Buffalo News’
Net Profits Up 8.1%

The Buffalo News got more bang from the buck in 1996.

Despite management's gloomy lament about a slight drop in circulation and advertising revenues, The News managed to squeeze more profits out of the paper than it has in all but three of the last 10 years.

The News' operating profits, which don't include taxes, rose by 7.6 percent last year to $49.8 million from $46.3 million the year before. If you add in taxes, The News' net profits improved by 8.1 percent to $29.5 million from $27.3 million during 1995.

Warren E. Buffett, the chairman of News' owner, Berkshire Hathaway Inc., said The News' 1995 profits were depressed because of buyouts it offered composing room workers and changes in the way certain computer equipment is depreciated. Without those special charges, The News' profits were "relatively unchanged" from 1995, Buffett said in the annual report, although it did not spell out the exact cost associated with the charges.

The improvement in profits is even more impressive because it occurred during a year in which the paper’s revenues declined by less than 1 percent to $154.2 million from $154.8 million during 1995. The News said its advertising and circulation revenues both declined for the first time in recent memory.

Even so, The News still made more money in profits from every dollar that it took in from its subscribers and advertisers. The News enjoyed an operating profit margin of 32.3 percent last year, which means it made 32.3 cents in operating profits for every dollar it took in last year.

That was a sharp improvement from the paper's 30.2 percent operating margin in 1995. While those margins remain below the eye-popping margins of 34 to 35 percent that the paper reaped during 1993 and 1994, they are right in line with the 32.2 percent operating margin the paper averaged during the last 10 years.

If you factor in taxes, the paper's 1996 net profit margin also improved substantially to 19.1 percent from 17.6 percent during 1995. Those gains still left The News' net margin slightly below the 19.5 percent average take during the last 10 years, although they remain among the most lucrative for the nation's major newspapers.

The improvement in profits also occurred without a major boost from falling newsprint costs, which contributed mightily to the weaker earnings in 1995. Newsprint costs rose during the first half of last year before falling sharply during the final six months of 1996, leading to only a slight drop in the paper's overall newsprint costs, Berkshire said.

To put The News' 1996 performance in perspective, the company's revenues were the second highest in the paper's history, second only to the 1995 record high.

And The News' operating profit of $49.8 million was the third best in the paper's history, trailing only 1994's record high of $53.7 million and the $50.4 million operating profit in 1993.

The paper's $29.5 million net profit was the fourth best in The News' history, behind only the 1994 record of $31.7 million and the $29.7 it earned during both 1989 and 1993.

Interestingly enough, while Buffett noted in the 1995 annual report that he no longer considered newspapers to be "bulletproof franchises," he did not repeat that observation in the latest report.