Business News
Sun-Times Media Group Announces First Quarter 2008 Results
Friday 09. May 2008 - Sun-Times Media Group, Inc. (NYSE: SVN) today reported a net loss of $35.8 million, or $0.44 per share, for the first quarter ended March 31, 2008, compared with a loss of $4.8 million, or $0.06 per share, in the first quarter of 2007. The Company reported an operating loss of $25.8 million in the first quarter of 2008, compared with operating income of $5.7 million in the first quarter of 2007.
The 2007 figure includes a legal settlement with a former officer of the Company, which was recognized as a reduction of expenses in the year-ago period.
The first quarter 2008 numbers reflect a 12.6 percent decline in advertising revenue, an 8.4 percent decline from the year-ago period in circulation revenue and $5.5 million of indemnification, investigation and litigation costs, which includes indemnification costs of $3.8 million related to the ongoing appeals process of certain former Company officers.
The Company reported that its cost reduction program, announced on December 14, 2007 and continued throughout the first quarter of 2008, favorably impacted expenses in the quarter. The Company is on track to meet its goal of reducing operating costs by $50 million this year.
Cyrus F. Freidheim, Jr., Sun-Times Media Group President and Chief Executive Officer, characterized the Company’s first quarter operating performance as being generally in line with its peer group. ‘Secular changes combined with a broad-based economic downturn made for a powerful one-two punch against nearly every newspaper company during the quarter,’ said Mr. Freidheim. ‘Classified and retail advertising were especially weak during the quarter. Nevertheless, Sun-Times Media Group has made significant progress toward aligning costs with advertising revenue trends in the industry.’
The Company continues to explore opportunities for revenue growth, particularly online, where suntimes.com enjoys a strong market position. ‘Our sales organization is developing strategic initiatives that will seek to expand Internet as well as print advertising opportunities throughout our entire Chicago footprint,’ noted Mr. Freidheim. ‘Additionally, we remain committed to achieving the goals we’ve shared all along: improved operating performance, resolution of the Company’s unique legacy issues, and exploration of strategic alternatives for the Company.’
Sun-Times Media Group announced on February 4, 2008 it had begun an evaluation of the Company’s strategic alternatives to enhance shareholder value, and that it had hired Lazard Freres & Co. LLC as its investment banker. These alternatives may include, but are not limited to, joint ventures or strategic partnerships with third parties, and/or the sale of the Company or any or all of its assets.
On March 25, 2008, the Company announced that it has agreed to the terms of a settlement that will resolve the various disputes and litigation between the Company and its controlling stockholder, Hollinger Inc. That settlement is subject to court approval in the U.S. and Canada.
Investor Presentation
The Company plans to review first quarter 2008 results during a conference call today beginning at 4:30pm EDT (3:30pm CDT). Mr. Freidheim and William G. Barker III, Chief Financial Officer, will host the call. Investors and other interested parties are invited to listen to the conference call by dialing (888) 680-0865 in the United States or (617) 213-4853 from abroad and entering pass code 26921502, or via a simultaneous Internet broadcast on the Company’s Web site at www.thesuntimesgroup.com under Investor Relations. A replay of the call will be available after 6:30 p.m. EDT for seven days by dialing (888) 286-8010 in the U.S. or (617) 801-6888 and entering passcode 30123388.
Review of Operating Results
Total operating revenue in the first quarter of 2008 was $81.0 million versus $91.7 million in the year-ago period. Advertising revenues declined 12.6 percent to $61.1 million versus $70.0 million in the 2007 period. Classified advertising was lower by $3.5 million, while retail and national advertising were lower by $4.1 million and $1.3 million, respectively, versus the year-ago period.
Circulation revenue was $18.3 million in the first quarter of 2008 compared with $20.0 million in the first quarter of 2007.
Total operating expenses in the first quarter were $106.8 million compared with $86.0 million a year earlier. The increase is due primarily to the legal settlement with a former officer of the Company during the first quarter of 2007. Indemnification, investigation and litigation costs for the first quarter of 2008 were $5.5 million, compared with a net recovery of $27.6 million in the same period in 2007.
Newsprint and ink expenses were $10.1 million in the first quarter of 2008, compared with $13.7 million in the first quarter of 2007, a decrease of $3.6 million, or 26 percent. Total newsprint consumption in the first quarter decreased approximately 23 percent versus the year-ago period, while the average cost per metric ton of newsprint was 6 percent lower than the same period last year. Newsprint consumption was positively affected by the combination of a daily newspaper with 13 bi-weeklies during the fourth quarter of 2007. Also, the Company changed the size and format for some newspapers and reconfigured ratios of advertising to editorial content in all newspapers to increase profitability.
Wages and benefits included in cost of sales declined $1.9 million to $24.8 million from $26.7 million a year ago, reflecting more than 400 full- and part-time job eliminations that were made pursuant to the Company’s cost-reduction plan.
Other operating costs in the first quarter of 2008 rose to $17.1 million from $14.4 million a year ago, with the increase mainly due to severance costs related to the Company’s outsourcing of its ad production, announced on February 19, 2008, a contract dispute adjustment recorded in 2007 and higher workers compensation costs.
Corporate expenses for the first quarter of 2008 were $8.5 million versus $15.5 million for the first quarter of 2007. The first quarter 2007 figure includes an adjustment of $5.0 million on the sale of newspaper operations (sold in prior years). Figures for the first quarter of 2008 reflect lower insurance costs and professional fees. As of March 31, 2008, the Company held $118.5 million in cash and cash equivalents.