'Chicago Sun-Times' Parent Reports Widening Q3 Loss On $165.8 Million Charge

By: E&P Staff Sun-Times Media Group (STMG) lost $194 million, or $2.41 per share in the third quarter, mostly on a non-cash write-down of accumulated tax credits, the parent of the Chicago Sun-Times said in a Securities and Exchange (SEC) filing Friday.

STMG took a charge of $165.8 million on the quarter. The tax credits, accumulated from previous losses, can be used, but accounting rules mandate that their value should be lowered if there is "significant evidence" the company is not going to be profitable enough in the future to take advantage of the credits.

In the same period a year ago, STMG lost $34 million, or 43 per share.

STMG's operating loss widened in the third quarter to $23.2 million from $22.4 million for the third quarter of 2006.

STMG, publisher of about 100 papers in the greater Chicago market, said its ad revenue turned down 6%, its circulation revenue fell 7% -- and it continues to spend heavily on litigation costs. The company spent $7 million in third period, mostly related to picking up the defense for ousted Chairman Conrad Black and three other former top executives who were convicted in federal court for fraud.

Separately, STMG said it is laying off 20 full-time and 11 part-time Daily Southtown newsroom employees as a result of the merger of the newspaper with the twice-weekly Start newspapers. The merged daily, renamed the SouthtownStar, begins publication Nov. 18, the company said.

The laid-off employees will continue at their jobs until the end of the year, STMG said.

In a conference call, STMG CEO Cyrus F. Freidheim Jr. said the company is "simply not where we wanted to be in the third quarter." He noted that the paper had narrowed its loss since the second quarter of the year.

STMG's total operating revenues in the third quarter of 2007 were $92.5 million against $99.5 million in the year-ago period.

Total operating costs and expenses in the quarter declined 5% to $115.8 million. Sales and marketing costs, however, increased 8%, "primarily related to increased compensation costs for additional sales staff," STMG said.

As of September 30, STMG said, it had $131.8 million in cash and cash equivalents on hand. It also has Canadian asset-backed commercial paper with a face value of $48.2 million that it has been unable to redeem since the summer. In the quarter, it said, STMG took a charge of $4.8 million to reduce the net carrying value of the paper.