Gloomy Economy Continues for Newspapers; but Third-Quarter Earnings Reports Indicate That Advertising Revenue Decline May Have Bottomed Out
Garneau, George, Editor & Publisher
Gloomy economy continues for newspapers
But third-quarter earnings reports indicate that advertising revenue decline may have bottomed out
Publicly traded newspaper companies reported third-quarter 1991 net profits far smaller than a year ago--signaling a continuation of two years of recessionary declines in advertising revenue and profitability.
Net and operating profits generally declined again in the third quarter, compared with a year earlier, as ad revenues continued to shrink because of the sluggish economy, and circulation revenues increased somewhat on higher prices.
The good news, if there were any, was that ad revenues may have bottomed out, and the industry may be sloughing along the bottom of an economic trough.
"We have not seen any sign of pickup in advertising in any meaningful amount in any of our lines of business. On the other hand, it's not getting worse," said Douglas McCorkindale, Gannett Company Inc. vice chairman and chief operating and administrative officer.
Also, the recovery's estimated time of arrival has been postponed again. With hopes of a turnaround this year all but evaporated, optimists are pinning their hopes on late 1992, pessimists a year later.
"The recovery we looked for in the second half of the year has not materialized, and we therefore expect a delayed timetable for improved earnings," said A.H. Belo chairman and chief executive officer Robert W. Decherd.
McCorkindale--who said the combination of sharp declines in classified and retail advertising "lead us to conclude it may be the worst advertising environment since as far back as World War II"--doubted a turnaround before second-quarter 1992.
William B. Huff, chief financial officer of Affiliated Publications Inc., agreed on the timing and added, "We don't expect a quick rebound once the improvement starts."
Even in California, where the recession hit later and lighter than in the East, McClatchy Newspapers Inc. chief executive officer Erwin Potts said, "[W]e still aren't optimistic about a significant recovery in the near future."
Affiliated Publications Inc., publishers of the Boston Globe, reported a third-quarter net loss of $1 million, or 1 [cent] a share, compared with net income of $4 million, or 6 [cents] a share, in the corresponding period last year.
Operating profits plunged 88% to $1.2 million, as revenues dipped to $121.9 million, from $130.4 million in third-quarter 1990.
The biggest declines came at the Globe, where quarterly operating income dropped to $4.1 million, from $11.9 million a year ago. Contributing to the decline was a $4 million management reduction program, which reduced quarterly net earnings by $2.4 million, or 6 [cents] a share.
Globe revenues fell 7.2% to $93.5 million.
Quarterly operating losses in specialty publishing, including Billboard and Adweek magazines, increased to $2.1 million, from $1.3 million a year earlier.
The company blamed the sluggish economy on lower ad volume at the Globe and at its specialty publishing subsidiary, BPI Communications Inc.
The Globe said that by offering enhanced benefits, it eliminated 20 managers, completing its management reduction plan. Using attrition and voluntary buyouts, it has cut the payroll by 43, toward a goal of 100 jobs.
BPI cut 44 people from its payroll.
The board of directors declared a regular quarterly dividend of 6 [cents] a share, the same as last year.
A.H. Belo Corp. reported that third-quarter net earnings fell 65% to $1.9 million, or 10 [cents] a share, from $5.5 million, or 29 [cents] a share, in the period a year before.
Revenues for the quarter edged down 4.1% to $104.1 million, from $108.6 million a year earlier. Expenses increased to $93.5 million, from $91.1 million. …