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Union: Pioneer Press the only MediaNews paper losing money

When Pioneer Press holding company Affiliated Media announced a pre-packaged bankruptcy Friday, a company press release noted that of its 54 dailies and more than 100 non-dailies, “all but one of our newspapers is profitable.” Turns out the unprofit

When Pioneer Press holding company Affiliated Media announced a pre-packaged bankruptcy Friday, the press release noted that of its 54 dailies and more than 100 non-dailies, “all but one of our newspapers is profitable.”

Turns out the unprofitable one is the Pioneer Press.

That’s according to the PiPress Newspaper Guild. In a memo to members, the Guild’s leadership quoted Marshall Anstandig, a vice president with Affiliated Media operating company MediaNews Group:

Including interest payments on its debt, the Pioneer Press lost money in 2007, 2008 and 2009.  Excluding the interest payments on its debt, the Pioneer Press still lost money in 2007 and 2009, according to our independent audit. The Pioneer Press was the unnamed newspaper cited in MediaNews’ Friday press release as losing money, Anstandig said.

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That’s a bombshell. If the PiPress is losing money for MediaNews CEO and self-declared industry consolidator Dean Singleton beyond the debt he’s shucking, it means the odds of the PiPress surviving just dipped.

Seth Faison, a MediaNews spokesperson, said he “couldn’t confirm or deny” the Pioneer Press was the sole paper in the red. PiPress Guild spokesman Dave Orrick would not comment, citing a contract renegotiation vote happening Thursday and Friday.

The Guild stunner means that, barring revenue gains, even reduced post-bankruptcy debt won’t put the paper into the black. It explains why the PiPress has been unable to replace departing reporters for more than a year, and why Guild members are voting on a 9-10 percent compensation cut.

While the company appears to classify the PiPress as a money-loser, by one measurement, it is not. The Guild memo (below) notes that the paper made an 2009 operating profit (known as EBITDA, or Earnings Before Interest, Taxes, Depreciation and Amortization). Across town, the Star Tribune consistently made an operating profit before, during and after its recent bankruptcy; its leaders have said EBITDA is their preferred measure of financial health, although critics say the method excludes too much.

In the past three years, the Pioneer Press has shown consistent, if small, circulation gains in an industry bleeding readers. Singleton has also touted MediaNews’ smaller-than-industry-average ad-revenue declines — but those are still declines, which obviously more than offset any circ-revenue growth.

In an employee memo Friday, Singleton declared “No layoffs, sale of newspapers, facility closings or consolidations are anticipated as a result of” the bankruptcy. But that doesn’t include ongoing business reversals.

To be clear: I still have no evidence of one local paper selling out to another. However, when a Wall Street Journal reporter asked Singleton about Twin Cities consolidation, the CEO replied: “Look at a map.”

Despite the PiPress vulnerabilities, it is unclear whether Singleton would sell his paper, or buy the Strib, or reduce expenses by sharing operations with his rival, or stand pat and hope revenues recover. The Star Tribune won’t comment about potential dealings with MediaNews.

Below are the three Guild memos:

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Guild vote on contract modifications to go forward

Coming just one day after the Guild’s tentative agreement with the Pioneer Press on contract concessions, Friday’s announcement by MediaNews about a “pre-packaged” bankruptcy filing has prompted a flurry of questions from members.

Guild leaders have worked through the weekend to get answers to those questions.  Based on what we’ve learned, and what we already know, our vote on the modifications to our contract will go forward as scheduled this Thursday and Friday.

This bulletin contains updated information that the Guild has obtained from Marshall Anstandig, general counsel and senior vice president for labor relations at MediaNews.  Anstandig, who led the company’s negotiations with the Guild, spoke over the weekend with Publisher Guy Gilmore and MediaNews executives to answer questions posed by the Guild.

This bulletin also contains additional information about the financial condition of the Pioneer Press that was obtained through an earlier review of company finances by an auditor employed by our union.

The key question posed by members — Why are we agreeing to concessions if the company just reduced its debt costs? — goes to the heart of the negotiations that led to last week’s agreement.  After all, debt expense has been cited a key contributor to the paper’s financial troubles.  That question is answered below.

Other members asked about the status of our contract and benefits and what steps the Guild is taking to protect members’ rights.

In addition to the list of questions and answers below, this bulletin also restates the key terms of the tentative agreement that was reached last week.  In that agreement, the Guild agreed to financial concessions in exchange for a guarantee that no layoffs would occur through the last payroll period before Feb. 1, 2011.


Does Friday’s MediaNews announcement about the so-called “pre-packaged” bankruptcy filing affect our contract?

No.  The Guild contract, which runs through July 31, 2011, remains in effect.

Does Friday’s announcement change the tentative agreement that was reached with the Pioneer Press?

No.  The tentative agreement to modify our contract stands and still will be put to a membership vote.  There are two voting periods: from 4 to 6 p.m. on Thursday, Jan. 21, in the basement conference room of the Pioneer Press, and from 10 a.m. to noon on Friday, Jan. 22, at the Crowne Plaza.  Friday’s meeting at the Crowne Plaza also will be an informational meeting for those who couldn’t attend our meeting last Friday.

Under the agreement with MediaNews’ lenders, would the debt of the Pioneer Press be reduced?

Yes.  The debt, and the interest on that debt, would be reduced, but not eliminated, according to Marshall Anstandig, general counsel and senior vice president for labor relations for MediaNews.  Much of that debt is attributable to the purchase of the Pioneer Press in 2006.

What does the Guild know about the financial condition of the Pioneer Press?

In preparation for the negotiations that occurred last week, the Pioneer Press agreed to permit a financial analyst from our parent union, the Communications Workers of America, to review its finances dating back to 2006.  We are limited, because of a confidentiality agreement, from reporting specific numbers. The review by our financial analyst did confirm, however, that the Pioneer Press has faced and continues to face severe financial stress, primarily related to debt and declining advertising revenue.

If the debt is reduced, why are we voting on concessions to our contract?

The debt reduction will help the Pioneer Press, but the paper still has financial problems related to sharp declines in advertising revenue.  Including interest payments on its debt, the Pioneer Press lost money in 2007, 2008 and 2009.  Excluding the interest payments on its debt, the Pioneer Press still lost money in 2007 and 2009, according to our independent audit. The Pioneer Press was the unnamed newspaper cited in MediaNews’ Friday press release as losing money, Anstandig said.

What happens if the tentative agreement is rejected by the membership?

Anstandig, who spoke with Publisher Guy Gilmore and MediaNews executives over the weekend, said the company’s intentions are the same: It will lay off 25 to 26 Guild-represented employees in the absence of an agreement to cut costs.

“Due to the continued revenue decline and projections through this calendar year and next, plus our increased pension and newsprint costs, if the TA (tentative agreement) with the Guild is rejected, we would proceed with our plans to dramatically reduce the workforce,” Anstandig said.  “Likewise we intend to proceed in our discussions with the other unions to reduce our cost structure and operating inefficiencies.”

What steps is the Guild taking to protect members’ rights and benefits as the company files for bankruptcy?

The international has provided financial and expert assistance in recent months to several locals whose employers have filed for bankruptcy.  In anticipation of the MediaNews filing, the Guild announced on Saturday that it has retained legal counsel with expertise in bankruptcy proceedings, and committed to make sure the voice of our members is heard and the interests of our members and retirees are protected.

“The Guild, with help from CWA, has been proactive in addressing bankruptcies in our industry. Being named to the creditors’ committee in five cases is one example,” said Carol Rothman, secretary-treasurer of The Newspaper Guild-CWA, at a meeting of Guild leaders from MediaNews papers on Saturday in San Francisco.  “We must get our members, locals and contracts through to the other end of this process, with some confidence that they can influence the results.”

Two unit officers from the St. Paul unit — Gayle Grundtner and Dave Orrick — attended that meeting in San Francisco.

More answers to your questions

We’ve heard some additional questions, along with follow-up questions to ones we answered in the last bulletin. We’ll try to answer new questions and clarify other ones here.

Q:  Since the company’s “pre-packaged” bankruptcy filing does not affect our contract, why are we still voting on concessions this week?

A: Regardless of the debt reduction under the agreement with MediaNews’ lenders, the Pioneer Press still has financial problems. If the Guild does not agree to cut costs, the company still says it will lay off 25 to 26 Guild-represented employees.

Q: Does the bargaining committee still recommend members vote “yes” to the tentative agreement?

A: Yes. Despite some tough cuts, it still protects the contract in important ways and attempts to make the cuts more equitable among members.

Q: Managers have told workers that the Pioneer Press was operating with a small profit, but the Guild’s last bulletin said the newspaper is losing money. Which one is it?

A: The Guild had been told the same thing as recently as November. The answer to the question isn’t simple; it depends on the measurement used to analyze the books.

Apart from what managers and other company officials have said, here’s what we know, based on an independent review.

The Pioneer Press agreed to allow a financial analyst employed by our union to review its finances before our negotiations last week.  Here’s what he found: By the financial measurement used by the company, which included interest payments on its debt as an operating expense, the company lost money in 2009.  By what our analyst characterized as the more standard measurement, which excluded interest payments on its debt, the company still lost money, though less, in 2009 (and the same was true in 2007 as well).  By a narrower measurement, in which our analyst calculated earnings before interest, taxes, depreciation and amortization were taken into account, the company generated positive income in 2009.

In Friday’s announcement about the “pre-packaged” bankruptcy filing, MediaNews reported that one unnamed paper in the company was losing money. That paper was identified by a company official over the weekend as the Pioneer Press.

Our financial analyst also looked at revenue trends and reported that, beyond the company’s debt burden, there’s been a sharp, consistent decline in advertising revenue year over year since 2006 — the same trend affecting the newspaper industry as a whole. To stay ahead of that declining ad revenue, the Pioneer Press, like most other newspapers, has reduced expenses through layoffs, buyouts, attrition and other cuts.

The Guild bargaining committee concluded that, based on the analyst’s report and projected trends, the Pioneer Press was, indeed, facing severe financial stress, and that additional cuts were inevitable. And the bargaining committee knew, based on the company’s stated intent, that 25 to 26 layoffs would occur unless an agreement was reached to find other cost savings.

Q: The tentative agreement calls for a 37.5-hour work week. Does working less than 40 hours a week affect workers eligibility for benefits, such as health insurance?

A: No, working 2.5 hours a week less won’t impact your health insurance.

There is an assumption that when you take vacation or holidays during the one year that employees are on a reduced work week, you’d be paid at the lower rate. Our contract specifies that you accrue a partial day of vacation for each day worked – presumably, that partial day of vacation accrual would be based on 7.5 hours, rather than 8 hours, pay. And, on a holiday, if you don’t work, you’d get paid at the new daily rate: 7.5 hours.

Q: I’m out of town on Thursday and Friday. Is there absentee voting?

A: We wish we could accommodate everyone, but we no not have time to carry out absentee voting. Absentee ballots have to be mailed to members’ homes and returned to a Guild post office box, to preserve the integrity of the ballot. We couldn’t make arrangements for this to happen before the vote must be done.