USA TODAY Co., Inc. — Filing identity and reporting period
Important identity note: The filing provided is New Media Investment Group Inc.’s Form 10-K, not a filing by USA TODAY Co., Inc. It covers the 52-week fiscal year ended December 27, 2015; it is not a standalone fourth-quarter filing. New Media owned and operated local newspapers, shoppers, websites, mobile sites, directories and digital marketing services across 489 markets in 31 states.
Financial performance and position
| Metric | FY 2015 | FY 2014 |
|---|---|---|
| Revenue | $1,195.8 million | $652.3 million |
| Operating income | $103.4 million | $26.4 million |
| Net income (loss) | $67.6 million | $(3.2) million |
| Adjusted EBITDA | $175.6 million | $67.7 million |
| Cash from operating activities | $115.3 million | $41.4 million |
Reported operating, net-income and Adjusted EBITDA margins were approximately 8.6%, 5.7% and 14.7%, respectively, in 2015. These reported results include acquisitions and unusual items; Adjusted EBITDA is a non-GAAP measure and is not a substitute for operating cash flow or net income.
- Revenue mix in 2015: advertising $696.7 million (about 58%); circulation $378.3 million (32%); commercial printing and other $120.9 million (10%).
- Digital revenue was $106.9 million, up 85% from $57.9 million; Propel contributed $31.3 million.
- At December 27, 2015, cash and cash equivalents were $146.6 million, restricted cash $7.0 million, total current assets $331.9 million and current liabilities $175.5 million.
- Debt carrying value was $356.9 million, including current maturities; the filing estimated debt fair value at $366.3 million. Cash interest paid was $21.7 million. The revolving facility had no balance outstanding at year-end, and the company reported compliance with debt covenants.
- Operating cash flow less capital expenditures of $10.2 million was approximately $105.2 million. Acquisition spending, net of cash acquired, was $431.1 million; asset-sale proceeds were $142.6 million.
Material changes versus the prior comparable period
- Revenue increased 83.3%, but the increase was driven by acquisitions: management attributed $552.1 million of revenue to acquisitions. Same-store revenue declined 3.9%; same-store advertising fell 6.1%, while same-store circulation rose 0.5%.
- Same-store print advertising weakness reflected secular shifts to digital media and uncertain economic conditions. Management cited price increases as partially offsetting print circulation declines.
- Net income improved from a loss to profit, but FY 2015 included a $57.1 million gain on the sale of the Las Vegas Review-Journal and related publications. The company also recorded a $4.8 million masthead impairment.
- FY 2015 acquisitions included Halifax Media, Stephens Media and other newspaper assets. The Las Vegas Review-Journal was sold in December for $140 million plus a working-capital adjustment. Debt and interest expense rose with acquisition financing; interest expense increased to $29.3 million from $16.6 million.
- Comparisons are affected by acquisition timing and fresh-start accounting after the predecessor’s 2013 bankruptcy restructuring; historical periods are not fully comparable.
Outlook, commentary and risks
- Management estimated 2016 free cash flow of $115 million to $135 million and capital expenditures of $10 million to $12 million. These are management estimates, not guaranteed results. It expected liquidity to meet working-capital, borrowing and capital-expenditure needs for at least 12 months.
- The company intended to distribute a substantial portion of free cash flow as quarterly dividends, subject to financial performance, Board approval, liquidity needs and credit-agreement restrictions. A $0.33-per-share fourth-quarter 2015 dividend was announced after year-end.
- Key risks include continuing print advertising and circulation declines; whether digital and Propel growth can offset those declines; acquisition integration and realization of expected savings; local economic weakness; debt service, floating-rate exposure and restrictive covenants; and the sustainability of dividends.
- Debt principal payments were scheduled to include $334.3 million in 2020. A 100-basis-point LIBOR change was estimated to affect annual interest expense by about $2.6 million. The filing also reported pension and postretirement plans underfunded by $11.2 million.
- Other investor considerations include a $4.8 million masthead impairment, restructuring costs, a $22.4 million accrued management and incentive fee balance, and management and incentive fee expense to Fortress of $9.4 million and $30.3 million, respectively, in 2015.
- The auditor gave unqualified opinions on the financial statements and internal controls. However, internal controls at four recently acquired businesses were excluded from the company’s 2015 assessment. Management did not expect current or threatened legal proceedings to have a material adverse effect, while noting outcomes remain uncertain.
Most important facts for investors to verify
- Confirm the correct issuer: the supplied filing identifies New Media Investment Group Inc., whereas the request metadata names USA TODAY Co., Inc.
- Assess organic performance separately from acquired revenue, including same-store advertising, circulation and digital trends.
- Reconcile reported earnings and Adjusted EBITDA for the sale gain, impairment, acquisition integration expenses and other adjustments.
- Review debt terms, covenant headroom, 2020 maturities, floating-rate exposure and cash available after debt service and dividends.
- Test whether the 2016 free-cash-flow outlook and dividend policy were supportable given the print declines, acquisition integration demands and pension obligations.
- Review the acquired businesses’ control integration and the related-party management and incentive fee arrangements.