By: Jennifer Saba
Janet Robinson, president and CEO of The New York Times Co., wasted no time addressing the company?s significant $814 million write-down of the New England Media Group announced this morning during a Q4 conference call with analysts and investors.
Robinson opened the call explaining the reason for the move while batting down any rumors the company is looking to divest The Boston Globe or the Worcester Telegram & Gazette. ?Despite the charge,? she said, ?these properties are important assets in our company.?
As reported here earlier, the write-down of the group was the result of deteriorating operating performance and current trends since the acquisition of the Globe in 1993 for $1.1 billion and the Telegram & Gazette for $296 million in 2000.
?We have seen our ups and downs with the regional economy hard hit,? Robinson said. ?Retail consolidation in the Boston area, the loss of Filene?s as well as telecommunication consolidation has had a particularly pronounced effect.?
Advertising revenue at the New England Media group fell 6.1% in Q4 and dropped 9% in 2006. Robinson said that excluding the extra week in Q4 2006, advertising revenue at the division declined 11.5%.
Robinson did indicate that management thinks that the advertising opportunities in the Boston market could possibly increase over time with new retailers moving into the area as well as heated competition from banks. ?That said, it is very clear the pressure is still on. We still will see challenges to the advertising climate there,? she said.
The write-down didn?t so much as come as a surprise — the company disclosed in a Q3 filing that it was considering such a move.
?When you buy something, you have a certain asset value and you assume it will hold over a certain amount of years,? Miles Groves, a media economist with MG Strategic Research, told E&P in December. ?When you find your assumptions are wrong, you need to adjust them.?
Since the New England group has been under performing for some time, the write-down indicates it?s not worth as much as the Times originally paid and the value has to be reconciled.
James Follo, the Times’ newly appointed senior vice president and CFO, said during the call that ?a substantial portion of the write-off is goodwill.?
For most newspaper (and media) companies the physical assets — such as the plant and equipment — dwarf the value of intangible assets. The gap between tangible assets and intangible assets and the price paid for a property is considered ?goodwill.?
Management also said that because there was a tax-free exchange when the company purchased the Globe there would be no significant tax benefit applied to the gains made from the $575 million sale of the Broadcast Media Group.
Robinson said there is strong push to re-balance the company?s portfolio as executives work to bridge the gap between online revenue and print revenue. The $700 million the company has in its coffers from the sale of Discovery Times and the Broadcast Media Group will be used to reduce debt, for acquisitions — especially those that will enhance online growth — increased dividends, share buybacks, and capital projects.
One analyst pressed Robinson during the question and answer session about the possibility down the road of the company selling newspaper properties including its regional papers. Robinson responded that executives are ?going to continue to make sure we evaluate these properties correctly. The properties we do own, are all strong properties and they have the ability to be even stronger going forward.?
Related: NYT Co. Takes Big 4Q Loss, Slashes Values of ‘Globe,’ Other Papers