L.A. Times' woes dragging down parent's profits.

Times Mirror cites plunging ads, recession's impact

Hammered by plummeting advertising revenue, journalism's colossus and the flagship of media empire Times Mirror -- The Los Angeles Times -- is pulling down the parent company's third-quarter profit picture.

Last week, the Southland economy and the Los Angeles Times -- the nation's biggest daily paper with 1.16 million in weekday circulation -- were blamed by parent Times Mirror management for an expected lousy third quarter.

"While advertising volume at our Eastern newspapers is beginning to recover, and newsprint costs remain below last year, these favorable trends are not sufficient to offset sharp declines in advertising revenues at The Times," said Times Mirror Chairman and Chief Executive Robert Erburu last week, in a prepared statement.

Erburu, Times' top-dog since 1981, added, "Consequently, we now anticipate that third-quarter operating results in the newspaper segment (of Times Mirror) will be considerably lower than the 1991 level."

Newspaper publishing makes up about 55 percent of Times Mirror revenues, but somewhat less of profits in recent years.

Wall Street blanched at Erburu's sentiments, and Times Mirror stock tumbled to $31.25 a share, off $1.75 immediately following the announcement.

Nor could Erburu summon optimistic words about the future financial profitability of The Times: "Advertising volume at the Los Angeles Times in August continued to deteriorate to levels well below our earlier expectations. This decline reflects the state of the economy in Southern California which is not expected to improve in the near future," he said.

Times Mirror, in addition to publishing the 111-year-old Times, also publishes the newspapers Newsday and New York Newsday, the Baltimore Sun, The Hartford Courant, and the magazines Field & Stream and Popular Science, as well as operating four radio stations, and several other media properties.

One analyst said the Los Angeles Times has always bounced out of recessions before -- but not this go-around. "(Los Angeles Times') ad revenues have always had a 'V' shape going into and out of recessions," said Craig Silvers, analyst with downtown Los Angeles securities brokerage Crowell Weedon "But this time they are just sort of sliding sideways."

At the Los Angeles Times, total advertising year-to-date through August is down 3.5 percent from last year. In classified advertising, the paper is down 13.7 percent for the year.

Despite the picture of limp ad revenues, Silvers said the $3.62-billion-in-revenues Times Mirror is still a good read on Wall Street. An economic rebound would translate into increased ad revenues and much fatter bottom lines, he said. Newspaper industry costs tend to be stable, even as revenues rise in economic recoveries, Silvers said.

"Eventually Southern California will turn around, and there is a lot of leverage in the newspaper business. When the economy improves, their profits will advance very quickly," said Silvers.

But local short-traders, aware of local economic conditions, are not enamored of Times Mirror. "I don't see this economy turning around. Do you?" asked one trader.

Said Ken Berentz, analyst in the Baltimore-based brokerage house Alex. Brown & Sons, in a recent interview, "I have been telling people all year the (Times Mirror) stock is overpriced. The California economy is not recovering, particularly Southern California."

Indeed, local economic indicators, such as employment, retail sales and real estate prices, are still in steady descent. Some economists wonder if Los Angeles, like cities such as Pittsburgh, Cleveland and Detroit, is going through an economic restructuring that may take years and even decades to work itself out.

Times Mirror stock has been underperforming the market since the late 1980s, reflective of tough times for all media properties.

Times' stock hit a high of more than $50 a share in 1987, but since has waffled down to the low $30s. Earnings per share, which hit $3.16 a share in 1986, last year fell to 64 cents. This year analysts are expecting earnings per share in the $1.50 range -- which leaves the stock trading at a healthy 20 times earnings.

Although little noticed, Times Mirror pretty much remains a family-controlled enterprise, through trusts owned by descendants of Los Angeles Times founder Otis Chandler.

Through Pasadena-based trusts, Chandler family members control more than 60 percent of Times Mirror "Series C" stock, which has 10 times the voting rights of regular common stock. Additionally, three Chandler descendants sit on the Times' 17-member board.