Times Co. writes down value of Globe, T&G
The New York Times Co. today said it wrote down the value of the Boston Globe and Worcester Telegram & Gazette by $814 million.
The writedown reflects a sharp deterioration in revenue over the past year and difficult prospects ahead.
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 value of the newspapers as part of an annual review of assets required under accounting rules. Times Co. said it took a noncash 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 compared to 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 rose in early trading. The share price was last up 60 cents, or 2.6 percent, to $23.50.
Meanwhile, the company also said today it would restate its financial reports, including earnings, for the last five years to reflect an error in the way it accounted for obligations primarily to a union pension fund and medical benefits fund for New York Times employees represented by the Newspaper Guild. The restatement sliced shareholder equity 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 writedown and earnings restatement are primarily 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.
The market values of properties aren’t necessarily reflected in the asset values used in financial statements, Times officials said.
In a memo to the staff, Boston Globe publisher P. Steven Ainsley said the writedown 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.”
“All of us know the reasons why this has occurred -- including consolidation among important customers and the shift from print to online advertising –- but that does not make it any less painful,” Ainsley said in the memo. “But there are encouraging signs on the horizon. New stores are entering the Boston market and there are other indications that the New England economy is improving.”
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, calling it “an important asset” that is well-positioned to extend its brand and journalistic traditions to the Internet and other technologies.
Times Co. officials said the decision to write down the value of their New England properties had no relation to the effort by Welch and Connors. In November, the company said it might write down the value of its New England holdings in a Securities and Exchange Commission filing.
The writedown was prompted by an accelerating decline in advertising revenue over the past year, Times Co. officials said. In the third quarter, for example, advertising revenue at the New England Media Group, of which the Globe is the largest holding, fell 12 percent, compared to a 3 percent decline in 2005, and an increase of 4.7 percent in 2004.
Times officials and analysts have attributed the sharp declines to the slow recovery of the New England economy; mergers among retailers and banks, resulting in fewer advertisers; and a high concentration of broadband use that has accelerated adoption of the Internet in the region.
Times Co.’s New England Media Group recently said it would offer buyout packages to employees to cut about 125 jobs, including 19 in the Globe newsroom and editorial pages. The Globe also is closing its three foreign bureaus.
Other newspaper and traditional mass media companies are struggling with the technological changes reshaping the industry. While Internet advertising revenue is growing quickly, it still represents a fraction of revenue generated by print, and is hardly enough to support the extensive news gathering operations newspapers traditionally have maintained.
Newspapers across the country are cutting staff. The Philadelphia Inquirer, for example, recently cut about one-fifth of its newsroom.
McClatchy 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.
(By Robert Gavin, Globe staff)