Second Quarter 2008 Earnings
Conference Call
August 26, 2008
Gary Weitman - Tribune Company - SVP, Corp Relations
Good morning, and thanks for attending the call. I’m Gary Weitman, the company’s SVP for Corporate Relations. And joining us for the call are Sam Zell, Tribune’s Chairman and CEO; Randy Michaels, our Chief Operating Officer; and Chandler Bigelow, our CFO.
As we’ve said before, during the course of 2008, we intend to provide timely, periodic updates on our business results and trends. The purpose of this call is to do just that.
Sam will begin and give you an overview of our business, update you on our obligations and overall liquidity, and provide you with the latest information on the disposition of the Cubs and Wrigley Field. Chandler will review the company’s Q2 2008 financial results. And Randy will talk primarily about developments at our newspapers and TV stations. We’ll use the remaining time for Q&A.
Before turning the call over to Sam, I want to remind you that today’s presentation will contain certain and forward-looking information. Such information, by its nature, is based on facts, events, assumptions, and uncertainties that are subject to change. In evaluating such information, you are advised to review the cautionary statements regarding forward-looking information contained in the company’s August 13th, 2008 earnings press release, and in our SEC reports.
And with that, I’ll turn it over to Sam.
Sam Zell - Tribune Company - CEO
Good morning, everyone.
Once again, thank you for joining us.
Our industry continues to feel the short-term effect of a weak economy and the long-term impact of advertising migration to the Internet. While consumer confidence bounced off a record low in August, it remains weak and pessimism regarding the job and housing markets continues.
In the first half of the year, the newspaper industry has seen publishing ad revenues decline around 15 percent. And I can tell you it hasn’t gotten any better in either July or August. Businesses have been cutting back their ad expense during the summer months, even more so than they have historically, to save capital for key, promotional periods, such as back-to-school and the holidays.
At Tribune, this all translates into continuing revenue declines in our classified, retail, and national advertising. Once again, our biggest revenue decline in the second quarter was in classified advertising, which fell 26 percent due primarily to the real estate, employment, and automotive sectors. National advertising revenues were down 12 percent and were mostly impacted by decreases in telecom and movie categories. Retail advertising revenues were down 8 percent from a number of sectors, including home furnishings, department stores, hardware and home improvement stores, specialty merchandise, and electronics.
In keeping with the last quarter, our broadcast results were slightly up, increasing 4 percent over last year. The increase this quarter reflects some of our successes in gaining local market share at most of our TV stations.
Also, radio entertainment revenues were up, primarily due to the Cubs. This increase was directly attributed to the team’s success and to the fact that we had two more home games this year than we did in last year’s second quarter.
Turning to liquidity and transactions, year to date we have paid $807 million of Term Loan X, from the net proceeds of our asset-backed, commercial paper program, and from our Newsday joint Venture transaction, both of which closed in July. These payments satisfy the December 2008 portion of the long-term X maturity, and leave us with a balance of $593 million to pay down in June of 2009. We believe we have the financial liquidity to meet our 2008 debt obligation and fully expect to meet the 2009 $593 payment.
As far as Cubs and Wrigley Field, with regard to the transaction, the process continues to move at a good pace. We have narrowed the original group of bidders from 10 to five with a combination of all the assets. And there are still additional bidders interested in the stadium on its own. The remaining bidders are in due diligence now and we expect to present a deal to the NLB sometime before the end of the year.
The Cubs continue to lead the division, to set records in revenue and ratings. We are now reaching well north of 3.2 million fans with every game. We would not have chosen a better year to monetize these assets and we’re confident that we’ll arrive at a transaction that is in the best interest of the company, our employees, and the team’s fans.
On the real estate front, in June, we announced that we had started the process of asking a number of real estate firms to give us their best thinking on how we can generate more value from the Tribune Tower and adjacent land in Chicago, and the Times Mirror Square Complex in downtown Los Angeles. Since then, we have selected a firm for each market. Our goal is to identify the best way to maximize these assets given their locations, stature, and current market conditions. We are now in the midst of compiling detailed operating information and projections for the properties to further narrow down the most advantageous solutions.
Finally, since our last call, we had some further changes in our senior management team. You have read that we have just recently named Eddy Hartenstein, the founder of Direct TV, as Publisher of the L.A. Times. Eddy has spent his distinguished career delivering subscription-based content to customers, and we believe that he will bring a fresh, entrepreneurial approach to our newspaper. And without exception, everybody is very excited.
Also at the L.A. Times, we’ve brought in a new head of cross-platform sales. Later this week, we’ll be announcing a Chief Revenue Officer and a new SVP of Advertising at the paper. Their appointments reflect our strategy to aggressively create promotional revenue opportunities across our print, broadcast, Internet products.
At Chicago Tribune, we are actively looking for a new publisher. In the interim, Bob Gremillion, continues to oversee the paper and he’s doing very well.
And last month, we named Gerry Kern as the new Editor of the Chicago Tribune. You’ve read a lot about the layoffs we’ve had at Tribune, and we, like the rest of the industry, have indeed, made reductions.
But we’re also reinvesting in the business. We’re actually adding people in areas that we believe will increase profitability. For instance, we’ve added roughly 90 people to our broadcast news department because we now know that our highest profitability in TV are in our own, local news product.
We are well on our way to rounding out our management team and our staffing in key areas. And this is a vital step in our continued evolution.
With that, I’ll turn the call over to Chandler.
Chandler Bigelow - Tribune Company - CFO
Thanks, Sam.
As you know, Tribune filed its second quarter 10-Q and issued an earnings release on August 13th. I don’t plan to review these results in detail, but rather summarize key points and give you an update on our performance and current liquidity position.
For comparability purposes, figures that I discuss this morning exclude non-cash, stock-based compensation, the results of Newsday, and any special, one-time items, including the $3.8 billion non-cash charges we took in the quarter related to write down the company’s publishing good will, and newspaper masthead, and tangible assets, most of which is related to our Times Mirror merger back in 2000.
For the quarter, our consolidated revenue is down 6 percent, or $67 million year over year. Publishing revenue was down 11 percent. And broadcasting and entertainment was up 4 percent. These trends were generally consistent with the first quarter. However, I’d point out that the publishing advertising revenue in the second quarter benefited from the shift from Easter.
Cash operating expenses for the consolidated entity before special items noted in our press release, were essentially flat. Publishing cash expenses were down 3 percent or $18 million to $593 million from $611 million, primarily due to lower compensation. Total publishing compensation was down about 4 percent due to the reduction of approximately 930 positions or 7 percent of the publishing workforce year over year, including 330 positions in the second quarter.
Newsprint expense was down 5 percent in the quarter, reflecting a 13-percent drop in consumption, offset by pricing increases in the 9-percent range.
Broadcasting and entertainment cash expenses were up about $20 million, primarily from higher player salaries at the Cubs, and higher broadcast rights on our new syndicated programming. However, I’d point out that the Cubs and our new syndicated programming, "Two-and-a-Half Men" and "Family Guy," are more than making up for the increased expenses.
In total, our consolidated operating cash flow before special items and excluding Newsday, was $218 million, down 24 percent.
As I mentioned on our last call, our operating expenses include non-cash ESOP retirement expense, which totals about $11 million on a consolidated basis in the quarter. Equity income in the quarter was up 7 percent to $31 million before a one-time, non-cash write down reflecting our share of a write down at one of our equity investments. Cash received from our equity investments totaled $4 million in the quarter, which was down from the $12 million we received last year, although I’d note that we did receive a cash distribution from our TV Food Network investment in the first week of the third quarter, representing our share of our second quarter cash flow, including this amount. Cash distributions from equity investments would have been up about 10 percent in the quarter.
When you consider the $4 million cash distributions we received from our equity investments from the quarter, as well as the 11 million of non-cash ESOP retirement expenses embedded in their operating expenses, our consolidated operating cash flow before ESOP expense and after the cash we received from our equity investments, totaled $233 million in the quarter, down about 22 percent.
Reported (gross interest) expense totaled $211 million in the quarter with our covenant cash interest expense at about $200 million.
In terms of cap ex, we spent $21 million in the quarter and have spent $44 million year to date. We expect to spend approximately $100 million for the full year.
Now turning to our bank covenant adjusted EBITDA calculation. As I just mentioned, our consolidated operating cash flow for the quarter before special one time items and excluding Newsday was $218 million. Newsday’s operating cash flow in the second quarter was $23 million, which we add back. We also add the cash distributions we receive from our equity investments, the non-cash ESOP retirement expense, our interest income and a number of other adjustments, including the sale of unused real estate in the quarter to get adjusted EBITDA in the quarter of approximately $285 million.
For the trailing 12-month period ended June 29th, 2008, our adjusted EBITDA totaled approximately $1.28 billion. At the end of the quarter, guaranteed debt, as defined in the credit agreement, stood at $10.6 billion. So our leverage ratio is approximately 8.3 times, and our interest coverage ratio was approximately 1.6 times, both of which are in compliance with our covenant.
Now since the end of the second quarter, as Sam mentioned, we have repaid a little over $800 million of Term Loan X, so the outstanding balance there is a little less than $600 million, which is all due in June of ’09. Between now and then, our only debt maturities are the one percent amortization on the Term Loan B, which is approximately $76 million annually, and our medium-term notes, which come due in the fourth quarter, which we will repay with the proceeds of our available delayed draw facility.
And finally, in terms of liquidity, we ended the second quarter with about $160 million of cash on the balance sheet. Today, I’d say that that amount is up slightly and we have not drawn on our revolver.
And, with that, I will turn it over to Randy.
Randy Michaels - Tribune Company - COO
Chandler thanks. I am pleased this morning to be able to report some real progress on our business plans. In previous calls, we’ve talked about getting a handle on the business. We’ve talked about making plans to right size the business, and we’ve gotten a lot of press for some of the things we’ve done, including making substantial cuts in most of the business units. But I’m here to tell you it’s about more than just cuts. Yes, we’ve cut cost, but we are not cutting or just selling assets to create success. We are investing in our business. We have added over 400 new positions, as Sam mentioned, in broadcast alone. And we’re doing this because we’re trying to recast the traditional media model.
I got a funny e-mail the other day from somebody who said, "I get what you’re doing. You’re cutting the print newsrooms to beef up broadcasting." And, of course, that’s not true. In fact, the reason we’re beefing up broadcasting is that news is the only programming that let’s us keep all the inventory. If we buy a program or have a syndicated program, we typically lose half of the inventory or more. We keep all the news inventory. And once you have a news department, it is not incrementally expensive to add more. And so we have invested heavily there.
Everything we are doing is focused on long-term, sustainable profitability. We’re focusing on product, sales and cost controls. We’re trying to eliminate red tape and unnecessary expense, marginally productive work, and I’m pleased to tell you that there’s a lot of it that we’ve found. Just one story: We had a request for capital to buy new air conditioning units for the data center on the eighth floor. Before we spent the money, we went around to see what we could unplug. It turns out we’re still maintaining -- we were -- still maintaining the 1998 mainframe from Times Mirror. Nothing goes into it. Nothing goes out of it. And when you unplugged it, nothing stopped. So we’ve stopped the service contract. We’ve stopped the maintenance. We’ve actually disconnected about half of the equipment on the eighth floor. We have surplus air conditioning, and, while that may not be material, it represents the kind of opportunity that exists here.
We’re busy changing the culture to save money. I realized, after I’d been here a couple of months, I was always busy, but I wasn’t getting a lot done. That, if a subject was on my calendar, 12 people would show up in the office. We had a culture of meetings. And I’m sure they were informative and helpful. Everyone could stay very busy going to meetings. We are actively campaigning against meetings if something can be handled with a quick conversation in the hall or a fast e-mail. So we’re having a lot fewer meetings. We’re getting a lot more done. We’re spending less money.
I’m very pleased with our broadcasting. Tribune absolutely leads the industry. Plus four isn’t great, but it’s a lot better than anybody else. The industry is down, you know, in the mid-single digits. To be plus four is terrific, and, as we’ve already mentioned, we’re investing in broadcast news. Hartford, Sacramento, Grand Rapids, Harrisburg, New Orleans, San Diego, Chicago and New York are all adding newscasts, more is coming, and, yet, at the same time, full-time broadcast employees are down.
We’re also adding programming that makes a difference in a number of other categories, notably sports. We just signed the Mets at WPIX. We’re also very proud that while the New York markets off in the mid-teens, and we’re flat. We have gained rank position. We’ve moved. We’re the number six network. We’re the number three television station, which means we’re ahead of a couple big network flagships. I’m not going to mention them, but one starts with N and one starts with C, and the Mets are going to help that.
We’ve also, through Ed Wilson’s relationship with the NFL, made a deal to carry the local NFL games in eight cities, including New York, Dallas, and a lot of big markets. And that should be both profitable and add to the viewership on our local TV stations. We’re also very excited about WGN America. The results from repackaging and promoting that channel, including giving it a new name, have been terrific. We’re spiking ratings while lowering the costs.
We talked about retro week last time. That’s been expanded from three to six hours because of great ratings. We’ve got an ‘80s week that where Alf set record ratings for WGN America. We’ve expanded with Friday night movies hosted by Marc Chase who is also President of Interactive, so we don’t pay him anything. But he is the night watchmen at the Fortress of Television Innovation. And we’re taking a bunch of movies we already paid for; we’re running them on Friday night to two and 300 percent rating increases.
I was there for the taping of the Ringmaster, which airs in two weeks. Jerry Springer came in. The set is in the fourth subbasement of the Tribune tower with a couch somebody was throwing away that’s got stuffing coming out of it. And Mark the security guard hosting "B" movies and getting "A" ratings. It’s an old format, but, Guest what? It works. It doesn’t cost us much. We already made the investment. And, like I said, the ratings are terrific.
This weekend we have a "Coach" marathon. We tried to get football movies to kick off college football -- and it’s been sold to TomTom GPS. On Halloween, we’ve tried to get all the Halloween movies. Guess what? They’re taken. So we bought the "Munsters." We’re having a "Munsters" marathon hosted by Alice Cooper from the roof of the Tribune tower. And sold it to Marathon. Get it? It’s a "Munsters" marathon.
We’re starting original programming on the third of September with The Bob and Tom Morning Show that has about five million listeners every morning in the Midwest. Very inexpensive robotic cameras in the studio. And some much more impressive announcements coming soon on the original programming front.
Moving to print, the RIFs are largely done. We’re moving ahead with redesigned newspapers. I can tell you they’re out in Orlando, Allentown, South Florida and now Baltimore. Those papers look terrific. They’re better papers. They’re less expensive papers. They’re better papers produced by a smaller staff. The reaction is terrific. The advertiser support is terrific. The number of cancellations is negligible. I don’t think we’re up to 10 yet in South Florida. And, because we involved advertisers in the process, they’re very supportive. And these papers were all designed by the local staffs. Lee Abrams, our Chief Innovation Officer, certainly inspired them, but the local staff has put together a paper that reflects the local market. Newport News rolls out on the 14th, Hartford and Los Angeles on the 28th, Chicago on the 29th, and they will all be redesigned.
Also in Chicago, Gerry Kern has eliminated layers of middle management, we consolidated the managing editor positions for features and news. And the new managing editor for all departments at Chicago Tribune is Jane Hirt. The reason she is an unusual choice is that she was the editor of RedEye, our free daily commuter paper, which has had great growth, very exciting. It’s a sexy newspaper, sends a very powerful message. And I can tell you that the Chicago Tribune already looks better. I am proud of it every morning.
Interactive, if you look at our revenue, you say, "What’s going on?" because our revenue is down in spite of the fact that page views are up 30 percent over last year. The reason for that is we are eliminating unprofitable business. We are no longer in the business of buying page views or buying $1 of revenue for $2. If we can’t make money at it, we’re going to stop doing it. And so then our profitability is up substantially even though our revenue is down. We’re in the process of training all sellers to sell the Web, and that will kick the growth again. We’re also building products that will sell the Web as it should be sold. Given the legacy systems we have, that’s been incredibly frustrating, but we’re getting close.
And, obviously, we don’t have an issue that wouldn’t be solved by better sales. You heard Sam mention that we have a new chief revenue officer and a new (SVP) of sales being announced, I think, tomorrow in Los Angeles. We just completed a big sales manager summit here for print in Chicago. Television has been selling local direct for some time. We’re just getting to print. I think LA just went to commission. That was the last paper to do so. So now we’ve got to move to the next phase.
Here’s how you make more sales. First of all, you’ve got to -- if you want to know what you’re going to bill, figure out the selling cycle. How long does it take to get an appointment, to make a proposal, to get copy approved, to get something in the paper? Probably three months, six months, so we have to understand that. We have to understand how many employees we get and what our closing ratio is. And an improvement in those metrics will improve our revenue. What does it take to get an appointment? It isn’t that people aren’t spending. It’s they’re spending less. So we have to be the entity that gets in to make the pitch, and we have to be the entity that closes the pitch. Very simply, to make more appointments and to get more sales closed, we need better ideas. The people we’re hiring are idea people, and I think we are going to sell newspapers as they have never been sold.
So, in summary, things are starting to happen. We are making progress. There is still a lot of very obvious upside to exploit, but we aren’t just cutting. We aren’t just selling our way to success. Yes we’re making cuts, and yes we’re selling non-core assets, but we are also investing in our company. We are operating our way to success. The economy is tough. We don’t see it getting a lot better, but we have solid plans. We’re making good progress. And, for the first time with confidence, I can tell you we’re going to succeed.
Gary Weitman - Tribune Company - SVP, Corp Relations
OK, operator, we will take some Q&A at this point, and then Sam will have some wrap up remarks. You want to explain the question-and-answer process?
Operator:
Absolutely, sir. Your first question comes from Les Levi with Plainfield.
Les Levi - Plainfield
Yes, thanks. Maybe you could talk a little bit about, you didn’t refer to, but in your press release, you noted that on July 1 you entered into a trade receivable facility of $300 million.
What were the terms? Do you expect to do more? I would assume it’s collateralized by receivables that the debt has no recourse to?
Chandler Bigelow - Tribune Company - CFO
Yes, well, this is Chandler. It was a $300 million dollar essentially advertising trade receivables deal that we’ve entered into. We drew $225 million down off the $300. We used the net proceeds from that draw to repay Term Loan X.
Importantly per the terms of our credit agreement, that debt is not included in our guaranteed debt for purposes of the covenant, so it was a deleveraging event from a covenant standpoint.
With respect to the rate we’re paying, we are paying, you know, very competitive interest that currently is inside the LIBOR 275 that we had been paying on the X, so there was that benefit as well.
And, at this point, we don’t have plans to draw the additional $300 million, but we’d certainly let the market know if we were to do so.
Les Levi - Plainfield
OK. Thank you.
Operator
And your next question comes from the line of Alex Klipper with Bank of America.
Alex Klipper - Bank of America
Hi. Sam, I wanted to get your thoughts on the coverage about the recent hire of Eddy Hartenstein’s team at the Times. You know it was noted he was given greater autonomy over the business and that any discussion of financial targets would take place in six months.
I wonder if you could comment on your ability to wait to set financial targets at the Times in the context of your covenant compliance, and you know in general how you’re thinking about covenant compliance going forward and how do you waive the importance of the Times as a contributor to EBITDA for a potential divestiture if someone made you an attractive bid.
Sam Zell - Tribune Company - CEO
I think your question is a very relevant question. I would answer it as follows.
We are highly sensitive to our covenant compliance, and everybody who has responsibility in this company is aware of and sensitive to our covenant compliance issues, and I assure you that the two weeks that Eddie spent studying the financials of both Tribune and the L.A. Times you know put him in a position where he fully understands. He and I have had extensive conversations as have Gerry and Randy of where we’re going and what we’re doing, and I’m, as I said before, we are very excited about having Eddie on board. We think he’s a... just a tremendous executive with a great track record, and we’re... we believe that he’s going to be a major factor in turning around the L.A. Times.
Alex Klipper - Bank of America
Thanks.
Operator
Your next question comes from the line of Jordan Teramo with Brigade Capital.
Jordan Teramo - Brigade Capital
Hey, how are you? Can you just ... you said you were thinking about presenting the deal to the MLB by the end of the year whereas I think in past conversations you were talking about closing a deal. I mean, what are the risks involved in presenting a deal, how long it would take MLB to review it ...
Sam Zell - Tribune Company - CEO
Yes. I’ll answer that question.
I’m ... we didn’t mean to change the definition of the accomplishment by use of the word: presenting. We would only present a deal to the MLB that was fully negotiated, fully financed, and where the MLB decision would be, hopefully, very rapid. They have been extremely cooperative with us. They’ve offered to put it on the agenda at the next meeting. They’ve offered to have a special meeting if necessary.
So, I guess our definition of "present" would envision a rapid closing thereafter.
Jordan Teramo - Brigade Capital
Well, what is your willingness, if needed be, to put in some more subordinated capital?
Sam Zell - Tribune Company - CEO
I don’t think that that’s a subject matter that I’m currently in a position to comment on. This is obviously a subject matter that has come up in the past, and there are a lot of barriers going both ways, and I ... so I’m not in a position to comment about that at this time.
Jordan Teramo - Brigade Capital
OK. Thank you.
Operator
Your next question comes from the line of John Carlin with Gulf Stream Asset Management.
John Carlin - Gulf Stream Asset Management
Yes. Thanks. Chandler, if possible, could you sort of do a bridge, if appropriate, I guess, for this call. Can you do a bridge of your consolidated operating cash flow number 218 to the covenant defined adjusted EBITDA number of 285?
Chandler Bigelow - Tribune Company - CFO
Yes. As I mentioned, the add backs would include $23 million for Newsday because, as a significant one, because our financial statements report Newsday as a discontinued operation or not you know not in our continued operating cash flow, and we add that back. The deal closed in the third quarter, so for covenant compliance purposes we still get the benefit of adding that EBITDA.
So we’d add that EBITDA to the 218, we’d add back $11 to $12 million for the non-cash (ESOP) retirement expense, we’d add back the four million from the cash distributions we received from our equity investments, we’d add back another four million for the interest income that we received in the quarter, and then there are a number of other adjustments, some that are added in, some that are subtracted.
The largest one, though, is we did sell some unused real estate, which is described in the press release, which we get to add back as well, and all in that’s $285.
John Carlin - Gulf Stream Asset Management
Thank you.
Operator
Your next question comes from the line of Adam Spielman with PPM America.
Adam Spielman - PPM America
Thanks. Just one more on the nitty gritty on the leverage calculation.
So, moving forward, we’ve now paid down roughly$ 600 million of debt in the third quarter. What is the amount of the LTM amount of Newsday EBITDA that we should then deduct to get you know apples to apples going forward here?
Chandler Bigelow - Tribune Company - CFO
So, this is Chandler again. We’ve actually paid down a little more than 800 million of guaranteed debt in the third quarter, so that would be the combination of roughly $590 million from Newsday and roughly $218 from our asset backed CP deal.
In the third quarter, our adjusted EBITDA will be adjusted to strip out the trailing 12 months’ EBITDA from Newsday. That’s a number, though, that we don’t disclose. You know we do disclose you know revenue from Newsday, which in 2007 was roughly $500 million, and I would tell you that generally speaking, that the margins at Newsday were slightly lower than the overall group. That should give you, you know, a general range of what the cash flow is.
Adam Spielman - PPM America
OK. One more on the cost trends, and I apologize, I think you said this so I just may not have caught it.
Compensation declines, I had written down some ... a seven percent number, but I think you said a lower number.
Chandler Bigelow - Tribune Company - CFO
Yes. Head count in the publishing group was off seven percent, but compensation in the publishing group is off four percent.
Adam Spielman - PPM America
OK. And then, I mean, just structurally, how you look at that going forward as we kind of continue to see like waves ... across the industry waves and waves of buyouts and stock reductions. I mean, is that a sustainable strategy to continue to take head count out, and if not, are there ... what other levers can you pull on to keep the costs moving down?
Sam Zell - Tribune Company - CEO
I think the focus obviously has to be on increasing revenue. We continue to address the question of what a newspaper of the 21st century should look like. The five papers that we’ve ... or four papers that we’ve now taken out in their new format, in our opinion, are both more exciting and cheaper to produce.
If we continue to get kind of positive response to that, I think that would be great. If we don’t, we’ll have to readdress the question. I mean, this is a process of trying to find out what is the product that will be a perpetual newspaper product going forward.
We have always stated that we believe in the future of the newspaper. At the same time, we recognize that the newspaper of the future does not perform the role of the newspaper of the past.
Adam Spielman - PPM America
OK. And just one more on the asset sale front. You used, I think it was a ... the leveraged partnership structure to keep the Newsday deal tax free. You know there were some reports in the press that the baseball sale may not be amenable to you know a leverage type structure.
So I guess the question is specifically for the Cubs, is that an issue, and two, more generally, should we think about you only selling assets if you can do them under a very tax efficient structure?
Sam Zell - Tribune Company - CEO
Well, I think your latter statement is pretty accurate.
As to the issue of the Cubs, I don’t think we’re in a position to make any comment about that while the transaction is in the process it is today.
Adam Spielman - PPM America
Thank you.
Gary Weitman - Tribune Company - SVP, Corp Relations
Operator, I think we have time for one more question, if there is anybody still in the queue.
Operator
All right, sir. And your final question comes from the line of Avi Steiner with J.P. Morgan.
Avi Steiner - JP Morgan
Thanks, guys. Three quick ones here. Just circling back to the asset-backed facility credit question. I believe if I read the credit agreement correctly you could do up to $450 million, and I’m curious why you only took out a $300 million facility now.
Secondly, can you talk about the relationship between Tribune and the two parents of the CW?
And lastly, and I know I’m probably going over my question limit here, but can you just talk about the Food Network and what your current thoughts are on that since you didn’t discuss it as part of maybe some of your other asset sales. Thank you.
Chandler Bigelow - Tribune Company - CFO
Yes, Avi, this is Chandler. I’ll do your asset-backed CP question first and then turn it over to Randy.
So, you’re right. The 450 is available in the credit facility as the carve out we negotiated back in ’07. We were able, and you know, frankly, I think quite fortunate to be able to get up to $300 million given the softness in that market today.
So for the time being, we’ve got the $300 million. If market conditions do improve, you know there is absolutely an opportunity for us to take advantage of the 450, but candidly speaking, I don’t see that improving any time real soon, but you’re absolutely right. We do have that capacity embedded in the facility.
Randy Michaels - Tribune Company - COO
And well, with respect to CW, I should tell you that we have assurances from Barry Meyer and Les Moonves at CBS that they’re committed, that they’re committing resources and have great expectations about the upcoming season, and obviously we hope they’re right.
In the event that they’re not, and in the event that their minds change, we think we have very solid backup plans, and so there are two ways for us to win: CW and 90210 and some of the shows they’re launching do better, or if they do worse, we believe that we can put on better programming with other people’s money, and a more profitable business model.
So I think we’re covered, and one of the reasons we brought Ed Wilson on board is his deep experience in television programming, and I’ll tell you that we are going to be fine. We have the sixth rated network in America now with CW, and we’re the highest growth rate in the TV business, so we’re going to be OK.
Sam Zell - Tribune Company - CEO
As to the question of the Food Network, the Food Network is one of you know a whole panoply of assets that we have. We do not make a habit of discussing what our plans are with any of those assets unless we’re ready to do so, and so I would suggest to you that that’s just another asset and another question for the future.
I want to close and just state that we continue to make progress toward our goal of establishing the Tribune as the integrated media company that offers compelling content 24x7 and that fully uses its unique platform of print broadcasting online products to serve customers, including readers, viewers, online users, and advertisers.
Since the beginning of the year, we have launched dozens of programs and products that have the potential to make a meaningful impact on our future, and we have made significant progress in aligning our expenses with the realities of an industry in recession.
We remain optimistic and are confident in the strength of our brands and the talent within our company.
Before I sign off, I’d like to share with you an experience that I had when I arrived at the Tribune Tower this morning. I was waiting for an elevator, and this guy walked up and he was obviously an employee, and he looked at me and he said, "You know I understand what you’re doing. The last company I worked for in this business doesn’t exist anymore."
That’s our challenge. We don’t want to end up like any other non-existing company, and we’re taking the necessary steps to make sure that doesn’t happen.
Obviously, it’s just not easy. It’s very challenging, and it’s very challenging to keep and maintain morale in a difficult environment, but I think we’re beginning to get the message across to our people that, in effect, we are committed to the future. And we are committed to this being a successful company. So thank you, again, for joining us on our call today. And we look forward to talking to you at the end of the third quarter. Thank you.
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