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tribune annual_00


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tribune annual_00

  1. 1. Albany Allentown Atlanta Baltimore Boston Chicago Dallas Denver Fort Lauderdale Grand Rapids Major Market Media Greenwich Harrisburg Hartford Houston Indianapolis Los Angeles Miami Tribune Company 2000 Annual Report New Orleans New York Newport News Orlando Philadelphia Sacramento San Diego Seattle Stamford Washington
  2. 2. Tribune at a Glance Operations Television WPIX (WB11) WLVI (WB56) KHWB (WB39) KWGN (WB2) WTIC (FOX61) WPMT (FOX43) Broadcasting Tribune Broadcasting owns and New York Boston Houston Denver Hartford, Conn. Harrisburg, Pa. operates 22 major-market television KTLA (WB5) KDAF (WB33) KCPQ (FOX13) KTXL (FOX40) WXMI (FOX17) WEWB (WB45) Los Angeles Dallas Seattle Sacramento, Calif. Grand Rapids, Mich. Albany, N.Y. stations, including national super- WGN (WB9) WBDC (WB50) KTWB (WB22) KSWB (WB69) WGNO (ABC26) station WGN, and reaches 80 Chicago Washington, D.C. Seattle San Diego New Orleans percent of U.S. television house- WPHL (WB17) WATL (WB36) WBZL (WB39) WXIN (FOX59) WNOL (WB38) holds. It is the largest TV group not Philadelphia Atlanta Miami Indianapolis New Orleans owned by a network. Broadcasting Radio Television Programming properties also include four radio WGN-AM Tribune Entertainment Company, Los Angeles — develops and distributes first-run television stations, Tribune Entertainment and Chicago programming for the Tribune station group and national syndication the Chicago Cubs baseball team. KEZW-AM Baseball Denver Chicago National League Ball Club Inc. (Chicago Cubs) KOSI-FM Denver Investments KKHK-FM The WB Television Network (25% owned); TV Food Network (29%); Denver The Golf Channel (9%); iBlast Networks (25%) Operations Daily Newspapers Entertainment Listings and Content Syndication Tribune Publishing operates Los Angeles Times The Hartford Courant Tribune Media Services—national and international print, online Publishing Los Angeles Hartford, Conn. and on-air TV and movie information; comics, columnists and features; market-leading newspapers online and wire services; print and interactive ad networks dedicated to great journalism. Chicago Tribune The Morning Call Chicago Allentown, Pa. Cable Programming It is the second-largest U.S. news- CLTV News, Chicago; Central Florida News 13, Orlando (50% owned) paper group in revenues and third Newsday Daily Press in total circulation. The group also Long Island, N.Y. Newport News, Va. National Advertising Tribune Media Net—oversees national advertising sales efforts for all distributes entertainment listings The Baltimore Sun The Advocate Tribune newspapers and coordinates sales of multimedia ad packages and syndicated content, and Baltimore Stamford, Conn. Classified Advertising operates two 24-hour cable South Florida Greenwich Time Tribune Classified Services—directs overall classified strategy for Tribune, news channels. Sun-Sentinel Greenwich, Conn. integrating print, interactive and niche products Fort Lauderdale, Fla. Hoy* Other Spanish-Language Newspapers Orlando Sentinel New York La Opinión, Los Angeles (50% owned); ¡Exito!, Chicago (weekly) Orlando, Fla. *Spanish language Operations Newspaper Sites Specialty Sites Investments BrassRing Inc. (24% owned) CareerBuilder Inc. (46%) Interactive Tribune Interactive operates leading Classified Ventures (34%) news and information Web sites in 18 of the nation’s top 30 markets. The sites attract approximately 5 million unique visitors per month, placing Tribune among the top 20 Classified Advertising Sites online news and information networks Recruitment—,,*,* in the country. Automotive—* TV and Radio Sites Real estate—,** See inside back cover for General merchandise— complete listing *affiliate/equity relationship; supported locally and nationally via sales and marketing
  3. 3. Competitive Advantages Strategic Priorities I Broad distribution —our TV stations reach 38% of U.S. television households I Create a leading distribution network in the consolidating television industry by over the air, and 80% with the cable and satellite coverage of WGN superstation acquiring stations in the nation’s top 40 markets I Major markets —we have TV stations in 10 of the nation’s top 12 markets I Continue track record of exceeding industry averages for revenue growth and and in 16 of the top 30. Tribune is one of only four TV groups with VHF stations margin expansion in New York, Los Angeles and Chicago (ABC, CBS and NBC are the others) I Expand local news programming to grow audience share and increase revenues I Buying power —our TV group’s size provides purchasing advantages in the I Achieve operating efficiencies in two-station markets and capitalize on further syndicated programming marketplace opportunities for dual ownership I Local programming excellence —news, sports and special-event coverage attracts I Exploit cross-media opportunities in top three markets to better serve consumers viewers and advertisers, and gives Tribune stations distinct identities in their markets and advertisers I WGN superstation —we operate one of America’s most-watched cable I Enhance ad revenue stream by expanding cable coverage of WGN superstation channels, reaching more than 51 million households outside of Chicago I Build out digital broadcast capacity and focus on maximizing the future revenue potential of our digital TV spectrum I Support the growing WB Television Network, the major source of prime-time programming for our affiliated stations I Increase Tribune-branded programming through Tribune Entertainment Competitive Advantages Strategic Priorities I Excellent markets —our newspapers are located in dynamic major markets, I Be the leading provider of local information in the communities where we do business including New York, Los Angeles and Chicago I Position Tribune’s newspaper brands as multimedia information franchises by building I Strong local franchises —our newspapers are the leading sources of news, cross-media presence information and classified advertising, in print and online, in their local markets I Capture the majority of local classified advertising dollars, in print and online I Award-winning journalism —Tribune newspapers have won a combined 90 Pulitzer I Increase Tribune’s share of the fast-growing national advertising category Prizes, and each is a frequent recipient of national and regional awards for investigative reporting, column and feature writing, sports coverage, photography and other categories I Leverage Tribune’s mass-media assets to accelerate growth and build cross-media sales I Electronic media alliances —through broadcast TV, radio, cable and the Internet, I Build readership and circulation through innovative marketing and product our newspapers extend their audience reach and brands, positioning themselves as enhancements that respond to customer needs complete, multimedia information sources I Sustain operating excellence, including high-quality production and cost efficiency, with equipment and technology upgrades Competitive Advantages Strategic Priorities I Established brands —our newspaper and broadcast Web sites build on the reputations of I Be the leading provider of online news, information and classifieds in our markets, Tribune’s well-known media brands, which are trusted sources of local news and information leveraging Tribune’s extensive content resources and brand equity I Scale and scope —we operate a network of leading news and information sites in I Focus growth strategy on newspaper Web sites, which attract the most users and 18 of the top 30 markets; this strong national reach and access to major markets is hold the greatest revenue potential important to advertisers I Build the nation’s No.1 network of major-market Web sites I Cross-promotion ability —Tribune’s TV and publishing assets enable cost-effective I Develop multiple revenue streams, including advertising and sponsorships, that lead marketing of our dot-com brands to local and national audiences our Internet activities to long-term profitability I Content creation —our Web sites draw on Tribune’s vast media network to provide I Create and strengthen content partnerships with providers of emerging wireless and more depth, including multimedia news and features broadband platforms to extend our reach I Online experience —Tribune was an early leader in adopting interactive technology. We I Invest in leading-edge Internet technology, ensuring that our Web sites have the know how to build compelling Web sites that provide value for consumers and advertisers features and speed that consumers and advertisers value
  4. 4. Tribune Company and Subsidiaries Financial Highlights For the Year (in thousands, except per share data) 2000 1999 change Operating revenues $ 4,910,363 $ 2,882,284 + 70% Operating profit $ 1,033,011 $ 732,842 + 41% Net income Continuing operations before non-operating items $ 403,519 $ 382,358 + 6% Continuing operations including non-operating items 310,401 1,449,962 – 79% Discontinued operations (86,015) 21,807 * Cumulative effect of accounting change, net – (3,060) – 100% Total $ 224,386 $ 1,468,709 – 85% Diluted Continuing operations before non-operating items $ 1.30 $ 1.41 – 8% earnings Continuing operations including non-operating items .99 5.49 – 82% per share Discontinued operations (.29) .08 * Cumulative effect of accounting change, net – (.01) – 100% Total $ .70 $ 5.56 – 87% Common dividends per share $ .40 $ .36 + 11% Common stock price per share: high $ 55.69 $ 60.88 low $ 27.88 $ 30.16 close $ 42.25 $ 52.56 At Year End Dec. 31, 2000 Dec. 26, 1999 change Total assets $14,676,212 $ 8,740,047 + 68% Total debt (excluding PHONES) $ 3,448,445 $ 1,396,039 + 147% Shareholders’ equity $ 5,885,916 $ 3,458,617 + 70% Common shares outstanding 299,518 237,792 + 26% * Not meaningful Operating Revenues Operating Profit EBITDA (dollars in billions) (dollars in millions) (dollars in millions) 5.0 1250 1500 1250 4.0 1000 1000 3.0 750 750 2.0 500 500 1.0 250 250 96 97 98 99 00 96 97 98 99 00 96 97 98 99 00
  5. 5. Tribune Company is a media industry leader with operations in major markets throughout the United States, including 18 of Through television, radio, the top 30. newspapers and the Internet, we reach more than 80 percent of U.S.households. Our multimedia growth strategy expands the audience for Tribune content, deepens news coverage and strengthens our local brands. It also helps us capture incremental advertising revenues, locally and nationally. In addition, we invest aggressively in technologies that are important to our future, such as digital television and innovative online services. Tribune’s annualized revenues are about $6 billion and we employ more than 22,000 people.
  6. 6. To our shareholders 2000 was an extraordinary year for Tribune, highlighted One key opportunity is to increase our share of national advertising. Tribune Media Net, our new nationwide sales organization, positions by our merger with The Times Mirror Company. Valued Tribune as a one-stop solution for advertisers who need to reach a mass at $8.3 billion, it was the largest acquisition in newspaper audience quickly and efficiently, particularly in the top three markets. Sales of cross-media ad programs—featuring any combination industry history. More importantly, it created the only of newspapers, television and the Internet—are gaining momentum. media company with television, newspaper and Internet Our combined television and newspaper reach is a major selling point: 75 percent of adults in Chicago, 62 percent in Los Angeles operations in the top three U.S. markets — New York, and 42 percent in New York. In addition, Tribune Media Net funnels Los Angeles and Chicago — and positions Tribune for national ad dollars to our mid-tier markets like Baltimore, Fort Lauderdale, Hartford and Orlando, producing incremental newspaper accelerated growth. revenue that was not attainable prior to the merger. The benefits of the Times Mirror merger, completed More options for Tribune advertisers are just the beginning. Our local editorial and newsgathering resources are extraordinary, and last June, extend well beyond newspapers. We acquired we know how to maximize their value. We’ve proven in Chicago that the scale that is essential for success in today’s media cross-promotion and sharing content across media strengthens our brands and gives our audiences a deeper level of news and information. environment, and the ability to serve advertisers and It produces operating efficiencies as well. As you’ll see throughout consumers in new ways that add value. That means this report, we’re now extending our unique multimedia growth strategy to other markets, including New York and Los Angeles. more opportunities to grow revenue across Tribune’s The integration of Times Mirror has progressed faster than entire network of mass-media businesses. expected. Merger-related synergies should generate about $130 million and employee owners 2
  7. 7. of incremental cash flow in 2001. In fact, a large portion of that amount we delivered a positive total return of 14.5 percent while, for the same has already been realized. Duplicate corporate overhead expenses were period, the S&P 500 Index declined 4.5 percent. eliminated ahead of schedule, and at the business unit level, we’ve taken Clearly, our stock price in 2000 did not reflect the progress made steps to increase operating margins at our newly acquired newspapers. throughout the company. The television group outperformed the In particular, our new management team at the Los Angeles Times has industry, leading Tribune Broadcasting to its ninth consecutive year made many positive changes. of record growth. Once again, combining great markets with excellent After the merger we divested non-core businesses, focusing programming proved a winning formula. We continue to benefit from Tribune resources exclusively on our affiliation with the popular broadcasting, publishing and inter- WB Network, smart programming active. We received excellent value buys in the syndication market for our education group and several and our stations’ growing local companies acquired in the Times news franchises. Mirror transaction—about $2 billion For Tribune Publishing, margin John W. Madigan Dennis J. FitzSimons Chairman, President and Executive Vice President Chief Executive Officer in cash after taxes. This helped off- expansion is a major focus as we set the cost of the merger, and we strive to operate the industry’s applied the funds to reduce debt most profitable newspapers. and repurchase Tribune stock. Installations of new technology Solid results Financially, are boosting productivity, and 2000 was another strong year for we’re reducing expenses. For Tribune. Although reported earnings per share were lower due to dilution example, several newspapers have converted to a narrower page size, from the Times Mirror merger, cash earnings—defined as income from cutting newsprint costs significantly. Readers find the new size more continuing operations, excluding non-operating items, plus amortization convenient, too. The Chicago Tribune, South Florida Sun-Sentinel and expense—rose 12 percent on a per share basis. The Hartford Courant will adopt the new format in 2001. In what was a difficult stock market overall, total return on Tribune Our interactive operations continue to grow rapidly, and we expect common shares was minus 22.5 percent in 2000. We were encouraged, the Internet to play a prominent role in Tribune’s future. It complements however, by our stock’s performance following the Times Mirror merger and extends our broadcasting and publishing businesses. In 2000, we announcement on March 13. From that day through December 31, tightened our growth strategy to focus on the Tribune newspaper sites, 3
  8. 8. which attract the most users and hold the greatest revenue potential. As always, the financial measure known as Shareholder Value Added, We also scaled interactive activities to better match online revenue or SVA, will help guide our decision-making on acquisitions, capital projections. These steps position Tribune Interactive to be profitable expenditures and operating budgets. by the second half of 2002. We believe high-quality media properties will continue to grow in Board of Directors We welcomed Enrique Hernandez, Jr. to the value, adding to our confidence in the company’s future. In today’s frag- Tribune board earlier this month. Rick is chairman, president and CEO mented media environment, advertisers need television and newspapers of Inter-Con Security Systems in Los Angeles and also owns interests in more than ever to reach a broad consumer audience—especially in the television industry. He fills the vacancy created by Donald Rumsfeld, the major markets, where Tribune is concentrated. We have the right who last month joined the Bush administra- businesses in the right places. tion as Secretary of Defense. Don joined the How we create value Tribune’s media brands and financial Tribune board in 1992 and we wish him strength are a powerful combination. Yet Develop premier branded content well as he once again serves our nation in a our greatest asset of all is people. We have very important role. Build value across multiple media an abundance of motivated, innovative Three of our long-time directors, Diego thinkers at all levels of the organization, Apply technology imaginatively Hernandez, Robert La Blanc and Kristie most of whom are Tribune shareholders. Miller, will retire from board service in Encourage creativity This further distinguishes Tribune and in a diverse workplace May. These directors have collectively contributes to our industry leadership. served Tribune shareholders for more than Use financial resources aggressively Even off the job, our employees are excep- 45 years and we appreciate their dedication to create shareholder value tional, volunteering their time and talent and commitment. Thomas Unterman, who in the communities where we do business. joined our board last June following the Times Mirror merger, will not This is a time of great optimism at Tribune. Never in our history be standing for reelection. We thank Tom for his contributions during have we had so many opportunities to grow, and so many competitive the transition and wish him well. advantages. The best is yet to come as we build the multimedia Outlook Even in the face of slower ad trends, Tribune is posi- company of the future. tioned for above-average growth. We are only beginning to capture the full benefits of the merger, including significant economies of Sincerely, scale. In addition, Tribune Media Net has a national sales team in place to serve a new class of advertisers and increase our business with existing ones. John W. Madigan We expect to make more acquisitions, especially in television, where Chairman, President and Chief Executive Officer we are actively searching for opportunities in the nation’s top 40 markets. February 23, 2001 4
  9. 9. Major Markets The audience for Tribune content swelled in 2000 as we Their cooperation — in newsgathering, content creation, continued our expansion in the nation’s largest, most lucrative promotion, sales and other areas — strengthens our local markets. Our major-market orientation, combined with an brands, deepens coverage and reduces costs. aggressive, multimedia growth strategy, sets Tribune apart Our joint efforts create new revenue streams, too. Tribune from both local and national competitors. Media Net, established in 2000, is pumping up our share In four of the five most-populated states, Tribune is the of the national advertising segment by offering targeted preeminent local media company. We are the only one with mass-media options that marketers have never seen before. television, newspaper and Internet operations in New York, Response to our customized, cross-market and cross-media Los Angeles and Chicago, and we are the leading news- ad programs has been very positive, and we’ve only begun paper publisher in Florida. In these markets and throughout to exploit this unique Tribune capability. In 2001, we’ll our national network, Tribune’s broadcasting, publishing and create even more value for national advertisers, helping interactive businesses work together. them succeed in the top three markets and beyond. Multi Media
  10. 10. Albany Allentown Atlanta Baltimore Boston Chicago Dallas Denver Fort Lauderdale Grand Rapids Greenwich Harrisburg Hartford Houston Indianapolis Los Angeles Miami New Orleans New York Newport News Orlando Philadelphia New Sacramento San Diego Seattle Stamford Washington
  11. 11. From Times Square to the eastern tip of Long Island, Tribune has the greater New York market covered. WPIX-TV extended its local news franchise in 2000, introducing the WB11 Morning News. The two-hour newscast has pulled in new viewers and advertisers alike, and, like the station’s flagship 10 p.m. news, benefits from a growing relationship with Newsday. I WPIX, Newsday and their corresponding Web sites combined resources on three statewide polls prior to the November election. More co-branded, content-sharing opportunities will be pursued in 2001, as will bundled advertising programs that bring together all Tribune media assets in the region. I Newsday and are powerful brands on their own. At 54 percent daily and 63 percent on Sundays, Newsday has the highest market penetration of any major York newspaper in the country. In addition, its primary circulation territory includes Nassau and Suffolk counties on Long Island — high-income areas that most advertisers need to reach. I Newsday also publishes Hoy, a fast-growing Spanish-language daily. Just north of the Big Apple, The Advocate (Stamford) and Greenwich Time serve Connecticut’s affluent Fairfield County. 7
  12. 12. Albany Allentown Atlanta Baltimore Boston Chicago Dallas Denver Fort Lauderdale Grand Rapids Greenwich Harrisburg Hartford Houston Los An Indianapolis Los Angeles Miami New Orleans New York Newport News Orlando Philadelphia Sacramento San Diego Seattle Stamford Washington
  13. 13. The Los Angeles Times and KTLA-TV pack a dynamic one-two punch in the nation’s geles second-largest market. Together, they reach approximately 62 percent of adults in the region every week. The Times and KTLA teamed up in 2000 to deliver enhanced coverage of the Democratic National Convention in Los Angeles and breaking news stories such as the Concorde crash in Paris. Content on and also reflect Tribune’s cooperative efforts in Southern California. I The Times earned its 24th Pulitzer Prize in 2000. New weekly sections, “Tech Times” and “Workplace,” and increasing coverage of L.A.’s Latino community, show the newspaper’s ability to address reader needs and grow with the market. “Sneaks,” a popular film-preview section published quarterly, was expanded to the Chicago Tribune and Newsday, generating incremental revenue from national advertising. I Partnering with the Times deepens KTLA’s established role as a local news and information leader. The station airs 24.5 hours of local news programming per week, including the innovative KTLA Morning News — No. 1 with adult viewers ages 25 to 54 — and the award-winning News @ Ten. 9
  14. 14. Albany Allentown Atlanta Baltimore Boston Chicago Dallas Denver Fort Lauderdale Grand Rapids Greenwich Harrisburg Hartford Houston Indianapolis Los Angeles Miami New Orleans Chic New York Newport News Orlando Philadelphia Sacramento San Diego Seattle Stamford Washington
  15. 15. The multimedia model we’re applying in New York and Los Angeles, as well as Hartford, was developed in Chicago. It is a proven success on three levels: content sharing, cross-brand promotion and cross-media ad sales. I Our local businesses draw ago from each other — a daily process that enriches the news and information appearing on-air, in print and online. WGN-TV, WGN Radio and CLTV, for example, often use Chicago Tribune reporters and columnists to augment their own take on a story. Viewers get more insight; the newspaper gets more exposure. All of our Chicago outlets promote one another, helping grow Tribune’s regional audience. I For advertisers, more channels mean more potential exposure. Our media in Chicago deliver 75 percent of adults every week. We offer convenience, too — a single point of contact for multimedia packages tailored to advertisers’ specific needs. I Even in our home market we see plenty of room to grow, and we’re investing in our local products aggressively. For example, a major expansion under way at Freedom Center, the Chicago Tribune’s printing facility, will increase zoning and inserting capacity. Readers will see more community-specific news and information, and advertisers will have more options for targeting their messages. At WGN-TV, a new state-of-the-art digital newsroom allows producers to review video edited for broadcast on their desktop computers. The technology gives the editors many more options in the use of special effects and provides a framework for greater content sharing with CLTV. 11
  16. 16. Albany Allentown Atlanta Baltimore Boston Chicago Dallas Denver Fort Lauderdale Grand Rapids Greenwich Harrisburg Hartford Houston Indianapolis Los Angeles Miami New Orleans New York Newport News Flo Orlando Philadelphia Sacramento San Diego Seattle Stamford Washington
  17. 17. The vibrant Florida market is a great place to sell newspapers, and we should know. The Orlando Sentinel and South Florida Sun-Sentinel are news and information leaders in the third fastest-growing state, and each employs aggressive multimedia growth strategies. I In 2000, the Orlando Sentinel captured a Pulitzer Prize, increased circulation and launched a cover-to-cover redesign. Central Florida News 13, our partnership with Time Warner, extends the Sentinel brand and offers the region’s only 24-hour local news on television. In print, online and on the air, Orlando Sentinel Communications reaches 88 percent of Central Florida adults. I Likewise, the Sun-Sentinel connects with more adults than any major daily newspaper in the Broward/South Palm Beach market — three times more than The Miami Herald. It’s also a hands-on content partner with several South Florida television and radio stations. I Our Florida newspapers, Web sites, WBZL-TV rida (Miami) and News 13 played a pivotal reporting role, nationally and locally, in the presidential election. Editorial staff shared their local knowledge with the full range of Tribune media outlets as the ballot controversy unfolded, deepening our companywide coverage in every medium. Sun-Sentinel editors and reporters also provided insights for CNN, C-SPAN, the BBC, MSNBC, National Public Radio and CBS Radio. 13
  18. 18. TV stations in10 of the top Broadcasting Tribune is the country’s fourth-largest broadcaster, operating the largest television group not owned by a network. With stations in 10 of the top 12 markets, and 16 of the top 30, we reach 80 percent of U.S. television households, including the cable and satellite coverage of superstation WGN. Effective programming strategies combined with our major-market presence continue to produce strong financial results. Tribune Broadcasting — including the television group, four radio stations, Tribune Entertainment and the Chicago Cubs — achieved record operating profit and operating revenues in 2000, up 19 percent and 13 percent, respectively. Television operating cash flow margins improved a full point in 2000, to 42 percent, and have more than doubled over the past 10 years. We are a leading consolidator in the television industry, focusing on acquisition opportunities in the nation’s top 40 markets. Expanding our national footprint gives us greater scale to stay competitive and increase cash flow. Besides entering new markets, we look to grow in our existing markets by acquiring second stations as we have done in Seattle and New Orleans. In addition to scale, building viewership is fundamental to our television success. Tribune’s main source of prime-time programming is The WB Television Network, in which we hold a 25 percent equity stake. Fifteen of our 22 stations are WB affiliates and together they comprise the major- market backbone of the network. We also operate six strong Fox affiliates. 14
  19. 19. NATIONAL REACH Tribune’s 22 stations reach 38 percent of U.S. television households.* Under FCC rules, which discount coverage for UHF stations, we’re well under the regulatory cap of 35 percent and have plenty of room to grow. Market Year Station Market Size Affiliation Acquired WPIX New York 1 WB11 1948** KTLA Los Angeles 2 WB5 1985 WGN Chicago 3 WB9 1948** WPHL Philadelphia 4 WB17 1992 WLVI Boston 6 WB56 1994 KDAF Dallas 7 WB33 1997 WBDC Washington, D.C. 8 WB50 1999 WATL Atlanta 10 WB36 2000 KHWB Houston 11 WB39 1996 KCPQ Seattle 12 FOX13 1999 12 U.S. markets KTWB Seattle 12 WB22 1998 WBZL Miami 16 WB39 1997 KWGN Denver 18 WB2 1966 KTXL Sacramento, Calif. 19 FOX40 1997 KSWB San Diego 25 WB69 1996 WXIN Indianapolis 26 FOX59 1997 The WB’s popularity with teen and young-adult viewers was never WTIC Hartford, Conn. 27 FOX61 1997 more apparent than in 2000. In the critical November “sweeps” period, WXMI Grand Rapids, Mich. 38 FOX17 1998 The WB scored the highest year-to-year ratings increase of any television WGNO New Orleans 42 ABC26 1983 network in the demographic segments most coveted by advertisers. WNOL New Orleans 42 WB38 2000 WPMT Harrisburg, Pa. 46 FOX43 1997 Overall ratings jumped 28 percent among adults ages 18-34, and 19 WEWB Albany, N.Y. 56 WB45 1999 percent for adults 18-49. 7th Heaven, The WB’s signature series, had its *Nielsen Media Research, 2000 HH estimates **Founded by Tribune best-ever sweeps average with gains of more than 40 percent in both the 18-34 and 18-49 adult groups. Angel, Dawson’s Creek and Felicity also achieved impressive audience growth. Gilmore Girls, a new series, 10-acre KTLA-TV studio lot and answers the exploding demand for digital performed even better than expected. production facilities from the Hollywood creative community. Programming during the “fringe” periods that surround prime time Tribune television stations enjoy close ties with their communities. also plays a key role in our success. The size of our station group gives Local news and sports programming strengthens those ties and distin- us a buying advantage in the syndication market and investments in guishes our channels from a sea of basic cable networks. Tribune stations off-network comedy series have produced excellent returns. Friends, broadcast more than 200 hours of local news every week. The programming for example, continues to yield solid ratings and revenue growth for appeals to viewers and advertisers alike, supporting our goal to increase our stations, attracting viewers whom advertisers will pay a premium local market shares. to reach. We believe Everybody Loves Raymond — one of the top-rated We’ve been especially aggressive in the morning news category. In shows on CBS and launching on most Tribune stations this fall — 2000, morning shows debuted in New York, Boston, Seattle and Denver. will generate similar benefits. The Tribune group will add another Like our popular morning newscasts in Los Angeles and Chicago, the proven winner, Will & Grace, in 2002. new shows feature an entertaining blend of news, information and Gene Roddenberry’s Andromeda, introduced by Tribune Entertainment personalities. The overriding goal is to give viewers something they last fall, looks like a winner, too. It is the No. 1-rated action drama can’t get anywhere else, and our morning shows frequently outperform in first-run syndication and demonstrates the value of Tribune the national broadcasts by traditional networks. Entertainment on multiple levels. With Andromeda, Tribune television We continue to expand our digital broadcast capacity in anticipation stations received a highly rated, first-run show at no cash cost. Tribune of growing consumer demand for high-definition television. Eight of our Entertainment, in turn, benefited from having one of the nation’s stations now deliver a digital signal. In addition, Tribune Broadcasting strongest station groups as a launch platform. A further plus is the extra is a leading investor in iBlast Networks, a new company that uses the revenue potential for programs that reach four seasons of production digital-television spectrum to distribute broadband content and services via the sale of re-run rights. In 2000, Tribune Entertainment sold to consumers. iBlast has aggregated part of the spectrum from local rights for 88 episodes of Gene Roddenberry’s Earth: Final Conflict to television stations in 246 markets covering 93 percent of the United cable’s Sci-Fi Channel. States. The service represents a potential new revenue stream for In February 2001, Tribune Entertainment announced the formation of Tribune television stations. Tribune Studios. The project includes a complete renovation of the historic 15
  20. 20. In 2000, Tribune strengthened its position as one of Publishing America’s premier newspaper publishers. The merger with Times Mirror tripled our circulation and marketing reach and doubled publishing revenues to more than $4 billion annually. Tribune is now the nation’s second- largest newspaper publisher measured by revenue and operating cash flow, and third in total circulation. 11 market-leading newspapers The addition of the Los Angeles Times, Newsday (New York), The Baltimore Sun, The Hartford Courant and other former Times Mirror newspapers significantly enhances Tribune’s network of major-market media assets. The Times, Chicago Tribune and Newsday are each among the nation’s 10 largest metropolitan daily newspapers, giving us the scale and scope to attract national advertising. In fact, our Los Angeles, Chicago and New York papers have a combined daily circulation of 2.2 million — a reach unmatched by The Wall Street Journal, USA Today or The New York Times. For national advertisers, our circulation on a market-by- market basis is even more compelling. In 2000, we established Tribune Media Net to execute an aggressive growth strategy in the national advertising segment. The group’s goal is to boost national ad revenue for all Tribune newspapers and leverage Tribune’s unique multimedia position in the nation’s top three markets. Our message to national ad buyers is simple: Tribune can help you target 16
  21. 21. LEADING BRANDS Tribune’s daily newspapers are known for award-winning journalism, multimedia reporting and technological innovation. They are read by more than 9 million people on weekdays and 12 million on Sundays. Circulation* Newspaper Daily Sunday Primary Market(s) Los Angeles Times 1,033,399 1,379,564 Southern California Chicago Tribune 620,600** 1,007,236 Greater Chicagoland Newsday 576,345 674,662 Long Island/Queens, N.Y. The Baltimore Sun 315,306 471,387 Central Maryland Orlando Sentinel 252,057 373,901 Central Florida South Florida Sun-Sentinel 238,096 351,189 South Florida The Hartford Courant 202,509 296,713 Greater Hartford/Connecticut The Morning Call 127,175 170,744 Allentown, Pa./Lehigh Valley Daily Press 93,174 114,376 Virginia Peninsula The Advocate 28,499 35,654 Stamford, Conn./Fairfield County Greenwich Time 12,384 13,810 Greenwich, Conn./Fairfield County *ABC report for six-months ended 9/24/00 ** Wed.-Fri. average for the period was 661,699. The new organization ensures that sales and marketing resources are maximized as we grow this vital part of our business. Classified adver- and 90 Pulitzers tising — primarily in the jobs, cars and real estate areas — accounts for about 30 percent of Tribune Publishing’s revenue. More and more advertisers are realizing the benefits of our “full-service” classified model, where integrated solutions are offered using a combination of the newspaper, the Web and niche publications. Initiatives in the Chicago market illustrate this approach. In early 2001, the Chicago Tribune upgraded its classified sections, adding more information for readers and making the pages easier to use. A new section, “Working,” offers tips for job searchers and points to the CareerBuilder area on Likewise, the newspaper’s twice weekly “Cars” section shares content with the area online. Specialty publications like Auto Finder, Job Finder and New Homes Guide round out our Chicago classified line, making the Tribune a true one-stop shop for local advertisers. Market-leading classifieds are only part of what readers find in Tribune newspapers. They also get award-winning journalism packaged with the most in-depth news and information available. Engaging content a broad audience in the most critical markets, quickly and cost-effectively. is our daily mission, and we’re constantly changing to better inform We can do it with newspapers alone, or with a combination of newspapers, and entertain readers. Our bureau in Havana, Cuba, opened in January television and the Internet. 2001, exemplifies how we strive to deepen news coverage and address Tribune Media Net generates revenue that is mostly incremental — important reader interests. The bureau will enhance content in all sales that were not possible prior to the merger. Special sections that Tribune newspapers and benefit Tribune’s broadcast units as well. share content and run in multiple markets are a key revenue driver. The The Times Mirror merger added two Spanish-language newspapers sections offer national advertisers a common editorial platform and high to our publishing mix: La Opinión in Los Angeles and Hoy in New York. readership — a great combination for those targeting a specialized audience. La Opinión, 50-percent-owned by Tribune, is the nation’s largest Spanish- Tribune published three cross-market special sections in 2000: two language daily, reaching 600,000 readers every day. Hoy was launched by explored technology themes and one previewed the holiday movie scene. Newsday in 1998 and already has a paid distribution of 54,000. Together Capturing the majority of classified advertising revenues in our local with ¡Exito!, the Chicago Tribune’s free weekly, Tribune Publishing reaches markets remains a top priority. With the Internet playing a greater role Hispanic readers in the nation’s top three markets. We are exploring in the classified marketplace, our print and online strategies must be opportunities for national advertising sales and content sharing between integrated, and our product development efforts accelerated. In 2000, all three publications in this high-growth market. we created Tribune Classified Services to carry out both objectives. 17
  22. 22. Content-rich Web Tribune Interactive operates leading news and information Interactive Web sites in Tribune’s 23 local media markets, along with other branded sites targeting specific communities of interest. In 2000, we accelerated Tribune’s growth online, advancing our goal to develop profitable businesses in the new medium. The Times Mirror merger gave a boost to our online efforts, elevating Tribune to the top tier of local news, information and classified advertising providers on the Web. Our sites attract approximately 5 million unique visitors per month, placing us among the top 20 online news and infor- mation networks in the country. The content and promotion resources of Tribune newspapers and television stations give Tribune Interactive a unique ability to deliver large online audiences in the nation’s top three markets. Likewise, Tribune’s strong local brands throughout the country and long-term relationships with consumers and advertisers provide a distinct competitive advantage as we build our interactive businesses. Like most other Internet companies, Tribune Interactive experienced growing pains in 2000. We responded aggressively, taking steps to scale our online operations to revenue projections. Cost reductions will save more than $15 million annually, which includes operating efficiencies from a common online publishing platform being introduced in 2001. The technology facilitates content sharing and national advertising sales while allowing each of our sites to retain a unique design. 18
  23. 23. sites serving 23 U.S. markets Tribune Interactive pro forma revenues were $48 million in 2000, POPULAR SITES IN MAJOR MARKETS Tribune Interactive operates a national up 41 percent from 1999. (Pro forma assumes the Times Mirror merger network of Web sites featuring in-depth news and information. The group’s high-traffic occurred at the beginning of 1999.) Strong revenue growth is projected for newspaper sites are the foundation for current and future online success. 2001, and the group is targeting profitability by the second half of 2002. Newspaper Sites Affiliation We are keenly focused on applying our interactive resources to areas that offer the greatest potential for hard dollar returns. In particular, that Los Angeles Times Chicago Tribune means exploiting opportunities to speed revenue growth at our flagship Newsday, Long Island, N.Y. newspaper Web sites. Our sites feature breaking news throughout the The Baltimore Sun day and in-depth information not available elsewhere. In most of our South Florida Sun-Sentinel newspaper markets we also operate the leading online marketplaces for Orlando Sentinel jobs, cars and homes. The Hartford Courant Classified advertising is our highest priority, accounting for nearly The Morning Call, Allentown, Pa. Daily Press, Newport News, Va. 70 percent of online revenues. We established Tribune Classified Services The Advocate, Stamford, Conn. in 2000 to further integrate our print and interactive classified operations Greenwich Time, Greenwich, Conn. and to capture ad revenues moving from print to the Internet. In Entertainment and addition, we reconfigured our newspaper Web sites to better showcase Specialty Sites (partial list) Description classified content. Leading online destination for African-Americans We continue to utilize strategic partnerships with other newspaper General classifieds site serving Southern California publishers to build nationally-branded sites like — sites that Multimedia site for local fans, launched in 2000 complement our own local sales efforts. In 2000, we greatly improved Chicago’s No.1 online entertainment guide Travel guide for Central Florida our position in the jobs category by partnering with Knight Ridder to Internet home of WPIX-TV, New York acquire CareerBuilder, a national leader in online recruiting. Tribune Internet home of KTLA-TV, Los Angeles newspaper sites now offer the full range of CareerBuilder services. Internet home of WGN-TV, Chicago Targeting new audience segments with sites that “build community” helps increase Tribune’s reach, locally and nationally, and helps develop new revenue streams. In 2000, for example, we launched, We also believe increasing bandwidth will play an important role in our a site that taps Tribune’s Chicago-based print, broadcast and interactive interactive growth. High-speed broadband technology promises to make resources to give local fans the richest possible online experience. Our the Internet more compelling for consumers and advertisers alike, and most successful online community is, which recently Tribune’s vast multimedia capabilities position us well for the changing entered a major strategic marketing alliance with General Motors. online environment. In fact, we are already partnering with AT&T’s cable The wide-ranging agreement demonstrates our belief in the power of modem service in several of our most important markets, providing the Internet as a medium for creative marketing solutions that go well customized multimedia content for distribution via PCs, digital cable beyond standard banner-type advertisements. TV set-top boxes and wireless handheld devices. 19
  24. 24. Tribune Ventures Tribune invests strategically in areas that are important to our businesses. As the pace of change quickens in and other investments the media industry, we aim to participate in emerging technologies and business models that could shape Tribune’s growth. Our primary investment vehicle is Tribune Ventures, which partners with new-media companies that have solid business plans and high growth potential. The idea for Tribune Ventures originated in 1991 when Tribune acquired BUILDING PARTNERSHIPS Tribune Ventures invests in companies that have a strategic a 10 percent stake in America Online. Our objective was to explore the connection with one or more Tribune business areas. Listed below are Ventures’ investments made in 2000 or early 2001. online services business in its formative stage. Over the years, partnering with creative young companies like AOL (now AOL Time Warner) has Company Description proven helpful in growing our own businesses. We gain an inside track DailyShopper retail promotion network on new technologies, industries and business models. Dotcast datacasting over analog spectrum Tribune Ventures is an active investor. We maximize the strategic online valuation for art, collectibles benefits of our investments by forming operating relationships with online memorials and related services our portfolio companies. For example, in 2000, Ventures invested in online market research sales The Feedroom, a broadband news network, and agreed to license NextDoor Networks online services marketplace the news video from Tribune’s television stations to their network. Performics online performance marketing services The Feedroom, in turn, will develop customized, broadband-driven RespondTV interactive television enabler Web sites for our stations that enhance their current online efforts. The FeedRoom broadband, interactive news network The major areas of Tribune Ventures’ investment activity are: TrueAdvantage sales-lead services Upoc wireless instant messaging service I Internet-based media and electronic commerce I digital and interactive television I broadband infrastructure and services to identify and help develop young businesses that can benefit from our I online marketing services team’s experience, time and attention. This has so far led to investments I wireless applications and services in Performics,, iExplore and The acquisition of The Times Mirror Company in 2000 heightened Tribune also has important strategic investments that are managed Tribune’s national identity and strengthened our strategic leverage in outside of Tribune Ventures. In 2000, the company acquired a 46 percent making venture investments. The merger also added new companies to stake in CareerBuilder Inc. — a leading provider of online recruitment the Tribune Ventures portfolio, and extended our investment network on services for employers and job seekers — in partnership with the West Coast through a stake in Rustic Canyon, a venture capital fund. Tribune also is an equity partner in BrassRing Inc., Tribune Ventures further expanded in 2000 by opening a New York another recruitment services start-up, and Classified Ventures, a network office and broadening its focus in Chicago to include seed-stage investing. of classified advertising Web sites that includes The Manhattan office facilitates our work with existing portfolio companies Tribune Broadcasting holds a 25 percent stake in The WB Television on the East Coast, and enables us to focus more closely on new investment Network and, in the cable arena, owns 29 percent of TV Food Network and opportunities in the region. Recent East Coast investments include 9 percent of The Golf Channel. We are also a lead investor in iBlast Networks, and Upoc. In Chicago, our seed-stage initiative aims an early innovator in “datacasting” via the digital television spectrum. 20
  25. 25. Tribune in the Community Tribune gives back to the communities we serve. Our busi- nesses support a wide range of nonprofit organizations that help people in need, and Tribune employees generously donate their time, talent and money in these efforts. Most of our business units participate in the communities program of reading issues and daily features, the program includes public and the Robert R. McCormick Tribune Foundation. In-kind contributions private partnerships, as well as volunteer and community outreach. from Tribune units help raise funds from the public, which are matched I Tribune television stations, working with, launched by the Foundation. This enables our businesses to increase their impact an innovative Black History Month initiative in 2001. The companywide in the community. In 2000, charitable funds sponsored by Tribune multimedia project honored African-Americans who are making history businesses and supported by the Foundation awarded grants totaling today through outstanding contributions to their local communities. $41 million. Dollars are directed to agencies dedicated to helping children, improving health care or alleviating homelessness and hunger. I More than 300 Chicago-area Tribune employees, working with the Tribune’s merger with Times Mirror expands our opportunities Chicago Park District and local residents, spent a full day last August for community development. We’ll be an even greater contributor building a playground for the children of Englewood, an impoverished in Southern California, where we operate KTLA-TV, Los Angeles; South Side neighborhood. KSWB-TV, San Diego; and the Los Angeles Times. Likewise, our I The Orlando Sentinel, partnering with the YMCA, established a newspaper/television combinations in New York and Hartford mentoring program in 2000 to foster development of Hispanic leaders will help raise our support level in those communities. in the community. The program, with youth and adult components, Throughout Tribune, the depth of our community service activities is modeled after Black Achievers, another Sentinel initiative. and the range of causes we support are best shown by example: I Newsday’s FutureCorps, founded in 1999, is the largest student public I “Reading by 9” is an ongoing literacy program for kindergarten service project ever undertaken on Long Island and in Queens, N.Y. The through third-grade classes administered by The Baltimore Sun and the program introduces students to volunteerism and demonstrates how Los Angeles Times. Complemented by news coverage on early childhood they can bring about positive change. 21
  26. 26. Tribune Company and Subsidiaries Management’s Responsibility for Financial Statements Financial Statements Management is responsible for the preparation, integrity and fair presentation of the Company’s consolidated financial statements and related financial information included in the Annual Report on Form 10-K to shareholders. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States and necessarily include certain amounts that are based on management’s best estimates and judgments. The consolidated financial statements were audited by PricewaterhouseCoopers LLP, independent accountants. PricewaterhouseCoopers LLP was given unrestricted access to all financial records and related data, including minutes of all meetings of shareholders, the Board of Directors and committees of the Board. The Company believes that all representations made to the independent accountants during their audits were valid and appropriate. Internal Control System Management is also responsible for establishing and maintaining a system of internal control, designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the preparation of reliable published financial statements. The system of internal controls is continually reviewed for its effectiveness and is augmented by written policies and procedures, the careful selection and training of qualified personnel and a program of internal audit. Each year, the Company’s independent accountants conduct a review of internal accounting controls to the extent required by generally accepted auditing standards and perform such tests and related procedures as they deem necessary to arrive at an opinion on the fairness of the financial statements. The Audit Committee of the Board of Directors is responsible for reviewing and monitoring the Company’s financial reporting and accounting practices. The Audit Committee consists of six independent directors. The Committee meets with representatives of management, the independent accountants and internal auditors to discuss financial reporting, accounting and internal control matters. PricewaterhouseCoopers LLP and the internal auditors have direct access to the Audit Committee. John W. Madigan Donald C. Grenesko Chairman, President and Chief Executive Officer Senior Vice President/Finance and Administration Report of Independent Accountants To the Board of Directors and Shareholders of Tribune Company We have audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheets of Tribune Company as of December 31, 2000 and December 26, 1999 and the related consolidated statements of income, of cash flows and of shareholders’ equity for each of the three years in the period ended December 31, 2000 (not presented herein); and in our report dated January 26, 2001, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated financial statements is fairly stated, in all material respects, in relation to the consolidated financial statements from which it has been derived. Chicago, Illinois January 26, 2001 22
  27. 27. Tribune Company and Subsidiaries Five Year Financial Summary (in thousands of dollars, except per share data) 2000 1999 1998 1997 1996 Operating Revenues Publishing $ 3,403,028 $1,559,192 $1,481,324 $ 1,423,947 $1,334,032 Broadcasting and Entertainment 1,465,553 1,302,058 1,153,006 1,057,529 876,750 Interactive 41,782 21,034 17,249 12,771 2,607 Total operating revenues $ 4,910,363 $2,882,284 $2,651,579 $ 2,494,247 $2,213,389 Operating Profit Publishing $ 700,932 $ 426,515 $ 398,846 $ 371,135 $ 304,844 Broadcasting and Entertainment 449,057 378,036 317,355 285,896 203,531 Interactive (52,606) (32,203) (21,709) (16,550) (13,587) Corporate expenses (64,372) (39,506) (35,435) (34,426) (30,935) Total operating profit 1,033,011 732,842 659,057 606,055 463,853 Net loss on equity investments (79,374) (40,083) (33,980) (34,696) (13,281) Net interest expense (207,584) (65,595) (82,339) (60,159) (15,663) Non-operating items and minority interest expense (165,301) 1,756,779 119,119 111,824 – Income from Continuing Operations Before Income Taxes 580,752 2,383,943 661,857 623,024 434,909 Income taxes (270,351) (933,981) (272,660) (250,265) (175,071) Income from Continuing Operations Before Accounting Change 310,401 1,449,962 389,197 372,759 259,838 Discontinued Operations of Education Segment, net of tax (86,015) 21,807 25,075 20,866 22,912 Discontinued Operations of QUNO, net of tax – – – – 89,317 Cumulative effect of change in accounting principle (1) – (3,060) – – – (2) Net Income $ 224,386 $1,468,709 $ 414,272 $ 393,625 $ 372,067 Share Information Basic EPS Continuing operations Before non-operating items $ 1.40 $ 1.53 $ 1.27 $ 1.16 $ .96 Total 1.06 6.03 1.53 1.44 .98 Discontinued operations (.32) .09 .10 .09 .46 Cumulative effect of accounting change – (.01) – – – Net income $ .74 $ 6.11 $ 1.63 $ 1.53 $ 1.44 Diluted EPS Continuing operations Before non-operating items $ 1.30 $ 1.41 $ 1.17 $ 1.07 $ .89 Total .99 5.49 1.41 1.33 .91 Discontinued operations (.29) .08 .09 .07 .41 Cumulative effect of accounting change – (.01) – – – Net income $ .70 $ 5.56 $ 1.50 $ 1.40 $ 1.32 Common dividends per share $ .40 $ .36 $ .34 $ .32 $ .30 Weighted average common shares outstanding (000’s) 271,951 237,367 242,428 245,758 245,684 Financial Ratios Operating profit margin 21.0% 25.4% 24.9% 24.3% 21.0% Debt to capital (3) 34% 37% 35% 41% 37% Financial Position and Other Data Total assets $14,676,212 $8,740,047 $5,824,037 $ 4,665,821 $3,629,151 Long-term debt (4) 4,007,041 2,694,073 1,615,955 1,520,646 979,754 Shareholders’ equity 5,885,916 3,458,617 2,356,617 1,826,004 1,539,506 Capital expenditures $ 302,471 $ 125,578 $ 128,800 $ 98,319 $ 87,171 This summary should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2000 Annual Report on Form 10-K. (1) The cumulative effect of adopting a new accounting pronouncement for derivative instruments decreased net income by $3.1 million in 1999. (2) Includes non-operating items as follows: loss on change in fair values of derivatives and related investments of $62.6 million and loss on sales of subsidiaries and investments, net of write-downs of $30.5 million, totaling $93.1 million in 2000; gain on change in fair values of derivatives and related investments of $131.2 million, gain on reclassification of investments of $666.2 million, and gain on sales of subsidiary and investments of $270.1 million, totaling $1.1 billion in 1999; gain on sales of subsidiary and investments, net of write-downs, totaling $63.5 million in 1998; gain on sales of investments, net of write-downs, totaling $68.9 million in 1997; and equity income related to Qwest Broadcasting of $6.0 million in 1996. (3) Capital comprises total debt, deferred taxes and shareholders’ equity. (4) Long-term debt includes the PHONES in 2000 and 1999. 23