Analysts Surprised by New Trib. Revelations

By: Jennifer Saba

Analysts were surprised yesterday when the Tribune Co. announced a $35 million pretax reserve charge in anticipation of a settlement with advertisers over the circulation scandal at Newsday and Hoy. Tribune also announced that the papers had misstated circ discrepancies more than previously thought.

In a note issued today by Merrill Lynch, Lauren Rich Fine wrote that the $35 million reserve — which she classifies as “fuzzy” — was not anticipated. She points out that during the Mid-Year Media Review management was “somewhat dismissive that there would be further ramifications related to the circulation misstatements … We were not surprised that advertisers might demand restitution but are surprised that management did not try to telegraph this earlier.”

Tribune said it could adjust the $35 million charge as the investigation continues, with an official report on the misstatements expected within a few weeks. The settlements, if they occur, will be determined on a case-by-case basis and could take the form of cash, make-goods, or a combination of both.

Yesterday, Dennis FitzSimons, chairman, president and CEO of Tribune, said that since the Mid-Year Media Review the company had found “additional circulation misstatements.” When the company first came forward with circulation information in mid-June they had originally thought that it was isolated only to 2003 reports and, to a smaller extent, the report ending March 2004.

Executives now say numbers for 2001 and 2002 were also affected. And the March 2004 circ report was off by much more. “The overstatement of March 2004 was roughly the same as the September 2003 overstatement,” said Jack Fuller, president of Tribune Publishing. For the 12-month period ending September 2003, the company said daily circ for Newsday had been inflated by 7% and Sunday circ by 9%. For Hoy, daily circ was off by 16% and Sunday circ was off by 12%. That was for the entire year. The March 2004 figure — for just the six-month period — was inflated by as much as the entire 2003 year.

On a parallel track, the Audit Bureau of Circulations is expected to have its audit of the September period complete by the end of July. Heidi Chen, a spokesperson for ABC, said that ABC would not discuss any audit until it has been officially released. Nor will the organization discuss the new revelations at Newsday and Hoy. However, Chen noted that ABC has already censured the papers and that additional measures will not be added at this time.

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