Times Co. reduces its valuation of Globe, T&G

The New York Times Co.'s move yesterday to write down the value of The Boston Globe and Worcester Telegram & Gazette by $814 million reflects both the rapid shifts in technology and consumer habits undercutting traditional media as well as the challenges of the New England market.

Times Co., which paid $1.1 billion for the Globe in 1993 and $296 million for the T&G in 2000, said it wrote down the combined value of the two newspapers as part of an annual review required under accounting rules. In doing so, Times Co. officials said, they acknowledged on financial statements what has become apparent in advertising and circulation trends: The papers are not generating the kind of revenue growth they once did and aren't expected to in the future, so they have less value as assets.

In both the third and fourth quarters of 2006, for example, advertising revenue at Times Co.'s New England Media Group, primarily made up of the Globe and T&G, have fallen at double-digit rates from the comparable periods in 2005. Times Co. officials and analysts attribute the sharp declines to the slow growth of the New England economy; mergers among retailers, banks, and telecommunications companies that have resulted in fewer advertisers; and a high concentration of broadband use that has accelerated adoption of the Internet in the region.

"All of us know the reasons why this has occurred -- including consolidation among important customers and the shift from print to online advertising," Globe publisher P. Steven Ainsley said in a memo to staff. "But that does not make it any less painful."

Ainsley, however, said that the write-down was "not money going out the door" but an accounting change that "should have no effect on our focus, our mission or execution of our long- term strategy."

Other newspaper and traditional mass media companies are also struggling with the changes reshaping the industry. The Philadelphia Inquirer, for example, recently cut about one-fifth of its newsroom. McClatchy Co. recently sold the Minneapolis Star Tribune to a group of private investors for $530 million, less than half the $1.2 billion McClatchy paid in 1998.

Times Co. disclosed the write-down of its New England papers when it released earnings for the fourth quarter and all of 2006. Times Co. said it took a non cash charge against fourth-quarter earnings to reflect the write-down, resulting in a net loss of $648 million, or $4.50 per share.

Not counting the charge, Times Co. said its fourth-quarter profit would have increased to $87.9 million from $63.2 million a year earlier, or 61 cents a share from 43 cents. Revenue rose 4.3 percent in the quarter from a year earlier.

Times Co. shares closed at $23.09, up 19 cents.

The company yesterday also said it would restate its financial reports, including earnings, for the past five years to reflect an error in the way it accounted for obligations to a union pension fund and medical benefits fund for New York Times employees represented by the Newspaper Guild. The restatement sliced shareholder equity, the net worth of a company after liabilities are subtracted from assets, by about $70 million, or about 5 percent of the total $1.5 billion.

It is the first time the company has ever restated earnings.

Times Co. officials said the write-down and earnings restatement are accounting measures that won't have a practical impact on the operations of its New England newspapers or the pensions of its New York employees.

While the company disclosed the size of the write-down, it does not report publicly the total value it estimates for the newspapers. Regardless, company officials and analysts said, the market values of properties aren't necessarily reflected in the asset values used in financial statements. Ed Atorino, media analyst at Benchmark Co. in New York, said the value of assets carried on companies books is similar to estimates of home values. Ultimately, he said, the actual value isn't known until the property is sold. Analysts have speculated about a possible sale of the Globe in recent months. A local group, led by former General Electric Co. chairman Jack Welch and Boston advertising executive Jack Connors, even sought exclusive rights to negotiate to buy the paper.

The Welch and Connors group estimated the value of the Globe at $550 million to $600 million, about half what Times Co. paid. The company rejected the group's negotiation proposals.

In a recent speech in Boston, Times Co.'s chief executive, Janet L. Robinson, suggested Times Co. has no plans to sell the paper, describing the Globe as well positioned to extend its brand and journalistic traditions to the Internet and other technologies. Yesterday, she said the write-down "in no way diminishes our belief in this important asset and our commitment to improving its performance and value in the future."

In his memo, Ainsley, the Globe's publisher, said there were "encouraging signs on the horizon. New stores are entering the Boston market and there are other indications that the New England economy is improving."

Robert Gavin can be reached at rgavin@globe.com.