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"I ain't here to make friends, cowboy; I'm here to tell you the ugly truth. So you might as well get out of that warm bed and deal with it."
It was just a matter of time, and today that clock's alarm went off. Here is the Official Spin:
Today Digital First Media announced Journal Register Company has filed for Chapter 11 bankruptcy and will seek to implement a prompt sale.
We expect the auction and sale process to take about 90 days, and I am pleased to tell you the Company has a signed stalking horse bid for Journal Register Company from 21st CMH Acquisition Co., an affiliate of funds managed by Alden Global Capital LLC.
So why file Chapter 11?
The Company exited the 2009 restructuring with approximately $225 million in debt and with a legacy cost structure, which includes leases, defined benefit pensions and other liabilities that are now unsustainable and threaten the Company’s efforts for a successful digital transformation.
From 2009 through 2011, digital revenue grew 235% and digital audience more than doubled at Journal Register Company. So far this year, digital revenue is up 32.5%. Expenses by year’s end will be down more than 9.7% compared to 2009.
At the same time, as total expenses were down overall, the Company has invested heavily in digital with digital expenses up 151% since 2009. Journal Register Company has and will continue to invest in the future.
But also from 2009 to 2011 Journal Register Company’s print advertising revenue declined 19% and print advertising represents more than half of the of the Company’s revenues. Print advertising for the newspaper industry declined approximately 17% over the same time period, according to the Newspaper Association of America. As well, both print circulation and circulation revenue have also declined over the same time period.
Since 2009, printing facilities have been reduced from 14 to 6; 9 of the 50 owned facilities have been sold and 8 distribution centers have been outsourced.
During the same time period, debt was reduced by 28% with the Company currently servicing in excess of $160 million of debt.
All of the digital initiatives and expense efforts are consistent with the Company’s Digital First strategy and while the Journal Register Company cannot afford to halt its investments in its digital future it can now no longer afford the legacy obligations incurred in the past.
Many of those obligations, such as leases, were entered into in the past when revenues, at their peak, were nearly twice as big as they are today and are no longer sustainable. Revenues in 2005 were about two times bigger than projected 2012 revenues. Defined Benefit Pension underfunding liabilities have grown 52% since 2009.
After a lot of thought, the Board of Directors concluded a Chapter 11 filing was the best course of action.
Journal Register Company’s filing will have no impact on the day-to-day operation of Journal Register Company, Digital First Media or MediaNews Group during the sale process. They will continue to operate their business and roll out new initiatives.
If you have questions just ask – you know how to reach me.
I know this announcement will leave you with questions – ask. Your managers, I and any member of senior leadership at Digital First Media will be available to answer.
And while I get this news may make some of you nervous, don’t let it. Concentrate on the job at hand and we will work through this. This really is the right decision for Journal Register Company.