Lefty "News" Media Going Under--Tribune Profit Falls 28 Percent in 1Q
By DAVE CARPENTER AP Business Writer Apr 13 2006
CHICAGO
Tribune Co., the newspaper publisher and radio and TV station operator, said Thursday that first-quarter profit fell 28 percent as revenue edged lower and the company absorbed stock-based compensation expenses and one-time charges.
The results slightly exceeded analysts' expectations but testified to the continuing slump in the newspaper business, with circulation from Tribune's 11 dailies down 3 percent and revenue from its newspaper division down 1 percent.
Tribune, whose holdings also include 26 television stations and the Chicago Cubs baseball team, also said revenues from its TV unit sank 2 percent, although the decline was the smallest since 2004.
The company, which has cut some 1,200 positions as part of a cost- cutting program initiated last year, said tight cost controls remain in effect.
Net income for the three months ended March 26 declined to $100.7 million, or 33 cents per share, from $140.8 million, or 44 cents per share, a year earlier. The results included severance charges and a non-operating loss totaling 6 cents per share, stock-based compensation expenses of 4 cents per share, and a 1 cent per-share gain from a property sale.
Excluding certain items, operating results were 38 cents per share _ 2 cents better than the estimate of analysts surveyed by Thomson Financial.
Revenue edged down 1 percent to $1.3 billion from $1.32 billion last year, with newspaper ad revenue remaining flat. Strength in classified, with interactive revenues up nearly 30 percent, was offset by declines in national and retail advertising.
"While there were some bright spots in our first-quarter revenue picture, overall results continue to reflect the challenging ad environment," CEO Dennis FitzSimons said on a conference call. "But our focus on cost control is paying off."
Besides the benefits of lower labor-related costs, he singled out a 1 percent gain in individually paid circulation _ home delivery plus single-copy purchases _ as encouraging. He said other, less profitable means of circulation are being "managed down," which reduces newsprint and distribution expenses.
In the publishing division, comprising Tribune's newspapers, operating profit fell 12 percent to $174 million and revenues slipped by $9 million to $997 million. The company cited the $19 million cost associated with new union contracts at Newsday in Long Island, N.Y., along with $7 million of stock-based compensation expense, partially offset by a $7 million gain on property sales.
The broadcasting and entertainment division saw operating revenues drop 2 percent to $303 million and operating profit rise 3 percent to $69 million. The favorable comparison was attributable to the Cubs' 2005 trade of Sammy Sosa to Baltimore, which caused Tribune to accelerate the payment of Sosa's salary and resulted in a $13.5 million charge in the first quarter last year.
Tribune shares rose 21 cents to $28.23 in midday trading on the New York Stock Exchange _ down 7 percent in 2006 and 47 percent from their all-time high of $53 on Feb. 2, 2004. The stock last week sank to its lowest price, adjusted for a split, since 1998 _ $27.09.
While FitzSimons said the stock is undervalued, analysts remain wary of the company's prospects unless it sells one of its businesses to generate cash. In a report to investors after the earnings report's release, Lauren Fine of Merrill Lynch criticized "a seeming reticence on the part of management to try to surface value through either asset sales or more material dividend or share repurchase proclamations."
Analysts have singled out the Cubs as a logical holding to be sold. But FitzSimons reiterated in an interview with Tribune's WGN-AM radio last week that the team is not for sale, denying the suggestion that the baseball club is a non-strategic asset and calling it a "tremendous asset" that fits well with WGN-TV, WGN radio and cable TV superstation WGN.
Dave Novosel, a Chicago-based analyst for the Gimme Credit research firm, said the company might need to wait out what he sees as a partly cyclical downturn in the industry while continuing to ramp up Internet-related operations to offset the loss of newspaper ads.
"I don't know that they really need to sell anything, because they have plenty of liquidity and they still generate very good cash flow," he said. "There's not really a need for cash. ... I don't think there's anything that Tribune management can do differently that can have a large impact."
Addressing the stock slide, FitzSimons reminded analysts that management and employees own nearly 10 percent of Tribune shares so "we're all intensely focused on shareholder value."
"We'll look to improve returns to shareholders over the long term through revenue improvement and continued expense control," he said. "We've made progress, and that will continue."
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