Sun-Times Loses $168M; Plans New Cuts

The Sun-Times Media Group Inc. told shareholders Thursday that dropping ad revenue will force it to take more "aggressive actions" to cut costs, including potential job cuts, and posted a narrower loss in the third quarter.

"In view of the worsening market conditions, the company is taking even more aggressive actions to reduce costs," Cyrus Freidheim Jr., president and CEO, said in a letter to shareholders. "Our organization understands the severity of the situation and the need for urgent action."

Woes for the company, which publishes the Chicago Sun-Times and some 70 community papers in the Chicago area, mirror those in the industry, and include a drop in advertising revenues as the financial meltdown forces advertisers to reduce their own expenses.

"Although we expect a weak market through 2009, we believe that our economy will recover and that the industries on which we depend will increase their advertising by early 2010," Freidheim said.

The company implemented $50 million in annual cost reductions in the first six months of the year in an unsuccessful attempt to help its cash flow, he said. The company plans to cut an additional $45 million to $55 million over the next nine months.

Freidheim did not specify how the company would cut costs.

"Outsourcing, downsizing and elimination of poorly performing products continue to be the key roads to cost reduction," he wrote.

Also Thursday, The company reported a net loss of nearly $168.8 million, or $2.04 a share, in the three-month period ended Sept. 30. That compares with a net loss of nearly $192.4 million or $2.39 a share, in the same period last year.

It said its quarter's operating loss of $227.8 million, wider than a loss of $23.2 million last year, included a non-cash charge of $209.3 million for the impairment of goodwill and other intangible assets. Total operating revenue in the quarter fell 15 percent to $78.8 million from $92.5 million last year.

Advertising revenue dropped 18 percent to $59.1 million. At the Chicago Sun-Times, advertising revenue fell 19 percent, while suburban newspaper advertising revenue was down 17 percent.

Circulation revenue fell slightly to $18.5 million from $18.9 million last year. At the Chicago Sun-Times, circulation revenue dipped 1 percent and suburban newspapers circulation revenue fell 4 percent.

The company noted its headcount is down 19 percent to about 2,340 employees in the last 12 months.

Freidheim said the company would seek out alternatives, such as a sale, deregistration or continuing as a public company, but he noted that may not be possible given the economy.

"The current financial and credit crisis and the state of our industry make the process difficult," he wrote.

Copyright AP - Associated Press
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