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California and the West

Tribune Posts Declines in Profit, Circulation

July 14, 2006|Joseph Menn | Times Staff Writer

As Tribune Co. reported Thursday a 62% profit drop and accelerating circulation declines, the owner of the Los Angeles Times and KTLA-TV Channel 5 struck a conciliatory posture in its battle with California's Chandler family.

"We will look forward to moving constructively with the Chandlers," Tribune Chief Executive Dennis FitzSimons told analysts during a conference call. "They are important shareholders."

FitzSimons' comments marked a change from last month's acrimonious spat between the management of the Chicago-based newspaper and television company and the Chandlers, who acquired a major stake in Tribune when it acquired Times parent Times Mirror Co. in 2000.

Last month, the Chandlers lost a bid to stop Tribune from borrowing money to repurchase as much as 25% of the company's shares. They called Tribune's strategy for uniting television and newspaper ownership "disastrous" and argued that the company should spin off its television assets to reverse a slide in the stock price.

The Chandlers have said little since the stock repurchase went through, and a family spokesman declined to respond to FitzSimons' overture Thursday.

Investors said FitzSimons' shift could signal a recognition that even though the Chandlers had tax reasons for opposing a buyback, other shareholders are likely to agree that structural change is in order.

"If you've got one of your biggest holders pressing you for changes, they can't be ignored," said analyst Peter Appert of Goldman, Sachs & Co.

Tribune shares fell 2.6%, or 85 cents, to $31.50 on Thursday after the earnings report and conference call.

"Abatement of tensions with a large shareholder would probably not be a positive sign, because it might mean more status quo," said Eric McKissack, chief investment officer of Channing Capital Management, which owns 600,000 Tribune shares.

Tribune's second-quarter earnings plunged to $88 million, or 28 cents a share, from $233 million, or 73 cents, a year earlier. The drop had been anticipated, and more than half of it came from writing down the value of two television stations that Tribune is selling.

Investors were more concerned about a 1.4% decline in revenue, to $1.3 billion, because analysts had projected a slight increase. The average paid daily circulation at Tribune's 11 metropolitan papers, which include the Chicago Tribune and New York's Newsday, fell 5% to 2.9 million copies.

Circulation revenue fell by the same proportion. Only a gain in website ad sales kept overall advertising in the publishing division at the same level as a year ago.

"People were hoping for some improvement, or at least signs of stabilization," McKissack said. "Circulation trends are worsening." In the first quarter, daily paid circulation fell 3%.

Newsprint prices rose 12%, and advertisers continued to move to the Web, where FitzSimons said Tribune would keep investing.

Tribune executives said they planned to finish the multi-stage stock buyback by purchasing 20 million shares on the open market before the year's end.

Tribune Publishing President Scott Smith, who oversees the company's newspapers and their related websites, said his division would "contribute by far the biggest portion" of a previously announced $200 million in annual cost cuts.

As the largest Tribune paper, The Times is expected to absorb some of those cuts.

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