Dean Singleton's Media News, though a private company, reports its financial results in regular SEC filings.
Its latest covers both the fourth quarter and final six months of 2007. It seemed to us representative of the weakness of the bottom line at many newspaper companies.
For the six months, the company had revenues of $680 million and income before taxes of $27.6 million. That is a margin of about 4%. After paying taxes of roughly 40% on that, net income was $16.3 million or about 2.5%.
Margins at some newspapers -- Gannett's, Lee's and those of the New York Times Regional Group -- are still in double-digit territory. But the notion that newspapers are obscenely profitable, the envy of other industries, etc., is badly dated. The last six months of 2007 saw an acceleration of revenue losses with more on the way in 2008. So, absent the newsroom cutting and outsourcing we read about daily in Romenesko, red ink would be a live possibility this year.
Media News has some accounting complications that make its numbers hard to parse. Revenues from its joint operating agreements in Denver and Salt Lake City are not reflected in the operating statement, only the income or loss that the JOAs contribute to the Media News balance sheet. A separate breakout, however, shows them operating on a margin of about 5% as well.
Because Singleton has been an aggressive acquirer of newspapers through the years with borrowed money, interest is a significant expense -- $41.2 million, or about 6% of revenues in the six-month period.
Depreciation and amortization ($44.4 million) are a similar amount. Unlike interest and taxes, these are accounting-only charges, not money flowing out the door. But because of changes in lending and management agreements, Media News's reported cash flow -- $19.3 million for the six months -- was not a lot better than the $16.3 million net after taxes.
Media News
had some particular problems. The Denver JOA had revenue losses of about 11% compared to an industry average of 7 to 8% for the six-month period. Internet revenues, slowing at many papers, were actually down at Media News.
The broader point is that most newspaper managements these days are claiming duress as they seek union concessions, move to outsourcing, and cut newsroom staff. The financials contain good evidence for judging those claims. In some cases, the goal may be to prop up profits at a level too high, given the urgent need for digital investments. Other top executives may be crying wolf because there is a wolf at the door.
