USA TODAY Co., Inc. — Filing Summary
Registrant and period: The supplied filing is a Form 10-Q for New Media Investment Group Inc. and subsidiaries, for the three months ended April 1, 2018, compared with the three months ended March 26, 2017. The filing does not identify USA TODAY Co., Inc. as the registrant; investors should verify the entity match.
Business Context and Financial Results
New Media operated a local media portfolio spanning print, digital, marketing and business services. It reported one aggregated business segment. At April 1, 2018, it said its portfolio included 684 community print publications and 566 websites, reaching more than 23 million people weekly.
| Metric | Q1 2018 | Q1 2017 | Change / context |
|---|---|---|---|
| Revenue | $340.8 million | $307.5 million | Up 10.8%; increases included acquisitions |
| Advertising revenue | $163.3 million | $155.6 million | Up 4.9%; acquisitions partly offset same-store declines |
| Circulation revenue | $130.0 million | $110.8 million | Up 17.3%; print volume declines were offset partly by pricing |
| Commercial printing and other revenue | $47.5 million | $41.2 million | Up 15.5%; growth included digital marketing and events |
| Operating income (loss) | $7.1 million | $(3.0) million | Operating margin about 2.1%, versus about (1.0)% |
| Net loss | $(0.7) million | $(3.7) million | Loss per share $(0.01), versus $(0.07) |
| Adjusted EBITDA | $26.8 million | $21.3 million | Non-GAAP measure; see filing reconciliation and exclusions |
| Operating cash flow | $18.7 million | $18.2 million | Near flat year over year |
Cash, Debt and Liquidity
- Cash and cash equivalents were $67.0 million; including restricted cash, cash totaled $70.1 million. Current assets were $279.8 million and current liabilities were $204.4 million.
- Debt carrying value was approximately $408.6 million, comprising $12.1 million current and $396.5 million long-term debt. The filing estimated debt fair value at $417.3 million. The main term loan carried a weighted-average interest rate of 8.13%; no revolving credit facility borrowings were outstanding.
- Operating cash flow of $18.7 million was below investing outflows of $22.1 million, which included $29.4 million for acquisitions, partly offset by $9.2 million of asset-sale proceeds. Financing provided $27.4 million, including $49.8 million of term-loan borrowings and $20.0 million of dividends paid.
- The company reported compliance with debt covenants, including a maximum total leverage ratio covenant of 3.25:1. Its term loans mature July 2022; the $8 million Halifax Alabama debt matures March 2019.
Material Changes and Unusual Items
- Revenue rose 10.8%, but management attributed much of the increase to acquisitions. Excluding acquisitions, operating costs fell $8.8 million and selling, general and administrative costs fell $5.0 million, reflecting cost reductions.
- The company completed six acquisitions during the quarter for an aggregate purchase price of $25.8 million. It also sold a Massachusetts property for $9.3 million and recognized a pre-tax gain of about $3.3 million.
- The company adopted ASC Topic 606 in January 2018. Certain licensing revenue and related expenses were each reported about $1.4 million lower due to principal-versus-agent presentation; adoption did not change opening accumulated deficit.
- No long-lived asset impairment charge was recorded in Q1 2018, compared with $6.5 million in Q1 2017. The filing cited prior-year facility closures and reported a $25.6 million goodwill impairment and $1.8 million masthead impairment in 2017.
- Related-party matters include a $1.225 million acquisition of assets from a company owned by the COO, and management fees, incentive compensation and expense reimbursements paid or recognized under the Manager agreement. The filing reported $2.4 million of management fees and $0.9 million of incentive compensation recognized in the quarter.
Outlook, Commentary and Risks
- Management expected adequate liquidity for working capital, debt service and required capital expenditures for at least the next 12 months, and forecast 2018 capital expenditures of $14 million to $16 million. The filing gives no specific revenue or earnings guidance.
- Management described first and third quarters as historically weaker advertising periods and cited ongoing same-store print advertising declines, industry migration to digital, and local economic uncertainty. Digital advertising and business services are intended to help offset print trends, but their success is not assured.
- Key risks include acquisition integration and valuation, debt and interest burden, covenant and refinancing constraints, future impairment charges, newsprint costs and supply, pension funding, customer receivable losses, and the company’s ability to sustain dividends. Management cautioned that dividends remain subject to board approval, financial performance, liquidity and debt restrictions.
- Subsequent to quarter end, the company sold 6.9 million shares and estimated net proceeds of $110.6 million; it granted the Manager options to buy 690,000 shares in connection with the offering. It also completed or announced additional acquisitions and an asset sale, including the Austin American-Statesman acquisition for $47.5 million and the Palm Beach Post acquisition for $49.25 million. The board extended the $100 million share repurchase authorization through May 18, 2019.
Most Important Facts to Verify
- Confirm that this New Media Investment Group filing is the intended filing for the company identified in the request as USA TODAY Co., Inc.
- Separate acquisition-driven revenue growth from same-store trends, particularly print advertising and circulation volumes.
- Review debt balances, interest costs, covenant headroom and the use of proceeds from the post-quarter equity offering against acquisition and liquidity needs.
- Assess whether operating cash flow can support dividends, planned capital expenditures and ongoing acquisitions without additional borrowing or equity issuance.
- Review related-party transactions and Manager fees, incentives and equity awards, as well as the preliminary purchase-price allocations for recent acquisitions.