With advertising in a slump throughout the newspaper and broadcasting industries, Los Angeles Times parent Tribune Co. on Thursday disappointed Wall Street with lower-than-expected operating profit and sales.
Tribune did post a substantial increase in net income for the third quarter. But much of it came from a one-time tax gain stemming from the restructuring of two partnerships with the Chandler family of Los Angeles. Excluding that profit bump, income came in slightly below analysts' consensus.
Operating revenue fell 3%, or $35 million, from the year-earlier quarter to $1.35 billion, and cash operating expenses edged up 1%, or $11 million. Of that, $4 million reflected stock-based compensation.
Net income for the quarter jumped to $164.3 million, or 65 cents a share, from $24 million, or 7 cents, a year earlier. But this year's results included 19 cents a share from the restructuring of the partnerships with the Chandlers, Tribune's largest shareholders. Without that and other one-time items, net income was 43 cents a share, a penny or two short of most analysts' forecasts.
In addition to The Times, Chicago-based Tribune owns the Chicago Tribune and other newspapers, broadcast stations including KTLA-TV Channel 5 and the Chicago Cubs baseball franchise.
Rival New York Times Co., reflecting problems besetting big-city newspapers, also reported declines in advertising and circulation revenue Thursday. Ad revenue fell 4.2% and circulation revenue declined 1.3%, contributing to a third-quarter profit drop of 39.2% compared with the year-earlier period.
Tribune shares rose 1 cent to $32.91. New York Times shares sank 51 cents to $22.74.
At Tribune, newspaper advertising revenue declined 3% in September, in line with expectations. But there was a negative surprise in a TV advertising shortfall.
Analyst Lauren Rich Fine of Merrill Lynch said the softness could reflect "dead time" between the phaseout of the old WB and UPN networks and the CW network's recent launch.
Also, analysts noted, because the majority of Tribune's 25 TV stations are not big-network affiliates, they do not greatly benefit from the surge of political advertising in this year of midterm congressional elections.
Dennis J. FitzSimons, Tribune chairman and chief executive, told analysts and reporters during a conference call that the performance of Tribune's digital businesses was a bright spot.
However, analyst Edward Atorino of Benchmark Co. said movie advertising "disappeared" during the quarter, causing him to worry about long-term trends in Hollywood's spending. Movie advertising in the company's newspapers was down 10% for the quarter and 17% year to date.
The effect of the tepid performance on Tribune's biggest business unit, the Los Angeles Times, remains to be seen, the newspaper's managers were told at a meeting Thursday morning.
The Times' revenue dropped 2.1% to $257 million and expenses dropped 3.8%, contributing to improved cash flow.
The newspaper is projecting revenue of $1.09 billion for 2006 and a 2.1% reduction in costs to $850.8 million, resulting in pretax cash flow of $240.1 million, less than 1% lower than the previous year.