The Star Tribune has posted a $1.8 million operating loss in its first six weeks in bankruptcy, according to court documents filed Friday.
The paper grossed $24.2 million from Jan. 15 to March 1, and spent $26 million. Management also racked up a hefty $2.2 million in reorganization costs, which are not reflected in the operating loss.
Until now, Strib has managed a profit even as its business deteriorated and it stopped paying off $480 million in debt. In 2008, for example, the operating profit was $31 million.
The danger for a bankrupt business is that no one will lend you money to cover losses, leaving only cutting to keep the doors open.
However, the Strib had squirreled away $25 million before its mid-January filing to keep operating, and the new documents shed some light on the bankruptcy move’s timing. Despite the $4 million lost to operations and reorganization, the paper’s cash position actually soared to $34 million as Christmastime advertising payments came in.
Even for solvent businesses, the first quarter is typically the worst, so it’s unwise to generalize about a full year based on these figures. The Strib grossed about $16 million a month in January and February; it has projected a monthly average of $17 million for the year.
If historically better quarters outpace economic deterioration and the advertising shift from print, the ’09 projection is makeable.
Still, how does a paper that lost $1.4 million in February hope not just to be profitable, but earn enough to pay back whatever post-bankruptcy debt is left after Christmastime cashflows abate?
Management’s answer is clearly labor cuts: the newest figures do not reflect $20 million management is steadily extracting from union workers. That amounts to $1.67 million a month. (Union officials say the actual cuts may be higher.)
Another $10 million has come from the nonunion workforce; it’s unclear how much of that is reflected in the January-February numbers.
On Wednesday, it was revealed that 10 non-newsroom executives received a collective $2.6 million in 2008, including $530,000 for its chief financial officer. Management has not quantified how much, if anything, it will save on that line item.