Tribune Co. sees 4th-quarter dive - What could happen if you endorse Bush for President.

Tribune Co. sees 4th-quarter dive

February 2, 2006

BY ERIC HERMAN Business Reporter

Profits at Tribune Co. plunged 38 percent in the last three months of 2005, the Chicago-based media giant said Wednesday.

Tribune, owner of a newspaper and television empire as well as the Chicago Cubs, said fourth-quarter profits fell to $134.4 million, or 43 cents per share, as revenue tumbled 5 percent to $1.41 billion.

Tribune has suffered, along with other media companies, from a tough advertising environment and declining newspaper circulation. In response, it took cost-cutting steps last year. Special charges related to those measures were largely responsible for the fourth-quarter profit decline, analysts said.

"I'd like to think that most of the worst is behind us. But what Wall Street wants to see is signs of an improving environment, and we're still not there yet," said Eric McKissack of Chicago-based Channing Capital Management, which owns 600,493 Tribune shares.


Tribune's shares fell 30 cents, closing at $28.71 Wednesday. The shares fell 27 percent in 2005, and now trade at levels not seen since the fall of 2001.

Some observers said the company might have to take drastic action -- a major asset sale or some other structural change -- if the shares do not recover.

"If we do find the stock at the same level six months from now, my sense would be that there would be some type of announcement," said John Miller of Ariel Capital Management, Tribune's fifth-largest shareholder with 9.6 million shares. "It's just one of those situations where the board would have to explore more aggressive strategic alternatives."

Last week, Wall Street barely noticed Tribune's announcement it would carry the new CW Television Network on 16 of its television stations. The network will combine programming from the UPN and WB Networks, which will cease operations.

Tribune owns such major-market newspapers as the Los Angeles Times, Newsday and the Chicago Tribune. It also owns 26 television stations. At those and other properties, "recent revenue trends don't give us much confidence," Deutsche Bank analyst Paul Ginocchio wrote in a report issued Wednesday.

In Tribune's newspaper division, the company's largest, advertising revenue declined 2.1 percent, and revenue from circulation, or daily newspaper sales, fell 4.3 percent. Meanwhile, ad sales in the broadcast division dropped 11 percent.

In this environment, Tribune Chairman Dennis FitzSimons said Wednesday he remains committed to reducing costs. Last year, the company cut 900 jobs and closed an L.A. Times plant in Southern California.

In all, FitzSimons reduced the growth of expenses to 2.7 percent in the fourth quarter, down from a 4.3 percent jump a year earlier.

The cost-cutting steps taken last year will save the company $55 million to $60 million in 2006, FitzSimons said.