Citing newspaper-industry woes and the economic downturn, Cablevision Systems Corp. said yesterday it would erase nearly 70 percent of the value of the Newsday Media Group from its books.
Cablevision, which bought the Newsday Media Group last summer for $650 million, said it would take $375 million to $450 million in pretax "impairment charges" to reflect Newsday's decreased value.
The move doesn't impact Cablevision's cash flow and isn't likely to have any material impact on the company, one of several to take write-downs in the last few weeks. Separately yesterday, Cablevision announced a $500-million debt offering.
"These impairment charges reflect the continuing deterioration of values in the newspaper industry and the greater than anticipated economic downturn and its current and anticipated impact on the newspaper publishing group's advertising business," Cablevision said in a Securities and Exchange Commission filing. "The impairment charges are not expected to result in any material future cash expenditures."
One analyst wasn't surprised by the move.
"This is [Cablevision] eating a slice of humble pie, because Wall Street greeted this deal with a raspberry from the day it was announced," said Craig Moffett, who follows Cablevision for Sanford C. Bernstein & Co. in Manhattan. "No one is really surprised to learn that newspapers are worth less than when they were bought."
Cablevision, Moffett said, already has enough other tax write-down items that it doesn't need Newsday's to improve its tax situation, he said. "It's adjusting a notational value that doesn't have a lot of cash consequences," he said. "It's like announcing that Ulysses S. Grant is dead."
Cablevision spokesman Charles Schueler said: "We continue to move forward with our plan to use Newsday with our other properties to strengthen our media portfolio and presence in the New York market."
Impairment charges have not only been common lately among media companies, they are also required for proper valuation of assets under generally accepted accounting principles, as Cablevision noted in its filing. Last week, News Corp., owner of the New York Post and The Wall Street Journal, recorded an $8.4 billion pretax write-down on various assets, including $2.8 billion pretax impairment charge on the value of Dow Jones & Co.
Last month, Times Co., publisher of The New York Times, reported noncash charges of $19.2 million on the value of the International Herald Tribune and $7.1 million for the Worcester Telegram & Gazette.
Cablevision last fall reported in an SEC filing that the value of Newsday and affiliated properties like amNewYork, Island Publications and Star Community Publishing declined for several years before the purchase under prior Newsday owner Tribune Co. Tribune incurred similar impairment charges on the value of Newsday in the hundreds of millions of dollars. Tribune filed for Chapter 11 bankruptcy protection in December.
Kevin Kamen, president of media appraisal firm Kamen & Co. in Baldwin, said Cablevision likely understood the deteriorating situation in print media when it bought Newsday, but knew also the value of further cornering the Long Island media market. Long term, he said, "Owning Newsday puts them in a better strategic position."
Cablevision shares gained 2 cents yesterday, to close at $15.13.