For the second year in a row, the Star Tribune was profitable enough to cut employees an extra check, though a pension bite reduced the amount by three-quarters.
The award for 2011 — $300-per-fulltimer — is down from $1,163 in 2010. CEO Mike Klingensmith says the reason was pretty straightforward: The Strib’s pension contribution tripled, from $4 million to $12 million.
That $8 million difference works out to about $800 for each of the Strib’s 1,000 employees, almost completely accounting for the profit-sharing difference.
Still, it’s an accomplishment that the paper, two years out of bankruptcy, has profits to share. (Another accomplishment: Newsroom staffing remains steady in the 260s.) While Klingensmith told employees the Strib “didn’t meet every number,” he had reason to add “we feel good about our results.”
Circulation revenue rose in the mid-single-digits, which nearly offset an advertising decline of the same magnitude. Because the revenue split is 59 percent advertising/41 percent circulation, the Strib’s 2011 cash flow slipped 3 percent from the previous year. The Strib’s 2011 budget forecast a smaller ad drop.
There was still enough to fund the pension, fully match 401(k)s and give the $300 spiff. And Klingensmith is confident enough to predict profit-sharing checks will be bigger next year, even as the Strib continues pension payments and resumes repaying its post-bankruptcy debt.
Despite these balmy results, it’s worth noting that the Strib newsroom will have gone without a pay raise for four-and-a-half years when the contract expires in January 2013. Negotiating a deal with employees (whose pensions were also frozen post-bankruptcy) will be a big deal for the CEO around Turkey Day.
For 2012, Klingensmith projects flat overall revenues, with ad sales sinking in the “low-single-digits” and circulation rising in the “high-single digits.”
He’s cheered by a 93 percent renewal rate for new digital subscribers, the first three weeks of whom largely stayed after an introductory buck-a-week rate doubled.
Klingensmith adds that digital access — bundled free with print subscriptions — has resulted in a 20 percent response-rate increase from direct-mail and in-paper solicitations. Overall, the Strib counts 12,300 “brand-new customers who subscribed to digital,” Klingensmith says.
Though the initial wave of sign-ups has crested, 1,500 new digital subscribers signed up in January. Twenty percent of the new digital subscribers added the Sunday print edition, and print circulation rose despite the first price hike in 15 years.
The Strib had $100 million in debt when it emerged from bankruptcy in 2009, and paid down $15 million in 2010. Though there was no 2011 reduction, Klingensmith says he expects a similar $15 million buy-down in 2012.
With interest rates low and cash flowing, the Strib can manage interest payments on that debt. Conversely, low rates on corporate bonds and U.S. Treasury bills reduced the ability to discount future pension liabilities, which forced last year’s higher increased contribution. Klingensmith expects a much lower pension payment in 2012.
The paper is also making some under-the-radar investments, transitioning an ad-circular product known as Twin Cities Values from mail to carrier delivery. The 530,000-copy TCV is a “total market coverage” product that gets Sunday ads to non-subscribers.
With the postal service raising rates and potentially dropping Saturday service, it’s at the very least a cost-cutting move; Klingensmith notes the Strib might be able to deliver other Saturday products if the mail carrier only comes weekdays.