New York Times Cash Crunch 2: Negative Net Worth
If you ignore the potential sale-value of the New York Times's consolidated businesses (New York Times, Boston Globe, Regional papers), the company has a severely negative net worth. Specifically, it owes about $400 million more than it has. The majority of this money is owed in the next six months, moreover, so this is not some far-off concern.
NYTCo's operations and debt-service payments are also now consuming more cash each quarter than the company generates. (The company borrowed an additional $25 million in Q3 to fund these losses). Unless NYTCo makes major cost cuts and/or sells or shuts down money-losing divisions, therefore, the picture will only get worse.
A company's financial position can be divided into two periods: short-term (up to a year) and long-term (more than a year). Neither of these look good for NYTCo. (For the purposes of this analysis, we have ignored intangible assets like "goodwill", which is essentially an accounting construct, and newsprint inventory, which is small in any case.)
THE SHORT TERM
What NYT Has (Short-Term):
- $46 million of cash
- $366 million owed to it by advertisers
Total: $412 million
What NYT Owes (Short-Term):
- $398 million of short-term debt (due in May)
- $161 million of accounts payable (newsprint, travel, etc.)
- $100 million of payroll (salaries)
- $159 million of other expenses
- $50 million owed on long-term debt and rent
Total: $865 million
Bottom Line: NYTCo owes $453 million more than it has.
Even excluding the $398 million debt payment due in May, the picture is discouraging: The company owes about $50 million more than it has. Since its operations are now burning cash, this picture will only get worse. Even if NYTCo is able to draw down its second $400 million credit line to meet the May debt payment, its short-term liquidity position will be severely negative.
THE LONG TERM
What NYT Has:
- $1.355 billion of buildings, real-estate, printing presses, trucks, technology
- $146 million of investments in joint ventures (Red Sox, etc.)
Total: $1.501 billion
What NYT Owes:
- $673 million of long-term debt
- $7 million of long-term rent
- $284 million of pension benefits
- $214 million of retiree healthcare and other benefits
- $290 million of other liabilities
Total: $1.468 billion
Bottom Line: Balance sheet carrying values can provide a very misleading picture of long-term asset values, especially for things like land and buildings, which may have appreciated (or depreciated) significantly. As a result, there may be significant embedded value in these assets. But assuming the NYT's land, buildings, and joint-ventures are carried at something approaching market value, NYTCo has only about $33 million more than it owes.
CONCLUSION
When a company like NYTCo is healthy and generating cash, none of this really matters. The New York Times's value isn't in buildings or land--it's in the value of the brand and ongoing business, which aren't reflected on the balance sheet. Now that NYTCo has gotten itself in a financial pickle, however, the balance sheet and current cash flows matter a lot.
The NYT's "current ratio"--current assets vs. current liabilities--is now about 1 to 2, which is horrible (In the next year, the company will be required to pay out more than twice as much value as it has on hand). For comparison, a robustly healthy company, such as Google, has a current ratio of 8 to 1. Even General Motors has a better current ratio than the NYT.
The NYT's "coverage ratios"--EBITDA to interest payments--are also now alarmingly low: under 4 to 1 in Q3 ($44 million of EBITDA to $12 million of interest payments). These ratios are deteriorating each quarter. By Q1, they will likely turn negative.
The bottom line is that the New York Times will find it very difficult and/or expensive to borrow more money to meet its upcoming liabilities, even over the short term. Now that the stock has collapsed, moreover, it is not in a strong position to issue equity.
Thus, the company's realistic options have been reduced to:
- Major cost cuts (including dividend)
- Large asset sales
- Sale of equity at fire sale price.
See Also:
New York Times Cash Crunch: $400 Million Due In May
New York Times Running On Fumes
How The New York Times Can Save Itself
Note that even GM has a better ratio than NYT.
Looks like Newspaper businesses must make major Looks like newspapers must change business model or die.
Or who knows -- maybe the stories of their own demise will sell enough papers ("extra extra -- this is our last issue!") to get them through this...
Their quick ratio dropped just below 1.0 in Sept Q3 (and deteriorating quarter over quarter, year over year), with rising inventory, going into a consumer recession...
And the Q3 numbers don't include October, which was awful.
You're welcome -- I just gave you a half-dozen more stories :)
This will be payback for getting him elected and to keep the propaganda machine well oiled for 2012.
They will frame the basis of the bailout on how newspapers are the only news source for disenfranchised, non internet abled citizens.
Just watch.
COuld it be that Murdoch is a logical suitor of last resort for the NYT, given that he could derive scale advantage by running one printing plant for both the WSJ and the NYT?
In spite of what the "blame the media" people are saying, it's troubling to imagine losing the newspaper's voice in our society. Aside from a few magazines, they're the only news outlet that will investigate and take on the government.
I hope the NYtimes goes down in flames.
> Or who knows -- maybe the stories of their own demise
> will sell enough papers ("extra extra -- this is our
> last issue!") to get them through this...
In an effort to further integrate our print and online efforts, Boston.com will now report to the Globe. It had been reporting into the New York Times Digital operation. Susan Hunt Stevens, currently our SVP of Circulation & Marketing will have a new position as the SVP for Digital, which includes Boston.com. Susan will report into Steve Ainsley. Susan will oversee all digital strategy and operations for Boston Globe Media, including digital product development, marketing, licensing, business development and e-commerce. Bob Kempf, Boston.com VP/Products, will report into Susan. Susan also will continue to oversee Globe interactive services and the Globe e-commerce and licensing initiatives. Boston.com's news operations will remain unchanged, reporting up to Marty [editor Marty Baron]. Likewise Boston.com advertising sales will continue to report up to Sam Martin.
He added that he thought there were still opportunities for some kind of partnership around search.
We don't think Steve is bluffing. We think he really has moved on. But we also note that this is Steve Ballmer we're talking about: He could always just wake up one morning and change his mind.
We don't think Steve is bluffing. We think he really has moved on. But we also note that this is Steve Ballmer we're talking about: He could always just wake up one morning and change his mind.
1) Do not "hand over" your inventory to ad networks, give them your unsold inventory. Keep your sales team in place. CNN uses Advertising.com to sell their unsold inventory for example.
2) There are enough ad networks out there fighting to represent premium sites with unsold inventory - Gawker has good content. CPM rates might lower in the long run,Online shopping but getting paid for something is better than nothing - it's as simple as that.
3) As for video, who says Gawker needs to create their own? YouTube certainly doesn't. They can grab videos out there and run ads Online collector against them. Maybe have user video reviews or something on Gizmodo for example...just an idea.
4)TV never gave into the third party route?