NEW YORK (AP) -- The New York Times Co. reported Thursday that its third-quarter profit dropped at least 51 percent 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 could continue into the normally lucrative holiday period, especially in digital advertising -- the industry's hope for the future.
Citing the weak prospects for advertising revenues, Standard & Poor's Ratings Services cut the Times' corporate credit rating to junk bond status Thursday.
The Times said that 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. 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.
"These are difficult times in the economy and in the media industry," Janet L. Robinson, the company's chief executive, said during a conference call. "We believe, however, that we have many strengths that are helping us successfully weather this period."
The Times signaled a cut in dividend rates, saying the board would review its policy by year's end "to determine what is most prudent" under current market conditions. The company will also consider reducing its debt, currently at about $1.1 billion. The McClatchy Co. already has cut dividend rates in half to pay down debt.
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.
The Times bucked industry trends in reporting that ad sales fell 14 percent in September compared with last year, its lowest monthly drop since May. Other newspaper publishers have been reporting a sharper drop in September than in August.
Although the economy has depressed ad spending, Robinson said the company gained from mutual funds, banks and insurance companies running ads to try to reassure customers.
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.
Internet advertising eased in the third quarter, as it has been across the online industry, and the company said the digital business was slowing so far in the fourth quarter as well, primarily because of less display advertising at the About sites.
In the third quarter, advertising and other 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 showed improvement on a month-to-month basis. Its online revenue growth of 11.7 percent in September, compared with last year, is better than the 6 percent in August and 2.6 percent in July. But the Internet's share of all revenue fell to 12 percent in September, from 13.4 percent in June.
Although the company said October numbers to date show steady print declines and slower online growth compared with September, advertisers appear to be committing later than usual, so improvement still is possible before the holidays.
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 were related to the planned shutdown of a division that distributes newspapers and magazines to retail outlets in the New York area.
S&P said it downgraded the Times' rating from "BBB-" -- its lowest investment grade -- to "BB-" because it believes that a "likely" economic recession in the United States would worsen ad revenues for at least a year. A recession would prolong, possibly until 2010, the time it would take for ad revenues to reach "more manageable rates of decline," S&P said.
For the first nine months of the year, the Times 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.
Times shares ended up 2 cents at $10.70 after briefly hitting a new 52-week low of $9.51 earlier in the session. But they tumbled 40 cents, or 3.7 percent, to $10.30 in after-hours dealings.
Early numbers from the current quarter indicate that slow ad sales at the Times newspaper and other properties could continue into the normally lucrative holiday period, especially in digital advertising -- the industry's hope for the future.
Citing the weak prospects for advertising revenues, Standard & Poor's Ratings Services cut the Times' corporate credit rating to junk bond status Thursday.
The Times said that 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. 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.
"These are difficult times in the economy and in the media industry," Janet L. Robinson, the company's chief executive, said during a conference call. "We believe, however, that we have many strengths that are helping us successfully weather this period."
The Times signaled a cut in dividend rates, saying the board would review its policy by year's end "to determine what is most prudent" under current market conditions. The company will also consider reducing its debt, currently at about $1.1 billion. The McClatchy Co. already has cut dividend rates in half to pay down debt.
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.
The Times bucked industry trends in reporting that ad sales fell 14 percent in September compared with last year, its lowest monthly drop since May. Other newspaper publishers have been reporting a sharper drop in September than in August.
Although the economy has depressed ad spending, Robinson said the company gained from mutual funds, banks and insurance companies running ads to try to reassure customers.
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.
Internet advertising eased in the third quarter, as it has been across the online industry, and the company said the digital business was slowing so far in the fourth quarter as well, primarily because of less display advertising at the About sites.
In the third quarter, advertising and other 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 showed improvement on a month-to-month basis. Its online revenue growth of 11.7 percent in September, compared with last year, is better than the 6 percent in August and 2.6 percent in July. But the Internet's share of all revenue fell to 12 percent in September, from 13.4 percent in June.
Although the company said October numbers to date show steady print declines and slower online growth compared with September, advertisers appear to be committing later than usual, so improvement still is possible before the holidays.
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 were related to the planned shutdown of a division that distributes newspapers and magazines to retail outlets in the New York area.
S&P said it downgraded the Times' rating from "BBB-" -- its lowest investment grade -- to "BB-" because it believes that a "likely" economic recession in the United States would worsen ad revenues for at least a year. A recession would prolong, possibly until 2010, the time it would take for ad revenues to reach "more manageable rates of decline," S&P said.
For the first nine months of the year, the Times 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.
Times shares ended up 2 cents at $10.70 after briefly hitting a new 52-week low of $9.51 earlier in the session. But they tumbled 40 cents, or 3.7 percent, to $10.30 in after-hours dealings.
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