Not sure how it came to this so fast, but the New York Times (NYT) is approaching the point where it will have to manage its business primarily to conserve cash and avoid defaulting on its debt. This situation will only get worse as advertising revenue continues to fall, and it will be very serious by early next year.
The company has only $46 million of cash. It appears to be burning more than it is taking in–and plugging the hole with debt. Specifically, it is funding operations by rolling over short-term loans–the kind that banks worldwide are cancelling or making prohibitively expensive to save their own skins:
At the end of the quarter, cash and cash equivalents were approximately $46 million and total debt was approximately $1.1 billion. The Company’s current source of short-term funding is its revolving credit agreements under which it had approximately $398 million in borrowings outstanding at the end of the quarter.
The company did not publish a balance sheet or cash flow statement when it released its (awful) preliminary Q3 results this morning, so we don’t have any cash-flow details. As best we can tell from the income statement detail, however, this is the situation:
The company’s EBITDA from its news businesses fell to $37 million in Q3 from $79 million last year (before corporate overhead). At this rate of revenue shrinkage, it will not take long for EBITDA to turn negative. About.com now contributes $13 million of EBITDA (pre overhead), or almost half as much as the news business [shocking]. Together, after subtracting $6 million of overhead, the total company EBITDA was $43 million, down from $77 million (-38%).
From that EBITDA subtract:
- CAPEX: $27 million
- Interest expense: $12 million
- Income tax: $13 million
- Severance: $18 million
That’s $70 million of burn. Then add back $12 million of share of net income from joint ventures, for a total estimated cash burn of $58 million…about $15 million more than EBITDA.
We won’t know the exact figures until the company publishes its balance sheet and cash flow statement, but suffice it to say there’s not a lot of clearance here. (Actually, operationally, there is almost NO clearance. This will improve as CAPEX and severance costs decline, but EBITDA is likely decline, too). So that’s why the company raised the possibility this morning that it might default on its debt. More likely, it will have to start selling assets.* At some point, it will also likely have to undergo a major restructuring.
*UPDATE: CEO Janet Robinson just said that newspaper asset sales are difficult (we don’t have exact quote). That leaves the building, the Red Sox stake, etc.
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