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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: March 31, 2022

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file no. 1-33741

Picture 1

DallasNews CORPORATION

(Exact name of registrant as specified in its charter)

Texas

 

38-3765318

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

 

P. O. Box 224866, Dallas, Texas 75222-4866

 

(214977-7342

(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

Series A Common Stock, $0.01 par value

DALN

The Nasdaq Stock Market LLC

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.     Yes þ     No ¨ 

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).     Yes þ     No ¨ 

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:  ¨

Non-Accelerated Filer:  þ

Smaller Reporting Company:  þ

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 þ

Shares of Common Stock outstanding at April 21, 2022: 5,352,490 shares (consisting of 4,737,605 shares of Series A Common Stock and 614,885 shares of Series B Common Stock).


DALLASNEWS CORPORATION

FORM 10-Q

TABLE OF CONTENTS

 

 

Page

PART I

Item 1.

Financial Information

 

PAGE 3

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

PAGE 17

Item 4.

Controls and Procedures

 

PAGE 23

 

 

 

 

PART II 

 

 

Item 1.

Legal Proceedings

 

PAGE 24

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

PAGE 24

Item 3.

Defaults Upon Senior Securities

 

PAGE 24

Item 4.

Mine Safety Disclosures

 

PAGE 24

Item 5.

Other Information

 

PAGE 24

Item 6.

Exhibits

 

PAGE 25

Signatures

 

PAGE 28

Exhibit Index

 

PAGE 29

DallasNews Corporation First Quarter 2022 on Form 10-Q


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

$

16,264

$

16,769

Circulation

16,096

16,022

Printing, distribution and other

3,927

4,024

Total net operating revenue

36,287

36,815

Operating Costs and Expense:

Employee compensation and benefits

16,410

17,947

Other production, distribution and operating costs

19,249

19,090

Newsprint, ink and other supplies

2,394

2,341

Depreciation

712

1,074

Amortization

64

Gain on sale/disposal of assets, net

(1)

Total operating costs and expense

38,765

40,515

Operating loss

(2,478)

(3,700)

Other income, net

18

1,254

Loss Before Income Taxes

(2,460)

(2,446)

Income tax provision

184

319

Net Loss

$

(2,644)

$

(2,765)

Per Share Basis

Net loss

Basic and diluted (1)

$

(0.49)

$

(0.52)

Number of common shares used in the per share calculation:

Basic and diluted (1)

5,352,490

5,352,490

(1)Share and per share amounts have been retroactively adjusted to reflect the one-for-four 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 First Quarter 2022 on Form 10-Q 3


DallasNews Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

Three Months Ended March 31,

In thousands (unaudited)

2022

2021

Net Loss

$

(2,644)

$

(2,765)

Other Comprehensive Income (Loss), Net of Tax:

Amortization of actuarial losses

130

360

Total other comprehensive income, net of tax

130

360

Total Comprehensive Loss

$

(2,514)

$

(2,405)

See the accompanying Notes to the Consolidated Financial Statements.

 

DallasNews Corporation First Quarter 2022 on Form 10-Q 4


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

$

30,892

$

32,439

Accounts receivable (net of allowance of $512 and $551 at March 31, 2022

and December 31, 2021, respectively)

12,758

16,012

Notes receivable

22,400

22,400

Inventories

1,781

2,192

Prepaids and other current assets

4,733

3,485

Total current assets

72,564

76,528

Property, plant and equipment, at cost

312,959

312,979

Less accumulated depreciation

(304,868)

(304,157)

Property, plant and equipment, net

8,091

8,822

Operating lease right-of-use assets

16,982

17,648

Deferred income taxes, net

232

257

Other assets

2,194

2,197

Total assets

$

100,063

$

105,452

Liabilities and Shareholders’ Equity

Current liabilities:

Accounts payable

$

5,832

$

7,821

Accrued compensation and benefits

5,049

4,932

Other accrued expense

4,937

4,573

Contract liabilities

10,652

10,592

Total current liabilities

26,470

27,918

Long-term pension liabilities

14,365

14,275

Long-term operating lease liabilities

18,529

19,181

Other post-employment benefits

1,337

1,349

Other liabilities

155

152

Total liabilities

60,856

62,875

Shareholders’ equity:

Preferred stock, $0.01 par value; Authorized 2,000,000 shares; none issued

Common stock, $0.01 par value; Authorized 31,250,000 shares

Series A: issued 5,216,045 shares at March 31, 2022 and December 31, 2021

52

52

Series B: issued 614,910 shares at March 31, 2022 and December 31, 2021

6

6

Treasury stock, Series A, at cost; 478,465 shares held at March 31, 2022 and December 31, 2021

(13,443)

(13,443)

Additional paid-in capital

494,563

494,563

Accumulated other comprehensive loss

(32,276)

(32,406)

Accumulated deficit

(409,695)

(406,195)

Total shareholders’ equity

39,207

42,577

Total liabilities and shareholders’ equity

$

100,063

$

105,452

See the accompanying Notes to the Consolidated Financial Statements.


DallasNews Corporation First Quarter 2022 on Form 10-Q 5


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
Series A

Shares
Series B

Amount

Additional
Paid-in
Capital

Shares
Series A

Amount

Accumulated
Other
Comprehensive
Loss

Accumulated
Deficit

Total

Balance at December 31, 2020

5,213,710 

617,245 

$

233 

$

494,389 

(478,465)

$

(13,443)

$

(32,468)

$

(402,303)

$

46,408 

Net loss

(2,765)

(2,765)

Other comprehensive income

360 

360 

Conversion of Series B to Series A (1)

20 

(20)

Dividends declared ($0.16 per share) (1)

(856)

(856)

Balance at March 31, 2021 (1)

5,213,730 

617,225 

$

233 

$

494,389 

(478,465)

$

(13,443)

$

(32,108)

$

(405,924)

$

43,147 

Balance at December 31, 2021

5,216,045 

614,910 

$

58 

$

494,563 

(478,465)

$

(13,443)

$

(32,406)

$

(406,195)

$

42,577 

Net loss

(2,644)

(2,644)

Other comprehensive income

130 

130 

Dividends declared ($0.16 per share)

(856)

(856)

Balance at March 31, 2022

5,216,045 

614,910 

$

58 

$

494,563 

(478,465)

$

(13,443)

$

(32,276)

$

(409,695)

$

39,207 

(1)Share and per share amounts have been retroactively adjusted to reflect the one-for-four 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 First Quarter 2022 on Form 10-Q 6


DallasNews Corporation and Subsidiaries

Consolidated Statements of Cash Flows

Three Months Ended March 31,

In thousands (unaudited)

2022

2021

Operating Activities

Net loss

$

(2,644)

$

(2,765)

Adjustments to reconcile net loss to net cash used for operating activities:

Depreciation and amortization

712

1,138

Net periodic pension and other post-employment expense (benefit)

227

(1,035)

Bad debt expense

31

211

Deferred income taxes

25

(15)

Gain on sale/disposal of assets, net

(1)

Changes in working capital and other operating assets and liabilities:

Accounts receivable

3,223

848

Inventories, prepaids and other current assets

(837)

(1,924)

Other assets

3

391

Accounts payable

(1,989)

(378)

Compensation and benefit obligations

117

(197)

Other accrued expenses

627

16

Contract liabilities

60

864

Other post-employment benefits

(19)

(18)

Net cash used for operating activities

(464)

(2,865)

Investing Activities

Purchases of assets

(227)

(163)

Sales of assets

1

Net cash used for investing activities

(227)

(162)

Financing Activities

Dividends paid

(856)

(856)

Net cash used for financing activities

(856)

(856)

Net decrease in cash and cash equivalents

(1,547)

(3,883)

Cash and cash equivalents, beginning of period

32,439

42,015

Cash and cash equivalents, end of period

$

30,892

$

38,132

Supplemental Disclosures

Income tax paid, net (refund)

$

(32)

$

8

Noncash investing and financing activities:

Dividends payable

856

856

See the accompanying Notes to the Consolidated Financial Statements.

 

DallasNews Corporation First Quarter 2022 on Form 10-Q 7


DallasNews Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

 

Note 1: Basis of Presentation and Recently Issued Accounting Standards

Description of Business.    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.

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.”

Reverse Stock Split.    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. No fractional shares were issued in connection with the reverse stock split. The par value of the Series A and Series B common stock was 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. Share amounts retroactively adjusted to reflect the reverse stock split exclude 90 fractional shares of Series A common stock and 26 fractional shares of Series B common stock, which were settled in cash on June 9, 2021.

COVID-19 Pandemic.    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.

Basis of Presentation.    The interim consolidated financial statements included herein are unaudited; however, they include adjustments of a normal recurring nature which, in the Company’s opinion, are necessary to present fairly the consolidated financial information as of and for the periods indicated in conformity with accounting principles generally accepted in the United States of America (“GAAP”) applicable to interim periods. All intercompany balances and transactions have been eliminated in consolidation. The Company consolidates its majority owned subsidiaries over which the Company exercises control. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021. All dollar amounts presented herein, except share and per share amounts, are in thousands, unless the context indicates otherwise.


DallasNews Corporation First Quarter 2022 on Form 10-Q 8


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.

Segment Presentation.    Based on the Company’s structure and organizational chart, the Company’s chief operating decision-maker (the “CODM”) is its Chief Executive Officer, Robert W. Decherd. Based on how the Company’s CODM makes decisions about allocating resources and assessing performance, the Company determined it has one reportable segment.

New Accounting Pronouncements. The Financial Accounting Standards Board (“FASB”) issued the following accounting pronouncements and guidance, which may be applicable to the Company but have not yet become effective.

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.

Note 2: Revenue

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.


DallasNews Corporation First Quarter 2022 on Form 10-Q 9


The table below sets forth revenue disaggregated by revenue source.

Three Months Ended March 31,

2022

2021

Advertising and Marketing Services

Print advertising

$

10,597

$

11,226

Digital advertising and marketing services

5,667

5,543

Total

$

16,264

$

16,769

Circulation

Print circulation

$

13,119

$

13,976

Digital circulation

2,977

2,046

Total

$

16,096

$

16,022

Printing, Distribution and Other

$

3,927

$

4,024