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Oct. 20--In its continuing battle against a deteriorating market for traditional advertising, Tribune Co. served up a mild disappointment with its third-quarter earnings report Thursday.
The owner of the Chicago Tribune, Los Angeles Times, WGN-TV and other media assets posted a 2.5 percent decline in revenue and a 17 percent slide in operating profit.
The news came amid the industry's general and persistent malaise--The New York Times Co. announced a 2.4 percent revenue decline Thursday--and investors seemed relieved that the results weren't even worse.
"At least advertising isn't precipitously declining," said Charles Bobrinskoy, vice chairman of Ariel Capital Management, Tribune's fourth-largest shareholder.
The company actually reported a sharp gain in net income compared with the third quarter a year ago, to $164.3 million, or 65 cents a diluted share after preferred dividends, from $24.0 million, or 7 cents a share.
But this year's results included a one-time after-tax gain of $48 million, or 19 cents a share, from the unwinding of two contentious partnerships with the company's largest shareholder, California's Chandler family. Excluding that gain and other non-operating items, Tribune earned 43 cents a share, 2 cents less than analysts had been forecasting, according to Thomson Financial.
On the print side of the business, advertising revenue fell 2 percent, or $17 million, as ad sales declined 2 percent at the Los Angeles Times, 5 percent at the Chicago Tribune and 10 percent at Newsday in New York.
Auto and national ads continued the erosion that has plagued the industry all year. But the slow housing market actually provided a ray of hope: Real estate classifieds shot up 24 percent as owners struggled to sell homes that are staying on the market longer.
Tribune's interactive properties, led by CareerBuilder, also delivered some positive results. Interactive revenues rose 28 percent, to $61 million, and now make up 8 percent of the publishing unit's total ad revenue, up from 6 percent a year earlier, according to a company spokesman.
Broadcasting and entertainment revenues, meanwhile, dropped 3 percent, to $393 million. Tribune Chairman and Chief Executive Dennis FitzSimons said that political advertising should help improve results in the fourth quarter and that the newly launched CW Network "will drive improved prime-time ratings and revenues at our television stations."
During a conference call, FitzSimons shed little light on the company's plan to restructure itself other than to reiterate that he expects to have a strategy in hand by the end of the year. On Wednesday, the company announced that Morgan Stanley had been retained to advise the special committee of independent directors that was formed to oversee the process.
FitzSimons did say, however, that despite continued declines in revenues it is unlikely he will cut more than the $200 million in annual costs he pledged earlier this year. That effort alone is far from complete and will continue into 2007 and 2008, he said. At the moment, the company is creating 2007 operating budgets and is still deciding on further staffing and expense reductions.
Asked whether he thought further job reductions would "cut to the bone"--a complaint that led to the forced resignation earlier this month of former Los Angeles Times Publisher Jeffrey Johnson--FitzSimons insisted not. He pointed out that some of the cost cutting will come from efficiencies created by new investments in technology that allow the papers to work more closely together.
"We want to make sure we keep quality high," he said, "We can accomplish that without cutting into the bone."
Shares of Tribune gained a penny, to $32.91, on the New York Stock Exchange.
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