Tribune Co. Reports Big Declines in Publishing Division's Profits and Cash Flow

By: Jennifer Saba The Tribune Co. reported today that publishing operating profit plummeted 32% to $132 million, the division's cash flow dropped 26% to $174 million, and Q3 earnings per share was $.37, compared with $.53 for the same period last year.

But the publishing division's operating revenue for the quarter increased 2% to $981 million, and its newspapers advertising revenue grew 2.6%, with gains in retail, up 3.8%, national, up 1.1%, and classified, up 2.3%.

The company took a $55 million pre-tax charge in Q3, or $.10 per share, to address advertisers affected by circulation problems at Newsday and Hoy. It also announced steep declines in reported circulation at the Los Angeles Times and Chicago Tribune in the upcoming Audit Bureau of Circulations FAS-FAX report.

"This was a challenging quarter for the company, due to an uneven economy and soft advertising environment," Dennis FitzSimons, Tribune chairman, president, and CEO, said in a statement. "Overall, we generated more than $300 million in operating cash flow, aggressively managed our costs, and made significant progress resolving circulation issues with advertisers at Newsday and Hoy, New York. Most important, internal audits at our other large newspapers detected no evidence of circulation misstatements like those at Newsday."

FitzSimons clarified that no other papers have experienced circulation scandals like Newsday and Hoy even though the Los Angeles Times and Chicago Tribune reported steep declines. "We don't see issues like [what happened at Newsday] at all. We took all the newspapers in the organization to a very hard frisk," FitzSimons said.

In another potentially troubling development, executives told analysts during this morning's conference call that only 18,000 out of 40,000 Newsday advertisers signed their settlement agreement relating to the circulation shortfalls, which had a deadline of October 15.

When pressed by analysts why Tribune's acceptance rate was lower and taking longer than Belo's, which reported an advertiser acceptance rate of 80% within a two months span, executives pointed to a legal bog. Newsday and Hoy asked advertisers to sign waivers agreeing not to join any class-action suits in conjunction with cash make-goods.