SEC Filing Summary
Entity and period: The supplied filing is New Media Investment Group Inc.’s Form 10-K for the fiscal year ended December 30, 2018, not a filing under the requested company name, USA TODAY Co., Inc. The company operated a portfolio of local media assets across 581 markets in 37 states. Its 2017 comparison year included 53 weeks; 2018 included 52.
Business context and financial performance
The company owned 678 print publications and 581 websites, and reported reaching more than 22 million people weekly and serving more than 199,000 business customers. Its strategy combined local publishing, digital marketing and business services through UpCurve, events through GateHouse Live, acquisitions, cost reductions and quarterly dividends.
| Metric | 2018 | 2017 |
|---|---|---|
| Revenue | $1,526.0 million | $1,342.0 million |
| Operating income | $58.1 million | $33.8 million |
| Net income (loss) attributable to New Media | $18.2 million | $(0.9) million |
| Adjusted EBITDA | $145.3 million | $143.8 million |
| Cash from operating activities | $109.6 million | $110.5 million |
| Cash and cash equivalents at year-end | $48.7 million | $43.1 million |
| Debt on balance sheet, current and long-term | $440.6 million | $359.9 million |
Revenue increased 13.7%, primarily through acquisitions. Advertising rose 6.5% to $728.3 million, circulation increased 21.2% to $575.0 million, and commercial printing and other revenue grew 21.3% to $222.7 million. The filing attributes much of the growth to acquired operations; it also describes continued same-store print advertising pressure. Digital and business services revenue was $179.2 million, up 25.0%; $95.8 million was attributable to UpCurve.
Operating margin was approximately 3.8% of revenue and net margin approximately 1.2%. Adjusted EBITDA margin was approximately 9.5%; this is a company-defined non-GAAP measure, not a substitute for GAAP earnings or cash flow. Operating income improved partly because 2017 included $27.4 million of goodwill and masthead impairment, versus none in 2018. The company reported $15.0 million of 2018 integration and reorganization costs and a $3.0 million loss on early debt extinguishment.
Cash flow, debt and liquidity
Operating cash flow was approximately flat year over year. Investing activities used $201.5 million, including $204.9 million for acquisitions, net of acquired cash, and $11.6 million of capital expenditures; asset-sale proceeds partly offset these outflows. A simple operating-cash-flow-less-capital-expenditure measure was approximately $97.9 million, before dividends, acquisitions, debt service and other uses.
Year-end cash was $48.7 million, with an additional $4.1 million of restricted cash. Current assets of $297.6 million exceeded current liabilities of $247.8 million by approximately $49.8 million. Total debt recorded on the balance sheet was approximately $440.6 million; the filing estimated debt fair value at $445.3 million. The term loans carried a weighted-average interest rate of 8.59%, and the company reported $31.2 million of cash interest paid. The revolving facility was undrawn at year-end. The company stated it was compliant with its debt covenants, including a maximum total leverage covenant of 3.25 to 1.00; the filing text does not provide a clear actual leverage ratio.
Financing cash flow included $111.1 million of common-stock issuance proceeds and $79.7 million of term-loan borrowings, partly offset by $87.2 million in dividends and other financing uses. Debt maturities and estimated interest obligations totaled $584.2 million in the contractual-obligations schedule, including $447.2 million in 2022. Operating lease obligations totaled $174.4 million. The company expected to have adequate resources for at least the next 12 months.
Material changes, outlook and risks
- Acquisitions and portfolio: 2018 acquisitions had an aggregate stated purchase price of $205.7 million and included newspapers, business publications, events, cloud services and digital assets. In January 2019, the company completed a $30 million, plus working capital, Schurz Communications asset acquisition funded with cash on hand.
- Operations and costs: The company ceased operations at seven print publications and six printing operations in 2018, recording $1.5 million of impairment charges and $3.6 million of accelerated depreciation. Newsprint consumption costs increased to $85.7 million from $66.3 million, with higher prices a key factor. The filing says print advertising and circulation volumes face secular pressure from digital migration.
- Capital spending and dividends: Management estimated 2019 capital expenditures of $15 million to $17 million, mainly for print-operation consolidation and system upgrades. The company paid $1.49 per share in 2018 dividends and announced a fourth-quarter dividend of $0.38 per share, payable in March 2019. Future dividends remain subject to board approval, financial performance, liquidity and credit-agreement restrictions.
- Interest-rate exposure: A 100-basis-point change in LIBOR was estimated to change annual interest expense by approximately $4.1 million. The company also identified uncertainty around LIBOR’s potential discontinuation or replacement.
- Other financial risks: Pension and postretirement plans were underfunded by approximately $24.5 million; estimated 2019 cash requirements were approximately $1.4 million. The company had $310.7 million of goodwill and $115.9 million of mastheads, with impairment risk if forecasts or market conditions deteriorate. It identified economic weakness, continued print declines, acquisition integration, newsprint prices, debt and covenant restrictions, and the success of digital initiatives as significant risks.
- Governance and controls: CFO and Chief Accounting Officer Gregory Freiberg was to resign effective February 28, 2019; the company had begun a search for a successor. Management and the auditor reported effective internal control over financial reporting, but controls for 2018 acquisitions—which represented about 16% of assets and 10% of revenue—were excluded from the assessment.
- Accounting and unusual items: Adoption of the revenue standard reduced 2018 commercial printing and other revenue and operating expenses by approximately $5.9 million through net presentation of certain licensing transactions; it did not change opening accumulated deficit. The company expected lease accounting adoption to add approximately $95 million of lease assets and $101 million of lease liabilities.
Investor verification priorities
- Confirm the issuer identity: the filing is for New Media Investment Group Inc., while the request names USA TODAY Co., Inc.
- Separate acquisition-driven growth from underlying trends, particularly same-store advertising, print circulation and digital revenue.
- Review debt principal, interest costs, maturity concentration in 2022, covenant headroom and the March 2019 maturity of the $8 million Advantage Alabama debt.
- Assess whether operating cash generation can support dividends, debt service, planned capital spending and further acquisitions.
- Check the integration and performance of 2018 and subsequent acquisitions, including the acquired operations excluded from the internal-control assessment.
- Evaluate impairment sensitivity, pension funding needs, newsprint-price exposure and the effects of the reported CFO transition.