1. TO OUR SHAREHOLDERS AND EMPLOYEE OWNERS
Despite progress in many areas, 2005 was a difficult year for Tribune. An uneven advertising climate
and one-time charges related to cost-reduction initiatives affected our results.
Operating revenues decreased 2 percent to $5.6 billion, and operating profit declined 6 percent
to $1.1 billion. Weakness in top advertising categories such as automotive, movies and travel, plus
consolidation in the department store and telecom areas affected Tribune companywide. Still, our
publishing revenues decreased only 1 percent from 2004 due to solid results at several newspapers
and strength in our interactive businesses. Broadcasting and entertainment revenues declined
6 percent, however, due to ratings issues and an overall soft television market.
Also in 2005, we received an unfavorable U.S. Tax Court ruling in the Matthew Bender case, a
dispute with the Internal Revenue Service that Tribune inherited when it acquired Times Mirror
Company in 2000. Our appeal of the Tax Court’s ruling is ongoing.
Tribune’s 2005 stock performance reflected these factors, as well as investor uncertainty about
traditional media stocks. Our shares declined 27 percent on a total return basis. While this was
comparable to the average decline of several peer-company stocks, it was uncharacteristic of
Tribune, and we are very focused on improvement.
BUILDING ON STRENGTHS
We have a strong foundation on which to build. Tribune newspapers and TV stations produced
$1.4 billion in operating cash flow in 2005, enabling investment in growth initiatives, the repurchase
of 12.2 million shares of stock and a 50-percent increase in the quarterly dividend. These actions
demonstrate our confidence in the company’s future.
As the media landscape evolves, newspapers and broadcast television remain essential tools for
marketers, accounting for more than 35 percent of all U.S. advertising expenditures. Tribune delivers
large local audiences, and the options we offer for targeting specific consumer groups continues
to grow. These strengths contributed to many positive developments in 2005:
Publishing ad revenues increased slightly to $3.2 billion, led by good revenue growth at our Florida
newspapers, the Chicago Tribune and mid-size dailies; interactive revenues increased 43 percent
from 2004, and CareerBuilder network revenue rose 75 percent.
Color press installation was completed at the Los Angeles Times and more color capacity will
come online at the Chicago Tribune and South Florida Sun-Sentinel in 2006. Demand for
premium-priced color advertising is strong.
We made progress toward our goal of stabilizing individually paid circulation—the home-delivered
and single-copy sales that are most important to advertisers.
Targeted publications such as RedEye, amNewYork and Spanish-language Hoy grew readership
and revenues. These three newspapers alone now reach 3 million readers per week and have
brought in 1500 new advertising clients.
2. Local news at our television stations increased to 250 hours per week, and morning newscasts
continued to register solid growth and ratings.
The state-of-the-art Tribune Media Center in Washington opened in December. The facility brings
together all of our D.C.-based print and broadcast journalists for the first time, enabling better
multimedia news coverage with less duplication and cost.
Our commitment to journalistic excellence was again rewarded as Tribune newspapers earned
four Pulitzer Prizes and our television stations captured 44 Emmy Awards for local news.
2006 STARTS WITH GOOD NEWS
The current year began with Newsday reaching agreements with its six major collective bargaining
units; terms of the four-year contracts include improved work-rule flexibility and more efficient
staffing, as well as modified retirement and health care plans. Newsday’s management team can
now focus on readership and revenue growth in its core Long Island market.
On Jan. 24, Tribune Broadcasting announced along with CBS Corporation and Warner Bros.
Entertainment the launch of The CW Network this fall. Tribune will be the leading CW affiliate group,
with 16 of our 19 current WB stations joining the network, including our New York, Los Angeles and
Chicago stations. The WB and UPN networks will cease operations and The CW, as well as Tribune,
will benefit from having the best shows from each network in the new prime-time schedule.
Affiliating with The CW ensures Tribune long-term access to quality prime-time programming from
a network backed by two large and successful television studios. Our TV stations will have a
stronger competitive position from which to grow. In addition, since we will not have an equity
stake in The CW (as we’ve had with WB), Tribune will be shielded from the financial volatility of the
network television business.
Three of our current WB affiliates—in Philadelphia, Atlanta and Seattle—will become independent
stations this fall due to our agreement with The CW. Fortunately, we have good options for ensuring
quality prime-time programming in these markets for the fall season. Several potential
programming sources have surfaced, including one from Fox called My Network TV.
FOCUSED ON READERSHIP
In publishing, more than ever, Tribune newspapers are putting readers first and improving their
products to better serve them. The goal is threefold: attract new readers; turn occasional readers into
more frequent readers; and add more value for current subscribers so they stay with us longer.
Results at the Sun-Sentinel show the positive impact of reader-driven product enhancements.
Readership in Broward and Palm Beach counties increased 3 percent daily and almost 2 percent on
Sundays in 2005. Improvements include an expanded News Digest on page one, more youth-oriented
content and greater emphasis on truly useful information.
Other Tribune newspapers also introduced important content and design changes to better
engage readers—from bolder graphics and better navigation to new “must read” feature sections.
3. High-profile promotion campaigns support these efforts. Key messages include the everyday benefits
of reading our newspapers—in print or online—and the unique content found in each day’s edition.
And with new database systems, we’re reaching out to potential readers in key market segments
and communicating with current subscribers to improve retention rates.
Tribune Interactive is our fastest-growing business and a big opportunity as we look ahead.
Revenues from interactive operations totaled $179 million in 2005. Adding our share of revenues
from online joint ventures, which are not included in consolidated revenues, the total was nearly
Integrated print and online strategies are paying off, and there’s no better example than
CareerBuilder, our partnership with Gannett and Knight Ridder. It’s now the market leader in both
site traffic and job postings. We recently increased the help-wanted sales forces at our largest
newspapers and at CareerBuilder, which will help gain further revenue share from our nearest
competitors, Monster and HotJobs, in 2006.
Classified Ventures, 28 percent owned by Tribune, operates national brands such as cars.com and
Apartments.com. CV strengthened its service to advertisers in the auto and real estate categories
in 2005 by acquiring NewCars.com and HomeGain.com.
Outside the classified categories, we’re expanding online with investments like Topix.net, a news
site that categorizes content from multiple sources. Monthly unique visitors have more than doubled
since Tribune acquired the site last year in another partnership with Gannett and Knight Ridder.
Links to Topix are integrated into our newspaper websites, which is just one of the ways we’re
adding value to our online newspaper network. We’re also creating deeper entertainment sites by
extending the Metromix brand that is so successful in Chicago. Special-interest sites like
TheEnvelope.com—a year-round awards site recently launched by the Los Angeles Times—also
will drive online traffic and revenues.
SERVING OUR COMMUNITIES
Tribune newspapers and television stations are news and information leaders in their communities,
and their value multiplies in times of crisis. We saw this last year when Hurricanes Katrina, Rita
and Wilma ravaged Florida and the Gulf Coast. Before and after Katrina hit, our TV stations in New
Orleans did an extraordinary job of keeping viewers informed—on the air and on the Web. In
October, the South Florida Sun-Sentinel never missed an edition despite severe facility damage
Tribune’s hurricane coverage was deeper and our business recoveries faster because of the company’s
scale and resource sharing. Our people showed great teamwork when it mattered most.
Local leadership was outstanding, including Larry Delia, general manager at WGNO/WNOL-TV in
New Orleans, and Bob Gremillion, publisher at the Sun-Sentinel.
4. As usual, Tribune employees stepped up to help those in need, including their own colleagues.
Our internal relief fund to assist WGNO/WNOL staff members in New Orleans raised more
than $400,000. Tribune employees and 33 Tribune businesses also supported the McCormick
Tribune Foundation’s Hurricane Katrina Relief Campaign, which generated $9.2 million from
nearly 47,000 donors.
Throughout every year, select Tribune business units partner with the McCormick Tribune
Foundation in local fundraising activities. In 2005, these partnerships resulted in $41 million in
grants by the Foundation’s Communities Program—money that helps strengthen the communities
where we do business.
John Reardon was named president of Tribune Broadcasting in November. He is a strong leader
with extensive television management experience at Tribune, including leading roles at two of our
largest stations, KTLA-TV in Los Angeles and WGN-TV in Chicago. John’s track record of success
will serve us well as our stations prepare to launch The CW this fall.
Kathryn C. Turner, chairperson and CEO of Standard Technology, a health care, benefits and
technology consulting firm, will retire from our board of directors in May. She served Tribune
shareholders with great dedication since joining the board in 2002 and we wish her well.
Miles D. White, chairman and CEO of Abbott Laboratories, joined as a director last July. As the
leader of one of Chicago’s largest companies, his insights and perspective clearly benefit our
board and all Tribune shareholders.
Revenue growth is our company’s top priority for 2006. We have redeployed resources to the
faster growing areas of the business, especially interactive, and we’ll keep pushing to deliver
added value to consumers and advertisers. We will focus capital expenditures on projects that
provide industry-leading capabilities and leverage our scale, such as standardized advertising,
circulation and editorial systems across the company.
Disciplined cost management continues throughout Tribune. Operating efficiencies achieved in
2005 are already offsetting higher newsprint and employee benefits expenses.
In television, we look forward to The CW’s fall debut. The network should significantly improve prime-
time ratings for our 16 CW stations and lift ratings for their evening news and sitcom programming
as well. We also expect a solid line-up of new and returning shows on our six Fox stations.
Resolution of the cross-ownership issue—operating newspapers and television stations in the same
market—should move forward soon when the Federal Communications Commission has a full
complement of commissioners. President Bush this month nominated Robert M. McDowell to fill the
open seat on the five-member FCC.
5. Our company is energized, and we’re confident in Tribune’s ability to be among the winners in
today’s media marketplace. We will succeed by:
Being a leading local provider of news, information and entertainment;
Making our content widely available in forms convenient to our consumers and valuable to
advertisers, including print, broadcast, online and mobile devices;
Differentiating our products through unmatched local resources and efficient resource sharing
across all our businesses;
Reinvesting for newspaper and targeted print growth;
Expanding our current Internet businesses and joint ventures, and investing in new interactive
opportunities, either on our own or with partners;
And, finally, by viewing everything we do in terms of the value it adds for our readers, viewers,
advertisers and shareholders.
With excellent major-market media assets, financial flexibility and talented people, Tribune is strong.
We’ve taken aggressive steps to position the company for better results, and we’re committed to
making significant progress in 2006.
DENNIS J. FITZSIMONS
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
FEBRUARY 24, 2006
6. FINANCIAL HIGHLIGHTS: TRIBUNE COMPANY AND SUBSIDIARIES
FOR THE YEAR ENDED (IN THOUSANDS, EXCEPT PER SHARE DATA) DEC. 25, 2005 DEC. 26, 2004
Operating revenues $ 5,595,617 $ 5,726,247
Operating profit $ 1,146,823 $ 1,218,289
Before cumulative effect of change in accounting principle $ 534,689 $ 573,324
Cumulative effect of change in accounting principle, net of tax — (17,788)
Total $ 534,689 $ 555,536
Diluted earnings per share
Before cumulative effect of change in accounting principle $ 1.67 $ 1.72
Cumulative effect of change in accounting principle, net of tax — (.05)
Total $ 1.67 $ 1.67
Common dividends per share $ .72 $ .48
Common stock price per share
high $ 42.37 $ 53.00
low $ 30.05 $ 39.20
close $ 30.52 $ 42.08
AT YEAR END DEC. 25, 2005 DEC. 26, 2004
Total assets $14,546,242 $14,155,432
Total debt (excluding PHONES) $ 2,752,021 $ 2,004,820
Shareholders’ equity $ 6,725,551 $ 6,836,844