Monday, August 18, 2008

Tribune Woes

In an August 14th article in the Wall Street Journal, on the Tribune Co. shows they're still deeply troubled. They took a $3.8 BILLION accounting charge in the second quarter.
Gannett Co., New York Times Co. and other publishers have taken similar charges, an acknowledgment that newspaper assets are worth less than the value shown on the companies' books.

In Tribune's case, the charge shows the company overpaid in the $8.3 billion deal in 2000 that united Times Mirror Co.'s Los Angeles Times, Newsday and other papers with Tribune's Chicago Tribune and TV stations. More than $3 billion of the second-quarter charge was to lower the value of that merger.
Tribune remains heavily in debt. The company still owes nearly $600 million by June, but the pending auction of the Chicago Cubs baseball team and related assets is expected to bring roughly $1 billion.

Tribune went private in December with the a leveraged buyout engineered by real estate magnate Sam Zell. But the debt-heavy company continues to disclose its results, because some of its bonds continue to trade publicly.

Gannett recorded a $2.8 billion charge to write down goodwill and impaired assets in the latest quarter, and E.W Scripps took a $779 million goodwill hit. (Goodwill = companies list on their books not just the value of their tangible assets, such as buildings or printing presses, but also intangible factors such as a strong brand name.If circumstances change enough to reduce the value of the goodwill on its books,a corporation is obliged to take a non-cash charge to reflect the lower value. )

And, yes, the Tribune has picked two brokers to sell their buildings that include Times Mirror Square and the Tribune Tower in Chicago.

Prices for the properties have not been set, but the Times headquarters was valued at about $150 million and Tribune Tower might garner about $230 million, according to industry trade publication Real Estate Alert. Money raised by any deal is expected to be used to pay down debt.

And it's likely to get worse. Shares of nearly all publicly traded newspaper companies have lost as much as 80% of their value in the last year -- but they haven't hit bottom yet, says a blistering report on the sector released Monday by Morningstar.The Chicago-based independent research firm calls newspapers "the market's most overvalued stocks.

Morningstar singled out five newspaper stocks that it says are trading at "significant premiums" to its estimates of their fair value.

McClatchy Co. fair value estimate is $1.95. Traded at $4.26.
Gannett Co. (USA Today) fair value estimate is $1.61 a share. Traded at $19.99.
Lee Enterprises fair value estimate is $1.63 a share. Traded at $3.56.
New York Times fair value estimate is $1.27. Traded at $13.94.
GateHouse Media Inc. was, they said, essentially worthless. Traded at 69 cents.

Who would buy them? This is a good clue.