Wednesday, August 13, 2008

Trib value fell $20 million a day under Zell

Sam Zell may have set some kind of record in the speed he was forced to write down a significant portion of the value of the Tribune Co.

Barely six months after acquiring Tribune at a value of $13.2 billion, the company charged off $3.8 billion in newspaper assets, trimming 29% of the value of the enterprise the Zellistas took over in an employee stock ownership plan on Dec. 20, 2007.

The writeoff, which is required by accounting rules, is forced by the sliding sales and profits of the newspaper division.

“Due to the continuing decline in newspaper advertising revenues in 2008,” said Tribune press release today, “the company performed an impairment review of goodwill attributable to its newspaper reporting unit and newspaper masthead intangible assets in the second quarter of 2008.”

In the six months Zell has helmed the company, newspaper sales fell $173.6 million from the first half of 2007, or 10.9%, and operating cash flow tumbled $92.4 million, or 32.5%. Gains in the sales and profitability of the broadcast units improved the performance of the company to the degree that its consolidated sales of $2.1 billion were down 6.2% from the prior year and the operating profit of $313.4 million was off by 8.2%.

The writeoff, which was effective as of the end of June but announced in an earnings release issued today, means the company’s value has dropped $640,518,500 per month on Sam's watch – or some $20 million per day.

4 Comments:

Anonymous Anonymous said...

If Tribune is in such bad shape, why did Cablevision pay Zell $650 million for Newsday? If I were a entrepreneur and things are this bad, would I jump in now to buy up Zell properties I wanted, or would I opt to wait and pick up the pieces I want later as things get really, really bad.

9:28 AM  
Blogger mathewi said...

Not that I'm taking Sam's side in all of this, Alan, but isn't it possible that things were just a lot worse than Zell anticipated when he bought the company? It's not uncommon for takeovers to lead to writedowns once the buyer gets a look at the books -- and goodwill writeoffs are also popular with M&A types because they help make any future improvements look even better by comparison.

1:09 PM  
Anonymous Anonymous said...

Alan, could you do a piece on how much severance costs are costing these newspaper companies? They got to be running in the tens of millions of dollars for each round of buyouts.

Seems that, at some point, all of these buy outs are going to start hurting the bottom line because of the severance costs.

11:30 PM  
Anonymous Anonymous said...

In announcing the new L.A. Times publisher, I think the paper has given out its new circulation figures which, of course, are down from 815,000 to 774,000:
http://www.latimes.com/business/la-fi-publisher16-2008aug16,0,3865648,full.story

11:00 AM  

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