Sunday, July 20, 2008

Seeing Red

Brace yourselves. Second quarter numbers are starting to come in and the Florida figures may be worse than ever.

Media General, owners of the Tampa Tribune, was one of the first out the gate. It’s a good example to watch because of the company is buffeted by the same economic crosswinds in its Florida operations as Tribune. Media General reported a second quarter operating loss of $1.4 million.

Publishing division profits plunged 70 percent to $6.8 million.
Newspaper ad revenues fell 17 percent. Speaking specifically of Tampa, Media General said classified advertising revenues fell by $14.1 million, or 29.5 percent
Publishing revenue in Florida was down 25 percent, the biggest decline of any state in which Media General publishes a newspaper

Retail advertising revenues declined $3.4 million, or 6.3 percent, primarily due to lower spending in Tampa in the department store, home furnishings, and entertainment categories
National revenues decreased $1.8 million, or 19.2 percent, due to lower utilities, travel and automotive categories in Tampa

Over at Gannett, the company who raised the bar on corporate profit margins to the detriment of newspaper operations everywhere, said:
Publishing ad revenue declined 13.3 percent to $1.11 billion
Publishing operating income plummeted nearly 27 percent.
Ad revenue slipped 8.3 percent
National revenues were down 14 percent
Classified ad revenue skidded 18.7 percent
Publishing operating cash flow sank 25 percent

As you know, Sam Zell was counting on cash flow to pay down Tribune’s gargantuan $12 billion debt. That’s not happening, hence the recent $300 million loan and the significant buyouts and layoffs across newspapers.

Zell must make a $650 million debt payment Dec. 4. If cash flow is as tight as it is, how do you spell relief? It just may be b-a-n-k-r-u-p-t-c-y.

Meanwhile, newspaper stocks are taking a huge hit. Publicly traded newspaper stocks have lost nearly $4 billion in value since the beginning of July, a reflection of the very, very dim outlook for newspapers at least in the short term.

Of course, Tribune is not a public company anymore. But you already know your value is in the toilet because Zell was able to buy the whole shaboom at essentially the price Tribune stock was trading for at the time. Compare that with Dow Jones, for which Rupert Murdoch paid nearly twice its street value! In other words, you got no premium. And you're stuck in a so-called employee-owned company in which the employees have no say. (See's recent posting on employee-owned firms.)

If you want to read more about the increasingly valueless news stocks, head to As far as I know, he was the first to take notice of the Titanic sinking of newspaper stocks.

No comments: