As if the newspaper business needs any more problems to go with falling stock prices and plunging readership, Bloomberg points up the industry's extreme slowness in writing down severely impaired goodwill assets.
Columnist Jonathan Weil — who won his spurs at the Wall Street Journal before getting caught in the not-so-funny business at Glass Lewis last year — particularly picks on Lee Enterprises; it last year paid $1.46 billion for Pulitzer Inc., owner of the St. Louis Post-Dispatch and other papers. Weil notes that Lee's market value today is $515 million, off 63 percent in the past year. Meanwhile, its $1.09 billion book value as of Sept. 30 included $2.44 billion of goodwill and other intangibles — 75 percent of total assets.
Since the Pulitzer chain now owned by Lee was founded by journalism pioneer Joseph Pulitzer (whose will also created the Pulitzer Prizes), Weil is able to label Lee as a company that "takes [the] prize for frothy numbers."
In response, Lee CFO Carl Schmidt wouldn't tell Weil whether any writedowns are coming, noting the requirement periodically to test for impairment. The message seems clear, even if you must read between the lines.
But Lee is only part of the industry's sad story. McClatchy Co. wrote down $1.53 billion of goodwill in Q3, reflecting the falling value of its huge Knight Ridder acquisition. And it is doing another year-end impairment review now. Weil notes that Gannett Co., the largest U.S. newspaper publisher, also "looks ripe for a balance-sheet hit."
One can only imagine what would be going on at Tribune Co. and Dow Jones, the Journal's old parent, had they not been "saved" by Sam Zell and Rupert Murdoch, respectively.
Newspaper companies all are looking for a new online-and-print operating model to help them return to investor favor and still serve the public journalistically. Let's hope a solution is found quickly.
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