DallasNews (US:DALN)2025-07-30 21:27PART I - FINANCIAL INFORMATION Item 1. Financial Information The company's Q2 2025 results show a net loss due to a pension charge, partially offset by an asset sale gain Consolidated Statements of Operations A significant pension settlement charge drove a Q2 net loss despite an asset sale gain boosting operating income Consolidated Statements of Operations Highlights (In thousands, except per share amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total net operating revenue | $29,766 | $32,061 | $58,891 | $63,163 | | Operating income (loss) | $1,263 | $568 | $35,471 | $(1,188) | | Other income (loss), net | $(34,979) | $641 | $(34,914) | $1,252 | | Net Income (Loss) | $(33,492) | $1,450 | $(5,207) | $87 | | Diluted EPS | $(6.26) | $0.27 | $(0.97) | $0.02 | - The significant net loss in Q2 2025 was primarily driven by a one-time non-cash pre-tax pension settlement charge of $35.3 million, which was recorded under 'Other income (loss), net'7175 - For the first six months of 2025, operating income was substantially boosted by a $36.3 million net gain on the sale/disposal of assets, specifically the North Plant Property890 Consolidated Balance Sheets The balance sheet strengthened with increased cash from an asset sale and eliminated long-term pension liabilities Consolidated Balance Sheet Highlights (In thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $33,700 | $9,594 | | Property, plant and equipment, net | $10,057 | $12,633 | | Total assets | $76,235 | $61,843 | | Long-term pension liabilities | $— | $11,764 | | Total liabilities | $37,751 | $55,030 | | Total shareholders' equity | $38,484 | $6,813 | Consolidated Statements of Cash Flows Cash from investing surged due to an asset sale, while operating cash flow was used for a pension contribution Consolidated Cash Flow Summary (In thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash used for operating activities | $(13,770) | $(1,660) | | Net cash provided by investing activities | $37,876 | $7,420 | | Net cash used for financing activities | $— | $(856) | | Net increase in cash | $24,106 | $4,904 | | Cash at end of period | $33,700 | $16,601 | - The increase in cash used for operations was mainly due to a voluntary cash contribution of approximately $10.0 million to fully fund its pension plan liabilities70196 - Cash from investing activities was primarily generated by $40.8 million in proceeds from the sale of the North Plant Property1690 Notes to the Consolidated Financial Statements Notes detail a major asset sale, pension plan annuitization, and a definitive merger agreement with Hearst - On March 11, 2025, the company completed the sale of its North Plant Property, receiving net cash proceeds of $40,773 and generating a net gain of $36,3108990 - On April 17, 2025, the company settled all its defined benefit pension obligations by purchasing a group annuity contract, funded by plan assets and a ~$10 million cash contribution, resulting in a one-time, non-cash pre-tax pension settlement charge of $35,2667071 - On July 9, 2025, the company entered into a merger agreement with Hearst Media West, LLC, which was later amended to increase the per-share consideration to $15.00 in cash103104 - The company received an unsolicited, non-binding proposal from an affiliate of Alden Global Capital to be acquired for $16.50 per share, which the Board of Directors rejected on July 28, 2025109 - On July 27, 2025, the company adopted a Rights Agreement (a 'poison pill') to protect shareholder interests, which will expire on July 26, 2026, or upon completion of the merger110114 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses transformative events including a merger agreement, asset sale, and pension settlement Recent Developments The company entered a merger agreement with Hearst, sold a major property, and annuitized its pension plans - Entered into a merger agreement with Hearst Media West, LLC, amended to a price of $15.00 per share in cash122123 - Received and rejected an unsolicited, non-binding acquisition proposal from an affiliate of Alden Global Capital for $16.50 per share129 - Adopted a Rights Agreement (poison pill) on July 27, 2025, to protect against hostile takeovers, set to expire on July 26, 2026130135 - Completed the sale of the North Plant Property, receiving net cash proceeds of $40,773 and generating a net gain of $36,310137 Results of Operations Total revenue declined across all segments, while a pension charge created a net loss despite lower operating costs Revenue by Source - Q2 2025 vs Q2 2024 (In thousands) | Revenue Source | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Advertising and marketing services | $12,302 | $12,784 | (3.8)% | | Circulation | $15,263 | $16,181 | (5.7)% | | Printing, distribution and other | $2,201 | $3,096 | (28.9)% | | Total Net Operating Revenue | $29,766 | $32,061 | (7.2)% | Segment Profit (Loss) - Six Months Ended June 30 (In thousands) | Segment | 2025 | 2024 | | :--- | :--- | :--- | | TDMN Segment Profit | $10,141 | $11,565 | | Agency Segment Profit (Loss) | $473 | $(371) | | Total Segment Profit | $10,614 | $11,194 | - The TDMN segment's profit declined by $1.4 million in the first six months of 2025 due to revenue declines in print advertising and circulation, despite expense savings from transitioning to a more efficient printing facility188 - The Agency segment's profitability improved by $0.8 million in the first six months of 2025, primarily due to strategic expense savings initiatives189 Liquidity and Capital Resources Liquidity improved significantly due to a $40.8 million asset sale, which funded a $10 million pension contribution - Cash and cash equivalents increased to $33,700 thousand as of June 30, 2025, from $9,594 thousand at December 31, 2024191 - The company received net cash proceeds of $40,773 thousand from the sale of its North Plant Property193 - Net cash used for operating activities increased by $12,110 thousand year-over-year, primarily due to a voluntary cash contribution of approximately $10,000 thousand to fund pension liabilities196 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective with no material changes in the quarter - Management concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025208 - No material changes to the Company's internal control over financial reporting occurred during the second fiscal quarter of 2025209 PART II - OTHER INFORMATION Item 1. Legal Proceedings Existing legal claims are not expected to have a material adverse effect on the company's financial condition - In the opinion of management, liabilities from currently existing legal claims would not have a material adverse effect on DallasNews' results of operations, liquidity or financial condition211 Item 1A. Risk Factors Primary risks relate to the pending merger with Hearst, including potential disruptions and failure to complete the deal - The announcement and pendency of the merger may adversely affect business operations, employee retention, and relationships with customers and partners213 - Failure to consummate the merger could materially harm the business and stock price, as closing is subject to conditions including shareholder approval and the company maintaining at least $20 million in Net Cash216 - The company may be required to pay a $3,000,000 termination fee to the acquirer, Parent, if the Merger Agreement is terminated under specific circumstances218222 - While the merger is pending, the company is subject to restrictions on its business, limiting its ability to issue securities, acquire businesses, dispose of assets, or incur significant capital expenditures without consent221 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered equity securities were sold in Q2 2025, and the stock repurchase program remains terminated - No unregistered sales of equity securities occurred during the reporting period223 - The company's board of directors terminated its stock repurchase authority in the third quarter of 2024224 Item 5. Other Information No directors or officers adopted or terminated Rule 10b5-1 trading arrangements during the second quarter - No director or officer adopted or terminated any Rule 10b5-1 trading arrangements during the second quarter of 2025227 Item 6. Exhibits This section lists key filed exhibits, including the merger agreement, its amendment, and the Rights Agreement - Key exhibits filed include the Merger Agreement (2.1), the amendment to the Merger Agreement (2.2), and the Rights Agreement (4.1)229