Co.'s 3rd qtr. net profits down, operating revs up
Crestfallen over defeat, Chicago Cubs owner the Tribune Co. took some consolation in the robust baseball ratings gains at its six Fox-affiliated TV stations, but otherwise spent Thursday explaining a 24% profit drop to investors at its third quarter earnings announcement. The steep decline in third-quarter earnings compared with the same period last year was due mainly to increased expenses.
Tribune is a major shareholder in the WB network and owns 26 major-market TV stations (19 of which are WB affils) and 13 newspapers, including the L.A. Times and Chicago Tribune. Net profit for the three months ended Sept. 30 dropped 24% to $176.2 million, compared with $230.4 million last year, on account of higher newsprint charges, payroll increases at the Cubs, pension costs, a higher tax rate and the acquisition of stations in St. Louis and Portland, Ore.
Company’s operating revenue nevertheless nudged up 3.4% for the quarter to $1.39 billion, helped by steady local TV ad sales and an uptick in newspaper classifieds.
Tribune prexy-CEO Dennis FitzSimons praised the Cubs for an exciting season (and “incredible ratings”) despite the previous night’s disappointing ending. “It says something about the interest in our team when … NBC pulled original episodes in primetime.”
Broadcasting and entertainment sales rose 6.5% in the quarter to $419 million, up from $394 million last year, though operating cash flow at Tribune’s TV stations declined due to higher operating expenses. Strength at the WB and less dependence on political advertising than some of its peers helped drive revenue growth at Trib’s broadcasting unit, up 3.9% on a same-station basis. Entertainment also got a boost from the Cubs’ successful season. Tribune earnings got a particularly nice boost from its profitable 31% stake in the Food Network, which along with the WB (23% owned by Tribune) showed healthy demand at the upfront market.
Though execs said they remained only cautiously optimistic about an imminent turnaround, prospects for TV stations are improving, with broadcast sales up 8.1% in September compared with reported results of up 4.3% in July, and up 3.7% in August. Analysts said this was an encouraging sign for the fourth quarter.
“Unlike what you’ve been hearing from radio, our local advertising has been strong,” FitzSimons told analysts on the Thursday conference call. “We’re seeing some improvement in TV (ad pricing) pacing. Scatter is not as strong as last year … but some local markets are looking a bit stronger,” FitzSimons said.
FitzSimons said he was optimistic that recently acquired rights to the edited “Sex and the City” episodes would generate high ratings “at a very reasonable price” in the show’s future late fringe time slot.
He noted that the WB was off to a strong start for the fall season but like other nets was facing tough ratings competition from baseball.
Company said expenses should fall back in line in the fourth quarter while his team looks for additional ways to reduce costs.
Despite the sluggish publishing recovery (revenues in that division recorded only a 2% lift), Tribune has been pushing new launches to help corner a younger 18-34 market. Company recently expanded its Spanish language Daily Hoy! to Chicago and, earlier this month, it launched a new commuter tabloid, amNew York, in Gotham.