Profit & Loss: Newspapers' ad revenue slowed at end of 1st quarter

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The war in Iraq took its toll on the first-quarter results of newspaper companies, and it's expected to affect the second quarter.

Four of the top publishers reported ad revenue slowed down in March as advertisers pulled back during the war. Travel advertising fell sharply and classified ads dropped due to weak help-wanted volume, in spite of continued strength in real-estate advertising.

"Everything in recent weeks has been impacted by the war, but overall, it's a good story for us," said Tribune Co. President-CEO Denis FitzSimons. Tribune-parent of the Los Angeles Times and Chicago Tribune-posted net income of $141.2 million, up from a loss of $101.6 million in 2002.

After factoring out the effects of a change in accounting in 2002, net income would have been up 120% from $64 million.

The company credited its performance to cost controls and improvements in local advertising. Revenue rose 5% to $1.29 billion, thanks to strong TV revenue and improvements in newspaper advertising.

The results of the war began to moderate in April, but "it's a little early to declare victory on the advertising front," said Russell Lewis, CEO of New York Times Co.

The parent company of The New York Times and Boston Globe posted $68.8 million in net income, up 26.4% from the year-ago period, on revenue of $783.7 million, up 6.3% from a year ago.

Advertising revenue rose 5%, or 3.9% excluding the results of the International Herald Tribune. The company acquired full ownership of the IHT from its former joint venture partner, Washington Post Co.

ad budgets intact

Janet Robinson, senior VP-newspaper operations, noted travel categories such as hotels and transportation have weakened since early March, recruitment ads remain weak and retail advertising has seen some softening.

However, she added advertisers' budgets remain intact, and she forecast a bounce back after the war effects are removed.

Advertising cancellations and postponements have declined "substantially" in April from where they were in late March, said Douglas McCorkindale, chairman-CEO of Gannett Co., parent of USA Today.

"The signs are getting positive each day, but it's too early," he said. Gannett posted net income of $249.8 million, up 2.6% from the year-ago period, on revenue of $1.55 billion, also up 2.6%. Advertising revenue rose 2% for the quarter, thanks to a 5% increase in classified revenue, which offset flat local advertising and a 3% drop in national ads.

TV revenue dropped 5% below last year's number, due to harsh comparisons to the year-ago quarter, said Mr. McCorkindale. He noted Olympic and political advertising totaled $30 million in the first quarter of last year.

Prospects for the second quarter are unclear, due to the continuing war and its aftermath, said Tony Ridder, Chairman-CEO of Knight Ridder Co. Knight Ridder, parent of The Miami Herald and Philadelphia Inquirer, posted net income of $50.7 million, up 84.4% from the year-ago period on flat revenue of $677.4 million.

But after factoring out the $24.3 million effect of an accounting change in 2002, net income dropped 2.1%.

Mr. FitzSimons noted employment-advertising trends were improving in early 2003. The trends were matching those in the 1991 recession until February, when they deteriorated after the outbreak of war, he said.

"With some clarity in the Middle East, we're hoping it will improve soon," he said.

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