By: Mark Fitzgerald
Sun-Times Media Group Inc. reported late Thursday a net loss of $168.8 million, or $2.04 per diluted share, narrowing slightly its loss of $192.4 million, or $2.39 per share, from a year ago — but forcing the company to impose a new round of deep cuts, its CEO said.
Last summer, the publisher of the Chicago Sun-Times and dozens of other Chicago-area papers completed an extensive round of expense cuts by reducing staff by 19%, outsourcing distribution, and cutting the physical size of its newspapers.
“In the first half of 2008, we successfully implemented a $50 million annual cost reduction, which we expected would stabilize the company’s cash flow. It didn’t,” CEO Cyrus F. Freidheim Jr. wrote to shareholders. “We have developed and are implementing another major cost reduction program of $45 million to $55 million. We expect to implement these actions during the next nine months. In total these two programs are expected to reduce our cost base by almost 30 percent. Our goal is to be cash flow neutral while preparing for a future economic rebound.”
Freidheim said the company’s cash position shrank by $16 million in the third quarter, and stands at $99.8 million, excluding another $10 million in Canadian asset-backed securities it has been unable to redeem because of the collapse of that market.
Operating losses at Sun-Times widened to $227.8 million in the third quarter of 2008 compared with a year-ago operating loss of $23.2 million. The 2008 results include a non-cash goodwill impairment charge of $209.3 million reflecting accelerated revenue declines and the precipitous fall in its market capitalization. As its stock collapsed to pennies per share in the past year, its market cap has tumbled, too. At close of trading Thursday, Sun-Times shares (OTCBB: SUTM) were priced at 10 cents, and indicated a market capitalization of just $7.81 million.
Ad revenue in the quarter fell 18% to $59.1 million, Sun-Times said. Classified advertising revenue dropped 21%, retail was down 13%, and national off 24%.
Sun-Times also became the latest newspaper company to report a drop in Internet advertising revenue. It said Internet ad revenue fell by 2%. It represented 5% of total ad revenue for the third quarter.
In his letter to shareholders, Freidheim responded to the suggestion made earlier this week by Davidson Kempner Capital Management LLC, owner of a 5.9% stake in Sun-Times, that the company cut its board of directors to five members, replacing four with Davidson Kempner nominees, keeping one present director, and eliminating the others, including Freidheim.
“The board intends to consider this request with full consideration of its fiduciary responsibility to act in the best interests of all shareholders and its other stakeholders,” Freidheim wrote. He also said the company continues to explore strategic alternatives, including a sale and deregistering as a public company.