Tag Archives: Stocks

Ridiculous Debt to Cash Flow Ratio Dooms Journal Register Company

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Journal Register, Publisher, Files for Bankruptcy -Bloomberg

The publisher of the New Haven Register would cancel its stock and become a closely held company, owned by its lenders under a proposed reorganization plan filed in U.S. Bankruptcy Court in New York. It listed debt of as much as $1 billion and assets of between $100 million and $500 million in Chapter 11 documents.

Journal Register Company Files for Chapter 11 to Implement Pre-Negotiated Debt Restructuring; Expects Normal Operations to Continue Uninterupted -Journal Register Company Website

Saturday, 21 February 2009

Yardley, PA, February 21, 2009 – Journal Register Company (the “Company”) (PINKSHEETS: JRCO) today announced that the Company and its subsidiaries have filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York to implement a pre-negotiated plan of reorganization (the “Plan”) with certain of its secured lenders designed to substantially reduce the Company’s debt.  The Company intends to continue to operate as usual, and does not anticipate any business interruption during the restructuring. -continue reading at the above link

There are many debt ratios which one can apply to measure a company’s ability to service debt, I’ll Just do the Cash Flow to Debt Ratio here.  This is more Alan Mutter‘s turf so ask him for those numbers (or verify mine).

JRCO’s operating cash flow for the year ended December 2007 was $54million

JRCO’s Total Debt for the year ended December 2007 was  $624.8million (Short/Current Long Term Debt + Long Term Debt)

Giving the company a Cash Flow to Debt Ratio of 0.086 or 8.6%

As investopedia states: Under more typical circumstances, a high double-digit percentage ratio would be a sign of financial strength, while a low percentage ratio could be a negative sign that indicates too much debt or weak cash flow generation.

As a comparison: Lee Enterprises (LEE)

LEE’s operating cash flow for the year ended September 2008 was $128million

LEE’s Total Debt for the year ended September 2008 was  $1337million (Short/Current Long Term Debt + Long Term Debt)

Giving the company a Cash Flow to Debt Ratio of 0.095 or 9.5%

As a comparison: The Washington Post (WPO)

WPO’s operating cash flow for the year ended December 2007 was $581million

WPO’s Total Debt for the year ended December 2007 was  $490million (Short/Current Long Term Debt + Long Term Debt)

Giving the company a Cash Flow to Debt Ratio of 1.185 or 119% – ample cash flow to service debt.   Oh Journal Register, where did you go wrong?  How does a company with one tenth the cash flow of The Washington Post have over one and a quarter times its debt? Lee, you are next.

Spotting a Trend, and Realizing It?

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The New York Times announced yesterday 100 newsroom jobs will be eliminated. People who purchased the stock this January 22nd would now be up about 32% at $18.69 The New York Times has by far the most people working for it compared to other American newspapers. Expect more layoffs in the near future as their Edison NJ plant goes completely off line later this year. Global Press Sales Inc. of Lambertville New Jersey is already selling 4 Goss Colorliner presses from that facility.

This article could very well have been called, MY MISSED OPPORTUNITY. I recently visited the NY Times College point facility and saw the renovations they were doing there. Very impressive. Couple this with their move into a new headquarters in Manhattan, their consolidation efforts, their increasing use of outsourcing labor, and their strong brand. The New York Times has an award winning website and although it has yet to eclipse the print model for revenue it is by far the best of the “big” newspaper websites.

In addition to the previous facts, the stock is being bought up by Harbinger in its quest for a board seat.  The increased volume and interest have pushed the stock price on an upward trajectory since the low…  This I could not have predicted.

Media Stocks Near 52 Week Lows. Any Buying Opportunities?

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The world is going to hell in a hand basket, the economy is in the dumper, movie stars are dying, and there is a heated election process going on in the free world. One would think this is a glorious time to be operating as a news organization, but the market told us otherwise today.

Publicly traded shares of The New York Times sank to a 52 week low today at $14.17 which I believe is the lowest this stock has gone since December of 1996. If anyone out there thinks this company can figure out how to monetize their potential, then this is a big buying opportunity right now. Me? I don’t own any NYT, nor do I plan on buying any.  I will change my mind however if i see the Times create new viable revenue streams.

The Washington Post Company is more diversified in its holdings and thus better able to handle the newspaper market declines at this point.  Their shares are trading at 52 week lows as well around $725.  What I like about WPO is that their Kaplan division has taken over as their main revenue stream and is performing well globally.   If you are interested in going long with media stocks, this is a buy.

I firmly believe newspapers serve a need in people’s daily lives it is just a matter of re-aligning the business model with a new paradigm.  When considering pure play Newspapers, there are just too many other buying opportunities out there with better fundamentals. And keep in mind that the financial sector rebounded 50% within 6 months of the 1990 bottom.

McClatchy On The Front Page… is it a signal or a sign?

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Usually when stories appear on the front page of a large distinguished newspaper like the NY Times or the Wall Street Journal, it is because the content of that story is of political or economic importance. On Wednesday December 26th, 2007 McClatchy Co. was on the cover of the Journal and the front page of the business section in the Times. Why now? Is it a signal? We already knew newspaper circulation figures were down and publicly traded newspaper stocks are getting beat up. What’s the story here? Is this just another case of newspapers covering newspapers (ad nauseam)? As I reported earlier this year, after the mid year media review, the investment community was quite concerned about McClatchy’s purchase of Knight Ridder and the overall stock performance of the company. Several months later and the company is in worse shape now, or at least their stock price is; ” since the beginning of 2006, Mr. Pruitt’s company has lost $1.46 billion and seen its stock price plunge 78%, exceeding the carnage at most newspaper companies.”(WSJ) So do we extrapolate this info to all other newspaper companies or is this just a story about McClatchy? (As a side note, individual company brands are often associated with their industry brand. You can be the best seal-clubber in the world, but you’re still a seal-clubber, get it?)

The five year chart below depicts the company’s problems.

go to finance.yahoo.com for more

So what does this all mean? Are we now seeing what Warren Buffett famously stated in 2006, that newspapers appear to have entered a period of “protracted decline”.

Buffett:  It may be that no one has followed the newspaper business as closely as we (Charlie Munger and Warren Buffett) have for as long as we have—50 years or more. It’s been interesting to watch newspaper owners and investors resist seeing what’s going on right in front of them. It used to be you couldn’t make a mistake managing a newspaper. It took no management skill—like TV stations. Your nephew could run one.” From Hypergene MediaBlog

Is this the decline? I’m sure this is part of the bigger story, that is, a paradigm shift in information streams. A re-arranging of media mediums is afoot and the only one winning is the new guy (digital) right now.

As someone working in the newspaper industry and keenly interested in its viability, I can only hope that we are near a bottom. We must now more than ever go where our customers are going, provide them with an unparalleled, quality experience, and things will work themselves out. It is imperative we harness the buying power of the well established customers and markets. Revamp your websites often, and get all manner or digital mediums involved; audio, video, mobile. Monetize these with your printed product for highest impact…

Contrarian investors should be snatching up newspaper publishing stocks right now. Why? The companies are NOW SUPPOSEDLY doing the right things to align their operations with the market. From what I heard at the mid year media review, they actually are. The American economy is at zero growth, can we have negative growth? Possibly, but at that point you may have other things on your mind like converting your dollars into Euros or Swiss Francs. Zero is a good starting point to go up. Crude oil is overpriced and for seemingly no reason. Expect energy costs to decline by the end of 2008. Lastly, the Domestic Auto and Housing markets are in recession. When these turn around they will positively impact newspapers bottom line. It is an election year, and that usually means more ad spending. So load up now and ride the coaster back up! Things are bound to get better. Right?! (frantic grin)

What should you buy? Buffett (through Berkshire Hathaway) still holds a significant interest in the Washington Post Company. So just because newspapers are having it bad right now, doesn’t mean he’s unloaded his stock. He’s holding on. But also think of this. Buffett avoids companies which behave as commodities. He owns Coke, not joes cola. He owns Geico, not bob’s insurance. He owns Fruit of the Loom, not tom’s underwear… you see the trend? These are formidable brands with established strongholds in their areas. There are high barriers to entry when attempting to knock these companies off their pedestals. Buffett famously said at an MBA lecture, “give me 10 billion dollars to challenge Coca-Cola, I can’t do it. That’s a good company. I’m buying Coke”. So do yourself a favor. If you are going to buy a beat up newspaper, make it one that stands out, a name people know and trust.

signs? signals? only time will tell. I can’t wait to see!

Dow Jones & Co. Amassing Online Business Units

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A sign of the times, Dow Jones & Co. publisher of 8 daily and 15 weekly community newspapers is shoring up its operations by buying online businesses which do not all require the use of printed paper to conduct business. In October of 2006 the company concluded its purchase of Factiva, an online news retrieval service. Today it agreed to acquire eFinancialNews Holdings Ltd. Included is efinancialnews.com a subscription based website and Private Equity a weekly publication which also offers training and events.

In 2004 Dow Jones bought MarketWatch. Here are the stats for the company today as it appears on their website:
“MarketWatch, Inc. is wholly-owned subsidiary of Dow Jones & Company, Inc. and is a leading provider of business news, financial information and analytical tools. The Company operates two award-winning Web sites, MarketWatch.com and BigCharts.com, as well as the stock market simulation site, VirtualStockExchange.com. The Company produces the syndicated MarketWatch Weekend television program and provides radio updates every 30 minutes on the MarketWatch.com Radio Network. MarketWatch also offers subscription products for individual investors, including the Hulbert Financial Digest suite of products, Retirement Weekly and ETF Trader. The Company’s MarketWatch Licensing Services group is a leading licensor of market news, data, investment analysis tools and other online applications to financial services firms, media companies, wireless carriers and Internet service providers.”

During this same period Dow Jones has sold six of its community newspapers.

Rich Zannino, chief executive officer of Dow Jones speaks of the sale.
“This sale and the pending acquisition of Factiva are the latest examples of our commitment to transform Dow Jones from a company heavily dependent on print publishing revenue to a more diversified company capable of meeting the needs of its customers across all consumer and enterprise media channels, whether print, online, mobile or otherwise”.