The Iceberg Awaiting The New York Times

(MoneyWatch)  Over the past few months, we've frequently speculated here that The New York Times Co. may be in worse financial condition than it was admitting. Evidence is emerging that we were right. The Silicon Alley Insider has been digging through the company's latest SEC filings to find that the Times owes its creditors a huge $400 million payment next May, but it only has $46 million in cash on hand with six bleak months to go.
Its stock closed today at a historic low -- $7.34/share -- a two-thirds drop from its high point over the past year. Layoffs -- some announced, some not -- have been regularly shrinking the newsroom, even as other executive talent walks out the door. For example, Vivian Schiller, the General Manager of NYTimes.com, is leaving the Times on December 1st to become the President and CEO of NPR.
According to its latest 10-Q, the Times has short-term cash and collectibles totaling $412 million and debt payments and accounts payable totaling $865 million, including long-term debt payments and rent of $50 million. The long-term picture is no better, with $1.501 billion in assets (according to the company's internal valuation methodology) and $1.468 billion oflong-term debt and other liabilities.

Add in the steady fall in advertising revenue for all newspapers, and you can surmise the extent of the crisis that faces the Times. None of its remaining options -- cutting its dividend, selling off major assets, and/or many more layoffs -- are attractive. On top of all of this, there are questions about whether the $366 million short-term credit line on its books is still actually available. The company's stock has been downgraded to junk status, it is shut out of the commercial paper market, and selling equity at fire sale prices has to seem likely to emerge as the choice of last resort.

The sad thing about all of this is it could have been avoided. The Times had well over a decade to adapt to the Internet and embrace online opportunities to extend its brand into the new media environment. However, the company's web strategy has lurched around from paid to free to partly hidden behind a paywall to all free again. Its only profitable arm -- About.com -- is reportedly up for sale, probably because the Times is so cash-starved.

During this recession, which George Soros predicts may well deepen into a depression, a lot of iconic American companies are going to fail. It doesn't give me any joy to predict that one of those, sooner as opposed to later, will be The New York Times.
(Thanks to my Bnet colleague David Hamilton for help with this piece.)