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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, 2024

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

 

(214977-8869

(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 May 10, 2024: 5,352,490 shares (consisting of 4,737,852 shares of Series A Common Stock and 614,638 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 16

Item 4.

Controls and Procedures

 

PAGE 22

 

 

 

 

PART II 

 

 

Item 1.

Legal Proceedings

 

PAGE 23

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

PAGE 23

Item 3.

Defaults Upon Senior Securities

 

PAGE 23

Item 4.

Mine Safety Disclosures

 

PAGE 23

Item 5.

Other Information

 

PAGE 23

Item 6.

Exhibits

 

PAGE 24

Signatures

 

PAGE 25

Exhibit Index

 

PAGE 26

DallasNews Corporation First Quarter 2024 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)

2024

2023

Net Operating Revenue:

Advertising and marketing services

$

11,646

$

15,309

Circulation

16,300

16,011

Printing, distribution and other

3,156

3,882

Total net operating revenue

31,102

35,202

Operating Costs and Expense:

Employee compensation and benefits

16,117

17,373

Other production, distribution and operating costs

15,059

18,028

Newsprint, ink and other supplies

1,284

2,184

Depreciation

398

373

Total operating costs and expense

32,858

37,958

Operating loss

(1,756)

(2,756)

Other income, net

611

362

Loss Before Income Taxes

(1,145)

(2,394)

Income tax provision

218

232

Net Loss

$

(1,363)

$

(2,626)

Per Share Basis

Net loss

Basic

$

(0.25)

$

(0.49)

Number of common shares used in the per share calculation:

Basic

5,352,490

5,352,490

See the accompanying Notes to the Consolidated Financial Statements.

 

DallasNews Corporation First Quarter 2024 on Form 10-Q 3


DallasNews Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

Three Months Ended March 31,

In thousands (unaudited)

2024

2023

Net Loss

$

(1,363)

$

(2,626)

Other Comprehensive Income (Loss), Net of Tax:

Amortization of actuarial (gains) losses

102

(10)

Total other comprehensive income (loss), net of tax

102

(10)

Total Comprehensive Loss

$

(1,261)

$

(2,636)

See the accompanying Notes to the Consolidated Financial Statements.

 

DallasNews Corporation First Quarter 2024 on Form 10-Q 4


DallasNews Corporation and Subsidiaries

Consolidated Balance Sheets

  

March 31,

December 31,

In thousands, except share amounts (unaudited)

2024

2023

Assets

Current assets:

Cash and cash equivalents

$

7,946

$

11,697

Short-term investments

10,478

10,781

Accounts receivable (net of allowance of $218 and $207 at March 31, 2024

and December 31, 2023, respectively)

8,582

9,923

Inventories

1,621

1,930

Prepaids and other current assets

4,887

2,602

Total current assets

33,514

36,933

Property, plant and equipment, at cost

307,502

307,436

Less accumulated depreciation

(300,735)

(300,337)

Property, plant and equipment, net

6,767

7,099

Operating lease right-of-use assets

15,652

16,141

Deferred income taxes, net

260

271

Other assets

1,785

1,790

Total assets

$

57,978

$

62,234

Liabilities and Shareholders’ Equity

Current liabilities:

Accounts payable

$

3,660

$

3,963

Accrued compensation and benefits

4,465

3,901

Other accrued expense

3,413

6,548

Contract liabilities

10,593

9,511

Total current liabilities

22,131

23,923

Long-term pension liabilities

16,766

17,353

Long-term operating lease liabilities

16,356

16,924

Other post-employment benefits

991

996

Other liabilities

37

80

Total liabilities

56,281

59,276

Contingent liabilities (see Note 9)

 

 

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 5,216,317 at March 31, 2024 and December 31, 2023

52

52

Series B: issued 614,638 at March 31, 2024 and December 31, 2023

6

6

Treasury stock, Series A, at cost; 478,465 shares held at March 31, 2024 and December 31, 2023

(13,443)

(13,443)

Additional paid-in capital

494,563

494,563

Accumulated other comprehensive loss

(40,145)

(40,247)

Accumulated deficit

(439,336)

(437,973)

Total shareholders’ equity

1,697

2,958

Total liabilities and shareholders’ equity

$

57,978

$

62,234

See the accompanying Notes to the Consolidated Financial Statements.


DallasNews Corporation First Quarter 2024 on Form 10-Q 5


DallasNews Corporation and Subsidiaries

Consolidated Statements of Shareholders’ Equity

Three Months Ended March 31, 2024 and 2023

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, 2022

5,216,237 

614,718 

$

58 

$

494,563 

(478,465)

$

(13,443)

$

(41,380)

$

(427,435)

$

12,363 

Net loss

(2,626)

(2,626)

Other comprehensive loss

(10)

(10)

Dividends declared ($0.16 per share)

(856)

(856)

Balance at March 31, 2023

5,216,237 

614,718 

$

58 

$

494,563 

(478,465)

$

(13,443)

$

(41,390)

$

(430,917)

$

8,871 

Balance at December 31, 2023

5,216,317 

614,638 

$

58 

$

494,563 

(478,465)

$

(13,443)

$

(40,247)

$

(437,973)

$

2,958 

Net loss

(1,363)

(1,363)

Other comprehensive income

102 

102 

Balance at March 31, 2024

5,216,317 

614,638 

$

58 

$

494,563 

(478,465)

$

(13,443)

$

(40,145)

$

(439,336)

$

1,697 

See the accompanying Notes to the Consolidated Financial Statements.

 

DallasNews Corporation First Quarter 2024 on Form 10-Q 6


DallasNews Corporation and Subsidiaries

Consolidated Statements of Cash Flows

Three Months Ended March 31,

In thousands (unaudited)

2024

2023

Operating Activities

Net loss

$

(1,363)

$

(2,626)

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

Depreciation

398

373

Net periodic pension and other post-employment benefit

(474)

(225)

Bad debt expense

74

8

Deferred income taxes

11

(11)

Gain on short-term investments

(111)

Provision, interest and penalties for uncertain tax positions

2

Changes in working capital and other operating assets and liabilities:

Accounts receivable

1,267

2,411

Inventories, prepaids and other current assets

(1,976)

(1,636)

Other assets

5

4

Accounts payable

(303)

(723)

Compensation and benefit obligations

564

398

Other accrued expenses

(2,366)

(363)

Contract liabilities

1,082

1,428

Other post-employment benefits

(16)

(15)

Net cash used for operating activities

(3,208)

(975)

Investing Activities

Purchases of assets

(101)

(236)

Purchases of short-term investments

(9,909)

(10,500)

Maturities of short-term investments

10,323

Net cash provided by (used for) investing activities

313

(10,736)

Financing Activities

Dividends paid

(856)

(856)

Net cash used for financing activities

(856)

(856)

Net decrease in cash and cash equivalents

(3,751)

(12,567)

Cash and cash equivalents, beginning of period

11,697

27,825

Cash and cash equivalents, end of period

$

7,946

$

15,258

Supplemental Disclosures

Income tax paid, net

$

5

$

2

Noncash investing and financing activities:

Dividends payable

856

See the accompanying Notes to the Consolidated Financial Statements.

 

DallasNews Corporation First Quarter 2024 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 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. These operations generate revenue from sales of advertising within the Company’s newspaper and digital platforms, subscriptions and retail sales of its newspaper, commercial printing and distribution services primarily related to national newspapers.

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.

As of March 31, 2024, the Company had 531 employees, a headcount decrease of 121 or 18.6 percent when compared to March 31, 2023, primarily resulting from the 2023 Voluntary Severance Program participants that left the Company in the first quarter. In the three months ended March 31, 2024, the Company paid $2,454 of related severance that was included in other accrued expense in the Consolidated Balance Sheet as of December 31, 2023.

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, 2023. All dollar amounts presented herein, except share and per share amounts, are in thousands, unless the context indicates otherwise.

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.

Areas where estimates are used include valuation allowances for credit losses, 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. Estimates are based on past experience and other considerations reasonable under the circumstances. Actual results may differ from these estimates.

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, Grant S. Moise. 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 November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This update requires an entity to disclose, on an annual and interim basis, significant segment expenses. Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures in ASC 280. The guidance is effective retrospectively for annual periods beginning after December 15, 2023, and for interim periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of the adoption on its financial statement disclosures.


DallasNews Corporation First Quarter 2024 on Form 10-Q 8


In December 2023, the FASB issued ASU 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This update requires an entity to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. Additionally, the guidance requires an entity to disclose annual income taxes paid (net of refunds received) disaggregated by federal (national), state and foreign taxes and disaggregate the information by jurisdiction based on a quantitative threshold. The guidance also requires an entity to disclose income tax expense (benefit) disaggregated by federal (national), state and foreign. The guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The amendments should be applied on a prospective basis although retrospective application is permitted. The Company is currently evaluating the impact of the adoption on its financial statement disclosures.

Note 2: Revenue

Revenue Recognition

Revenue is recognized when obligations under the terms of a contract with the Company’s customer are satisfied. This occurs when control of the promised goods or services is transferred to its 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.

The table below sets forth revenue disaggregated by revenue source.

Three Months Ended March 31,

2024

2023

Advertising and Marketing Services

Print advertising

$

5,639

$

9,296

Digital advertising and marketing services

6,007

6,013

Total

$

11,646

$

15,309

Circulation

Print circulation

$

11,756

$

12,381

Digital circulation

4,544

3,630

Total

$

16,300

$

16,011

Printing, Distribution and Other

$

3,156

$

3,882

Total Revenue

$

31,102

$

35,202

Advertising and Marketing Services

Advertising and marketing services revenue is recognized when an ad or service is complete and delivered based on the contract price. Payment is typically received within 30 to 60 days after the customer is billed. Longer-term contracts often include multiple performance obligations, digital and other forms of advertising, and a single performance obligation containing a bundle of services that are not distinct but provided to maximize a customer’s marketing plan. When the Company has a longer-term contract, revenue is recognized over time as the ads or services are delivered. For contracts with over time revenue recognition the company is providing a series of services and recognizes revenue by 1) using a time-based method of measuring progress of delivery over time, or 2) as each distinct performance obligation (typically ads or impressions) are delivered on a monthly basis. 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.

Print advertising is primarily comprised of display and classified advertising revenue. Display revenue results from sales of advertising space within the Company’s core newspaper 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 newspaper. At the end of August 2023, the Company ended its program to distribute preprinted advertisements through the mail or through third-party distributors to households in targeted areas, and discontinued print-only editions of the Company’s niche publications.


DallasNews Corporation First Quarter 2024 on Form 10-Q 9


Digital advertising and marketing services revenue consists of strategic marketing services, consulting, branding, paid media strategy and management, creative services, search optimization, direct mail, the sale of promotional materials, and subscriptions to the Company’s multi-channel marketing solutions cloud-based software and services. In addition, it includes digital sales of banner, classified and native advertisements on the Company’s news websites, social media platforms and mobile apps, as well as targeted and multi-channel (programmatic) advertising placed on third-party platforms.

For ads placed on certain third-party platforms, 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 platforms 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 platforms. The Company is acting as the agent because the publisher controls the advertising inventory. The Company will record certain arrangements gross when it controls the inventory or it has latitude in establishing price or it determines that advertising campaign management, targeting or other actions provide significant value added service to the customer.

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.

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 mailed advertisements for business customers. 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.

Contract Liabilities

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, 2024, the Company recognized $6,144 of revenue that was included in the contract liabilities balance as of December 31, 2023. The Company typically recognizes deferred revenue within 1 to 12 months.

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.

The Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less and contracts for which revenue is recognized at the amount invoiced for services performed.


DallasNews Corporation First Quarter 2024 on Form 10-Q 10


Note 3: Financial Instruments and Accounts Receivable, Net