F+W Media, Citing Debt, Decline And Mismanagement, Files For Bankruptcy Protection


F+W Media, dealing with near-term liquidity points with solely about $2.5 million in money accessible and $105.2 million in excellent debt, yesterday filed for defense underneath Chapter 11 of the federal chapter code, citing in varied paperwork an ideal storm of secular decline, poor investments, and even mismanagement.

Writer’s Digest, left, with a 1921 situation of the journal, is one in every of F&W Media’s best-known publications. (AP Photo/David Kohl)ASSOCIATED PRESS

The New York-based firm, one of many nation’s largest publishers of specialty and fanatic media, stated it plans to promote its companies whereas persevering with to function, in an effort to “maximize the value of their estates for the benefit of all their stakeholders.”

F+W’s portfolio is various, together with on-line schooling, print and digital books and magazines, subscription video websites, client and commerce occasions, and curated e-commerce shops. Its manufacturers embrace Deer and Deer Hunting, Sky & Telescope, Old Cars Weekly, Popular Woodworking, CoinsNumismatic News, and varied crafting titles, amongst others. In all, it segments its media into ten classes, together with crafts, artist’s community, collectibles, writing, open air, sky & telescope, woodworking, household tree, development, and horticulture.

The segments, which F+W calls “communities,” produced a complete of $67.7 million in income in 2018. The largest was the crafts neighborhood, with $32.5 million, and the second largest was the artists community, with $eight.7 million. The firm’s guide division, which produces about 120 new books annually and has a backlist of two,100 titles, produced $22 million in 2018.

F+W stated within the chapter filings that it has an estimated 1,000 to five,000 collectors. It estimates belongings at $50 million to $100 million, and liabilities at $100 million to $500 million. Its checklist of unsecured collectors learn like a who’s who of magazine-industry suppliers. Among the highest 30, it owes:

  • LSC Communications $2.7 million
  • Oracle America $952,582
  • Palm Coast Data $729,025
  • Adobe Systems $695,233
  • R.R. Donnelley Asia Printing  $689,626
  • ProCirc $377,386
  • Zinio $109,294

It additionally owes $486,138 on a lease in Norcross, Georgia; $400,723 to the guide writer Dover Publications; and $82,024 to Lindenmeyr Paper. The full checklist of collectors might be seen right here.

Over the previous decade, F+W has grown considerably, buying Catalyst Aspire Holdings Corp., Frontenac Aspire Holdings Corp., Aspire Media, Aspire Operations, and Interweave Press. But within the final 12 months it has scrambled to divest varied belongings.

According to a declaration by CEO Gregory Osberg that accompanied the submitting paperwork, the chapter was attributable to a number of elements, inner and exterior, most of them associated to a shift towards ecommerce in 2008. First, the marketplace for subscription print periodicals of every kind, together with these revealed by F+W, has been in decline over the past decade. Indeed, since 2015 alone, F+W’s subscriber base decreased from 33.four million to 21.5 million, and its advert income decreased from $20.7 million to $13.7 million. As a results of this pattern, the corporate shifted into digital platforms and ecommerce.

However, in line with Osberg, one consequence of this shift to digital commerce was that the corporate entered into varied expertise contracts that elevated capital expenditures by 385% in 2017 alone. And as a result of it ventured into fields the place it lacked experience, “it soon realized that the technology used on the company’s websites was unnecessary or flawed, resulting in customer-service issues that significantly damaged the company’s reputation and relationship with its customers,” Osberg stated in his assertion. In 2018 within the crafts enterprise alone, “the company spent approximately $6 million on its efforts to sell craft ecommerce and generated only $3 million in revenue,” he stated.

A 2017 restructuring lowered debt, however “largely as a result of mismanagement, the Company exhausted the entire $15 million of the new funding it received in the six (6) months following the Restructuring,” CEO Osberg continued. “In those six (6) months, the Company’s management dramatically increased spending on technology contracts, merchandise to store in warehouses, and staffing, while the Company was faltering and revenue was declining.”

“The Company’s decision to focus on e-commerce and deemphasize print and digital publishing accelerated the decline of the Company’s publishing business,” Osberg continued, “and the resources spent on technology hurt the Company’s viability because the technology was flawed and customers often had issues with the websites.”

Ultimately, the previous CEO and several other high managers had been dismissed and Osberg took over on January ninth, 2018. “Immediately following my appointment, I worked to create analytics and determined that the worst performing business channel of the Company was its ecommerce channel,” Osberg stated in his declaration. “Of the Company’s four (4) major channels, the only channel that did not positively contribute to the Company was the channel responsible for physical products sold through e-commerce.”

It bought off belongings all through final 12 months, however could not construct a cash-flow mannequin that projected sustained liquidity. Among the belongings bought:

  • The Keepsake Quilting e-commerce enterprise for $2.45 million.
  • Blade, a knife collector journal and enormous commerce present, for $four.34 million. These belongings bought for roughly $2.45 million and $four.34 million, respectively
  • The Martha Pullen on-line enterprise for roughly $1.54 million.

Ultimately, “realizing that periodic asset sales are not a long-term operational solution,” the F+W board decided that the one viable various was to pursue a sale transaction throughout the context of a chapter 11 submitting.

 



Source link Forbes.com

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