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Topic: Memos Sent to Romenesko
Date/Time: 2/19/2008 6:18:00 PM
Title: Bay Area News Group buyout memo
Posted By: Jim Romenesko
 
Memo regarding Bay Area News Group (BANG) buyouts. BANG includes the Contra Costa Times, Oakland Tribune and other MediaNews Group-owned papers

From: Armstrong, John
Sent: Tuesday, February 19, 2008 2:07 PM
To: &EB All
Subject: Important Announcement from John Armstrong

Dear Colleagues:

As you are well aware from my State of the Company remarks and my monthly updates, we are faced with huge financial challenges. There is no need to repeat the reasons for them now, other than to emphasize the challenges are of historic proportions.

One example: In January BANG-East Bay had a positive cash flow, but only because of an accounting adjustment. Looking back nearly 30 years in the history of the Contra Costa Times, we could find only one month in which the paper had a negative cash flow, in 1991 when Bush I invaded Kuwait.

With the housing slump continuing, with widespread talk of a recession, Pete Herschberger, Advertising & Marketing VP, and his team took another look at advertising revenue prospects for the balance of this fiscal year and for the 2009 fiscal year, from now through June 2009.

It's not a pretty picture. We think the short-term future, from the current quarter looking forward 16 months, will continue to show advertising revenue declines, although at less severe rates as we move into the 2009 calendar year. At the same time, our costs will continue to increase. Newsprint, our most expensive commodity, is expected to have three price increases this year alone.

We reviewed these projections with Mac Tully, the new publisher at San Jose who now also is responsible for all of BANG, and Steve Rossi, the MediaNews executive vice president who, with George Riggs' departure, is now responsible for the California Newspapers Partnership. We did some tweaking of the forecast, showing modestly better results in some categories, weaker performance in others. We also projected our costs if we made no major changes in our operations.

When we finished that work, we reached the unavoidable conclusion that we must reduce our operating costs, and we must do so quickly. And we cannot accomplish what we need to accomplish without reducing the size of our workforce. In the past few months, we've relied on attrition to bring down the number of employees, but that no longer is adequate./CONTINUED

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