Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message| ()  
TRANSCRIPT SPONSOR
Better Than AdSense

Tribune Co. (TRB)

Q4 2006 Earnings Call

February 8, 2007 9:00 am ET

Executives

Dennis FitzSimons - Chairman, President, CEO

Don Grenesko –CFO

Scott Smith - President, Tribune Publishing

John Reardon - President, Tribune Broadcasting

Ruthellyn Musil – IR

Analysts

Lisa Monaco - Morgan Stanley

Alexia Quadrani – Bear Stearns

Craig Huber - Lehman Brothers

Paul Ginocchio - Deutsche Bank

Steven Barlow - Prudential Equity Group

Edward Atorino - Benchmark

Debra Schwartz - Credit Suisse

Fred Searby – JP Morgan

William Bird - Citigroup

John Janedis - Wachovia Securities

Lee Westerfield - BMO Capital Markets

Christa Quarles - Thomas Weisel Partners

Brian Shipman - UBS

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the fourth quarter 2006 Tribune earnings conference call. (Operator Instructions) It is now my pleasure to turn this presentation over to your host, Ms. Ruthellyn Musil, Senior Vice President of Corporate Relations. Ma'am, please proceed.

Ruthellyn Musil

Thank you and good morning everyone. Welcome to our conference call to review our 2006 fourth quarter and full year results. Our opening remarks will be brief and then we will take questions. As always, we expect to finish within the hour.

Speakers this morning are Dennis FitzSimons, our CEO; and Don Grenesko, Senior Vice President and CFO. We also have other members of management available for the Q&A session.

Turning to our press release, Tribune's fourth quarter diluted earnings per share from continuing operations of $0.96 and full year diluted earnings per share from continuing operations of $2.39, both on GAAP basis, include several non-operating items. Our release contains the information that will enable you to make a meaningful comparison to First Call estimates.

Since we're here to discuss fourth quarter and the full year results, we're not going to be taking questions about our strategic review process this morning.

Now before turning the call over to Dennis just a quick reminder that our discussion may include some forward-looking statements that are covered in greater detail in Tribune's SEC filings. Now here is Dennis.

TRANSCRIPT SPONSOR

Better Than AdSense

What if there was a way to promote your company to a perfectly targeted group of potential customers, partners, acquirers and investors? What if you could tailor your pitch to them at the moment of maximum interest? And what if you could do this for a no-brainer price?

This is exactly what Seeking Alpha is offering with transcript sponsorships.

Seven types of companies are sponsoring earnings transcripts on Seeking Alpha:

1. Company sponsors its own earnings call transcript (example).

2. Company sponsors partner's transcript (example).

3. Company sponsors competitor's transcript (example).

4. Issuer-sponsored research firm sponsors client's transcript (example).

5. Investment newsletter sponsors transcripts of successful stock picks (example).

6. IR firm sponsors transcript of micro-cap company (example).

7. Consulting company sponsors company's transcript in sector of interest (example).

Your company's name and promotion could have been on this transcript! Learn more, or email Zack Miller for details.

Dennis FitzSimons

Thanks, Ruthellyn. Good morning. 2006 ended on a positive note for us with improved fourth quarter performance led by Broadcasting and Interactive. We continue to execute on our Interactive strategies as our existing Internet businesses continue to grow at a rapid rate as we invest in additional Interactive ventures.

We also saw excellent expense control throughout the company. Excluding the extra week and special items, fourth quarter cash expenses were down slightly in the fourth quarter and flat for the full year.

In 2006, our Media businesses generated more than $1.3 billion of operating cash flow and about half of that converted to free cash flow. We achieved these results despite the speculation surrounding our strategic alternative process. That process continues with resolution to be announced this quarter. The process has been rigorous and thorough, and as you might imagine, we look forward to its completion so we can spend 100% of our time focused on the future.

We also executed on the performance improvement plan that we launched in conjunction with our tender offer back in June. We have announced over $470 million of the $500 million in asset sales we committed to, and will pass that goal very soon. In addition, we're implementing initiatives throughout the company that will put us over our $200 million goal of cost savings for 2007 and 2008.

Let's take a closer look at some of the company's 2006 accomplishments. Tribune Interactive's fourth quarter revenues increased 31% over the same period last year and 29% for the full year. Non-classifieds revenue was up 49% in the fourth quarter and 44% for the year. Classifieds revenue up 26%, both in the quarter and for the year.

With over 50 websites, Tribune Interactive attracted nearly 14 million average monthly unique visitors during the fourth quarter. Our wholly-owned digital businesses now represent 6% of Publishing revenues; and when you include our pro rata share of Interactive joint venture revenue, that figure rises to about 10%.

Fourth quarter market revenues for CareerBuilder grew by 29% over the same period last year, and 36% for the full year. CareerBuilder drew more than 18 million average monthly unique visitors for the quarter compared to Monster's 10 million and Hot Jobs 15 million. As you will recall, in July we increased our equity stake in CareerBuilder to 42.5%. In 2006 we also raised our investments in ShopLocal and Topics.net, a news aggregation site, and also acquired ForSaleByOwner.com, the largest site of its kind on the web.

In print, Tribune newspapers made strides in ‘06 toward increasing readership and individually paid circulation. Four papers -- the LA Times, Chicago Tribune, South Florida Sun Sentinel, and the Daily Press and Newport News -- reported growth in daily individually paid circulation in the September audit period, placing them among the top performers in the industry.

During the fourth quarter we also will completed the outsourcing of our customer service call centers for the top eight newspapers. In January we began the process of outsourcing our IT help desk operations. I would like to just note that customer service standards in these customer service call centers have remained high.

Our newspapers invested in editorial, marketing and sales innovations and new ad positions on section fronts and backs are delivering incremental revenue. We also launched a common advertising system with a sophisticated ecommerce platform for selling classifieds via our newspaper websites.

Other positive developments for the publishing group are additional color capacity in Chicago and South Florida. We have reached profitability at RedEye and A.M. New York and declining newsprint prices will be helpful this year. We're also seeing good results from the LA Times distribution agreement with Advo, which began in August. The agreement expands the newspaper's insert program and will generate about $10 million of operating cash flow in 2007 -- that's an additional $10 million.

The LA Times also saw its movie advertising increase in the last two months of the year and is seeing excellent results from its launch of Envelope.com earlier in the year, which is now actually reverse publishing in print to go after revenue share from Variety and the Hollywood Reporter.

Turning to Broadcasting, 2006 highlights include the launch of the CW Network. We're pleased with its performance in our station group, it particularly in New York, Chicago and Dallas. Advertiser response continues to be positive and CW primetime revenues are up in the mid single-digits for the fourth quarter, and better than the first quarter.

Also, you may have seen the article in the Wall Street Journal this morning, our competitive position has been enhanced versus NewsCorp’s among network TV affiliates, the former UPN affiliates. Stronger network programming benefits primetime news ratings and provides a better platform for promoting our morning news; WPIX in New York and WGN in Chicago in particular have seen a positive impact.

Advanced feedback from advertisers on Family Guy and Two-and-a-Half Men, our two new sitcoms that launch this fall have been great. With this fresh programming and additional program development from the CW, our stations are going to be in great position come September.

So on that note let's go to Don and I will be back to wrap up.

Don Grenesko

Thank you, Dennis and good morning, everyone. On a GAAP basis our diluted earnings per share from continuing operations of $0.96 compares to $0.42 per share in the fourth quarter of 2005. The results for this year's fourth quarter included a non-operating gain of $0.29 per share, primarily related to the mark-to-market adjustments on the [phones] and related Time Warner shares. A favorable income tax expense adjustment also related to the [phones] and a $0.04 per share gain on the sale of our 27% investment in Brass Ring. In addition, we had a net charge of $0.01 per share for several special items which was included in continuing operations.

As you saw in our press release, consolidated revenues for the fourth quarter increased 5% while cash operating expenses increased 3% and operating cash flow gained 14%. As you're probably aware, 2006 included an extra week of results for both the fourth quarter and full year. Excluding the extra week in special items, consolidated revenues were down 1%, expenses declined slightly and operating cash flow was down 1% for the quarter.

Now let's take a closer look at our Publishing and Broadcasting groups. Publishing revenues increased $39 million or 4% to $1.1 billion in the fourth quarter. Advertising revenues rose 4% with retail up 7% and national gaining 3%. Preprints -- which are primarily included in retail -- were up 7%. Excluding Newsday, preprints rose by 9% and without the extra week, total advertising revenues were down 2.5%.

Circulation revenue was up 1% for the quarter. Excluding the additional week, circulation revenue fell by 6% due to single copy declines and continued selective discounting in home delivery. For the group, individually paid circulation was down 2% daily and 3% Sunday from the same period in 2005. We expect stronger performance in the first two quarters of 2007.

Cash operating expenses in publishing were flat. Newsprint and ink expense increased 2% for the quarter as average newsprint prices rose 6% compared to the fourth quarter of 2005 and consumption decreased by 2%. Excluding the additional week in special items, cash expenses were down 3% for the quarter, a continuation of our ongoing focus on controlling costs and improving efficiencies.

Turning to Broadcasting, group operating revenues were up 11% to $356 million for the quarter. Cash expenses for the group were up 14%, or $28 million. Television revenues rose by 10% in the fourth quarter to $325 million, as we saw improvement at our stations in New York, Los Angeles and Chicago. Television revenues increased 4% without the additional week. Cash operating expenses for the group were up 9% or $16 million due mostly to the additional week in the quarter.

Turning to our equity line, income was $29 million for the quarter, up from $21 million a year ago. The increase is largely due to improvements at TV Food Network, CareerBuilder and Classified Ventures.

Interest expense rose to $94 million for the fourth quarter, due to higher debt levels in interest rates. Excluding the [phones], debt was at $4.4 billion at the end of 2006 compared to $2.8 billion at the end of 2005. The increase was due to financing the 71 million common shares we repurchased in 2006, which reduced our average shares outstanding by 22% in the fourth quarter of 2006 compared to the same period last year.

Our capital spending totaled $103 million for the quarter and $222 million for the full year.

With that I'll turn it back to Dennis.

Dennis FitzSimons

Looking forward, online advertising is off to a strong start with growth rates, so far, similar to what we saw last year. We will also move forward with our new national network for Internet ad sales in partnership with Gannet and others in the industry. The network will focus on the needs of our customers and allow any national advertiser to reach local newspaper website users more efficiently and better enable us to tap into the larger pool of national online dollars.

As you heard from our peers, publishing print revenues are soft as 2007 begins. Retailers curtail their spending following the Christmas holidays and real estate revenues are down after a very strong performance last first quarter, and that's particularly true in Florida. Classified advertising was impacted somewhat by the timing of the Super Bowl which shifted into period 1 in 2007.

We expect trends to improve as the year progresses. On a positive note -- I mentioned this earlier -- there's been a turnaround in the movie category and that's been led by the performance at the LA Times following their initiatives to boost sales, talent and product offerings. Movies were up significantly in January, making it the third month in a row of growth over the previous year.

In Broadcasting, our first quarter television ad revenues are pacing down just slightly; January down slightly, February up slightly, while domestic auto continues to be weak. Five of our top categories are pacing ahead of last year, led by entertainment and media. We're also looking for higher equity income driven by our investments in TV Food Network and Comcast SportsNet Chicago.

Just let me wrap up by summarizing our top priorities for 2007. They will be continuing to drive growth in Interactive; improving revenue trends in print and targeted print; redeploying resources to faster growth areas that will improve performance; and, continuing to operate as efficiently as possible.

With that, we would be happy to open it up questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Lisa Monaco - Morgan Stanley.

Lisa Monaco - Morgan Stanley

Could you just give us some more color on December? What was the ad revenue performance excluding the extra week? If possible, can you give us the ad revenue performance for the top three papers in December and/or the quarter? Thanks.

Dennis FitzSimons

Scott Smith will take that one.

Scott Smith

Starting with publishing, December ad revenue for the five weeks before the sixth week was down about 2.5%. That would be consistent with the trend in total for the fourth quarter. I've got in front of me the quarterly revenues without the extra week for the large papers. LA was down about 1.5%; Chicago just under 3%; Newsday around 3.5%; and Florida about 5%.

Lisa Monaco - Morgan Stanley

Just on the cost side, Dennis, can you give us a little bit more color on where the $200 million of cost savings is coming from? Thanks.

Dennis FitzSimons

That's mostly on the publishing side.

Scott Smith

Let me just recap our cost-saving programs that are focused on gaining efficiencies while we continue to serve readers and advertisers exceptionally well. We've said that a big part of our cost savings will come through our common technology systems, advertising, circulation, editorial and related savings. Those will total something over $40 million out of the $200 million.

We're also saving money in terms of newsprint, through a planned reduction in our web width, going to the new industry standard of 48 inches. We have selectively reduced newsprint consumption in other ways, in effect cutting back on pages and sections that are not as popular with readers and advertisers, and also reducing newsprint consumption tied to other paid circulation.

Finally, we're looking at other efficiencies, largely on a local basis, market by market, again with focus on serving customers exceptionally well.

Lisa Monaco - Morgan Stanley

Thank you.

Dennis FitzSimons

Lisa, one other thing; you had asked about Broadcasting also. In December, revenue was up plus 9; that's on a five versus six week and plus 4, five versus five.

Lisa Monaco - Morgan Stanley

Thanks.

Operator

Your next question comes from Alexia Quadrani – Bear Stearns.

Alexia Quadrani – Bear Stearns

Thank you. Do you have the advertising revenue by segment – national, classifieds, and retail – excluding the extra week in the quarter, and December if you have it?

Could you let us know what sort of advertising rate hikes you're expecting in 2007 for the Publishing group?

Dennis FitzSimons

By segment, retail revenue was up 1% in the quarter, down 2% in December without the extra week. National down 5% for the quarter, flat in December; and classifieds down 5% for the quarter, down 9% for December; so in total, down about 2.5% both for December and the quarter ex the 53rd week.

In terms of rates, as we have said in prior calls, we approach that on a market segment basis, really looking at both demand for advertising and available supply. On average, across all categories, we would expect rates to go up a couple percentage points.

Alexia Quadrani – Bear Stearns

It looks like Newsday is still putting a bit of pressure on the preprint business, based on results. When do you think you might cycle through the turnover from last year in that property?

Dennis FitzSimons

By the middle of 2007.

Alexia Quadrani – Bear Stearns

Thank you.

Operator

Your next question comes from Craig Huber - Lehman Brothers.

Craig Huber - Lehman Brothers

Good morning. Just clarify a little bit, can you just give us a little more detail on January for the newspapers? Is it tracking better or worse than the down 2.5% from the month of December?

Dennis FitzSimons

It's a little softer than that for January.

Craig Huber - Lehman Brothers

Any other comment on what categories might be a little bit different than the trend you saw in December, excluding the extra week?

Dennis FitzSimons

The retail category was softer in January, in particular; and then as I mentioned, the real estate -- particularly in Florida, where Florida just had a really strong first quarter last year, we have seen declines in real estate advertising.

Craig Huber - Lehman Brothers

Would you mind actually quantifying how much real estate is down in Florida right now or the fourth quarter?

Don Grenesko

It's trending down in the 20%-plus range. So essentially a year ago they were up more than that and what we're doing is roughly giving up a year's great growth in real estate. So we will cycle that roughly in the first half of 2007.

Craig Huber - Lehman Brothers

Then just back on the costs, if I could, please. The fourth quarter, excluding the extra week, excluding the various one-time items in Publishing, what would you say your non-newsprint cash cost, what was the percent change there, non-newsprint?

Don Grenesko

It was down about 3% in the fourth quarter before the extra week.

Craig Huber - Lehman Brothers

My last question, on this $200 million of cost savings, how much would you say, roughly, of that is coming from the TV broadcast division? I mean, is it almost immaterial?

Dennis FitzSimons

Just about all of it is publishing.

Craig Huber - Lehman Brothers

Great, thank you.

Operator

Your next question comes from the line of Paul Ginocchio - Deutsche Bank.

Paul Ginocchio - Deutsche Bank

Comments on Advo in LA, I think the $10 million is similar to what Advo was saying on the cost side; are there any revenue synergies coming through there from that JV? Thank you.

Don Grenesko

Yes, there are. Essentially what we're doing is on the [L.A.] week program, we took responsibility for packaging and mailing preprints they sold as well the ones we have sold. They go in Daily Times, but then non-subscribing households and beyond, also, the newspapers out there, they go in the mail. We booked the revenue for that as well as the postage and packaging costs associated with it.

So over the course of 12 months, we think the revenue will be in the $30 million, $35 million range and then there will be more costs, mostly postage, net in cash flow in the $10 million range.

Paul Ginocchio - Deutsche Bank

Has this changed your view on maybe potential further relationships based on how it's going in LA maybe in Chicago, Florida or Long Island?

Don Grenesko

First, LA was clearly the most competitive of the preprint markets we're in. We have leading market shares in all our other markets. LA we were the leader, but it clearly made sense in terms of efficiency to partner there. We wouldn't rule out the possibility of doing something elsewhere if it proved highly advantageous to us.

Paul Ginocchio - Deutsche Bank

Thank you very much.

Operator

Your next question comes from Steven Barlow - Prudential Equity Group.

Steven Barlow - Prudential Equity Group

On the $200 million of costs, is there a way to isolate '07 benefits and then '08 benefits as you build to that $200 million?

Don Grenesko

Well over half of the $200 million total we will realize in savings in 2007.

Steven Barlow - Prudential Equity Group

Dennis, could you give us 2007 CapEx please?

Dennis FitzSimons

Don will handle that.

Don Grenesko

We had total of $222 million, Steve. For 2007 we're looking around $200 million, so it would be down about $20 million or so.

Dennis FitzSimons

A fair amount of that is for our common systems projects that will really put us in a leadership position in terms of those common systems in advertising, editorial and also in circulation.

Steven Barlow - Prudential Equity Group

Last thing, how should we look at programming costs on the television side? Obviously you always change your programming in September -- amortization, et cetera and new shows going on -- how should we look at quarter-by-quarter programming costs going up? Thanks.

Dennis FitzSimons

We launched, in September, a couple shows, According to Jim, but in this coming September because of our very reasonable costs that we paid for both Family Guy and Two and a Half Men, we're going to be pretty flat.

Steven Barlow - Prudential Equity Group

Thanks.

Operator

Your next question comes from Edward Atorino - Benchmark.

Edward Atorino - Benchmark

Hi, good morning. Three questions: if you look at equity income and interest expense, a run rate for equity income looks like it could be over a $100 million if you're doing 20 whatever it is each quarter. Would that be a good guess for '07?

The same thing if I look at the fourth quarter interest rate, interest expense and annualize that, does that give me a target for interest expense?

Thirdly on your cost reductions, particularly in newsprint, what are you budgeting for newsprint expense year over year?

Don Grenesko

The run rate on the interest expense, Ed, should be comparable to the fourth quarter on an ongoing kind of basis, as is. The equity income line, there is some seasonality there. I think our equity investments, our existing equity investments, will continue to improve, however we will continue to make equity investments that could generate some losses that we would also run through that line.

Edward Atorino - Benchmark

And on newsprint?

Don Grenesko

Newsprint, as you know, newsprint prices are declining.

Edward Atorino - Benchmark

And you have taken newsprint out, right?

Don Grenesko

They are 4% or 5% under their peak last fall, today. How much they go down this year remains to be seen, but we think they will continue to drop. And between less consumption and lower prices, we're looking at newsprint down in the high single-digit percentage rate.

Edward Atorino - Benchmark

Thanks.

Dennis FitzSimons

Ed, as you know, the biggest piece of that equity line is the Food Network and the scatter market has been strong in the first quarter and the Food Network's ratings are good. Things look very positive in '07 for the Food Network.

Operator

Your next question comes from the Debra Schwartz - Credit Suisse.

Debra Schwartz - Credit Suisse

Two questions: first on TV, can you give us some more color on how core categories are trending in TV? You mentioned entertainment is strong and auto is weak, but if you could give us a sense on some of the other core categories?

Also in terms of auto, can you break out for Q4 maybe just generally speaking, how much auto is down? Is it in the lower single-digit range or a decline stronger than that? Thanks.

Dennis FitzSimons

Auto was down low single-digit in quarter 4 and is remaining weak in Q1 of this year. Restaurants, financial are looking good; telecom is good, as is entertainment, but that's pretty much it. John Reardon is here too, he can give you a little more color on that.

John Reardon

The auto perspective, the manufacturers did not advertise in January so we expect that pace to turn around in February and March. Movies are trending down slightly right now, but they're back loaded in the quarter there will be more releases in February and March, so we are looking for that to pick up. A good point that we're seeing is the scatter market, our [unwired] business up substantially over last year so there is pressure in the marketplace coming up. We feel good about that.

Dennis FitzSimons

The other thing in the automotive business, there will be 50 new model launches this year. So ultimately that should translate into advertising later in the year.

Debra Schwartz - Credit Suisse

Great, thanks. Then a just quick question on publishing. Scott can you just talk a little bit about what you're seeing in the Chicago Tribune? It seems like revenues have been down in the 3% to 4% range for the past three quarters. Which categories are causing the most trouble there and do you see any signs of improvement?

Scott Smith

The trends have been pretty much as you described. It's largely been driven by softness in national and there it's largely been financial advertising where we had a great year in 2005, softened some in 2006, and will come back, we believe, in 2007.

Also the Chicago Tribune really benefited from the big auto manufacturer spending in 2005 and that was down a lot in ‘06. Recycling the very end of that, in January we expect the auto trends to improve. We in fact got a bigger schedule from General Motors that will run the rest of this year, a special blockbuster section in the main part of the paper we're printing with our new press capacity.

Also you find in Chicago that classifieds has been somewhat soft, recruitment running down year over year; real estate again somewhat softer than the prior year as you see nationally. Retail has been a bright spot in Chicago and also I would say if you look at market share compared to other newspapers, we gained a couple of share points in total ad spending in 2006. We're confident we can continue to grow our print market share here in Chicago.

Debra Schwartz - Credit Suisse

Thank you.

Operator

Your next question comes from Fred Searby – JP Morgan.

Fred Searby - JP Morgan

Yes, two quick questions. One if you could just talk about the outlook for preprint, specifically Newsday, the drag there. You have taken some remedial measures. How long we should expect it still to drag on your overall preprint growth?

Just a quick follow up on entertainment, are you saying it's a broad-based pickup in print and newspaper from the entertainment category, the LA Times has specifically been able to kind of gain some share recently? Thank you.

Scott Smith

Preprint first. As we have described before, you have a very competitive situation at Newsday and in the New York market, where a former sales agent went into business against us and took some key accounts. We have won back a couple, but it continues to be an ongoing competitive battle. We continue to believe because of our approach to sales and distribution that over the long term we will prevail and gain back a significant part of that business. The timing of when accounts move and how that plays out remains fluid.

Our preprint business is very good in Los Angeles and Chicago, where we're implementing the sub-zip zoning and doing a lot of things that advertisers see huge value in so we see upside there.

In terms of entertainment, the LA times and the Publishing group represents 70% or so of our movie revenue. The fact they're doing really well bodes well for the group as a whole.

Dennis FitzSimons

I mentioned earlier that relates to new sales talent that's been brought in and also new product offerings and a strategy that is a good one given the amount of trade advertising that exists in L.A.; to go after Variety and the Hollywood Reporter really makes sense.

Fred Searby - JP Morgan

Thank you.

Operator

Your next question comes from William Bird - Citigroup.

William Bird - Citigroup

What was the rate of decline in print advertising in Q4 versus Q3? I also was wondering what CPMs look like year over year at the CW versus the WB. Thank you.

Don Grenesko

I've got Q4, we will see if we can dig out Q3. But ex the 53rd week again, print ad revenue was down about 4% in the fourth quarter compared to the total group down 2.5%. As for the third quarter, my guess is about the same. We can double-check that for you, but it's not materially different.

William Bird - Citigroup

Thank you.

Dennis FitzSimons

I will just mention on the CW, what's happened with My Network TV effectively being out of the primetime business right now, they're just not doing all that well, it's tightened demand a little bit. So we have that as a positive as we look at first quarter and going further into the year. The other thing we have are easier comps as the WB last year cut back on promotion and just wasn't all that strong in terms of revenue production. So right now our pacing for primetime on the CW is very strong.

Operator

Your next question comes from John Janedis - Wachovia Securities.

John Janedis - Wachovia Securities

Thank you. Dennis, I think you said earlier that primetime ad revenues for the CW were up. I'm not sure if you said mid to high singles early in the first quarter, but I think you also said pacings are down a bit. Does that mean you're seeing some declines in early and late fringe or news, is that related to some programming or ratings issues?

Dennis FitzSimons

I would say it's early and late fringe.

John Reardon

Primarily early and late fringe right now. Prime is definitely helping us out and demand overall. We feel that we are going to be in a very strong position come the fourth quarter with this new programming. It's just slightly down.

Dennis FitzSimons

That's where we get the big boost when we put on those two shows, both of which are available for double runs.

John Janedis - Wachovia Securities

Okay. As it relates to revenue, how variable is it by day part in terms of the revenue growth or decline?

John Reardon

In terms of the individual day parts?

John Janedis - Wachovia Securities

Yes.

John Reardon

Prime is really helping us out. Daytime is plus. News is still plus. It's early fringe access and late fringe that are trending down slightly, but like I said, we will correct that in the fourth quarter, but that's really what's pushing it down right at the moment.

Dennis FitzSimons

Just to put that in context, prime time represents about 17% or 18% of our revenue. Early and late fringe is about 40%.

John Janedis - Wachovia Securities

Okay. And is news around 25%?

Don Grenesko

About 15%

Dennis FitzSimons

Across the group. More in our top three markets where we have four hours of morning news as well as primetime news.

John Janedis - Wachovia Securities

Thank you.

Operator

Your next question comes from Lee Westerfield - BMO Capital Markets.

Lee Westerfield - BMO Capital Markets

Hi everyone, good morning. I have a few questions on this broadcast TV unit if I could. The first John, if you have it, what was the tax amortization for cash purposes, the deductible intangibles on the broadcast division in the 2006 year? If that is at your fingertips, what might that be in 2007 and does that change significantly, drop significantly in '08, '09, '10? What's the trajectory of tax deductibility, is my first question.

The second question is relating to retrans, consent agreements for New York, LA and Chicago and when your current retrans agreement may come up for renewal.

Dennis FitzSimons

We want to make sure we understood the first question Lee, was that broadcast rights amortization you were talking about?

Lee Westerfield - BMO Capital Markets

No, specifically I'm talking about the deduction for federal income taxes on broadcast amortization. The intangibles for the mark up enhanced when you originally acquired them.

Dennis FitzSimons

I tell you what, let us get back to you offline on that and make sure we understand correctly exactly what you're looking at.

Lee Westerfield - BMO Capital Markets

The second question was retrans New York, LA, Chicago, when do those come up for renegotiation?

Scott Smith

LA came up in August. We just filed this month; as you know, the process takes some time, but we expect temporary waivers until the completion. Retrans -- I'm sorry.

Dennis FitzSimons

We have retrans agreements, what we have done there Lee, I think as you know, we have gotten additional distribution for our Super Station and of course retransmission consent rights into the Food Network, going back a ways. But most of those agreements are in place for the next three years.

John Reardon

Three years. We're in good shape. As Dennis said, we monetized the deal, we have over 71 million homes outside of Chicago with the Super Station and we're in very good shape in our retrans news.

Lee Westerfield - BMO Capital Markets

I'll follow up on the tax question, thank you very much.

Operator

Your next question comes from Christa Quarles - Thomas Weisel Partners.

Christa Quarles - Thomas Weisel Partners

Hi, I was wondering if you could just give the classified categories, excluding the extra week for the fourth quarter? Then also if you could just comment on what help wanted online looked like, in particular was it impacted by up sell weakness? Thanks.

Don Grenesko

Sure. For the fourth quarter, recruitment was down 8%, auto down 9%, and real estate up 2% with real estate weakening in December; the trends in the other two categories were about the same.

Christa Quarles - Thomas Weisel Partners

Okay. Then online help wanted, can you make any commentary there? McClatchy showed a big -- they indicated that up sales were a problem.

Don Grenesko

Recruitment’s online revenue continued to grow but the rate of growth did slow because of the decline in print ad volume to up sells online. But we still showed a growth in online revenue in Q4, ex the 53rd week.

Christa Quarles - Thomas Weisel Partners

Great, thanks.

Operator

Your next question comes from Brian Shipman - UBS.

Brian Shipman - UBS

Good morning. I was wondering if you could talk about circulation trends at the three major metro newspapers? And then, also elaborate on your comment please, Dennis, that you made regarding circulation trends improving in '07. Thank you.

Dennis FitzSimons

Sure, glad to talk about circulation trends in our big markets. Chicago Tribune, Los Angeles times in the September ABC period reported two of the best circulation results of the top four papers in the country both daily and Sunday. We have done very well on circulation in those two markets. Daily essentially flat, Sunday flat in Chicago, on an individually paid basis, and down about 2.7% in LA which is mostly single copy decline.

In LA, we did have further declines in total, but that was our conscious decision to eliminate other paid circulation that had limited value to advertisers. We also see good readership trends through our survey research in both Chicago and LA so that's very encouraging. All that in Chicago is before the continued growth of RedEye readership and circulation. Newsday has continued to focus its circulation on Long Island, also Queens, we have seen some continued declines in circulation there. But in its core market it's doing well also.

Brian Shipman - UBS

And your costs?

Dennis FitzSimons

For '07 we said our strategy is to stabilize individually paid circulation and we would expect that to continue in our major market. Frankly the biggest challenge is single copy. Our home delivery trends are good, but as across the industry, single copy sales continue to be soft and any decline we will see will be in the single copy area.

Brian Shipman - UBS

Can you talk about circulation revenues in 2007 please?

Don Grenesko

We will continue selective discounting, primarily focused on home delivery subscriptions where the economics of continuing a discount to keep a home delivery subscriber who is price sensitive are far better than losing them and having to go remarket. We would expect circulation revenues to be down again in '07, but by a smaller percentage than in 2006.

Dennis FitzSimons

One other minor comment I would add is the success of the subscriber advantage program here in Chicago, which now has I believe 220,000 members.

Don Grenesko

Yes. Over that 230,000 out of the total subscriber base of 700,000 and that subscriber advantage program we're seeing real benefits in terms of subscriber retention and also increased online usage.

Operator

Thank you. Ladies and gentlemen, this concludes the question-and-answer portion of today's conference call. I'll now turn your presentation back to Ruthellyn Musil for her closing remarks.

Ruthellyn Musil

Actually I think Dennis is going to close.

Dennis FitzSimons

Yes, I was just going to say although what most of you are reading about us relates to speculation regarding our process, I want to assure you that Scott and John and the people running our business units, our newspapers and television stations are doing a great job in keeping their people focused on the revenue initiatives that we have going as well as tight expense control.

So while these distractions are not helpful, the businesses are being run very well, very effectively by our people. Thank you.

Ruthellyn Musil

Thanks for joining us today. We will be happy to take your follow-up calls across the day. Good bye.

Operator

Ladies and gentlemen, thank you for your participation in today's Tribune earnings conference call. This concludes the presentation.

TRANSCRIPT SPONSOR

Better Than AdSense

What if there was a way to promote your company to a perfectly targeted group of potential customers, partners, acquirers and investors? What if you could tailor your pitch to them at the moment of maximum interest? And what if you could do this for a no-brainer price?

This is exactly what Seeking Alpha is offering with transcript sponsorships.

Six types of companies are sponsoring earnings transcripts on Seeking Alpha:

1. Company sponsors its own earnings call transcript (example).

2. Company sponsors partner's transcript (example).

3. Company sponsors competitor's transcript (example).

4. Issuer-sponsored research firm sponsors client's transcript (example).

5. Investment newsletter sponsors transcripts of successful stock picks (example).

6. IR firm sponsors transcript of micro-cap company (example).

7. Consulting company sponsors company's transcript in sector of interest (example).

Your company's name and promotion could have been on this transcript! Learn more, or email Zack Miller for details.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Tribune Q4 2006 Earnings Call Transcript
This Transcript
All Transcripts