DallasNews (DALN) - 2019 Q1 - Quarterly Report

PART I - Financial Information Item 1. Financial Information A. H. Belo Corporation reported a reduced net loss of $3.0 million on $46.6 million revenue for Q1 2019, with new lease accounting impacting the balance sheet and varied segment performance Consolidated Statements of Operations | Metric | Q1 2019 (in thousands) | Q1 2018 (in thousands) | | :--- | :--- | :--- | | Total net operating revenue | $46,589 | $49,453 | | Advertising and marketing services | $24,041 | $25,741 | | Circulation | $17,273 | $17,747 | | Printing, distribution and other | $5,275 | $5,965 | | Operating loss | $(4,052) | $(6,217) | | Net Loss | $(3,012) | $(4,014) | | Diluted EPS | $(0.14) | $(0.19) | - Total net operating revenue decreased by 5.8% YoY, from $49.5 million in Q1 2018 to $46.6 million in Q1 2019[9] - The company narrowed its operating loss to $4.1 million from $6.2 million in the prior-year quarter, and the net loss improved to $3.0 million from $4.0 million[9] Consolidated Balance Sheets | Balance Sheet Item | March 31, 2019 (in thousands) | December 31, 2018 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $50,301 | $55,313 | | Total current assets | $81,186 | $87,394 | | Total assets | $155,432 | $142,348 | | Total current liabilities | $29,138 | $31,663 | | Total liabilities | $89,855 | $71,762 | | Total shareholders' equity | $65,577 | $70,586 | - Total assets increased to $155.4 million from $142.3 million at year-end 2018, primarily due to the adoption of the new lease accounting standard which added $22.5 million in operating lease right-of-use assets[14][23] - Total liabilities increased significantly to $89.9 million from $71.8 million, mainly driven by the recognition of $23.9 million in long-term operating lease liabilities upon adopting the new lease standard[14][23] Consolidated Statements of Cash Flows | Cash Flow Activity (in thousands) | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Net cash (used for) provided by operating activities | $(2,766) | $947 | | Net cash used for investing activities | $(180) | $(2,307) | | Net cash used for financing activities | $(2,066) | $(2,325) | | Net decrease in cash | $(5,012) | $(3,685) | - Cash from operations was a net use of $2.8 million, a significant decrease from the $0.9 million provided in the same period last year, primarily due to changes in working capital[19][146] - Financing activities used $2.1 million, consisting of $1.7 million in dividend payments and $0.3 million in share repurchases[19][148] Notes to the Consolidated Financial Statements - The company adopted the new lease accounting standard ASU 2016-02 on January 1, 2019, using a modified retrospective approach, which resulted in recognizing operating lease right-of-use assets and lease liabilities[23][54] - The company operates under two reportable segments: Publishing and Marketing Services; a business unit reclassification in Q1 2019 led to recast prior-year segment data for comparability[30][34] - On April 1, 2019, the company acquired Cubic, Inc. for approximately $2.4 million in cash, to be included in the Marketing Services segment and not expected to be material to financial results[99] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 5.8% YoY revenue decline to newspaper industry challenges, with Publishing revenue down 6.7% and Marketing Services up 1.1%, while cost reductions led to a smaller operating loss and cash decreased by $5.0 million Results of Operations Segment Performance (Q1 2019 vs Q1 2018) | Segment | Revenue Q1 2019 (in thousands) | Revenue Q1 2018 (in thousands) | % Change | Operating Income/(Loss) Q1 2019 | Operating Income/(Loss) Q1 2018 | | :--- | :--- | :--- | :--- | :--- | :--- | | Publishing | $40,703 | $43,629 | (6.7)% | $(4,040) | $(6,302) | | Marketing Services | $5,886 | $5,824 | 1.1% | $(12) | $85 | - Publishing advertising revenue decreased by 8.8% YoY, driven by declines in preprint and digital advertising on dallasnews.com[115][117][118][119] - Circulation revenue decreased 2.7% due to volume declines in home delivery (12.5%) and single copy sales (20.2%), partially offset by rate increases[123] - Total operating costs and expenses decreased by 9.0% YoY, primarily due to a $3.3 million reduction in employee compensation and benefits from headcount reductions in the Publishing segment[128][129] Liquidity and Capital Resources - The company's cash balance decreased from $55.3 million at year-end 2018 to $50.3 million as of March 31, 2019[142] - Cash flows from operating activities decreased by $3.7 million compared to the prior year period, shifting from a source of cash to a use of cash, primarily due to changes in working capital[146] - The company repurchased 83,529 shares for $340,000 and paid dividends of $1.7 million during the quarter[148] - The board of directors declared a quarterly dividend of $0.08 per share, payable in June 2019[150] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company reported no material changes in its market risk exposure compared to its 2018 Annual Report on Form 10-K disclosures - There were no material changes in the company's market risk exposure compared to the year ended December 31, 2018[156] Item 4. Controls and Procedures The CEO and CFO concluded disclosure controls were effective, with internal control changes implemented for the new lease accounting standard (ASU 2016-02) including new software and processes - The CEO and Principal Financial Officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2019[157] - The company implemented changes to its internal control over financial reporting due to the adoption of the new lease accounting standard, Topic 842, which included new software and processes[158] PART II - Other Information Item 1. Legal Proceedings The company is involved in various legal proceedings, but management does not expect them to materially affect financial condition or results of operations - Management does not expect pending legal proceedings to have a material adverse effect on the company's results of operations, liquidity, or financial condition[162] Item 1A. Risk Factors No material changes were reported to the risk factors previously disclosed in the 2018 Annual Report on Form 10-K - No material changes were reported from the risk factors disclosed in the 2018 Annual Report on Form 10-K[163] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds In Q1 2019, the company repurchased 83,529 shares for $340,000 and authorized an additional 1,500,000 shares for repurchase - In Q1 2019, the board of directors authorized an additional 1,500,000 shares for repurchase under its publicly announced program[165] Issuer Purchases of Equity Securities (Q1 2019) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | January 2019 | 37,813 | $4.13 | | February 2019 | 36,377 | $4.06 | | March 2019 | 9,339 | $3.90 | Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including CEO/CFO certifications, XBRL data, and incorporated by reference documents - The report includes required certifications from the Chief Executive Officer and principal financial officer pursuant to the Sarbanes-Oxley Act of 2002[174] - Interactive Data Files (XBRL) are included as exhibits with this filing[171][174]