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Tribune Media Co – ‘10-K’ for 12/31/00

On:  Tuesday, 3/27/01, at 2:17pm ET   ·   For:  12/31/00   ·   Accession #:  912057-1-8471   ·   File #:  1-08572

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 3/27/01  Tribune Media Co                  10-K       12/31/00   12:1.4M                                   Merrill Corp/FA

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        Annual Report                                       HTML   1.26M 
 2: EX-3.1(C)   Cert of Amend Pref Stock Ser C                        13     61K 
 3: EX-3.1(D)   Cert of Amend Pref Stock Ser D-1                      14     61K 
 4: EX-3.1(E)   Cert of Amend Pref Stock Ser D-2                      15     66K 
 8: EX-10.14A   Material Contract                                      1      8K 
 9: EX-10.17A   First Amend. to Amended & Restated Lmtd Liability      5     19K 
 5: EX-10.2B    Material Contract                                      1      8K 
 6: EX-10.6A    Material Contract                                      1      8K 
 7: EX-10.8A    Material Contract                                      1      8K 
10: EX-12       Comp of Earnings                                    HTML     29K 
11: EX-21       Subsidiaries of the Registrant                         4     25K 
12: EX-23       Consent of Pricewaterhousecoopers                   HTML     10K 

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2000
Commission file number 1-8572

TRIBUNE COMPANY

(Exact name of registrant as specified in its charter)

Registrant's telephone number, including area code: (312) 222-9100
Securities registered pursuant to Section 12(b) of the Act:

    Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X  No / /

    Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / /

    Aggregate market value of the Company's voting and non-voting common equity held by non-affiliates on March 13, 2001, based upon the closing price of the Company's Common Stock as reported on the New York Stock Exchange Composite Transactions list for such date: approximately $8,508,000,000.

    At March 13, 2001, there were 299,744,791 shares outstanding of the Company's Common Stock ($.01 par value per share), excluding 129,386,919 shares held by subsidiaries and affiliates of the Company (See Note 15 to the Company's Consolidated Financial Statements).

    The following document is incorporated by reference, in part:

    Definitive Proxy Statement for the May 8, 2001 Annual Meeting of Shareholders (Part III, to the extent described therein).

INDEX TO TRIBUNE COMPANY
2000 FORM 10-K

PART I

ITEM 1. BUSINESS.

    Tribune Company ("Tribune" or the "Company") is a media and entertainment company. Through its subsidiaries, the Company is engaged in newspaper publishing, television and radio broadcasting and entertainment, and the development and distribution of information and entertainment through the Internet. The Company was founded in 1847 and incorporated in Illinois in 1861. As a result of a corporate restructuring in 1968, the Company became a holding company incorporated in Delaware. References in this report to "the Company" include Tribune Company and its subsidiaries, unless the context otherwise indicates. The information in this Item 1 should be read in conjunction with the information contained in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations." Certain prior year amounts have been reclassified to conform with the 2000 presentation.

    This Annual Report on Form 10-K contains certain forward-looking statements that are based largely on the Company's current expectations. Forward-looking statements are subject to certain risks, trends and uncertainties that could cause actual results and achievements to differ materially from those expressed in the forward-looking statements. Such risks, trends and uncertainties, which in some instances are beyond the Company's control, include changes in advertising demand; newsprint prices; interest rates; competition; regulatory rulings; adverse results from litigation; and other economic conditions; the effect of professional sports team labor strikes, lock-outs and negotiations; the effect of acquisitions, investments, divestitures and derivative transactions on the Company's results of operations and financial condition; and the Company's reliance on third-party vendors for various services. The words "believe," "expect," "anticipate," "estimate," "intend" and similar expressions generally identify forward-looking statements. Readers are cautioned not to place undue reliance on such forward-looking statements, which are being made as of the date of this filing. The Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

Significant Events

    On March 13, 2000, Tribune and The Times Mirror Company ("Times Mirror") announced the signing of a definitive agreement that provided for a merger of Times Mirror into Tribune in a cash and stock transaction. Prior to the merger, Times Mirror published the Los Angeles Times, Newsday, The Baltimore Sun, The Hartford Courant, The Morning Call, The Advocate, Greenwich Time and several smaller newspapers. The merger was effected through a two-step transaction for a total purchase price of approximately $8.3 billion, including assumption of debt.

    In the first step of the transaction, Tribune made a cash tender offer, for up to 28 million Times Mirror shares at a price of $95 per share, which expired on April 17, 2000. Through the tender offer, Tribune acquired 23.1 million Times Mirror shares for $2.2 billion, representing 39.4% of the outstanding Times Mirror common shares. Following the tender offer, Tribune gained effective control of Times Mirror and named 13 Tribune designees to Times Mirror's 27 member board of directors. Tribune began to consolidate Times Mirror's operating results starting April 17.

    Tribune completed the second step of the acquisition on June 12, 2000, following Tribune and Times Mirror shareholder approvals, through a merger of the two companies. In the merger, each remaining Times Mirror common share was converted, at the election of the shareholder, into 2.5 shares of Tribune common stock or, to the extent available, $95 in cash. This transaction was accounted for as a step acquisition purchase, and the effects of both steps of the merger are included in the Dec. 31, 2000 Consolidated Financial Statements. Consolidated results of operations include 39.4% of Times Mirror's operating results for the period April 17 through June 11, 2000 and 100% after June 12. Minority interest expense of $16 million, net of tax, was recorded for the remaining 60.6% of Times Mirror that Tribune did not own during the period of April 17 through June 11, 2000. The total

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acquisition cost of $8.3 billion has been allocated to the assets acquired and liabilities assumed based on preliminary estimates of their respective values. A total of $5.9 billion, representing the excess of acquisition cost over the fair value of Times Mirror's net tangible assets, has been allocated to intangible assets. In addition, three former Times Mirror subsidiaries, Jeppesen, Times Mirror Magazines, AchieveGlobal, were sold by the Company in the fourth quarter of 2000. See Note 2 to the Company's Consolidated Financial Statements in Item 8 for further discussion.

    On Sept. 5, 2000, the Company sold its education segment to The McGraw-Hill Companies for approximately $686 million, including the related tax benefit of $22 million. In the 2000 third quarter, the Company received $642 million in cash, and the remaining proceeds were received in January 2001. In the second quarter of 2000, Tribune recorded a one-time, after-tax loss on the sale of the education segment of approximately $96 million. The information in this Annual Report on Form 10-K reflects the education segment as a discontinued operation for all periods presented. See Note 3 to the Company's Consolidated Financial Statements for further discussion.

Business Segments

    The Company's operations are divided into three industry segments, identified according to product: publishing, broadcasting and entertainment, and interactive. These segments operate primarily in the United States. In addition, certain other activities are reported and included under Corporate. These segments reflect the way the Company sells its products to the marketplace and the way in which it manages operations and makes business decisions. The following table sets forth operating revenues and profit information for each segment of the Company (in thousands).

(1)

Operating results for the former Times Mirror publishing and interactive operations are included beginning on April 17, 2000.

(2)

Operating profit for each segment excludes interest income and expense, equity earnings and losses, non-operating items and income taxes.

2

    The following table sets forth asset information for each industry segment (in thousands).

(1)

Corporate assets include cash and cash equivalents, marketable securities and other investments.

(2)

Represents the net assets of the education segment, sold in September 2000.

    The Company's results of operations, when examined on a quarterly basis, reflect the seasonality of the Company's revenues. Second and fourth quarter advertising revenues are typically higher than first and third quarter revenues. Results for the second quarter usually reflect spring advertising, while the fourth quarter includes advertising related to the holiday season. Fiscal year 2000 comprised 53 weeks, while fiscal years 1999 and 1998 comprised 52 weeks. The effect of the additional week in 2000 on the comparative financial statements taken as a whole is not significant.

Publishing

    The publishing segment represented 69% of the Company's consolidated operating revenues in 2000. The six-month combined average circulation in 2000 of the Company's daily newspapers was approximately 3.5 million daily copies and 4.9 million Sunday copies. The Company's primary newspapers are the Los Angeles Times, Chicago Tribune, Newsday, South Florida Sun-Sentinel, Orlando Sentinel and The Baltimore Sun. Other daily newspapers include The Hartford Courant, Daily Press, The Morning Call, The Advocate and Greenwich Time. The Company also owns an entertainment listings, newspaper syndication and media marketing company, a Chicago-area cable television news channel and other publishing-related businesses.

    The Company's newspaper subsidiaries produce a wide range of niche publications in addition to their flagship products. These include community newspapers, lifestyle magazines and numerous publications devoted to the major classified advertising categories. Direct marketing, commercial printing and related services are also performed by the Company's newspaper subsidiaries. Revenues for the Company's newspaper subsidiaries and other publishing related businesses for the last three years were as follows (in thousands):

(1)

Revenues for the former Times Mirror newspapers are included beginning on April 17, 2000.

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    The following table provides a breakdown of operating revenues for the publishing segment for the last three years (in thousands):

(1)

Revenues for the former Times Mirror newspapers are included beginning on April 17, 2000.

(2)

Primarily includes revenues from advertising placement services; the syndication of columns, features, information and comics to newspapers; commercial printing operations; delivery of other publications; direct mail operations; cable television news programming; distribution of entertainment listings; and other publishing-related activities.

    The following table sets forth information concerning the Company's advertising volume for its primary daily newspapers (in thousands):

(1)

Advertising volume for the former Times Mirror newspapers is included for the full twelve months.

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    The following table sets forth information concerning the Company's circulation for its primary daily newspapers (in thousands):

(1)

Circulation data based on Audit Bureau of Circulation ("ABC") averages for the six-month periods ended September 30.

(2)

The Chicago Tribune's Wednesday through Friday ABC circulation averages for 2000, 1999 and 1998 were 662, 658 and 674, respectively.

    Each of the Company's newspapers operates independently to most effectively meet the needs of the area it serves. Local management establishes editorial policies. The Company coordinates certain aspects of operations and resources in order to provide greater operating efficiency and economies of scale.

    The Company's newspapers compete for readership and advertising in varying degrees with other metropolitan, suburban and national newspapers, as well as with television, radio, Internet services and other media. Competition for newspaper advertising is based upon circulation levels, readership demographics, price, service, and advertiser results, while competition for circulation is based upon the content of the newspaper, service and price.

    The Chicago Tribune, South Florida Sun-Sentinel, Orlando Sentinel and Daily Press are printed in Company-owned production facilities. The daily newspapers acquired in connection with the Times Mirror acquisition are printed on Company-owned presses in production facilities leased from an affiliate (see Note 7 to the Company's Consolidated Financial Statements in Item 8). The principal raw material is newsprint. In 2000, the Company's newspapers consumed approximately 851,000 metric tons of newsprint. Average newsprint prices increased 5% in 2000 from 1999. Average newsprint prices declined 11% in 1999 and increased 3% in 1998.

    The Company is party to a contract with Abitibi Consolidated Inc. (which purchased Donohue Inc. in 2000), expiring in 2007, to supply newsprint based on market prices. Under the contract, the Company purchased 257,000 metric tons of newsprint in 2000, representing 36% of the Company's newspapers' newsprint supply. As a result of the Times Mirror acquisition, the Company has agreed to increase its purchases to 370,000 metric tons of newsprint in 2001; 410,000 in 2002; and 450,000 from 2003 to 2007, subject to certain limitations.

Los Angeles Times

    The Los Angeles Times has been published continuously since 1881. The Los Angeles Times has won 24 Pulitzer Prizes, including one for feature reporting in 2000. It is published every morning and is the largest metropolitan newspaper in the United States in circulation. The Los Angeles market ranks second in the nation in terms of households. In its primary circulation areas of Los Angeles, Orange, Ventura, San Bernardino and Riverside counties, the Los Angeles Times competes for advertising and circulation with 16 local daily newspapers, with its largest competitor having approximately 360,000

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total average daily circulation, and three daily national newspapers. Approximately 69% and 79% of the paper's daily and Sunday circulation, respectively, was home delivered in 2000, with the remainder sold at newsstands and vending boxes.

    In addition to the daily edition covering the Los Angeles metropolitan area, the Los Angeles Times publishes daily Orange County, San Fernando Valley and Ventura County editions. The Los Angeles Times also publishes a daily national edition that is distributed primarily in Northern California, New York and Washington, D.C. In an effort to provide targeted local news coverage, the Los Angeles Times inserts daily and semi-weekly community newspapers published by its subsidiary, Times Community Newspapers. Through its subsidiary, E Z Buy & E Z Sell Recycler Corporation, the Los Angeles Times publishes a collection of 17 alternative classified papers in Southern California including titles such as the Recycler, AutoBuys, CycleBuys and the Renter. In conjunction with Garden State Newspapers, Inc., the Los Angeles Times owns CIPS Marketing Group, Inc., which provides alternative distribution services for advertising preprints.

Chicago Tribune

    Founded in 1847, the Chicago Tribune is published every morning and primarily serves a nine-county market in northern Illinois and Indiana. This market ranks third in the United States in number of households. The Chicago Tribune has won 20 Pulitzer Prizes. For the six months ended September 2000, the Chicago Tribune ranked seventh in average daily circulation and fourth in average Sunday circulation in the nation, based on ABC averages. The Chicago Tribune's principal competitor is the Chicago Sun-Times. According to the ABC, for the sixth-month period ended September 2000, the Chicago Tribune had a 32% lead in total daily paid circulation and a 157% lead in Sunday paid circulation. The Chicago Tribune's total advertising volume and operating revenues are estimated to be substantially greater than those of the Chicago Sun-Times. Approximately 77% of the paper's daily and 64% of its Sunday circulation is sold through home delivery, with the remainder sold at newsstands and vending boxes.

    The Chicago Tribune publishes ¡Exito!, a free weekly newspaper targeting Spanish-speaking households. Other businesses owned by Chicago Tribune Company include Tribune Direct Marketing, a direct mail operation, and RELCON, Inc., a publisher of free apartment and new-home guides and a provider of apartment-rental referral services to prospective renters. The Chicago Tribune also offers printing and delivery of other publications.

Newsday

    Newsday, a morning newspaper which is published seven days a week, circulates primarily in Nassau and Suffolk counties on Long Island, New York and the in borough of Queens in New York City. The New York metropolitan area ranks first among U.S. markets in terms of households. The paper has been published since 1940 and has won 16 Pulitzer Prizes. For the six-month period ended September 2000, Newsday ranked eighth and eleventh for average daily and Sunday circulation in the country, according to the ABC. Newsday competes with three major metropolitan newspapers and several daily regional editions of national newspapers. In addition, there are numerous daily, weekly and semiweekly local newspapers and free distribution newspapers in its distribution area. Approximately 64% of the paper's daily and 62% of its Sunday circulation is sold through home delivery, with the remainder sold at newsstands and vending boxes.

    Newsday also publishes Distinction, a bi-monthly magazine that is designed to serve Long Island's upscale community. In addition, Newsday's affiliated publishing and alternate distribution company, DSA Community Publishing, operates Newport Media, a publisher of 135 pennysaver editions; This Week, a publisher of a free distribution shopper with 67 editions; Hoy, a Spanish-language daily newspaper for the New York metropolitan area; DSA, a distributor of preprints; and DSA Direct, a distributor of numerous publications in the five boroughs of New York City.

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The Baltimore Sun

    The Baltimore Sun primarily serves the Baltimore-Annapolis metropolitan area, including Anne Arundel, Baltimore, Carroll, Harford and Howard counties. The Baltimore market ranks 24th in terms of households in the United States. The Baltimore Sun has published a daily, morning newspaper since 1837 and has won 14 Pulitzer Prizes. The Baltimore Sun was ranked as 26th and 22nd for average daily and Sunday circulation in the country, according to the ABC. The Baltimore Sun competes with The Washington Post in Anne Arundel and Howard counties, with The Annapolis Capital in Anne Arundel County and with The Carroll County Times in Carroll County, as well as with daily regional editions of national newspapers. In addition, there are other daily and weekly local newspapers in its distribution area. Approximately 78% of the paper's daily and 63% of its Sunday circulation is sold through home delivery, with the remainder sold at newsstands and vending boxes.

    The Baltimore Sun's subsidiaries, Patuxent Publishing and Homestead Publishing, publish 17 weekly newspapers throughout Anne Arundel, Baltimore, Carroll, Harford and Howard counties. The largest of these weekly newspapers are The Columbia Flier, The Towson Times, The Owings Mills Times and The Aegis.

South Florida Sun-Sentinel

    The Sun-Sentinel is a morning newtspaper and leads the Broward/South Palm Beach market in circulation. The Sun-Sentinel has been published since 1910. The Miami/Fort Lauderdale market ranks 16th in the nation in terms of households. Approximately 73% of the paper's daily and 69% of its Sunday circulation is sold through home delivery, with the remainder sold at newsstands and vending boxes.

    The Sun-Sentinel owns Gold Coast Shopper, a publication located in Deerfield Beach and City Link, a weekly publication. In May 1999, the Company purchased Florida New Homes and Condominiums Guide, a bimonthly real estate magazine. The Sun-Sentinel also offers printing and delivery of other publications, direct mail services and publications targeted to specific consumer market segments.

Orlando Sentinel

    The Orlando Sentinel is published every morning and serves primarily a five-county area in Central Florida. It is the only major daily newspaper in the Orlando market, although it competes with other Florida and national newspapers, as well as with other media. The Orlando Sentinel has been published since 1876. The Orlando/Daytona Beach/Melbourne market ranks 21st among U.S. markets in terms of households. The Orlando Sentinel has won three Pulitzer Prizes, including one in 2000 for editorial writing. Approximately 76% of the paper's daily and 70% of its Sunday circulation is sold through home delivery, with the remainder sold at newsstands and vending boxes.

    The Orlando Sentinel also publishes US/Express, a free weekly entertainment publication used to distribute advertising to non-subscribers, and the RELCON apartment guide for the Central Florida market. The Orlando Sentinel also publishes New Homes and Auto Finder, which are free publications distributed in the Central Florida market. The Orlando Sentinel also offers printing and delivery of other publications.

Other Newspapers

    The Company's other daily newspapers include The Hartford Courant, Daily Press, The Morning Call, The Advocate and Greenwich Time. All of these newspapers are published every morning.

    The Hartford Courant, a morning daily and Sunday newspaper that was first published in 1764, is the oldest continuously published newspaper in the United States. The Hartford Courant has won two Pulitzer Prizes. It is published in Hartford, Connecticut, and serves the state's northern and central regions. The Hartford/New Haven market is the 27th largest U.S. market in terms of households. The

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Hartford Courant publishes 10 regional editions on a daily basis, which provide local news and advertising. The Hartford Courant owns New Mass. Media, Inc., a publisher of five weekly alternative newspapers in Connecticut, Massachusetts and New York, and operates ValuMail, Inc., a shared mail company that distributes advertising supplements to households in Connecticut, Massachusetts and Rhode Island.

    The Daily Press is published daily, including Sunday, and serves the Hampton Roads, Virginia market. The Daily Press is the only major daily newspaper in its primary market, although it competes with other regional and national newspapers, as well as with other media. The Daily Press market includes Newport News, Hampton, Williamsburg and eight other cities and counties. This market, together with Norfolk, Portsmouth and Virginia Beach, is the 41st largest U.S. market in terms of households.

    The Morning Call in Allentown, Pennsylvania is published daily and primarily serves Lehigh and Northampton counties in Eastern Pennsylvania.

    The Advocate and Greenwich Time are published every morning and serve the southern part of Fairfield County, Connecticut. The Advocate circulates primarily in Stamford, Connecticut and Greenwich Time circulates in Greenwich, Connecticut. The Advocate has won one Pulitzer Prize.

Other Publishing Related Businesses

    The Company is also involved in weekly publications, syndication activities, advertising placement services, entertainment listings, cable television news programming and other publishing-related activities. The Company acquired Sun-Sentinel Community News Group, a group of community-based weeklies, in September 1998. Sun-Sentinel Community News Group's publications include the Jewish Journal, a collection of newspapers serving South Florida's Jewish community. The syndication activities, conducted primarily through Tribune Media Services ("TMS"), involve the marketing of comics, features and opinion columns to newspapers. TMS is also engaged in advertising placement services for television, cable and movie listings in newspapers and online and the development of news products and services for electronic and print media. In February 1999, TMS acquired Premier DataVision, Inc. ("PDI") and JDTV, Inc. ("JDTV"). PDI distributes movie show-time data and assembles and distributes movie show-time and display advertising. JDTV publishes television listings information for the cable and satellite television industries. The Company also operates CLTV News, a regional 24-hour cable news channel in the Chicagoland area. CLTV News was launched in January 1993 and currently is available to more than 1.7 million cable households in the Chicago-area market.

8

Broadcasting and Entertainment

    The broadcasting and entertainment segment represented 30% of the Company's consolidated operating revenues in 2000. At Dec. 31, 2000, the segment included WB television affiliates located in New York, Los Angeles, Chicago, Philadelphia, Boston, Dallas, Washington, D.C., Atlanta, Houston, Seattle, Miami, Denver, San Diego, New Orleans and Albany; FOX television affiliates in Seattle, Sacramento, Indianapolis, Hartford, Grand Rapids and Harrisburg; an ABC television affiliate in New Orleans; four radio stations, one located in Chicago and three located in Denver; the Chicago Cubs baseball team; and Tribune Entertainment, a company that develops and distributes first-run television programming for the Company's station group and national syndication.

    In February 2000, the Company acquired the remaining interest in Qwest Broadcasting LLC, which owns television stations WATL-Atlanta and WNOL-New Orleans, for $107 million in cash and conversion of notes and debt. The Company had owned a 33% equity interest and convertible debt in Qwest since it was formed in 1995. The acquisition was recorded as a purchase. The Federal Communications Commission ("FCC") rule changes in August 1999 permit the Company to own both WNOL and the Company's WGNO-New Orleans television station.

    The Company acquired the assets of television station KCPQ-Seattle, a FOX television affiliate, with a fair value of approximately $380 million, in exchange for its WGNX-Atlanta television station and cash in March 1999. In September 1999, the Company acquired the assets of television station WEWB-Albany (formerly WMHQ) for $18.5 million in cash. In November 1999, the Company acquired the assets of television station WBDC-Washington, D.C. for $125 million in cash.

    In June 1998, the Company exchanged substantially all of the assets of its WQCD radio station in New York and cash for the assets of television stations KTWB-Seattle and WXMI-Grand Rapids. The divestiture of WQCD was accounted for as a sale and the acquisition of the television stations was recorded as a purchase.

    The following table shows sources of revenue for the broadcasting and entertainment segment for the last three years (in thousands).

(1)

Includes the following stations since their respective acquisition dates: WATL-Atlanta and WNOL-New Orleans (February 2000), WBDC-Washington, D.C. (November 1999), WEWB-Albany (September 1999), KCPQ-Seattle (exchanged for WGNX-Atlanta in March 1999) and KTWB-Seattle and WXMI-Grand Rapids (June 1998).

(2)

Includes WQCD-New York through June 1998.

(3)

See "Entertainment/Other" below for further discussion.

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Television

    In 2000, television contributed 86% to the broadcasting and entertainment segment's operating revenues. The Company's television stations compete for audience and advertising with other television and radio stations, cable television and other media serving the same markets. Competition for audience and advertising is based upon various interrelated factors including programming content, audience acceptance and price. Selected data for the Company's television stations is shown in the following table.

(1)

Source: Nielsen Station Index (DMA Market and Demographic Rank Report, September 2000). Ranking of markets is based on number of television households in DMA (Designated Market Area).

(2)

Source: Nielsen Station Index (Viewers in Profile Reports, 2000). Major commercial stations program for a broad, general audience and have a large viewership in the market.

(3)

See "Governmental Regulation."

(4)

In connection with the Times Mirror acquisition, the Company acquired newspapers in these markets. See "Governmental Regulation" for discussion of the FCC's television/newspaper cross-ownership rule.

(5)

Founded by the Company.

(6)

The FCC has granted the Company a waiver extension to allow continued ownership of both the Miami television station and the South Florida Sun-Sentinel newspaper until the FCC has completed a review of the newspaper/television cross-ownership rule. See "Governmental Regulation" and "Item 3, Legal Proceedings" for a discussion of the cross-ownership rule.

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    Programming emphasis at the Company's WB and FOX-affiliated stations is placed on network-provided shows, syndicated series, feature motion pictures, local and regional sports coverage, news and children's programs. These stations acquire most of their programming from outside sources, including The WB Television Network ("The WB Network") and the FOX Network, although a significant amount is produced locally or supplied by Tribune Entertainment (see "Entertainment/Other"). Due to the growth and expansion of The WB Network's distribution system of local affiliates, WB programming is no longer aired on WGN Cable ("WGN Superstation"), which reaches over 52 million households outside of Chicago. WGN Superstation broadcasts movies and first-run programming. The Company's WGNO-New Orleans station, affiliated with the ABC Network, acquires much of its programming from that network. Contracts for purchased programming generally cover a period of one to five years, with payment also typically made over several years. The expense for amortization of television broadcast rights in 2000 was $339 million, which represented approximately 27% of total television operating revenues.

    Average audience share information for the Company's television stations for the past three years is shown in the following table.

(1)

Represents the estimated number of television households tuned to a specific station as a percent of total viewing households in a defined area. The percentages shown reflect the average Nielsen ratings shares for the February, May, July and November measurement periods for 7 a.m. to 1 a.m. daily.

(2)

Prior to acquisition in September 1999, WEWB-Albany was a public broadcasting station.

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Radio

    In 2000, radio operations contributed 4% to the broadcasting and entertainment segment's operating revenues. The largest radio station owned by the Company, measured in terms of operating revenues, is WGN in Chicago. Radio operations also include three stations in Denver and Tribune Radio Network (which produces and distributes farm and sports programming to radio stations, primarily in the Midwest). Also included was WQCD, which was exchanged for television stations KTWB-Seattle and WXMI-Grand Rapids in June 1998.

    Selected information for the Company's radio operations is shown in the following table.

(1)

Source: Radio markets ranked by Arbitron Metro Survey Area, Arbitron Company 2000.

(2)

Source: Arbitron Company 2000.

(3)

Source: Average of Winter, Spring, Summer and Fall 2000 Arbitron shares for persons 12 years old and over, 6 a.m. to midnight daily during the period measured.

Entertainment/Other

    In 2000, entertainment/other contributed 10% to the broadcasting and entertainment segment's operating revenues. This portion of the broadcasting and entertainment segment includes Tribune Entertainment Company and the Chicago Cubs baseball team.

    Tribune Entertainment is the largest syndicator of first-run, hour-long action dramas ("action hours") in the United States. Tribune Entertainment produced and syndicated the following action hours during the 2000-2001 season:

(1)

Represents seasons produced by Tribune Entertainment.

(2)

Represents future seasons Tribune Entertainment has committed to produce.

    These action hours are co-produced with various foreign partners that are responsible for approximately two-thirds of the shows' production costs. Andromeda had the highest rated debut for a weekly hour show in five years and continues to be the No. 1 action hour in syndication. In 1999, Tribune Entertainment began producing and syndicating "DreamMaker", a one-hour show that was cancelled in January 2000. In September 1997, Tribune Entertainment launched "NightMan," a one-hour show that was cancelled after the 1998-1999 season. During the 2000-2001 television season, Tribune Entertainment originated or syndicated approximately 4.5 hours of first-run programs per week. On average, the Company's 22 television stations utilized approximately five hours per week of programming furnished by Tribune Entertainment.

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    The Company owns the Chicago Cubs baseball team. In addition to providing local sports entertainment, the Cubs represent an important source of live programming for the Company's Chicago-based broadcasting operations and regional cable programming channel. In 1999, the Chicago Cubs reached an agreement with FOX Sports Chicago to provide coverage of selected Cubs games throughout the network's viewing region.

Interactive

    The interactive segment represented 1% of the Company's consolidated operating revenues in 2000. Beginning in 2000, operating results for the interactive segment were reported separately from publishing. The Company's interactive segment manages Web sites of the Company's daily newspapers and television stations, as well as other branded sites targeting specific communities of interest. On average, it attracts approximately five million unique visitors per month, placing it among the 20 largest online news and information networks in the United States. The Company's established reputation and media brand recognition, which are trusted sources of local news and information, provide a competitive advantage.

    Selected information for several of the Company's top Web sites is shown in the following table:

    The interactive segment's revenues are derived primarily from advertising sales. Banner and sponsorship advertising is sold to local and national customers. Classified advertising revenues are mainly derived from two sources: bundling print and online classified advertising with the Company's daily newspapers and selling online-only classified products.

    Total operating revenues for the interactive segment for the last three years are shown below (in thousands):

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Investments

    The Company has investments in several public and private companies. See Note 8 to the Company's Consolidated Financial Statements for further discussion of the Company's cost and equity method investments.

    The Company's principal equity method investments currently include The WB Network, iBlast, CareerBuilder, Classified Ventures, BrassRing, TMCT I and TMCT II. The WB is a growing network that provides the Company's WB affiliate television stations with original prime-time and children's programming. iBlast is a new company that plans to use the digital-television spectrum to deliver broadband content and services to consumers. CareerBuilder, an online recruiting company, was formed by the Company and Knight-Ridder in September 2000. Classified Ventures is a network of classified advertising Web sites. BrassRing is a national recruitment services company, which the Company formed in September 1999 with The Washington Post Company. The Company's investments in TMCT I and TMCT II are further discussed in Note 7 to the Company's Consolidated Financial Statements in Item 8.

Non-Operating Items

    The Company reported several non-operating items in 2000, 1999 and 1998, which included gains and losses resulting from sales of investments and subsidiaries, changes in the fair value of derivatives and related investments, reclassification of investments, and write-downs of investments. These non-operating items are further discussed in Note 2 to the Company's Consolidated Financial Statements.

Governmental Regulation

    Various aspects of the Company's operations are subject to regulation by governmental authorities in the United States.

    The Company's television and radio broadcasting operations are subject to FCC jurisdiction under the Communications Act of 1934, as amended. FCC rules, among other things, govern the term, renewal and transfer of radio and television broadcasting licenses, and limit concentrations of broadcasting control inconsistent with the public interest. Federal law also regulates the rates charged for political advertising and the quantity of advertising within children's programs. The Company is permitted to own both newspaper and broadcast operations in the Chicago market by virtue of "grandfather" provisions in the FCC regulations and in the Fort Lauderdale/Miami market by virtue of a temporary waiver of the television/newspaper cross-ownership rule.

    Because the Times Mirror acquisition did not involve the transfer of any broadcast station licenses, FCC approval was not required to complete the transaction. Under the FCC's television/newspaper cross-ownership rule, the Commission may not renew the license of a television station that is part of a prohibited local television/newspaper combination. License renewals for Tribune television properties affected by the Times Mirror acquisition are in years 2006 (KTLA-Los Angeles and WTIC-Hartford) and 2007 (WPIX-New York). The FCC has initiated rulemaking proceedings to consider modifying its newspaper/broadcast cross-ownership rules. If the rules are not modified by the time the licenses are due for renewal, the Company will require waivers to allow continued ownership of both newspapers and broadcast licenses in the Los Angeles, Hartford and New York markets. The Company has a temporary waiver, pending the outcome of the same rulemaking proceeding, in connection with its 1997 acquisition of WBZL-Miami, which is considered part of the market served by the South Florida Sun-Sentinel, published in Fort Lauderdale. The Company cannot predict the outcome of the FCC cross-ownership rule review.

    Congress removed national limits on the number of broadcast stations a licensee may own in 1996. However, federal law continues to limit the number of radio and television stations a single owner may

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own in a local market, and the percentage of the national television audience that may be reached by a licensee's television stations in the aggregate. On Aug. 5, 1999, the FCC revised its local station ownership limitations to allow, under certain conditions, common ownership of two television stations and certain radio/television combinations. The FCC did not revise its national audience reach limitation of 35%. Television and radio broadcasting licenses are subject to renewal by the FCC, at which time they may be subject to competing applications for the licensed frequencies. At Dec. 31, 2000, the Company had FCC authorization to operate 22 television stations and two AM and two FM radio stations. In 2000, the Company received FCC authorization to operate television stations KTWB-Seattle, WATL-Atlanta and WNOL-New Orleans. An application to acquire an additional television station, WTXX-Hartford, is currently pending before the FCC.

    The FCC has approved technical standards and channel assignments for digital television ("DTV") service. DTV will permit broadcasters to transmit video images with higher resolution than existing analog signals. Operators of full-power television stations have each been assigned a second channel for DTV while they continue analog broadcasts on the original channel. After the transition is complete, broadcasters will be required to return one of the two channels to the FCC and transmit exclusively in digital format. By law, the transition to DTV is to occur by Dec. 31, 2006, subject to extension under certain circumstances. Conversion to digital transmission will require all television broadcasters, including those owned by the Company, to invest in digital equipment and facilities. The Company does not believe that the required capital expenditures will have a material effect on its consolidated financial position or results of operations.

    The FCC has not yet issued regulations governing some aspects of DTV operation. These include the obligations of cable television systems and other multichannel video providers to carry DTV signals and additional "public interest" obligations that may be imposed on broadcasters' use of DTV. The FCC has adopted rules requiring broadcasters transmitting subscription-based services over the DTV channel to pay to the government fees in the amount of 5% on gross revenues collected from such services.

    From time to time, the FCC revises existing regulations and policies in ways that could affect the Company's broadcasting operations. In addition, Congress from time to time considers and adopts substantive amendments to the governing communications legislation. The Company cannot predict what regulations or legislation may be proposed or finally enacted or what effect, if any, such regulations or legislation could have on the Company's broadcasting operations. See "Item 3, Legal Proceedings" for a discussion of pending FCC rule review.

Employees

    The average number of full-time equivalent employees of the Company in 2000 was 22,700, approximately 11,000 more than the average for 1999. The increase was primarily due to the inclusion of Times Mirror employees.

    During 2000, the Company's publishing segment employed approximately 18,600 full-time equivalent employees, about 21% of whom were represented by unions covered under 21 labor contracts. Contracts with unionized employees of the publishing segment expire at various times through June 2006.

    Broadcasting and entertainment had an average of 3,400 full-time equivalent employees in 2000. Approximately 23% of these employees were represented by a total of 21 unions covered under 21 labor contracts. Contracts with unionized employees of the broadcasting and entertainment segment expire at various times through December 2003.

    Interactive had an average of 500 full-time equivalent employees in 2000.

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Executive Officers of the Company

    Information with respect to the executive officers of the Company as of March 13, 2001 is set forth below. The descriptions of the business experience of these individuals include the principal positions held by them since March 1996. Unless otherwise indicated, all references to positions are to officers of the Company.

Dennis J. FitzSimons (50)
Executive Vice President since January 2000; President since May 1997 and Executive Vice President until May 1997 of Tribune Broadcasting Company*.

Jack W. Fuller (54)
President of Tribune Publishing Company* since May 1997; President and Publisher of Chicago Tribune Company* until May 1997.

Donald C. Grenesko (52)
Senior Vice President/Finance and Administration since August 1996; Senior Vice President and Chief Financial Officer until August 1996.

David D. Hiller (47)
President of Tribune Interactive* since May 2000; Senior Vice President/Development and Strategy until May 2000.

Crane H. Kenney (38)
Senior Vice President, General Counsel and Secretary since May 2000; Vice President, General Counsel and Secretary since August 1996; Vice President/Chief Legal Officer until August 1996.

Luis E. Lewin (52)
Senior Vice President/Human Resources since May 2000; Vice President/Human Resources from October 1996 until May 2000; Director of Human Resources until October 1996; Acting Publisher of ¡Exito!* in Chicago until September 1996.

John W. Madigan (63)
Chairman, President and Chief Executive Officer; Director since 1975.

Ruthellyn Musil (49)
Vice President/Corporate Relations.

Andrew J. Oleszczuk (44)
Senior Vice President/Development since May 2000; President of Tribune Ventures** from August 1998 until May 2000; Vice President/Development until August 1998.

Jeff R. Scherb (43)
Senior Vice President/Chief Technology Officer since May 2000; President of Tribune Interactive* from May 1999 until May 2000; Senior Vice President/Chief Technology Officer from August 1996 until May 1999; Chief Technology Officer and Senior Vice President, Dun & Bradstreet Software until August 1996.

*

A subsidiary of the Company.

**

A division of the Company.

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ITEM 2. PROPERTIES.

    The corporate headquarters of the Company are located at 435 North Michigan Avenue, Chicago, Illinois. The general character, location and approximate size of the principal physical properties used by the Company on Dec. 31, 2000 are listed below. In addition to those listed, the Company owns or leases transmitter sites, parking lots and other land aggregating approximately 961 acres in 97 separate locations, and owns or leases an aggregate of approximately 1,633,000 square feet of office and production space in 210 locations. The Company also owns Wrigley Field, the 39,000-seat stadium used by the Chicago Cubs baseball team. The Company considers its various properties to be in good condition and suitable for the purposes for which they are used.

(1)

In connection with the Times Mirror acquisition, the Company assumed several lease agreements which expire at various dates through 2011. In 1997, Times Mirror contributed eight real properties, constituting 3,030,000 square feet, to TMCT I. The Company is leasing these properties from TMCT I under a lease with an initial term of 12 years, which expires August 2009. See Note 7 to the Company's Consolidated Financial Statements for further discussion.

(2)

Includes Tribune Tower, an approximately 630,000-square-foot office building in downtown Chicago, and Freedom Center, the approximately 697,000 square foot production center of the Chicago Tribune. Tribune Tower houses the Company's corporate headquarters, the Chicago Tribune's business and editorial offices, offices of various subsidiary companies and approximately 42,600 square feet of space leased to unaffiliated tenants. Freedom Center houses the Chicago Tribune's printing, packaging and distribution operations.

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ITEM 3. LEGAL PROCEEDINGS.

    The Company and its subsidiaries are defendants from time to time in actions for matters arising out of their business operations. In addition, the Company and its subsidiaries are involved from time to time as parties in various regulatory, environmental and other proceedings with governmental authorities and administrative agencies.

    In March 1997, the Company acquired Renaissance Communications Corp., a publicly traded company that owned six television stations, for $1.1 billion in cash. The stations acquired were KDAF-Dallas, WBZL-Miami, KTXL-Sacramento, WXIN-Indianapolis, WTIC-Hartford and WPMT-Harrisburg. The FCC granted a 12-month waiver of its rule prohibiting television/newspaper cross-ownership in the same market, which relates to the Miami television station and the South Florida Sun-Sentinel newspaper. The FCC subsequently issued a rule review to consider modifying its cross-ownership rule. In March 1998, the FCC granted the Company a waiver extension to allow continued ownership of both the Miami television station and the South Florida Sun-Sentinel newspaper until the rule review has concluded. The Company cannot predict the outcome of the FCC cross-ownership rule review.

    The Company does not believe that any of the matters or proceedings presently pending will have a material adverse effect on its consolidated financial position, results of operations or liquidity.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

    Not applicable.

PART II

ITEM 5. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

    The Company's Common Stock is presently listed on the New York, Chicago and Pacific stock exchanges. The high and low sales prices of the Common Stock by fiscal quarter for the two most recent fiscal years, as reported on the New York Stock Exchange Composite Transactions list, were as follows:

    At March 13, 2001 there were 7,301 holders of record of the Company's Common Stock.

    Quarterly cash dividends declared on Common Stock were $.10 per share in 2000 and $.09 per share in 1999. Total cash dividends declared on Common Stock by the Company were $107,085,000 for 2000 and $85,625,000 for 1999.

ITEM 6. SELECTED FINANCIAL DATA.

    Selected financial data for the years 1996 through 2000 is contained under the heading "Eleven Year Financial Summary" on pages 78 and 79 and is derived from financial statements for those years which were audited by PricewaterhouseCoopers LLP, independent accountants. The information contained in the "Eleven Year Financial Summary" is not necessarily indicative of the results of operations to be expected for future years, and should be read in conjunction with "Management's

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Discussion and Analysis of Financial Condition and Results of Operations" included in Item 7 and the Consolidated Financial Statements and related notes thereto included in Item 8 of this Annual Report on Form 10-K.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

    The following discussion presents the significant factors that have affected the businesses of Tribune Company and its subsidiaries (the "Company") over the last three years. This commentary should be read in conjunction with the Company's Consolidated Financial Statements and "Eleven Year Financial Summary," which are also presented in this Annual Report on Form 10-K.

FORWARD-LOOKING STATEMENTS

    This discussion, the information contained in the subsequent notes to the Consolidated Financial Statements and the information contained in Item 7A, "Quantitative and Qualitative Disclosures About Market Risk," contain certain forward-looking statements that are based largely on the Company's current expectations. Forward-looking statements are subject to certain risks, trends and uncertainties that could cause actual results and achievements to differ materially from those expressed in the forward-looking statements. Such risks, trends and uncertainties, which in some instances are beyond the Company's control, include changes in advertising demand; newsprint prices; interest rates; competition; regulatory rulings; adverse results from litigation; and other economic conditions; the effect of professional sports team labor strikes, lock-outs and negotiations; the effect of acquisitions, investments, divestitures and derivative transactions on the Company's results of operations and financial condition; and the Company's reliance on third-party vendors for various services. The words "believe," "expect," "anticipate," "estimate," "intend" and similar expressions generally identify forward-looking statements. Readers are cautioned not to place undue reliance on such forward-looking statements, which are being made as of the date of this filing. The Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

SIGNIFICANT EVENTS

TIMES MIRROR ACQUISITION

    On March 13, 2000, Tribune and Times Mirror announced the signing of a definitive agreement that provided for a merger of Times Mirror into Tribune in a cash and stock transaction. Prior to the merger, Times Mirror published the Los Angeles Times, Newsday, The Baltimore Sun, The Hartford Courant, The Morning Call, The Advocate, Greenwich Time and several smaller newspapers. The merger was effected through a two-step transaction for a total purchase price of approximately $8.3 billion, including assumption of debt.

    In the first step of the transaction, Tribune made a cash tender offer, for up to 28 million Times Mirror shares at a price of $95 per share, which expired on April 17, 2000. Through the tender offer, Tribune acquired 23.1 million Times Mirror shares for $2.2 billion, representing 39.4% of the outstanding Times Mirror common shares. Following the tender offer, Tribune gained effective control of Times Mirror and named 13 Tribune designees to Times Mirror's 27 member board of directors. Tribune began to consolidate Times Mirror's operating results starting April 17.

    Tribune completed the second step of the acquisition on June 12, 2000, following Tribune and Times Mirror shareholder approvals, through a merger of the two companies. In the merger, each remaining Times Mirror common share was converted, at the election of the shareholder, into 2.5 shares of Tribune common stock or, to the extent available, $95 in cash. The election to receive cash in the merger was available up to the balance of 28 million shares, reduced by Tribune's purchase of

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23.1 million Times Mirror shares in the tender offer and Tribune's purchase of 0.2 million Times Mirror shares in the open market following the tender offer. In the merger, Tribune became obligated to pay approximately $447 million in cash for 4.7 million Times Mirror common shares at $95 per share. At Dec. 31, 2000, $426 million of this amount has been paid. Also, each remaining Times Mirror common share was converted into 2.5 shares of Tribune common stock. On June 12, 2000, Tribune issued a net 83 million common shares in exchange for a net 33.2 million Times Mirror common shares. These net amounts exclude 127 million shares of Tribune common stock, treated as treasury shares, which were exchanged for 51 million Times Mirror shares held by Times Mirror affiliates. Tribune settled 7.1 million Times Mirror stock options for $302 million in cash. In addition, approximately 6.4 million Times Mirror options were converted into 16.1 million Tribune options. Shares of Times Mirror preferred stock were converted in the merger into shares of Tribune preferred stock with similar terms.

    This transaction was accounted for as a step acquisition purchase, and the effects of both steps of the merger are included in the Dec. 31, 2000 Consolidated Financial Statements. Consolidated results of operations include 39.4% of Times Mirror's operating results for the period April 17 through June 11, 2000 and 100% after June 12. Minority interest expense of $16 million, net of tax, was recorded for the remaining 60.6% of Times Mirror that Tribune did not own during the period of April 17 through June 11, 2000.

    The total purchase price for Times Mirror was approximately $8.3 billion, which includes direct costs as well as debt and preferred stock assumed in connection with the merger. Direct costs include fees and expenses associated with the merger. The components of the total purchase price are as follows (in billions):

    The total acquisition cost of $8.3 billion has been allocated to the assets acquired and liabilities assumed based on preliminary estimates of their respective values. A total of $5.9 billion, representing the excess of acquisition cost over the fair value of Times Mirror's net tangible assets, has been allocated to intangible assets. Identifiable intangible assets are being amortized over periods ranging from 15 to 40 years. Goodwill is being amortized over 40 years. The estimated fair value of the assets acquired and liabilities assumed of Times Mirror are as follows (in billions):

    During the second quarter of 2000, Tribune announced its intention to sell Jeppesen, a former Times Mirror subsidiary that provides flight information services for airlines, and Times Mirror Magazines, a publisher of special interest and leisure-oriented magazines. Times Mirror had previously accounted for its AchieveGlobal subsidiary as a discontinued operation, and Tribune also announced an intention to divest this business. Accordingly, Jeppesen, Magazines and AchieveGlobal were classified as assets held for sale and their operating results were excluded from the consolidated statements of

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income. On Oct. 4, 2000, Jeppesen was sold to The Boeing Company for $1.5 billion in cash. On Oct. 31, 2000, AchieveGlobal was sold to the Institute for International Research for approximately $100 million in cash, and on Dec. 4, 2000, Times Mirror Magazines was sold to Time, Inc. for $475 million in cash. Approximately $35 million of interest expense was allocated to assets held for sale during 2000.

    Due to the merger with Times Mirror, Tribune's ownership interests in Classified Ventures and CareerPath.com increased to 34% and 38%, respectively, as Times Mirror also had interests in these companies. As a result, these investments are now accounted for under the equity method, and 1999 results and 2000 first quarter results have been restated to record equity losses based on the Company's pre-merger ownership interests of 17% in Classified Ventures and 18% in CareerPath.com. The restatement resulted in the Company recording additional pretax equity losses of $19 million for the fiscal year 1999 ($.04 per diluted share) and $6 million ($.01 per diluted share) for the first quarter of 2000.

    Because the Times Mirror acquisition did not involve the transfer of any broadcast station licenses, approval of the Federal Communications Commission ("FCC") was not required to complete the transaction. Under the FCC's current television/newspaper cross-ownership rule, companies are generally prohibited from owning both a newspaper and a broadcast license in the same market. The FCC's policy provides, however, that newly created television/newspaper combinations may be held until the next license renewal. License renewals for Tribune television properties affected by the Times Mirror acquisition are in years 2006 (KTLA-Los Angeles and WTIC-Hartford) and 2007 (WPIX-New York). The FCC has issued a rule review to consider modifying its cross-ownership rule. If the cross-ownership rule is not modified by the time the licenses are due for renewal, a waiver will be needed to allow continued ownership of both newspapers and broadcast licenses in the Los Angeles, Hartford and New York markets. The Company cannot predict the outcome of the FCC cross-ownership rule review.

OTHER ACQUISITIONS

    On Feb. 3, 2000, the Company acquired the remaining interest in Qwest, which owns television stations WATL-Atlanta and WNOL-New Orleans, for $107 million in cash and the conversion of notes and debt. The Company had owned a 33% equity interest and convertible debt in Qwest since it was formed in 1995. The FCC's rule changes in August 1999 permit Tribune to own both WNOL and the Company's WGNO-New Orleans television station.

    In February 1999, the Company acquired JDTV, a publisher of television listings information for the cable and satellite television industries. In March 1999, the Company acquired the assets of television station KCPQ-Seattle, with a fair value of approximately $380 million, in exchange for its WGNX-Atlanta television station and cash. In September 1999, the Company acquired the assets of television station WEWB-Albany (formerly WMHQ) for $18.5 million in cash. In November 1999, the Company acquired the assets of television station WBDC-Washington, D.C. for $125 million in cash.

    The operating results of these acquired businesses have been included in the Consolidated Financial Statements since their respective dates of acquisition.

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DISCONTINUED OPERATIONS

    On Sept. 5, 2000, the Company sold its education segment to The McGraw-Hill Companies for approximately $686 million, including the related tax benefit of $22 million. In the 2000 third quarter, the Company received $642 million in cash, and the remaining proceeds were received in January 2001. In the second quarter of 2000, Tribune recorded a one-time, after-tax loss on the sale of the education segment of approximately $96 million. The accompanying Consolidated Financial Statements reflect the education segment as a discontinued operation for all periods presented. Discontinued operations are summarized as follows (in millions):

NON-OPERATING ITEMS

    Fiscal years 2000, 1999 and 1998 included several non-operating items. Non-operating items for 2000 are summarized as follows (in millions, except per share data):

    In 2000, the Company recorded a $101 million pretax loss on the change in fair values of its derivatives and related investments. This loss resulted primarily from a $747 million decrease in the fair value of 16.0 million shares of AOL Time Warner common stock, which was substantially offset by a $636 million decrease in the fair value of the derivative component of the Company's Exchangeable Subordinated Debentures due 2029 ("PHONES'). Also in 2000, the Company determined that the decline in fair value of certain public and private investments was other than temporary and wrote down the investments to fair value 2000 in accordance with FAS 115, "Accounting for Certain Investments in Debt and Equity Securities." A non-cash, pretax loss of $108 million is included in "Sales of investments, net of write-downs in the consolidated statement of income. The Company also sold its Digital City investment and shares of America Online ("AOL") common stock in 2000.

    Non-operating items for 1999 are summarized as follows (in millions, except per share data):

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    In 1999, the Company recorded a pretax gain of $216 million for the change in fair values of its derivatives and related investments, and a pretax gain of $1.1 billion from reclassifying certain investments from available-for-sale to trading securities.

    In 1999, the change in fair value of the derivative component of the PHONES resulted in a pretax loss of $68 million, which was more than offset by a $299 million pretax gain resulting from the change in fair value of the related AOL trading shares since the beginning of the second quarter. The net change in the fair values of the derivative component of the PHONES and the related AOL shares resulted in a non-cash pretax gain of $231 million. The changes in the fair values of all of the Company's derivatives, net of changes in the fair values of the related shares, resulted in a pretax gain of $216 million.

    With the adoption of FAS 133, "Accounting for Derivative Instruments and Hedging Activities," in the second quarter of 1999, the 16.0 million shares of AOL common stock and the 5.5 million shares of Mattel common stock related to the Company's PHONES and Debt Exchangeable for Common Stock Securities ("DECS"), respectively, were reclassified from available-for-sale to trading securities. As a result of this change in classification, the Company was required, under the provisions of FAS 115, to recognize pretax gains totaling approximately $1.1 billion in its second quarter 1999 statement of income. These gains represented the unrealized market appreciation on these investments through the end of the 1999 first quarter. The second quarter of 1999 also included a $3 million after-tax loss, or $.01 per diluted share, representing the cumulative effect of adopting FAS 133 as of the beginning of the second quarter. This cumulative effect resulted from adjusting the DECS and AOL collar derivatives to their fair values as of March 28, 1999.

    On March 1, 1999 the Company exchanged its WGNX-Atlanta television station and cash for the assets of television station KCPQ-Seattle. The divestiture of WGNX was accounted for as a sale, and the acquisition of KCPQ was recorded as a purchase. The Company recorded the assets of KCPQ at fair market value and recognized a pretax gain of $348 million. Also in 1999, the Company sold certain investments.

    Non-operating items for 1998 are summarized as follows (in millions, except per share data):

    In 1998, the Company sold its WQCD radio station subsidiary, sold a portion of its investment portfolio and wrote down certain investments. In June 1998, the Company exchanged its WQCD radio station in New York and cash for the assets of television stations KTWB-Seattle and WXMI-Grand Rapids. The divestiture of WQCD was accounted for as a sale and the acquisition of the television stations was recorded as a purchase. The transaction resulted in a pretax gain of $85 million.

RESULTS OF OPERATIONS

    The Company's fiscal year ends on the last Sunday in December. Fiscal year 2000 comprised 53 weeks, while fiscal years 1999 and 1998 comprised 52 weeks. The effect of the additional week in 2000 on the comparative financial statements taken as a whole is not significant.

    Tribune has consolidated Times Mirror's results since the cash tender offer closed on April 17, 2000. Tribune owned 39.4% of Times Mirror from April 17 until June 11. On June 12, the merger of

23

the two companies was completed, resulting in Tribune owning 100% of Times Mirror. Minority interest expense reflects the 60.6% of Times Mirror not owned by Tribune from April 17 through June 11.