....absent all the charges. That SEEMS underpriced to me. Is anyone expecting that to decline to a LOSS position, before this recession is out? I HIGHLY doubt it. More likely we drop to no LESS than $1.00-1.50 in EPS in 2009, and rebound, eventually, in a few years, back to $3 or so in EPS.
Stock is cheap. Long-term, USA Today will ALWAYS be a profitable, unassailable franchise. I can't wait to see if the insiders step in and buy stock in the open market, now that the earnings are out (or do they have to wait until the final results are out??)
I think you need to look at the charge against the equity on the balance sheet to get a feel for what management thinks the publishing is worth.
If you accept, from that, the notion management intends GCI to be a digital provider you need ask yourself what sort of dividend do digital providers pay. The earnings are moving in that direction; management intends to mark the balance sheet in that direction; the reality may be that print journalism is best done by untraded companies and that our assets are, thus, worth what each publication would bring at auction in its market. In some cases - as in Arizona - that may negative if we can not find a buyer and have to close it down.
I think you need to take this charge and its like prior charge and spread both back over the last 10 years of earnings to get a feel for what the "normal" earning power of GCI really is.
Management is correct in saying these non-cash charges change nothing in GCI's current profitability BUT they absolutely refute past profitablity claims --
I am much struck by implications of the writeoff of publishing goodwill --- it clearly indicates the switch to a "digital provider" model. In particular, I have been wrong to give value to the publishing assets as my margin of safety.
I have sold my shares for the loss net of the dividends collected.
One would think the trading since the annoucement has put in the necessary discounts but each of the following -- discounted or not -- will have its future day in the news:
1. The expected charge for publishing goodwill marks the book to market. The trading since the annoucement more than takes care of that.
2. The conversion of the dividend from a publishing dividend to an "digital provider" dividend. Ultimately, after you adjust to the normal earnings implied by writing down the prior earnings for the publishing goodwill writeoffs, that cut -- in stages or not -- will be more than 50%. The stock is a sell if the board maintains the dividend.
3. The next downgrade of the credit will price GCI debt as particularly speculative. Even if you have the cash, debt reduction can have its own charges and the already annouced downgrade from Prime2 to Prime3 will not help GCI to access funds from the money market funds. The race is on to get the balance sheet to look like that of a "digital provider" --- those looking for share buybacks need do some more dilligence.
Nonsense. Most of the write-down is due to the fact that the market has panicked, and sold off GCI's equity down to $5.75. That FORCES a dramatic write-down, under the current accounting rules, and only frightens the nervous nellies all the more. I think the 23% decline in GCI's ad revenues in the current quarter is 80%+ owing to the economy, and I'm willing to put my money where my mouth is. For those who don't buy into the very very CONVENTIONAL (now) thinking that all newspaper companies are going out of business within 5-10 years, I think there is PLENTY of money to be made. And it just so happens that GCI is one of the lowest risk plays in the space out there.