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.
OVERVIEWDallasNews, formerly A. H. Belo Corporation, headquartered in Dallas, Texas, is
the leading local news and information publishing company in Texas. The Company
has a growing presence in emerging media and digital marketing, and maintains
capabilities related to commercial printing, distribution and direct mail.
DallasNews delivers news and information in innovative ways to a broad range of
audiences with diverse interests and lifestyles.
The Company publishes The Dallas Morning News (www.dallasnews.com), Texas'
leading newspaper and winner of nine Pulitzer Prizes, and various niche
publications targeting specific audiences. Its newspaper operations also provide
commercial printing and distribution services to several large
national newspapers. In addition, the Company has the capabilities of a
full-service strategy, creative and media agency that focuses 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. 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.
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 will continue to be secured by a first
priority lien on the property.
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DallasNews Corporation Third Quarter 2021 on Form 10-Q 18
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Table of Contents
The COVID-19 pandemic that began in January 2020, resulted in increased travel
restrictions, and disruption and shutdown of businesses. The pandemic and any
preventative or protective actions that the Company has taken and may continue
to take, or may be imposed on the Company by governmental intervention, in
respect of the pandemic may result in a period of disruption to the Company's
financial reporting capabilities, its printing operations, and its operations
generally. COVID-19 is impacting, 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 continued throughout the pandemic. While digital
subscriptions continue to grow, the Company experienced decreased demand for its
print and digital advertising. As a result, beginning in 2020, the Company
implemented measures to reduce costs and preserve cash flow. These measures
included reduction in the quarterly dividend rate per share, temporary decreases
in employee compensation, as well as reductions in discretionary spending. In
addition, the Company benefited from tax provisions permitted under the
Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") and expects
to benefit from the pension relief provisions under the American Rescue Plan Act
of 2021 (the "ARP Act"). However, these measures do not fully offset the impact
of the COVID-19 pandemic on the Company's business and, as such, the pandemic is
likely to continue to have an adverse impact on the Company's business, results
of operations and financial condition at least for the near term. The Company
continues to evaluate the future material impacts on its consolidated financial
statements that may result from the actions taken by the Company and its
customers in respect of the pandemic.
In the third quarter of 2021, the Company recorded a tax benefit of $2,384 and
$548 of interest income, primarily due to the release of a federal uncertain tax
reserve and related interest resulting from the statute of limitations lapsing
in August 2021.
As of September 30, 2021, the Company performed a review of potential impairment
indicators for its long-lived assets, including property, plant and equipment,
and right-of-use assets. The Company determined there was no significant
decrease in the market value of the long-lived assets or significant change in
the extent or manner in which the asset group is being used or in its physical
condition as of September 30, 2021, and there was no significant adverse change
in legal factors or in the business climate during the period that could affect
the value of the asset group. Based upon the review of indicators, the Company
did not identify any events or changes in circumstances that indicate the
carrying amount of long-lived assets may not be recoverable. See Note 3 -
Leases for information on right-of-use asset impairment occurring during the
period.
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 and nine months ended September 30, 2021
and 2020. 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.
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DALLASNEWS CORPORATION 
