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Tribune's Earnings Decline 80%, Hurt by Tax Ruling

October 14, 2005|From Times Staff and Wire Reports

Tribune Co., parent of the Los Angeles Times and KTLA-TV Channel 5, said Thursday that third-quarter profit tumbled 80% because of an adverse tax ruling that forced it to take a huge charge.

The Chicago-based media company's results also showed continuing sluggishness in advertising sales and lower revenue from newspaper circulation, although Tribune said circulation trends were showing improvement.

Net income for the three months ended Sept. 25 was $24 million, or 7 cents a share, after preferred dividend payments, down from $121.7 million, or 37 cents, a year earlier.

Results included a $150-million charge related to a federal Tax Court ruling disallowing a tax-free reorganization of the Matthew Bender division, a former unit of Times Mirror Co., which Tribune acquired in 2000. The quarter also included a $27-million gain from derivatives and other investments.

Excluding those items, Tribune said operating earnings were 50 cents a share, or 2 cents higher than the consensus estimate of analysts surveyed by Thomson Financial.

That helped Tribune shares rise 77 cents to $32.58, a day after sinking to their lowest level in four years.

Revenue declined slightly to $1.4 billion from $1.41 billion. Tribune's holdings include 11 daily newspapers, 26 TV stations and the Chicago Cubs.

"On the newspaper side, things look pretty good," said John Miller, an Ariel Capital Management money manager in Chicago. His firm is Tribune's No. 5 investor, with 10 million shares. "Ad trends are encouraging. We were somewhat discouraged in terms of the results on the broadcasting side."

Tribune executives told analysts that they continued to evaluate the company's mix of assets, adding that they would consider a transaction such as trading a TV station in one market to get a duopoly in another.

"It wouldn't make a lot of sense for us to get specific right now, but believe me, we're looking at the portfolio and looking at everything that we can do to improve shareholder value," Chief Executive Dennis FitzSimons said.

Merrill Lynch analyst Lauren Rich Fine said that circulation was finally stabilizing at Tribune's newspapers, but that the company still faced overall fundamental weakness in the newspaper business, among other issues.

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