing activities was $856 for the three months ended March 31, 2022 and 2021, all attributable to dividend payments.
Financing Arrangements
None.
Contractual Obligations
The Company has contractual obligations for operating leases, primarily for office space and other distribution centers, some of which include escalating lease payments. See Note 3 – Leases for future lease payments by year.
Under the applicable tax and labor laws governing pension plan funding, no contributions to the DallasNews Pension Plans are required in 2022.
On March 3, 2022, the Company’s board of directors declared a $0.16 per share dividend to shareholders of record as of the close of business on May 13, 2022, which is payable on June 3, 2022.
Additional information related to the Company’s contractual obligations is available in Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed on March 7, 2022, with the Securities and Exchange Commission (“SEC”).
Critical Accounting Policies and Estimates
No material changes were made to the Company’s critical accounting policies as set forth in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations”, included in the Company’s Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2021.
Forward-Looking Statements
Statements in this communication concerning DallasNews Corporation’s business outlook or future economic performance, revenues, expenses, and other financial and non-financial items that are not historical facts are “forward-looking statements” as the term is defined under applicable federal securities laws. Forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those statements. Such risks, trends and uncertainties are, in most instances, beyond the Company’s control, and include the current and future impacts of the COVID-19 pandemic on the Company’s financial reporting capabilities and its operations generally and the potential impact of the pandemic on the Company’s customers, distribution partners, advertisers, production facilities, and third parties, as well as changes in advertising demand and other economic conditions; consumers’ tastes; newsprint prices; program costs; labor relations; cybersecurity incidents; technological obsolescence; as well as other risks described in the Company’s Annual Report on Form 10-K and in the Company’s other public disclosures and filings with the Securities and Exchange Commission. Among other risks, there can be no guarantee that the board of directors will approve a quarterly dividend in future quarters. Forward-looking statements, which are as of the date of this filing, are not updated to reflect events or circumstances after the date of the statement.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, are controls that are designed to ensure that information required to be disclosed by the Company in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Company’s Chief Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing disclosure controls and procedures, management is required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures is also based, in part, upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
The Company’s management, with the participation of its Chief Executive Officer and Principal Financial Officer, evaluated the effectiveness of the design and operation of its disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, as of March 31, 2022, management concluded that the Company’s disclosure controls and procedures were effective.
Changes in Internal Control Over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting that occurred during the first fiscal quarter ended March 31, 2022, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II
Item 1. Legal Proceedings
A number of legal proceedings are pending against DallasNews. In the opinion of management, liabilities, if any, arising from these legal proceedings would not have a material adverse effect on DallasNews’ results of operations, liquidity or financial condition.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
There were no unregistered sales of the Company’s equity securities during the period covered by this report.
Issuer Purchases of Equity Securities
The Company continues to have a board-authorized repurchase authority. However, the agreement to repurchase the Company’s stock expired and was not renewed.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
None.
Item 6. Exhibits
Exhibits marked with an asterisk (*) are incorporated by reference to documents previously filed by the Company with the SEC, as indicated. In accordance with Regulation S-T, the XBRL-related information marked with a double asterisk (**) in Exhibit No. 101 to this Quarterly Report on Form 10-Q is deemed filed. All other documents are filed with this report. Exhibits marked with a tilde (~) are management contracts, compensatory plan contracts or arrangements filed pursuant to Item 601(b)(10)(iii)(A) of Regulation S-K.
|
|
|
|
|
|
|
| ||||
Exhibit Number | Description | ||||
2.1 | * | ||||
3.1 | * | ||||
3.2 | * | ||||
3.3 | * | ||||
3.4 | * | ||||
3.5 | * | ||||
3.6 | * | Certificate of Correction to Certificate of Amendment (Exhibit 3.2 to the June 30, 2021 Form 8-K) | |||
3.7 | * | Amended and Restated Bylaws of DallasNews Corporation (Exhibit 3.3 to the June 30, 2021 Form 8-K) | |||
4.1(a) | * | Certain rights of the holders of the Company’s Common Stock set forth in Exhibits 3.1-3.4 above | |||
4.1(b) | * | Description of Capital Stock (Exhibit 4.1 to the July 2, 2018 Form 8-K) | |||
4.2 | * | ||||
4.3 | * | ||||
10.1 | * | Material Contracts | |||
|
| (1) | * | ||
|
| (2) | * | Guaranty of Lease dated December 30, 2016 (Exhibit 10.2 to the January 3, 2017 Form 8-K) | |
|
| (3) | * | ||
|
| (4) | * | ||
|
|
| * | (a) | |
|
|
| * | (b) | |
|
|
| * | (c) | Second Modification Agreement effective June 30, 2021 (Exhibit 10.1 to the June 30, 2021 Form 8-K) |
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
Exhibit Number | Description | ||||||||||||||
10.2 | * | Compensatory plans and arrangements: | |||||||||||||
|
| ~(1) | * | ||||||||||||
|
|
| * | (a) | |||||||||||
|
|
| * | (b) | |||||||||||
|
|
| * | (c) | |||||||||||
|
|
| * | (d) | Fourth Amendment to the A. H. Belo Savings Plan (Exhibit 10.2 to the July 2, 2018 Form 8-K) | ||||||||||
|
|
| * | (e) | |||||||||||
|
|
| * | (f) | |||||||||||
|
|
| * | (g) | |||||||||||
|
|
| * | (h) | |||||||||||
|
|
| * | (i) | |||||||||||
|
| ~(2) | * | ||||||||||||
|
|
| * | (a) | |||||||||||
|
|
| * | (b) | |||||||||||
|
|
| * | (c) | |||||||||||
|
|
| * | (d) | |||||||||||
|
|
| * | (e) | |||||||||||
|
| ~(3) | * |
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
Exhibit Number | Description | ||||||||||||||||
|
| ~(4) | * | ||||||||||||||
|
|
| * | (a) | |||||||||||||
|
|
| * | (b) | |||||||||||||
|
| ~(5) | * | ||||||||||||||
10.3 | * | Agreements relating to the separation of A. H. Belo from its former parent company: | |||||||||||||||
|
| (1) | * | ||||||||||||||
|
| (2) | * | ||||||||||||||
31.1 |
|
|
| Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||||||||||||
31.2 |
|
|
| ||||||||||||||
32 |
|
|
| ||||||||||||||
101.INS |
|
| ** | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | |||||||||||||
101.SCH |
|
| ** | Inline XBRL Taxonomy Extension Schema Document | |||||||||||||
101.CAL |
|
| ** | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |||||||||||||
101.DEF |
|
| ** | Inline XBRL Taxonomy Extension Definition Linkbase Document | |||||||||||||
101.LAB |
|
| ** | Inline XBRL Taxonomy Extension Label Linkbase Document | |||||||||||||
101.PRE |
|
| ** | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |||||||||||||
104 |
|
| ** | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | |||||||||||||
|
|
|
|
|
|
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
|
|
| |||
|
|
|
|
| DALLASNEWS CORPORATION | ||
|
|
| |
| By: | /s/ | Katy Murray |
|
|
| Katy Murray |
|
|
| Executive Vice President/Chief Financial Officer |
|
|
| (Principal Financial Officer) |
|
| ||
| Dated: | April 22, 2022 | |
|
|
|
EXHIBIT INDEX
|
|
|
|
|
|
Exhibit Number |
| Description |
31.1 |
| Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
31.2 |
| Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
32 |
| |
101.INS | ** | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
101.SCH | ** | Inline XBRL Taxonomy Extension Schema Document |
101.CAL | ** | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF | ** | Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB | ** | Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE | ** | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 | ** | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
In accordance with Regulation S-T, the XBRL-related information marked with a double asterisk (**) in Exhibit No. 101 to this Quarterly Report on Form 10-Q is deemed filed.
SECTION 302 CERTIFICATION
I, Robert W. Decherd, Chairman of the Board, President and Chief Executive Officer of DallasNews Corporation, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of DallasNews Corporation; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) |
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) |
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) |
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) |
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) |
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) |
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
|
By: |
/s/ Robert W. Decherd |
|
|
Robert W. Decherd |
|
|
Chairman of the Board, President and Chief Executive Officer |
|
|
|
|
|
|
|
Date: |
April 22, 2022 |
SECTION 302 CERTIFICATION
I, Katy Murray, Executive Vice President/Chief Financial Officer of DallasNews Corporation, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of DallasNews Corporation; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) |
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) |
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) |
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) |
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) |
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) |
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
|
By: |
/s/ Katy Murray |
|
|
Katy Murray |
|
|
Executive Vice President/Chief Financial Officer |
|
|
|
|
|
|
|
Date: |
April 22, 2022 |
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of DallasNews Corporation (the “Company”) on Form 10-Q for the period ended March 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Robert W. Decherd, Chairman of the Board, President and Chief Executive Officer of the Company, and Katy Murray, Executive Vice President/Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
|
By: |
/s/ Robert W. Decherd |
|
|
Robert W. Decherd |
|
|
Chairman of the Board, President and Chief Executive Officer |
|
|
|
|
|
|
|
Date: |
April 22, 2022 |
|
By: |
/s/ Katy Murray |
|
|
Katy Murray |
|
|
Executive Vice President/Chief Financial Officer |
|
|
|
|
|
|
|
Date: |
April 22, 2022 |