Chairman-CEO David J. Pecker recently told bondholders that Star and American Media would cut costs and increase revenue with measures including staff reductions, increasing cover prices at certain titles, and combining some of Star and National Enquirer's newsgathering operations. With some of those steps complete, such as the newsroom consolidation, today's layoffs finish the effort.
"He made a very strategic move in December with the newsgathering," the spokesman said. "The sharing of information has paid off tremendously. Advertising is up at Star. Our weekly newsstand sales have been consistently up since January."
The move today also comes as the company released a long-awaited restatement of its financials to the Securities and Exchange Commission. The documents, filed March 23, revealed among other things that the SEC has opened an informal query in connection with the restatements themselves. "We cannot predict the outcome of this inquiry, including whether the SEC will take any action against the company," American Media said.
Corrections for accounting, presentation and disclosure were made in 23 areas, including rack costs, subscription marketing programs, paper consumption, severance, bonuses, advertising, editorial costs and bonuses. The net financial impact of the restatements was not overwhelming; adjustments for the fiscal year ended March 2004 and the fiscal year ended March 2005 reduced net income by just $24.6 million in total.
Loss of $160 million in '06
In last week's filings, American Media also revealed how it did in the fiscal year ended March 2006: a net loss of $160.9 million (compared with a loss of $13.8 million a year earlier) on revenue of $496.2 million (down from $501.8 million).
The loss was largely a result of a $147.5 million impairment charge that American Media took to reduce the value on its balance sheet of some trade names -- National Enquirer, Star, Weekly World News, Country Weekly, National Examiner, Sun and MiniMag -- and the goodwill of the Star and Weekly World News. American Media has yet to file quarterly reports for the fiscal year ending March 31.
Bonnie Fuller's contract details
The filings also detailed many terms of the company's latest contract with Bonnie Fuller, its exec VP-chief editorial director and the subject of rumors (which she denies) that she's looking for a new gig. She gets an annual salary of $1.5 million, a minimum bonus of at least $500,000 each year, a "target bonus" of $1 million, and incidentals such as first-class travel, accommodations at hotels such as the Four Seasons, $80,000 a year for car services and up to $20,000 per year in "properly documented hair and makeup charges for business-related appearances."
Her contract, which was extended last summer, runs through March 31, 2009, but is subject to certain confidentiality and non-competition provisions that would restrict her options if she and the company parted ways.
Others in the magazine industry, facing a tough business climate and challenges from new media, have also scoured their operations for costs to reduce. Earlier today, for example, Meredith Corp. closed Child magazine and eliminated 60 positions. Time Inc. has eliminated hundreds of jobs since a reorganization began in December 2005.
Jossip posted rumors of layoffs at Star earlier today, asking "Is Today 'Tuesday, Bloody Tuesday' At Star Magazine?"