Posts for Ticker ‘JRC’

Gannett (GCI) Gives Up The Ghost

Gannett (GCI) may take as much as $3 billion in non-cash write-downs for some of its assets. It is that bad in the newspaper industry. The charge would cover as much as 20% of the value of Gannett’s properties.

Gannett can survive the accounting action, at least for now. Its debt is a modest $4 billion when it is taken against revenue and operating income.

Some of GCI’s smaller peers are not so lucky. Journal Register was recently kicked off the NYSE for trading below $1 longer for longer than the exchange rules allow. Newspaper companies including McClatchy (MNI) and Gatehouse (GHS) have lost over 60% of their market value in just a year. The borrowing they took on to buy other papers is so great that their debt service may swamp operating income.

All of this is likely to cause a tremendous auction of newspapers as the public companies that own them can no longer afford to stay in business. That actually may be good news.

The Journal Register bought a large newspaper group in Michigan just a few years ago. It paid $425 million. Based on JRC SEC filings, those properties may be worth less than $100 million now. But, for a buyer, justifying $100 million is easier than swallowing four times that.

Newspapers, and their reporters, may be able to survive the industry downturn if the value of the properties falls far enough so that the leverage for owning them is modest.

The destruction of the value of the newspaper industry may be what saves it.

Douglas A. McIntyre

Posted on: June 10, 2008 – 5:13 am in Old Media, , ,

NYSE Delisting Candidates, Headed To The Pink Sheets?

With the sudden delisting of the Journal Register, it is interesting to look at who else is on the NYSE list of companies who could get delisted. The NYSE is generally very good about this and lets the companies have time to get into compliance. Below are the lists. They are grouped based on why the NYSE has problems with them.

Issuers that are noncompliant with its quantitative and corporate governance listing standards:

Fremont General Corporation (FMT)

Fremont General Financing I (FMTPR)

Impac Mortgage Holdings, Inc. (IMH)

Impac Mortgage Holdings, Inc. (IMHPRB)

Impac Mortgage Holdings, Inc. (IMHPRC)

Journal Register Co. (JRC)

Luminent Mortgage Capital, Inc. (LUM)

Medifast, Inc. (MED)

Milacron Inc. (MZ)

NIS GROUP CO., LTD. (NIS)

Scottish Re Group Limited (SCT)

Scottish Re Group Limited (SCTPRB)

Sun-Times Media Group, Inc. (SVN)

Zarlink Semiconductor, Inc. (ZL)

Companies as delayed in filing both Annual and Interim Reports:

Beazer Homes USA, Inc. (BZH)
Diebold, Incorporated (DBD)
International Rectifier Corporation (IRF)
Penn Treat American Corporation. (PTA)

Sunrise Senior Living, Inc. (SRZ)
Symmetry Medical Inc. (SMA)
VeriFone Holdings, Inc. (PAY)
W Holding Company, Inc. (WHI)
WellCare Health Plans, Inc. (WCG)

Companies as delayed in filing an Annual Report:

China Yuchai International Limited (CYD)
Fremont General Corporation. (FMT)
Fremont General Financing I (FMTPR)
Impac Mortgage Holdings, Inc. (IMH)
    Impac Mortgage Holdings, Inc. (IMHPRB)
    Impac Mortgage Holdings, Inc. (IMHPRC)
Mesa Royalty Trust (MTR)
Schawk, Inc. (SGK)

Some firms make it on to more than one list, and some, like JRC and FMT, have already left for the "pink sheets"

Douglas A. McIntyre

Posted on: April 17, 2008 – 9:10 am in Exchange News, , , , , , , , , , , , , , , , , , , ,

Tough Market Cannibalizes Prices Of Weakest Companies (SIRI)(GRMN)(MOT)(DELL

No rest for the weak in a market which even punishes mediocrity.

Several widely traded companies made new lows.

Firms with heavy debt and poor operating profit prospects were hit particularly hard. Sirius (NASDAQ: SIRI), which is still awaiting approval of its deal with XM Satellite (NASDAQ: XMSR), bottomed. So did Motorola (NYSE: MOT), which appears to be doing worse each quarter in core handset business. Journal Register (NYSE: JRC), the most troubled of the newspaper companies, spent part of the weak under $.20 and will be delisted this week.

Several stocks which are leaders in sectors which appear to be weakening also hit lows. Gannett (NYSE: GCI), part of the newspaper industry, found a new bottom as did PC market No. 2 player Dell (NYSE: DELL).

Stocks in some fields which had been hot up, up until recently, are beginning to be hurt, showing how fast a sector can disintegrate.  GPS company Garmin (NASDAQ: GRMN) hit a 52-week low of $44.51 after being at $125.68 in late October of last year. Wall St. is worried that consumer electronics sales could be hurt by the recession and a number of cellphone companies are adding GPS functions to their products.

Douglas A. McIntyre

Posted on: April 13, 2008 – 3:12 pm in Research, , , , , , ,

Journal Register, Unfit For Listing (JRC)

Journal Register Co. (NYSE: JRC) has been given notice by the NYSE that its shares are slated to get booted off of the prestigious exchange.  The NYSE said in its statement that the company failed the 30-day $1.00 average for 30 consecutive days.  The exchange even cited its "abnormally low price" in the decision.

We have featured this one on numerous occasions via our own "stocks under $10" and the "Old Media / New Media" weekly newsletters as one that was going to buckle under its own weight.   We’ve even started identifying which newspaper stocks might actually be worth buying at today’s prices and those should survive the digital migration.  But just F.Y.I., Journal Register isn’t one of them.

Have you ever been on an airplane that lost it’s primary hydraulic system with over an hour left in your flight?  It’s scary, trust me on that.  The 52-week high is $6.48.  It even used to be $15.00 and even over $20.00.  This looks like a recapitalization is heading the company’s way in a hurry after shares closed at $0.265 today.  That will be just as scary as losing the primary hydraulic system.  The company waited far too long to explore its alternatives. We’ve even speculated last summer about the possibilities that the company would be at risk of servicing its debt.

We recently even noted that this stock could be one of the stocks that go to zero. Journal Register is hanging out with Elvis, Marilyn Monroe, Bogey, and James Dean.  Yep, it’s the Boulevard of Broken Dreams.

You can join our open email distribution list to hear about special financings, secondary offerings, IPO’s, M&A, and more previews for other special situations in various stages.

There is nothing wrong with being listed on the pink sheets.  Despite the fact that getting information becomes nearly impossible, and despite the issues of no one wanting to own pink sheet stocks, and despite the fact that many institutions are barred from owning pink sheet stocks… yep. Nothing wrong at all.

Jon C. Ogg
April 11, 2008

Jon Ogg produces the Special Situation Investing Newsletter.  He can be reached at jonogg@247wallst.com and he does not own securities in the companies he covers.

Posted on: April 11, 2008 – 4:31 pm in Media,

Journal Register Finally Yells ‘Uncle!’ (JRC)

Journal Register Company (NYSE: JRC) has finally announced today that it hired Lazard Freres & Co. LLC as its financial advisor to help the company evaluate strategic options.

It noted concern over the state of the economy and the environment for print advertising.  Frankly, this is a boondoggle of epic proportions.  To top it off, last week it was given potential NYSE delisting notice.

The company tries to make at least some shinola out of an the current environment:

  • It generated $90.3 million of EBITDA in 2007, above its $38.5 million interest expense; reduced debt by $105 million during 2007; has no scheduled principal payments due until Q2-2009.

We have covered the woes of this company in our "Old Media/New Media" weekly newsletter as one of the in-trouble companies for longer than we care to recall.  The "alternatives" left at this point are few and far between now that management has waited this long to hire an advisor.

Shares are down a massive 64% today at $0.185.  Before today, its 52-week trading range was $0.31 to $6.48.  In 2004, this was a $20.00+ stock.  But since that date, this company has been on a crash course to zero.

Jon C. Ogg
April 7, 2008

Jon Ogg can be reached at jonogg@247wallst.com; he produces the Special Situation Investing Newsletter and he does not own securities in the companies he covers.

Posted on: April 7, 2008 – 1:49 pm in Media,

Data Differentiates Newspaper Vs. Online News Reader Characteristics (SCOR, JRC, MNI, NYT, JRN, GCI)

If you have read any of our commentary or probably most other commentary online, you know that newspapers are not exactly the next growth engine in the economy.  In fact, they are probably losing the same percentage of their client base at the same rate as Southern California loses smokers.  Tonight we saw a report out of comScore (NASDAQ: SCOR) that outlines some of the differences between online news readers and newspaper readers.  You can read that full report from comScore here.

We actually run a newsletter called the "Old Media/New Media Newsletter" here that our own Doug McIntyre produces each week.  We make the case for or against certain media properties such as newspapers, radio, cable, television, and the internet.  Believe it or not, we actually just covered some newspapers that we identified as survivors.  Sure some we covered as likely funeral candidates as well.  This went out Sunday night to our readers and we’ve just taken it off embargo if you would like to read a copy. 

Companies mentioned in the report are Journal Register (NYSE: JRC), McClatchy (NYSE: MNI), Journal News (NYSE: JRN), Gannett (NYSE: GCI), The Washington Post (NYSE: WPO), and the New York Times (NYSE: NYT).  Not all of those are buys, but some will actually survive the secular trend working against the sector.  Take a Test ride.

Jon C. Ogg
March 13, 2008

Posted on: March 13, 2008 – 5:20 pm in Media, , , , , ,

Short Sellers Take Long Knives To Newspaper Stocks (MNI)(JRC)

Short sellers went after newspaper chains with a vengeance based on data from the NYSE as of February 29. The coverage ratio for Journal Register (NYSE: JRC) hit 52 days. The stock trades at $.80 down from a 52-week high of $7.08.

At McClatchy (NYSE: MNI), the number of days to cover its short position based on average volume moved to 28 days. McClatchy trades at $9.07 down from a 52-week high of $35.97.

Both newspaper companies recently had negative changes in their debt by credit ratings agencies.

Douglas A. McIntyre

Posted on: March 7, 2008 – 8:49 am in Short Interest, ,

Corporate Bankruptcies Likey To Take Sharp Jump (CHTR)(MNI)(JRC)(LVLT)

It should come as no surprise that companies which has taken on too much debt over the last three years will start to fail and have to file for Chapter 11. Some of the signs that this process is about to accelerate are starting to show up.

"High-yield debt sales have sputtered so far in 2008 and are off to their weakest start in 17 years thanks to an anemic U.S. economy, a worldwide credit crunch and a pronounced absence of investor appetite for risky assets," according to Reuters.

While there is no saying which companies might face severe problems certainly several firms with widely traded stocks are at risk. This would include newspaper companies McClatchy (MNI) and Journal Register (JRC) which have high debt and rapidly falling revenue. Cable company Charter (CHTR) is saddled with $19 billion in long-term debt. Level 3 (LVLT) has a shaky balance sheet and extremely modest cash flow. Shares sold short in the firm are higher than those of any other stock listed on Nasdaq.

Douglas A.McIntyre

Posted on: March 1, 2008 – 6:26 am in Economy, , , ,

The 52-Week Low Club (FMT)(RHD)(S)(JRC)(LLNW)(IACI)

Fremont General (FMT) Threatens more write-downs. Falls to $.73 from 52-week high of $13.80.

R H Donnelley  (RHD) Downgrades after poor earnings. Hits bottom of $6.26 from 52-week high of $84.49.

MF Global (MF) Still falling after trading loss. Drops to $14 down from 52-week high of $32.20.

Sprint Nextel (S) Still being punished for earnings. Falls to $7.08 from 52-week high of $23.42.

Journal Register (JRC) Newspaper company. Falls to $.78 from 52-week high of $7.23.

Limelight Networks (LLNW) Loses patent suit. Sells off to $3.82 from 52-week high of $24.33.

IAC Interactive (IACI) Underperforming e-commerce company. Drops to $19.76 from 52-week high of $39.06.

Douglas A. McIntyre

Posted on: February 29, 2008 – 4:13 pm in HI/LOW, , , , , , ,

The 52-Week Low Club (S)(NT)(GCI)

Nortel (NT) Nine-to-one this dog never hits bottom. Down to $9.05 from 52-week high of $30.

Mylan (MYL) Market unhappy about quartery results. Sells off to $12 from 52-week high of $22.90.

Gannett (GCI) Newspaper companies in flat spin. Drops to $30.26 from 52-week high of $61.68.

Sprint (S) drops dividend and loses a ton of money. Dips to $7.75 from 52-week $23.42.

Journal Register (JRC) Another newspaper down for the count. Sell down to $1.07 from 52-week high of $7.23.

EpiCept (EPTC) Europe drug authority turns down product. Drops to $.87 from 52-week high of $4.89.

Neurogesx (NGSX) Bad trial data. Falls to $3.62 from 52-week high of $10.99.

Borland Software (BORL) Rough earnings. Down to $1.93 from 52-week high of $6.22.

Douglas A. McIntyre

Posted on: February 28, 2008 – 4:17 pm in HI/LOW, , , , , , ,

The 52-Week Low Club (NT)(DY)(GCI)(ADSK)(CVTX)

Dycom Industries (DY) Posts loss on lawsuit settlement. Falls to $11.88 from 52-week high of $34.13.

Nortel (NT) Big loss and lay-offs. Down to $9.67 from 52-week high of $30.27.

Journal Register (JRC) Sells off to $1.19 to more bad news from newspaper Industry. Has 52-week high of $7.46.

Gannett (GCI) More newspaper industry woes. Drops down to $31.50 from 52-week high of $62.70.

CV Therapeutics (CVTX) Misses Q4 numbers and sells down to $6.13 from 52-week high of $13.74.

Autodesk (ADSK) Bad quarter pushes share to $32.36 from 52-week high of $51.32.

EnerNoc (ENOC) Fourth quarter loss drops shares to $16.25 from 52-week high of $50.50.

Douglas A. McIntyre

Posted on: February 27, 2008 – 4:03 pm in HI/LOW, , , , , , ,

A Junk Bond Depression?

The default rate on junk bonds in 2007 was well under 1%. Junk guru and finance professor Edward Altman says that number will move well above 4.6% this year. According to The Wall Street Journal "already in January, Mr. Altman estimated defaults hit $3.2 billion, about 60% of the total for all of 2007." That means the level of defaults could move well above 5%, if things stay bad.

Junk bonds, or "high-yield" as Mr. Mike Milken liked to call them, touch a much broader spectrum of the economy than most investors would guess. Not only are high-yield bond funds popular with investors, institutions also own baskets of this debt. It is not terribly unlke baskets of mortgages, credit card, or auto loans.

Companies financed by junk bonds employ a lot of people. Quebecor (NYSE: IQW) which recently defaulted on some of its bonds, employees several thousand people. Sirva (NYSE:SIR) has 4,600 workers. It has had trouble making debt payments. Junk debt helped finance big newspaper chains including McClatchy (NYSE: MNI) and Journal Register (NYSE: JRC)

To make the point, companies financed by junk bonds employ hundreds of thousand of people and have suppliers who employ hundreds of thousand more.

A rising junk bond default rate is an early indication that empoyment numbers may begin to head in a bad direction.

Douglas A. McIntyre

Posted on: February 6, 2008 – 5:58 am in Drug companies, , , ,

Newspaper News (MNI)(JRC)(GCI)(NYT)

The news about the demise of newspapers is now at least two years old. Each month newspaper chains put out their advertising numbers and each month they are worse.

The only real question about the newspaper industry is whether online versions of print papers can help offset falling print ad revenue. So far, that has not been working well. The best case is probably The New York Times (NYT) which gets about 10% of its revenue online now.

Goldman Sachs now says that a recession will take newspaper ad revenue down 7.9% next year. Only recently the investment bank was calling for a 2.6% decline.

This year will probably be the year that the newspaper industry has dreaded. Some companies with significant debt like McClatchy (MNI) and Journal Register (JRC) may have to go through large financial restructuring. Common shareholders may not make it out alive. At firms like Gannett (GCI) and The New York Times the only alternative will be to cut staff, perhaps sharply.

The future has finally caught up to the industry.

Douglas A. McIntyre

Posted on: January 10, 2008 – 9:57 am in Old Media, , , ,

Stocks Which Could Drop 50% In 2008

It actually is not very unusual for a stock to lose half its value, especially if it is in the right sector. Shares in Countrywide Financial (CFC) are down over 75% in 2007. Several newspaper company stocks have dropped by more than half. Advanced Micro Devices (AMD) has gone from $22 to $8.

Usually a stock is affected because its industry is being pushed underwater, as has happened with the mortgage fiasco, or because of several bad decisions by management which simply do so much damage that shareholders hit the exits

We have listed ten companies which could fall by more than half next year. For each one we have given specific reasons. These are the issues that Wall St. has to debate when it considers whether these firms will face significant sell-offs.

Citigroup (C). It would be nice to think that Citi has already taken as much of a beating as it can. The stock has fallen from $57 to $31 this year. Now, could it go to $15? Moody’s recently downgraded Citi saying that it believed that the bank could post more net losses next year. The firm still has a $200 billion mortgage book. Citi might also have to cut its dividend to raise cash. That could make it a much less attractive investment, at least short-term. A deep recession or more trouble in the mortgage-backed securities market could halve Citi’s shares.It has happedned to the bank before three times in the last 35 years, most recently in 1990.

Baidu (BIDU) The Chinese search engine is well ahead of its top rival, Google (GOOG) in the world’s most populated country. That may be why the company’s shares have jumped from under $100 in April to $356. But, Baidu trades at 62 times sales. Google trades at 14 times. Baidu is so high because Wall St. expects online search to become the next big thing in China. But, right now that is not the case. Baidu’s revenue in the third quarter was $66 million. That was double the year before, but is still a tiny number. The Chinese company faces two challenges. One is that Google is going to do whatever it can to take share from Baidu. The US company can’t afford to be a distant second in a market as large as China Baidu has been helped by the fact that the Shanghai Composite is up almost 120% in the last year. If there is a big sell-off in China stocks, Baidu will get pulled down as well.

Journal Register (JRC) This company is probably weaker than most other newspaper chains. It trades at $2.25, down from its 52-week high of $7.76. The company’s operating income is shrinking because of the fall-off of newspaper advertising. In the last quarter, Journal Register had operating income of $17.6 million and interest expense of $10.7 million. Based on newspaper industry trends, the company’s revenue could drop another 8% next year. That means debt service could become a problem.

Ford (F) Ford is a turnaround which almost happened. The company brought in a new CEO and he was able to cut costs. The latest UAW contract should pare Ford’s annual costs by as much as $2 billion. This takes $23 billion in liabilities off Ford’s books. And, the company will pay $13.2 billion into the new UAW benefits fund. Ford’s problem is that it keeps losing sales. The company’s domestic unit sales dropped 12 consecutive months through October and made a small recovery in November. Ford now has about 15% share in the US market. Aside from the fact that Ford’s piece of the pie could keep shrinking, forecasters predict that US car and light truck sales could fall from just over 16 million units this year to 15.5 million next year. In a deep recession, that number could go below 15 million which would take about $25 billion in revenue out of total domestic vehicle sales. Ford’s shares are at $6.79, near a 52-week low, and the company only has a market cap of $14.3 billion.

VMWare (VMW) Almost everyone expects that VMWare shares will be up next year. The company owns the virtualization solutions market which can help servers run much more efficiently, saving enterprises substantial sums of money. After its IPO. the stock moved from $51.50 and peaked at $125.25. It trades at just over $86 now, which indicates that it already may be vulnerable to selling pressure. With a forward P/E of 74, maybe it should be. The market for VMW’s products could slow, but that is unlikely. One securities analyst recently pointed out that VMWare sells software licenses which involve large upfront purchases. That might hurt revenue in future years. And, Microsoft (MSFT) is coming to market with its own virtualization technology, which it calles Hyper-V. The product could be a bust, but Redmond does have a huge foot in the server door with it Windows platform.

Countrywide Financial (CFC) The shares are already down to $9 from a 52-week high of $45.26. This is the most visible casualty of the mortgage mess. The housing market could still sink the company. Nearly half of the firm’s portfolio is backed by California property. If foreclosures continue to spike and the values in the housing market plummet further, Countrywide simply does not have the capital to weather another full year in this climate. Just count the defaults. If they get too high, CFC may not make it. Zacks and Citigroup recently issued negative research comments about the company.

Bidz.com (BIDZ) The company has been in a running fight with research firm Citron. The fight includes claims that that the company’s inventory levels are rising at least 300% higher than the company’s revenue run rate. The company recently reported a good third quarter with net revenue of $40.1 million, a 48% increase compared with $27.1 million reported for the third quarter of 2006. Barron’s has pointed out that short sellers are going after the company and will do whatever they can, within the boundaries of fair play, to keep the shares moving lower. Wall St. is clearly worried. The stock had a 52-week high of $22.50 and now trades at $8.56. There is a lot of evidence that online spending has not been as good as expected this holiday season. Audience research firm Alexa actually shows Bidz traffic falling from early November to mid-December.

Micron Technology (MU) The company has already lost close to half its value in the last year, with the stock going from a 52-week high of $14.31 to $7.82. The firm’s core business in memory chips is being seriously affected by sharply falling prices. Jefferies & Co recently made negative comments on MU and revised revenue down and losses up. The price cutting in the NAND and DRAM markets is furious now. MU needs reasonable operating income to fund R&D. That may not happen. With product pricing in some of its key markets down 40%, 2008 could be a very poor year.

LDK Solar (LDK) A former employee reported that the company had inventory problems. This crashed the shares and they moved from $74 in September to $27 in late November. An audit determined that there was no inventory problem and the shares moved back over $68. Several analysts think the news is a little too good. Goldman Sachs has a "sell" on the stock with a price target of $33. The investment house thinks that the company is giving away a lot of margin to get long-term contracts. CIBC also has a "sell" rating on the shares. LDK has additional market risk. Its shares are up, to some extent, because of the huge increases in the prices of most Chinese stocks. If there is a sell-off in Shanghai or Hong Kong, odds are that the stock goes out with the tide

PMC-Sierra (PMCS) The designer and marketer of communications semiconductors has not been doing well. Shares have dropped from a 52-week high of $9.83 to the current $6.76. Banc of America Securities recently rated the stock as a "sell". Short interest in the company rose sharply at the end of November. When the company released its third quarter results, the CEO announced that he would be leaving. In that quarter, revenue was flat at just over $117 million. Net income was a negative $5.9 million. PMC’s great risk is that spending in the telecom industry is slowing. If build-outs of new technology like 3G wireless continue to decelerate into 2008, the company can do little to find new revenue. With other struggling companies like Conexant (CNXT) in the same market, price cutting is a part of the business.

Douglas A. McIntyre

Posted on: December 18, 2007 – 10:36 pm in HI/LOW, , , , , , , , , , , ,

Memo To Journal Register (JRC) CEO James W. Hall: Sell The Company Assets ASAP

The writing is on the wall now. Journal Register (JRC) is almost certainly worth less than its debt and market cap combined. The company’s debt stands at $642 million as of the end of the September quarter. The company’s stock market value is $79 million.

JRC’s stock is down almost 75% this year. That compares to another company, McClatchy (MNI), which is off about 68%. The New York Times (NYT) received a "sell" rating yesterday. Its shares are down 30% for the period.

Newspaper revenue in general is dropping 8% quarter-over-last-years-quarter. For the last quarter JRC  reported revenue was $113 million, and operating income was almost $18 million. But interest and other costs were almost $11 million.  If revenue is down to $104 million in Q3 2008, the company may not make debt service.

The company has an incremental debt facility, but drawing down on that only further complicates JRC’s chances of handling its debt service. In the current credit markets refinancing debt on more favorable terms is unlikely.

The value of the JRC properties is going to continue to drop. This has nothing to do with them individually. Most newspapers are losing value, no matter who owns them. The chance to get out of the newspaper business in not likely to improve.

What can the Journal Register get for its papers? In 2006, peak EBITDA multiples for newspaper sales hit about 11x. Dow Jones (DJ) was able to sell some of its papers based on that level of valuation. But, the condition of the JRC papers is getting worse each quarter and multiples in general for newspapers are falling fast.

The JRC Michigan newspaper group is doing so badly that the company would be lucky to get a blended 8x EBITDA value for its businesses. EBITDA was $22.5 million in the last quarter. Holding that level going into next year will be extremely difficult.

At a multiple of eight times, JRC might sell its properties for a total consideration of $640 million. At that level, the common shareholders would be left with nothing. But, with a $2 stock price, they don’t have much to lose now.

Sell now. Selling later will only be worse.

Douglas A. McIntyre

Posted on: November 29, 2007 – 10:30 am in Old Media, , ,

Six Stocks That Could Go To Zero (CHTR)(JRC)(AMD)(XMSR)

In the current credit environment, there are several fairly big companies that could get in enough trouble that it would wipe out the common shareholders. The ones in the financial industry like Countrywide (CFC) and E*Trade (ETFC) are obvious. But there are others outside finance that have huge debt loads which can no longer be fre-inanced to buy them time, especially if the core businesses are not doing well.

Charter Communications (CHTR) Charter now has over $19 billion in debt and a market cap of only $486 million. It stock has recently fallen from $4.93 to $1.20. In the last quarter, Charter had $105 million in operatng income on $1.525 billion in revenue. Interest expense was $452 million. Charter is up against increasing competition from satellite TV and telecom companies. It does not have the capital it needs to upgrade its infrasturcture to stay in the competitive game.

Journal Register (JRC) The newspaper chain had operating income of $22 million last quarter on revenue of $121 million. Interest expense was almost $10 million. Long-term debt is over $700 million, and revenue at JRC and most newspaper companies is dropping at about 7% year-over-previous year. Its stock has fallen from over $8 to about $2 over the last year.

AMD (AMD) The chip company recently got a cash infusion of $622 from the Abu Dhabi government’s investment arm. When the money came in, the stock traded above $13. It has since fallen to $10.27. Wall St. is not convinced that AMD can compete with Intel (INTC), at least not with its current capital structure. In the last quarter, AMD had an operating loss of $226 million on revenue of $1.632 billion. Interest expense was $95 million. Debt, much of its taken on witht the purchase of graphics chip company ATI, now runs almost $5.4 billion. Early word is that the market is not impressed with the company’s next-generation Barcelona chip. AMD would need a huge turnaround in a short time to handle its debt problems.

XM Satellite (XMSR) XM does not like to talk about it, but it needs to merge with Sirius (SIRI) for financial reasons as much as anything else. The company has total liabilities of over $2.4 billion including long-term debt of almost $1.5 billion. Its subscriber growth rate has been slowing each quarter and in the September period it had an operating loss of $113 million on revenue of $257 million. Interest expense was $27 million. Less than two years ago, XM traded for over $30. It now trades at under $14. Imagine what would happen if the merger is killed.

None of these companies is likely to fail in the sense that it will cease to operate, but it is not hard to imagine that all of them will be forced to restructure, and common sharesholders are likely to get nothing.

Douglas A. McIntyre

Posted on: November 27, 2007 – 7:03 am in Accounting, , , , , , ,

The 52-Week Low Club (WB)(CFC)(WM)(TWX)(GM)

GENESCO (GCO) Broken buy-out. Down to $29.04 from 52-week high of $54.15.

Unisys (UIS) No new news. Old line computer maker working on transformation to services. Down to $5.13 from 52-week high of $9.70.

Journal Register (JRC) Newspaper chain with falling revenue and too much debt. Down to $2.00 from 52-week high of $8.60.

Novastar  (NFI) Bad news in mortgage markets takes it down again. Falls to $1.45 from 52-week high of $125.64.

Freddie Mac (FRE) Mortgage disease. Drops to $36.66 from 52-week high of $69.85.

CountryWide Financial (CFC) Falls to $10.25 from 52-week high of $45.26.

Washington Mutual (WM) Down to $18.25 from 52-week high of $46.38.

Wachovia (WB) Big banks not good business anymore. Drifts off to $37.53 from 52-week high of $58.80.

Sprint (S) Housing problems must be hurting cellular business. Down to $14.67 from 52-week high of $23.42.

Time Warner (TWX) Fear of recession hurting ad spending. Down to $16.71 from 52-week high of $23.15.

GM (GM) Housing and fuel concerns hit car stocks. Falls to $26.57 from 52-week high of $43.20.

Acacia Resh (ACTG) Loses patent dispute with Microsoft (MSFT). Down to $9.89 from 52-week high of $17.92.

Douglas A. McIntyre

Posted on: November 19, 2007 – 4:07 pm in HI/LOW, , , , , , , , , , , ,

Gannett’s (GCI) USA Today Cuts Edit Staff As Newspaper Stocks Hit Lows

Gannett (GCI) is the largest newspaper chain in the US and its prized property, USA Today, is the largest paper by total circulation. It is a bad sign then that such a large company has asked 9% of the editorial staff at its national paper to leave. According to The New York Post, the move is being made "because of declining revenue at Gannett Co.’s flagship publication".

Gannett has a large online audience for its paper’s so the move is an indication that revenue from the internet is not keeping up with falling print sales.

The move probably signals that more cuts are coming across the industry. Gannett trades below $40, near its 52-week low and down from the high of $63.50. The New York Times (NYT) shares are below $19, also near their low for the last year. The stocks of Journal Register (JRC) and McClatchy (MNI) two other chains, are down over 60% over the last year.

There is little left for the newspaper industry other than to cut people. Paper and delivery costs have already been taken down. The costs of printing and production cannot be brought lower. That leaves headcount. And, large newspapers can’t operate with just a few dozen people.

Douglas A. McIntyre

Posted on: November 16, 2007 – 6:44 am in Old Media, , , ,

Gatehouse (GHS) Could Fall Much Further

Newspaper chain Gatehouse (GHS) has been down as much as 15% today on poor earnings and a downgrade from "buy" to "neutral" at Goldman Sachs (GS).

And, this may just be the beginning. Gatehouse trades at a premium to most other newspaper stocks, and the reasons for that are going away. The company reported revenue "as adjusted" of $172 million, and operating income of $12.5 million. The company had a net loss of $8.8 million. The "as adjusted" numbers are used because the company has made a number of acquisitions.

On a GAAP basis, the company had revenue of $163.4 million up from $97.6 million in the same quarter last year. Excluding depreciation and other items, expenses were $131.2 million, up from $78.1 million. Interest expense was $22.3 million, and that is the company’s big problem. If revenue continues to fall, the Gatehouse long-term debt of almost $1.2 billion looks like a very big number.

Gatehouse still trades at about one times revenue. Gannett (GCI) is at 1.2x, but smaller and financially weaker McClatchy (MNI) is .6x. Journal Register (JRC), which is also loaded with debt, trades at .2x.

What is the rational price for the Gatehouse stock? Based on industry comparables, probably less than $6. That is well below the $10.26 it trades for today.

Douglas A. McIntyre

Posted on: November 14, 2007 – 12:38 pm in Media, , , , ,

The 52-Week Low Club

Bankatlantic (BBX) Real estate loans lead to loss. Falls to $4.05 from 52-week high of $14.

Moneygram (MGI) Two recent analyst downgrades. Drops to $14.42 from 52-week high of $35.18.

Journal Register (JRC) Newspaper stocks still getting pushed down. Drops to $2.23 from 52-week high of $8.60.

Trident Microsystems (TRID) Bad quarter. Shares down to $6.80 from 52-week high of $23.59.

Micrel (MCRL) Wall St. unhappy about earnings. Falls to $8.61 from 52-week high of $13.98.

Douglas A. McIntyre

Posted on: October 26, 2007 – 3:01 pm in HI/LOW, , , , ,