Earnings Preview: Tribune Co. (Dinosaur Media Extinction Alert

NEW YORK (AP) -- Tribune Co. reports earnings for the first quarter on Thursday. The following is a summary of key developments and analyst opinion related to the period.

EXPECTATIONS: Tribune Co., publisher of the Chicago Tribune, Los Angeles Times and other papers, is expected to post earnings of 36 cents per share on revenue of $1.3 billion for the quarter, according to Thomson Financial.

ANALYST TAKE: "Given Tribune's heavy exposure to challenging metro markets, we believe revenue growth will be muted in 2006," JPMorgan analyst Frederick Searby said. "We are estimating flat revenue growth."

Bear Stearns analyst Alexia Quadrani, in a note, said Tribune is likely to continue aggressively managing its costs structure amid a challenging ad outlook. But "rising newsprint prices and increased health care and benefit expenses will likely pressure results," said Quadrani, who expects Tribune to fall just shy of analysts' estimates with earnings of 34 cents per share.

QUARTER DEVELOPMENTS: Tribune said during the quarter that its revenue fell 3 percent in February from last year, as both advertising and publishing revenue declined. Tribune's February advertising losses were led by an 11.5 percent decline in national advertising, mainly because of lower automotive and movie advertising. Circulation revenue fell 3.9 percent.

Earlier in the quarter, Tribune said it would relinquish its 22.5 percent stake in The WB television network in exchange for a 10-year affiliation deal to carry a new network launched by CBS Corp. and Warner Bros. Tribune will carry the network, "The CW," on 16 of its stations.

COMPETITORS: Gannett Co., the largest newspaper publisher in the country, reported Wednesday an 11.5 percent decline in profit for its first quarter as the company began expensing stock options and recording costs from its new newspaper partnership in Detroit. Despite the slip, Gannett's results were in line with the Street's expectations.

Elsewhere in the sector, Dow Jones & Co., publisher of The Wall Street Journal, received a debt downgrade from Moody's Investors Services during the quarter, on weak operating results and higher industry risks. In February, Dow Jones announced a new organizational structure that combines the print and Web editions of the Journal for the first time in a new consumer publishing unit. Dow Jones reports earnings next week and has said it expects to post a profit ranging in the low-teens cents per share.

Moody's also during the quarter said it is reviewing the New York Times Co.'s debt for a possible downgrade, on concerns about the company's high financial leverage, deteriorating operating margins and weak free cash flow available for reducing debt.

STOCK PERFORMANCE: Tribune shares fell 11 percent in the quarter and are off 8 percent for the year so far.

Stock Costs Weigh on Newspaper Companies

Wednesday April 12, 2:12 pm ET

By Seth Sutel, AP Business Writer

Stock Costs Weigh on Newspaper Companies; Gannett Posts 11.5 Percent Earnings Drop in 1Q

Gannett Co., publisher of USA Today, reported an 11.5 percent decline in first-quarter earnings Wednesday as softer advertising and stock expenses weighed down results.

Also, Gannett's chairman said the company wasn't participating in the auction of 12 newspapers owned by Knight Ridder Inc. that are being sold by Knight Ridder's buyer, McClatchy Co. "We're not involved," Douglas McCorkindale said in response to a question on a conference call.

Gannett, the largest newspaper publisher in the country, had net income of $235.3 million, or 99 cents per share, in the 13 weeks ended March 26. The results were down from $265.7 million, or $1.05 per share, in the same period a year ago, which included 2 cents per share profit from discontinued operations.

The most recent results were in line with the forecasts of analysts surveyed by Thomson Financial and include a non-cash expense of 3 cents per share from stock option expenses, which the company began recording in the first quarter as required by accounting rules.

Overall advertising revenue from newspapers fell 1.8 percent in the quarter, assuming Gannett owned the same newspapers in both periods, as softer demand for ads and an unfavorable shift in currency rates pulled down results in the company's U.K. newspapers.

Advertising revenue at USA Today fell 4.2 percent as paid ad pages declined 7.4 percent compared with the same period a year ago.

Edward Atorino, an analyst with Benchmark Co., said Gannett "took a big hit in the U.K. ... plus USA Today had a tough quarter as well."

Another newspaper publisher and broadcasting company, Media General Inc. swung to a profit, though stock-option expenses and the publishing division's performance pulled down earnings.

Media General earned $6.7 million, or 28 cents per share, in the first quarter, compared to a loss of $316.2 million, or $13.25 per share, in the year-ago period, which included a $325.5 million charge related to the valuation of broadcast licenses.

The earnings fell a penny short of the 29-cents-per-share estimate of analysts surveyed by Thomson Financial. The Richmond, Va.-based company publishes 25 daily newspapers in the Southern United States.

Media General's overall revenue rose about 4 percent to $226.4 million. Stock option expenses reduced pre-tax income by $1.6 million. The publishing unit, in the meantime, saw its profit fall 6.1 percent.

Gannett's revenue rose 6.5 percent to $1.88 billion from $1.77 billion in the same period a year ago.

The increase was mainly due to the consolidation of the Detroit Free Press, which it acquired from Knight Ridder in August of last year and then combined into a partnership with The Detroit News, which MediaNews Group Inc. bought from Gannett.

Excluding the Detroit transaction and other newspaper deals, Gannett's revenue would have edged down 0.5 percent in the quarter from the same period a year ago. Last August, Gannett also exchanged three of its newspapers with Knight Ridder for its Tallahassee, Fla. newspaper plus cash.

Gannett's operating expenses for the first quarter increased 10.8 percent, mainly reflecting the consolidation of the Detroit partnership as well as stock compensation expenses. On a comparable basis and excluding the stock compensation costs, operating costs rose 0.6 percent, the company said.

In a note to investors, Merrill Lynch analyst Lauren Rich Fine described the first-quarter performance at Gannett as "lackluster" and said newspaper ad revenues were likely to remain "sluggish" in the second quarter.

Gannett's U.S. advertising revenue grew 1.5 percent in the first quarter from a year ago, assuming it held the same properties in both periods.

Revenue from broadcasting rose 10.9 percent in the quarter as demand increased for ads on Gannett's NBC affiliated stations during the Winter Olympics.

Gannett shares fell 45 cents to $58.37 on the New York Stock Exchange, while Media General's shares fell 40 cents to $43.30, also on the NYSE.

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