Is the New York Times Going Bankrupt?

The newspaper industry is, in no uncertain times, battling for its very survival right now.

Some major newspapers are either choosing to shut down completely or move entirely to the Internet.

Workers at these companies are being laid off in droves. Companies are aggressively cutting costs in an effort to stay afloat.

Revenues are way, way down due to a multitude of different reasons. Advertisers cutting back their advertising budgets. Advertisers spending more of their advertising dollars on other forms of media. Declining subscription numbers. A declining readership in general.

The newspaper industry is a mess right now, and no company illustrates this better than the New York Times.

Five years ago, NYT was trading at around $45 per share.

Since then, the trend has been straight down, and the company now finds itself trading for just $4.94 per share. The entire company is worth just $711 million dollars, a fraction of its value compared to just a few short years ago.

The company is bleeding cash and revenues are declining sharply.

In its most recent earnings report (Q1 2009), the company posted a loss of 52 cents per share, or $74.5 million dollars. Excluding special items, this loss would have still been 34 cents per share.

Compare this to a year ago, when the company posted a break-even quarter.

Revenues were down dramatically on the quarter (Q1 2009), dropping an alarming 19% to $609 million dollars.

Classified ad sale revenues dropped 45%.

Advertising sales declined 28%.

Online newspaper revenue fell.

Online ad revenue fell.

Henry Blodget, in an article posted here, opines that he believes the New York Times will max out its borrowing capacity in "4 quarters".

He says that the company only has $34 million dollars of cash on hand, after subtracting the "portion held in escrow for repayment of debt".

Blodget says that the company "still has assets that they can sell", and that "there are presumably some folks who will lend to them", but that the "terms were likely to be horrific".

According to Blodget, the New York Times "remains on the brink of insolvency" and "bankruptcy is a very real possibility".

Can the NYT continue to cut costs and make up for the dramatic drop in ad sales? Can they do this in time to avoid a bankruptcy filing?

This is interesting news for a number of reasons:

1) The New York Times is an extremely well-known and influential paper that owns a number of media properties

2) Other newspapers are currently wrestling with the same problems right now.

Can the New York Times halt its descent into the dark abyss of bankruptcy?

Filed under: The Economic Meltdown

COMMENTS

Comment by Dan Cunningham on June 01, 2009 @ 12:33 am

Let me disclose that I bought 50 shares of NYT at around 14 and the value has evaporated. But then Harbinger put in a lot more money than did I.
It is not just technology changes destroying newspapers. They also loaded up with huge sums of debt. Investment bankers apparently urged the Times to ramp up its debt and to buy back shares with money it should have retained, according to The New Yorker this week.
Investment bankers weakened newspapers by engineering huge leveraged debt acquisitions, such as Tribune Co. Throughout U. S. industry investment bankers have been urging companies to sell out to highly leveraged buyers who then fire workers and or outsource jobs overseas so that former wages are now used for interest payments.
The New York Times, by running up huge debt in a company more than a century old, would indicate its personnel can report news but not pay attention to what it is reporting.

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