Death spiral memo

Sent: Friday, July 11, 2008 4:40 PM
To: OSC DL Management Update
Subject: A Message from Chief Financial Officer Robyn Motley

Management Team,

As you know, advertising revenue has declined significantly year over year. In addition, substantially higher newsprint prices and fuel costs have negatively impacted our operating cash flow.

Teams across the company have responded by implementing both revenue and cost containment initiatives and we applaud their efforts, which have helped stem the tide. However, the advertising outlook for the balance of the year remains challenging, and we don’t see newsprint or fuel prices reversing any time soon. Therefore, effective immediately, we are calling on each of you to significantly reduce, and eliminate where possible, all discretionary spending, defined as that which does not generate revenue or impact our ability to publish or deliver our products.

The list of discretionary expenses outlined below is by no means all-inclusive. Please review all expenses and use your best judgment about which line items, in addition to these, can be reduced or eliminated. While you may consider some of these reductions to be relatively insignificant, collectively they will add up to substantial savings. It is also essential everyone uses the same good judgment. So, we would ask managers and supervisors to communicate the same expectation to their staff, especially those who hold PCards and AMEX cards.

While these more stringent cost containment efforts are to begin immediately, over the next few weeks, each Director will work with his/her staff and budget analyst to project potential savings for the balance of the year.

Cost Containment Initiatives:

· Reduce total labor expense, defined as the total of regular pay, overtime, temp help, freelance and contractor expense.
· Significantly reduce or eliminate employee/employee entertainment. Reduce or eliminate all other entertainment except customer entertainment.
· Reduce business travel and mileage expense except for customer visits and editorial coverage.
· Reduce conference fees and the related travel expense by sending fewer people.
· Eliminate business gifts except for those pre-approved by division VP.
· Eliminate company events, except employee recognition meetings/events.
· Significantly reduce or eliminate food and beverage at employee-only meetings.
· Reduce dues and subscriptions.
· Flower arrangements should not be budgeted, but absorbed in the budget, if warranted.
· Reduce outside training, opting instead for in-house training or training the trainer.
· All company memberships must be approved by the CFO before renewal.
· Review cell phone/PDA expense to ensure that charges are correct and that company issued devices are still warranted for all employees listed.
· Consolidate and reduce office supplies proportionate to recent FTE reductions.
· Any expense that is eligible must be capitalized, and all capital must be approved by the CEO.
· Above all, challenge the status quo by assessing the business benefit of all expenditures. Spend only what is necessary, not necessarily what’s in your budget.

Our management team has a long history of quickly responding to challenges such as the one we currently face, and I have every confidence that we will again meet this challenge. Thank you in advance for your help and please do not hesitate to contact Doug Vance or me if you have any questions or require additional clarification