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Star Tribune’s July is break-even

The bankrupt paper earned $24,000 in operating income between June 29 and Aug. 2, as sales fell but compensation costs slid more.
By David Brauer

As the Star Tribune prepares to exit bankruptcy next month, it can point to July as a sign of better things.

On an operating basis, the Strib made $24,000 between June 29 and Aug. 2 — only the second month in the black since filing Chapter 11 in mid-January.

When the paper exits bankruptcy — currently projected for late September — an operating profit won’t be enough. Interest payments will resume, though at $9 million to $10 million a year, far below the $35 million due in 2008.

The Strib will service that debt with earnings before interest, taxes and depreciation (EBITDA) — a measure of cash flow the business spins off. In the newest reporting period, cash flow totaled $1.35 million; if operating revenues and costs stay the same, the paper should be able to pay its new owners, who (for now) are its secured creditors.

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The reorganization plan forecasts $2.3 million in interest payments between October and December 2009 — but $9.4 million in EBITDA.

The Strib still posted a $831,000 net loss for June 29-Aug. 2 period, thanks to $1.37 million in bankruptcy-related costs, offset by a $518,000 income tax benefit. However, the paper is still sitting on $35 million in cash, its highest total since late March.

Sales totaled $16.6 million for this 35-day period. On a daily basis, revenue fell 11.2 percent from the June 1-28 report. However, compensation plunged faster: 17.7 percent. Throughout bankruptcy, there have been similar variations plus or minus, especially on the comp side.

The paper’s assets declined by $3.4 million, primarily on a drop in accounts receivable, while liabilities fell by $2.5 million, thanks to lower accounts payable and accrued compensation.