Thursday, March 15, 2012 08:53 am
Parachutes get more golden at GateHouse
On the same day that GateHouse in its annual report disclosed shrinking revenue and profits, LinkedIn, the online company that connects employers with job candidates, reported that newspapers have, percentage-wise, shed more jobs during the past five years than any other industry in the United States.
Since 2007, the number of jobs at U.S. newspapers is down by more than 28 percent, LinkedIn reported. The trend holds true at the State Journal-Register, which last year shut down its press and shifted printing operations to Peoria, resulting in the loss of more than 50 local jobs. In January, a dozen SJ-R employees were laid off, just days after publisher Walt Lafferty announced that the newspaper will shut down its copy desk this summer, reducing employment by another 10 workers.
But GateHouse chief executive officer Michael Reed and two other top executives won’t have to worry as much about losing their jobs, given new severance packages approved last week by the GateHouse board of directors.
Under terms of his exit deal that is based on his salary and annual bonus, Reed, who is paid $500,000 a year, would get $98,611 a month for 27 months, for a total of more than $2.6 million in monthly payments if he is terminated without cause. In addition, he would receive a year of health insurance, plus a pro-rated payout based on the annual bonus due the year he loses his job. This year, the GateHouse board of directors bumped his bonus from $750,000 to $800,000. By contrast, under his previous severance deal Reed would have received a year’s salary plus his annual bonus – less than half what he would get now if he loses his job. Two other top executives also got sweetened severance deals.
On the downside, the 325,000 shares of GateHouse stock that Reed received when he was hired in 2006 were worth just $16,250 when the company issued its annual report last week. The shares were worth more than $7 million on the initial day of trading in 2006, when GateHouse shares topped out at $21.60 each. The company was de-listed from the New York Stock Exchange two years later, when the price fell to below $1 a share. The stock now trades over-the-counter at around a nickel.
In a written statement, Reed last week put a rosy face on dismal year-end numbers: Revenue was down by $30.2 million and operating income fell by $9.3 million. Net loss was more than $22.2 million, which was $4.4 million less than in 2010, when net loss was more than $26.6 million. Earnings for the fourth quarter were up by 4.3 percent, but down by 7.9 percent for the full year. Advertising revenue dropped by 3.4 percent while circulation revenue dipped by 4 percent. Operating costs declined by 5.5 percent. Daily circulation at the State Journal-Register was 40,595 according to the annual report; it was 55,574 in 2007.
“We are starting to see some positive changes in our trends resulting from the strategic initiatives we embarked on in 2011,” Reed said in a press release posted on the GateHouse website. “I am pleased with the implementation of a more structured approach to many of the functional areas of our business and the impact it is having on our results.”
The enhanced severance packages and financial declines come as a debt of more than $1 billion comes due in 2014. GateHouse borrowed the money to buy a string of publications, including the State Journal-Register in 2007, shortly before the economy tanked along with the value of newspapers. GateHouse owns 97 daily newspapers and nearly 200 weekly publications across the nation.
Contact Bruce Rushton at email@example.com.