The Breakdown

Explaining Southern California's economy

The news keeps getting worse for Kushner and the Register

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51198 full

Less than two months ago, I had a lengthy conversation with Orange County Register publisher Aaron Kushner right before he launched the Los Angeles Register, and I asked him about the financial health of his company:

You’ve had to make layoffs, you had to stop matching employee retirement contributions, you had trouble putting up the money for the Press-Enterprise sale, you’ve been sued by the Register’s former owner’s for not making a payment. … All these things suggest that your company is not in great financial shape.

To the contrary, we closed the Press-Enterprise transaction in six weeks, which anyone who has purchased large complex businesses knows is really quick. And we did close it. The proof is in the pudding. When you look at the facts of what we have accomplished and what we are accomplishing, we are a very dynamic and growing business and expect to continue to grow.

Are you profitable?

We’re very happy with where we are. We expect that we’ll have a very healthy and profitable year this year.

It now appears Kushner was either not aware of the financial troubles at his company, or more likely, was being less than completely candid with me. In a memo to staff on Tuesday, obtained by the Romenesko media blog, Kushner outlined a series of cost-saving measures:

• a company-wide, two-week furlough during the months of June and July (see related FAQ)
• voluntary severance packages within the newsroom
• restructuring of the sales team to ensure sustainable, cost-effective growth
• Long Beach Register transitioning from a standalone edition to daily section within the Los Angeles Register, and a standalone Sunday section delivered to 61,000 households and within subscriber copies of Los Angeles Register on Sundays.

Media analyst Ken Doctor, who has followed Kushner's experiment in Santa Ana and beyond as closely as anyone, thinks the moves raise questions about the immediate viability of the Register;

As a package, the announcement — delivered by email, without a newsroom meeting — shocked the company. It’s a big red flag, screaming we’re running out of money really soon, following numerous months of yellow flags.

Yesterday my KPCC colleague Larry Mantle tried to pin Kushner down on exactly how his newspapers are doing, with little success. 

I have to say, if I worked for you, hearing your description and the lack of specifics, I'd be very nervous about the future. 

"Any other questions?"

Speak to that, please, what do you say to your employees? How do you convince people that things are going to go in a positive direction?

"Our employees who actually see our numbers and understand what we're doing as a private company see and feel every day the growth that we're experiencing."

Actually, a number of commenters identifying themselves as employees of Freedom, which is the Register's parent, wrote in the comments section of Larry's interview that they worry about the future of the company.

Meanwhile, frequent Kushner critic Gustavo Arellano, editor of the OC Weekly, obtained a confidential slideshow Kushner presented to investors in December, when he was apparently trying to raise $12 million to keep Freedom afloat. The slides don't contain any of the financial specifics that Kushner always refuses to share, but they do show the extent of the company's reliance on buildings and land to stay solvent.

Kushner's main leverage to ensure the future of his company and convince investors he'd be financially solvent? Real estate.

Unbeknownst to Register staff at the time, he planned to sell all of Freedom's land and property, which he estimated would bring $81 million by the beginning of 2015.

As Arellano writes, it's not clear if Kushner got his $12 million. This week's events suggest otherwise.

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