Sunday, April 01, 2007

AMI bleeds $160 million

AMI bleeds $160 million

By Jeff Ostrowski
Palm Beach Post Staff Writer ness/epaper/2007/03/30/a1d_ami_0330.html

A flood of red ink! Jobs axed! Plunging circulation! Restated earnings!

In this tabloid tale the tables have turned for Boca Raton-based American Media Operations Inc., and its finances are the story.

The once highly profitable AMI, publisher of the Star, National Enquirer and Weekly World News,restated earnings last week, acknowledging mistakes in its accounting in a filing with the Securities and Exchange Commission.

The publisher of fitness magazines and pulpy tabloids reported a $160 million net loss for the year ended March 31, 2006. Much of the red ink came from a charge for writing down the values of eight publications and AMI's MiniMag unit.

An AMI spokesman declined to comment, but the SEC filings painted a grim picture of a company that's struggling to cut costs to offset falling sales.

"Our newspapers have experienced declines in single- copy circulation," AMI said in its filing. Circulation of National Enquirer fell to 802,000 in 2006 from 1.2 million in 2004, while sales of the wacky Weekly World News dipped to 83,000 in 2006 from 153,000 in 2004.

AMI blamed increased competition from the Internet - where sites such as and provide gossip for free - and other print publications.

The company has tried to make up for the decline in circulation by raising prices. National Enquirer, for instance, costs $3.29 now, up from $2.35 in 2004.

All the while, AMI is struggling under the weight of more than $1 billion in debt. It paid $86 million in interest in fiscal 2006, its filing shows.

Media observers such as Martin Walker, a New York publishing consultant, aren't surprised that AMI is struggling in a climate that has been harsh to print publishers.

"They were heavily leveraged and in debt to begin with," Walker said. "Newsstand sales in general were down across the board for magazines. And you can get the salacious stuff on the Internet. It's a confluence of a lot of things."

AMI offers no publicly held stock, but it is compelled to report to the SEC because its bonds are publicly traded.

Two rating agencies, Standard & Poor's and Moody's, steadily have lowered AMI's rating deeper into junk territory, AMI reported. Standard & Poor's rates AMI CCC-, while Moody's ranks it Caa2. Those ratings are only a few steps above default and reflect what the agencies see as a high level of risk for bondholders.

Interest in the tabloid giant's fate isn't limited to Wall Street.

Two people familiar with the company who asked not to be identified said AMI is in crisis and noted that the company has been unable to cut its way to success.

"There's nothing that can save the empire," one said.

Even so, AMI continues to cut. MediaWeek reported that AMI cut 20 staffers this week, including 12 at the Star. And the company said last year that it was seeking buyers for Muscle & Fitness, Muscle & Fitness Hers, Flex, Country Weekly and Mira!

AMI had about 1,400 employees as of March 31, 2006. Its operations include newsrooms in Boca Raton, New York and Los Angeles. AMI is headed by David Pecker, who was paid $1.5 million in 2006.


AMI Aftermath: Inside the Star Slashings
From JOSSIP aftermath-inside-the-star-slashings- 20070330.php

The tales from American Media Inc.'s bloodshed this week have been pouring in — and there's plenty to sift over. With cuts at Star in the 10-20 range, there's plenty of folks willing to share war stories of their own and of now-former colleagues. As you'll recall from when we broke rumors of the staff slash, among the axings were exec editor Jon Auerbach, film and television critic Marshall Fine, and in-house publicist Kate Ottenberg.

Most staffers were let go the lazy way: as a group, with HR vice prez Daniel Rotstein leading the parade. Says one witness: "Most of the editorial people were let go at the same time in the conference room," says a witness. "So basically, they had like 10 people in there and were like, 'You're all fired.'" Ouchy.

We're told that editorial director Bonnie Fuller had little to do with deciding to fire masthead members, or even much say in who stayed or left. Rather, new Star EIC Candace Trunzo and National Enquirer chief David Perel called the shots, with David Pecker ready to OK anything that cut costs (and that went beyond Bonnie's hair styling salary). Something about losing $160 million last year and carrying $1+ billion in debt.

"There are some incredibly incompetent people who survived," chimes one insider, "including a few reporters and Coburn Communications." The PR department's Number Two, Nekiesha Walker, remains, says a current staffer.

Elsewhere, we're told that even current staffers will be suffering: Employee benefits (health insurance, smealth insurance) are being cut and the Delray office in Florida is being consolidated into Boca Raton's operations.

And while Fuller will deny she's hunting for a new gig – who wouldn't after your car expenses get capped? – she is said to be considering a jump even quicker now that her confidants have been removed.

No comments: