The company announced a significant restructuring plan:
- Reduction of employees by 500 people, or 14 percent of work force, to eliminate $50 million of operating expense by 1st quarter of 2009.
- Reduction in capital spending by 10 percent. To maintain capital spending at $20 million per year for 2008 and 2009.
- Disposal of non-core assets, which potentially could fetch $35 million. The current operating losses would save capital gain tax.
- Reduction in dividend payout for 2009, which is still under discussion.
In my opinion, management is taking rational steps towards coping with current difficult environment, which might be a chronic situation.
Goldman Sachs has issued a sell report on A.H. Belo (AHC) (dated July 28), and pegged its intrinsic value at $5.00 per share based on DCF analysis. However, it has not put any valuation on AHC's $150 million worth of non-core property values. At a 25 percent haircut, the properties are worth at least $112.5 million, or $5.50 per share.
I have sent an email to Goldman analysts to find out on their thoughts of these properties and should update you in due course.
Disclosure: Long AHC