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April 21, 2009

Red ink mounts at the NYT

Thomas Lifson
Uh-oh! Pinch lost over $60 million last quarter, according to a press release from the New York Times Company announcing quarterly results. That would be a quarter billion dollars a year, at an annualized pace. Just about the same sum borrowed from Carlos Slim at credit card-like interest rates.

The New York Times Company announced today a first-quarter 2009 operating loss of $61.6 million compared with operating profit of $6.2 million in the first quarter of 2008. Excluding depreciation, amortization, severance and special items (noted below in this release), first-quarter 2009 operating profit was $16.5 million compared with $77.7 million in the first quarter of 2008.

In the first quarter of 2009 loss per share from continuing operations was $.52, which included a $.07 loss on leases and an $.11 charge for severance, compared with first-quarter 2008 earnings per share of $.00, which included a $.07 non-cash charge for an asset write-down, a $.04 charge for severance and a $.03 gain from a favorable tax adjustment.

The company's major achievement was a 9.5% reduction in operating costs -- still not keeping pace with the advertising revenue decline -- and a slight increase in circulation revenue, thanks to price increases -- a strategy that ultimately leads to further circulation losses and lower advertising revenue, known as "harvesting a cash cow" in business strategy jargon. Jack Risko and I described this long term strategy of the NYT over three years ago. Accurately predicting that it would lead to further decline.

Even internet ad revenues declined at the Times last quarter.

The company's survival strategy now consists of waiting for an economic upturn:

"In time, however, we believe that the economy will grow and the advertising market will improve. While we are looking forward to that day, we are not waiting for it. We have moved aggressively to restructure our cost base in line with our revenues and continue to develop innovative new digital products that enhance our financial performance. When advertising improves, we believe we will be well positioned to meet the needs of the marketplace and to benefit from our restructured cost base."

And if massive government spending on ACORN, "refundable tax credit" welfare checks for the people who pay no income tax, government takeovers of the big banks and Detroit, and other boondoggles keep the economy mired down, then the Times can hope for its own bailout.

Hat tip: Ed Lasky

Posted at 11:06 AM | Email | | | Share Share
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