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Transcript

Annual Meeting of Shareholders
May 18, 2005

Dennis FitzSimons, Chairman, President and CEO

Good morning, everyone, and welcome to our 2005 Annual Meeting.

It’s good to see so many shareholders and employees with us this morning. Lots of familiar faces -- so thanks for being here.

Let’s begin the meeting with a formal call to order.

First, I’d like to recognize our board of directors, which does an outstanding job representing Tribune shareholders. I would like to ask you to hold your applause until we’ve introduced everyone:

Jeff Chandler, president and CEO of Chandler Ranch Company.

Roger Goodan, a consultant to Schlumberger Limited;

Rick Hernandez, Chairman, President, and CEO of Inter-Con Security Systems;

Betsy Holden, President, Global Marketing and Category Development, Kraft Foods, Incorporated;

Bob Morrison, retired Vice Chairman of PepsiCo, and retired CEO of The Quaker Oats Company;

Bill Osborn, Chairman and CEO of Northern Trust Corporation;

Chris Reyes, the founder and Chairman of Reyes Holdings, Incorporated.

Bill Stinehart, retired partner of the law firm Gibson, Dunn & Crutcher.

Dudley Taft, President of Taft Broadcasting Company.

Kathryn Turner, chairperson and CEO of Standard Technology, Incorporated.

Please join me in thanking our directors for their excellent service on behalf of Tribune shareholders.

Now I’d just like to say a word about one of our directors who is retiring from Tribune’s board and couldn’t join us today... Pat Ryan. Pat is the Chairman of Aon Corporation, and has served on our Board since 1997. He has been a great advocate for Tribune shareholders.

Pat chaired the Board’s Governance and Compensation Committee, and served on the Executive Committee, as well. His experience and counsel have been invaluable to the Board and to me personally. We thank Pat for his dedicated service to Tribune and wish him well.

Now, I’d also like to recognize several former directors of Tribune who are with us today:

• Charlie Brumback... our former Chairman and CEO;

• Stan Cook... who preceded Charlie in those same positions;

• Jim Dowdle... former Executive Vice President for Tribune;

• John Madigan... my predecessor as Chairman and CEO;

• Frank Considine... a longtime member of our Board;

• Ward Quaal... who ran WGN for many years.

Thanks to all of you for being here today...

Now, let’s move ahead with the formal business of the meeting.

Crane Kenney, our secretary, has informed me that lawful notice of the meeting has been given and that a quorum is present. The polls for voting are now open. The ushers have ballots for any shareholder who has not submitted a proxy card or voted by phone or the Internet. If there are any shareholders who would like to vote by ballot, please raise your hand, and the ushers will bring you one.

The polls will be closed as to all business voted upon at this meeting when the ushers complete the collection of ballots.

The first matter submitted for your approval is the election of directors.

The Board has nominated Roger Goodan, Rick Hernandez, Chris Reyes and Dudley Taft for three-year terms, expiring in 2008. No other nominations were received prior to the deadline set by the Company’s by-laws.

Are there any questions or comments regarding the election of directors?

The next proposal is the ratification of the selection of PricewaterhouseCoopers as our independent accounting firm for 2005. Are there any questions or comments regarding the selection of PricewaterhouseCoopers?

If there are no questions, this concludes the matters for which the Company seeks your approval. Will the ushers please collect the ballots

I now declare the polls closed. We’ll give you a report on the voting later in the meeting.

Now, with the formal business of the meeting concluded, I’d like to review some events and accomplishments of the past year. As you know, we’ve had a number of management changes at the company. Jack Fuller, a director and president of Tribune Publishing, retired at the end of 2004 after a distinguished career of more than 30 years with the company. John Puerner has led the LA Times since our acquisition of the newspaper in 2000, and will step down as publisher next month. We wish both Jack and John well and thank them for their many years of service.

On January 1st of this year, Scott Smith moved up to president of the Publishing Group after seven years as head of the Chicago Tribune. Scott will cover publishing developments in a moment and Pat Mullen will report on broadcasting. But first, let me talk about Tribune overall.

A lot has happened since our last Annual Meeting. Like a lot of our peer companies, we’ve faced a number of challenges -- continuing fragmentation of media audiences, rapid technological change, and an uneven advertising environment. In addition, Tribune has had its own unique set of issues -- the biggest, of course, being the circulation misstatements at Newsday and Hoy.

But none of these issues has changed our fundamental belief that the business of local mass media is healthy and that there is growth in our future. Tribune’s newspapers and TV stations are resilient. We have strong businesses in top markets, and they are critically important for advertisers, consumers, and the communities we serve.

Our media businesses are, however, sensitive to their local economies. Certainly, we have seen improvement in the national economy, but this growth did not convert into advertising demand in our markets in 2004.

Coupled with increasing competition from new media, the environment for all traditional media -- newspapers, radio, outdoor, as well as TV -- has been challenging.

If you think about it, audience fragmentation has made life more difficult for marketers, too... gone are the days when you can reach fifty percent of the country with just a few spots on national network TV.

But advertisers are looking for media alternatives that can produce results, and that’s what Tribune’s media outlets can deliver.

With that as a backdrop, let me cover:

• Our financial results;
• What we’re doing to address some short term issues that are causing investor uncertainty about Tribune;
• And, finally, having just passed the five-year anniversary of our acquisition of Times Mirror, cover some important accomplishments.

So, let’s begin with our 2004 financial results. Our revenues grew 2 percent and operating cash flow was about even with 2003 at 1.6 billion dollars. Of that, over 850 million dollars was converted to free cash flow. We used those funds to repurchase over 15 million shares of stock, pay dividends and make small but important acquisitions and investments in new businesses.

Our 2004 results were adversely impacted by severance charges we took when we reduced staff at our publishing businesses... and by a $90 million charge for settlements with Newsday and Hoy advertisers.

Which brings to the steps we’re taking to reduce the investor uncertainty that is causing our shares to trade at a discount to our peers. We have five areas of focus: Newsday, the L.A. Times, The WB Network, FCC deregulation and the Matthew Bender tax case, and here’s what we’re doing in each of these areas...

At Newsday: We will substantially resolve all advertiser settlement agreements by the end of the second quarter. Newsday’s new management team has reached agreements with 80 percent of its major advertisers and nearly 30,000 advertisers in total.

At the Los Angeles Times: We’re making progress restoring financial momentum at the newspaper. Jeff Johnson will become publisher on June 1. Jeff will lead a management team that includes a new general manager with a strong sales and marketing background, two new circulation executives, and a new ad director. All of them bring fresh perspectives to the Times on improving top line growth.

At The WB Network: The WB’s upfront advertiser sales presentation took place yesterday in New York. Our fall program schedule is set, and we recently renewed our affiliation agreement through September 2006. You’ll hear more from Pat about some of the high-profile producers who will be bringing programs to The WB Fall schedule.

On the regulatory front: We have petitioned the Supreme Court to review the FCC’s current ban on newspaper-broadcast cross-ownership. We look for a positive resolution of this issue either from the court or the FCC. In this fast-changing environment, our industry and our investors need regulatory clarity.

On the Matthew Bender tax case: The tax court heard our case in December and final briefs will be filed next week. We look forward to a ruling late this year or early in 2006.

And that brings me to the last area I want to discuss: Our accomplishments as a company in the five years since our acquisition of Times Mirror, a transaction that gave us the scale we needed to compete effectively in today’s media marketplace.

You may have seen the Chicago Tribune or Wall Street Journal stories marking the anniversary of the acquisition -- each mentioned several important points that are worth highlighting:

• We doubled in size and added some great media assets in major markets like Los Angeles, New York, Baltimore and Hartford.
• We made significant financial progress, reducing our debt from 5.4 billion dollars to under 2 billion. We have also increased our dividend 64%, and repurchased about 51 million shares of Tribune stock.
• To drive future growth, we’ve invested more than 350 million dollars in important projects that have expanded our pre-print advertising capacity and color printing capability.
• In broadcasting, we acquired additional TV stations in St. Louis, Indianapolis and Portland, and invested more than 60 million dollars in our digital broadcasting capability.
• We’ve grown our footprint in the Interactive space, and revenues are almost four times what they were in 1999. Our interactive businesses now represent the fastest growing segment of our company.
  • A large part of this is CareerBuilder, our on-line recruitment resource, which we own in partnership with Gannett and Knight Ridder.
  • We have similar hopes for other joint ventures including:
• ShopLocal.com, which provides consumers with on-line access to local retailers.
• And, Topix.net, an aggregator of news and information that allows consumers to search by zip code or subject matter.

It is also important to remember that we accomplished all of this while delivering great journalism to our readers, viewers and listeners. We have journalists stationed around the world, many of them in dangerous areas like the Middle East. Their role in reporting the news, particularly during a time of war, is critically important.

With more and more national competitors emerging, the important local journalism produced at our newspapers, TV stations and at WGN Radio sets us apart.

Our journalists are regularly honored for their outstanding work:

• Last year our TV stations received 38 Emmy Awards for excellence in local news and production.
• In publishing, our newspapers were recognized with four Pulitzer Prizes:
  • The Los Angeles Times won the Public Service Pulitzer for a series exposing deadly problems at the King Drew county hospital in L.A.
  • The Chicago Tribune’s Julia Keller won for feature writing on the devastating effects of a tornado that hit Utica, Illinois.
  • And, awards for international reporting went to Newsday’s Dele Olojede (Day-lay O-la-Je-day) for his stories about Rwanda and LA Times reporter Kim Murphy for her wide-ranging coverage of Russia.

As a company, we have much to accomplish and a lot to look forward to this year, and beyond. Now, let me turn it over to Scott Smith for a report on our Publishing operations. Scott?

Scott Smith, President/Tribune Publishing

Good morning everyone. The video we just saw clearly reflects the vital role our newspapers play in their communities.

Each year we recognize that commitment by honoring excellence in impactful local, news coverage with the Tribune journalism award. This year’s award was presented to the Hartford Courant for its penetrating series on corruption in the administration of Governor John Rowland that led to his resignation and conviction.

We also present the Tribune award for innovation in readership, which this year went to the Baltimore Sun for its success among the city’s African Americans through a comprehensive set of editorial, marketing and sales initiatives

These are examples of why each of our metropolitan newspapers is the leading local media business in its market. The papers’ broad reach across diverse age and ethnic groups deliver informed and engaged audiences for thousands of advertisers.

But in today’s intensely competitive media marketplace, we know our papers need to better serve those consumers and advertisers every day. We are also aggressively extending our reach and revenue through more than 130 targeted publications, our preprint advertising mailings and more than 50 news, entertainment and classified websites.

Before describing our key priorities to grow our print and interactive businesses, let me first recap our recent financial performance.

In the challenging environment that Dennis described, 2004 publishing and interactive revenue grew 2% to 4.1 billion dollars. Operating cash flow, excluding the special charges, declined 2% as reduced profits in several markets more than offset solid growth in Chicago, Baltimore and Hartford.

So far in 2005, ad revenue is growing modestly despite the effect of lower rates at Newsday. Circulation, however, is down more than in recent years, both in volume and revenue. In the first quarter, we were still able to grow operating profit 5% through expense reductions.

Our priorities focus on how we can improve growth and our overall performance. The first priority is to grow responsive readership and on-line audiences. In most of our markets, we reach at least half of the adults every week. We are committed to finding ways to be more valuable to these customers, growing frequency, loyalty and engagement that is so important to advertisers. We are attracting many new customers to our array of media choices as well.

Improving our circulation trends is a key element, particularly home delivery. There are a number of initiatives underway at each of our newspapers which we expect to show sustainable results as the year progresses.

Retention is a priority -- keeping existing customers longer and acquiring new subscribers who are most likely to stay with us. Our sales and retention efforts already are showing signs of reducing customer churn, particularly in Los Angeles.

We’re making additional investments in marketing. New promotion campaigns are underway in most of our markets including a daily multi-media campaign that emphasizes stories you can find only in Newsday. We built a new marketing database to better target consumer interests in Los Angeles similar to the one in Chicago, and we’re expanding that to our other papers as well.

We’re also making our editorial content more accessible, engaging and distinctive. We’re improving navigation, graphics, headlines and story selection, with a focus on news readers will find useful and entertaining.

Publications like AM New York and Red Eye that target young urban commuters as well as the Spanish language editions of Hoy, extend our reach by more than 2 million readers per week.

Our websites now have more than 11 million monthly users. And here in Chicago, where we offer the most media choices, the total weekly reach of our newspapers and internet sites has grown in the past 5 years to over 60% of all adults in the market.

Our second key priority is to grow ad revenue and share across key categories.

We believe the fundamental advantages of newspaper advertising continue to hold. For example, in a recent Yankelovich survey, an overwhelming 90% of consumers said they’d keep ads in newspapers even if they could get rid of them. In this cluttered ad world, delivering that kind of consumer interest is vital.

Our preprint strategy is continuing to pay big dividends. Preprints represent more than $660 million in revenue for Tribune Publishing, growing 8% a year since 2000. A big part of our preprint story is in Los Angeles, where we’ve grown preprint revenues by 10% annually, but where our market share is still well below levels we achieve in most of our markets. The Value Network -- described in the video -- enables advertisers to efficiently reach 7 million homes across Southern California with one coordinated buy.

We’re also creating more colorful and compelling ads. We’ve expanded color press capacity by a third at the LA Times and are doubling color in Chicago and South Florida in 2006. This color lets us run high impact ads such as these.

In classifieds, our integrated print and online strategy is proving to be a solid competitive advantage. Ten percent of all our classified revenue is now coming through the Internet.

Our third priority, to drive for further cost efficiencies, is in high gear. We expect cash expenses to be up only slightly this year, and will actually decline when you exclude the impact of higher benefit costs and newsprint prices. We see further opportunities to capitalize on technology and scale economies in the years ahead.

Finally, but most importantly, our people are central to our progress -- all those participating as employee owners today and thousands more. We’ve made a number of key executive moves over the past year to help lead us forward, including four new publishers, four general managers and three editors. Throughout the organization, we’re developing our talents so together we innovate boldly and execute with consistent discipline to create value for our customers, communities and shareholders.

On that note let me turn it over to Pat Mullen for his broadcasting update. Thank you.

Pat Mullen, President/Tribune Broadcasting

Thank you Scott and good morning everyone.

2004 was a challenging year for Tribune Broadcasting due to general softness in the core television advertising business. Nevertheless, Tribune Broadcasting turned in a solid performance:

• Revenues increased 3 percent to 1.6 billion dollars, with about 85 percent of those revenues contributed by our television group, which consists of 26 stations in 22 markets plus Superstation WGN.
• Operating cash flow for Tribune Broadcasting grew 3 percent to 597 million dollars, and operating profit also gained 3 percent.

So far in 2005, soft market conditions have persisted, and we’re also being affected in the top markets by a new audience measurement system by Nielsen. We’ve been disappointed with this new technology because it tends to under-report the younger viewers who make up our core audience. We’re working with Nielsen on modifications that should lead to more accurate ratings.

We’re also working closely with our partners at The WB. This spring we renewed our affiliation agreement covering our 19 WB stations and we’re pleased with the changes taking place at the network. David Janollari, the new head of programming, has strong relationships with the Hollywood creative community.

He has brought in several renowned TV producers including Jerry Bruckheimer, producer of C.S.I., and David E. Kelly, producer of Ally McBeal and The Practice. These producers, in turn, are attracting big-name stars to the network.

Last week I had the opportunity to screen the pilot episodes for The WB’s new fall season and the shows look terrific. And, just yesterday, the network presented these shows to advertisers in New York and they were very well received. We’re confident the schedule will produce better prime-time ratings for our stations.

Another positive story is local news, and morning news in particular. Last year we expanded our successful morning newscasts in New York, Los Angeles, Chicago and Seattle.

Tribune TV stations now broadcast a combined 235 hours of award-winning, local news every week. It’s a good business for Tribune, and it helps our TV stations build close ties with their communities. Local news is also our chance to showcase top-notch journalism.

We recently awarded WXMI-TV in Grand Rapids the Tribune Journalism Award for its newscasts last summer that told the story of a murder that could have been prevented. WXMI’s story prompted an investigation into local police dispatch operations and closed a dangerous loophole.

Besides news, another key success factor for our local TV stations is the programming we air in the important early and late fringe time periods... which come right before... and after... primetime. The off-network sit-coms aired during these dayparts, like perennial favorites Friends, Raymond and Will & Grace, contribute nearly 40 percent of our local TV revenues.

This fall we’re adding two new sitcoms to our line-up. First, in early fringe, My Wife and Kids. Then, in late fringe, HBO’s Sex and the City. In the fall of 2006, we’ll also be adding According to Jim. The addition of these new shows will give a nice boost to our existing lineups.

Sex and the City from HBO is our first "off-cable" program and a good example of how we’re looking to broaden our sources of programming. Additionally, earlier this month we announced a partnership with Sony Pictures Television to develop and produce first-run syndicated programming for the Tribune station group. Our first project under this partnership will be a daytime series debuting in fall 2006.

We’re actively seeking similar production agreements with other Hollywood studios to ensure that we continue to provide the very best programming for our station group.

Another important piece of our television business is Superstation WGN, where over the past three years we’ve grown distribution from 52 million to 66 million homes, well on the way to our goal of 70 million.

One of Tribune’s best-known business units is the Cubs, and the team’s popularity has been important to our success at the Superstation and to WGN-TV and WGN Radio locally.

Attendance at Wrigley Field last season surpassed the 3 million mark for the first time. Some nice enhancements to the ballpark are in store for 2006, including 1,800 more seats in the bleachers and a restaurant behind the center field fence. These and other improvements will be undertaken with great care, so that Wrigley’s unique charm and character remains intact.

If you’re a Cubs fan living here in Chicago you’re probably familiar with Comcast SportsNet, which launched last October. Tribune holds a 25% ownership interest, so we share in the channel’s profits while also receiving rights fees for the 72 Cubs games they will air this season.

Obviously what we put on the air is critical to our success in television. But how we put it there is important too. On the operations side, we work hard to be innovative and maximize economies of scale. During this time of slower revenue growth, being efficient and controlling costs is essential.

I want to thank all the employees of Tribune Broadcasting who have done such a terrific job at this. Your efforts have really made a difference.

Leading-edge digital technology is helping improve our operations as well. Our all-digital Central Distribution Center is now up and running in Indianapolis. The facility can format and distribute programming for our entire station group, eliminating redundant efforts in our local markets.

In summary, our local stations are well managed, and our strategy of programming to younger TV viewers differentiates our WB and Fox affiliates in today’s media environment. The quality of local news programming and efficient operations also set Tribune apart.

We’ll continue to have strong network programming, acquire the best syndicated programming, and provide compelling local news, assuring success in our business of local mass media.

And now I’ll turn the podium back over to Dennis...

Dennis FitzSimons, Chairman, President and CEO

Thanks, Pat

Before we get to our question and answer session, I’d like to update you on our earlier voting. I have received a report that indicates:

• Each of the nominees to our board has been elected, and
• The selection of PricewaterhouseCoopers as independent accountants for 2005 has been ratified.

The final vote tally will be reported in our next quarterly report to shareholders.

The Tribune Management Award has been presented each year since 1982 in memory of Robert Reneker, one of Tribune’s first outside directors and a great advocate of the principles of professional management.

This year, the award goes to a team of 12 people from across the company who recently completed a very significant project -- assessing Tribune’s compliance with Section 404 of the Sarbanes-Oxley Act.

This complex federal law requires the documentation and testing of all management controls and certification of a company’s publicly reported financial information.

The twelve people on this team coordinated the work of hundreds of others at our business units. In addition to their regular daily duties, this team worked the entire year to document, test and assess more than 4000 control activities across the company. When they were finished, I am proud to say, we confirmed that Tribune has strong and effective financial reporting controls and practices.

I’m going to ask Crane Kenney and Don Grenesko to help me in presenting these well-deserved awards to the following people:

• Jerry Agema, CFO of the Publishing Group;
• Harry Amsden, our VP of Corporate Compliance;
• Tom Caputo, VP/Auditing;
• Kathy Coddington, Director/Auditing
• Darko Dejanovic, VP and Chief Technology Officer;
• Terry Jimenez, CFO at Newsday
• Shelly Lebioda, Director of Quality Assurance
• Mike Plonski, Chief Technology Officer at Tribune Interactive;
• John Poelking, CFO of our Broadcasting Group;
• Josh Seeger, Chief Information Officer with the Broadcasting Group;
• Scott Tafelski, Director/Technical Development in the Publishing Group;
• And Mark Mallory, VP/Controller.

Please join me in congratulating all these team members for a job well done!

Now, I’d like to ask Luis Lewin, our senior vice president for human resources to help with the presentation of the Tribune Values Award. Luis??

Luis Lewin, Senior Vice President/Human Resources

The Values Award is presented each year to an employee or team who, by their actions, embody the values of our company. This award was created in memory of James Beré, who served on our board and believed strongly that values are a critical ingredient of business success.

This year’s Values award goes to a group of people who personify the meaning of "teamwork" -- four individuals from WPIX-TV in New York who brightened the winter holiday season last year for our troops in the Middle East.

They are led by News Director Karen Scott, reporter Marvin Scott, photographer Dave Kimmel, and Engineering Supervisor Jake Soto. They were embedded with a military unit from New York and transported a "taste of New York" to Iraq. Everyday things that we take for granted like cheesecake and bagels, disposable cameras, even basketballs.

But, they also transported equipment which they used to link up soldiers via satellite with their loved ones back home. The reunions were often emotional. Take a look...

These four individuals remind us of what we can accomplish for others when we work together as a team. Karen, Marvin, Dave and Jake, it is an honor to present you the Tribune Values Award.

Dennis FitzSimons, Chairman, President and CEO

Thanks, Luis. What a great way to bring this meeting to a close.

I want to thank Kathy O’Malley for all her help this morning…and everyone who worked so hard to produce today’s program, especially our great production team at WGN and our multimedia staff.

On behalf of the Board of Directors and the Tribune management team here in Chicago, thanks to all our shareholders here today and to all our employee-owners watching via satellite. We have concluded our official business…The meeting is adjourned!

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This document contains certain comments or forward-looking statements that are based largely on the company's current expectations and are subject to certain risks, trends and uncertainties. Such comments and statements should be understood in the context of Tribune's publicly available reports filed with the SEC, including the most current annual report, 10-K and 10-Q, which contain a discussion of various factors that may affect the company's business. These factors could cause actual future performance to differ materially from current expectations. Tribune Company is not responsible for updating the information contained in this press release beyond the published date, or for changes made to this document by wire services or Internet service providers.