Sun-Times narrows 3Q loss, to cut more costs

CHICAGO - The Sun-Times Media Group Inc. posted a narrower loss in the third quarter on Thursday and said in a letter to shareholders it'll undertake more cost-cutting measures, potentially job cuts, as ad revenue continues to drop.

The Sun-Times Media Group, which publishes the Chicago Sun-Times and some 70 community papers in the Chicago area, 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.

The company 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. It determined the acceleration of revenue declines in the industry and at the company, along with the negative outlook for the economy, were indicators of potential impairment.

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, while classified advertising fell 21 percent. The company said retail advertising declined 13 percent and national advertising tumbled 24 percent.

At the Chicago Sun-Times, advertising revenue fell 19 percent, while suburban newspaper advertising revenue was down 17 percent.

Internet advertising revenue was down 2 percent, and made up 5 percent of total advertising revenue in the quarter.

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

The flagship paper's Monday to Friday circulation fell 3.9 percent, above the industry's decline of 4.6 percent in the period. Sunday circulation rose 4.5 percent in the six-month period ending Sept. 30, far ahead of the 4.8 percent drop the industry reported. Circulation in the suburban publications had a slight decrease year over year.

The paper, like many in the industry, is seeing advertising revenues decline on a drop in readership and advertisers cutting back on their own expenses amid a weakening economy.

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

Chief Executive Cyrus Freidheim Jr. wrote in a note to shareholders that 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. The company has planned another major cost reduction program of between $45 million to $55 million, to be implemented in the next nine months. The two efforts will reduce the company's cost base by nearly 30 percent, he wrote.

The letter 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.

Freidheim said the company was continuing to explore 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.

Freidheim said he expected ad revenue to stabilize as advertisers look to increase their advertising by early 2010.

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