Could Journal Register (JRC) Miss Its Debt Service?

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Journal Register (JRC) announced its Q2 earnings today. They were ugly and Wall St. punished the company by pushing it to a 52-week low of $3.68. The company missed consensus earnings estimates by three pennies.

JRC had revenue of $120.7 million. Net income was $5.5 million and interest payments on the company’s $646 million debt were $10 million.

JRC now has a market cap of $140 million, well under the value of its debt and only 25% of its revenue run rate. Gannett (GCI) has a market cap to revenue multiple of 1.5x. Clearly its does not have JRC’s debt problem.

Journal Register also announced that June advertising revenue dropped almost11%. Total revenue for the month fell to $36.6 million. That would be a quarterly run rate of about $111 million.

Last year in the third quarter JRC had revenue of $132 million. The company’s current quarterly operating expenses are about $100 million.

Could JRC’s revenue be as low at $110 million in Q3 07. If revenue loss accelerates at all, it could.

At $110 million, all of JRC’s operating income goes to interest expense. Any slip from there put the company in a world of hurt.

Douglas A. McIntyre can be reached at