We don't need to belabor that newspaper financial results have been bad lately. But here is a sampler of recent specifics on just how bad.
The Washington Post newspaper division (the Post itself and a small paper in Everett, Washington) recorded a first quarter operating margin of 0.6 percent. That is break-even, more or less. Fortunately for the Washington Post company, earnings at its Kaplan education, cable television and local broadcast groups brought overall operating earnings to more respectable 9 percent.
Within the last two months Journal Register and MediaNews have given notice they will no longer file financial reports with the Securities and Exchange Commission. As Journal Register shares traded well below a dollar, the company has been delisted from the New York Stock Exchange and has engaged an investment bank to "restructure" the company through bankruptcy or some other device to ease debt payments. In essence,
it is not a public company anymore.
MediaNews, an aggressive acquirer of newspapers until last year, is also highly leveraged with debt. Though not a public company, it has regularly reported quarterly results. But no more.
Our farewell visit to the company's financials in mid-February showed it operating on a thin margin, especially if you consider how much of earnings must be used to make interest payments.
Among more profitable public companies, operating margins and cash flow margin are not all that they used to be but are still robust. The hitch is that those percentage measures of profitability conceal how quickly actual profits are declining.
Gannett, for instance, reports results for its community newspapers, USA Today and a group of British papers as a single publishing division. For the first quarter, operating margin was around 19 percent, little changed from the year before. But publishing revenues were down 8.6 percent, operating income down 16.2 percent and cash flow down 14.5 percent.
Similarly, at McClatchy, first quarter revenues were down about 14 percent, but operating income was down 35 percent. The gap was even bigger at Lee Enterprises, where a 5 percent decline in revenues translated to a 44 percent decline in operating income.
This snapshot shows that in the early part of the year, newspaper companies had not been able to reduce expenses as quickly as revenues -- classifieds particularly -- were falling. That explains why many are turning to selling land, buildings, and shares in inessential businesses and pumping the proceeds back into debt payment or investment in new lines of business.
It also explains why a continued wave of reductions in staff and news space is now in process and likely in the months to come.
