As expected, the New York Times’s business operations began burning cash this quarter (until now, they had remained cash-flow positive). The company has recently made several wise moves that have postponed the date at which it will run out of cash. But the situation is still critical.
At the current rate of cash consumption, assuming no one-time expenses (highly unlikely), we estimate that the company will max out its current borrowing capacity in 4 quarters. At that point, it will owe about $1.2 billion in debt. This estimate does not include any payments on the company’s $600+ million pension and benefit obligation, of which $181 million is due next year.
The bottom line: The New York Times Company remains on the brink of insolvency. There are also at least $1.5 billion of claims ahead of common shareholders of the company’s assets should it file for bankruptcy.
NYTCo does not publish a balance sheet and cash flow statement with its quarterly release, but as best we can tell, here’s the current situation. If the results and outlook are materially different when we get full financials, we’ll update this post.
EBITDA: $16 million (approx. half from About.com)
CAPEX: $26 million
CASH FLOW FROM BUSINESS: – $10 million
INTEREST EXPENSE: $18 million
CASH FLOW AFTER INTEREST: -$28 million
The quarterly cash burn from operations and debt service is therefore about $30 million. If ad revenues continue to drop, which we expect they will, this quarterly burn will rise.
NYTCO also burned another $36 million of cash in the quarter on shutdown and severance costs. The company is hastily trimming expenses, but doing this isn’t free.
SEVERANCE: $25 million
BUSINESS CLOSING COSTS: $16 million
TOTAL CASH BURN IN QUARTER: -$64 million
CURRENT CASH SITUATION
The New York Times has only $34 million of cash left on hand and some additional borrowing capacity to meet its near-term liabilities.
Here’s a balance sheet snapshot:
CASH: $294 million
PORTION HELD IN ESCROW FOR REPAYMENT OF DEBT: $260 million
AVAILABLE CASH: $34 million
That’s only one quarter’s worth of operating cash.
And here’s a snapshot of the debt repayment schedule. This chart does not include an additional $625 million owed under the company’s benefit and pension plans, $181 million of which is due next year.
DEBT REPAYMENT SCHEDULE (STILL DUE)
(in thousands) 2009 $ 44,500 2011 220,000 2012 75,000 2015 500,000 2019 250,000 Debt excluding redeemed notes
$ 1,024,553 BORROWING CAPACITY
The company has a $400 million revolving credit line that is due in 2011. So far, as shown in the chart above, it has drawn down $220 million of this. This means the company has $180 million of additional borrowing capacity on its current credit lines.
NYTCo will use its credit line to pay off the $44.5 million in debt still due in 2009 (see above). The company’s uncommitted borrowing capacity, therefore, is only $135 million.
At the current rate of burn, with no additional one-time expenses (highly unlikely), this would allow the company to survive for another 4 quarters. And that’s assuming no payments to the pension obligation or other one-time expenses.