Novice Investing - Inside Tribune Co.

Date: Sunday 20th 2008f July 2008 12:44:19 PM

Inside Tribune Co. - 09/08/2005

By: Hari Wibowo

Tribune Co. (TRB) engages in newspaper publishing, broadcasting and entertainment. It owns major newspapers such as Los Angeles Times, Chicago Tribune and other smaller papers. In broadcasting, Tribune Co. operates 26 local TV and radio stations. How do we know this? You guess it right. Tribune's Annual report will tell you that. What else will it tell us? Read on.

You can get Tribune's annual report by clicking here. Reading 153 pages of Tribune's 2004 annual filing is pretty cumbersome. However, if I can describe Tribune Co. in one sentence, what would it be? The answer is Los Angeles Times and Chicago Tribune. What? Should it be more than that? After all, Tribune owns more than 10 newspapers and 26 local stations. Pretty simple. Looking at Tribune's 2004 annual report, it raked in $ 5.76 Billion in revenue in 2004. $ 4.1 Billion came from newspapers while $1.6 Billion came from its stations. Tribune Co. looks like it is dependent on its newspaper publishing business. But, why these two? Well, LA Times and Chicago Tribune raked in $ 2 Billion in revenue for 2004. That is over 34% of Tribune's total revenue. Obviously, when these two papers aren't doing well, so will Tribune Co.

Overall, the newspapers segment boasts a daily circulation of 3.1 million papers on weekdays and 4.5 million copies on Sunday. For a price of 25 cents per copy for daily paper and 50 cents per copy for sunday paper, this translates into annual revenue of $ 360 Million.

A while ago, we talked about CNET Networks' seemingly dominance website properties. You can click here to read it. For all of 2004, however, CNET generates $ 291 Million of revenue. This shows the significance of Tribune Co in the publishing business. The above calculation shows Tribune generating $ 360 M revenue alone without taking into accounts the advertising revenue.

In the asset side, Tribune Co's annual filing shows that it owns 5.38 million square feet of land around the country. In its balance sheet, Tribune Co valued its land at $ 135 M. Land is normally depreciated to zero while its value does not. Often times, land rises in value. Using a value of $ 50 per square feet, the real value of Tribune Co's land should be about $ 269 M

A major red light for Tribune Co is the fact that it has $ 5.47 Billion in goodwill on top of $ 3.52 Billion in intangible asset. Gasp. That is a huge number of intangible asset. Although Tribune Co. held some of the best brand in publishing business, its value can be eroded depending on how management handle the franchise. As of 2004, Tribune Co. has amortization cost of a 'mere' $ 18.9 Million. It will take 289 years to amortize the whole goodwill ! The conservative way is to amortize it over a period of say 10 years. This alone will reduce Tribune Co's net profit to .... zero ! Yikes.

Finally, Tribune Co. has a large but still manageable debt load of $ 2.32 Billion. With annual cash flow of about $ 1 Billion, it can repay its entire long term debt within two years. I have seen others who can do worse and can still qualify as good investments.

I believe Tribune Co. generates lots of cash flow and will continue to do so for the foreseeable future. The resurgence of internet might make it less relevant in the publishing business but for now, Tribune co. is still dominant. However, from its 2004 annual report, the amount of its goodwill and intangible asset are quite high. We should watch for these when we decide to explore Tribune further for investment.

END

For preliminary research, you can browse our collection of annual reports here

Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding Tribune Co. (TRB) or other securities.

[Resources] [Forum] [Link Partner ] [Novice Investing Directory ] [ Submit Your Article Here ]