Anonymous@11:08 writes today in Real Time Comments about replacing the publisher's car -- when it's only two years old. "Now, we need to buy him a 'green' car. Buying a 'green' car was a directive from Corporate. When we told them that they did not offer 'green' cars in what we needed -- circulation trucks -- we were told to find a way to buy one 'because we have . . . (to) spend the money.' So, now we are replacing a nice two-year-old car with a 'green' car. The answer will be: 'Well, that comes from a different account.' Can someone -- without venting, or trashing Gannett -- really explain this logic?"
Join the debate, in the original post.
[Image: Toyota]
I think you will find that every corporation --- for tax purposes --- budgets "capital expenditures" each year. These are hard assets: buildings, presses, trucks, etc., that have predetermined shelf life and produce depreciation.
ReplyDeletePerhaps an accountant in our midst could explain than better.
Yes, I'd like to know why you HAVE to spend every penny in each bucket? Why not say, "That 2-year-old car is fine, so let's put the $25,000 we don't really need to spend on a green car into the salaries bucket (to give raises to the people still here who are doing the work of 2+ people)"?
ReplyDeleteYou folks just don't get it...and you never will...most newspapers have lost almost 50% of their profit in the past 2-3 years...you can not continue to spend at previous levels as when the ad revenues were rolling in....most newspapers still have payrolls that make up almost 45-48% of the TOTAL expenses…you can not have the infrastructure and number of employees on the payroll that you did in the good old days….I see little if any ideas on this site that recommends how to turn things around and bring in the ad dollars…not in the traditional newspaper, or from the digital side…so if the income is not there, you can not have a business model that is leverage by expenses that were supported by revenue segments that have tanked…specifically, cars and homes and jobs…even the traditionally strong retail segments of newspapers are hurting…these are the Dillards, Penneys, Cellular, furniture, and electronic like Best Buy and Circuit City…these “normal” stores are getting killed by the internet…look at the profits for past quarter…down 30-50 percent.
ReplyDeleteThere is an old saying that holds true here….you are either part of the problem or part of the solution….the greater number of folks that post on this web site are not part of the solution…and they should get out of the way and find another industry to bring down…the newspaper industry and their dot.com site will survive…smaller, less costly, and less market dominant…but still a very strong and viable business in their community
"You folks just don't get it"
ReplyDeleteActually, we do. We're trying to make sense of this garbage.
Jim, can you make a thread to have people post what kind of cars their publishers drive?
ReplyDeleteThe confusion springs from what is a capital expense vs what is an operating expense. They are not interchangable. Day to day stuff like supplies, fuel, payroll, utilities are operating expenses. Once you use them they are gone. In simplist terms The Capital Budget is for the purchase of euipment, buildings and systems that are used for many years is approved by the BOD and can only be spent during the year they are approved for. If you take a one time $25,000 capital expense and put it into payroll its not a one time expenditure but a forever expenditure. It will then occur every year. If you don't make capital purchases you never replace your editorial systems, vehicles, presses or whatever.
ReplyDeleteCapital Assets are expensed to the P&L through depreciation expense. Depreciation is determined by a schedule that assigns a life to the asset. For example a car might be 5 years, a heavy truck 10 a press 20 a building 40 years. If you take the cost of the asset say $25k and divide it by its life lets say 5 years , then the company will expense $5k of the asset value each year over the 5 years of life. The asset may exist after 5 years and be in use, but at that point it is fully depreciated and there is no more expense to be booked.
If you have any questions go talkt to your finance director or VP of finance if there are any left.
To 4:29:
ReplyDeleteEveryone gets that ad sales have dropped. Nothing new. People also understand that expenses must also drop to reflect the lost revenue. What doesn't make sense is that many newspapers are still tied to the idea of insanely high profit margins. Yes, revenue has dropped, but other industries survive on much slimmer margins than papers traditionally have. Many newspaper companies expect 20 percent or above.
I'd be really interested to know what profit margin Gannett expects from its properties. And, how has the company altered its expectations regarding margins in light of the events of the past years. Newspapers will survive. The question is whether the current companies can survive. Many expected huge margins to continue indefinitely and signed debt covenants that required margins at that level (See Morris Communications of Augusta, Ga., or Gatehouse Media Inc. of Fairport, N.Y.) I haven't checked Gannett's 10k on file with the SEC lately to figure out its overall margin. I know both Morris and Gatehouse are feeling the pain, though.
Where are you getting that Gannett demands 20% profits...those days are gone....there are not half a dozen Gannett newspapers still making 20% profit...and thats before taxes...it does not take Warren Buffett to see this...if profits were at 20+% do you really think the stock price would be at $18???
ReplyDeleteIt amazes me how people can post on this site without any knowledge of actual facts and figures.
Most Gannett newspaper/digital sites will show revenue losses in 2008 and 2009. Blame it on the economy or the internet or President Bush (he gets blamed for everything)..but income will be down huge... next year newsprint will be up 20%...transportation costs will be up 5-10%...small raises and benefits will also be up 3-10% (mostly increased health costs)...so where is the high Gannett profit expectation of 20%...you're living in the past and watching a b/w television.
If Gannett newspapers are so profitable...then why hasn't the cash rich digital folks at Google or Yahoo snapped up the print media and their 20% margins...because they don't want their payroll costs, especially newsroom and union production shops...and also they would enter in the business world where they have not been before...stockholders expecting quarterly dividend payments...
10:19 is right as far as capital expenditures go - and if the cars are bought.
ReplyDeleteI'm not sure how the sites handle this nowadays. I was at one some years ago that switched from buying to leasing all the company vehicles including the publisher's, which, of course, then made the cars operating expenses, and in turn made managers of revenue producing departments (circ. and mainly adv.) groan, because they knew they would have to budget so much more income to cover leasing expenses vs. depreciation.
12:48 a.m., when quarterly PROFITS are reported in the hundreds of millions of dollars (see earlier reports on this blog) and CEOs are getting bonuses of $1.75 MILLION, it's very, very hard for those of us in the trenches to believe we aren't being raped to sustain ridiculouly high margins.
ReplyDeleteJust taking a wild guess here, but I'd wager the "20% figure" is related to Ad sales goals. With revenues down industry wide, advertising sales goals are still set at an average of 20% YOY revenue growth during a period of time when the economy has tanked and the trends indicate the market cannot support the revenue expectations.
ReplyDeleteReps are being raped of commisions. I'm sure those savings are going directly into the pockets of Ad directors and CEO's in the form of their "cost saving" bonuses.
"You folks just don't get it"
ReplyDeleteAt my former site, one of Gannett's smallest papers, there have been 40+ layoffs this year so far. The ad dept. had a very strong history of developing revenue and site was maintaining double digit profit margins 2 years ago....until the CUT EXPENSES directive came down. Regional VP actually told us that it didn't matter what we had in the works (new revenue that we were going to bring in), only cutting expenses was acceptable since that is actual money that is cut. I.E. we cannot bank on future revenue development.
Anyone who knows anything about running a business knows that if you do nothing to invest in the future - revenue and people, if you only cut expenses, you cannot maintain a healthy business - you WILL create what you fear - less and less revenue that cutting people/resources/expenses cannot ever offset.
Gannett's current business model is desperte, demeaning, ignorant and very shortsighted/short term. I believe Gannett is digging it's own grave and those who get out now will not take the dirt nap with the corp.
I once worked at a newspaper that paid commission based on your territory size, etc. Tell me why it makes sense to pay a sales rep with a $70,000 goal the same commission as you would pay a rep with a 10,000 goal. It's ridiculous. You are going to lose your better sales people and be stuck with the slackers.
ReplyDelete10:19 gave a good explanation of capital vs. operating expense. In terms of profit margins and stock price, as a public company, it's not what Gannett expects, it's what investors and analysts expect, and how GCI compares to other industries and options for investors. That's more true than ever in these days of uncertain economic markets. Margins, growth and stability are all important to investors. If you had a spare couple of mil sitting around to invest, would you put it in Google, Citi bank, an overseas stock fund (we do live in a global economy) or GCI? What price would GCI have to fall to before you'd invest? That's the decision investors are making every day, and why the stock price is where it is.
ReplyDeletePS At our small USCP site, the GM drives his own car and gets the same $.35 (a recent increase) per mile as the rest of us.