Tribune Takes Huge Q2 Loss on $3.8 Billion Write-Down

By: E&P Staff In one fell swoop, the Tribune Co. took nearly half the value of the Times Mirror acquisition off its books. On Wednesday, the company reported a staggering Q2 loss from continuing operations of $3.8 billion on a goodwill impairment charge of $3.8 billion, due almost entirely to the Times Mirror purchase. That March 2000 transaction of $8 billion was once the largest newspaper deal in history.

Before the write-down, Tribune recorded $168 million in operating profit in Q2, down 3.8% from the same period last year.

The company led by CEO Sam Zell also reported a loss in discontinued operations of $705 million in Q2 compared to the same period a year ago, related mainly to the sale of Newsday in Melville, N.Y.

Operating cash flow declined 2% to $221 million in Q2.

The publisher of the Los Angeles Times and Chicago Tribune reported that operating revenues at its newspaper division decreased 11% to $701 million. Operating expenses fell 12%, which included a $23 million real estate gain and a $15 million charge for severance. Cash flow dropped 4% to $114 million.

Advertising revenue at the publishing division plummeted 15%, or $91 million on losses in retail advertising, down 8% (or $20 million); national advertising, down 12% (or $16 million); and classified advertising, down 26% (or $55 million).

Within the classified category, real estate revenue dropped 38%, help-wanted fell 33%, and auto declined 9%.

Interactive revenue decreased 4% or $2 million stemming from classified losses.

Circulation revenue was down 2% or $3 million due to declines in Los Angeles and Chicago. Circulation revenue increased in Baltimore, Ft. Lauderdale and Orlando, Fla. Daily circulation is down 5% in Q2 across the company's properties.

Zell said in a statement that Tribune has paid down $807 million of borrowings under the Tranche X Facility made possible by the proceeds from an asset-backed commercial paper program and the Newsday divestiture. The company has met its 2008 obligations for that loan. The remaining principal balance of $593 million is due in June 2009.

Commenting on the publishing results, Zell said Tribune is, "for the most part, in line with industry trends, which remain consistent with what we reported in the first quarter."