Dec 15, 2007 4:33 pm US/Central
Sun-Times Plans To Cut '08 Costs By $50 Million
CHICAGO (AP) ―
Sun-Times Media Group Inc., owner of the Chicago Sun-Times and dozens of smaller area newspapers, said Friday it will reduce operating costs by $50 million in 2008 and make more layoffs in the face of a "terrible" market for print advertising.
The company, under pressure from shareholders to return to profitability and boost its collapsed stock price, said its board of directors endorsed management's latest cutback plan Thursday. A year of restructuring moves under CEO Cyrus Freidheim have yet to pay off; Sun-Times Media lost $192 million in the third quarter on a 7 percent decline in revenue.
The latest plan, to be implemented in the first half of the year, includes $10 million in anticipated savings from its recent distribution agreement with the Chicago Tribune and the consolidation last month of two suburban papers -- the Daily Southtown and the Star -- into the Tinley Park, Ill.-based Southtown Star.
Freidheim told the staff in a memo that it will be "by far the biggest cost-reduction effort in our company's history," including a reduction in staff, further outsourcing of selected activities and reformatting of the company's products.
Specific details are still being worked out and will be disclosed next month, he said.
The company has failed to achieve one of the most important goals of its nearly year-old turnaround plan: to slow and eventually stabilize the decline in advertising revenue, Freidheim said.
"The market for print advertising has been terrible," Freidheim said. "Simply put, we have to accept that the print advertising market may never again reach the levels of the past. Consequently, we must scale our organization to meet that reality."
In separate remarks aimed at investors, he said, "The future of the company rests on management's ability to size anticipated costs with anticipated revenues to achieve profitable operations."
The board's adoption of the plan came two days after the company's largest shareholder, K Capital Partners, voiced its dissatisfaction with the continued decline, urging it in a letter to develop a new strategy and to inform investors of the key points by Jan. 15.
Boston-based K Capital, which owns a 9.8 percent stake, also said the company should compensate executives and directors entirely in stock and limit 2008 compensation.
The company, while not mentioning the demand, took steps in that direction. It said Freidheim and other executives have agreed to take a portion of their 2008 compensation in shares of Sun-Times Media Group Class A common stock and board members have agreed to receive 100 percent of their 2008 annual retainer fees in stock.
"Management needs to set an example and demonstrate the confidence it has in the future of Sun-Times Media Group," Freidheim said in a news release.
In 2006, when the company lost $56.7 million, former CEO Gordon Paris received $3.7 million in compensation and Freidheim, who succeeded him 13 months ago, got $1.2 million.
Sun-Times shares rose 6 cents to $1.20 in Friday trading. They have lost more than 80 percent of their value since April.
(© 2009 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)
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