More Cost-Cutting at 'Star' Publisher American Media
Promises Long-Awaited Financial Restatement by Feb. 15
By Nat Ives
Published: February 02, 2007
NEW YORK (AdAge.com) -- American Media today finally sketched the scope of its long-delayed financial restatements, copped to the damage done by Star'snewsstand slump and revealed that a new cost-cutting effort is coming fast.
American Media Chairman-CEO David Pecker
Photo Credit: Darryl Estrine
Uncertainty among staff
Each front has been a hot one for the company, where uncertainty prevails among the staff. American Media has already missed several deadlines to file its restatements. It was also recently swamped by rumors -- eventually denied by Chairman-CEO David Pecker -- that Star would be moved back to the company headquarters in Boca Raton, Fla., in a bid to save money.
In a filing to the Securities and Exchange Commission, American Media said its restatements, now due Feb. 15, are expected to affect $32.8 million of operating income over the restatement period.
Will Dolce stay?
The company said in February 2006 that it would restate results for the fiscal year ending March 31, 2005, and the following two quarters because they "should no longer be relied upon." It said it believed that the restatements would result in a revenue reduction but would not change operating income.
Today's filing also said that the quarter ending Dec. 31 had failed to meet forecasts, mostly because of weak newsstand sales for Star. That weakness, widely noted in the highly competitive celebrity-weekly category, has already produced speculation that Star Editor in Chief Joe Dolce won't remain at American Media after his contract expires at the end of March.
'Action plan'
Cash flow for the quarter totaled $21.5 million, down 10% from the final quarter of 2005. The company said the quarter ending March 30 should look a little better because of a recovery in Star sales, lower costs and relatively weak results in the equivalent quarter a year earlier.
To improve the company's cash flow, the filing revealed, management has developed an "action plan" that will boost revenue -- and cut costs even more.
A company spokesman declined to comment on the plan or whether it would include measures like layoffs or magazine shut-downs.
The filing did not mention the company's still-unfulfilled attempt to sell five magazines -- Muscle & Fitness, Flex, Muscle & Fitness Hers, Country Weekly and Mira -- an effort it announced last June.
