NY Times 3Q profits down 51 percent, beats estimates

[October 24, 2008]  NEW YORK (AP) -- The New York Times Co. reported third-quarter profits on Thursday but still beat Wall Street estimates as the newspaper industry continues to suffer from advertising reductions accelerated by a worsening economy.

Early numbers from the current quarter indicate that slow ad sales at the Times newspaper and other properties are likely to continue into the normally lucrative holiday period, especially in digital advertising -- the industry's hope for the future.

The Times said preliminary net income in the July-September quarter was $6.53 million, or 5 cents a share, compared with $13.4 million, or 9 cents a share, in the same period last year.

Profits will be reduced, though, once the Times takes an accounting charge estimated at $100 million to $150 million to reflect the declining value of its New England newspapers as revenue prospects remain weak because of the ongoing migration to the Internet.

Excluding severance costs and broadcast operations sold last year, the Times earned 6 cents a share. Analysts polled by Thomson Reuters, who generally exclude such one-time charges, were expecting 4 cents a share.

Revenue dropped 9 percent to $687 million, from $754 million, roughly in line with analyst expectations of $692 million.

Advertising sales fell 16 percent at the Times' news media properties, which include print and online operations for the Times, The Boston Globe, the International Herald Tribune and 16 other daily newspapers.

That's steeper than the 11 percent reduction seen in the first six months of the year as the declining economy resulted in fewer retailers, auto dealers, real-estate brokers and employers willing to place ads.

Circulation revenue rose 1 percent in the third quarter, reflecting price increases at the flagship Times newspaper. Last year's decision to cease a paid online subscription product called TimesSelect contributed to a 5.4 percent drop in other revenue. Overall, revenue in the news media group fell 9.8 percent to $658 million.

The company's About.com Web sites saw a revenue gain of 16 percent to $28.7 million. Combined with the newspapers' Web sites, online revenue grew 6.7 percent to $85.1 million. But because Internet businesses accounted for just 12 percent of all revenue, the online gains were not enough to offset sharp declines in the print businesses.

Online advertising eased in the third quarter, and the company said the digital business was slowing so far in the fourth quarter as well, primarily because of less display advertising.

The growth rate for online advertising across the industry already has been slowing as the size of the pie gets larger, even when growth is steady in terms of dollars. But the weak economy has been adding pressure on growth.

In the third quarter, advertising and other online revenue at the company's digital operations grew just $5.4 million compared with a year ago, the lowest growth amount all year. The 6.7 percent growth rate is also lower than the 12.8 percent in the second quarter and the 11.6 percent in the first quarter.

The Times said it reduced third-quarter operating costs across the company by 6.8 percent over last year, despite seeing newsprint prices rise 22 percent. Overall newsprint costs rose just 2.1 percent as the company reduced usage.

Job cuts earlier in the year helped reduce payroll costs, though the Times took an after-tax charge of $10.3 million, or 7 cents per share, for severance costs, about half of which related to the planned shutdown of a division that distributes newspapers and magazines to retail outlets in the New York area.

The company said it had debt of about $1.1 billion.

For the first nine months of the year, the company had net income of $27.3 million, or 19 cents a share, down 82 percent from $156 million, or $1.08 a share, in a year-ago period boosted by the sale of its broadcast unit. The company had $2.18 billion in revenue, down 6.5 percent from $2.33 billion last year.

Its shares rose 16 cents, or 1.5 percent, to $10.84 in morning trading.

[Associated Press; By ANICK JESDANUN]

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