Tribune Retains Morgan Stanley After Disappointing 3Q Results

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By: Jennifer Saba

The Tribune Co. has retained Morgan Stanley as its financial advisor on the recommendation of the board’s independent special committee.

Meanwhile the company’s largest papers continue to struggle against what is shaping up to be a brutal advertising environment.

Publishing operating cash flow fell 13% or $185 million while operating profit declined 17% to $141 million in 3Q.

Advertising revenue at the company’s newspapers dropped 2%. Excluding Newsday, it fell 1%.

Retail advertising was flat though some papers including the Orlando Sentinel and the Chicago Tribune reported growth. Preprint revenue dropped 1%. Excluding Newsday, it was up 1%.

National advertising dropped 8% with declines in most categories including entertainment. On a conference call this morning with analysts and investors, executives said that movie advertising is down 10% in 3Q and 17% year-to-date. In Los Angeles, movie advertising represents about 10% of the paper’s ad revenue.

Scott Smith, president of Tribune Publishing, attributed the drop-off to smaller movie ads and shorter theater runs.

Classified advertising revenue for the company decreased 1%. Within that category real estate advanced 24%, auto decreased 15%, and help wanted slipped 10%.

Tribune continues to wrestle with declining circulation trends. For the quarter, circulation revenue was down 6%. Smith said they were trying to stabilize individually paid circulation. Part of that strategy involves offering discounts to home subscribers.

During the call, executives broke out the performance of its biggest paper when asked by an analyst. Ad revenue at the Los Angeles Times slipped 2% in 3Q. At Newsday, it was down 10%. The Chicago Tribune’s ad revenue dropped 5%. At The Sun in Baltimore, revenue was down slightly — though the results weakened compared to 2Q.

When asked about the transition of publishers at the Los Angeles Times, Smith responded that it’s “going very smoothly. David [Hiller] is absolutely the best executive to step in to that situation.”

Tribune fired Los Angeles Times Publisher Jeffrey Johnson in October after he went public with his dismay over pending cost cuts. Hiller, most recently publisher of the Chicago Tribune, was tapped to take the helm.

The company’s Chairman and CEO Dennis FitzSimons said that Tribune was still working through its plan to save $200 million, and that the company has no plans for further cost cutting at this point.

When pressed if Tribune was “getting down to the bone” in terms of cuts, FitzSimons responded: “We’ve invested a lot too … in common systems. We tried to keep our quality high,” compared to other companies. “In terms of staffing we are in very good shape.”

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