David Carr and Ravi Somaiya on the spin-off of Time Inc. from Time Warner:
The new entity will start off with $1.3 billion in debt, including $600 million that will go toward a one-time cash dividend to Time Warner shareholders. That stands in stark contrast to Rupert Murdoch’s News Corporation, which was given a $2 billion cash cushion when it was spun off into a separate company last year. At approximately three times earnings, Time Inc.’s debt is high-risk, and Moody’s has rated it at less than investment grade.
As recently as 2006, Time Inc. produced about $1 billion in earnings, a figure that is now down to $370 million. Revenue has declined in 22 of the last 24 quarters, which has tried the patience of both investors and Jeffrey L. Bewkes, Time Warner’s chief executive.
I’m a bit late to this, but there are a couple staggering things here. Earnings have been sliced by almost two-thirds — in just eight years. And the amount of debt they’re saddling this thing with seems absolutely insane. It’s really hard to see how Time Inc. exists in ten years. Maybe even five.