How Bad Is It at A.H. Belo?

It could be very bad. In July, when we last looked at its financials, I said the market was being irrational for its low valuation of $122 million. Today that valuation has sunk to $40 million. When I first saw that figure today, I was dumbstruck. Surely, Belo’s real estate is worth that much. But then I plunged into the financials to make my case that the market has gone insane — and now I must admit I’m not so sure it has. The company looks like it is running out of cash.

For the third quarter ending September 30, A.H. Belo had current assets of $122 million with current liabilities of $113 million, giving it a net working capital of $8 million $9 million. Cash flow from operations was $25 million but deducted from that were $14 million in capital expenditures, netting $11 million. (My rule of thumb for media companies, learned over years of hard experience, is that we need about 10 percent of our annual revenues in cash to operate: in A.H. Belo’s case, that would be about $60 million to $80 million.) Belo’s cash position, which looks perilous to me, has to have gotten worse since the economic collapse; ours certainly has. As for that real estate, in today’s market it could probably bring in $30 million or so, if anyone could get the financing to buy it. But it is co-owned with its broadcasting sibling, Belo Corp., so the net effect of a sale would only be $15 million or so.

This analysis is dated, to be sure: I’m depending on September 30 balance sheet numbers. On the other hand, things have gone into the ditch since then. Riverside, California, where the company owns the Press-Enterprise, is the worst real estate market in the country and has an unemployment rate of 9.5 percent. In Providence, where it owns the Journal, October home sales fell 12 percent, the largest decline in the Northeast.

So it seems the market is being rational after all. In which case, it is time to be worried about how A.H. Belo and the Morning News will manage to survive. Any commenters who have a media financial background or inside knowledge would be greatly appreciated. I would love someone to challenge or — even better — disprove my gloomy assessment.

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Comments

22 responses to “How Bad Is It at A.H. Belo?”

  1. SLR says:

    Well, first off, your math is bad: $122MM of current assets minus $113MM of current liabilities leaves $9MM of working capital, so the situation is 12.5% better than you reported.

  2. Chris says:

    So its ok to discuss the demise of your competition on frontburner, but not the demise of D. Got it.

  3. Kelly says:

    Interesting all the way around. And I’m sure a lot of excuses. None the less I blame lack of good management, talented staff and good mural. Case in point, in the 4 months I have been consulting with a monthly title their Revenue has jumped 31%. Circulation almost matches that same percentage jump. If print wants to stay in the black, there is a bigger picture that has to be looked at.

  4. Tim Rogers says:

    @Chris: as I explained earlier, we temporarily shuttered our blog in deference to the employees that had not yet been fired. But after a down weekend, I posted about our layoffs. Wick linked to that post above. You’re welcome to join the discussion in the comments section of that post.

    Also remember this: A.H. Belo is a public company, so we get to see its balance sheet and discuss it. D Magazine is owned by a private company.

  5. News Junkie says:

    They need to quit focusing on prize winning long term projects and spend time and money more wisely on features and online content that has proven to grow readership.

  6. Tom says:

    As a commenter with a media background and little to no financial skills outside of taking Econ for non-Business majors in college, it looks like Belo went all-in with the newspaper spinoff and lost. The goal was to transfer debt to the TV side, and the economy may create issues there as well.
    Bottom line: Get ready for more budget/workforce cuts for the newspaper and TV companies and perhaps a real estate sell-off.
    This scenario is playing out for every other media company, even those that are privately held. The Internet killed the mass media star.

  7. tinkerbell says:

    Wick-

    I have been reading your coverage of Belo/DMN for a while now on this blog and have refrained from commenting til now. Slip me a couple a glasses of wine and boy, could I tell you stories.

    I was a senior officer of DMN for some years and had a front row seat to the horrible decision making; pouring tens of millions into worthless pet projects (Cue Cat, anyone?), promoting and hiring people who were buddies or relatives of Belo officers for positions they were vastly underqualified for, allowing individuals to build up fifedoms and protect their turf without scrutinizing data (circulation scandal, anyone?), just to name a few. And these are just some examples that the general public already knows about- there are PLENTY more.

    Anyone who had marketable professional skills jumped that ship a long time ago. Those left were scamming the system, or couldn’t make it in any other company.

    I am not including the journalism side of the company in these comments. Those folks were brillant individuals who struggled to cover the news with more and more budget constraints and constant dictates from “across the street” in the Belo building.

    As a former journalist who moved over to the dark side of management, I sat in those bi-weekly officer meetings and cringed at the poor decision making that would effect the quality of the product. Anyone who was on the inside for any amount of time saw this coming. I’m just suprised it’s taken this long.

  8. jrp says:

    just wait until a bunch more area car dealerships go out of business (which seems inevitable, no?) and the DMN loses even more ad rev

    a little birdy that may or may not work in the Belo HQ bldg. told me a while back that more staff cuts should be expected before the end of the 1Q, expect them to be back office, but editorial may see some again, too

    should we expect anymore staff cuts at D in the new year?

  9. jrp says:

    why didn’t you stop it, tinkerbell? you sat there and cringed, but what did you do to stop it? or, at least, try to lessen the impact to the quality of the product?

  10. Jared says:

    Um, Eric, weren’t you denying the other week that yooz guyz are gloating about the demise of Belo?

  11. Randoph and Mortimer says:

    S-e-l-l, S-e-l-l, S-e-l-l!!!!!*

    ___________________
    *(This is not meant to be financial advise, just a joke.)

  12. Wick Allison says:

    @Jared — Where’s the gloating? Point it out if you can find it.

  13. jrp says:

    Mr. Allison, sadly it often seems too many people mistakenly equate reporting financial losses to advocating for the demise of the entity.

  14. Always right says:

    I love the folks who think “better content” will fix everything with newspapers. How about this: Craigslist and those like it killed classified revenue. It’s not coming back – ever. The Internet created loads of niche Web sites (Monster, HotJobs, AutoTrader.com, Realtor.com) with outstanding ad-targeting capability which could deliver measurable ROI to advertisers…. How’s that 4×6 print ad that’s delivered to the masses working now? The Web enables users to self-select the content and services they want….. How’s that 2-pound pile of paper on your doorstep looking now? How much of it did you really care about anyway?

    Yes, bad management and poor vision contributed to the mess. But at the end of the day, the situation is this: the newspaper is a terribly inefficient way to deliver information and advertising. The Web has exposed all it’s vulnerabilites. And now it’s time for it to go away.

  15. tinkerbell says:

    jrp-

    There were several of us who tried and tried and tried. In fact three of us who were brought into TDMN (none of us rose up through the system) to change things were told “no, you can’t touch that,” “no, we won’t change that,” etc. I recall a specific meeting when two of us told the Belo board that the Cue Cat project was not viable, the projections were pulled out of someone’s orifice, the technology jsut didn’t make sense. With voices raised, we asked them to walk away. Nope. they moved forward.

    Over and over again this happened. The three of us brought in to help all left within months of each other. It was so frustrating to know what could have been and see what it became.

  16. jrp says:

    sad
    and true of newsrooms i’ve seen, as well
    thanks

  17. billy says:

    First of all, AHBelo and Belo Corp are not co-owned. 2 different companys, yes decherd is chairman of the board of both but he is not ceo of belo corp. belo corp should have never let him have the name belo. it makes the tv company that is making money and will make it long term look bad because of AHBelo on the death bed

  18. Wick Allison says:

    @Billy. My understanding is that the real estate is co-owned by the two Belo companies, as I stated in the post.

  19. Worried Reporter says:

    Similar woes are upon the NY Times:

    http://www.alleyinsider.com/2008/11/cash-crunch-at-new-york-times-nyt-400-million-due-in-may

    The Gray Lady is also pretty much out of cash.

  20. Liz says:

    I read all of these comments; however, I don’t hear any sympathy for those employees at Dallas Morning News and Dallas Magazine who have lost their jobs and those who will lose their jobs. Many of the people at DMN have been there for years and are no longer young. This is the tragedy that should be looked at.

  21. Ink Stained Wretch says:

    Hey Tinker Bell — can you toss some pixie dust my way so I can fly the coop?

  22. Serendipity says:

    RE: Always Right “The Web enables users to self-select the content and services they want….. How’s that 2-pound pile of paper on your doorstep looking now? How much of it did you really care about anyway?”
    The best thing a newspaper has going for it is that you never know what you’re going to find when you turn the page. You may find yourself reading a news story or feature about somebody or some place in Dallas that you would never have “self selected” on the Web. So we’re never surprised, and we never grow, and that contibutes to a very parched and insular life.