**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

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**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, 2006**

**Commission file number 1-8572**

**TRIBUNECOMPANY**

(Exactname of registrant as specified in its charter)

| **Delaware**                                                    |   | **36-1880355**                       |
|-----------------------------------------------------------------|--------|--------------------------------------|
| (State or other jurisdiction of  incorporation or organization) |   | (I.R.S. Employer Identification No.) |
| **435 North Michigan Avenue  Chicago, Illinois**                |   | **60611**                            |
| (Address of principal executive offices)                        |   | (Zip Code)                           |

 

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

|                                                                 | **Title of each class** | ** **              | ** ** | ** **                                      | ** ** | **Name of each exchange on  which registered** |
|-----------------------------------------------------------------|----------------------------------------|-------------------------|------------|-------------------------------------------------|------------|-------------------------------------------------------------------------|
| Common  Stock ($.01 par value)  Preferred Share Purchase Rights | }                                      |                    | {          | New York Stock Exchange  Chicago Stock Exchange |
| 2%  Exchangeable Subordinated Debentures Due 2029               |                                   | New York Stock Exchange |

 

Indicateby check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405of the Securities Act. Yes x   No o

Indicateby check mark if the registrant is not required to file reports pursuant to Section 13or Section 15(d) of the Act. Yes o   No x

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

Indicateby check mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K is not contained herein, and will not be contained, to thebest of registrant’s knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-K or anyamendment to this Form 10-K.   x

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, or a non-accelerated filer. Seedefinition of “accelerated filer and large accelerated filer” in Rule 12b-2of the Exchange Act. (check one): 

Large Accelerated Filer x   AcceleratedFiler o   Non-Accelerated Filer o

Indicateby check mark whether the registrant is a shell company (as defined in ExchangeAct Rule 12b-2).Yes o   No x

Aggregatemarket value of the Company’s voting and non-voting common equity held bynon-affiliates on June 23, 2006, based upon the closing price of theCompany’s Common Stock as reported on the New York Stock ExchangeComposite Transactions list for such date: approximately $6,998,000,000.

AtFebruary 16, 2007, there were 240,197,343 shares outstanding of theCompany’s Common Stock ($.01 par value per share), excluding 60,683,388 sharesheld by subsidiaries of the Company (see Note 15 to the Company’sConsolidated Financial Statements).

The following document is incorporated by reference,in part:

DefinitiveProxy Statement for the registrant’s May 9, 2007 Annual Meeting ofShareholders (Part III, to the extent described therein).

 

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**INDEXTO TRIBUNE COMPANY2006 FORM 10-K**
| Item No. | ** ** | ** **                                                                                                                               | ** ** | **Page** | ** ** |
|---------------|------------|------------------------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|
|          |       | **PART I**                                                                                                                          |       |     |       |   |   |
| 1.            |       | Business                                                                                                                                 |       |     | 1          |   |   |
|          |       | Significant  Events                                                                                                                      |       |     | 1          |   |   |
|          |       | Business  Segments                                                                                                                       |       |     | 4          |   |   |
|          |       | Publishing                                                                                                                               |       |     | 6          |   |   |
|          |       | Broadcasting and Entertainment                                                                                                           |       |     | 11         |   |   |
|          |       | Investments                                                                                                                              |       |     | 16         |   |   |
|          |       | Non-Operating  Items                                                                                                                     |       |     | 17         |   |   |
|          |       | Governmental  Regulation                                                                                                                 |       |     | 17         |   |   |
|          |       | Employees                                                                                                                                |       |     | 19         |   |   |
|          |       | Executive Officers of the Company                                                                                                        |       |     | 19         |   |   |
|          |       | Available  Information                                                                                                                   |       |     | 20         |   |   |
| 1A.           |       | Risk Factors                                                                                                                             |       |     | 21         |   |   |
| 1B.           |       | Unresolved Staff  Comments                                                                                                               |       |     | 24         |   |   |
| 2.            |       | Properties                                                                                                                               |       |     | 25         |   |   |
| 3.            |       | Legal Proceedings                                                                                                                        |       |     | 26         |   |   |
| 4.            |       | Submission of  Matters to a Vote of Security Holders                                                                                     |       |     | 29         |   |   |
|          |       | **PART II**                                                                                                                         |       |     |       |   |   |
| 5.            |       | Market for  Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases  of Equity Securities                 |       |     | 30         |   |   |
| 6.            |       | Selected Financial  Data                                                                                                                 |       |     | 31         |   |   |
| 7.            |       | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                                              |       |     | 32         |   |   |
| 7A.           |       | Quantitative  and Qualitative Disclosures About Market Risk                                                                              |       |     | 61         |   |   |
| 8.            |       | Financial  Statements and Supplementary Data                                                                                             |       |     | 65         |   |   |
|          |       | Report of Independent Registered Public Accounting  Firm                                                                                 |       |     | 66         |   |   |
|          |       | Management’s Responsibility for Financial Statements  and Management’s Report on Internal Control Over Financial Reporting     |       |     | 68         |   |   |
|          |       | Consolidated Statements of Income for each of the  three fiscal years in the period ended Dec. 31, 2006                        |       |     | 69         |   |   |
|          |       | Consolidated Balance Sheets at Dec. 31, 2006 and  Dec. 25, 2005                                                                |       |     | 71         |   |   |
|          |       | Consolidated Statements of Shareholders’ Equity for  each of the three fiscal years in the period ended Dec. 31, 2006     |       |     | 74         |   |   |
|          |       | Consolidated Statements of Cash Flows for each of the  three fiscal years in the period ended Dec. 31, 2006     |       |     | 76         |   |   |
|          |       | Notes to  Consolidated Financial Statements                                                                                              |       |     |       |   |   |
|          |       | Note 1:  Summary of Significant Accounting Policies                                                                                 |       |     | 77         |   |   |
|          |       | Note 2:  Changes in Operations and Non-Operating Items                                                                              |       |     | 85         |   |   |
|          |       | Note 3:  Discontinued Operations and Assets Held for Sale                                                                           |       |     | 89         |   |   |
| * *      | * *   | Note 4*: Newsday*and*Hoy,*New  York Charge                                                                                          |       |     | 91         |   |   |
|          |       | Note 5: Inventories                                                                                                                 |       |     | 92         |   |   |
|          |       | Note 6:  Goodwill and Other Intangible Assets                                                                                       |       |     | 93         |   |   |
|          |       | Note 7: TMCT and TMCT II                                                                                                       |       |     | 95         |   |   |
|          |       | Note 8: Investments                                                                                                                 |       |     | 98         |   |   |
|          |       | Note 9: Debt                                                                                                                        |       |     | 99         |   |   |
|          |       | Note 10:  Contracts Payable for Broadcast Rights                                                                                    |       |     | 102        |   |   |
|          |       | Note 11:  Fair Value of Financial Instruments                                                                                       |       |     | 102        |   |   |
|          |       | Note 12:  Commitments and Contingencies                                                                                             |       |     | 102        |   |   |
|          |       | Note 13: Income Taxes                                                                                                               |       |     | 103        |   |   |
|          |       | Note 14:  Pension and Other Postretirement Benefits                                                                                 |       |     | 107        |   |   |

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|        |   | **PART II (continued)**                                                                                       |   |   |   |   |   |
|--------|--------|--------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|
|   |   | Notes to Consolidated  Financial Statements (continued)                                                            |   |   |   |   |   |
|   |   | Note 15:  Capital Stock and Share Purchase Rights Plan                                                        |   |   | 112    |   |   |
|   |   | Note 16:  Incentive Compensation and Stock Plans                                                              |   |   | 113    |   |   |
|   |   | Note 17:  Comprehensive Income                                                                                |   |   | 119    |   |   |
|   |   | Note 18: Business  Segments                                                                                   |   |   | 120    |   |   |
|   |   | 2006 Quarterly  Results (Unaudited)                                                                                |   |   | 123    |   |   |
|   |   | 2005 Quarterly  Results (Unaudited)                                                                                |   |   | 124    |   |   |
|   |   | Five Year Financial  Summary                                                                                       |   |   | 126    |   |   |
|   |   | Financial Statement Schedule for each of the three  fiscal years in the period ended Dec. 31, 2006       |   |   |   |   |   |
|   |   | Schedule II  Valuation and Qualifying Accounts and Reserves                                                   |   |   | 128    |   |   |
| 9.     |   | Changes in and  Disagreements with Accountants on Accounting and Financial Disclosure                              |   |   | 129    |   |   |
| 9A.    |   | Controls and  Procedures                                                                                           |   |   | 129    |   |   |
| 9B.    |   | Other Information                                                                                                  |   |   | 129    |   |   |
|   |   | **PART III**                                                                                                  |   |   |   |   |   |
| 10.    |   | Directors,  Executive Officers and Corporate Governance                                                            |   |   | 129    |   |   |
| 11.    |   | Executive  Compensation                                                                                            |   |   | 130    |   |   |
| 12.    |   | Security  Ownership of Certain Beneficial Owners and Management and Related Stockholder  Matters    |   |   | 130    |   |   |
| 13.    |   | Certain  Relationships and Related Transactions, and Director Independence                                         |   |   | 131    |   |   |
| 14.    |   | Principal  Accountant Fees and Services                                                                            |   |   | 131    |   |   |
|   |   | **PART IV**                                                                                                   |   |   |   |   |   |
| 15.    |   | Exhibits and  Financial Statement Schedules                                                                        |   |   | 131    |   |   |
|   |   | *** * * * ***                                                                                  |   |   |   |   |   |
|   |   | Signatures                                                                                                         |   |   | 132    |   |   |
|   |   | Exhibit Index                                                                                                 |   |   | 134    |   |   |
|   |   | Consent of  Independent Registered Public Accounting Firm                                                          |   |   | 139    |   |   |
|   |   | Certifications of Chief  Executive Officer and Chief Financial Officer                                             |   |   | 140    |   |   |

 

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**PART I**

**ITEM 1.   BUSINESS.**

Tribune Company (“Tribune” or the “Company”) is amedia and entertainment company. Through its subsidiaries, the Company isengaged in newspaper publishing, television and radio broadcasting andentertainment. The Company was founded in 1847 and incorporated in Illinois in1861. As a result of a corporate restructuring in 1968, the Company became aholding company incorporated in Delaware. References in this report to “theCompany” include Tribune Company and its subsidiaries, unless the contextotherwise indicates. The information in this Item 1 should be read inconjunction with the information contained in Item 7, “Management’sDiscussion and Analysis of Financial Condition and Results of Operations” andthe Company’s consolidated financial statements and related notes theretoincluded in Item 8. Certain prior year amounts have been reclassified toconform with the 2006 presentation. These reclassifications had no impact onreported prior year total revenues, operating profit or net income.

This Annual Report on Form 10-K(“Form 10-K”) contains certain forward-looking statements thatare based largely on the Company’s current expectations. Forward-lookingstatements are subject to certain risks, trends and uncertainties that could causeactual results and achievements to differ materially from those expressed inthe forward-looking statements including, but not limited to, the itemsdiscussed in Item 1A, “Risk Factors.” Such risks, trends anduncertainties, which in some instances are beyond the Company’s control,include: changes in advertising demand, circulation levels and audience shares;regulatory and judicial rulings; availability and cost of broadcast rights;competition and other economic conditions; changes in newsprint prices; changesin the Company’s credit ratings and interest rates; changes in accountingstandards; adverse results from litigation, governmental investigations or taxrelated proceedings or audits; the effect of labor strikes, lock-outs andnegotiations; the effect of acquisitions, investments and divestitures; theeffect of derivative transactions; the Company’s reliance on third-partyvendors for various services; and the Company’s exploration of alternatives forcreating additional value for shareholders. The words “believe,” “expect,” “anticipate,”“estimate,” “could,” “should,” “intend” and similar expressions generallyidentify forward-looking statements. Readers are cautioned not to placeundue reliance on such forward-looking statements, which are being madeas of the date of this filing. The Company undertakes no obligation to updateany forward-looking statements, whether as a result of new information,future events or otherwise.

**Significant Events**

**Common Stock Repurchases—****The**Company’scommon stock repurchases totaled 71 million shares for $2.3 billion in 2006 and12 million shares for $440 million in 2005. The following table summarizes theCompany’s 2006 common stock repurchases (in thousands):

| ** **                                                                            | ** ** | **Shares** | ** ** | **Cost**  | ** ** |
|---------------------------------------------------------------------------------------|------------|------------|------------|-----------|------------|
| Repurchases in  first quarter                                                         |       | 4,604      |       | $         | 137,746    |   |
| Tender offer  repurchases                                                             |       | 45,027     |       | 1,468,270 |       |
| Repurchases from  the Robert R. McCormick Tribune Foundation  and Cantigny Foundation |       | 10,000     |       | 325,300   |       |
| Repurchases  subsequent to the tender offer                                           |       | 11,053     |       | 330,952   |       |
| Total common stock  repurchases                                                       |       | 70,684     |       | $         | 2,262,268  |   |

 

On May 30, 2006, the Company initiated a modified“Dutch Auction” tender offer to repurchase up to 53 million shares of itscommon stock at a price per share not greater than $32.50 and not less than$28.00. The tender offer closed on June 26, 2006, and the Company acquired45 million shares of its common stock on July 5, 2006 at a price of $32.50per share before transaction costs. The Company also acquired 

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10 million shares ofits common stock from the Robert R. McCormick Tribune Foundation and theCantigny Foundation on July 12, 2006 at a price of $32.50 per share beforetransaction costs. The Robert R. McCormick Tribune Foundation and the CantignyFoundation are affiliated non-profit organizations, which together held 13.6%of the Company’s outstanding shares when the tender offer was launched. Inconnection with the tender offer, the board of directors also authorized therepurchase of an additional 12 million shares of the Company’s commonstock commencing on the eleventh business day following the completion of thetender offer. In the third quarter of 2006, the Company repurchased anadditional 11.1 million shares under that authorization at a weightedaverage cost of $29.94 per share. In addition, the Company repurchased andretired 4.6 million shares of its common stock in the first quarter of 2006.

**Credit Agreements—****On**June 19,2006, the Company entered into a five-year credit agreement and a 364-daybridge credit agreement, both of which were amended and restated on June 27,2006. The five-year credit agreement provides for a $1.5 billion unsecured termfacility, of which $250 million was used to refinance the medium-term notesthat matured on Nov. 1, 2006, and a $750 million unsecured revolvingfacility. The 364-day bridge credit agreement provided for a $2.15billion unsecured bridge facility.

The Company entered into these agreements to financethe Company’s tender offer initiated on May 30, 2006; to repurchase sharesof the Company’s common stock from the Robert R. McCormick Tribune Foundationand Cantigny Foundation; to repurchase shares of the Company’s common stockpursuant to open market or privately negotiated transactions; to refinancecertain indebtedness; and to pay fees and expenses incurred in connection withthe repurchases. In addition, the revolving facility is available for workingcapital and general corporate purposes, including acquisitions.

In general, borrowings under the credit agreementsbear interest at a rate equal to LIBOR plus a spread ranging from 0.35% to1.25%. The applicable spread is determined on the basis of the Company’s debtratings by S&P and Moody’s. The Company’s debt ratings are also used indetermining the annual facility fee, which may range from 0.07% to 0.25% of theaggregate unused commitments. In addition, the Company has agreed to paycustomary fees to the lenders under the credit agreements.

As of Dec. 31, 2006, the Company had outstandingborrowings of $1.5 billion and $1.3 billion under the term facility and thebridge facility, respectively, and the Company had no borrowings under therevolving facility. As of Dec. 31, 2006, the applicable interest rate onboth the term facility and the bridge facility was 6.2%.

The credit agreements contain certain restrictivecovenants, including financial covenants that require the Company to maintain amaximum total leverage ratio and a minimum interest coverage ratio. At Dec. 31,2006, the Company was in compliance with the covenants.

**TMCT Transactions—****As**a result of theCompany’s acquisition of The Times Mirror Company (“Times Mirror”) in 2000, theCompany holds investment interests in TMCT, LLC (“TMCT”) and TMCT II, LLC (“TMCTII”). TMCT and TMCT II were formed in 1997 and 1999, respectively, as a resultof transactions involving agreements between Times Mirror and its largestshareholders, Chandler Trust No. 1 and Chandler Trust No. 2(collectively, the “Chandler Trusts”). The Times Mirror acquisition resulted inthe Chandler Trusts becoming significant shareholders of the Company. The TMCTand TMCT II LLC agreements have no specific term, and the dissolution,determination of liquidation values and distribution of assets require themutual consent of the Company and the Chandler Trusts.

The collective assets of TMCT and TMCT II as of Dec. 25,2005 included approximately 51.4 million shares of the Company’s common stockand 1.1 million shares of the Company’s preferred stock, representing all ofthe Company’s issued Series C, D-1 and D-2 preferred stock.The TMCT and TMCT II assets also include a variety of fixed income and equityinvestments. In addition, TMCT owns eight real properties that are leased tothe Company. Additional information pertaining to the Company’s 

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investments in TMCT andTMCT II is provided in Note 7 to the consolidated financial statements in Item 8.

On Sept. 21, 2006, the Company and the Chandler Trustsentered into agreements to restructure TMCT and TMCT II. Under the terms of theagreements, the Company received on Sept. 22, 2006, a total of 38.9 millionshares of the Company’s common stock and all 1.1 million shares of the Company’spreferred stock held collectively by TMCT and TMCT II. As a result of thetransactions, the Company’sinterests in each of TMCT and TMCT II were reduced to approximately 5%. TheSept. 21, 2006 agreements also provide for certain put and call options, whichare exercisable at fair market value beginning in September 2007, relatingto the Company’s remaining ownership interests in TMCT and TMCT II. As a resultof the transactions, the Company in the third quarter of 2006 recorded aone-time, non-operating gain of $48 million, net of tax; increased its commontreasury stock by $161 million and its preferred treasury stock by $107million; and reduced its combined investment in TMCT and TMCT II by $195million.

On Sept. 22, 2006, the Company and TMCT amended thelease agreement for the eight properties the Company leases from TMCT. Underthe terms of the amended lease, the Company was granted an accelerated optionto acquire the eight properties during the month of January 2008 for $175million. The Company was also granted an option to acquire the leasedproperties from Feb. 8, 2008 to three months prior to the expiration ofthe amended lease. In addition, the amendment extended the properties’ currentfixed rental rate through Aug. 7, 2021.

On Oct. 20, 2006, the remaining 12.4 millionshares of the Company’s common stock held by TMCT and TMCT II were distributedto the Company and the Chandler Trusts in accordance with their respectiveownership interests. The Company received 0.6 million shares and the ChandlerTrusts received 11.8 million shares.

The Company and the Chandler Trusts share in the cashflows of the various assets held by TMCT and TMCT II. Prior to the Sept. 22,2006 transactions, the cash flows from the Tribune common and preferred sharesheld by TMCT and TMCT II were largely allocated to the Company, while the cashflows from the other assets were largely allocated to the Chandler Trusts. As aresult, the Company included in treasury stock 80% of the Tribune common andpreferred shares held by TMCT and TMCT II. In addition, 80% of the dividends onthe preferred and common shares held by TMCT and TMCT II were effectivelyeliminated. Following the Sept. 22, 2006 transactions and until the Oct. 20,2006 distribution, the Company included in treasury stock approximately 5% ofthe Tribune common shares held by TMCT and TMCT II. As a result of thetransactions, the Company no longer has any shares of its Series C, D-1and D-2 preferred stock outstanding, and the Company’s common sharesoutstanding increased by 1.6 million.

**Sales of WATL-TV, Atlanta,WCWN-TV, Albany and WLVI-TV, Boston—****On** June 5,2006, the Company announced the sale of WATL-TV, Atlanta to Gannett Co., Inc.for $180 million. The sale closed on Aug. 7, 2006. On June 19, 2006,the Company announced the sale of WCWN-TV, Albany to Freedom Communications, Inc.for $17 million. The sale closed on Dec. 6, 2006. On Sept. 14, 2006, theCompany announced the sale of WLVI-TV, Boston, to Sunbeam Television Corp. for$113.7 million. The sale closed on Dec. 19, 2006.

These businesses were considered components of theCompany’s broadcasting and entertainment segment as their operations and cashflows could be clearly distinguished, operationally and for financial reportingpurposes, from the rest of the Company. The operations and cash flows of thesebusinesses have been eliminated from the ongoing operations of the Company as aresult of the sales, and the Company will not have any significant continuinginvolvement in their operations. Accordingly, the results of operations of eachof these businesses have been reported as discontinued operations in theconsolidated 

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statements of income. Prioryear consolidated statements of income have been reclassified to conform to thecurrent year presentation of discontinued operations.

In conjunction with the sales of WATL-TV, Atlanta andWCWN-TV, Albany, the Company recorded in the second quarter of 2006 a pretaxloss totaling $90 million, including $80 million of allocated television groupgoodwill, to write down the net assets of the stations to estimated fair value,less costs to sell. The Company subsequently reduced the pretax loss on salesof the Atlanta and Albany stations during the third quarter of 2006 by $1million. In addition, the Company recorded in the fourth quarter of 2006 apretax gain of $41 million, including $45 million of allocated television groupgoodwill, for the sale of the Boston station. In accordance with FAS No. 142,“Goodwill and Other Intangible Assets”, the Company aggregates all of itstelevision stations into one reporting unit for goodwill accounting purposes.FAS No. 142 requires the Company to allocate a portion of its totaltelevision group goodwill to stations that are to be sold on a relative fairvalue basis. The net pretax loss on sales of the three stations sold during2006 was $48 million, including $125 million of allocated television groupgoodwill.

**Acquisition of AdditionalEquity in CareerBuilder, ShopLocal and Topix—****In**August 2006,the Company completed its acquisition of additional equity interests in each ofCareerBuilder, LLC, ShopLocal, LLC (formerly CrossMedia Services, Inc.) andTopix, LLC for an aggregate purchase price of $155 million. The negotiatedequity purchases followed the exercise of call options by the Company andGannett Co., Inc. on Knight-Ridder, Inc.’s equity ownership in thethree online businesses after The McClatchy Company’s announcement of itsproposed acquisition of Knight-Ridder, Inc. As a result of thistransaction, the Company and Gannett Co., Inc. each increased theirrespective ownership of CareerBuilder, LLC and ShopLocal, LLC to 42.5% with TheMcClatchy Company retaining a 15% interest in both entities. Additionally, eachof the Company’s and Gannett Co., Inc.’s interest in Topix, LLC increasedto 31.9%. As a result of subsequent funding, the current ownership of Topix,LLC is approximately 33.7% for both the Company and Gannett Co., Inc.,11.9% for The McClatchy Company and 20.7% for management of Topix, LLC.

**Network Affiliations—****On** Jan. 24,2006, the Company announced that it had reached a 10-year agreement toaffiliate 16 of its television stations which were at that time affiliated withthe former WB Network (including those in New York, Los Angeles and Chicago)with a new broadcast network, the CW Network. The new network was launched in September 2006by Warner Bros. Entertainment and CBS. The new network airs a portion of theprogramming previously carried on the WB Network and the UPN Network, as wellas new programming. The WB Network has shut down. The Company did not incur anycosts related to the shutdown of the WB Network.

In the second quarter of2006, the Company announced that its other three former WB Network affiliates(Philadelphia, Atlanta and Seattle) would become affiliates of the newbroadcast network, MyNetworkTV, which was launched in September 2006 bythe FOX Television Stations Network Inc. and Twentieth Century Television. Thenew network airs primarily primetime dramas. The Company subsequently sold itsAtlanta station in August 2006 and its Albany and Boston stations in December 2006.

**Business Segments**

The Company’s operations are divided into two industrysegments: publishing and broadcasting and entertainment. These segments operateprimarily in the United States. Certain administrative activities are notincluded in either segment, but are reported as corporate. These segmentsreflect the way the Company sells its products to the marketplace, managesoperations and makes business decisions.

TheCompany’s fiscal year ends on the last Sunday in December. Fiscal year 2006ended on Dec. 31, 2006 and encompassed 53 weeks, while fiscal years 2005and 2004 each encompassed 52 weeks. For 2006, the additional weekincreased consolidated operating revenues and operating expenses byapproximately 1.5% and consolidated operating profit by approximately 2%. Thefollowing table sets forth operating 

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revenues and operating profit information for eachsegment of the Company for 2006, 2005 and 2004 (in thousands):

| ** **                     | ** ** | **2006**  | ** ** | **2005**  | ** ** | **2004**  | ** ** |
|--------------------------------|------------|-----------|------------|-----------|------------|-----------|------------|
| Operating revenues:            |       |      |       |      |       |      |       |
| Publishing                     |       | $         | 4,092,562  |      | $          | 4,096,850 |       | $ | 4,129,850 |   |
| Broadcasting and entertainment |       | 1,425,146 |       | 1,414,433 |       | 1,501,581 |       |
| Total operating  revenues      |       | $         | 5,517,708  |      | $          | 5,511,283 |       | $ | 5,631,431 |   |
| Operating profit  (loss)(1):   |       |      |       |      |       |      |       |
| Publishing                     |       | $         | 749,189    |      | $          | 759,713   |       | $ | 726,207 |   |
| Broadcasting and entertainment |       | 391,533   |       | 416,891   |       | 513,289   |       |
| Corporate expenses             |       | (55,712   | )          | (49,413   | )          | (52,218   | )          |
| Total operating profit         |       | $         | 1,085,010  |      | $          | 1,127,191 |       | $ | 1,187,278 |   |

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(1)       Operatingprofit for each segment excludes interest and dividend income, interestexpense, equity income and loss, non-operating items and income taxes.

Thefollowing table sets forth asset information for each industry segment (inthousands):

| ** **                     | ** ** | **Dec. 31, 2006** | ** ** | **Dec. 25, 2005** | ** ** |
|--------------------------------|------------|------------------------|------------|------------------------|------------|
| Assets:                        |       |                   |       |                   |       |
| Publishing(1)                  |       | $                      | 8,512,512  |                   | $          | 8,637,176 |   |
| Broadcasting and entertainment |       | 3,987,449              |       | 4,425,135              |       |
| Corporate(2)                   |       | 900,811                |       | 1,483,931              |       |
| Total assets                   |       | $                      | 13,400,772 |                   | $          | 14,546,242 |   |

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(1)       Publishingassets at Dec. 31, 2006 and Dec. 25, 2005 include $9 million and$24 million of assets held for sale and $26 million and $34 million ofassets idled, respectively (see Note 3 to the consolidated financialstatements in Item 8).

(2)       Corporateassets include cash and cash equivalents, marketable securities and otherinvestments.

The Company’s results of operations, when examined ona quarterly basis, reflect the seasonality of the Company’s revenues. Secondand fourth quarter advertising revenues are typically higher than first andthird quarter revenues. Results for the second quarter reflect springadvertising revenues, while the fourth quarter includes advertising revenuesrelated to the holiday season.

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**Publishing**

The publishing segment represented 74% of the Company’sconsolidated operating revenues in 2006. For the six months ended September 2006,total average paid circulation for Tribune’s 11 metro newspapers averaged2.8 million copies daily (Mon.-Fri.) and 4.1 million copies Sunday, adecline of 4.5% and 4.4%, respectively, from 2005. The Company’s primary dailynewspapers are the *Los Angeles Times*,*Chicago Tribune*, *Newsday, South Florida Sun-Sentinel*, *Orlando Sentinel, The Sun*,*Hartford Courant*, *The Morning Call*, *Daily Press*, *The Advocate* and *GreenwichTime*. The Company’s publishing segment manages the websites of theCompany’s daily newspapers and television stations, as well as other brandedsites targeting specific communities of interest. The Company also ownsentertainment listings, a newspaper syndication and media marketing company, aChicago-area cable television news channel and other publishing-relatedbusinesses.

Theadditional week in fiscal year 2006 increased publishing advertising revenues,circulation revenues, and operating profit by approximately 2% and increasedoperating expenses by approximately 1.5%. Operating revenues for the Company’sthree largest newspapers, including their related businesses, for the lastthree years were as follows (in thousands):

| ** **                      | ** ** | **2006**  | ** ** | **2005**  | ** ** | **2004**  | ** ** |
|---------------------------------|------------|-----------|------------|-----------|------------|-----------|------------|
| Operating revenues:             |       |      |       |      |       |      |       |
| Los Angeles Times(1)            |       | $         | 1,116,858  |      | $          | 1,111,052 |       | $ | 1,134,780 |   |
| Chicago Tribune(1)              |       | 862,660   |       | 873,668   |       | 853,165   |       |
| Newsday(1)                      |       | 541,074   |       | 574,864   |       | 614,681   |       |
| Other newspapers and businesses |       | 1,571,970 |       | 1,537,266 |       | 1,527,224 |       |
| Total publishing  revenues      |       | $         | 4,092,562  |      | $          | 4,096,850 |       | $ | 4,129,850 |   |

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(1)       Includesthe daily newspaper and other related businesses.

Thefollowing table provides a breakdown of operating revenues for the publishingsegment for the last three years (in thousands):

| ** **        | ** ** | **2006**  | ** ** | **2005**  | ** ** | **2004**  | ** ** |
|-------------------|------------|-----------|------------|-----------|------------|-----------|------------|
| Advertising:      |       |      |       |      |       |      |       |
| Retail            |       | $         | 1,344,124  |      | $          | 1,323,547 |       | $ | 1,330,951 |   |
| National          |       | 736,808   |       | 774,093   |       | 802,530   |       |
| Classified        |       | 1,179,128 |       | 1,146,460 |       | 1,095,012 |       |
| Total advertising |       | 3,260,060 |       | 3,244,100 |       | 3,228,493 |       |
| Circulation       |       | 575,043   |       | 596,163   |       | 643,947   |       |
| Other(1)          |       | 257,459   |       | 256,587   |       | 257,410   |       |
| Total             |       | $         | 4,092,562  |      | $          | 4,096,850 |       | $ | 4,129,850 |   |

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(1)       Primarilyincludes revenues from advertising placement services; the syndication ofcolumns, features, information and comics to newspapers; commercial printingoperations; delivery of other publications; direct mail operations; cabletelevision news programming; distribution of entertainment listings; and otherpublishing-related activities.

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Thefollowing table sets forth information concerning the Company’s advertisingvolume for its daily newspapers for the last three years (in thousands):

| ** **                | ** ** | **2006**   | ** ** | **2005**   | ** ** | **2004**   | ** ** |
|---------------------------|------------|------------|------------|------------|------------|------------|------------|
| Advertising  inches       |       |       |       |       |       |       |       |
| Full run:                 |       |       |       |       |       |       |       |
| Retail                    |       | 6,119      |       | 5,980      |       | 6,200      |       |
| National                  |       | 3,457      |       | 3,774      |       | 3,998      |       |
| Classified                |       | 10,154     |       | 10,023     |       | 10,265     |       |
| Total full run            |       | 19,730     |       | 19,777     |       | 20,463     |       |
| Part run             |       | 21,217     |       | 20,112     |       | 20,575     |       |
| Total advertising  inches |       | 40,947     |       | 39,889     |       | 41,038     |       |
| Preprint pieces           |       | 14,928,728 |       | 14,929,047 |       | 14,680,009 |       |

 

Thefollowing table sets forth information concerning the Company’s circulation forits primary daily newspapers (in thousands):

| ** **                              | ** ** | **Average Paid Circulation  For the Six Months Ended Sept.(1)** | ** ** |
|-----------------------------------------|------------|----------------------------------------------------------------------------------------------------|------------|
| ** **                              | ** ** | **Daily(2)**                                                                                       | ** ** | **Sunday ** | ** ** |
| ** **                              | ** ** | **2006**                                                                                           | ** ** | **2005** | ** ** | **2004** | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
| Los Angeles Times                       |       | 776                                                                                                |       | 843 |   | 877 |   | 1,172 |   | 1,248 |   | 1,292 |   |
| Chicago Tribune                         |       | 576                                                                                                |       | 586 |   | 601 |   | 938 |   | 951 |   | 964 |   |
| Newsday (Long  Island)                  |       | 411                                                                                                |       | 432 |   | 459 |   | 475 |   | 496 |   | 521 |   |
| South Florida Sun-Sentinel              |       | 222                                                                                                |       | 227 |   | 232 |   | 305 |   | 322 |   | 337 |   |
| Orlando Sentinel                        |       | 214                                                                                                |       | 220 |   | 247 |   | 317 |   | 331 |   | 364 |   |
| The Sun (Baltimore)                     |       | 236                                                                                                |       | 247 |   | 270 |   | 381 |   | 419 |   | 454 |   |
| Other daily  newspapers(3)              |       | 408                                                                                                |       | 422 |   | 436 |   | 559 |   | 571 |   | 597 |   |
| Total Net Paid Circulation(4)           |       | 2,843                                                                                              |       | 2,977 |   | 3,122 |   | 4,147 |   | 4,338 |   | 4,529 |   |
| Total  Individually Paid Circulation(4) |       | 2,724                                                                                              |       | 2,759 |   | 2,880 |   | 4,066 |   | 4,171 |   | 4,324 |   |

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(1)       Circulationdata is based on internal records, is subject to audit by the Audit Bureau ofCirculations (“ABC’’) and may be updated in subsequent filings.

(2)       Averagedaily circulation is based on a five-day (Mon.-Fri.) average.

(3)       Otherdaily newspapers include *Hartford Courant, TheMorning Call, Daily Press, The Advocate* and *GreenwichTime*.

(4)       Individuallypaid circulation includes home delivery and single copy sales. This circulationis more highly valued by advertisers and represented 96% of total dailycirculation and 98% of total Sunday circulation for the six months ended September 2006.Total net paid circulation includes both individually paid and other paid(education, sponsored, hotels) copies.

Each of the Company’s newspapers operatesindependently to most effectively meet the needs of the community it serves.Local management establishes editorial policies. The Company coordinatescertain aspects of operations and resources in order to provide greateroperating efficiency and economies of scale.

The Company’s newspapers compete for readership andadvertising with other metropolitan, suburban and national newspapers, and alsowith television, radio, Internet services and other media. Competition fornewspaper advertising is based upon circulation levels, readership demographics,price, service and advertiser results, while competition for circulation isbased upon the content of the newspaper, service and price.

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The *Los Angeles Times,**Chicago Tribune, South Florida Sun-Sentinel,Orlando Sentinel, Daily Press, The Morning Call*, *The Advocate* and *Greenwich Time*are printed in Company-owned production facilities. *Newsday*,*The Sun* and *HartfordCourant* are printed on Company-owned presses in productionfacilities leased from an affiliate (see Note 7 to the consolidatedfinancial statements in Item 8). The principal raw material is newsprint.In 2006, the Company’s newspapers consumed approximately 697,000 metric tons ofstandard newsprint, 45.0 gram basis weight. Average newsprint pricesincreased 10% in 2006 from 2005 reflecting increased market prices. Averagenewsprint prices increased 12% and 10% in 2005 and 2004, respectively.

The Company is party to anagreement with Abitibi Consolidated Inc., expiring in 2009, to supplynewsprint. Under the current agreement, the Company purchased approximately 369,000metric tons of newsprint in 2006, representing 53% of the Company’s newsprintpurchases and has agreed to purchase 369,000 metric tons in 2007, 2008 and2009, subject to certain limitations, based on market prices at the time ofpurchase.

***Los Angeles Times and Related Businesses***

The *Los AngelesTimes* has been published continuously since 1881. The newspaper haswon 37 Pulitzer Prizes and is the largest daily metropolitan newspaper in theUnited States in circulation. The Los Angeles market ranks second in the nationin terms of households. In its primary circulation areas of Los Angeles,Orange, Ventura, San Bernardino and Riverside counties, the *Los Angeles Times* competes for advertisingand circulation with 16 local daily newspapers and three daily nationalnewspapers, with its largest local competitor having almost 300,000 in averagedaily circulation. For the six-month period ended September 2006, the *Los Angeles Times* ranked fourth and secondin the country for average daily and Sunday circulation, respectively,according to ABC. Approximately 78% and 81% of the paper’s daily and Sundaycirculation, respectively, was home delivered in 2006, with the remainderprimarily sold at newsstands and vending boxes.

In addition to the dailyedition covering the Los Angeles metropolitan area, the *Los Angeles Times* publishes Orange County,San Fernando Valley, Inland Empire and Ventura County editions. Daily andsemi-weekly community newspapers are either inserted into the paper in selectedgeographic areas or distributed to homes and through vending machines toprovide targeted local news coverage. The company operates latimes.com, anonline expanded version of the newspaper featuring 50,000 content pages, whichprovides entertainment, local, national and international news, andtheenvelope.com, a comprehensive year-round entertainment awards website.Through a subsidiary, EZ Buy & EZ Sell Recycler Corporation, thecompany publishes a collection of eight alternative classified papers inSouthern California including titles such as *Recycler*,*AutoBuys*, *Truck Buys*, *Cycle & BoatBuys* and *Jobs*, and also operates recycler.com, an online version ofthe publications. The company owns 50% of California Independent Postal Systems(“CIPS”), which provides alternative distribution services for advertisingpreprints. MediaNews Group, Inc. owns the other 50% of CIPS.

***Chicago Tribune and Related Businesses***

Founded in 1847, the *ChicagoTribune* is the flagship publication of the Chicago Tribune Company.The newspaper has won 24 Pulitzer Prizes and is the largest circulation paperin Chicago and the Midwest. It ranks eighth among U.S. daily newspapers with anaverage daily paid circulation of approximately 576,000; and third among U.S.Sunday newspapers with an average Sunday paid circulation of approximately938,000. Approximately 84% of its weekday newspapers and 74% of its Sundaynewspapers are home delivered with the remainder primarily sold at newsstandsand vending boxes. Considered an industry leader in journalism and innovation,Chicago Tribune Company has grown into a multi-product, multi-channel news andinformation leader. It also operates chicagotribune.com, an online version ofthe newspaper and *RedEye*, a free daily newspaper inChicago targeting young, urban commuters.

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Other businesses owned byChicago Tribune Company include Tribune Direct, which provides integrated andcomprehensive direct mail services, and Chicagoland Publishing Company, whichpublishes a number of free guides in the real estate, automotive and helpwanted categories. Chicagoland Publishing also publishes the monthly magazine *Chicago*, which earned a 2004 NationalMagazine “Ellie” Award for general excellence.

***Newsday and Related Businesses***

*Newsday *ispublished daily and circulated primarily in Nassau and Suffolk counties on LongIsland, New York, and in the borough of Queens in New York City. The paper hasbeen published since 1940 and has won 18 Pulitzer Prizes. The New Yorkmetropolitan area ranks first among U.S. markets in terms of households. *Newsday* competes with three majormetropolitan newspapers, daily regional editions of several national newspapersand numerous daily, weekly and semiweekly local newspapers and freedistribution newspapers. Approximately 70% of the paper’s daily and 66% of itsSunday circulation is sold through home delivery, with the remainder primarilysold at newsstands and vending boxes. See Note 4 to the consolidated financialstatements in Item 8 for a discussion of charges recorded in 2004 related tothe anticipated settlement with advertisers regarding misstated circulation at *Newsday*.

Newsday, Inc.,publisher of *Newsday*, alsopublishes *Distinction*, a magazineserving Long Island’s households, issued 10 times per year; *Parents & Children*, a magazinefor Long Island families, issued 12 times per year; *Long Island Weddings*, a magazine for brides-to-be, publishedtwo times per year; and *Wellness*,a magazine serving Long Island’s 40+ health and fitness market, published sixtimes per year. Newsday, Inc.’s subsidiary, Star Community PublishingGroup, LLC, publishes 183 pennysaver editions in Nassau and Suffolk counties onLong Island, New York, and in the boroughs of Queens, Brooklyn and StatenIsland in New York City. Additionally, the results of *amNew York*, a free daily newspaper in NewYork City targeting young, urban commuters, are included in Newsday, Inc.’sresults. Newsday, Inc. also has several websites including newsday.com andamny.com, which are online versions of the newspapers.

***Other Newspapers***

The Company’s other primary daily newspapers are *South Florida Sun-Sentinel, Orlando Sentinel, The Sun, HartfordCourant, Daily Press, The Morning Call, The Advocate* and *Greenwich Time*.

The *South FloridaSun-Sentinel* is the major daily newspaper serving the Broward/PalmBeach County market, leading in both circulation and readership. The Miami/FortLauderdale/Miami Beach metropolitan area, which includes Broward and Palm Beachcounties, ranks sixth in the nation in terms of households. Approximately 75%of the paper’s daily and 71% of its Sunday circulation is sold through homedelivery, with the remainder primarily sold at newsstands and vending boxes.

Sun-Sentinel Company, publisher of the*South Florida Sun-Sentinel*, also servesthe news and information needs of South Florida through sun-sentinel.com, itsbreaking news and information website; southflorida.com, a South Floridaentertainment website; *el Sentinel*,a weekly Spanish language newspaper; *Teenlink*,a weekly newspaper distributed in Broward County high schools; weekly communitynewspapers; niche publications; and television and radio partnerships,including its close working relationship with Tribune Broadcasting’s WSFL-TV,Miami, the CW Network affiliate serving South Florida.

Other publications produced by Sun-Sentinel Companyinclude: *City & Shore*, abimonthly lifestyle magazine; *City Link*,an alternative weekly newspaper*; Florida NewHomes & Condo Guide*, a comprehensive bimonthly guide toSouth Florida real estate; *Jewish Journal*,a collection of weekly newspapers serving South Florida’s Jewish community; and*South Florida Parenting*, amonthly magazine providing parenting information and resources for localfamilies.

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The *OrlandoSentinel* primarily serves a six-county area in central Florida. Thenewspaper is the only major daily newspaper in the Orlando market, although itcompetes with other Florida and national newspapers, as well as with othermedia. The *Orlando Sentinel* hasbeen published since 1876 and has won three Pulitzer Prizes. The Orlando marketranks 27th among U.S. markets in terms of households. Approximately 80% of thepaper’s daily and 73% of its Sunday circulation is sold through home delivery,with the remainder primarily sold at newsstands and vending boxes.

Orlando Sentinel Communications Company, publisher ofthe *Orlando Sentinel* andorlandosentinel.com, also publishes *ShopLocal*,a free weekly publication used to distribute advertising and content tonewspaper non-subscribers. In addition to orlandosentinel.com, the companyoperates metromix.com covering central Florida. The company publishes theweekly, Spanish-language newspaper, *ElSentinel*, and its companion website, elsentinel.com, as well as sixweekly Forum community newspapers. The company’s multimedia portfolio alsoincludes free-distribution, niche products in the central Florida marketincluding *Job Xtra* and *AutoFinder* magazines. Orlando SentinelCommunications offers direct marketing/direct mail services through TribuneDirect/Orlando in addition to distribution services for other publications.

*TheSun,* Maryland’s largest newspaper, has won 15Pulitzer Prizes since it began publishing a daily newspaper in 1837. TheBaltimore market ranks 20th in the United States in number of households. Forthe six-month period ending Sept. 25, 2006, *TheSun* was ranked the 22nd largest newspaper in the country by Sundaycirculation according to ABC. *The Sun*competes with *Baltimore Examiner*as well as *The Washington Post* inAnne Arundel and Howard counties, with *TheAnnapolis Capital* in Anne Arundel County and with *The Carroll County Times* in CarrollCounty. It also competes with regional editions of national daily newspapers,as well as other local dailies and weeklies. Approximately 79% of the paper’sdaily and 64% of its Sunday circulation is sold through home delivery, with theremainder primarily sold at newsstands and vending boxes.

The Baltimore Sun’s subsidiaries, Patuxent Publishingand Homestead Publishing, publish 17 weekly newspapers throughout Anne Arundel,Baltimore, Carroll, Harford and Howard counties. The largest of these weeklynewspapers are *The Columbia Flier, TheTowson Times, The Owings Mills Times* and *The Aegis*. The Baltimore Sun also operates a market-leadingwebsite, baltimoresun.com, as well as baltimore.metromix.com, a localentertainment site targeting users in the 18-34 demographic.

*HartfordCourant,* founded in 1764, is the oldestcontinuously published newspaper in the United States. It is the most widelycirculated and read newspaper in Connecticut and the strongest medium in thestate for advertisers and readers alike. Winner of two Pulitzer Prizes andtwice named one of the five best-designed newspapers in the world,*Hartford Courant* is published in thestate’s capital, Hartford, and serves the state’s northern and central regions.The Hartford Courant’s primary market is the Hartford market, which includesHartford, Tolland and Middlesex counties. The Hartford market ranks 44th amongU.S. markets in terms of households. Hartford Courant Company, publisher of *Hartford Courant*, has one of the mostextensive zoning operations in the country, publishing eight editions of *Hartford Courant* zoned for local news andadvertising. The company also operates courant.com, Connecticut’s leadingonline news site, and ctnow.com, a statewide entertainment website. It alsoowns two subsidiaries: New Mass Media, Inc., a publisher of four weeklyalternative newspapers in Connecticut and Massachusetts, and ValuMail, Inc.,a shared-mail company that distributes advertising supplements to more thantwo million households in Connecticut, Massachusetts, New York and RhodeIsland. Approximately 90% of the paper’s daily and 78% of its Sundaycirculation is sold through home delivery, with the remainder primarily sold atnewsstands and vending boxes.

Founded in 1896,**the*Daily Press* serves the Virginia Peninsulamarket, which includes Newport News, Hampton, Williamsburg and eight othercities and counties. This market, together with Norfolk, Portsmouth andVirginia Beach, is the 40th largest U.S. market in terms of households. *Daily Press* is the 

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only major daily newspaperin its primary market, although it competes with other regional and nationalnewspapers, as well as with other media. Approximately 84% of the paper’s dailyand 80% of its Sunday circulation is sold through home delivery, with theremainder primarily sold at newsstands and vending boxes. The Daily Press, Inc.,publisher of *Daily Press*, alsoowns *The Virginia Gazette*, whichis published twice weekly and primarily serves Williamsburg, Va., andsurrounding counties. The *Daily Press*serves the Internet community through its online affiliates dailypress.com,7cities.com and hrtownsquare.com.

*TheMorning Call,* published since 1895, is thedominant regional newspaper for nine counties in eastern Pennsylvania and NewJersey. The Morning Call, Inc., publisher of *The Morning Call*, offers free publications serving therecruitment and real estate markets, and selected high-income households. A freeweekly newspaper and a targeted online venture serve the 18-34 year-oldaudience. Subsidiaries of The Morning Call, Inc. offer full service directmarketing and saturation preprint delivery through non-subscriber distribution.In addition, the company owns and operates the premier regional website,mcall.com. Allentown-Bethlehem-Easton is the 60th largest U.S.market in terms of households. Approximately 83% of the paper’s daily and 79%of its Sunday circulation is sold through home delivery, with the remainderprimarily sold at newsstands and vending boxes.

*The Advocate* and*Greenwich Time* primarily servethe Stamford/Greenwich market in southwestern Fairfield County, Conn. Thenewspapers also serve neighboring Norwalk. *TheAdvocate* has won a Pulitzer Prize.

***Other PublishingRelated Businesses***

The Company also owns targeted publications, includingthree editions of the Spanish language newspaper, *Hoy*. *Hoy*, NewYork, a free publication as of January 2006, was introduced in 1998; *Hoy*, Chicago, is a free publicationintroduced in September 2003; and *Hoy*,Los Angeles, is a free publication introduced in March 2004. SeeNote 3 to the consolidated financial statements in Item 8 for adiscussion of the charges recorded in 2004 related to the anticipated settlementwith advertisers regarding misstated circulation at *Hoy*, New York. *Hoy*provideslocal, national and international news and features of interest to Hispanics. *Hoy*, New York, serves the second-largestHispanic market in the U.S.; *Hoy*,Los Angeles, serves the largest Hispanic market in the U.S.; and *Hoy*, Chicago, serves the fourth largestHispanic market in the U.S. The Spanish-language daily newspaper also operateshoyinternet.com, a national Spanish-language website. On Feb. 12, 2007,the Company announced the sale of *Hoy,* New Yorkto ImpreMedia, LLC. The sale is expected to close in the first quarter of 2007.

The Company also owns Tribune Media Services, Inc.(“TMS”), which creates, aggregates and distributes news, information andentertainment content that reaches millions of users through print, online andon-screen media. The TMS Entertainment Products group creates TV and movieguide products for major media companies and consumers. TMS provides data forinteractive program guides to cable, satellite operators and consumerelectronics manufacturers. The TMS News and Features group licenses content frommore than 600 writers, artists, newspaper and magazine publishers, and wireservices to roughly 4,000 media customers worldwide.

The Company also operatesCLTV, a regional 24-hour cable news channel serving Chicagoland. CLTV waslaunched in January 1993 and currently is available to more than1.6 million cable households in the Chicago market.

**Broadcasting andEntertainment**

The broadcasting and entertainment segment represented26% of the Company’s consolidated operating revenues in 2006. At Dec. 31,2006, the segment included The CW Television Network (“The CW Network”)affiliates located in New York, Los Angeles, Chicago, Dallas, Washington, D.C.,Houston, Miami, Denver, St. Louis, Portland, Indianapolis, San Diego,Hartford, and New Orleans; the FOX 

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Network televisionaffiliates in Seattle, Sacramento, Indianapolis, Hartford, Grand Rapids andHarrisburg; MyNetworkTV affiliates in Philadelphia and Seattle; an ABCtelevision affiliate in New Orleans; one radio station in Chicago; the ChicagoCubs baseball team; and Tribune Entertainment, a company that distributes itsown programming together with programming licensed from third parties. On Jan. 24,2006, the Company announced that it had reached a 10-year agreement toaffiliate 16 of its former WB Network affiliates stations with The CW Network.The network was launched in September 2006 by Warner Bros. Entertainmentand CBS. The network airs a portion of the programming previously carried onthe WB Network and the UPN Network, as well as new programming. The WB Networkwas shut down in 2006. The Company did not incur any costs related to theshutdown of the WB Network. The Company sold its Albany and Boston stations,both CW Network affiliates, in December 2006.

In the second quarter of 2006, the Company announcedthat its other three WB Network affiliates (Philadelphia, Atlanta and Seattle)would become affiliates of the new broadcast network, MyNetworkTV, which waslaunched in September 2006 by the FOX Television Stations Network Inc. andTwentieth Century Television. The new network airs primarily prime-time dramas.The Company subsequently sold its Atlanta station in August 2006.

Theadditional week in fiscal year 2006 increased operating revenues, operatingexpenses and operating profit by approximately 1%. The following tableshows sources of operating revenues for the broadcasting and entertainmentsegment for the last three years (in thousands):

| ** **          | ** ** | **2006** | ** ** | **2005** | ** ** | **2004**  | ** ** |
|---------------------|------------|----------|------------|----------|------------|-----------|------------|
| Television          |       | $        | 1,178,104  |     | $          | 1,165,821 |       | $ | 1,258,802 |   |
| Radio/entertainment |       | 247,042  |       | 248,612  |       | 242,779   |       |
| Total               |       | $        | 1,425,146  |     | $          | 1,414,433 |       | $ | 1,501,581 |   |

 

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***Television***

In2006, television contributed 83% of the broadcasting and entertainment segment’soperating revenues. The Company’s television stations compete for audience andadvertising with other television and radio stations, cable television andother media serving the same markets. Competition for audience and advertisingis based upon various interrelated factors including programming content,audience acceptance and price. Selected data for the Company’s televisionstations are shown in the following table:

| ** **                   | ** ** | **Market(1)**       | ** ** | ** **                         | ** ** | ** ** | ** ** | **Major  Over-the Air** | ** ** | **Expiration ** | ** ** | ** **                      | ** ** |
|------------------------------|------------|---------------------|------------|------------------------------------|------------|------------|------------|------------------------------|------------|----------------------|------------|---------------------------------|------------|
| ** **                   | ** ** | **National  Ranks** | ** ** | **% of U.S  Households** | ** ** | **FCC  %** | ** ** | **Analog  Channel**          | ** ** | **Affiliation**      | ** ** | **Stations in  Market(2)** | ** ** | **of FCC  License(3)** | ** ** | **Year  Acquired** | ** ** |
| WPIX—New York, NY       |       |                | 1          |                               |       |       | 6.6        |                         |       |                 | 6.6        |                            |       | 11-VHF |   |   | CW |   |   |   | 7 |   |   |   | 2007 | (4)(6) |   |   | 1948 | (5) |   |
| KTLA—Los Angeles, CA    |       |                | 2          |                               |       |       | 5.0        |                         |       |                 | 5.0        |                            |       | 5-VHF |   |   | CW |   |   |   | 8 |   |   |   | 2006 | (4)(6) |   |   | 1985 |   |   |
| WGN—Chicago, IL         |       |                | 3          |                               |       |       | 3.1        |                         |       |                 | 3.1        |                            |       | 9-VHF |   |   | CW |   |   |   | 8 |   |   |   | 2005 | (6) |   |   | 1948 | (5) |   |
| WPHL—Philadelphia, PA   |       |                | 4          |                               |       |       | 2.6        |                         |       |                 | 1.3        |                            |       | 17-UHF |   |   | MNTV |   |   |   | 7 |   |   |   | 2007 | (7) |   |   | 1992 |   |   |
| KDAF—Dallas, TX         |       |                | 6          |                               |       |       | 2.1        |                         |       |                 | 1.1        |                            |       | 33-UHF |   |   | CW |   |   |   | 9 |   |   |   | 2006 | (6) |   |   | 1997 |   |   |
| WDCW—Washington, D.C.   |       |                | 8          |                               |       |       | 2.0        |                         |       |                 | 1.0        |                            |       | 50-UHF |   |   | CW |   |   |   | 7 |   |   |   | 2004 | (6) |   |   | 1999 |   |   |
| KHCW—Houston, TX        |       |                | 10         |                               |       |       | 1.8        |                         |       |                 | 0.9        |                            |       | 39-UHF |   |   | CW |   |   |   | 9 |   |   |   | 2006 | (6) |   |   | 1996 |   |   |
| KCPQ—Seattle, WA        |       |                | 14         |                               |       |       | 1.5        |                         |       |                 | 1.5        |                            |       | 13-VHF |   |   | FOX |   |   |   | 8 |   |   |   | 2007 | (6) |   |   | 1999 |   |   |
| KMYQ—Seattle, WA        |       |                | 14         |                               |       |       | —     |                         |       |                 | —     |                            |       | 22-UHF |   |   | MNTV |   |   |   | 8 |   |   |   | 2007 | (6) |   |   | 1998 |   |   |
| WSFL—Miami, FL          |       |                | 16         |                               |       |       | 1.4        |                         |       |                 | 0.7        |                            |       | 39-UHF |   |   | CW |   |   |   | 7 |   |   |   | 2013 | (4) |   |   | 1997 |   |   |
| KWGN—Denver, CO         |       |                | 18         |                               |       |       | 1.3        |                         |       |                 | 1.3        |                            |       | 2-VHF |   |   | CW |   |   |   | 7 |   |   |   | 2006 | (6) |   |   | 1966 |   |   |
| KTXL—Sacramento, CA     |       |                | 20         |                               |       |       | 1.2        |                         |       |                 | 0.6        |                            |       | 40-UHF |   |   | FOX |   |   |   | 7 |   |   |   | 2006 | (6) |   |   | 1997 |   |   |
| KPLR—St. Louis, MO |       |                | 21         |                               |       |       | 1.1        |                         |       |                 | 1.1        |                            |       | 11-VHF |   |   | CW |   |   |   | 6 |   |   |   | 2014 |   |   |   | 2003 |   |   |
| KRCW—Portland, OR       |       |                | 23         |                               |       |       | 1.0        |                         |       |                 | 0.5        |                            |       | 32-UHF |   |   | CW |   |   |   | 7 |   |   |   | 2007 | (6) |   |   | 2003 |   |   |
| WTTV—Indianapolis, IN   |       |                | 25         |                               |       |       | 1.0        |                         |       |                 | 1.0        |                            |       | 4-VHF |   |   | CW |   |   |   | 7 |   |   |   | 2013 |   |   |   | 2002 |   |   |
| WXIN—Indianapolis, IN   |       |                | 25         |                               |       |       | —     |                         |       |                 | —     |                            |       | 59-UHF |   |   | FOX |   |   |   | 7 |   |   |   | 2005 | (6) |   |   | 1997 |   |   |
| KSWB—San Diego, CA      |       |                | 27         |                               |       |       | 0.9        |                         |       |                 | 0.5        |                            |       | 69-UHF |   |   | CW |   |   |   | 7 |   |   |   | 2006 | (6) |   |   | 1996 |   |   |
| WTIC—Hartford, CT       |       |                | 28         |                               |       |       | 0.9        |                         |       |                 | 0.5        |                            |       | 61-UHF |   |   | FOX |   |   |   | 7 |   |   |   | 2007 | (4)(6) |   |   | 1997 |   |   |
| WTXX—Hartford, CT       |       |                | 28         |                               |       |       | —     |                         |       |                 | —     |                            |       | 20-UHF |   |   | CW |   |   |   | 7 |   |   |   | 2007 | (4)(6) |   |   | 2001 |   |   |
| WXMI—Grand Rapids, MI   |       |                | 39         |                               |       |       | 0.7        |                         |       |                 | 0.3        |                            |       | 17-UHF |   |   | FOX |   |   |   | 7 |   |   |   | 2005 | (6) |   |   | 1998 |   |   |
| WPMT—Harrisburg, PA     |       |                | 41         |                               |       |       | 0.6        |                         |       |                 | 0.3        |                            |       | 43-UHF |   |   | FOX |   |   |   | 5 |   |   |   | 2007 | (7) |   |   | 1997 |   |   |
| WGNO—New Orleans, LA    |       |                | 54         |                               |       |       | 0.5        |                         |       |                 | 0.3        |                            |       | 26-UHF |   |   | ABC |   |   |   | 7 |   |   |   | 2005 | (6) |   |   | 1983 |   |   |
| WNOL—New Orleans, LA    |       |                | 54         |                               |       |       | —     |                         |       |                 | —     |                            |       | 38-UHF |   |   | CW |   |   |   | 7 |   |   |   | 2013 |   |   |   | 2000 |   |   |

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(1)       Source:Nielsen Station Index (DMA Market and Demographic Rank Report, September 2006).Ranking of markets is based on number of television households in DMA(Designated Market Area).

(2)       Source:Nielsen Station Index (Viewers in Profile Reports, 2006). Major over-the-airstations program for a broad, general audience in the market.

(3)       See“Governmental Regulation.”

(4)       See“Governmental Regulation” for discussion of the Federal CommunicationsCommission (“FCC”) television/newspaper cross-ownership rule.

(5)       Foundedby the Company.

(6)       TheWDCW-TV license expired October 2004, the renewal application filed in June 2004is pending; the WGNO-TV license expired June 2005, the renewal applicationfiled in February 2005 is pending; the WXIN-TV license expired August 2005,the renewal application filed in March 2005 is pending; the WXMI-TVlicense expired October 2005, the renewal application filed in May 2005is pending; the WGN-TV license expired December 2005, the renewalapplication filed in August 2005 is pending; the KWGN-TV license expired inApril 2006, the renewal application filed in December 2005 ispending; the KDAF-TV license expired August 2006, the renewal applicationfiled in March 2006 is pending; the KHCW-TV license expired August 2006,the renewal application filed in March 2006 is pending; the KTLA-TVlicense expired December 2006, the renewal application filed in August 2006is pending; the KTXL-TV license expired December 2006, the renewalapplication filed in August 2006 is 

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pending; and the KSWB-TV license expired December 2006, therenewal application filed in August 2006 is pending. The KCPQ-TV licenseexpired in February 2007, the renewal application filed in October 2006is pending; the KMYQ-TV license expired in February 2007, the renewalapplication filed in October 2006 is pending; the KRCW-TV license expiredin February 2007, the renewal application filed in October 2006 ispending; the WTIC-TV license expires in April 2007, the renewalapplication filed in December 2006 is pending; the WTXX-TV license expiresin April 2007, the renewal application filed in December 2006 ispending; and the WPIX-TV license expires in June 2007, the renewalapplication filed in February 2007 is pending.

(7)       TheWPHL-TV and WPMT-TV license renewal applications are due by April 1, 2007.

Programming emphasis at the Company’s stations isplaced on network-provided shows, syndicated series, feature motionpictures, local and regional sports coverage, news, and children’s programs.These stations acquire most of their programming from outside sources,including The CW Network, the FOX Network and MyNetworkTV, although asignificant amount is produced locally. Superstation WGN programming isdelivered by cable or satellite outside of the Chicago area and includessyndicated series, movies and first-run programming. Contracts for purchasedprogramming generally cover a period of one to five years, with payment alsotypically made over several years. The expense for amortization of televisionbroadcast rights in 2006 was $361 million, which represented approximately31% of total television operating revenues.

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Averageaudience share information for the Company’s television stations for the pastthree years is shown in the following table:

| ** **                            | ** ** | ** **      | ** ** | **Average Audience Share(1)**              | ** ** |
|---------------------------------------|------------|-----------------|------------|------------------------------------------------------|------------|
| ** **                            | ** ** | ** **      | ** ** | **Total Market  Year Ended December** | ** ** | **In-Market Stations(2)  Year Ended December** | ** ** |
| ** **                            | ** ** | **Affiliation** | ** ** | **2006**                                             | ** ** | **2005** | ** ** | **2004** | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
| WPIX—New York                    |       |            | CW         |                                                 |       |   | 4.4 | % |   |   | 5.1 | % |   |   | 5.8 | % |   | 11.1 | % | 12.4 | % | 13.6 | % |
| KTLA—Los Angeles                 |       |            | CW         |                                                 |       |   | 3.6 |   |   |   | 4.0 |   |   |   | 4.6 |   |   | 9.9 |   | 10.7 |   | 11.4 |   |
| WGN—Chicago                      |       |            | CW         |                                                 |       |   | 5.9 |   |   |   | 6.2 |   |   |   | 7.0 |   |   | 12.9 |   | 13.2 |   | 13.9 |   |
| WPHL—Philadelphia                |       |            | MNTV       |                                                 |       |   | 3.7 |   |   |   | 4.0 |   |   |   | 4.0 |   |   | 8.4 |   | 8.5 |   | 8.2 |   |
| KDAF—Dallas                      |       |            | CW         |                                                 |       |   | 4.3 |   |   |   | 4.3 |   |   |   | 6.4 |   |   | 9.2 |   | 9.1 |   | 12.4 |   |
| WDCW—Washington                  |       |            | CW         |                                                 |       |   | 3.2 |   |   |   | 4.2 |   |   |   | 4.4 |   |   | 8.2 |   | 9.5 |   | 10.1 |   |
| KHCW—Houston                     |       |            | CW         |                                                 |       |   | 4.5 |   |   |   | 4.8 |   |   |   | 5.1 |   |   | 9.9 |   | 9.8 |   | 10.3 |   |
| KCPQ—Seattle                     |       |            | FOX        |                                                 |       |   | 5.7 |   |   |   | 6.7 |   |   |   | 5.8 |   |   | 12.3 |   | 13.7 |   | 11.8 |   |
| KMYQ—Seattle                     |       |            | MNTV       |                                                 |       |   | 2.0 |   |   |   | 2.5 |   |   |   | 2.5 |   |   | 4.3 |   | 5.0 |   | 5.0 |   |
| WSFL—Miami                       |       |            | CW         |                                                 |       |   | 3.9 |   |   |   | 5.2 | (3) |   |   | 5.2 |   |   | 11.0 |   | 13.9 | (3) | 13.9 |   |
| KWGN—Denver                      |       |            | CW         |                                                 |       |   | 3.2 |   |   |   | 3.9 |   |   |   | 4.3 |   |   | 7.8 |   | 9.4 |   | 9.8 |   |
| KTXL—Sacramento                  |       |            | FOX        |                                                 |       |   | 5.2 |   |   |   | 5.7 |   |   |   | 5.8 |   |   | 10.3 |   | 13.3 |   | 13.2 |   |
| KPLR—St. Louis                   |       |            | CW         |                                                 |       |   | 5.5 |   |   |   | 5.0 |   |   |   | 5.8 |   |   | 10.4 |   | 9.5 |   | 10.8 |   |
| KRCW—Portland                    |       |            | CW         |                                                 |       |   | 3.3 |   |   |   | 3.7 |   |   |   | 4.0 |   |   | 7.2 |   | 7.9 |   | 8.2 |   |
| WTTV—Indianapolis                |       |            | CW         |                                                 |       |   | 2.7 |   |   |   | 3.7 |   |   |   | 3.8 |   |   | 5.9 |   | 7.8 |   | 7.7 |   |
| WXIN—Indianapolis                |       |            | FOX        |                                                 |       |   | 5.8 |   |   |   | 6.5 |   |   |   | 5.7 |   |   | 12.8 |   | 13.7 |   | 11.7 |   |
| KSWB—San Diego                   |       |            | CW         |                                                 |       |   | 2.6 |   |   |   | 3.1 |   |   |   | 3.8 |   |   | 6.8 |   | 7.7 |   | 9.2 |   |
| WTIC—Hartford                    |       |            | FOX        |                                                 |       |   | 5.4 |   |   |   | 6.3 |   |   |   | 5.8 |   |   | 12.6 |   | 14.5 |   | 13.1 |   |
| WTXX—Hartford                    |       |            | CW         |                                                 |       |   | 2.1 |   |   |   | 2.1 |   |   |   | 2.4 |   |   | 4.9 |   | 4.7 |   | 5.5 |   |
| WXMI—Grand Rapids                |       |            | FOX        |                                                 |       |   | 6.4 |   |   |   | 7.1 |   |   |   | 6.6 |   |   | 12.2 |   | 13.6 |   | 12.6 |   |
| WPMT—Harrisburg                  |       |            | FOX        |                                                 |       |   | 5.5 |   |   |   | 6.1 |   |   |   | 5.8 |   |   | 11.8 |   | 13.9 |   | 12.7 |   |
| WGNO—New Orleans                 |       |            | ABC        |                                                 |       |   | — | (4) |   |   | 4.6 | (3) |   |   | 4.6 |   |   | — | (4) | 9.8 | (3) | 9.5 |   |
| WNOL—New Orleans                 |       |            | CW         |                                                 |       |   | — | (4) |   |   | 3.8 | (3) |   |   | 4.9 |   |   | — | (4) | 8.2 | (3) | 10.0 |   |
| **23 Station Unweighted Average (5)** | ** ** | ** **      | ** ** | ** **                                           | ** ** | ** ** | **4.2** | ** ** | ** ** | ** ** | **4.7** | ** ** | ** ** | ** ** | **5.0** | ** ** | ** ** | **9.5** | ** ** | **10.4** | ** ** | **10.6** | ** ** |

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(1)       Representsthe estimated number of television households tuned to a specific station as apercent of total viewing households in a defined area. The percentages shownreflect the average Nielsen ratings shares for the February, May, July andNovember measurement periods for 7 a.m. to 1 a.m. daily.

(2)       Excludescable, satellite, public broadcasting, foreign language and minor independentchannels.

(3)       Nielsendid not release November 2005 data for WSFL-TV, WGNO-TV and WNOL-TV as aresult of hurricanes in these areas. The 2005 shares for these markets reflectthe average of ratings for the February, May and July measurementperiods only.

(4)       Nielsendid not release 2006 ratings data for WGNO-TV and WNOL-TV as a result ofHurricane Katrina.

(5)       2006unweighted station average is for 21 stations rather than 23, since New Orleanswas not measured in 2006.

Average audience sharesare shown on two bases: total market, which includes all channels, andin-market stations, which includes only the major over-the-air stations.Average in-market shares are a more relevant benchmark to determine thestations’ performance in their respective markets as they compare the stations’performance to their primary programming and sales competition. In 2006, theaverage total market share and the average in-market share for the 23-stationgroup declined versus 2005. Ratings for stations in the larger marketscontinued to be affected by the introduction of Nielsen’s Local People Meters (“LPMs”).LPMs have tended to reduce the overall share of broadcast television ascompared to cable television and, within the broadcast television universe,disadvantage stations like Tribune’s that target younger audiences. Thestations were also affected by some audience erosion due to a lack of major newsyndicated programming and by lower WB Network prime-time ratings. The WBceased operations in 

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September 2006.Fourteen of Tribune’s WB stations became affiliates of The CW network, a jointventure between CBS Corporation and Warner Bros. Entertainment. Two Tribune WBstations became affiliates of MyNetworkTV, a new television network owned by FOXTelevision Stations Network Inc. and Twentieth Century Television.

***Radio/Entertainment***

In2006, radio/entertainment operations contributed 17% of the broadcasting andentertainment segment’s operating revenues. WGN-AM, Chicago, is the only radiostation owned by the Company. Selected information for WGN-AM, Chicago, isshown in the following table:

| ** **       | ** ** | ** **                      | **Format** | ** ** | ** ** | **Frequency** | ** ** | **National  Market  Rank(1)** | ** ** | **Number of  Operating  Stations in  Market(2)** | ** ** | **Audience  Share(3)** | ** ** |
|------------------|------------|---------------------------------|------------|------------|------------|---------------|------------|-------------------------------|------------|------------------------------------------------------------|------------|------------------------|------------|
| WGN-AM,  Chicago |       | Personality/Infotainment/Sports |       |       | 720-AM     |          |       |                          | 3          |                                                       |       |                   | 39         |   |   |   | 5.5 | % |   |
|                  |            |                                 |            |            |            |               |            |                               |            |                                                            |            |                        |            |  |  |  |  |  |  |  |  |

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(1)       Source:Radio markets ranked by Arbitron Metro Survey Area, Arbitron Company 2006.

(2)       Source:Arbitron Company 2006.

(3)       Source:Average of Winter 2005 and Spring, Summer and Fall 2006 Arbitron shares forpersons 12 years old and over, 6 a.m. to midnight daily during theperiod measured.

Entertainment includes Tribune Entertainment Company (“TribuneEntertainment”) and the Chicago Cubs baseball team. The Chicago Cubs wereacquired in 1981. Cubs games are broadcast on WGN-TV and WGN-AM. TribuneEntertainment is a distributor of programming in the United States syndicatedtelevision, cable television and ancillary markets. Tribune Entertainmentdistributes its own programming together with programming licensed from thirdparties.

Tribune Entertainment is party to a variety ofdistribution, marketing, and advertiser sales relationships with majorsuppliers such as DreamWorks SKG for the exclusive domestic syndication and adsales of their film library, FremantleMedia, Hearst Entertainment, RigelEntertainment, Telco Productions, Debmar-Mercury Entertainment, DICEntertainment, Carlton America, and New Line Television. These relationshipscomprise over 400 television and theatrical motion pictures and more than 1,300episodes of various television series and specials including “South Park,” “FamilyFeud,” “Soul Train,” “The Soul Train Music Awards,” and “Ron Hazelton’s HouseCalls.” Tribune Entertainment also distributes its television seriesproductions of “Andromeda,” “Earth Final Conflict,” “Beastmaster,” “Mutant X,”and “Nightman.”

In the fall of 2006, the first of the DreamWorks SKGtitles became available. In addition, Tribune Entertainment launched “AmericanIdol Rewind,” in domestic syndication. The weekly one-hour series, includesoriginal, never-before-seen episodes of the highly successful “American Idol”franchise.

Tribune California Properties,a subsidiary of Tribune Entertainment, owns and maintains the 10.5-acrestudio production lot in Hollywood. Tribune Studios, also a subsidiary ofTribune Entertainment, manages the site that includes facilities rental of ninestate-of-the art digital sound stages and associated production office space.

**Investments**

The Company has investments in several public andprivate companies. See Note 8 to the consolidated financial statements inItem 8 for further discussion of the Company’s cost and equity methodinvestments.

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The Company’s principalequity method investments currently include CareerBuilder, Classified Ventures,TV Food Network, Comcast SportsNet Chicago, ShopLocal, Topix.net, TMCT andTMCT II. CareerBuilder, an online recruiting company formed in 2000, isowned 42.5 % by the Company, 42.5% by Gannett Co., Inc. and 15% by TheMcClatchy Co., Inc. Classified Ventures is a network of automotive andreal estate classified advertising websites. TV Food Network is a 24-hourcable/satellite television network focusing on food and entertaining. ComcastSportsNet Chicago is a 24-hour cable/satellite television network, whichbegan programming in the fall of 2004, focusing on Chicago sports teams.ShopLocal transforms traditionally print-based retail promotions intosearch-based interactive formats. The Company, Gannett Co., Inc. andMcClatchy Co., each own a 42.5%, 42.5% and 15% interest in ShopLocal,respectively. Topix.net is an online news and information aggregation websitethat continuously monitors breaking news from over 10,000 online sources andcategorizes daily news content into over 300,000 topics, 24 hours a day. The ownership of Topix, LLC is approximately33.7% for both the Company and Gannett Co., Inc., 11.9% for the McClatchyCo. and 20.7% for management of Topix, LLC. On Sept. 21, 2006, theCompany and the Chandler Trusts entered into agreements to restructure TMCT andTMCT II. As a result, the Company’s interests in each of TMCT and TMCT II werereduced to approximately 5%. The Company’s investments in TMCT and TMCT IIare further discussed in Note 7 to the consolidated financial statementsin Item 8.

**Non-Operating Items**

The Company reportedseveral non-operating items in 2006, 2005 and 2004, which included gains andlosses resulting from sales of investments, changes in the fair values of theCompany’s PHONES derivatives and related Time Warner investment, the TMCT andTMCT II restructuring, the early retirement of debt, write-downs ofinvestments, and income tax adjustments, including additional tax expenseassociated with the Matthew Bender and Mosby tax liability. These non-operatingitems are further discussed in Note 2 to the consolidated financialstatements in Item 8.

**GovernmentalRegulation**

Various aspects of the Company’s operations aresubject to regulation by governmental authorities in the United States.

The Company’s television and radio broadcastingoperations are subject to FCC jurisdiction under the Communications Act of1934, as amended. FCC rules, among other things, govern the term, renewal andtransfer of radio and television broadcasting licenses, and limitconcentrations of broadcasting control inconsistent with the public interest.Federal law also regulates the rates charged for political advertising and thequantity of advertising within children’s programs. The Company is permitted toown 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 byvirtue of a temporary waiver of the television/newspaper cross-ownershiprule.

Because the Times Mirror acquisition in 2000 did notinvolve the transfer of any broadcast station licenses, FCC approval was notrequired to complete the transaction. Under the television/newspaper cross-ownershiprule in effect at the time of the merger, companies were generallyprohibited from owning both a newspaper and a broadcast license in the samemarket. However, it was also the FCC’s policy to permit newly created television/newspapercombinations to be held until the next broadcast license renewal. As such,license renewals for three Tribune television properties—KTLA-TV, Los Angeles(renewal in 2006), WPIX-TV, New York (renewal in 2007) and WTIC-TV, Hartford(renewal in 2007)—are affected by the Times Mirror acquisition under the oldFCC media ownership rules. In June 2003, the FCC adopted new mediaownership rules, including a new television/newspaper cross-ownershiprule. The new rule would eliminate the cross-ownership prohibitionentirely in markets with nine or more television stations. Under this rule, theCompany would be permitted to retain its newspaper and television 

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operations in each of thefive markets where it owns both newspaper and television operations—New York,Los Angeles, Chicago, South Florida and Hartford.

In September 2003, the United States Court ofAppeals for the Third Circuit stayed the effectiveness of the new mediaownership rules pending the outcome of appeals by advocacy groupschallenging the new rules. In June 2004, the Third Circuit remanded thenew rules to the FCC for further proceedings while keeping the stay ineffect. In January 2005, the Company and other media companies filed ajoint petition seeking United States Supreme Court review of the June 2004Third Circuit remand. In June 2005, the Supreme Court declined to reviewthe petition, without addressing the Constitutional arguments raised andwithout foreclosing additional appeals if the Company’s interests are notadequately addressed as part of the FCC’s remand proceeding. In June 2006,the FCC adopted a Further Notice of Proposed Rulemaking seeking comment on theissues raised by the Third Circuit in its stay and remand, including thoserelating to the FCC’s new television/newspaper cross-ownership rule. In October 2006,the Company filed comments in response to the FCC’s Further Notice of ProposedRulemaking. While the Company remains optimistic that the cross-ownership banwill ultimately be loosened in major markets, it cannot predict with certaintythe outcome of the FCC’s remand proceeding. Accordingly, in its FCC license renewalapplications, the Company has sought and expects to receive waivers to allowcontinued ownership of both the *Los Angeles Times*and KTLA-TV, both *Hartford Courant* andWTIC-TV/WTXX-TV and both *Newsday* andWPIX-TV pending the outcome of the FCC proceeding. The Company has atemporary waiver, pending the outcome of the same rulemaking proceeding, inconnection with its 1997 acquisition of WSFL-TV, Miami, which is consideredpart of the market served by the *SouthFlorida Sun-Sentinel*, published in Fort Lauderdale.

Congress removed national limits on the number ofbroadcast stations a licensee may own in 1996. However, federal law continuesto limit the number of radio and television stations a single owner may own ina local market, and caps the percentage of the national television audiencethat may be reached by a licensee’s television stations in the aggregate at39%. The local ownership rules allow, under certain conditions, commonownership of two television stations and certain radio/television combinations.In 2001, the Company acquired television station WTXX-TV, Hartford, pursuant toa so-called “failing station” waiver allowing common ownership of WTIC-TV andWTXX-TV in the same market.

Television and radio broadcasting licenses are subjectto renewal by the FCC, at which time they may be subject to petitions to denythe license renewal applications. At Dec. 31, 2006, the Company had FCC authorization to operate 23television stations and one AM radio station. At Dec. 31, 2006, theCompany had 16 television license renewal applications pending before the FCC(WDCW-TV, Washington, D.C., WGNO-TV, New Orleans, WXIN-TV, Indianapolis,WXMI-TV, Grand Rapids, WGN-TV, Chicago, KWGN-TV, Denver, KDAF-TV, Dallas,KHCW-TV, Houston, KTLA-TV, Los Angeles, KTXL-TV, Sacramento, KSWB-TV, SanDiego, KRCW-TV, Portland, KCPQ-TV, KMYQ-TV, Seattle/Tacoma, and WTIC-TV andWTXX-TV, Hartford/Waterbury). The Company expects the FCC to renew all of thelicenses.

The FCC has approved technical standards and channelassignments for digital television (“DTV”) service. DTV permits broadcasters totransmit video images with higher resolution than existing analog signals.Operators of full-power television stations have each been assigned a secondchannel for DTV while they continue analog broadcasts on the original channel.After the transition is complete, broadcasters will be required to return oneof the two channels to the FCC and transmit exclusively in digital format. Bylaw, the transition to DTV was to occur by Dec. 31, 2006, subject toextension if 80% or more of U.S. households did not have a DTV receiver, abenchmark that was not met. In December 2005, the Senate passed a billthat would, among other things, extend the digital transition deadline to Feb. 17,2009. Conversion to digital transmission is requiring all televisionbroadcasters, including those owned by the Company, to invest in digitalequipment and facilities. At Dec. 31, 2006, all of the Company’stelevision stations were DTV compliant.

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The FCC has not yet issued final DTV channelassignments for operation after the transition from analog has ended, and hasnot resolved a number of issues relating to the operation of DTV stations.These issues include the obligations of DTV stations to broadcast children’sprogramming as well as additional “public interest” obligations that may beimposed on broadcasters’ use of digital spectrum.

From time to time, the FCCrevises existing regulations and policies in ways that could affect the Company’sbroadcasting operations. In addition, Congress from time to time considers andadopts substantive amendments to the governing communications legislation. TheCompany cannot predict what regulations or legislation may be proposed orfinally enacted or what effect, if any, such regulations or legislation couldhave on the Company’s broadcasting operations.

**Employees**

The average number of full-time equivalent employeesof the Company in 2006 was 21,000, approximately 1,200 less than the averagefor 2005, primarily due to the elimination of approximately 450 positions atvarious times during 2006 and approximately 900 positions near the end of 2005,primarily in the publishing segment.

During 2006, the Company’s publishing segment employedan average of approximately 17,800 full-time equivalent employees. About 13% ofthese employees were represented by unions covered under 19 labor contracts.Contracts with unionized employees of the publishing segment expire at varioustimes through April 2012.

The broadcasting andentertainment segment had an average of approximately 3,100 full-timeequivalent employees in 2006. Approximately 19% of these employees wererepresented by unions covered under 20 labor contracts. Contracts withunionized employees of the broadcasting and entertainment segment expire atvarious times through December 2009.

**Executive Officersof the Company**

Information with respectto the executive officers of the Company as of Feb. 26, 2007, is set forthbelow. Their ages are indicated in parentheses. The descriptions of thebusiness experience of these individuals include the principal positions heldby them since February 2002. Unless otherwise indicated, all references topositions are to officers of the Company.

Dennis J. FitzSimons (56)Chairman (since January 2004), Chief Executive Officer (since January 2003)and President (since July 2001); Chief Operating Officer from July 2001until December 2002; Executive Vice President from January 2000 untilJuly 2001; President of Tribune Broadcasting Company* from May 1997until January 2003.

Donald C. Grenesko (58)Senior Vice President/Finance and Administration.

Crane H. Kenney (44)Senior Vice President, General Counsel and Secretary.

Timothy J. Landon (44)President of Tribune Interactive, Inc.* since March 2004; Presidentof Tribune Classified* from June 2000 until March 2004.

Thomas D. Leach (46)Senior Vice President/Development since February 2005; Vice President/Developmentfrom 

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February 2004 until February 2005; VicePresident and Chief Financial Officer of Tribune Broadcasting Company* from March 2001until January 2004.

Luis E. Lewin (58)Senior Vice President/Human Resources.

R. Mark Mallory (56)Vice President and Controller.

Ruthellyn Musil (55)Senior Vice President/Corporate Relations since February 2004; VicePresident/Corporate Relations until February 2004.

John E. Reardon (53)President of Tribune Broadcasting Company* since November 2005; VicePresident of Tribune Broadcasting Company* from March 2004 until November 2005;Vice President and General Manager of KTLA-TV, Los Angeles* until March 2004.

Scott C. Smith (56)President of Tribune Publishing Company* since January 2005 and Publisherof Chicago Tribune Company* since October 2006; Chief Operating Officer ofTribune Publishing Company* from November 2004 until January 2005;President of Chicago Tribune Company* until November 2004.

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*               Asubsidiary or a division of the Company

**AvailableInformation**

The Company maintains an Internet website atwww.tribune.com where the Company’s Annual Report on Form 10-K,Quarterly Reports on Form 10-Q, Current Reports on Form 8-Kand all amendments to those reports are available without charge, as soon asreasonably practicable following the time that they are filed with or furnishedto the Securities and Exchange Commission.

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**ITEM 1A.   RISKFACTORS.**

The foregoing businessdiscussion and the other information included in this Form 10-Kshould be read in conjunction with the following risks, trends anduncertainties, any of which, either individually or in the aggregate, could materiallyand adversely affect our business, operating results or financial condition.

**Advertising demand will continue to be impacted bychanges in economic conditions and fragmentation of the media landscape**

Advertising revenue is the primary source of revenuefor our publishing and broadcasting businesses. National and local economicconditions, particularly in major metropolitan markets, affect the levels ofretail, national and classified newspaper advertising revenue, as well astelevision advertising revenue. Changes in Gross Domestic Product, consumerspending, auto sales, housing sales, unemployment rates, job creation andcirculation levels and rates all impact demand for advertising. Consolidationacross various industries, particularly large department store andtelecommunications companies, may also reduce our overall advertising revenue.

Competition from other media, including othermetropolitan, suburban and national newspapers, broadcasters, cable systems andnetworks, satellite television and radio, websites, magazines, direct marketingand solo and shared mail programs, affects our ability to retain advertisingclients and raise rates. In recent years, Internet sites devoted torecruitment, automobile and real estate have become significant competitors ofour newspapers and websites for classified advertising. While we have investedin successful Internet ventures such as CareerBuilder and Classified Venturesto capture some of the advertising dollars that have migrated online, retainingour historical share of classified advertising revenues remains a challenge.

Seasonal variations in consumer spending cause ourquarterly advertising revenues to fluctuate. Second and fourth quarteradvertising revenues are typically higher than first and third quarteradvertising revenues, reflecting the slower economic activity in the winter andsummer and the stronger fourth quarter holiday season.

In broadcasting, theproliferation of cable and satellite channels, advances in mobile and wirelesstechnology, the migration of television audiences to the Internet and theviewing public’s increased control over the manner and timing of their mediaconsumption through personal video recording devices, have resulted in greaterfragmentation of the television viewing audience and a more difficult salesenvironment.

**Circulation andaudience share may decline as consumers migrate to other media alternatives**

Competition for newspaper advertising is based onreader demographics, price, service, advertiser results, and circulation andreadership levels, while competition for circulation is based upon the contentof the newspaper, service and price. Competition for television advertising isbased on audience share and ratings information, audience demographics andprice.

The National Do Not Call Registry has impacted the waynewspapers sell home-delivery circulation, particularly for the largernewspapers that historically have relied on telemarketing. Similarly, Nielsen’sLocal People Meters, which capture viewership data in a different manner thanhistorical Nielsen viewership data collection methods, have tended to reducethe overall share of broadcast television compared to cable television and,within the broadcast television universe, disadvantage stations like ours that targetyounger audiences.

Both advertising andcirculation revenues are being affected by consumer trends, including decliningnewspaper buying by young people and the migration to other available forms ofmedia for news. In order to address declining circulation in certain markets,we may increase marketing designed to retain our 

21

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existingsubscriber base and continue to introduce niche publications targeted atcommuters and young adults. We may also increase marketing efforts to drivetraffic to our proprietary websites.

**Changes in theregulatory landscape could affect our business operations and asset mix**

Various aspects of our operations are subject toregulation by governmental authorities in the United States. Changes in thecurrent regulatory environment could result in increased operating costs ordivestitures of several of our properties.

Our television and radio broadcasting operations aresubject to FCC jurisdiction under the Communications Act of 1934, as amended.FCC rules, among other things, govern the term, renewal and transfer of radioand television broadcasting licenses and limit concentrations of broadcastingcontrol inconsistent with the public interest. Federal law also regulates therates charged for both political advertising and the quantity of advertisingwithin children’s programs.

From time to time, the FCCrevises existing regulations and policies in ways that could affect ourbroadcasting operations. In addition, Congress from time to time considers andadopts substantive amendments to governing communications legislation. Wecannot predict what regulations or legislation may be proposed or finallyenacted or what effect, if any, such regulations or legislation could have onour broadcasting operations. See “Item 1. Business—Governmental Regulation”for a discussion of the pending FCC review of the television/newspaper cross-ownershiprule and the effect the outcome could have on our business.

**The availabilityand cost of quality syndicated programming may impact television ratings**

The cost of syndicatedprogramming represents a significant portion of television operating expenses.Programming emphasis at our stations is placed on network-providedprogramming, syndicated series, feature motion pictures, local and regionalsports coverage, news, and children’s programs. Most of our stations’programming is acquired from outside sources, including the networks with whichour stations are affiliated, and some is produced locally or supplied byTribune Entertainment Company. Syndicated programming costs are impactedlargely by market factors, including demand from other stations or cablechannels within the market. Availability of syndicated programming depends onthe production of compelling programming and the willingness of studios to offerthe programming to unaffiliated buyers. Our inability to continue to acquire orproduce affordable programming for our stations could adversely affectoperating results or our financial condition.

**Events beyond ourcontrol may result in unexpected adverse operating results**

Our results could beaffected in various ways by global or domestic events beyond our control, suchas wars, political unrest, acts of terrorism, and natural disasters. Suchevents can quickly result in significant declines in advertising revenues andsignificant increases in newsgathering costs. Coverage of the war in Iraq andHurricane Katrina are two examples where newsgathering costs increased and, inthe case of Hurricane Katrina, revenues dropped off significantly at our twoNew Orleans television stations.

**Newsprint pricesmay continue to be volatile and difficult to predict and control**

Newsprint is one of thelargest expenses of our publishing units. The price of newsprint hashistorically been volatile and the consolidation of North American newsprintmills over the years has reduced the number of suppliers. We have historicallybeen able to realize favorable newsprint pricing by virtue of our company-widevolume and a long-term contract with a significant supplier. Failure to maintainour current consumption levels, further supplier consolidation or the inabilityto maintain our existing relationships with our newsprint suppliers couldadversely impact newsprint prices in the future.

22

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**Wehave certain risks relating to our existing credit agreements.**

***In June 2006, the Company entered into afive-year credit agreement and a 364-day bridge credit agreement. The five-yearcredit agreement provides for a $1.5 billion unsecured term facility and a$750 million unsecured revolving facility. The 364-day bridge creditagreement provided for a $2.15 billion unsecured bridge facility. As ofDec. 31, 2006, the Company had outstanding borrowings of $1.5 billionand $1.3 billion under the term facility and the bridge facility,respectively, and the Company had no borrowings under the revolving facility.For additional information regarding these credit agreements, see Item 7,“Management’s Discussion and Analysis of Financial Condition and Results ofOperations—Significant Events—Credit Agreements.”***

***Interest rates for our borrowings underthese credit agreements are affected by our credit ratings. Increased debtlevels and/or decreased earnings could result in downgrades in these ratings,which could increase our borrowing costs under our existing credit agreementsand could raise our other borrowing rates. In addition, borrowings under thesecredit agreements bear interest at variable rates based on LIBOR plus a spreaddetermined on the basis of the Company’s credit ratings. Accordingly, changes inLIBOR may adversely affect our cost of borrowings. For additional discussion ofinterest rate risk, see Part II, Item 7A, “Quantitative andQualitative Disclosure About Market Risk.” Further, the Company intends torefinance borrowings under the bridge facility prior to maturity. Refinancingthese borrowings on similar financial terms will be contingent upon a number offactors, including the outcome of the Company’s exploration of strategicalternatives, financial market conditions and the Company’s credit ratings.***

**Changes inaccounting standards can significantly impact reported earnings and operatingresults**

Generally acceptedaccounting principles and accompanying pronouncements and implementationguidelines for many aspects of our business, including those related tointangible assets, pensions, income taxes, derivatives, share-basedcompensation, and broadcast rights, are complex and involve significantjudgments. Changes in these rules or their interpretation couldsignificantly change our reported earnings and operating results. See “Item 7.Management’s Discussion and Analysis of Financial Condition and Results ofOperations—Critical Accounting Policies and Estimates” and Note 1 to theconsolidated financial statements in “Item 8. Financial Statements andSupplementary Data.”

**Adverse results from litigation or governmentalinvestigations can impact our business practices and operating results**

From time to time, Tribuneand its subsidiaries are parties to litigation and regulatory, environmentaland other proceedings with governmental authorities and administrativeagencies. Adverse outcomes in lawsuits or investigations could result insignificant monetary damages or injunctive relief that could adversely affectour operating results or financial condition as well as our ability to conductour businesses as they are presently being conducted.

**We could be facedwith additional tax liabilities**

We are subject to bothfederal and state income taxes and are regularly audited by federal and statetaxing authorities. Significant judgment is required in evaluating our taxpositions and in establishing appropriate reserves. We analyze our taxpositions and reserves on an ongoing basis and make adjustments when warrantedbased on changes in facts and circumstances. While we believe our tax positionsand reserves are reasonable, the resolution of our tax issues are unpredictableand could negatively impact our effective tax rate, net income or cash flowsfor the period or periods in question.

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**Labor strikes, lock-outs and protractednegotiations can lead to business interruptions and increased operating costs**

Union employees currentlycomprise about 14% of our workforce. We are required to negotiate collectivebargaining agreements across our business units on an ongoing basis.Complications in labor negotiations can lead to work slowdowns or otherbusiness interruptions and greater overall employee costs.

**Acquisitions,investments and divestitures pose inherent financial and other risks andchallenges**

We continuously evaluateour businesses and make strategic acquisitions and investments, eitherindividually or with partners, and divestitures as part of our strategic plan.These transactions involve challenges and risks in negotiation, execution,valuation and integration. Moreover, competition for certain types ofacquisitions is significant, particularly in the Interactive space. Even ifsuccessfully negotiated, closed and integrated, certain acquisitions orinvestments may prove not to advance our business strategy and may fall shortof expected return on investment targets. In certain of our investments, wetake a minority position in a company with limited voting rights and aninability to exert absolute control over the entity.

**The effects andresults of our exploration of strategic alternatives are uncertain**

On Sept. 21, 2006, weannounced that our board of directors established an independent specialcommittee to oversee management’s exploration of alternatives for creatingadditional value for shareholders. There can be no assurance that theexploration of alternatives will result in a transaction. Further, it is notcertain what impact any particular alternative, or lack thereof, may have onour stock price, credit ratings, operating results, financial condition orbusiness prospects.

**ITEM 1B.   UNRESOLVEDSTAFF COMMENTS.**

None.

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**ITEM 2.   PROPERTIES.**

Thecorporate headquarters of the Company are located at 435 North Michigan Avenue,Chicago, Illinois. The general character, location and approximate size of theprincipal physical properties used by the Company on Dec. 31, 2006 are listedbelow. In total, the Company owns or leases transmitter sites, parking lots andother land aggregating approximately 1,100 acres in 92 separate locations. Inaddition to those properties listed below, the Company owns or leases anaggregate of approximately 2,732,000 square feet of office and production spacein 289 locations. The Company also owns Wrigley Field, the 41,118-seatstadium used by the Chicago Cubs baseball team. The Company considers itsvarious properties to be in good condition and suitable for the purposes forwhich they are used.

| ** **                                                                         | ** ** | **Approximate Area   in Square Feet** | ** ** |
|------------------------------------------------------------------------------------|------------|------------------------------------------------------|------------|
| **General Character of Property**                                   | ** ** | ** **                                           | ** ** | **Owned** | ** ** | **Leased(1)** | ** ** |
| Publishing:                                                                        |       |                                                 |       |   |   |
| Printing plants,  business and editorial offices, and warehouse  space located in: |       |                                                 |       |   |   |
| Los Angeles, CA                                                                    |       | 656,000                                              |       | 1,353,000 |   |
| Chicago, IL                                                                        |       | 1,583,000                                            | (2)        | 89,000 |   |
| Melville, NY                                                                       |       | —                                               |       | 719,000 |   |
| Baltimore, MD                                                                      |       | 10,000                                               |       | 875,000 |   |
| Hartford, CT                                                                       |       | 173,000                                              |       | 337,000 |   |
| Orlando, FL                                                                        |       | 374,000                                              |       | 81,000 |   |
| Deerfield Beach, FL                                                                |       | 320,000                                              |       | 44,000 |   |
| Costa Mesa, CA                                                                     |       | 339,000                                              |       | 47,000 |   |
| Irwindale, CA                                                                      |       | —                                               |       | 325,000 |   |
| Allentown, PA                                                                      |       | 222,000                                              |       | — |   |
| Chatsworth, CA                                                                     |       | —                                               |       | 52,000 |   |
| Newport News, VA                                                                   |       | 251,000                                              |       | 22,000 |   |
| Northlake, IL                                                                      |       | —                                               |       | 246,000 |   |
| Fort Lauderdale, FL                                                                |       | —                                               |       | 163,000 |   |
| Oakbrook, IL                                                                       |       | —                                               |       | 99,000 |   |
| Stamford, CT                                                                       |       | 85,000                                               |       | — |   |
| Miller Place, NY                                                                   |       | 85,000                                               |       | — |   |
| Glens Falls, NY                                                                    |       | —                                               |       | 59,000 |   |
| Bel Air, MD                                                                        |       | 52,000                                               |       | — |   |
| Columbia, MD                                                                       |       | 29,000                                               |       | 14,000 |   |
| Greenwich, CT                                                                      |       | 24,000                                               |       | — |   |
| Washington, DC                                                                     |       | —                                               |       | 41,000 |   |
| Williamsburg, VA                                                                   |       | 25,000                                               |       | 3,000 |   |
| Broadcasting and  entertainment:                                                   |       |                                                 |       |   |   |
| Business offices,  studios and transmitters located in:                            |       |                                                 |       |   |   |
| Los Angeles, CA                                                                    |       | 309,000                                              |       | 65,000 |   |
| Chicago, IL                                                                        |       | 132,000                                              |       | — |   |
| New York, NY                                                                       |       | —                                               |       | 121,000 |   |
| Indianapolis, IN                                                                   |       | 79,000                                               |       | — |   |
| Seattle, WA                                                                        |       | 68,000                                               |       | — |   |
| Greenwood Village, CO                                                              |       | 42,000                                               |       | — |   |
| Maryland Heights, MO                                                               |       | —                                               |       | 39,000 |   |
| Houston, TX                                                                        |       | 35,000                                               |       | — |   |
| Dallas, TX                                                                         |       | 33,000                                               |       | — |   |
|                                                                                    |            |                                                      |            |  |  |  |  |

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| San Diego, CA    |   | — |   | 26,000 |   |
|------------------|--------|--------|--------|--------|--------|
| Hartford, CT     |   | — |   | 22,000 |   |
| Philadelphia, PA |   | 21,000 |   | 4,000  |   |
| Sacramento, CA   |   | 24,000 |   | — |   |
| Grand Rapids, MI |   | 21,000 |   | — |   |
| Hollywood, FL    |   | 20,000 |   | — |   |
| York, PA         |   | 20,000 |   | — |   |
| Beaverton, OR    |   | 14,000 |   | — |   |
| Washington, DC   |   | — |   | 13,000 |   |

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(1)       TheCompany has financed eight real properties, constituting 2,989,000 square feetfrom TMCT. This property financing arrangement was amended by Tribune and TMCTon Sept. 22, 2006, to extend the properties’ current fixed rental rate through Aug. 7,2021. Under the terms of the amended financing agreement, the Company wasgranted an accelerated option to acquire the eight properties during the monthof January 2008 for $175 million. The Company was also granted an optionto acquire the leased properties from Feb. 8, 2008 to three months priorto the expiration of the amended lease at the higher of the fair market valueor $195 million. See Note 7 to the consolidated financial statements in Item 8for further discussion.

(2)       Includes Tribune Tower, anapproximately 630,000 square foot office building in downtown Chicago, andFreedom Center, the approximately 943,000 square foot production center of theChicago Tribune. Tribune Tower houses the Company’s corporate headquarters, theChicago Tribune’s business and editorial offices, offices of various subsidiarycompanies and approximately 41,000 square feet of space leased to unaffiliatedtenants. Freedom Center houses the Chicago Tribune’s printing, packaging anddistribution operations.

**ITEM 3.   LEGALPROCEEDINGS.**

The Company and its subsidiaries are defendants fromtime 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 asparties in various regulatory, environmental and other proceedings withgovernmental authorities and administrative agencies.

In February 2004, a purported class actionlawsuit was filed in New York Federal Court by certain advertisers of *Newsday* and *Hoy*, New York, alleging that they were overcharged foradvertising as a result of inflated circulation numbers at these twopublications. The purported class action also alleges that entities that paid a*Newsday* subsidiary to deliveradvertising flyers were overcharged. In July 2004, another lawsuit wasfiled in New York Federal Court by certain advertisers of *Newsday* alleging damages resulting frominflated *Newsday* circulationnumbers as well as federal and state antitrust violations. The Company isvigorously defending these suits.

On June 17, 2004, the Company publicly disclosedthat it would reduce its reported circulation for both *Newsday* and *Hoy*, New York for the 12-month period endingSept. 30, 2003 and the six-month period ending March 31, 2004. Thecirculation adjustments were the result of a review of reported circulation at *Newsday* and *Hoy*, New York, conducted by the Company’s internal auditstaff and the Audit Bureau of Circulations (“ABC”). Subsequent to the June 17th disclosure, the Company continued its internalreview and found additional misstatements for these time periods, as well asmisstatements that impacted the 12-month period ending Sept. 30,2002. On Sept. 10, 2004, the Company announced additional revisions to thecirculation figures for *Newsday*and *Hoy*, New York, for the 12-monthperiod ending Sept. 30, 2003 and the six-month period ending March 31,2004.

As a result of misstatements of reported circulationat *Newsday* and *Hoy*, New York, the Company recorded atotal pretax charge of $90 million in 2004 as its estimate of the probablecost to settle with advertisers. The Company will continue to evaluate theadequacy of this charge on an ongoing basis (see Note 4 to theconsolidated financial statements in Item 8).

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In addition to the advertiser lawsuits, several classaction and shareholder derivative suits were filed against the Company andcertain of its current and former directors and officers as a result of thecirculation misstatements at *Newsday*and *Hoy*, New York. These suitsalleged breaches of fiduciary duties and other managerial and director failingsunder Delaware law, the federal securities laws and ERISA. The consolidatedshareholder derivative suit filed in Illinois state court in Chicago wasdismissed with prejudice on March 10, 2006, and the dismissal is currentlybeing appealed to the Illinois State Court of Appeals. The consolidatedsecurities class action lawsuit and the consolidated ERISA class action lawsuitfiled in Federal District Court in Chicago were both dismissed with prejudiceon Sept. 29, 2006, and the dismissals are currently being appealed to theUnited States Court of Appeals for the Seventh Circuit. The Company believesthese suits are without merit and will continue to vigorously defend them.

On May 30, 2006, the Securities and ExchangeCommission (“SEC”) concluded its inquiry into circulation practices at *Newsday*and *Hoy*, New York. In closing its inquiry, the SEC ordered theCompany to cease and desist from violating statutory provisions related to itsrecord keeping and reporting. No fines or other sanctions were levied againstthe Company. The Company consented to the order without admitting or denyingany of the Commission’s findings. The SEC acknowledged the prompt internalinvestigation and remedial acts undertaken by the Company and the cooperationthe Company afforded the Commission’s staff throughout its investigation.

The United States Attorney for the Eastern District ofNew York and the Nassau County District Attorney are continuing their inquiriesinto the circulation practices at *Newsday*and *Hoy*, New York. To date, nineformer employees and contractors of *Newsday*and *Hoy,*New York, have pleadedguilty to various criminal charges in connection with the fraudulentcirculation practices uncovered by the Company. The Company is cooperatingfully with these inquiries. At the date of this report, the Company cannotpredict with certainty the outcome of these inquiries.

In March 1997, the Company acquired RenaissanceCommunications Corp., a publicly traded company that owned six televisionstations, for $1.1 billion in cash. The stations acquired were KDAF-TV,Dallas, WSFL-TV, Miami, KTXL-TV, Sacramento, WXIN-TV, Indianapolis, WTIC-TV,Hartford, and WPMT-TV, Harrisburg. The FCC granted a 12-month waiver ofits rule prohibiting television/newspaper cross-ownership in thesame market, which relates to the WSFL-TV, Miami television station and the *South Florida Sun-Sentinel* newspaper. In March 1998,the FCC granted the Company a waiver extension to allow continued ownership ofboth WSFL-TV, Miami, and the *South FloridaSun-Sentinel* newspaper until the FCC concludes its review of thetelevision/newspaper cross-ownership rule. As discussed below, the newtelevision/newspaper cross-ownership rule adopted by the FCC in June 2003permits Tribune to own the newspapers and broadcast licenses in all of itscurrent cross-owned markets, including South Florida. However, also asdiscussed below, the new television/newspaper cross-ownership rule hasbeen remanded to the FCC for further proceedings. Depending on the outcome ofthe FCC proceedings, the Company may require a waiver to allow continuedownership of both WSFL-TV, Miami, and the *SouthFlorida Sun-Sentinel*.

In March 2000, as a result of the Times Mirrormerger, the Company acquired the *Los AngelesTimes*, *Newsday*, *The Sun*, *HartfordCourant*, *The Morning Call*,*The Advocate*, *Greenwich Time* and several smallernewspapers. Because the Times Mirror acquisition did not involve the transferof any broadcast station licenses, approval of the FCC was not required tocomplete the transaction. Under the FCC’s television/newspaper cross-ownershiprule in effect at the time of the merger, companies were generallyprohibited from owning both a newspaper and a broadcast license in the samemarket. However, it was also the FCC’s policy to permit newly createdtelevision/newspaper combinations to be held until the next broadcast licenserenewal. As such, license renewals for three Tribune television properties—KTLA-TV,Los Angeles (renewal in 2006), WPIX-TV, New York (renewal in 2007) and WTIC-TV,Hartford (renewal in 2007), are affected by the Times Mirror acquisition underthe old FCC media ownership rules. Accordingly, in its FCC license renewal applications, the Company hassought and expects to receive 

27

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waiversto allow continued ownership of both the *Los Angeles Times*and KTLA-TV, both *Hartford Courant* andWTIC-TV/WTXX-TV and both *Newsday* andWPIX-TV pending the outcome of the FCC proceeding.

In 2001, the Company received FCC authorization tooperate television station WTXX-TV, Hartford. The FCC granted a so-called “failingstation” waiver to allow common ownership of WTIC-TV, Hartford, and WTXX-TV,Hartford. In addition, the FCC granted a temporary six-month waiver of thenewspaper-broadcast ownership prohibition. The temporary waiver has beenextended until the FCC has completed its review of the renewal application forWTXX-TV. Should there be no timely relief forthcoming from the newtelevision/newspaper cross-ownership rule, the Company will seek and expects toreceive a waiver to allow continued ownership of both WTIC-TV, Hartford, andWTXX-TV, Hartford, and *Hartford Courant*.

In June 2003, the FCC adopted new media ownershiprules, including a new television/newspaper cross-ownership rule. The newrule would eliminate the cross-ownership prohibition entirely inmarkets with nine or more television stations and permits combinations of onenewspaper and one television station in markets having from four to eighttelevision stations. Under this rule, the Company would be permitted to retainits newspaper and television operations in each of the five markets where itowns both—New York, Los Angeles, Chicago, South Florida, and Hartford. In September 2003,the United States Court of Appeals for the Third Circuit stayed theeffectiveness of the new media ownership rules pending the outcome ofappeals by advocacy groups challenging the new rules. In June 2004, theThird Circuit remanded the new rules to the FCC for further proceedingswhile keeping the stay in effect. In January 2005, the Company and othermedia companies filed a joint petition seeking United States Supreme Courtreview of the June 2004 Third Circuit remand. In June 2005, theSupreme Court declined to review the petition, without addressing the Constitutionalarguments raised and without foreclosing additional appeals if the Company’sinterests are not adequately addressed as part of the FCC’s remand proceeding.In June 2006, the FCC adopted a Further Notice of Proposed Rulemakingseeking comment on the issues raised by the Third Circuit in its stay andremand, including those relating to the FCC’s new television/newspapercross-ownership rule. In October 2006, the Company filed comments inresponse to the FCC’s Further Notice of Proposed Rulemaking. While the Companyremains optimistic that the cross-ownership ban will ultimately beloosened in major markets, it cannot predict with certainty the timing or theoutcome of the FCC’s remand proceeding.

During 1998, Times Mirror, which was acquired by theCompany in 2000, disposed of its Matthew Bender and Mosby subsidiaries inseparate transactions, which were structured to qualify as tax-freereorganizations under the Internal Revenue Code. The Company believes thesetransactions were completed on a tax-free basis. However, the Internal RevenueService (“IRS”) audited the transactions and disagreed with the position takenby Times Mirror. In the fourth quarter of 2001, the Company received an IRSadjustment to increase Times Mirror’s 1998 taxable income by approximately$1.6 billion. The Company filed a petition in United States Tax Court in November 2002to contest the IRS position, and in December 2004, the Company presentedits position in Tax Court.

In September 2005, the Tax Court issued anopinion contrary to the Company’s position and determined that the MatthewBender transaction was a taxable sale. In January 2006, the Tax Courtextended its opinion in the Matthew Bender case to the Mosby transaction giventhe similarity of the two transactions. Taxes and related interest for both theMatthew Bender and Mosby transactions total approximately $1 billion. Overtime, deductions for state taxes and interest are expected to reduce the netcash outlay to approximately $840 million.

The Company has appealed the Tax Court ruling to theUnited States Court of Appeals for the Seventh Circuit. The Company does notexpect a ruling before the second half of 2007. The Company cannot predict withcertainty the outcome of this appeal.

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Times Mirror established a tax reserve of$180 million in 1998 when it entered into the transactions. The reserverepresented Times Mirror’s best estimate of the amount the expected IRS andstate income tax claims could be settled for based upon an analysis of thefacts and circumstances surrounding the issue. The Company maintained thisinitial reserve, plus interest, and evaluated the adequacy of the reserve on aperiodic basis. As a result of the Tax Court ruling, the Company increased itstax reserve by an additional $609 million in the third quarter of 2005 byrecording additional income tax expense of $150 million, representingadditional after-tax interest applicable to the post-acquisition period, andgoodwill of $459 million. On Sept. 30, 2005, the Company paid$880 million to the IRS, representing the federal tax and interest owed onthe transactions, and financed the payment through the issuance of commercialpaper. The Company made a related state tax and interest payment of approximately$86 million in February 2006. See Note 13 to the consolidatedfinancial statements in Item 8.

The Company does notbelieve that any other matters or proceedings presently pending will have amaterial adverse effect on its consolidated financial position, results ofoperations or liquidity.

**ITEM 4.   SUBMISSIONOF MATTERS TO A VOTE OF SECURITY HOLDERS.**

None.

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**PART II**

**ITEM 5.**                MARKETFOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUERPURCHASES OF EQUITY SECURITIES.

TheCompany’s common stock is presently listed on the New York and Chicago stockexchanges. The high and low sales prices of the common stock by fiscal quarterfor the two most recent fiscal years, as reported on the New York StockExchange Composite Transactions list, were as follows:

| ** **  | ** ** | **2006**   | ** ** | **2005** | ** ** |
|-------------|------------|------------|------------|----------|------------|
| **Quarter** | ** ** | ** ** | ** ** | **High** | ** ** | **Low** | ** ** | **High** | ** ** | **Low** | ** ** |
| First       |       | $          | 31.84      |     | $          | 27.79 |   | $ | 42.37 |   | $ | 38.59 |   |
| Second      |       | 32.94      |       | 27.09    |       | 40.14 |   | 35.02 |   |
| Third       |       | 34.28      |       | 28.66    |       | 39.56 |   | 34.53 |   |
| Fourth      |       | 33.99      |       | 30.74    |       | 36.15 |   | 30.05 |   |
|             |            |            |            |          |            |  |  |  |  |  |  |  |  |  |  |

 

The following graphcompares the five-year cumulative total return on Tribune common stock with thecumulative total return during the same period for companies included in theS&P 500 Stock Index and the S&P 500 Publishing and Printing Index. TheS&P 500 Publishing and Printing Index includes Tribune Company, Dow Jones &Company, Inc., Gannett Co., Inc., The McGraw-Hill Companies, Inc.,Meredith Corporation, and The New York Times Company. The S&P 500 StockIndex is comprised of 500 U.S. companies, including Tribune Company, in theindustrial, transportation, utilities and financial sectors. Both the S&P500 Stock Index and the Publishing and Printing Index are weighted by marketcapitalization.

| ** **                          | ** ** | **2001** | ** ** | **2002** | ** ** | **2003** | ** ** | **2004** | ** ** | **2005** | ** ** | **2006** | ** ** |
|-------------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
| Tribune Company                     |       | $        | 100.00     |     | $          | 122.63   |       | $        | 140.38     |     | $          | 115.95   |       | $ | 85.24 |   | $ | 88.73 |   |
| S&P 500                         |       | 100.00   |       | 78.03    |       | 100.16   |       | 110.92   |       | 116.28   |       | 134.43   |       |
| S&P 500 Publishing and Printing |       | 100.00   |       | 106.57   |       | 126.41   |       | 122.76   |       | 107.23   |       | 123.42   |       |
|                                     |            |          |            |          |            |          |            |          |            |          |            |          |            |  |  |  |  |  |  |

 

At Feb. 16,2007, there were 3,787 holders of record of the Company’s common stock.Quarterly cash dividends declared on common stock were $.18 per share for eachquarter during 2006 and 2005. Total cash dividends declared on common stock bythe Company were $195 million for 2006 and $225 million for 2005. TheCompany announced in February 2007 that its first quarter 2007 cash dividendwould be $.18 per share.

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**Stock Repurchase Program—****In** 2000, the Company’sBoard of Directors authorized the Company to repurchase $2.5 billion ofits common stock. Through Dec. 25, 2005, the Company repurchased 56 millionshares of its common stock at a cost of $2.3 billion under this authorization.In December 2005, the Board of Directors authorized additional repurchasesof $1 billion (inclusive of $160 million of remaining authority underthe 2000 stock repurchase authorization). In the first quarter of 2006, theCompany repurchased an additional 5 million shares of its common stock ata cost of $138 million pursuant to this authorization. As of Dec. 31,2006, the Company may repurchase an additional $862 million of its commonstock pursuant to this authorization.

**Modified“Dutch-Auction” Tender Offer—****On**May 30,2006, the Company initiated a modified “Dutch Auction” tender offer torepurchase up to 53 million shares of its common stock at a price per share notgreater than $32.50 and not less than $28.00. The tender offer closed on June 26,2006, and the Company acquired 45,026,835 shares of its common stock at a priceof $32.50 per share on July 5, 2006 before transaction costs. The Companyalso acquired 10 million shares of its common stock from the Robert R.McCormick Tribune Foundation and the Cantigny Foundation on July 12, 2006at a price of $32.50 per share before transaction costs. In connection with thetender offer, the board of directors, in May 2006, also authorized therepurchase of an additional 12 million shares of the Company’s common stockcommencing on the eleventh business day following the completion of the tenderoffer. In the third quarter of 2006, the Company repurchased an additional 11.1 millionshares in the open market at a weighted average cost of $29.94 per sharepursuant to this authorization. The Company does not intend to repurchase anyadditional shares of its common stock in the open market pursuant to the May 2006authorization.

Repurchases during 2006,by fiscal period, were as set forth below (in thousands, except average cost).All repurchases during Period 7 and Period 8 were made in connection withthe tender offer and pursuant to the May 2006 authorization.

| ** **                                    | ** ** | **Shares  Repurchased** | ** ** | **Average  Cost** | ** ** | **Total Number of  Shares Repurchased** | ** ** | **Value of Shares  that May Yet be  Repurchased(1)** | ** ** |
|-----------------------------------------------|------------|-------------------------|------------|-------------------|------------|--------------------------------------------------------|------------|-------------------------------------------------------------------------------|------------|
| Period 1 (5 weeks ended  Jan. 29, 2006)  |       |                    | 1,000      |              |       | $                                                      | 30.46      |                                                                          |       | 57,426 |   |   |   | $ | 969,520 |   |   |
| Period 2 (4 weeks ended  Feb. 26, 2006)  |       |                    | 3,604      |              |       | 29.74                                                  |       |                                                                          | 61,030     |   |   |   | 862,254 |   |   |
| Period 3 (4 weeks ended  March 26, 2006) |       |                    | —     |              |       | —                                                 |       |                                                                          | 61,030     |   |   |   | 862,254 |   |   |
| Period 4 (4 weeks ended  April 23, 2006) |       |                    | —     |              |       | —                                                 |       |                                                                          | 61,030     |   |   |   | 862,254 |   |   |
| Period 5 (4 weeks ended  May 21, 2006)   |       |                    | —     |              |       | —                                                 |       |                                                                          | 61,030     |   |   |   | 862,254 |   |   |
| Period 6 (5 weeks ended  June 25, 2006)  |       |                    | —     |              |       | —                                                 |       |                                                                          | 61,030     |   |   |   | 862,254 |   |   |
| Period 7 (5 weeks ended  July 30, 2006)  |       |                    | 61,124     |              |       | 32.25                                                  |       |                                                                          | 122,154    |   |   |   | 862,254 |   |   |
| Period 8 (4 weeks ended  Aug. 27, 2006)  |       |                    | 4,956      |              |       | 29.79                                                  |       |                                                                          | 127,110    |   |   |   | 862,254 |   |   |
| Period 9 (4 weeks ended  Sept. 24, 2006)      |       |                    | —     |              |       | —                                                 |       |                                                                          | 127,110    |   |   |   | 862,254 |   |   |
| Period 10 (4 weeks ended  Oct. 22, 2006) |       |                    | —     |              |       | —                                                 |       |                                                                          | 127,110    |   |   |   | 862,254 |   |   |
| Period 11 (4 weeks ended  Nov. 19, 2006) |       |                    | —     |              |       | —                                                 |       |                                                                          | 127,110    |   |   |   | 862,254 |   |   |
| Period 12 (6 weeks ended Dec. 31, 2006)  |       |                    | —     |              |       | —                                                 |       |                                                                          | 127,110    |   |   |   | 862,254 |   |   |
|                                               |            |                         |            |                   |            |                                                        |            |                                                                               |            |  |  |  |  |  |  |  |  |

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(1)       Values of shares that mayyet be repurchased at the end of Periods 6 through 12 do not include any amountsrelated to the additional 12 million shares of the Company’s common stock thatthe board of directors authorized for repurchase in May 2006.

**ITEM 6.   SELECTEDFINANCIAL DATA.**

Selected financial datafor the years 2002 through 2006 is contained under the heading “Five YearFinancial Summary” on pages 126 and 127 and is derived from financialstatements for those years. The information contained in the “Five YearFinancial Summary” is not necessarily indicative of the results of operationsto be expected for future years, and should be read in conjunction with “Management’sDiscussion and Analysis of Financial Condition and Results of Operations”included in Item 7 and the consolidated financial statements and relatednotes thereto included in Item 8 of this Form 10-K which wereaudited by the Company’s independent registered public accounting firm,PricewaterhouseCoopers LLP.

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**ITEM 7.**                MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussionpresents the significant factors that have affected the businesses of TribuneCompany and its subsidiaries (the “Company”) over the last three years. Thiscommentary should be read in conjunction with the Company’s consolidatedfinancial statements and “Five Year Financial Summary,” which are alsopresented in this Form 10-K. Certain prior year amounts have beenreclassified to conform with the 2006 presentation. These reclassifications hadno impact on reported prior year total revenues, operating profit or netincome.

**FORWARD-LOOKINGSTATEMENTS**

The discussion containedin this Item 7 (including, in particular, the discussion under “Overview”),the information contained in Item 7A, “Quantitative and Qualitative Disclosuresabout Market Risk,” and the information contained in the subsequent notes tothe consolidated financial statements, contain certain forward-lookingstatements that are based largely on the Company’s current expectations.Forward-looking statements are subject to certain risks, trends anduncertainties that could cause actual results and achievements to differmaterially from those expressed in the forward-looking statementsincluding, but not limited to, the items discussed in Item 1A, “RiskFactors.” Such risks, trends and uncertainties, which in some instances arebeyond the Company’s control, include: changes in advertising demand,circulation levels and audience shares; regulatory and judicial rulings;availability and cost of broadcast rights; competition and other economicconditions; changes in newsprint prices; changes in the Company’s creditratings and interest rates; changes in accounting standards; adverse resultsfrom litigation, governmental investigations or tax-related proceedingsor audits; the effect of labor strikes, lock-outs and negotiations; the effectof acquisitions, investments and divestitures; the effect of derivativetransactions; the Company’s reliance on third-party vendors for variousservices; and the Company’s exploration of alternatives for creating additionalvalue for shareholders. The words “believe,” “expect,” “anticipate,” “estimate,”“could,” “should,” “intend” and similar expressions generally identify forward-lookingstatements. Readers are cautioned not to place undue reliance on such forward-lookingstatements, which are being made as of the date of this filing. The Companyundertakes no obligation to update any forward-looking statements,whether as a result of new information, future events or otherwise.

**OVERVIEW**

Tribune Company is a media and entertainment company,operating primarily in the United States, that conducts its operations throughtwo business segments: publishing and broadcasting and entertainment. Thesesegments reflect the manner in which the Company sells its products to themarketplace, manages its operations and makes business decisions. The Company’smedia operations are principally in major metropolitan areas of the UnitedStates and compete against similar media and other types of media on both alocal and national basis.

Publishing currently consists primarily of 11 dailynewspapers, which include related businesses such as interactive websites.Publishing represented 74% of the Company’s consolidated revenues in 2006.About 80% of publishing revenues were derived from advertising. These revenueswere generated from the sale of advertising space in published issues of thenewspapers and on interactive websites. Approximately 14% of publishingrevenues were generated from the sales of newspapers to individual subscribersor to sales outlets, which re-sell the newspapers. The remaining 6% of revenuescame from a variety of activities including the syndication of columns,features, information and comics to newspapers, commercial printing operations,sales of entertainment listings and other publishing-related activities.

Publishing advertising revenues are comprised of threebasic categories: retail, national and classified. Changes in advertisingrevenues are heavily correlated with changes in the level of economic activityin the 

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United States. Changes inGross Domestic Product, consumer spending, auto sales, housing sales,unemployment rates, job creation, circulation levels and rates all impactdemand for advertising in the Company’s newspapers. The Company’s advertisingrevenues are subject to changes in these factors both on a national level andon a local level in its markets.

Significant expense categories for publishing includecompensation, newsprint and ink and other operating expenses. Compensation,which includes benefits expense and stock-based compensation expense in 2006,represented 41% of publishing’s consolidated operating expenses in 2006.Compensation expense is affected by many factors, including the level of meritincreases, the number of full-time equivalent employees and changes in thedesign and costs of the Company’s various employee benefit plans. Newsprint andink represented 15% of the 2006 operating expenses for publishing. The Companyconsumed approximately 697,000 metric tons of newsprint in 2006. Newsprint is acommodity and pricing can vary significantly between years. Other expensescomprised 44% of total operating expenses. These expenses are principally forthe distribution of the newspaper, promotional activities and other general andadministrative expenses. These expenses are typically subject to lessvariability.

Broadcasting and entertainment currently consists of23 television stations, one radio station, the Chicago Cubs and TribuneEntertainment, a company that distributes its own programming together withprogramming licensed from third parties. Broadcasting and entertainmentrepresented 26% of the Company’s consolidated revenues in 2006. About 78% ofthese revenues came from the sale of advertising spots in its television group.Changes in advertising revenues are heavily correlated with and influenced bychanges in the level of economic activity in the United States. Changes inGross Domestic Product, consumer spending levels, auto sales, programmingcontent, audience share and rates all impact demand for advertising on theCompany’s television stations. The Company’s advertising revenues are subjectto changes in these factors both on a national level and on a local level inthe markets in which it operates.

Significant expense categories for broadcasting andentertainment include programming expense, compensation and other expenses.Programming expense represented 34% of 2006 expenses. The level of programmingexpense is affected by the cost of programs available for purchase and theselection of programs aired by the Company’s television stations. Compensationexpense represented 40% of broadcasting and entertainment’s 2006 expenses andis impacted by the same factors as noted for publishing. Other expensesrepresented 26% of total operating expenses and are for promotional activitiesand other station operating expenses.

The Company uses revenuesand operating profit as ways to measure the financial performance of itsbusiness segments. The Company uses average net paid circulation for itsnewspapers and average audience share for its television stations as a means tomeasure its publishing and broadcasting and entertainment market shares andperformance.

**CRITICAL ACCOUNTINGPOLICIES AND ESTIMATES**

The Company’s significant policies are summarized inNote 1 to the Company’s consolidated financial statements in Item 8.These policies conform with accounting principles generally accepted in theUnited States of America and reflect practices appropriate to the Company’sbusinesses. The preparation of the Company’s consolidated financial statementsrequires management to make estimates and assumptions that affect the amountsreported in the financial statements and accompanying notes. Actual resultscould differ from these estimates. On an ongoing basis, the Company evaluatesits policies and estimates, including those related to income taxes, pensionand postretirement benefits, broadcast rights, goodwill and other intangibleassets, self-insurance liabilities, accounts receivable allowances and stock-basedcompensation.

Management has discussedwith the Audit Committee of the Board of Directors the development, selectionand disclosure of the critical accounting policies and estimates and theapplication of these 

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policiesand estimates. In addition, there are other items within the financialstatements that require estimation, but are not deemed to be criticalaccounting policies and estimates. Changes in the estimates used in these andother items could have a material impact on the financial statements.

**Income Taxes**

Provisions for federal andstate income taxes are calculated on reported pretax earnings based on currenttax laws and also include, in the current period, the cumulative effect of anychanges in tax rates from those used previously in determining deferred taxassets and liabilities. Taxable income reported to the taxing jurisdictions inwhich the Company operates often differs from pretax earnings because someitems of income and expense are recognized in different time periods for incometax purposes. The Company provides deferred taxes on these temporarydifferences in accordance with Financial Accounting Standard (“FAS”) No. 109,“Accounting for Income Taxes.” Taxable income also may differ from pretaxearnings due to statutory provisions under which specific revenues are exemptfrom taxation and specific expenses are not allowable as deductions. TheCompany establishes reserves for income tax when it is probable that one ormore of the taxing authorities will challenge and disallow a position taken bythe Company in its income tax returns and the resulting liability is estimable.The consolidated tax provision and related accruals include estimates of thepotential taxes and related interest as deemed appropriate. These estimates arereevaluated and adjusted, if appropriate, on a quarterly basis. Althoughmanagement believes its estimates and judgments are reasonable, the resolutionsof the Company’s tax issues are unpredictable and could result in taxliabilities that are significantly higher or lower than that which has beenprovided by the Company. See Note 13 to the Company’s consolidatedfinancial statements in Item 8 for additional information.

**Pension and OtherPostretirement Benefits**

The Company provides defined benefit pension,postretirement health care and life insurance benefits to eligible employeesunder a variety of plans (see Note 14 to the Company’s consolidatedfinancial statements in Item 8). Accounting for pension and otherpostretirement benefits requires the use of several assumptions.

Weightedaverage assumptions used in 2006 and 2005 in accounting for pension benefitsand other postretirement benefits were:

| ** **                                        | ** ** | **Pension Plans** | ** ** | **Other  Postretirement  Plans** | ** ** |
|---------------------------------------------------|------------|------------------------|------------|----------------------------------|------------|
| ** **                                        | ** ** | **2006**               | ** ** | **2005**                         | ** ** | **2006** | ** ** | **2005** | ** ** |
| Discount rate for  expense                        |       | 5.50                   | %          | 5.75                             | %          | 5.50 | % | 5.75 | % |
| Discount rate for  obligations                    |       | 5.75                   | %          | 5.50                             | %          | 5.75 | % | 5.50 | % |
| Increase in  future salary levels for expense     |       | 3.50                   | %          | 3.50                             | %          | — |   | — |   |
| Increase in  future salary levels for obligations |       | 3.50                   | %          | 3.50                             | %          | — |   | — |   |
| Long-term rate of  return on plans’ assets   |       | 8.50                   | %          | 8.50                             | %          | — |   | — |   |

 

The Company used a building block approach todetermine its current 8.5% assumption of the long-term expected rate of returnon pension plan assets. Based on historical market studies, the Company’slong-term expected returns for equity and fixed income securities approximate10% and 6%, respectively. As of the date of this report, a 0.5% decrease in theCompany’s long-term rate of return assumption would result in an $8 millionincrease in the Company’s net pension expense. In 2006, the pension plans’assets earned a return of approximately 15%. The Company bases the rate usedfor discounting future benefit obligations and calculating interest cost on anindex of Aa-rated corporate bonds. The duration of the bonds in thisindex approximates the timing of future payments for the Company’s benefitobligations.

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In September 2006, the Financial AccountingStandards Board (“FASB”) issued FAS No. 158, “Employers’ Accounting forDefined Benefit Pension and Other Postretirement Plans, an amendment of FASBStatements No. 87, 88, 106 and 132(R)” which requires an employer torecognize the overfunded or underfunded status of a defined benefitpostretirement plan (other than a multiemployer plan) as an asset or liabilityin its statement of financial position and to recognize changes in that fundedstatus in the year in which changes occur through comprehensive income. TheStatement also requires an employer to measure the funded status of a plan asof the date of its year-end statement of financial position, with limitedexceptions. The Company adopted the provisions of FAS No. 158 as of Dec. 31,2006. Prior to the adoption of FAS No. 158, the Company’s prepaid pensionasset at Dec. 31, 2006 and Dec. 25, 2005 included an unrecognized netactuarial loss of $631 million and $870 million, respectively. Asignificant portion of this net actuarial loss resulted from the differencebetween the Company’s expected returns on plan assets and the actual losses onplan assets in 2002 and 2001. Expected returns on plan assets were$158 million and $176 million in 2002 and 2001, respectively; actuallosses were $161 million and $113 million, respectively. Uponadoption of FAS No. 158, the Company recognized the $631 million of actuariallosses, net of tax, in the accumulated other comprehensive income (loss)component of shareholders’ equity at Dec. 31, 2006. In accordance with FASNo. 87, the actuarial loss will be recognized in net periodic pensionexpense over approximately 11 years, representing the estimated averageremaining service period of active employees expected to receive benefits, withcorresponding adjustments made to accumulated other comprehensive income (loss)in accordance with FAS No. 158. The Company’s policy is to incorporateasset-related gains and losses into the asset value used to calculate theexpected return on plan assets and into the calculation of amortization ofunrecognized net actuarial loss over a four-year period.

In December 2005, the pension benefits for formerTimes Mirror non-union and non-Newsday employees were frozen. As a result ofthe plan freeze, a pretax curtailment gain of $18 million ($13 million atpublishing, $1 million at broadcasting and entertainment, and $4 million atcorporate) was recorded. On March 31, 2006, the pension plan benefits forNewsday union and non-union employees were frozen.

The Company’s pension plans’ assetallocations at Dec. 31, 2006 and Dec. 25, 2005 were as follows (inmillions):

| ** **               | ** ** | **Plan Assets** | ** ** |
|--------------------------|------------|----------------------|------------|
| **Asset Category**  | ** ** | ** **           | ** ** | **Dec. 31, 2006** | ** ** | **Dec. 25, 2005** | ** ** |
| Equity securities        |       | $                    | 1,344      |   | 76.2 | % | $ | 1,186 |   | 74.2 | % |
| Fixed income  securities |       | 334                  |       | 18.9 | % | 329 |   | 20.6 | % |
| Other                    |       | 86                   |       | 4.9 | % | 83 |   | 5.2 | % |
| Total                    |       | $                    | 1,764      |   | 100 | % | $ | 1,598 |   | 100 | % |
|                          |            |                      |            |  |  |  |  |  |  |  |  |  |  |

 

The Company’s current 2007 target allocation forpension plans’ assets are 75% in equity securities and 25% in fixed incomesecurities and other.

For purposes of measuring 2006 postretirement healthcare costs, a 9.0% annual rate of increase in the per capita cost of coveredhealth care benefits was assumed for 2006. The rate was assumed to decreasegradually to 5% for 2010 and remain at that level thereafter. For purposes ofmeasuring health care obligations at Dec. 31, 2006, a 9.0% annual rate ofincrease in the per capita cost of covered health care benefits was assumed for2007. The rate was assumed to decrease gradually to 5% for 2012 and remain atthat level thereafter. On Dec. 8, 2003, the Medicare Prescription Drug,Improvement and Modernization Act of 2003 (“Act”) were signed into law. The Actresulted in a $15 million reduction in the accumulated otherpostretirement obligations for prior service costs in 2004 and a$1 million reduction in net periodic postretirement benefit costs.

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Assumedhealth care cost trend rates have a significant effect on the amounts reportedfor health care plans. As of the date of this report, a 1% change in assumedhealth care cost trend rates would have the following effects (in thousands):

| ** **                      | ** ** | **1% Increase** | ** ** | **1% Decrease** | ** ** |
|---------------------------------|------------|----------------------|------------|----------------------|------------|
| Service cost and  interest cost |       |                 | $          | 415                  |       |   |   | $ | (368 | ) |   |
| Projected benefit  obligation   |       |                 | $          | 7,486                |       |   |   | $ | (6,624 | ) |   |

 

The Company contributed $7 million to certain ofits union and non-qualified pension plans and $14 million to its otherpostretirement plans in 2006. The Company plans to contribute $8 millionto certain of its union and non-qualified pension plans and $13 million toits other postretirement plans in 2007.

**ExpectedFuture Benefit Payments—****The**following benefit payments,which reflect expected future service, as appropriate, are expected to be paid(in thousands):

| ** ** | ** ** | **Pension  Benefits** | ** ** | **Other  Postretirement  Benefits** | ** ** |
|------------|------------|-----------------------|------------|-------------------------------------|------------|
| 2007       |       | $                     | 79,967     |                                |       | $ | 14,211 |   |   |
| 2008       |       | 81,579                |       |                                | 14,233     |   |   |
| 2009       |       | 84,233                |       |                                | 14,310     |   |   |
| 2010       |       | 87,050                |       |                                | 14,488     |   |   |
| 2011       |       | 89,421                |       |                                | 14,619     |   |   |
| 2012-2016  |       | 495,915               |       |                                | 69,089     |   |   |
|            |            |                       |            |                                     |            |  |  |  |  |

 

**Broadcast Rights**

Broadcast rights consist principally of rights tobroadcast syndicated programs, sports and feature films and are stated at thelower of cost or estimated net realizable value. The total cost of these rightsis recorded as an asset and a liability when the program becomes available forbroadcast. Syndicated program rights that have limited showings are generallyamortized using an accelerated method as programs are aired. Sports and featurefilm rights are amortized using the straight-line method. The current portionof broadcast rights represents those rights available for broadcast that areexpected to be amortized in the succeeding year. At Dec. 31, 2006 and Dec. 25,2005, the Company had broadcast rights assets of $567 million and$669 million, respectively.

The Company maintains anallowance for programming that is not expected to be aired by the end of thecontract period. This allowance for excess programming inventory is based on aprogram-by-program review of the Company’s five-year broadcast plans andhistorical write-off trends. The total reserve balance at Dec. 31, 2006and Dec. 25, 2005 was $4 million. Actual write-offs in 2006 and 2005were $.4 million and $1 million, respectively. Future write-offs can varybased on changes in consumer viewing trends and the availability and costs ofother programming.

**Goodwill and OtherIntangible Assets**

The Company periodically reviews goodwill and certainintangible assets no longer being amortized for impairment in accordance withFAS No. 142, “Goodwill and Other Intangible Assets.” Under FAS No. 142,the impairment review of goodwill and other intangible assets not subject toamortization must be based generally on fair values.

The Company performs its annual impairment review inthe fourth quarter of each year. The estimated fair value of the reportingunits to which goodwill is allocated is determined using multiples of 

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operating cash flows forpurposes of analyzing goodwill for impairment. A significant decline inmultiples and/or operating cash flows for a reporting unit could result in anon-cash impairment charge under FAS No 142. The estimated fairvalues of other assets subject to the annual impairment review, which includenewspaper mastheads and FCC licenses, are calculated based on projected futurediscounted cash flow analyses. The development of market multiples and cashflow projections used in the analyses requires the use of assumptions,including assumptions regarding revenue and market growth. The analyses usediscount rates based on specific economic factors in the publishing andbroadcasting industries. These assumptions reflect the Company’s bestestimates, but these items involve inherent uncertainties based on marketconditions generally outside of the Company’s control.

In the fourth quarter of 2004, the Company elected toearly adopt the provisions of the Financial Accounting Standards Board’sEmerging Issues Task Force Topic No. D-108, which requires the useof a direct valuation method for valuing intangible assets, such as FederalCommunications Commission (“FCC”) licenses, and reviewing them for impairment.Historically, the Company had been using a residual valuation method to reviewits FCC licenses for impairment each year. A direct valuation method generallyresults in a lower valuation than does a residual valuation method. The Companyperformed an impairment review of its FCC licenses for the year ended Dec. 28,2003 using a residual method. No impairments were required as a result of theanalyses performed in 2003. The effect of changing to a direct valuation methodfor the 2004 FCC licenses impairment review was a pretax charge of$29 million ($18 million after-tax). The charge was recorded in thefourth quarter of 2004 as a cumulative effect of a change in accountingprinciple in the consolidated statements of income.

TheCompany’s goodwill and other intangible assets at Dec. 31, 2006 consistedof the following (in thousands):

| ** **                                                            | ** ** | **Dec. 31, 2006** | ** ** |
|-----------------------------------------------------------------------|------------|-----------------------------|------------|
| ** **                                                            | ** ** | **Gross  Amount**           | ** ** | **Accumulated  Amortization** | ** ** | **Net  Amount** | ** ** |
| **Intangible assets subject to  amortization**                        |       |                        |       |   |   |   |   |   |   |
| Subscribers  (useful life of 15 to 20 years)                     |       | $                           | 190,660    |   |   | $ | (72,126 | ) |   | $ | 118,534 |   |
| Network  affiliation agreements (useful life of 40 years)(1)(2)  |       | 278,034                     |       |   | (22,614 | ) |   | 255,420 |   |
| Other (useful  life of 3 to 40 years)                            |       | 25,128                      |       |   | (8,717 | ) |   | 16,411 |   |
| Total                                                                 |       | $                           | 493,822    |   |   | $ | (103,457 | ) |   | 390,365 |   |
| **Goodwill  and other intangible assets not subject to amortization** |       |                        |       |   |   |   |   |   |   |
| Goodwill                                                              |       |                        |       |   |   |   |   |   |   |
| Publishing                                                            |       |                        |       |   |   |   |   | 4,395,967 |   |
| Broadcasting and entertainment(2)                                     |       |                        |       |   |   |   |   | 1,441,241 |   |
| Total goodwill                                                        |       |                        |       |   |   |   |   | 5,837,208 |   |
| Newspaper  mastheads                                                  |       |                        |       |   |   |   |   | 1,575,814 |   |
| FCC licenses(2)                                                       |       |                        |       |   |   |   |   | 871,946 |   |
| Tradename                                                             |       |                        |       |   |   |   |   | 7,932 |   |
| Total                                                                 |       |                        |       |   |   |   |   | 8,292,900 |   |
| Total goodwill and other  intangible assets                           |       |                        |       |   |   |   |   | $ | 8,683,265 |   |

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(1)       Networkaffiliation agreements, net of accumulated amortization, included$179 million related to Fox affiliations, $74 million related to CWaffiliations and $2 million related to MyNetworkTV affiliations.

(2)       As a result of the sales ofWATL-TV, Atlanta, WCWN-TV, Albany and WLVI-TV, Boston, network affiliationagreements, broadcasting and entertainment goodwill and FCC licenses declinedby $12 million, $125 million and $213 million, respectively.

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**Self-InsuranceLiabilities**

The Company self-insuresfor certain medical and disability benefits, workers’ compensation costs andautomobile and general liability claims. The recorded liabilities forself-insured risks are calculated using actuarial methods and are notdiscounted. The liabilities include amounts for actual claims, claim growth andclaims incurred but not reported. Actual experience, including claim frequencyand severity as well as health care inflation, could result in differentliabilities than the amounts currently recorded. The recorded liabilities forself-insured risks totaled $115 million and $113 million at Dec. 31,2006 and Dec. 25, 2005, respectively.

**Accounts ReceivableAllowances**

The Company’s accountsreceivable are primarily due from advertisers. Credit is extended based on anevaluation of a customer’s financial condition and generally collateral is notrequired. The Company maintains an allowance for uncollectible accounts,rebates and volume discounts. This allowance is determined based on historicalwrite-off experience and any known specific collectibility exposures. At Dec. 31,2006 and Dec. 25, 2005, the Company’s allowance for accounts receivablewas $34 million and $43 million, respectively.

**Stock-BasedCompensation**

In the first quarter of 2006, the Company adopted FAS No. 123R,“Share-Based Payment,” which superseded Accounting Principles Board (“APB”)Opinion No. 25, FAS No. 123 and related interpretations. FAS No. 123Rrequires the Company to expense stock-based compensation in its incomestatement. Under FAS No. 123R, stock-based compensation cost is measuredat the grant date based on the estimated fair value of the award. The Companyuses the Black-Scholes option-pricing model to determine the fair valueof each stock option it grants. The Black-Scholes model includesassumptions regarding dividend yields, expected volatility, expected lives andrisk-free interest rates. These assumptions reflect the Company’s bestestimates, but they involve certain risks, trends and uncertainties, which insome instances are outside of the control of the Company. As a result, if otherassumptions had been used, stock-based compensation could have beenmaterially impacted. Furthermore, if the Company uses different assumptions infuture periods, share-based compensation expense could be materiallyimpacted. The Company adopted FAS No. 123R utilizing the modifiedprospective application method and did not restate prior years. Additionalinformation on the accounting for stock-based compensation in accordance withFAS No. 123R is provided in Note 16 to the Company’s consolidatedfinancial statements in Item 8.

Prior to the adoption of FAS No. 123R, theCompany accounted for its stock-based compensation plans in accordance with APBNo. 25 and related interpretations. Under APB No. 25, no compensationexpense was recorded because the exercise price of employee stock optionsequaled the market price of the underlying stock on the date of grant. Underthe provisions of APB No. 25, the Company was not required to recognizecompensation expense for its Employee Stock Purchase Plan. The pro formastock-based compensation expense was calculated under FAS No. 123, asamended by FAS No. 148, for 2005 and 2004 and is disclosed in Note 1to the consolidated financial statements in Item 8.

On June 24, 2005, the Company accelerated thevesting of certain stock options granted on Feb. 11, 2003 and Feb. 10,2004, totaling 2.4 million in each year. Unvested stock options awarded tothe then current executive officers of the Company on these grant dates, whichaggregated 0.8 million and 0.6 million, respectively, were notaccelerated at that time. On Dec. 16, 2005, the Company accelerated thevesting of all stock options granted on Feb. 8, 2005, totaling3.5 million. Also, on Dec. 16, 2005, the Company accelerated theremaining unvested stock options granted to the current executive officers ofthe Company on Feb. 11, 2003 and Feb. 10, 2004, totaling0.4 million in both years. All other terms and conditions of the stockoption grants remain unchanged.

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In accordance with APB No. 25 and relatedinterpretations, the acceleration of vesting of these stock options did notrequire accounting recognition in the Company’s income statement. The exerciseprices of the 2003, 2004 and 2005 grants were $45.90, $52.05 and $40.59,respectively, and the Company’s closing stock prices on the June 24, 2005and Dec. 16, 2005 dates of acceleration were $35.64 and $30.80,respectively. The impact of the accelerated vesting was to increase pro formastock-based compensation by $82 million, or $50 million net oftax, in 2005. The accelerated vesting of these stock options was one of severalactions the Company took to reduce stock-based compensation expense withthe adoption of FAS No. 123R.

**SIGNIFICANTEVENTS**

**Common StockRepurchases**

TheCompany repurchased 71 million common shares for $2.3 billion in 2006 and12 million common shares for $440 million in 2005. The following tablesummarizes the Company’s 2006 common stock repurchases (in thousands):

| ** **                                                                           | ** ** | **Shares** | ** ** | **Cost**  | ** ** |
|--------------------------------------------------------------------------------------|------------|------------|------------|-----------|------------|
| Repurchases in  first quarter                                                        |       | 4,604      |       | $         | 137,746    |   |
| Tender offer  repurchases                                                            |       | 45,027     |       | 1,468,270 |       |
| Repurchases from  the Robert R. McCormick Tribune Foundation and Cantigny Foundation |       | 10,000     |       | 325,300   |       |
| Repurchases  subsequent to the tender offer                                          |       | 11,053     |       | 330,952   |       |
| Total common stock  repurchases                                                      |       | 70,684     |       | $         | 2,262,268  |   |

 

On May 30, 2006, theCompany initiated a modified “Dutch Auction” tender offer to repurchase up to53 million shares of its common stock at a price per share not greaterthan $32.50 and not less than $28.00. The tender offer closed on June 26,2006, and the Company acquired 45 million shares of its common stock onJuly 5, 2006 at a price of $32.50 per share before transaction costs. TheCompany also acquired 10 million shares of its common stock from theRobert R. McCormick Tribune Foundation and the Cantigny Foundation onJuly 12, 2006 at a price of $32.50 per share before transaction costs. TheRobert R. McCormick Tribune Foundation and the Cantigny Foundation areaffiliated non-profit organizations, which together held 13.6% of the Company’soutstanding shares when the tender offer was launched. In connection with thetender offer, the board of directors also authorized the repurchase of anadditional 12 million shares of the Company’s common stock commencing on theeleventh business day following the completion of the tender offer. In thethird quarter of 2006, the Company repurchased an additional 11.1 millionshares under that authorization at a weighted average cost of $29.94 per share.In addition, the Company repurchased and retired 4.6 million shares of itscommon stock in the first quarter of 2006.

**Credit Agreements**

On June 19, 2006, the Company entered into afive-year credit agreement and a 364-day bridge credit agreement, both ofwhich were amended and restated on June 27, 2006. The five-year creditagreement provides for a $1.5 billion unsecured term facility, of which $250million was used to refinance the medium-term notes that matured onNov. 1, 2006, and a $750 million unsecured revolving facility. The 364-daybridge credit agreement provided for a $2.15 billion unsecured bridge facility.

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The Company entered into these agreements to financethe Company’s tender offer initiated on May 30, 2006; to repurchase sharesof the Company’s common stock from the Robert R. McCormick TribuneFoundation and Cantigny Foundation; to repurchase shares of the Company’scommon stock pursuant to open market or privately negotiated transactions; torefinance certain indebtedness; and to pay fees and expenses incurred inconnection with the repurchases. In addition, the revolving facility isavailable for working capital and general corporate purposes, includingacquisitions.

In general, borrowings under the credit agreementsbear interest at a rate equal to LIBOR plus a spread ranging from 0.35% to1.25%. The applicable spread is determined on the basis of the Company’s debtratings by S&P and Moody’s. The Company’s debt ratings are also used indetermining the annual facility fee, which may range from 0.07% to 0.25% of theaggregate unused commitments. In addition, the Company has agreed to paycustomary fees to the lenders under the credit agreements.

As of Dec. 31, 2006, the Company had outstandingborrowings of $1.5 billion and $1.3 billion under the term facilityand the bridge facility, respectively, and the Company had no borrowings underthe revolving facility. As of Dec. 31, 2006, the applicable interest rateon both the term facility and the bridge facility was 6.2%.

The credit agreementscontain certain restrictive covenants, including financial covenants thatrequire the Company to maintain a maximum total leverage ratio and a minimuminterest coverage ratio. At Dec. 31, 2006, the Company was in compliancewith the covenants.

**TMCT Transactions**

As a result of the Company’s acquisition of The TimesMirror Company (“Times Mirror”) in 2000, the Company holds investment interestsin TMCT, LLC (“TMCT”) and TMCT II, LLC (“TMCT II”). TMCT and TMCT IIwere formed in 1997 and 1999, respectively, as a result of transactionsinvolving agreements between Times Mirror and its largest shareholders,Chandler Trust No. 1 and Chandler Trust No. 2 (collectively, the “ChandlerTrusts”). The Times Mirror acquisition resulted in the Chandler Trusts becomingsignificant shareholders of the Company. The TMCT and TMCT II LLCagreements have no specific term, and the dissolution, determination ofliquidation values and distribution of assets require the mutual consent of theCompany and the Chandler Trusts.

The collective assets of TMCT and TMCT II as of Dec. 25,2005 included approximately 51.4 million shares of the Company’s commonstock and 1.1 million shares of the Company’s preferred stock, representing allof the Company’s issued Series C, D-1 and D-2 preferred stock.The TMCT and TMCT II assets also include a variety of fixed income andequity investments. In addition, TMCT owns eight real properties that areleased to the Company. Additional information pertaining to the Company’sinvestments in TMCT and TMCT II is provided in Note 7 to the Company’sconsolidated financial statements in Item 8.

On Sept. 21, 2006, the Company and the Chandler Trustsentered into agreements to restructure TMCT and TMCT II. Under the termsof the agreements, the Company received on Sept. 22, 2006, a total of 38.9 millionshares of the Company’s common stock and all 1.1 million shares of theCompany’s preferred stock held collectively by TMCT and TMCT II. As aresult of the transactions, the Company’s interests in each of TMCT and TMCT II were reduced toapproximately 5%. The Sept. 21, 2006 agreements also provided forcertain put and call options, which are exercisable at fair market valuebeginning in September 2007, relating to the Company’s remaining ownershipinterests in TMCT and TMCT II. As a result of the transactions, theCompany in the third quarter of 2006 recorded a one-time, non-operating gain of$48 million, net of tax; increased its common treasury stock by $161 millionand its preferred treasury stock by $107 million; and reduced its combinedinvestment in TMCT and TMCT II by $195 million.

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On Sept. 22, 2006, the Company and TMCT amended thelease agreement for the eight properties the Company leases from TMCT. Underthe terms of the amended lease, the Company was granted an accelerated optionto acquire the eight properties during the month of January 2008 for $175 million.The Company was also granted an option to acquire the leased properties from Feb. 8,2008 to three months prior to the expiration of the amended lease. In addition,the amendment extended the properties’ current fixed rental rate through Aug. 7,2021.

On Oct. 20, 2006, the remaining 12.4 millionshares of the Company’s common stock held by TMCT and TMCT II were distributedto the Company and the Chandler Trusts in accordance with their respectiveownership interests. The Company received 0.6 million shares and the ChandlerTrusts received 11.8 million shares.

The Company and theChandler Trusts share in the cash flows of the various assets held by TMCT andTMCT II. Prior to the Sept. 22, 2006 transactions, the cash flows from theTribune common and preferred shares held by TMCT and TMCT II were largelyallocated to the Company, while the cash flows from the other assets werelargely allocated to the Chandler Trusts. As a result, the Company included intreasury stock 80% of the Tribune common and preferred shares held by TMCT andTMCT II. In addition, 80% of the dividends on the preferred and common sharesheld by TMCT and TMCT II were effectively eliminated. Following the Sept. 22,2006 transactions and until the Oct. 20, 2006 distribution, the Companyincluded in treasury stock approximately 5% of the Tribune common shares heldby TMCT and TMCT II. As a result of the transactions, the Company nolonger has any shares of its Series C, D-1 and D-2 preferredstock outstanding, and the Company’s common shares outstanding increased by 1.6 million.

**Sales of WATL-TV,Atlanta, WCWN-TV, Albany and WLVI-TV, Boston**

On June 5, 2006, the Company announced the saleof WATL-TV, Atlanta to Gannett Co., Inc. for $180 million. The sale closedon Aug. 7, 2006. On June 19, 2006, the Company announced the sale ofWCWN-TV, Albany to Freedom Communications, Inc. for $17 million. The saleclosed on Dec. 6, 2006. On Sept. 14, 2006, the Company announced thesale of WLVI-TV, Boston, to Sunbeam Television Corp. for $113.7 million. Thesale closed on Dec. 19, 2006.

These businesses were considered components of theCompany’s broadcasting and entertainment segment as their operations and cashflows could be clearly distinguished, operationally and for financial reportingpurposes, from the rest of the Company. The operations and cash flows of thesebusinesses have been eliminated from the ongoing operations of the Company as aresult of the sales, and the Company will not have any significant continuinginvolvement in their operations. Accordingly, the results of operations of eachof these businesses have been reported as discontinued operations in theconsolidated statements of income. Prior year consolidated statements of incomehave been reclassified to conform to the current year presentation ofdiscontinued operations.

In conjunction with thesales of WATL-TV, Atlanta and WCWN-TV, Albany, the Company recorded in thesecond quarter of 2006 a pretax loss totaling $90 million, including $80 millionof allocated television group goodwill, to write down the net assets of thestations to estimated fair value, less costs to sell. The Company subsequentlyreduced the pretax loss on sales of the Atlanta and Albany stations during thethird quarter of 2006 by $1 million. In addition, the Company recorded in thefourth quarter of 2006 a pretax gain of $41 million, including $45 million ofallocated television group goodwill, for the sale of the Boston station. Inaccordance with FAS No. 142, “Goodwill and Other Intangible Assets”, theCompany aggregates all of its television stations into one reporting unit forgoodwill accounting purposes. FAS No. 142 requires the Company to allocatea portion of its total television group goodwill to stations that are to besold on a relative fair value basis. The net pretax loss on sales of the threestations sold during 2006 was $48 million, including $125 million of allocatedtelevision group goodwill.

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**Acquisition ofAdditional Equity in CareerBuilder, ShopLocal and Topix**

In August 2006, theCompany completed its acquisition of additional equity interests in each ofCareerBuilder, LLC, ShopLocal, LLC (formerly CrossMedia Services, Inc.)and Topix, LLC for an aggregate purchase price of $155 million. The negotiatedequity purchases followed the exercise of call options by the Company andGannett Co., Inc. on Knight-Ridder, Inc.’s equity ownership in thethree online businesses after The McClatchy Company’s announcement of itsproposed acquisition of Knight-Ridder, Inc. As a result of thistransaction, the Company and Gannett Co., Inc. each increased theirrespective ownership of CareerBuilder, LLC and ShopLocal, LLC to 42.5% with TheMcClatchy Company retaining a 15% interest in both entities. Additionally, eachof the Company’s and Gannett Co., Inc.’s interest in Topix, LLC increasedto 31.9%. As a result of subsequent funding, the current ownership of Topix,LLC is approximately 33.7% for both the Company and Gannett Co., Inc.,11.9% for The McClatchy Company and 20.7% for management of Topix, LLC.

**NetworkAffiliations**

On Jan. 24, 2006, the Company announced that ithad reached a 10-year agreement to affiliate 16 of its televisionstations which were at that time affiliated with the former WB Network (includingthose in New York, Los Angeles and Chicago) with a new broadcast network, theCW Network. The new network was launched in September 2006 by Warner Bros.Entertainment and CBS. The new network airs a portion of the programmingpreviously carried on the WB Network and the UPN Network, as well as newprogramming. The WB Network has shut down. The Company did not incur any costsrelated to the shutdown of the WB Network.

In the second quarter of2006, the Company announced that its other three former WB Network affiliates(Philadelphia, Atlanta and Seattle) would become affiliates of the newbroadcast network, MyNetworkTV, which was launched in September 2006 bythe FOX Television Stations Network Inc. and Twentieth Century Television. Thenew network airs primarily primetime dramas. The Company subsequently sold itsAtlanta station in August 2006 and its Albany and Boston stations in December 2006.

**Consolidation ofLos Angeles Times’ Production Operations**

In December 2005, the *Los Angeles Times* announced it would close its San FernandoValley printing facility in January 2006 and consolidate production at itsremaining three facilities in Los Angeles, Costa Mesa, and Irwindale,California. The closing of the printing facility resulted in the elimination ofapproximately 120 positions from across the *LosAngeles Times’* production facilities.

As a result of the facility closing, the Companyreclassified the San Fernando Valley printing facility land and building asheld for sale at Dec. 25, 2005. The Company recorded a $2 millionpretax charge in the fourth quarter of 2005 to reduce the carrying value of theSan Fernando Valley printing facility’s land and building to $24 million,representing the estimated fair value of the assets less costs to sell theassets. On Oct. 30, 2006, the Company sold the San Fernando Valley landand building for net proceeds of approximately $24 million.

The Company evaluated the machinery and equipment atthe San Fernando Valley printing facility and determined that press and otherrelated equipment with a net book value of $16 million would be abandoned.Therefore, the Company reduced its estimate of the useful life of the press andother related equipment and recorded accelerated depreciation of$16 million in the fourth quarter of 2005. The Company idled the remainingSan Fernando Valley machinery and equipment, which had a net book value of$26 million at Dec. 31, 2006 and $34 million at Dec. 25, 2005.The Company is continuing to depreciate the remaining idled equipment. In thefourth quarter of 2006, the Company disposed of and wrote off $4 millionof the idled equipment that had previously been designated for redeployment at Dec. 25,2005. 

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The Company is currentlyevaluating alternative uses of the remaining idled equipment, which will mostlikely be redeployed elsewhere within the publishing segment.

TheCompany recorded a pretax charge in the fourth quarter of 2005 of$22 million, excluding severance related costs, as a result of itsdecision to close the San Fernando Valley printing facility. A summary of thesignificant components of the $22 million pretax charge recorded in thefourth quarter of 2005 is as follows (in millions):

| Accelerated  depreciation on machinery and equipment |   | $   | 16.1   |   |
|------------------------------------------------------|--------|-----|--------|--------|
| Impairment of  assets held for sale                  |   | 2.1 |   |
| Other                                                |   | 4.0 |   |
| Total                                                |   | $   | 22.2   |   |

 

**Employee Reductions**

The Company reduced itsstaffing levels by approximately 450 positions in 2006, primarily atpublishing, and recorded a pretax charge of $9 million. In 2005, the Companyreduced its staffing levels by approximately 900 positions and recorded apretax charge of $45 million ($43 million at publishing,$1 million at broadcasting and entertainment and $1 million atcorporate). The eliminations in 2005 included 120 positions as a result ofclosing the *Los Angeles Times*’San Fernando Valley printing facility, as discussed above. The Company recordeda pretax charge of $41 million in 2004 related to the elimination ofapproximately 600 positions in its publishing segment. The Company had acurrent liability of approximately $7 million at Dec. 31, 2006 and $37 millionat Dec. 25, 2005 related to these employee reductions.

**Non-Operating Items**

Fiscalyears 2006, 2005 and 2004 included several non-operating items. Non-operatingitems for 2006 are summarized as follows (in millions, except per sharedata):

| ** **                                                            | ** ** | **Proceeds** | ** ** | **Pretax  Gain (Loss)** | ** ** | **After-tax  Gain (Loss)** | ** ** | **Diluted  EPS** | ** ** |
|-----------------------------------------------------------------------|------------|--------------|------------|------------------------------|------------|---------------------------------|------------|------------------|------------|
| Gain on change in  fair values of derivatives and related investments |       |         | $          | —                       |       |                            |       | $                | 11         |   |   |   | $ | 7 |   |   |   | $ | .02 |   |   |
| Gain on TMCT  transactions                                            |       |         | —     |                         |       |                            | 60         |             |       |   | 48 |   |   |   | .17 |   |   |
| Gain on sales of  investments, net                                    |       |         | 83         |                         |       |                            | 37         |             |       |   | 22 |   |   |   | .08 |   |   |
| Other, net                                                            |       |         | —     |                         |       |                            | (5         | )                |       |   | (1 | ) |   |   | — |   |   |
| Income tax  adjustments                                               |       |         | —     |                         |       |                            | —     |             |       |   | 34 |   |   |   | .12 |   |   |
| Total non-operating  items                                            |       |         | $          | 83                           |       |                            |       | $                | 103        |   |   |   | $ | 110 |   |   |   | $ | .40 |   |   |

 

The 2006 change in the fair values of derivatives andrelated investments pertained entirely to the Company’s PHONES and related TimeWarner investment. The $11 million non-cash pretax gain resulted primarilyfrom a $66 million increase in the fair value of 16 million shares ofTime Warner common stock, which was partially offset by a $52 millionincrease in the fair value of the derivative component of the Company’s PHONES.

In 2006, the Company recorded a one-time gain of $48million, net of tax, as a result of transactions related to its investments inTMCT, LLC and TMCT II, LLC (see Note 7 to the Company’s consolidatedfinancial statements in Item 8). In addition, the Company sold 2.8 millionshares of Time Warner common stock unrelated to the PHONES for net proceeds of$46 million and recorded a pretax gain on sale of $19 million, andsold its investment in BrassRing for a gain of $17 million.

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Also in 2006, the Company recorded a favorable $34million income tax expense adjustment, most of which related to the Company’sPHONES as a result of reaching an agreement with the Internal Revenue Serviceappeals office pertaining to the deduction of interest expense on the PHONES(see Note 13 to the Company’s consolidated financial statements in Item 8).

Non-operatingitems for 2005 are summarized as follows (in millions, except per sharedata):

| ** **                                                            | ** ** | **Proceeds** | ** ** | **Pretax  Gain** | ** ** | **After-tax  Gain (Loss)** | ** ** | **Diluted  EPS** | ** ** |
|-----------------------------------------------------------------------|------------|--------------|------------|------------------|------------|---------------------------------|------------|------------------|------------|
| Gain on change in  fair values of derivatives and related investments |       |         | $          | —           |       |                            |       | $                | 62         |   |   |   | $ | 38 |   |   |   | $ | .12 |   |   |
| Gain on sales of  investments, net                                    |       |         | 17         |             |       |                            | 7          |             |       |   | 4 |   |   |   | .01 |   |   |
| Other, net                                                            |       |         | 5          |             |       |                            | 1          |             |       |   | 1 |   |   |   | .01 |   |   |
| Income tax  adjustments                                               |       |         | —     |             |       |                            | —     |             |       |   | (139 | ) |   |   | (.44 | ) |   |
| Total non-operating  items                                            |       |         | $          | 22               |       |                            |       | $                | 70         |   |   |   | $ | (96 | ) |   |   | $ | (.30 | ) |   |

 

The 2005 change in the fair values of derivatives andrelated investments pertained entirely to the Company’s PHONES and related TimeWarner investment. The $62 million non-cash pretax gain resulted primarilyfrom an $87 million decrease in the fair value of the derivative componentof the Company’s PHONES, which was partially offset by a $23 milliondecrease in the fair value of 16 million shares of Time Warner commonstock.

As a result of the United States Tax Court opinionissued on Sept. 27, 2005 related to the Matthew Bender tax dispute, theCompany recorded additional income tax expense of $150 million in thethird quarter of 2005 (see Note 13 to the Company’s consolidated financialstatements in Item 8). In the first quarter of 2005, the Company reducedits income tax expense and liabilities by a total of $12 million as aresult of favorably resolving certain other federal income tax issues.

Non-operatingitems for 2004 are summarized as follows (in millions, except per sharedata):

| ** **                                                            | ** ** | **Proceeds** | ** ** | **Pretax  Gain (Loss)** | ** ** | **After-tax  Gain (Loss)** | ** ** | **Diluted  EPS** | ** ** |
|-----------------------------------------------------------------------|------------|--------------|------------|------------------------------|------------|---------------------------------|------------|------------------|------------|
| Loss on change in  fair values of derivatives and related investments |       |         | $          | —                       |       |                            |       | $                | (18        | ) |   |   | $ | (11 | ) |   |   | $ | (.03 | ) |   |
| Loss on early  debt retirement                                        |       |         | —     |                         |       |                            | (141       | )                |       |   | (87 | ) |   |   | (.26 | ) |   |
| Gain on sales of  investments, net                                    |       |         | 24         |                         |       |                            | 20         |             |       |   | 12 |   |   |   | .03 |   |   |
| Other, net                                                            |       |         | 16         |                         |       |                            | (6         | )                |       |   | (4 | ) |   |   | (.02 | ) |   |
| Total non-operating  items                                            |       |         | $          | 40                           |       |                            |       | $                | (145       | ) |   |   | $ | (90 | ) |   |   | $ | (.28 | ) |   |

 

The 2004 change in the fair values of derivatives andrelated investments pertained entirely to the Company’s PHONES and related TimeWarner investment. The $18 million non-cash pretax loss resulted from a$39 million increase in the fair value of the derivative component of theCompany’s PHONES, which was partially offset by a $21 million increase inthe fair value of 16 million shares of Time Warner common stock.

In 2004, the Company redeemed all of its outstanding$400 million ($396 million net of unamortized discount) 7.45%debentures due 2009 and retired $66 million ($64 million net ofunamortized discount) of its 7.25% debentures due 2013 and $165 million($160 million net of unamortized discount) of its 6.61% debentures due2027 through cash tender offers. The Company paid approximately$760 million to retire this debt and, as a result, recorded a one-time,pretax loss of $141 million in 2004. The Company funded these transactionswith cash and the issuance of commercial paper.

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The 2004 gain on sales ofinvestments related primarily to the sale of the Company’s 50% interest in *La Opinión* for $20 million, resultingin a pretax gain of $18 million.

**OTHER DEVELOPMENTS**

In February 2004, a purported class actionlawsuit was filed in New York Federal Court by certain advertisers of *Newsday* and *Hoy*, New York, alleging that they were overcharged foradvertising as a result of inflated circulation numbers at these twopublications. The purported class action also alleges that entities that paid a*Newsday* subsidiary to deliveradvertising flyers were overcharged. In July 2004, another lawsuit wasfiled in New York Federal Court by certain advertisers of *Newsday* alleging damages resulting frominflated *Newsday* circulationnumbers as well as federal and state antitrust violations. The Company isvigorously defending these suits.

On June 17, 2004, the Company publicly disclosedthat it would reduce its reported circulation for both *Newsday* and *Hoy*, New York for the 12-month period endingSept. 30, 2003 and the six-month period ending March 31, 2004. Thecirculation adjustments were the result of a review of reported circulation at *Newsday* and *Hoy*, New York, conducted by the Company’s internalaudit staff and the Audit Bureau of Circulations (“ABC”). Subsequent to the June 17th disclosure, the Company continued its internalreview and found additional misstatements for these time periods, as well asmisstatements that impacted the 12-month period ending Sept. 30, 2002.On Sept. 10, 2004, the Company announced additional revisions to thecirculation figures for *Newsday*and *Hoy*, New York, for the 12-monthperiod ending Sept. 30, 2003 and the six-month period ending March 31,2004.

As a result of misstatements of reported circulationat *Newsday* and *Hoy*, New York, the Company recorded atotal pretax charge of $90 million in 2004 as its estimate of the probablecost to settle with advertisers. The Company will continue to evaluate theadequacy of this charge on an ongoing basis (see Note 4 to the Company’sconsolidated financial statements in Item 8).

In addition to the advertiser lawsuits, several classaction and shareholder derivative suits were filed against the Company andcertain of its current and former directors and officers as a result of thecirculation misstatements at *Newsday*and *Hoy*, New York. Thesesuits alleged breaches of fiduciary duties and other managerial and directorfailings under Delaware law, the federal securities laws and ERISA. Theconsolidated shareholder derivative suit filed in Illinois state court inChicago was dismissed with prejudice on March 10, 2006, and the dismissalis currently being appealed to the Illinois State Court of Appeals. Theconsolidated securities class action lawsuit and the consolidated ERISA classaction lawsuit filed in Federal District Court in Chicago were both dismissedwith prejudice on Sept. 29, 2006, and the dismissals are currently beingappealed to the United States Court of Appeals for the Seventh Circuit. The Companybelieves these suits are without merit and will continue to vigorously defendthem.

On May 30, 2006, the Securities and ExchangeCommission (“SEC”) concluded its inquiry into circulation practices at *Newsday*and *Hoy*, New York. In closing its inquiry, the SEC orderedthe Company to cease and desist from violating statutory provisions related toits record keeping and reporting. No fines or other sanctions were leviedagainst the Company. The Company consented to the order without admitting ordenying any of the Commission’s findings. The SEC acknowledged the promptinternal investigation and remedial acts undertaken by the Company and thecooperation the Company afforded the Commission’s staff throughout itsinvestigation.

The United States Attorney for the Eastern District ofNew York and the Nassau County District Attorney are continuing theirinquiries into the circulation practices at *Newsday*and *Hoy*, New York. To date,nine former employees and contractors of *Newsday*and *Hoy,*New York, havepleaded guilty to various criminal charges in connection with the fraudulentcirculation practices uncovered by the Company. The Company is cooperatingfully with these inquiries. At the date of this report, the Company cannotpredict with certainty the outcome of these inquiries.

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**RESULTS OFOPERATIONS**

The Company’s fiscal yearends on the last Sunday in December. Fiscal year 2006 ended on Dec. 31,2006 and encompassed 53 weeks, while fiscal years 2005 and 2004 eachencompassed 52 weeks. For 2006, the additional week increased consolidatedoperating revenues and operating expenses by approximately 1.5% andconsolidated operating profit by approximately 2%.

**Consolidated**

TheCompany’s consolidated operating results for 2006, 2005 and 2004 are shown inthe table below.

| ** **                                                                                     | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Change** | ** ** |
|------------------------------------------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|
| **(in millions, except per share data)**                              | ** ** | **2006**   | ** ** | **2005**   | ** ** | **2004**   | ** ** | **06-05**  | ** ** | **05-04** | ** ** |
| Operating  revenues                                                                            |       | $          | 5,518      |       | $          | 5,511      |       | $          | 5,631      |   | — |   | -      2 | % |
| Operating  profit(1)                                                                           |       | $          | 1,085      |       | $          | 1,127      |       | $          | 1,187      |   | -      4 | % | -      5 | % |
| Net income on  equity investments(2)                                                           |       | $          | 81         |       | $          | 41         |       | $          | 18         |   | +   96 | % | + 130 | % |
| Net Income:                                                                                    |       |       |       |       |       |       |       |       |       |   |   |
| Income from continuing operations before cumulative  effect of change in accounting  principle |       | $          | 661        |       | $          | 523        |       | $          | 554        |   | +   26 | % | -      6 | % |
| Income (loss) from discontinued operations, net of  tax(3)                                     |       | (67        | )          | 12         |       | 19         |       | *          |       | -    37 | % |
| Cumulative effect of change in accounting principle,  net of tax(4)                            |       | —     |       | —     |       | (18        | )          | —     |       | * |   |
| Net income                                                                                     |       | $          | 594        |       | $          | 535        |       | $          | 555        |   | +   11 | % | -      4 | % |
| Diluted earnings per  share:                                                                   |       |       |       |       |       |       |       |       |       |   |   |
| Continuing operations before cumulative effect of  change in accounting principle              |       | $          | 2.39       |       | $          | 1.63       |       | $          | 1.67       |   | +   47 | % | -      2 | % |
| Discontinued operations(3)                                                                     |       | (.24       | )          | .04        |       | .06        |       | *          |       | -    33 | % |
| Cumulative effect of change in accounting principle,  net of tax(4)                            |       | —     |       | —     |       | (.05       | )          | —     |       | * |   |
| Net income                                                                                     |       | $          | 2.14       |       | $          | 1.67       |       | $          | 1.67       |   | +   28 | % | — |   |

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(1)       Operating profit excludesinterest and dividend income, interest expense, equity income and losses,non-operating items and income taxes. Operating profit in 2006 includes $32million of stock-based compensation expense, a charge of $20 million forseverance and other payments associated with the new union contracts atNewsday, a charge of $9 million for the elimination of approximately 400positions at publishing, a charge of $4 million for the disposition of a pressat the *Los Angeles Times* San FernandoValley printing facility, a gain of $7 million related to real property salesin Publishing and a gain of $7 million related to the sale of the corporateairplane. Operating profit in 2005 includes $22 million of expensesrelated to the shutdown of the San Fernando Valley printing facility,$45 million of severance charges for the elimination of approximately 900positions, primarily in publishing, and a pension curtailment gain of$18 million. Operating profit in 2004 includes $90 million of chargesrelated to anticipated settlements with advertisers regarding misstatedcirculation at *Newsday* and *Hoy*, New York, and $41 million ofcharges related to the elimination of approximately 600 publishing positions.

(2)       Net income on equityinvestments for 2006 included the Company’s $5.9 million share of a one-timefavorable income tax adjustment at CareerBuilder.

(3)       In June 2006, theCompany announced agreements to sell its Atlanta and Albany televisionstations. The sale of the Atlanta station closed in August. In September 2006,the Company announced an agreement to sell its Boston television station. Thesales of the Albany and Boston stations closed in December 2006. Operatingresults for these stations have been reported as discontinued operations.

(4)       Referto Note 1 to the Company’s consolidated financial statements inItem 8 for further discussion.

*               Notmeaningful

**Earnings Per Share (“EPS”)—****Diluted** EPS was$2.14 in 2006 compared to $1.67 in 2005. Diluted EPS from continuing operationsin 2006 was $2.39, up from $1.63 in 2005. The 2006 results included a net non-

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operating gain of $.40 per diluted share, a charge of$.07 per diluted share as a result of the adoption of the new accountingstandard for stock-based compensation, a charge of $.04 per diluted share forseverance and other payments associated with the new union contracts atNewsday, a charge of $.02 per diluted share for the elimination ofapproximately 400 positions at publishing, a charge of $.01 per diluted sharefor the disposition of a press at the *LosAngeles**Times* San FernandoValley printing facility, a gain of $.02 per diluted share related to realproperty sales in publishing, a gain of $.02 per diluted share related to thesale of the corporate airplane, and a gain of $.01 per diluted share related tothe Company’s share of a one-time favorable income tax adjustment recorded atCareerBuilder. Diluted EPS from continuing operations in 2005 was $1.63,compared to $1.67 in 2004 before the cumulative effect of a change inaccounting principle. The 2005 results included a net non-operating loss of$.30 per diluted share, a charge of $.04 per diluted share for theshutdown of the San Fernando Valley printing facility, severance charges of$.09 per diluted share for the elimination of approximately 900 positions,primarily in publishing, and a pension curtailment gain of $.03 per dilutedshare as a result of the Company’s replacement of certain defined benefit planswith a defined contribution plan. The 2004 results included a net non-operatingloss of $.28 per diluted share, a charge of $.17 per diluted sharerelated to the anticipated settlement with advertisers regarding misstatedcirculation at *Newsday* and *Hoy*, New York, a charge of $.07 perdiluted share for the elimination of approximately 600 positions in thepublishing group and a one-time charge of $.05 per diluted share for thecumulative effect of a change in accounting principle related to early adoptionof FASB’s Emerging Issues Task Force Topic No. D-108, which coversthe use of a direct valuation method for intangible assets such as FCClicenses.

The Company incurred a loss from discontinuedoperations of $.24 per diluted share in 2006. In 2005 and 2004, income fromdiscontinued operations was $.04 per diluted share and $.06 per diluted share,respectively.

**Operating Revenuesand Profit—****Consolidated**operating revenues,depreciation and amortization expense, and operating profit by business segmentwere as follows:

| ** **                                   | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Change** | ** ** |
|----------------------------------------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|
| **(in millions)**                       | ** ** | **2006**   | ** ** | **2005**   | ** ** | **2004**   | ** ** | **06-05**  | ** ** | **05-04** | ** ** |
| **Operating  revenues**                      |       |       |       |       |       |       |       |       |       |   |   |
| Publishing                                   |       | $          | 4,093      |       | $          | 4,097      |       | $          | 4,130      |   | — |   | -  1% |   |
| Broadcasting and entertainment               |       | 1,425      |       | 1,414      |       | 1,501      |       | + 1%       |       | -  6% |   |
| Total operating  revenues                    |       | $          | 5,518      |       | $          | 5,511      |       | $          | 5,631      |   | — |   | -  2% |   |
| **Depreciation  and amortization expense**   |       |       |       |       |       |       |       |       |       |   |   |
| Publishing(1)                                |       | $          | 174        |       | $          | 191        |       | $          | 179        |   | -  9% |   | + 7% |   |
| Broadcasting and entertainment               |       | 51         |       | 48         |       | 49         |       | + 6%       |       | -  2% |   |
| Corporate expenses                           |       | 2          |       | 2          |       | 2          |       | - 15%      |       | — |   |
| Total  depreciation and amortization expense |       | $          | 227        |       | $          | 241        |       | $          | 230        |   | -  6% |   | + 5% |   |
| **Operating  profit (loss)(2)**              |       |       |       |       |       |       |       |       |       |   |   |
| Publishing                                   |       | $          | 749        |       | $          | 760        |       | $          | 726        |   | -  1% |   | + 5% |   |
| Broadcasting and entertainment               |       | 392        |       | 417        |       | 513        |       | -  6% |       | - 19% |   |
| Corporate expenses                           |       | (56        | )          | (49        | )          | (52        | )          | - 13%      |       | + 5% |   |
| Total operating profit                       |       | $          | 1,085      |       | $          | 1,127      |       | $          | 1,187      |   | -  4% |   | -  5% |   |

----

(1)       Depreciationand amortization expense for 2005 included $16 million of accelerateddepreciation related to the shutdown of the San Fernando Valley printingfacility.

(2)       Operatingprofit (loss) for each segment excludes interest and dividend income, interestexpense, equity income and loss, non-operating items and income taxes.

47

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Consolidated operating revenues were essentially flatat $5.5 billion in 2006 as a decrease in publishing revenues was offset by anincrease in broadcasting and entertainment revenues. Consolidated operatingrevenues decreased 2%, or $120 million, in 2005 due to declines inpublishing and broadcasting and entertainment revenues.

Consolidated operating profit decreased 4%, or $42million, in 2006. Publishing operating profit decreased 1%, or $11 million, in2006. Publishing operating profit in 2006 included $15 million of stock-basedcompensation expense, a $20 million charge for severance and other paymentsassociated with the new union contracts at Newsday, a $9 million severancecharge for the elimination of approximately 400 positions, a $4 million chargefor the disposition of a press at the San**FernandoValley printing facility, and a $7 million gain related to real property sales.Publishing operating profit in 2005 included a $22 million charge for the shutdownof the San Fernando Valley printing facility, a $43 million severancecharge for the elimination of over 800 positions and a pension curtailment gainof $13 million. Broadcasting and entertainment operating profit decreased6%, or $25 million, primarily due to higher programming and compensationexpenses, partially offset by higher revenues.

Consolidated operating profit decreased 5%, or$60 million, in 2005. Publishing operating profit rose 5%, or$34 million, in 2005. Publishing operating profit in 2005 included a$22 million charge for the shutdown of the *Los Angeles Times* San Fernando Valley printing facility, a$43 million charge for the elimination of over 800 positions and a pensioncurtailment gain of $13 million. In 2004, publishing operating profitincluded a $90 million charge related to the anticipated settlement withadvertisers regarding misstated circulation at *Newsday*and *Hoy*, New York and a$41 million charge for the elimination of approximately 600 positions.Broadcasting and entertainment operating profit decreased 19%, or $96 million,in 2005 primarily due to decreased television revenues and increasedcompensation and programming expenses, partially offset by a rise in ChicagoCubs revenues.

**OperatingExpenses—****Consolidated**operating expenseswere as follows:

| ** **                                      | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Change** | ** ** |
|-------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|
| **(in millions)**                          | ** ** | **2006**   | ** ** | **2005**   | ** ** | **2004**   | ** ** | **06-05**  | ** ** | **05-04** | ** ** |
| Cost of sales  (exclusive of items shown below) |       | $          | 2,737      |       | $          | 2,696      |       | $          | 2,669      |   | + 2% |   | + 1% |   |
| Selling, general  and administrative            |       | 1,469      |       | 1,447      |       | 1,545      |       | + 2%       |       | - 6% |   |
| Depreciation and  amortization                  |       | 227        |       | 241        |       | 230        |       | - 6%       |       | + 5% |   |
| Total operating expenses                        |       | $          | 4,433      |       | $          | 4,384      |       | $          | 4,444      |   | + 1% |   | - 1% |   |

 

Cost of sales increased 2%, or $41 million, in 2006primarily due to increases in programming, newsprint and ink, and circulationdistribution expenses, partially offset by a decrease in compensation expense.Programming expenses increased 7%, or $22 million, primarily due to higherbroadcast rights amortization. Newsprint and ink expense was up 3%, or $17million. The Company’s newspapers have transitioned to lighter weight newsprintthat on a per ton basis, costs more, but yields more pages. On a same-weightbasis, average newsprint cost per metric ton increased 10% and consumptiondeclined 6% in 2006. Circulation distribution expense increased 5%, or $23million, primarily due to higher mailed preprint advertising postage expensesresulting from higher postage rates and increased volume. Compensation expensedecreased 2%, or $21 million, mainly due to the impact of position eliminationsin 2006 and 2005.

Cost of sales increased 1%, or $27 million, in2005 primarily due to higher newsprint and ink and outside services expense,partially offset by a decline in circulation distribution expense. Compensationexpense was flat compared with 2004. Newsprint and ink expense was up 3%, or$14 million, in 2005, due to a 16% increase in newsprint costs perton, partially offset by an 11% drop in consumption. Outside servicesexpense increased 11%, or $18 million, in 2005 due largely to higher legal feesand outside printing costs. Programming expenses were flat compared to 2004.Circulation distribution expense declined 1%, or 

48

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$5 million, primarilydue to lower payments to outside contractors as a result of circulation volumedeclines.

Selling, general and administrative expenses (“SG&A”)expenses were up 2%, or $22 million, in 2006. Compensation expense increased5%, or $34 million, in 2006. Compensation expense in 2006 included $32 millionof stock-based compensation, a $20 million charge for severance and otherpayments associated with the new union contracts at Newsday and a $9 millionseverance charge for the elimination of approximately 400 positions atpublishing. Compensation expense in 2005 included a $45 million severancecharge for the elimination of approximately 900 positions and a pensioncurtailment gain of $18 million. Promotion expense decreased 4%, or $4million, due to the Company’s efforts to reduce costs in 2006. SG&A expensein 2006 also included a $7 million gain on real property sales in Publishingand a $7 million gain related to the sale of the corporate airplane.

SG&A expenses were down 6%, or $98 million,in 2005. Compensation expense decreased 1%, or $5 million, in 2005.Compensation expense in 2005 included a $45 million severance charge forthe elimination of approximately 900 positions and a pension curtailment gainof $18 million, while 2004 compensation expense included a$41 million severance charge for the elimination of about 600 positions inpublishing. Circulation expense decreased 6%, or $7 million, in 2005.Other SG&A expenses declined $81 million in 2005. Other SG&Aexpenses in 2004 included a charge of $90 million related to theanticipated settlement with advertisers regarding misstated circulation at *Newsday* and *Hoy*, New York.

The decrease in depreciationand amortization of intangible assets in 2006 and the increase in 2005 isprimarily due to $16 million of accelerated depreciation in 2005 related to theshutdown of the *Los Angeles Times*San Fernando Valley printing facility.

**Publishing**

For 2006, the additional week increased publishingadvertising revenues, circulation revenues, other operating revenues, andoperating profit by approximately 2%, and increased operating expenses byapproximately 1.5%.

**Operating Revenues andProfit—****In**2006, publishing contributed74% of the Company’s revenues and 69% of its operating profits. Daily newspaperrevenue is derived principally from advertising and circulation sales, whichaccounted for 80% and 14%, respectively, of the publishing segments totalrevenues in 2006. Advertising revenue is comprised of three basic categories:retail, national and classified. Newspaper advertising volume is categorized asfull run inches, part run inches or preprint pieces. Circulation revenueresults from the sale of newspapers. Other publications/services revenueaccounted for 6% of the segment’s total revenues in 2006 and includessyndication of editorial products, advertising placement services, direct mailoperations, cable television news programming, distribution of entertainmentlistings and other publishing-related activities.

Explanations of certainadvertising types used in this discussion are as follows:

| Retail:          |   | Display or preprint  advertising from local retailers, such as department stores                                                                                  |
|------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| National:        |   | Display or preprint  advertising by national advertisers that promote products or brand names on a  nation-wide basis                                             |
| Classified:      |   | Local advertising listed  together and organized by type (including help wanted, real estate and  automotive) and display advertisements in these same categories |
| Full run inches: |   | Advertising appearing in  all editions of a newspaper                                                                                                             |

49

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| Part run inches: |   | Advertising appearing in  only select editions or zones of a newspaper’s market |
|-----------------------|--------|--------------------------------------------------------------------------------------|
| Preprint pieces:      |   | Advertising supplements prepared by advertisers and  inserted into a newspaper       |

 

Thetable below presents publishing operating revenues, operating expenses andoperating profit:

| ** **             | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Change** | ** ** |
|------------------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|
| **(in millions)** | ** ** | **2006**   | ** ** | **2005**   | ** ** | **2004**   | ** ** | **06-05**  | ** ** | **05-04** | ** ** |
| Operating  revenues    |       | $          | 4,093      |       | $          | 4,097      |       | $          | 4,130      |   | — |   | -    1 | % |
| Operating  expenses    |       | 3,344      |       | 3,337      |       | 3,404      |       | —     |       | -    2 | % |
| Operating profit       |       | $          | 749        |       | $          | 760        |       | $          | 726        |   | -    1 | % | +   5 | % |

 

Publishing operating revenues in 2006 were essentiallyflat at $4.1 billion as an increase in advertising revenue was offset by a decreasein circulation revenue. The largest increases in advertising revenue were atOrlando and South Florida while the biggest declines in circulation revenueswere at Chicago, Los Angeles and Baltimore. Publishing operating revenuesin 2005 decreased 1% to $4.1 billion, down $33 million from 2004, duemainly to lower circulation revenue in Los Angeles, Chicago and New York.

Operating profit decreased 1%, or $11 million, in2006. For 2006, publishing operating profit included $15 million of stock-basedcompensation expense, a $20 million charge for severance and other paymentsassociated with the new union contracts at Newsday, a $9 million severancecharge for the elimination of approximately 400 positions, a $4 million chargefor the disposition of a press at the *LosAngeles Times*San* *FernandoValley printing facility, and a $7 million gain related to real property sales.Operating profit increased 5%, or $34 million, in 2005 primarily due tolower one-time charges. For 2005, publishing operating profit included a$22 million charge for the shutdown of the San Fernando Valley printingfacility, $43 million of severance charges for the elimination of over 800positions and a $13 million pension curtailment gain as a result ofchanges to the retirement programs at the Company. For 2004, publishingoperating profit included a $90 million charge related to the anticipatedsettlement with advertisers regarding misstated circulation at *Newsday* and *Hoy*, New York, for the periods of September 2001through March 2004. Operating profit for 2004 also included a$41 million severance charge for the elimination of about 600 positions.

**OperatingRevenues—****Total**operating revenues wereessentially flat in 2006 and decreased 1% in 2005 compared to 2004. Totalpublishing operating revenues, by classification, were as follows:

| ** **                | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Change** | ** **   |
|---------------------------|------------|------------|------------|------------|------------|------------|------------|------------|--------------|
| **(in millions)**    | ** ** | **2006**   | ** ** | **2005**   | ** ** | **2004**   | ** ** | **06-05**  | ** **   | **05-04** | ** ** |
| Advertising               |       |       |       |       |       |       |       |       |         |   |   |   |   |   |   |
| Retail                    |       | $          | 1,344      |       | $          | 1,324      |       | $          | 1,331        |   |   | +** **2 | % |   |   | -** **1 | % |   |
| National                  |       | 737        |       | 774        |       | 803        |       |       | -** **5 | % |   |   | -** **4 | % |   |
| Classified                |       | 1,179      |       | 1,146      |       | 1,095      |       |       | +** **3 | % |   |   | +** **5 | % |   |
| Total advertising         |       | 3,260      |       | 3,244      |       | 3,229      |       |       | —       |   |   |   | — | % |   |
| Circulation               |       | 575        |       | 596        |       | 644        |       |       | -** **4 | % |   |   | -** **7 | % |   |
| Other                     |       | 258        |       | 257        |       | 257        |       |       | —       |   |   |   | — |   |   |
| Total operating  revenues |       | $          | 4,093      |       | $          | 4,097      |       | $          | 4,130        |   |   | — |   |   |   | -** **1 | % |   |

 

**Advertising Revenue andVolume—****Total**advertising revenues wereessentially flat in 2006 compared to 2005. Retail advertising revenues were up2%, or $20 million, primarily due to increases in the hardware/home improvementstores, amusements and personal services categories, partially offset by adecrease in the department store category. Preprint revenues, which areprimarily included in retail 

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advertising, rose 1%, or$8 million, due to increases at Chicago, Los Angeles, Orlando, Baltimore andHartford, partially offset by a decrease at Newsday. National advertisingrevenues decreased 5%, or $37 million, primarily due to decreases in theauto, movies and resorts categories, partially offset by increases in the mediaand health care categories. Classified advertising revenues increased 3%, or$33 million, in 2006, with an increase in real estate of 23%, partiallyoffset by decreases in automotive and help wanted of 10% and 2%, respectively.Interactive revenues, which are included in the above categories, increased29%, or $51 million, in 2006.

Total advertising revenues were essentially flat in2005 compared to 2004. Retail advertising revenues were down 1%, or$7 million, for the year as decreases in the department stores, food &drug stores, electronics and furniture/home furnishings categories werepartially offset by increases in the hardware/home improvement and other retailcategories. Preprint revenues, which are primarily included in retailadvertising, rose 2%, or $15 million, due to increases at Los Angeles andChicago, partially offset by a decrease at Newsday. National advertising revenuedecreased 4%, or $29 million, in 2005 as decreases in the wireless,transportation, technology and movies categories were offset by an increase inthe financial category. Classified advertising revenues increased 5%, or$51 million, in 2005 due to increases in real estate and help wanted of15% and 13%, respectively, partially offset by an 8% decrease in auto.Interactive revenues, which are included in the above categories, increased43%, or $53 million, in 2005.

Advertisingvolume data for 2006, 2005 and 2004 was as follows:

| ** **                             | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Change** | ** **   |
|----------------------------------------|------------|------------|------------|------------|------------|------------|------------|------------|--------------|
| **Inches (in thousands)**    | ** ** | **2006**   | ** ** | **2005**   | ** ** | **2004**   | ** ** | **06-05**  | ** **   | **05-04** | ** ** |
| Full run inches                        |       |       |       |       |       |       |       |       |         |   |   |   |   |   |   |
| Retail                                 |       | 6,119      |       | 5,980      |       | 6,200      |       |       | +** **2 | % |   |   | -** **4 | % |   |
| National                               |       | 3,457      |       | 3,774      |       | 3,998      |       |       | -** **8 | % |   |   | -** **6 | % |   |
| Classified                             |       | 10,154     |       | 10,023     |       | 10,265     |       |       | +** **1 | % |   |   | -** **2 | % |   |
| Total full run  inches                 |       | 19,730     |       | 19,777     |       | 20,463     |       |       | —       |   |   |   | -** **3 | % |   |
| Part run  inches                  |       | 21,217     |       | 20,112     |       | 20,575     |       |       | +** **5 | % |   |   | -** **2 | % |   |
| Total inches                           |       | 40,947     |       | 39,889     |       | 41,038     |       |       | +** **3 | % |   |   | -** **3 | % |   |
| **Preprint pieces (in millions)** |       | 14,929     |       | 14,929     |       | 14,680     |       |       | —       |   |   |   | +** **2 | % |   |

 

Full run advertising inches were flat in 2006 as adecrease in national advertising inches was offset by increases in retail andclassified advertising inches. Full run retail advertising inches were up 2% in2006 mainly due to increases at *Hoy*and Newsday, partially offset by a decrease at South Florida. Full run nationaladvertising inches were down 8% in 2006 primarily due to decreases at Chicago,Los Angeles, South Florida and Allentown. Full run classified advertisinginches rose 1% in 2006 mainly due to increases at Orlando and Los Angeles,partially offset by decreases at Chicago, Newport News and Newsday. Part runadvertising inches were up 5% in 2006 due to increases at Chicago and LosAngeles, partially offset by decreases at Newsday and Orlando. Preprintadvertising pieces were flat in 2006 as increases at Los Angeles, Orlando andHartford were offset by a decrease at Newsday.

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Full run advertising inches were down 3% in 2005 dueto decreases in all three major advertising categories. Full run retailadvertising inches were down 4% mainly due to decreases at Southern Connecticutand Baltimore, partially offset by increases at Orlando and *Hoy*. Full run national advertising incheswere down 6% in 2005 primarily due to decreases at Los Angeles, Orlando,Hartford and Baltimore. Full run classified advertising inches fell 2% for theyear due to declines at South Florida, Baltimore, *Hoy* and Los Angeles, partially offset by an increase atOrlando. Part run advertising inches were down 2% in 2005 due to adecrease at Los Angeles, partially offset by an improvement at Newsday.Preprint advertising pieces rose 2% for the year due to increases at LosAngeles and Chicago, partially offset by a decrease at Newsday.

**Circulation Revenues—****Circulation**revenueswere down 4% in 2006 and 7% in 2005, primarily due to selective home deliverydiscounting and volume declines. The largest revenue declines in 2006 were atChicago, Los Angeles and Baltimore. The largest revenue declines in 2005 wereat Los Angeles, Chicago and Newsday.

**Other Revenues—****Other**revenues arederived 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 newsprogramming; distribution of entertainment listings; and other publishing-relatedactivities. Other revenues were flat in both 2006 and 2005 compared to 2004.

**Operating Expenses—****Operating**expensesfor 2006, 2005 and 2004 were as follows:

| ** **                          | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Change** | ** ** |
|-------------------------------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|
| **(in millions)**              | ** ** | **2006**   | ** ** | **2005**   | ** ** | **2004**   | ** ** | **06-05**  | ** ** | **05-04** | ** ** |
| Compensation                        |       | $          | 1,387      |       | $          | 1,396      |       | $          | 1,410      |   |   | -1 | % |   |   | -1 | % |   |
| Newsprint and ink                   |       | 508        |       | 491        |       | 477        |       |       | +3         | % |   |   | +3 | % |   |
| Circulation distribution            |       | 485        |       | 462        |       | 474        |       |       | +5         | % |   |   | -2 | % |   |
| Outside services                    |       | 322        |       | 310        |       | 289        |       |       | +4         | % |   |   | +7 | % |   |
| Promotion                           |       | 105        |       | 109        |       | 110        |       |       | -4         | % |   |   | -1 | % |   |
| Depreciation and  amortization      |       | 174        |       | 191        |       | 179        |       |       | -9         | % |   |   | +7 | % |   |
| *Newsday***and*Hoy,*New York charge |       | —     |       | —     |       | 90         |       |       | —     |   |   |   | * |   |   |
| Other                               |       | 363        |       | 378        |       | 375        |       |       | -4         | % |   |   | +1 | % |   |
| Total operating expenses            |       | $          | 3,344      |       | $          | 3,337      |       | $          | 3,404      |   |   | — |   |   |   | -2 | % |   |

----

*               Not meaningful

Publishing operating expenses were flat in 2006.Compensation expense decreased 1%, or $9 million, in 2006 primarily due to a 5%(1,000 full-time equivalent positions) reduction in staffing. Compensationexpense in 2006 included a $20 million charge related to the new unioncontracts at Newsday, $15 million of stock-based compensation expense and a $9million charge for the elimination of 400 positions. Compensation expense in2005 included $43 million of severance charges for the elimination of over 800 positionsand a $13 million pension curtailment gain. Newsprint and ink expense was up3%, or $17 million, for 2006. The Company’s newspapers have transitioned tolighter weight newsprint that on a per ton basis costs more, but yields morepages. On a same-weight basis, average newsprint cost per metric ton increased10% and consumption declined 6% in 2006. Circulation distribution expenseincreased 5%, or $23 million, primarily due to higher mailed preprintadvertising postage expenses resulting from higher postage rates and increasedvolume. Outside services expense was up 4%, or $12 million, in 2006 due largelyto higher outside printing costs. Promotion expense decreased 4%, or $4million, due to the Company’s efforts to reduce costs in 2006. Depreciation andamortization expense decreased 9%, or $17 million, primarily due to $16million of accelerated depreciation in 2005 related to the shutdown of the *Los**AngelesTimes’* San Fernando Valley printing facility. Other expenses for2006 included a $4 million charge for the disposition of a press at theSan Fernando Valley printing facility and a $7 million gain on realproperty sales.

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Publishing operatingexpenses decreased 2%, or $67 million, in 2005 primarily due to theabsence of the *Newsday* and *Hoy*, New York charge and a decrease incompensation and circulation distribution expenses, partially offset byincreases in newsprint and ink, depreciation and amortization expense.Compensation expense decreased 1%, or $14 million, in 2005, primarily dueto the $13 million pension curtailment gain. The Company recorded$43 million of severance charges for the elimination of over 800 positionsin 2005 and $41 million of severance charges for the elimination of about600 positions in 2004. Newsprint and ink expense was up 3%, or$14 million, in 2005, as newsprint cost per ton increased 16%, whileconsumption decreased 11%. The Company’s newspapers were transitioning tolighter weight newsprint in 2005. The increase in newsprint cost per tonreflects increased market prices and the higher cost of lighter weight paper.Circulation distribution expense declined 2%, or $12 million, due to lowerpayments to outside contractors primarily as a result of circulation volumedeclines. Outside services expense rose 7%, or $21 million, in 2005 due largelyto higher legal fees and outside printing costs. Depreciation and amortizationexpense increased 7%, or $12 million, primarily due to $16 million ofaccelerated depreciation as a result of the shutdown of the San Fernando Valleyprinting facility. Publishing operating expenses in 2004 included a charge of$90 million related to the anticipated settlement with advertisers regardingmisstated circulation at *Newsday*and *Hoy*, New York.

**Broadcasting andEntertainment**

For 2006, the additional week increased operatingrevenues, operating expenses and operating profit by approximately 1%.

**Operating Revenues andProfit—****In******2006,broadcasting and entertainment contributed 26% of the Company’s revenues and36% of its operating profits. The following table presents broadcasting andentertainment operating revenues, operating expenses and operating profit fortelevision and radio/entertainment. The Company’s broadcasting operations atthe end of 2006 included 23 television stations. Radio/entertainmentincludes WGN-AM, Chicago, Tribune Entertainment and the Chicago Cubs.

| ** **                | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Change** | ** ** |
|---------------------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|
| **(in millions)**    | ** ** | **2006**   | ** ** | **2005**   | ** ** | **2004**   | ** ** | **06-05**  | ** ** | **05-04** | ** ** |
| **Operating  revenues**   |       |       |       |       |       |       |       |       |       |   |   |   |   |
| Television                |       | $          | 1,178      |       | $          | 1,165      |       | $          | 1,259      |   |   | +1 | % |   | -7% |   |
| Radio/entertainment       |       | 247        |       | 249        |       | 243        |       |       | -1         | % |   | +2% |   |
| Total operating  revenues |       | $          | 1,425      |       | $          | 1,414      |       | $          | 1,501      |   |   | +1 | % |   | -6% |   |
| **Operating expenses**    |       |       |       |       |       |       |       |       |       |   |   |   |   |
| Television                |       | $          | 820        |       | $          | 782        |       | $          | 764        |   |   | +5 | % |   | +2% |   |
| Radio/entertainment       |       | 213        |       | 215        |       | 225        |       |       | -1         | % |   | -4% |   |
| Total operating  expenses |       | $          | 1,033      |       | $          | 998        |       | $          | 988        |   |   | +4 | % |   | +1% |   |
| **Operating profit**      |       |       |       |       |       |       |       |       |       |   |   |   |   |
| Television                |       | $          | 358        |       | $          | 383        |       | $          | 495        |   |   | -7 | % |   | -22% |   |
| Radio/entertainment       |       | 34         |       | 33         |       | 18         |       |       | +1         | % |   | +80% |   |
| Total operating profit    |       | $          | 392        |       | $          | 417        |       | $          | 513        |   |   | -6 | % |   | -19% |   |

 

Broadcasting and entertainment revenues increased 1%,or $11 million, in 2006 due to increased television revenues, partially offsetby lower radio/entertainment revenues. Television revenues increased 1%, or $13million, as declines in the retail, restaurant and fast food, health care andpharmacy and automotive categories were offset by increases in the political,telecom, education and movie categories. Radio/entertainment revenues decreased1%, or $2 million, due to lower revenues at Tribune Entertainment, partiallyoffset by increased revenues at the Chicago Cubs. Tribune Entertainment 

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revenues declined due tolower syndication revenues and Chicago Cubs revenues increased as a result ofhigher game receipts, marketing revenues and broadcasting revenues.

Broadcasting and entertainment revenues decreased 6%,or $87 million, in 2005 due mainly to lower television revenues, partiallyoffset by an increase in radio/entertainment revenues. Television revenues decreased7%, or $94 million, in 2005 due to lower advertising revenues. Televisionadvertising revenues reflected weakness in the telecom, automotive, and foodcategories, partially offset by increases in the financial and educationcategories. In addition, station revenues in New York, Los Angeles and Chicago wereimpacted by lower audience ratings due in part to the use of Nielsen’s LocalPeople Meters (“LPMs”) in these markets. Compared to Nielsen’s previousmeasurement methodology, LPMs have tended to reduce the overall share ofbroadcast television in relation to cable television and, within the broadcasttelevision universe, disadvantage stations like Tribune’s that target youngeraudiences. Radio/entertainment revenues increased 2%, or $6 million, in2005 due to an increase at the Chicago Cubs, partially offset by lower revenuesat Tribune Entertainment. Chicago Cubs revenues increased primarily as a resultof growth in marketing and broadcasting revenues, while Tribune Entertainmentrevenues declined due to lower syndication revenues.

Operating profit for broadcasting and entertainmentwas down 6%, or $25 million, in 2006. Television operating profit declined 7%,or $25 million, in 2006 due to higher programming expenses and stock-based compensation,partially offset by higher operating revenues. Radio/entertainment operatingprofit increased 1%, or $1 million, due to higher revenues at the Chicago Cubs,partially offset by reduced revenues at Tribune Entertainment.

Operating profit for broadcasting and entertainmentwas down 19%, or $96 million, in 2005. Television operating profitdeclined 22%, or $112 million, in 2005 due to lower operating revenues andincreased compensation and programming expenses. Radio/entertainment operatingprofit increased 80%, or $15 million, in 2005 due to higher revenues atthe Chicago Cubs and lower operating expenses primarily due to fewer programsin production at Tribune Entertainment.

**Operating Expenses—****Operating**expensesfor 2006, 2005 and 2004 were as follows:

| ** **                     | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Change** | ** ** |
|--------------------------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|
| **(in millions)**         | ** ** | **2006**   | ** ** | **2005**   | ** ** | **2004**   | ** ** | **06-05**  | ** ** | **05-04** | ** ** |
| Compensation                   |       | $          | 417        |       | $          | 412        |       | $          | 402        |   |   | +1 | % |   |   | +2 | % |   |
| Programming                    |       | 352        |       | 330        |       | 330        |       |       | +7         | % |   |   | — |   |   |
| Depreciation and  amortization |       | 51         |       | 48         |       | 49         |       |       | +6         | % |   |   | -2 | % |   |
| Other                          |       | 213        |       | 208        |       | 207        |       |       | +3         | % |   |   | — |   |   |
| Total operating expenses       |       | $          | 1,033      |       | $          | 998        |       | $          | 988        |   |   | +4 | % |   |   | +1 | % |   |

 

Broadcasting and entertainment operating expensesincreased 4%, or $35 million, in 2006 primarily due to an increase incompensation, programming and other expenses. Compensation expense increased1%, or $5 million, due to $5 million of stock-based compensation in 2006.Programming expenses were up 7%, or $22 million, in 2006 due to higherbroadcast rights amortization. Other expenses increased 3%, or $5 million, in2006.

Broadcasting andentertainment operating expenses increased 1%, or $10 million, in 2005primarily due to an increase in compensation expense. Compensation expenseincreased 2%, or $10 million, in 2005 due to higher player compensation atthe Chicago Cubs and increases in television. Depreciation and amortization wasdown 2%, or $1 million, in 2005.

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**Equity Results**

| ** **                        | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Change** | ** ** |
|-----------------------------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|
| **(in millions)**            | ** ** | **2006**   | ** ** | **2005**   | ** ** | **2004**   | ** ** | **06-05**  | ** ** | **05-04** | ** ** |
| Net income on  equity investments |       |       | $          | 81         |       |       |       | $          | 41         |   |   |   | $ | 18 |   |   |   | +96 | % |   | +130% |   |
|                                   |            |            |            |            |            |            |            |            |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

Equity income totaled $81 million in 2006, anincrease of $40 million from 2005. The increase primarily reflectsimprovements at TV Food Network, CareerBuilder and Classified Ventures and theabsence of losses from The WB Network. In addition, equity income for 2006includes the Company’s $6 million share of a one-time favorable income taxadjustment at CareerBuilder.

Equity income totaled$41 million in 2005, an increase of $23 million from 2004. Theincrease primarily reflects improvements at TV Food Network and ComcastSportsNet Chicago. In addition, the Company stopped recording losses for The WBNetwork in the fourth quarter of 2005 as the Company’s recorded investment hadbeen reduced to zero with no future funding requirements.

**Interest and Dividend Income and Interest Expense**

| ** **                    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Change** | ** ** |
|-------------------------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|
| **(in millions)**        | ** ** | **2006**   | ** ** | **2005**   | ** ** | **2004**   | ** ** | **06-05**  | ** ** | **05-04** | ** ** |
| Interest and  dividend income |       | $          | 14         |       | $          | 7          |       | $          | 3          |   |   | +88 | % |   | +147% |   |
| Interest expense              |       | $          | (274       | )          | $          | (155       | )          | $          | (153       | ) |   | +76 | % |   | +1% |   |

 

Interest and dividend income increased to$14 million in 2006, from $7 million in 2005, due to higher averagecash balances, higher interest rates and an increase in Time Warner dividendincome. Interest and dividend income increased to $7 million in 2005, from$3 million in 2004, due to higher cash balances and $1.9 million of TimeWarner dividend income. Time Warner began paying quarterly dividends in September 2005.The Company currently holds 16.3 million shares of Time Warner stock.

Interest expense increased76%, or $119 million, in 2006 primarily due to higher debt levels fromfinancing the share repurchases in the third quarter of 2006 (see Note 9 to theCompany’s consolidated financial statements in Item 8) and higher interestrates. Interest expense increased 1% in 2005 primarily due to new long-termnotes issued in August 2005 and the issuance of commercial paper in September 2005to pay the federal portion of the Matthew Bender and Mosby tax liabilities (seeNote 13 to the Company’s consolidated financial statements inItem 8). Excluding the PHONES, the average debt level was$3.6 billion in 2006, $2.1 billion in 2005 and $2.1 billion in2004. Including the PHONES, average debt levels were $4.2 billion in 2006,$2.6 billion in 2005 and $2.6 billion in 2004. Excluding the PHONES,outstanding debt was $4.4 billion at year-end 2006, $2.8 billion atyear-end 2005 and $2.0 billion at year-end 2004. Including the PHONES,outstanding debt was $5.0 billion at year-end 2006, $3.3 billion atyear-end 2005 and $2.6 billion at year-end 2004.

**Other**

Corporateexpenses for 2006, 2005 and 2004 were as follows:

| ** **             | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Change** | ** ** |
|------------------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|
| **(in millions)** | ** ** | **2006**   | ** ** | **2005**   | ** ** | **2004**   | ** ** | **06-05**  | ** ** | **05-04** | ** ** |
| Corporate  expenses    |       | $          | (56        | )          | $          | (49        | )          | $          | (52        | ) |   | +13 | % |   | -5% |   |
|                        |            |            |            |            |            |            |            |            |            |  |  |  |  |  |  |  |

 

Corporate expenses increased 13%, or $7 million,in 2006 primarily due to $11 million of stock-based compensation expense,partially offset by a $7 million gain related to the sale of the corporateairplane in 2006. Corporate expenses decreased 5%, or $3 million, in 2005compared to 2004 primarily due to a pension curtailment gain of $4 million as aresult of changes to the retirement programs at the Company.

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The effective tax rate onincome from continuing operations in 2006 was 34.5%, compared with a rate of52.1% in 2005 and 39.1% in 2004. The effective tax rates for 2006 and 2005 wereaffected by income tax settlements and adjustments, as well as othernon-operating items (see Note 2 to the consolidated financial statements inItem 8). In 2006, the Company recorded a favorable $34 million income taxexpense adjustment, most of which related to the Company’s PHONES as a resultof reaching an agreement with the Internal Revenue Service appeals officepertaining to the deduction of interest on the PHONES. In the third quarter of2005, the Company recorded additional income tax expense of $150 millionrelated to the Matthew Bender and Mosby tax liabilities (see Note 13 tothe Company’s consolidated financial statements in Item 8). In the firstquarter of 2005, the Company reduced its income tax expense and liabilities by$12 million as a result of favorably resolving certain other federalincome tax issues. In the aggregate, non-operating items lowered the effectivetax rate for 2006 by 4.7 percentage points and increased the effective taxrate in 2005 by 12.7 percentage points.

**DISCONTINUEDOPERATIONS**

On June 5, 2006, the Company announced the saleof WATL-TV, Atlanta to Gannett Co., Inc. for $180 million. The sale closedon Aug. 7, 2006. On June 19, 2006, the Company announced the sale ofWCWN-TV, Albany to Freedom Communications, Inc. for $17 million. The saleclosed on Dec. 6, 2006. On Sept. 14, 2006, the Company announced the saleof WLVI-TV, Boston, to Sunbeam Television Corp. for $113.7 million. The saleclosed on Dec. 19, 2006.

These businesses were considered components of theCompany’s broadcasting and entertainment segment as their operations and cashflows could be clearly distinguished, operationally and for financial reportingpurposes, from the rest of the Company. The operations and cash flows of thesebusinesses have been eliminated from the ongoing operations of the Company as aresult of the sales, and the Company will not have any significant continuinginvolvement in their operations. Accordingly, the results of operations of eachof these businesses have been reported as discontinued operations in theconsolidated statements of income. Prior year consolidated statements of incomehave been reclassified to conform to the current year presentation ofdiscontinued operations.

In conjunction with the sales of WATL-TV, Atlanta andWCWN-TV, Albany, the Company recorded in the second quarter of 2006 a pretaxloss totaling $90 million, including $80 million of allocated television groupgoodwill, to write down the net assets of the stations to estimated fair value,less costs to sell. The Company subsequently reduced the pretax loss on salesof the Atlanta and Albany stations during the third quarter of 2006 by $1million. In addition, the Company recorded in the fourth quarter of 2006 apretax gain of $41 million, including $45 million of allocated television groupgoodwill, for the sale of the Boston station. In accordance with FAS No. 142,“Goodwill and Other Intangible Assets”, the Company aggregates all of itstelevision stations into one reporting unit for goodwill accounting purposes.FAS No. 142 requires the Company to allocate a portion of its totaltelevision group goodwill to stations that are to be sold on a relative fairvalue basis. The net pretax loss on sales of the three stations sold during2006 was $48 million, including $125 million of allocated television groupgoodwill.

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Selectedfinancial information related to discontinued operations is summarized asfollows (in millions, except per share data):

| ** **                                                      | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|-----------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Operating  revenues                                             |       |     | $          | 65       |       |     |       | $ | 84 |   |   |   | $ | 95 |   |   |
| Operating profit(1)                                             |       |     | $          | 2        |       |     |       | $ | 20 |   |   |   | $ | 31 |   |   |
| Loss on sales of  discontinued operations                       |       |     | (48        | )        |       |     | —     |   |   |   | — |   |   |
| Income (loss)  from discontinued operations before income taxes |       |     | (46        | )        |       |     | 20         |   |   |   | 31 |   |   |
| Income taxes(2)                                                 |       |     | (21        | )        |       |     | (8         | ) |   |   | (12 | ) |   |
| Income (loss)  from discontinued operations, net of tax         |       |     | $          | (67      | )          |     |       | $ | 12 |   |   |   | $ | 19 |   |   |
| Income (loss)  from discontinued operations per share:          |       |     |       |     |       |     |       |   |   |   |   |   |   |
| Basic                                                           |       |     | $          | (.25     | )          |     |       | $ | .04 |   |   |   | $ | .06 |   |   |
| Diluted                                                         |       |     | $          | (.24     | )          |     |       | $ | .04 |   |   |   | $ | .06 |   |   |

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(1)       Operatingprofit for 2006 included $6 million of severance and related charges incurredas a result of the sales of the three television stations.

(2)       Income taxes for 2006included a tax benefit of $12 million related to the $89 million pretax loss onsales of the Atlanta and Albany stations. The $12 million tax benefit was only13% of the pretax loss because most of the $80 million goodwill allocation,which is included in the loss, is not deductible for income tax purposes.Income taxes for 2006 also included a tax expense of $32 million relatedto the $41 million pretax gain on sale of the Boston station. The $32 milliontax expense was 77% of the pretax gain because most of the $45 million goodwillallocation included in the Boston gain is not deductible for income taxpurposes.

**LIQUIDITY ANDCAPITAL RESOURCES**

Cash flow generated from operations is the Company’sprimary source of liquidity. Net cash provided by operations was $788 millionin 2006, up from $659 million in 2005, due in part to lower income taxpayments. The Company expects to fund dividends, capital expenditures and otheroperating requirements with net cash provided by operations. Funding requiredfor share repurchases and acquisitions is financed by available cash flow fromoperations, borrowings under the new credit agreements described below, and, ifnecessary, by the issuance of debt and proceeds from the issuance of stockrelated to stock option exercises.

Net cash provided by investments totaled$26 million in 2006 compared with net cash used by investments of$725 million in 2005. The Company’s capital expenditures totaled $222million in 2006. The Company spent $174 million in cash for investmentsand $48 million for acquisitions and received $471 million from the salesof subsidiaries, investments and real estate in 2006. Included in the $471 millionreceived from the sales was $325 million for the sale of the Atlanta, Albanyand Boston television stations (see Note 3 to the Company’s consolidatedfinancial statements in Item 8).

Net cash used for financing activities was $791 millionin 2006. The Company borrowed $1.6 billion under its bridge credit facility and$1.5 billion under its five-year credit agreement in 2006. The Company repaid$827 million of commercial paper, net of issuances, $290 million on the bridgecredit facility and $319 million of long-term debt in 2006. The Companyrepurchased 70.7 million shares of its common stock for $2.3 billion in 2006.Under the Company’s 2000 and 2005 general stock repurchase authorizations, theCompany may buy back an additional $862 million of common stock. Dividends paidon common and preferred shares totaled $201 million in 2006. Quarterlydividends per share on common stock were $.18 in 2006, flat compared to 2005.

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The Company completed its tender offer and acquired 45million shares of its common stock on July 5, 2006 at a price of $32.50per share before transaction costs. The Company also acquired 10 millionshares of its common stock from the Robert R. McCormick Tribune Foundation andthe Cantigny Foundation on July 12, 2006 at a price of $32.50 per sharebefore transaction costs. In connectionwith the tender offer, the board of directors also authorized the repurchase ofan additional 12 million shares of the Company’s common stock commencing on theeleventh business day following the completion of the tender offer. In thethird quarter of 2006, the Company repurchased an additional 11.1 millionshares under that authorization at a weighted average cost of $29.94 per share.

On June 19, 2006, the Company entered into afive-year credit agreement and a 364-day bridge credit agreement, both ofwhich were amended and restated on June 27, 2006. The five-year creditagreement provides for a $1.5 billion unsecured term facility, of which $250million was used to refinance the medium-term notes that matured on Nov. 1,2006, and a $750 million unsecured revolving facility. The 364-day bridgecredit agreement provided for a $2.15 billion unsecured bridge facility. As of Dec. 31,2006, the Company had outstanding borrowings of $1.5 billion and $1.3 billionunder the term facility and the bridge facility, respectively, and the Companyhad no borrowings under the revolving facility. The Company intends torefinance borrowings under the bridge facility prior to maturity. Refinancingthese borrowings on similar financial terms will be contingent upon a number offactors, including the outcome of the Company’s exploration of strategicalternatives, financial market conditions and the Company’s credit ratings.

The Company’s commercial paper is currently rated “B,”“NP,” and “R-2m” by Standard and Poor’s (“S&P”), Moody’s InvestorsServices (“Moody’s”), and Dominion Bond Rating Service (“Dominion”),respectively. The Company’s senior unsecured long-term debt is rated “BB+” byS&P, “Ba1” by Moody’s, “BB+” by Fitch Ratings (“Fitch”) and “BBB” byDominion. Moody’s has a “negative” outlook on the Company, and S&P andFitch have the Company on “negative” credit watch. Dominion has the Companyunder review with negative implications.

The Company has for several years maintained activedebt shelf registration statements for its medium-term note program and otherfinancing needs. A $1 billion shelf registration statement was declaredeffective in February 2006. In July 2006, a new shelf registrationstatement was filed and declared effective, replacing the shelf registrationstatement declared effective in February 2006. The new shelf registrationstatement does not have a designated amount, but the Company’s Board ofDirectors has authorized the issuance and sale of up to $3 billion of debtsecurities, inclusive of the $1 billion that was registered pursuant to the February 2006registration statement. Proceeds from any future debt issuances under the newshelf would be used for general corporate purposes, including repayment ofshort-term and long-term borrowings, capital expenditures, working capital,financing of acquisitions and stock repurchase programs.

Although management believes its estimates andjudgments are reasonable, the resolutions of the Company’s tax issues areunpredictable and could result in tax liabilities that are significantly higheror lower than that which has been provided by the Company.

**Off-Balance SheetArrangements—****Off-balance**sheet arrangements asdefined by the Securities and Exchange Commission include the following fourcategories: obligations under certain guarantees or contracts; retained orcontingent interests in assets transferred to an unconsolidated entity orsimilar arrangements; obligations under certain derivative arrangements; andobligations under material variable interests. The Company has not entered intoany material arrangements, which would fall under any of these four categories,which would be reasonably likely to have a current or future material effect onthe Company’s financial condition, revenues or expenses, results of operations,liquidity or capital expenditures.

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**Contractual Obligations—****The**table belowpresents long-term debt maturities, required payments under contractualagreements for broadcast rights recorded in the consolidated balance sheet, futureminimum lease payments to be made under non-cancelable operating leases, andother purchase obligations as of Dec. 31, 2006 (in thousands).

| **Fiscal Year** | ** ** | ** ** | ** ** | **Long-term Debt** | ** ** | **Broadcast Rights  Contracts Payable** | ** ** | **Future  Minimum  Lease Payments** | ** ** | **Other  Purchase Obligations(1)** | ** ** | **Total(2)** | ** ** |
|----------------------|------------|------------|------------|-------------------------|------------|---------------------------------------------------|------------|------------------------------------------|------------|-----------------------------------------|------------|--------------|------------|
| 2007                 |       |       | $          | 1,429,007               |       |                                              |       | $                                        | 317,945    |                                    |       |         | $          | 62,149 |   |   |   | $ | 192,910 |   |   | $ | 2,002,011 |   |
| 2008                 |       |       | 287,023    |                    |       |                                              | 163,374    |                                     |       |                                    | 55,835     |         |       |   | 213,497 |   |   | 719,729 |   |
| 2009                 |       |       | 15,851     |                    |       |                                              | 123,766    |                                     |       |                                    | 47,350     |         |       |   | 174,671 |   |   | 361,638 |   |
| 2010                 |       |       | 451,246    |                    |       |                                              | 73,052     |                                     |       |                                    | 34,370     |         |       |   | 153,519 |   |   | 712,187 |   |
| 2011                 |       |       | 1,832,963  |                    |       |                                              | 40,984     |                                     |       |                                    | 23,844     |         |       |   | 107,097 |   |   | 2,004,888 |   |
| Thereafter           |       |       | 989,128    |                    |       |                                              | 24,751     |                                     |       |                                    | 45,878     |         |       |   | 313,131 |   |   | 1,372,888 |   |
| Total                |       |       | $          | 5,005,218               |       |                                              |       | $                                        | 743,872    |                                    |       |         | $          | 269,426 |   |   |   | $ | 1,154,825 |   |   | $ | 7,173,341 |   |

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(1)       Otherpurchase obligations include $682 million for commitments for broadcast rightsthat are not currently available for broadcast (see Note 12 to the Company’sconsolidated financial statements in Item 8), and $473 million for talentcontracts.

(2)       Inaddition to the amounts listed in the table above, the Company had commitmentstotaling $63 million at Dec. 31, 2006 related to the purchase ofinventory and property, plant and equipment. In addition, under its currentagreement with Abitibi Consolidated Inc., the Company has a commitment topurchase 369,000 metric tons of newsprint each year over the next three years,subject to certain limitations, at prevailing market prices at the time ofpurchase (see Note 12 to the Company’s consolidated financial statementsin Item 8).

**Capital Spending—****The**Company spent$222 million for capital expenditures during 2006 and $206 million in2005 (see Note 18 to the Company’s consolidated financial statements inItem 8 for capital spending by business segment). The Company classifiescapital expenditures that are expected to provide a rate of return oninvestment above an internally set minimum rate as growth expenditures. TheCompany spent $133 million in 2006 and $87 million in 2005 on growthexpenditures, primarily in publishing.

Major capital projects that were in process during2006 included the expansion of preprint inserting operations and color presscapacities and the implementation of new standard advertising, editorial andcirculation systems.

Capital spending for the expansion of preprintinserting capacity in Chicago and Orlando totaled $20 million in 2006. Thenew inserters in Orlando began production in 2006. As of Dec. 31, 2006,the installation of additional equipment and systems at Chicago was inprogress. The Chicago expansion is scheduled to be completed by mid-2007with additional capital spending of approximately $22 million in 2007.During 2005 and 2004, the Company spent $6 million and $7 million,respectively, for preprint inserting capacity expansions at Los Angeles, SouthFlorida and Orlando. The Los Angeles and South Florida expansions wereoperational in 2004.

The Company’s Los Angeles, Chicago and South Floridanewspapers are increasing their color press capacities. The Los Angeles andSouth Florida expansions were operational in 2005 and 2006, respectively, whilethe Chicago expansion is scheduled to be completed in mid-2007. Capitalspending for the color expansion at these three newspapers totaled$17 million, $45 million and $78 million in 2006, 2005 and 2004,respectively. Additional capital spending of $4 million is expected forthe color expansions in 2007.

The Company is in the process of implementing a newstandard advertising system in all ten of its newspaper markets at a totalestimated capital cost of approximately $80 million. The project began in2004 and is expected to be completed in late 2008. Capital spending for thisproject totaled $22 million, $12 million, and $4 million in 2006, 2005 and2004, respectively. Capital spending for this project is expected to beapproximately $30 million in 2007.

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The Company started new projects in 2006 to replacethe editorial and circulation systems in all ten of its newspaper markets. Thetotal estimated capital costs for the new editorial and circulation systems areapproximately $35 million and $20 million, respectively. The targetedcompletion dates are late 2008 for the editorial systems and late 2007 for thecirculation systems. The editorial system spending was $11 million in2006, while the circulation system spending was $13 million. Capitalspending for these two projects is expected to total approximately $20 millionin 2007. 

The Company expects total capital expenditures to besomewhat lower in 2007 compared to 2006. Management reviews the capitalexpenditure program periodically and modifies it as required to meet currentbusiness needs. It is expected that 2007 capital expenditures will be fundedfrom cash flow generated from operations.

**Effects of Inflation—****The**Consumer PriceIndex, a widely used measure of the impact of changing prices, has increasedonly moderately in recent years, up between 2% and 3% each year since 1991.This level of inflation has not impacted the Company’s operationssignificantly, nor have historically higher inflation levels that prevailedprior to 1991. The principal effect of inflation on the Company’s operating resultsis to increase costs. Subject to normal competitive conditions, the Companygenerally has demonstrated an ability to raise sales prices to offset thesecost increases.

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**ITEM 7A.   QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.**

**Interest Rate Risk—****All**of the Company’sborrowings are denominated in U.S. dollars. The Company manages interest raterisk by issuing a combination of both fixed and variable rate debt.

Informationpertaining to the Company’s debt at Dec. 31, 2006 is shown in the tablebelow (in thousands).

| **Maturities**                       | ** ** | ** ** | ** ** | **Fixed Rate  Debt** | ** ** | **Weighted Avg.  Interest Rate** | ** ** | **Variable Rate  Debt** | ** ** | **Weighted Avg.  Interest Rate** | ** ** | **Total  Debt** | ** ** |
|--------------------------------------|------------|------------|------------|---------------------------|------------|--------------------------------------------|------------|------------------------------|------------|--------------------------------------------|------------|-----------------|------------|
| 2007(1)(2)                           |       | $          | 353,044    |                      |       | 2.3                                        | %          |                         |       | $                                          | 1,407,019  |            |       |   | 6.2 | % |   | $ | 1,760,063 |   |
| 2008                                 |       | 287,023    |       |                      | 5.8        | %                                          |       |                         | —     |                                       |       |            | —     |   |   | 287,023 |   |
| 2009                                 |       | 15,851     |       |                      | 7.7        | %                                          |       |                         | —     |                                       |       |            | —     |   |   | 15,851 |   |
| 2010                                 |       | 451,246    |       |                      | 4.9        | %                                          |       |                         | —     |                                       |       |            | —     |   |   | 451,246 |   |
| 2011                                 |       | 1,907      |       |                      | —     |                                       |       |                         | 1,500,000  |                                       |       |            | 6.2        | % |   | 1,501,907 |   |
| Thereafter(3)(4)                     |       | 989,128    |       |                      | 3.9        | %                                          |       |                         | —     |                                       |       |            | —     |   |   | 989,128 |   |
| Total at Dec. 31, 2006          |       | $          | 2,098,199  |                      |       |                                       |       |                         |       | $                                          | 2,907,019  |            |       |   |   |   |   | $ | 5,005,218 |   |
| Fair Value at  Dec. 31, 2006(5) |       | $          | 1,997,371  |                      |       |                                       |       |                         |       | $                                          | 2,907,019  |            |       |   |   |   |   | $ | 4,904,390 |   |

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(1)       Includes$331 million related to the Company’s 2% PHONES (fixed rate debt). This amountwas classified as long-term and treated as maturing after 2011 for financialstatement presentation purposes because of the Company’s ability and intent torefinance these securities, on a long-term basis, in the event that the 2%PHONES are put to the Company in 2007. See Note 9 to the Company’s consolidatedfinancial statements in Item 8 for further discussion.

(2)       Includes$20 million of property financing obligation (fixed rate debt). See Note 7to the consolidated financial statements in Item 8 for further discussion.

(3)       Includes$242 million related to the Company’s 2% PHONES, due 2029. The Company mayredeem the PHONES at any time for the greater of the principal value of thePHONES ($156.47 per PHONES as Dec. 31, 2006) or the then market value oftwo shares of Time Warner common stock, subject to certain adjustments.Quarterly interest payments are made to the PHONES holders at an annual rate of2% of the initial principal. The Company records both cash and non-cashinterest expense on the discounted debt component of the PHONES. See Note 9 tothe consolidated financial statements in Item 8 for further discussion.

(4)       Includes$25 million related to the interest rate swap agreement on the$100 million 7.5% debentures due in 2023 effectively converting the fixed7.5% rate to a variable rate based on LIBOR.

(5)       Fairvalue was estimated based on quoted market prices for similar issues or oncurrent rates available to the Company for debt of the same remainingmaturities and similar terms. The carrying value of the Company’s derivativeinstruments approximates fair value. The fair value of the PHONES wasdetermined by reference to the market value resulting from trading on anational securities exchange.

**Variable Interest Rate Debt—****On**June 19,2006, the Company entered into new credit agreements to finance the Company’stender offer to repurchase shares of the Company’s common stock as well as torefinance certain indebtedness. In addition, one of the credit agreementsincludes an unsecured revolving credit facility that is available for workingcapital and general corporate purposes, including acquisitions. These creditagreements were subsequently amended and restated on June 27, 2006. Ingeneral, borrowings under these credit facilities bear interest at a variablerate based on LIBOR plus a spread ranging from 0.35% to 1.25% based on theCompany’s credit ratings. As of Dec. 31, 2006, the Company had $2.8 billionof variable rate borrowings outstanding under these credit facilities. At thisborrowing level, a hypothetical one percent increase in the underlying interestrates for the Company’s variable rate borrowings under these agreements wouldresult in an additional $28.1 million of annual pretax interest expense.

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Informationpertaining to the Company’s debt at Dec. 25, 2005 is shown in the tablebelow (in thousands).

| **Maturities**                       | ** ** | ** ** | ** ** | **Fixed Rate  Debt** | ** ** | **Weighted Avg.  Interest Rate** | ** ** | **Variable Rate  Debt** | ** ** | **Weighted Avg.  Interest Rate** | ** ** | **Total  Debt** | ** ** |
|--------------------------------------|------------|------------|------------|---------------------------|------------|--------------------------------------------|------------|------------------------------|------------|--------------------------------------------|------------|-----------------|------------|
| 2006(1)(2)                           |       | $          | 578,928    |                      |       | 4.6                                        | %          |                         |       | $                                          | 923,532    |            |       |   | 4.4 | % |   | $ | 1,502,460 |   |
| 2007                                 |       | 18,550     |       |                      | 7.7        | %                                          |       |                         | —     |                                       |       |            | —     |   |   | 18,550 |   |
| 2008                                 |       | 282,247    |       |                      | 5.8        | %                                          |       |                         | —     |                                       |       |            | —     |   |   | 282,247 |   |
| 2009                                 |       | 13,224     |       |                      | 7.7        | %                                          |       |                         | —     |                                       |       |            | —     |   |   | 13,224 |   |
| 2010                                 |       | 451,056    |       |                      | 4.9        | %                                          |       |                         | —     |                                       |       |            | —     |   |   | 451,056 |   |
| Thereafter(3)(4)                     |       | 994,185    |       |                      | 3.9        | %                                          |       |                         | —     |                                       |       |            | —     |   |   | 994,185 |   |
| Total at Dec. 25, 2005          |       | $          | 2,338,190  |                      |       |                                       |       |                         |       | $                                          | 923,532    |            |       |   |   |   |   | $ | 3,261,722 |   |
| Fair Value at  Dec. 25, 2005(5) |       | $          | 2,445,475  |                      |       |                                       |       |                         |       | $                                          | 923,532    |            |       |   |   |   |   | $ | 3,369,007 |   |

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(1)       Includes$638 million related to the Company’s commercial paper (variable ratedebt), $269 million related to the Company’s 2% PHONES (fixed rate debt)and $293 million related to the Company’s medium-term notes (fixed ratedebt). These amounts were classified as long-term and treated as maturing in2008 for financial statement presentation purposes because of the Company’sability and intent to refinance these securities, on a long-term basis, as thecommercial paper and medium-term notes matured in 2006 or, in the case of the2% PHONES, if put to the Company in 2006. See Note 9 to the consolidatedfinancial statements in Item 8 for further discussion.

(2)       Includes$15 million of property financing obligation (fixed rate debt). SeeNote 9 to the consolidated financial statements in Item 8 for furtherdiscussion.

(3)       Includes$241 million related to the Company’s 2% PHONES, due 2029. The Company mayredeem the PHONES at any time for the greater of the principal value of thePHONES ($156.84 per PHONES at Dec. 25, 2005) or the then market value oftwo shares of Time Warner common stock, subject to certain adjustments.Quarterly interest payments are made to the PHONES holders at an annual rate of2% of the initial principal. The Company records both cash and non-cashinterest expense on the discounted debt component of the PHONES. SeeNote 9 to the Company’s consolidated financial statements in Item 8for further discussion.

(4)       Includes$30 million related to the interest rate swap agreement on the$100 million 7.5% debentures due in 2023 effectively converting the fixed7.5% rate to a variable rate based on LIBOR.

(5)       Fair value was estimatedbased on quoted market prices for similar issues or on current rates availableto the Company for debt of the same remaining maturities and similar terms. Thecarrying value of the Company’s derivative instruments approximates fair value.The fair value of the PHONES was determined by reference to the market valueresulting from trading on a national securities exchange.

**Equity Price Risk**

**Available-For-Sale Securities—****The**Company hascommon stock investments in publicly traded companies that are subject tomarket price volatility. Except for 16 million shares of Time Warnercommon stock (see discussion below), these investments are classified asavailable-for-sale securities and are recorded on the balance sheet at fairvalue with unrealized gains or losses, net of related tax effects, reported inthe accumulated other comprehensive income (loss) component of shareholders’equity.

**2006—****The**followinganalysis presents the hypothetical change at Dec. 31, 2006 in the fairvalue of the Company’s common stock investments in publicly traded companiesthat are classified as available-for-sale, assuming hypothetical stock pricefluctuations of plus or minus 10%, 20% and 30% in each stock’s price. As of Dec. 31,2006, the Company’s common stock investments in publicly traded companiesconsisted primarily of 274,080 shares of Time Warner common stock unrelated toPHONES (see discussion below in “Derivatives and Related Trading Securities”)and 3.4 million shares of AdStar, Inc.

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| ** **                                    | ** ** | **Valuation of Investments  Assuming Indicated Decrease  in Stock’s Price** | ** ** | ** ** | ** ** | **Valuation of Investments  Assuming Indicated Increase  in Stock’s Price** | ** ** |
|-----------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------|------------|------------|------------|----------------------------------------------------------------------------------------------------------------|------------|
| **(In thousands)**                       | ** ** | **-30%**                                                                                                       | ** ** | **-20%**   | ** ** | **-10%**                                                                                                       | ** ** | **Dec. 31, 2006  Fair Value** | ** ** | **+10%** | ** ** | **+20%** | ** ** | **+30%** | ** ** |
| Common stock  investments in public companies |       | $                                                                                                              | 9,728      |       | $          | 11,117                                                                                                         |       | $ | 12,507 |   |   | $ | 13,897 | (1) |   | $ | 15,286 |   | $ | 16,676 |   | $ | 18,066 |   |
|                                               |            |                                                                                                                |            |            |            |                                                                                                                |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

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(1)       Excludes16 million shares of Time Warner common stock. See discussion below in “Derivativesand Related Trading Securities.”

During the last 12 quarters preceding Dec. 31,2006, market price movements caused the fair value of the Company’s common stockinvestments in publicly traded companies to change by 10% or more in two of thequarters, by 20% or more in one of the quarters and by 30% or more in one ofthe quarters.

**2005—****The**followinganalysis presents the hypothetical change at Dec. 25, 2005 in the fairvalue of the Company’s common stock investments in publicly traded companiesthat are classified as available-for-sale, assuming hypothetical stock pricefluctuations of plus or minus 10%, 20% and 30% in each stock’s price. As of Dec. 25,2005, the Company’s common stock investments in publicly traded companiesconsisted primarily of 3.1 million shares of Time Warner common stockunrelated to PHONES (see discussion below in “Derivatives and Related TradingSecurities”).

| ** **                                    | ** ** | **Valuation of Investments  Assuming Indicated Decrease  in Stock’s Price** | ** ** | ** ** | ** ** | **Valuation of Investments  Assuming Indicated Increase  in Stock’s Price** | ** ** |
|-----------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------|------------|------------|------------|----------------------------------------------------------------------------------------------------------------|------------|
| **(In thousands)**                       | ** ** | **-30%**                                                                                                       | ** ** | **-20%**   | ** ** | **-10%**                                                                                                       | ** ** | **Dec. 25, 2005  Fair Value** | ** ** | **+10%** | ** ** | **+20%** | ** ** | **+30%** | ** ** |
| Common stock  investments in public companies |       | $                                                                                                              | 38,139     |       | $          | 43,588                                                                                                         |       | $ | 49,036 |   |   | $ | 54,485 | (1) |   | $ | 59,933 |   | $ | 65,382 |   | $ | 70,830 |   |
|                                               |            |                                                                                                                |            |            |            |                                                                                                                |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

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(1)       Excludes16 million shares of Time Warner common stock. See discussion below in “Derivativesand Related Trading Securities.”

During the last 12 quarters preceding Dec. 25,2005, market price movements caused the fair value of the Company’s commonstock investments in publicly traded companies to change by 10% or more inthree of the quarters, by 20% or more in one of the quarters and by 30% or morein one of the quarters.

**Derivatives and Related Trading Securities—****The**Company issued8 million PHONES in April 1999 indexed to the value of its investmentin 16 million shares of Time Warner common stock (see Note 9 to theconsolidated financial statements in Item 8). Since the second quarter of1999, this investment in Time Warner has been classified as a trading security,and changes in its fair value, net of the changes in the fair value of therelated derivative component of the PHONES, have been recorded in the statementof income.

At maturity, the PHONES will be redeemed at thegreater of the then market value of two shares of Time Warner common stock orthe principal value of the PHONES ($156.47 per PHONES at Dec. 31, 2006).At Dec. 31, 2006 and Dec. 25, 2005, the PHONES carrying value wasapproximately $573 million and $510 million, respectively. Since theissuance of the PHONES in April 1999, changes in the fair value of thederivative component of the PHONES have partially offset changes in the fairvalue of the related Time Warner shares. There have been and may continue to beperiods with significant non-cash increases or decreases to the Company’s netincome pertaining to the PHONES and the related Time Warner shares.

**2006—****The**followinganalysis presents the hypothetical change at Dec. 31, 2006, in the fairvalue of the Company’s 16 million shares of Time Warner common stockrelated to the PHONES assuming hypothetical stock price fluctuations of plus orminus 10%, 20% and 30% in the stock’s price.

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| ** **                | ** ** | **Valuation of Investment  Assuming Indicated Decrease  in Stock Price** | ** ** | ** ** | ** ** | **Valuation of Investment  Assuming Indicated Increase  in Stock Price** | ** ** |
|---------------------------|------------|--------------------------------------------------------------------------------------------------------|------------|------------|------------|--------------------------------------------------------------------------------------------------------|------------|
| **(In thousands)**   | ** ** | **-30%**                                                                                               | ** ** | **-20%**   | ** ** | **-10%**                                                                                               | ** ** | **Dec. 31, 2006  Fair Value** | ** ** | **+10%** | ** ** | **+20%** | ** ** | **+30%** | ** ** |
| Time Warner common  stock |       | $                                                                                                      | 243,936    |       | $          | 278,784                                                                                                |       | $ | 313,632 |   |   | $ | 348,480 |   |   | $ | 383,328 |   | $ | 418,176 |   | $ | 453,024 |   |
|                           |            |                                                                                                        |            |            |            |                                                                                                        |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

During the last 12 quarters preceding Dec. 31,2006, market price movements have caused the fair value of the Company’s16 million shares of Time Warner common stock to change by 10% or more intwo of the quarters, by 20% or more in one of the quarters and by 30% or morein none of the quarters.

**2005—****The**followinganalysis presents the hypothetical change at Dec. 25, 2005 in the fairvalue of the Company’s 16 million shares of Time Warner common stockrelated to the PHONES assuming hypothetical stock price fluctuations of plus orminus 10%, 20% and 30% in the stock’s price.

| ** **                | ** ** | **Valuation of Investment  Assuming Indicated Decrease  in Stock Price** | ** ** | ** ** | ** ** | **Valuation of Investment  Assuming Indicated Increase  in Stock Price** | ** ** |
|---------------------------|------------|--------------------------------------------------------------------------------------------------------|------------|------------|------------|--------------------------------------------------------------------------------------------------------|------------|
| **(In thousands)**   | ** ** | **-30%**                                                                                               | ** ** | **-20%**   | ** ** | **-10%**                                                                                               | ** ** | **Dec. 25, 2005  Fair Value** | ** ** | **+10%** | ** ** | **+20%** | ** ** | **+30%** | ** ** |
| Time Warner common  stock |       | $                                                                                                      | 198,016    |       | $          | 226,304                                                                                                |       | $ | 254,592 |   |   | $ | 282,880 |   |   | $ | 311,168 |   | $ | 339,456 |   | $ | 367,744 |   |
|                           |            |                                                                                                        |            |            |            |                                                                                                        |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

During the last 12 quarters preceding Dec. 25,2005, market price movements have caused the fair value of the Company’s16 million shares of Time Warner common stock to change by 10% or more inthree of the quarters, by 20% or more in one of the quarters and by 30% or morein one of the quarters.

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**ITEM 8.**                FINANCIALSTATEMENTS AND SUPPLEMENTARY DATA.

**INDEXTO FINANCIAL STATEMENTSAND FINANCIAL STATEMENT SCHEDULE**
|                                                                                                                                       | ** ** | **Page** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|
| Report of  Independent Registered Public Accounting Firm                                                                              |       |     | 66         |   |   |
| Management’s  Responsibility for Financial Statements and Management’s Report on Internal  Control Over Financial Reporting |       |     | 68         |   |   |
| Consolidated  Statements of Income for each of the three fiscal years in the period ended  Dec. 31, 2006                         |       |     | 69         |   |   |
| Consolidated Balance  Sheets at Dec. 31, 2006 and Dec. 25, 2005                                                             |       |     | 71         |   |   |
| Consolidated  Statements of Shareholders’ Equity for each of the three fiscal years in the  period ended Dec. 31, 2006      |       |     | 74         |   |   |
| Consolidated Statements of Cash Flows for each of the  three fiscal years in the period ended Dec. 31, 2006                      |       |     | 76         |   |   |
| Notes to  Consolidated Financial Statements                                                                                           |       |     |       |   |   |
| Note 1:  Summary of Significant Accounting Policies                                                                              |       |     | 77         |   |   |
| Note 2:  Changes in Operations and Non-Operating Items                                                                           |       |     | 85         |   |   |
| Note 3:  Discontinued Operations and Assets Held for Sale                                                                        |       |     | 89         |   |   |
| Note 4: *Newsday***and*Hoy,*New  York Charge                                                                                     |       |     | 91         |   |   |
| Note 5:  Inventories                                                                                                             |       |     | 92         |   |   |
| Note 6:  Goodwill and Other Intangible Assets                                                                                    |       |     | 93         |   |   |
| Note 7:  TMCT and TMCT II                                                                                                   |       |     | 95         |   |   |
| Note 8:  Investments                                                                                                             |       |     | 98         |   |   |
| Note 9:  Debt                                                                                                                    |       |     | 99         |   |   |
| Note 10:  Contracts Payable for Broadcast Rights                                                                                 |       |     | 102        |   |   |
| Note 11:  Fair Value of Financial Instruments                                                                                    |       |     | 102        |   |   |
| Note 12:  Commitments and Contingencies                                                                                          |       |     | 102        |   |   |
| Note 13:  Income Taxes                                                                                                           |       |     | 103        |   |   |
| Note 14:  Pension and Other Postretirement Benefits                                                                              |       |     | 107        |   |   |
| Note 15:  Capital Stock and Share Purchase Rights Plan                                                                           |       |     | 112        |   |   |
| Note 16:  Incentive Compensation and Stock Plans                                                                                 |       |     | 113        |   |   |
| Note 17:  Comprehensive Income                                                                                                   |       |     | 119        |   |   |
| Note 18: Business  Segments                                                                                                      |       |     | 120        |   |   |
| 2006 Quarterly  Results (Unaudited)                                                                                                   |       |     | 123        |   |   |
| 2005 Quarterly  Results (Unaudited)                                                                                                   |       |     | 124        |   |   |
| Five Year Financial  Summary                                                                                                          |       |     | 126        |   |   |
| Financial Statement  Schedule for each of the three fiscal years in the period ended Dec. 31,  2006                              |       |     |       |   |   |
| Schedule II  Valuation and Qualifying Accounts and Reserves *                                                                    |       |     | 128        |   |   |

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*               Allother schedules required under Regulation S-X are omitted becausethey are not applicable or not required.

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**REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

To the Board of Directorsand Shareholders of Tribune Company:

We have completedintegrated audits of Tribune Company’s consolidated financial statements and ofits internal control over financial reporting as of December 31, 2006, inaccordance with the standards of the Public Company Accounting Oversight Board(United States). Our opinions, based on our audits, are presented below.

**Consolidatedfinancial statements and financial statement schedule**

In our opinion, the consolidated financial statementslisted in the accompanying index present fairly, in all material respects, thefinancial position of Tribune Company and its subsidiaries at December 31,2006 and December 25, 2005, and the results of their operations and theircash flows for each of the three years in the period ended December 31,2006 in conformity with accounting principles generally accepted in the UnitedStates of America. In addition, in our opinion, the financial statementschedule listed in the accompanying index presents fairly, in all materialrespects, the information set forth therein when read in conjunction with therelated consolidated financial statements. These financial statements andfinancial statement schedule are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on these financialstatements and financial statement schedule based on our audits. We conductedour audits of these statements in accordance with the standards of the PublicCompany Accounting Oversight Board (United States). Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whetherthe financial statements are free of material misstatement. An audit offinancial statements includes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements, assessing theaccounting principles used and significant estimates made by management, andevaluating the overall financial statement presentation. We believe that ouraudits provide a reasonable basis for our opinion.

As discussed inNote 1 to the consolidated financial statements, the Company changed themanner in which it evaluates certain indefinite-lived intangible assets forimpairment. Additionally, as discussed in Notes 14 and 16 to the consolidatedfinancial statements, the Company changed the manner in which it accounts for definedbenefit pension and other postretirement plans effective December 31, 2006and the manner in which it accounts for share-based compensation in 2006.

**Internal controlover financial reporting**

Also, in our opinion, management’s assessment, includedin the accompanying Management’s Report on Internal Control Over FinancialReporting, that the Company maintained effective internal control overfinancial reporting as of December 31, 2006 based on criteria establishedin *Internal Control—Integrated Framework*issued by the Committee of Sponsoring Organizations of the Treadway Commission(COSO), is fairly stated, in all material respects, based on those criteria.Furthermore, in our opinion, the Company maintained, in all material respects,effective internal control over financial reporting as of December 31,2006, based on criteria established in *InternalControl—Integrated Framework* issued by the COSO. The Company’smanagement is responsible for maintaining effective internal control overfinancial reporting and for its assessment of the effectiveness of internalcontrol over financial reporting. Our responsibility is to express opinions onmanagement’s assessment and on the effectiveness of the Company’s internalcontrol over financial reporting based on our audit. We conducted our audit ofinternal control over financial reporting in accordance with the standards ofthe Public Company Accounting Oversight Board (United States). Those standardsrequire that we plan and perform the audit to obtain reasonable assurance aboutwhether effective internal control over financial reporting was maintained inall material respects. An audit of internal control over financial reportingincludes obtaining an understanding of internal control over financial reporting,evaluating management’s assessment, testing 

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and evaluating the designand operating effectiveness of internal control, and performing such otherprocedures as we consider necessary in the circumstances. We believe that ouraudit provides a reasonable basis for our opinions.

A company’s internal control over financial reportingis a process designed to provide reasonable assurance regarding the reliabilityof financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles. A company’sinternal control over financial reporting includes those policies andprocedures that (i) pertain to the maintenance of records that, inreasonable detail, accurately and fairly reflect the transactions anddispositions of the assets of the company; (ii) provide reasonableassurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accountingprinciples, and that receipts and expenditures of the company are being madeonly in accordance with authorizations of management and directors of thecompany; and (iii) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of thecompany’s assets that could have a material effect on the financial statements.

Because of its inherentlimitations, internal control over financial reporting may not prevent ordetect misstatements. Also, projections of any evaluation of effectiveness tofuture periods are subject to the risk that controls may become inadequatebecause of changes in conditions, or that the degree of compliance with thepolicies or procedures may deteriorate.

**/s/ PricewaterhouseCoopersLLP**

**PricewaterhouseCoopersLLP**

**Chicago,Illinois**

**February 21, 2007**

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**MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL STATEMENTSANDMANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING**

**Management’sResponsibility for Financial Statements**

Management is responsible for the preparation,integrity and fair presentation of the Company’s consolidated financialstatements and related financial information included in this Annual Report on Form 10-Kto shareholders. The consolidated financial statements have been prepared inaccordance with accounting principles generally accepted in the United Statesof America and necessarily include certain amounts that are based on management’sbest estimates and judgments.

The system of internal control over financialreporting is periodically assessed for its effectiveness and is augmented bywritten policies and procedures, the careful selection and training ofqualified personnel and a program of internal audit.

The consolidated financial statements were audited byPricewaterhouseCoopers LLP, an independent registered public accounting firm,and their report is shown on pages 66 and 67. PricewaterhouseCoopers LLPwas given unrestricted access to all financial records and related data,including minutes of all meetings of shareholders, the Board of Directors andcommittees of the Board. The Company believes that all representations made tothe independent accountants during their audits were valid and appropriate.

The Audit Committee of theBoard of Directors is responsible for reviewing and monitoring the Company’sfinancial reporting and accounting practices. The Audit Committee consists offour independent directors. The Committee meets with representatives ofmanagement, the independent registered public accounting firm and internalauditors to discuss financial reporting, accounting and internal controlmatters. PricewaterhouseCoopers LLP and the internal auditors have directaccess to the Audit Committee.

**Management’s Reporton Internal Control Over Financial Reporting**

Managementis responsible for establishing and maintaining adequate internal control overfinancial reporting, designed to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statementsfor external purposes in accordance with accounting principles generallyaccepted in the United States of America. As of Dec. 31, 2006, the Company’smanagement conducted an evaluation of the effectiveness of the design andoperation of the Company’s internal control over financial reporting based oncriteria established in *Internal Control—IntegratedFramework* issued by the Committee of Sponsoring Organizations of theTreadway Commission and concluded that the Company’s internal control overfinancial reporting was effective as of that date. Our management’s assessmentof the effectiveness of the Company’s internal control over financial reportingas of Dec. 31, 2006 has been audited by PricewaterhouseCoopers LLP, anindependent registered public accounting firm, as stated in their report whichappears herein.

|                                                  |                                                   |
|--------------------------------------------------|---------------------------------------------------|
| Dennis J.  FitzSimons                            | Donald C. Grenesko                                |
| Chairman,  President and Chief Executive Officer | Senior Vice President/Finance and  Administration |

 

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**TRIBUNE COMPANY AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME(In thousands of dollars, except per share data)**

| ** **                                                                                                          | ** ** | **Year Ended**         | ** ** |
|---------------------------------------------------------------------------------------------------------------------|------------|-----------------------------|------------|
| ** **                                                                                                          | ** ** | **Dec. 31, 2006** | ** ** | **Dec. 25, 2005** | ** ** | **Dec. 26, 2004** | ** ** |
| **Operating Revenues**                                                                                              |       |                        |       |   |   |   |   |   |   |   |   |   |   |
| Publishing                                                                                                          |       |                        |       |   |   |   |   |   |   |   |   |   |   |
| Advertising                                                                                                         |       |                        | $          | 3,260,060 |   |   |   | $ | 3,244,100 |   |   |   | $ | 3,228,493 |   |   |
| Circulation                                                                                                         |       |                        | 575,043    |   |   |   | 596,163 |   |   |   | 643,947 |   |   |
| Other                                                                                                               |       |                        | 257,459    |   |   |   | 256,587 |   |   |   | 257,410 |   |   |
| Total                                                                                                               |       |                        | 4,092,562  |   |   |   | 4,096,850 |   |   |   | 4,129,850 |   |   |
| Broadcasting and  entertainment                                                                                     |       |                        | 1,425,146  |   |   |   | 1,414,433 |   |   |   | 1,501,581 |   |   |
| Total operating  revenues                                                                                           |       |                        | 5,517,708  |   |   |   | 5,511,283 |   |   |   | 5,631,431 |   |   |
| **Operating Expenses**                                                                                              |       |                        |       |   |   |   |   |   |   |   |   |   |   |
| Cost of sales  (exclusive of items shown below)                                                                     |       |                        | 2,736,411  |   |   |   | 2,695,818 |   |   |   | 2,668,969 |   |   |
| Selling, general  and administrative                                                                                |       |                        | 1,469,274  |   |   |   | 1,447,233 |   |   |   | 1,545,067 |   |   |
| Depreciation                                                                                                        |       |                        | 207,200    |   |   |   | 222,153 |   |   |   | 211,561 |   |   |
| Amortization of  intangible assets                                                                                  |       |                        | 19,813     |   |   |   | 18,888 |   |   |   | 18,556 |   |   |
| Total operating  expenses                                                                                           |       |                        | 4,432,698  |   |   |   | 4,384,092 |   |   |   | 4,444,153 |   |   |
| **Operating  Profit**                                                                                               |       |                        | 1,085,010  |   |   |   | 1,127,191 |   |   |   | 1,187,278 |   |   |
| Net income on  equity investments                                                                                   |       |                        | 80,773     |   |   |   | 41,209 |   |   |   | 17,931 |   |   |
| Interest and  dividend income                                                                                       |       |                        | 14,145     |   |   |   | 7,539 |   |   |   | 3,053 |   |   |
| Interest expense                                                                                                    |       |                        | (273,902   | ) |   |   | (155,191 | ) |   |   | (153,118 | ) |   |
| Gain (loss) on  change in fair values of derivatives and related investments                                        |       |                        | 11,088     |   |   |   | 62,184 |   |   |   | (18,497 | ) |   |
| Loss on early debt  retirement                                                                                      |       |                        | —     |   |   |   | — |   |   |   | (140,506 | ) |   |
| Gain on TMCT  transactions                                                                                          |       |                        | 59,596     |   |   |   | — |   |   |   | — |   |   |
| Gain on sales of  investments, net                                                                                  |       |                        | 36,732     |   |   |   | 6,780 |   |   |   | 20,347 |   |   |
| Other non-operating  gain (loss), net                                                                               |       |                        | (4,447     | ) |   |   | 897 |   |   |   | (6,388 | ) |   |
| **Income  From Continuing Operations Before Income Taxes and Cumulative Effect of  Change in Accounting Principle** |       |                        | 1,008,995  |   |   |   | 1,090,609 |   |   |   | 910,100 |   |   |
| Income taxes  (Note 13)                                                                                        |       |                        | (348,142   | ) |   |   | (567,820 | ) |   |   | (355,724 | ) |   |
| **Income  from Continuing Operations Before Cumulative Effect of Change in Accounting  Principle**                  |       |                        | 660,853    |   |   |   | 522,789 |   |   |   | 554,376 |   |   |
| **Income  (Loss) from Discontinued Operations, net of tax (Note 3)**                                                |       |                        | (66,858    | ) |   |   | 11,900 |   |   |   | 18,948 |   |   |
| **Income  Before Cumulative Effect of Change in Accounting Principle**                                              |       |                        | 593,995    |   |   |   | 534,689 |   |   |   | 573,324 |   |   |
| Cumulative effect  of change in accounting principle, net of tax (Note 1)                                      |       |                        | —     |   |   |   | — |   |   |   | (17,788 | ) |   |
| **Net  Income**                                                                                                     |       |                        | 593,995    |   |   |   | 534,689 |   |   |   | 555,536 |   |   |
| Preferred  dividends                                                                                                |       |                        | (6,309     | ) |   |   | (8,364 | ) |   |   | (8,308 | ) |   |
| **Net  Income Attributable to Common Shares`**                                                                      |       |                        | $          | 587,686 |   |   |   | $ | 526,325 |   |   |   | $ | 547,228 |   |   |
| **Earnings  Per Share (Note 1)**                                                                               |       |                        |       |   |   |   |   |   |   |   |   |   |   |
| **Basic:**                                                                                                          |       |                        |       |   |   |   |   |   |   |   |   |   |   |
| Continuing  operations before cumulative effect of change in accounting principle                                   |       |                        | $          | 2.40 |   |   |   | $ | 1.64 |   |   |   | $ | 1.69 |   |   |
| Discontinued  operations                                                                                            |       |                        | (.25       | ) |   |   | .04 |   |   |   | .06 |   |   |
| Cumulative effect  of change in accounting principle, net of tax                                                    |       |                        | —     |   |   |   | — |   |   |   | (.05 | ) |   |
| Net income                                                                                                          |       |                        | $          | 2.16 |   |   |   | $ | 1.68 |   |   |   | $ | 1.70 |   |   |
| **Diluted:**                                                                                                        |       |                        |       |   |   |   |   |   |   |   |   |   |   |
| Continuing  operations before cumulative effect of change in accounting principle                                   |       |                        | $          | 2.39 |   |   |   | $ | 1.63 |   |   |   | $ | 1.67 |   |   |
| Discontinued  operations                                                                                            |       |                        | (.24       | ) |   |   | .04 |   |   |   | .06 |   |   |
| Cumulative effect  of change in accounting principle, net of tax                                                    |       |                        | —     |   |   |   | — |   |   |   | (.05 | ) |   |
| Net income                                                                                                          |       |                        | $          | 2.14 |   |   |   | $ | 1.67 |   |   |   | $ | 1.67 |   |   |

 

See Notes to Consolidated Financial Statements.

69

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**TRIBUNE COMPANY AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(In thousands of dollars, except share data)**

| ** **                                                      | ** ** | **Dec. 31, 2006** | ** ** | **Dec. 25, 2005** | ** ** |
|-----------------------------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| **Assets**                                                      |       |                        |       |                        |       |
| **Current  Assets**                                             |       |                        |       |                        |       |
| Cash and cash equivalents                                       |       | $                           | 174,686    |                        | $          | 151,110 |   |
| Accounts receivable (net of allowances of $33,771  and $42,558) |       | 765,871                     |       | 798,441                     |       |
| Inventories                                                     |       | 40,962                      |       | 44,103                      |       |
| Broadcast rights                                                |       | 271,995                     |       | 308,011                     |       |
| Deferred income taxes                                           |       | 74,450                      |       | 114,274                     |       |
| Prepaid expenses and other                                      |       | 49,466                      |       | 52,458                      |       |
| Total current assets                                            |       | 1,377,430                   |       | 1,468,397                   |       |
| **Properties**                                                  |       |                        |       |                        |       |
| Machinery, equipment and furniture                              |       | 2,306,400                   |       | 2,314,085                   |       |
| Buildings and leasehold improvements                            |       | 1,014,865                   |       | 992,083                     |       |
|                                                            |       | 3,321,265                   |       | 3,306,168                   |       |
| Accumulated depreciation                                        |       | (1,907,365                  | )          | (1,853,914                  | )          |
|                                                            |       | 1,413,900                   |       | 1,452,254                   |       |
| Land                                                            |       | 127,797                     |       | 127,167                     |       |
| Construction in progress                                        |       | 143,415                     |       | 152,506                     |       |
| Net properties                                                  |       | 1,685,112                   |       | 1,731,927                   |       |
| **Other  Assets**                                               |       |                        |       |                        |       |
| Broadcast rights                                                |       | 295,186                     |       | 361,376                     |       |
| Goodwill                                                        |       | 5,837,208                   |       | 5,947,142                   |       |
| Other intangible assets, net                                    |       | 2,846,057                   |       | 3,087,723                   |       |
| Time Warner stock related to PHONES debt                        |       | 348,480                     |       | 282,880                     |       |
| Other investments                                               |       | 564,750                     |       | 632,663                     |       |
| Prepaid pension costs (Note 14)                                 |       | 293,455                     |       | 871,382                     |       |
| Assets held for sale                                            |       | 9,172                       |       | 24,436                      |       |
| Other                                                           |       | 143,922                     |       | 138,316                     |       |
| Total other assets                                              |       | 10,338,230                  |       | 11,345,918                  |       |
| Total assets                                                    |       | $                           | 13,400,772 |                        | $          | 14,546,242 |   |

 

See Notes to Consolidated Financial Statements.

71

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**TRIBUNECOMPANY AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(In thousands of dollars, except share data)**

| ** **                                                                                                                                                                                                                                                                                                              | ** ** | **Dec. 31, 2006** | ** ** | **Dec. 25, 2005** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| **Liabilities and Shareholders’ Equity**                                                                                                                                                                                                                                                                           |       |                        |       |                        |       |
| **Current Liabilities**                                                                                                                                                                                                                                                                                                 |       |                        |       |                        |       |
| Borrowings under bridge  credit facility                                                                                                                                                                                                                                                                                |       | $                           | 1,310,000  |                        | $          | — |   |
| Other debt due within one  year                                                                                                                                                                                                                                                                                         |       | 119,007                     |       | 302,460                     |       |
| Accounts payable                                                                                                                                                                                                                                                                                                        |       | 151,601                     |       | 168,205                     |       |
| Employee compensation and  benefits                                                                                                                                                                                                                                                                                     |       | 185,551                     |       | 244,156                     |       |
| Contracts payable for  broadcast rights                                                                                                                                                                                                                                                                                 |       | 317,945                     |       | 329,930                     |       |
| Deferred income                                                                                                                                                                                                                                                                                                         |       | 108,607                     |       | 101,065                     |       |
| Other                                                                                                                                                                                                                                                                                                                   |       | 354,003                     |       | 300,842                     |       |
| Total current liabilities                                                                                                                                                                                                                                                                                               |       | 2,546,714                   |       | 1,446,658                   |       |
| **Long-Term Debt**                                                                                                                                                                                                                                                                                                      |       |                        |       |                        |       |
| PHONES debt related to  Time Warner stock                                                                                                                                                                                                                                                                               |       | 572,960                     |       | 509,701                     |       |
| Other long-term  debt (less portions due within one year)                                                                                                                                                                                                                                                               |       | 3,003,251                   |       | 2,449,561                   |       |
| Total long-term  debt                                                                                                                                                                                                                                                                                                   |       | 3,576,211                   |       | 2,959,262                   |       |
| **Other Non-Current Liabilities**                                                                                                                                                                                                                                                                                       |       |                        |       |                        |       |
| Deferred income taxes                                                                                                                                                                                                                                                                                                   |       | 1,974,672                   |       | 2,352,633                   |       |
| Contracts payable for  broadcast rights                                                                                                                                                                                                                                                                                 |       | 425,927                     |       | 528,878                     |       |
| Deferred compensation and  benefits                                                                                                                                                                                                                                                                                     |       | 392,187                     |       | 356,612                     |       |
| Other obligations                                                                                                                                                                                                                                                                                                       |       | 165,445                     |       | 176,648                     |       |
| Total other non-current  liabilities                                                                                                                                                                                                                                                                                    |       | 2,958,231                   |       | 3,414,771                   |       |
| **Commitments  and Contingent Liabilities (Note 12)**                                                                                                                                                                                                                                                              |       | —                      |       | —                      |       |
| **Shareholders’ Equity**                                                                                                                                                                                                                                                                                           |       |                        |       |                        |       |
| Series C convertible preferred stock                                                                                                                                                                                                                                                                               |       |                        |       |                        |       |
| Authorized: no  shares at Dec. 31, 2006 and 823,568 shares at Dec. 25, 2005; Issued  and outstanding: no shares at Dec. 31, 2006 and 88,519 shares  (net of 354,077 treasury shares) at Dec. 25, 2005 (liquidation value  $500 per share)                                            |       | —                      |       | 44,260                      |       |
| Series D-1 convertible preferred stock                                                                                                                                                                                                                                                                             |       |                        |       |                        |       |
| Authorized: 137,643 shares  at Dec. 31, 2006 and 380,972 shares at Dec. 25, 2005; Issued  and outstanding: no shares (net of 137,643 treasury shares) at  Dec. 31, 2006 and 76,194 shares (net of 304,778 treasury shares) at  Dec. 25, 2005 (liquidation value $500 per share) |       | —                      |       | 38,097                      |       |
| Series D-2 convertible preferred stock                                                                                                                                                                                                                                                                             |       |                        |       |                        |       |
| Authorized: no shares at  Dec. 31, 2006 and 245,100 shares at Dec. 25, 2005; Issued and outstanding: no  shares at Dec. 31, 2006 and 49,020 shares (net of 196,080 treasury  shares) at Dec. 25, 2005 (liquidation value $500 per share)                                                  |       | —                      |       | 24,510                      |       |
| Common stock ($0.01 par value)                                                                                                                                                                                                                                                                                          |       |                        |       |                        |       |
| Authorized: 1,400,000,000  shares; 387,179,076 shares issued at Dec. 31, 2006 and 390,122,184  shares issued at Dec. 25, 2005                                                                                                                                                                            |       | 2,241                       |       | 2,270                       |       |
| Additional paid-in  capital                                                                                                                                                                                                                                                                                             |       | 6,834,788                   |       | 6,818,533                   |       |
| Retained earnings                                                                                                                                                                                                                                                                                                       |       | 3,138,313                   |       | 2,824,762                   |       |
| Treasury common stock (at  cost) 147,971,659 shares in 2006 and 83,441,765 shares in 2005                                                                                                                                                                                                                          |       | (5,288,341                  | )          | (3,015,581                  | )          |
| Accumulated other  comprehensive income (loss)                                                                                                                                                                                                                                                                          |       | (367,385                    | )          | (11,300                     | )          |
| Total shareholders’  equity                                                                                                                                                                                                                                                                                        |       | 4,319,616                   |       | 6,725,551                   |       |
| Total liabilities and shareholders’ equity                                                                                                                                                                                                                                                                         |       | $                           | 13,400,772 |                        | $          | 14,546,242 |   |

 

See Notes to Consolidated Financial Statements.

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**TRIBUNE COMPANY AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY(In thousands, except per share data)**
|                                                                                                       | ** ** | ** ** | ** ** | ** **   | ** ** | **Accumulated**        | ** ** | ** **                                | ** ** | ** **             | ** ** | ** **             | ** ** |
|-------------------------------------------------------------------------------------------------------|------------|------------|------------|--------------|------------|------------------------|------------|-------------------------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                                                                                            | ** ** | ** ** | ** ** | ** **   | ** ** | **Other**              | ** ** | ** **                                | ** ** | ** **             | ** ** | ** **             | ** ** |
| ** **                                                                                            | ** ** | ** ** | ** ** | **Retained** | ** ** | **Comprehensive**      | ** ** | **Convertible Preferred Stock** | ** ** |
| ** **                                                                                            | ** ** | **Total**  | ** ** | **Earnings** | ** ** | **Income (Loss)** | ** ** | **Series C(1)**                      | ** ** | **Series D-1(1)** | ** ** | **Series D-2(1)** | ** ** |
| **Balance at Dec. 28, 2003**                                                                     |       | $          | 7,028,124  |         | $          | 3,008,460              |       |                                      | $          | 13,516                 |       |                   |       | $ | 44,260 |   |   |   | $ | 38,097 |   |   |   | $ | 24,510 |   |   |
| Comprehensive income:                                                                                 |       |       |       |         |       |                   |       |                                      |       |                   |       |                   |       |   |   |   |   |   |   |   |   |
| Net income                                                                                            |       | 555,536    |       | 555,536      |       |                   | —     |                                      |       |                   | —     |                   |       |   | — |   |   |   | — |   |   |
| Other  comprehensive income:                                                                          |       |       |       |         |       |                   |       |                                      |       |                   |       |                   |       |   |   |   |   |   |   |   |   |
| Change in unrealized gain on securities, net                                                          |       | 896        |       | —       |       |                   | 896        |                                      |       |                   | —     |                   |       |   | — |   |   |   | — |   |   |
| Change in minimum pension liabilities, net                                                            |       | (1,700     | )          | —       |       |                   | (1,700     | )                                         |       |                   | —     |                   |       |   | — |   |   |   | — |   |   |
| Change in foreign currency translation adjustments,  net                                              |       | 118        |       | —       |       |                   | 118        |                                      |       |                   | —     |                   |       |   | — |   |   |   | — |   |   |
| Comprehensive income                                                                                  |       | 554,850    |       | —       |       |                   | —     |                                      |       |                   | —     |                   |       |   | — |   |   |   | — |   |   |
| Dividends declared:                                                                                   |       |       |       |         |       |                   |       |                                      |       |                   |       |                   |       |   |   |   |   |   |   |   |   |
| Common ($.48 per share)                                                                               |       | (154,702   | )          | (154,702     | )          |                   | —     |                                      |       |                   | —     |                   |       |   | — |   |   |   | — |   |   |
| Series C, D-1 and D-2 preferred                                                                  |       | (8,308     | )          | (8,308       | )          |                   | —     |                                      |       |                   | —     |                   |       |   | — |   |   |   | — |   |   |
| Shares issued under option and stock plans                                                            |       | 242,620    |       | —       |       |                   | —     |                                      |       |                   | —     |                   |       |   | — |   |   |   | — |   |   |
| Tax benefit on stock options exercised                                                                |       | 32,819     |       | —       |       |                   | —     |                                      |       |                   | —     |                   |       |   | — |   |   |   | — |   |   |
| Shares tendered as payment for options exercised                                                      |       | (124,473   | )          | (51,879      | )          |                   | —     |                                      |       |                   | —     |                   |       |   | — |   |   |   | — |   |   |
| Purchases of treasury stock                                                                           |       | (734,086   | )          | —       |       |                   | —     |                                      |       |                   | —     |                   |       |   | — |   |   |   | — |   |   |
| Retirement of treasury stock                                                                          |       | —     |       | (538,565     | )          |                   | —     |                                      |       |                   | —     |                   |       |   | — |   |   |   | — |   |   |
| **Balance at Dec. 26, 2004**                                                                     |       | $          | 6,836,844  |         | $          | 2,810,542              |       |                                      | $          | 12,830                 |       |                   |       | $ | 44,260 |   |   |   | $ | 38,097 |   |   |   | $ | 24,510 |   |   |
| Comprehensive income:                                                                                 |       |       |       |         |       |                   |       |                                      |       |                   |       |                   |       |   |   |   |   |   |   |   |   |
| Net income                                                                                            |       | 534,689    |       | 534,689      |       |                   | —     |                                      |       |                   | —     |                   |       |   | — |   |   |   | — |   |   |
| Other  comprehensive income:                                                                          |       |       |       |         |       |                   |       |                                      |       |                   |       |                   |       |   |   |   |   |   |   |   |   |
| Change in unrealized gain on securities, net                                                          |       | (3,463     | )          | —       |       |                   | (3,463     | )                                         |       |                   | —     |                   |       |   | — |   |   |   | — |   |   |
| Change in minimum pension liabilities, net                                                            |       | (20,597    | )          | —       |       |                   | (20,597    | )                                         |       |                   | —     |                   |       |   | — |   |   |   | — |   |   |
| Change in foreign currency translation adjustments,  net                                              |       | (70        | )          | —       |       |                   | (70        | )                                         |       |                   | —     |                   |       |   | — |   |   |   | — |   |   |
| Comprehensive income                                                                                  |       | 510,559    |       | —       |       |                   | —     |                                      |       |                   | —     |                   |       |   | — |   |   |   | — |   |   |
| Dividends declared:                                                                                   |       |       |       |         |       |                   |       |                                      |       |                   |       |                   |       |   |   |   |   |   |   |   |   |
| Common ($.72 per share)                                                                               |       | (225,110   | )          | (225,110     | )          |                   | —     |                                      |       |                   | —     |                   |       |   | — |   |   |   | — |   |   |
| Series C, D-1 and D-2 preferred                                                                  |       | (8,364     | )          | (8,364       | )          |                   | —     |                                      |       |                   | —     |                   |       |   | — |   |   |   | — |   |   |
| Shares issued under option and stock plans                                                            |       | 51,102     |       | —       |       |                   | —     |                                      |       |                   | —     |                   |       |   | — |   |   |   | — |   |   |
| Tax benefit on stock options exercised                                                                |       | 5,395      |       | —       |       |                   | —     |                                      |       |                   | —     |                   |       |   | — |   |   |   | — |   |   |
| Shares tendered as payment for options exercised                                                      |       | (1,101     | )          | (769         | )          |                   | —     |                                      |       |                   | —     |                   |       |   | — |   |   |   | — |   |   |
| Purchases of treasury stock                                                                           |       | (443,774   | )          | —       |       |                   | —     |                                      |       |                   | —     |                   |       |   | — |   |   |   | — |   |   |
| Retirement of treasury stock                                                                          |       | —     |       | (286,226     | )          |                   | —     |                                      |       |                   | —     |                   |       |   | — |   |   |   | — |   |   |
| **Balance at Dec. 25, 2005**                                                                     |       | $          | 6,725,551  |         | $          | 2,824,762              |       |                                      | $          | (11,300                | )          |                   |       | $ | 44,260 |   |   |   | $ | 38,097 |   |   |   | $ | 24,510 |   |   |
| Comprehensive income:                                                                                 |       |       |       |         |       |                   |       |                                      |       |                   |       |                   |       |   |   |   |   |   |   |   |   |
| Net income                                                                                            |       | 593,995    |       | 593,995      |       |                   | —     |                                      |       |                   | —     |                   |       |   | — |   |   |   | — |   |   |
| Other  comprehensive income:                                                                          |       |       |       |         |       |                   |       |                                      |       |                   |       |                   |       |   |   |   |   |   |   |   |   |
| Change in unrealized gain on securities, net                                                          |       | (9,396     | )          | —       |       |                   | (9,396     | )                                         |       |                   | —     |                   |       |   | — |   |   |   | — |   |   |
| Change in minimum pension liabilities, net                                                            |       | 18,987     |       | —       |       |                   | 18,987     |                                      |       |                   | —     |                   |       |   | — |   |   |   | — |   |   |
| Change in foreign currency translation adjustments,  net                                              |       | 183        |       | —       |       |                   | 183        |                                      |       |                   | —     |                   |       |   | — |   |   |   | — |   |   |
| Comprehensive income                                                                                  |       | 603,769    |       | —       |       |                   | —     |                                      |       |                   | —     |                   |       |   | — |   |   |   | — |   |   |
| Adjustments, net of tax, for initial adoption of FAS  No. 158 (see Note 1 and Note 14) |       | (365,859   | )          | —       |       |                   | (365,859   | )                                         |       |                   | —     |                   |       |   | — |   |   |   | — |   |   |
| Dividends declared:                                                                                   |       |       |       |         |       |                   |       |                                      |       |                   |       |                   |       |   |   |   |   |   |   |   |   |
| Common ($.72 per share)                                                                               |       | (194,640   | )          | (194,640     | )          |                   | —     |                                      |       |                   | —     |                   |       |   | — |   |   |   | — |   |   |
| Series C, D-1 and D-2 preferred                                                                  |       | (6,309     | )          | (6,309       | )          |                   | —     |                                      |       |                   | —     |                   |       |   | — |   |   |   | — |   |   |
| Shares issued under option and stock plans                                                            |       | 38,714     |       | —       |       |                   | —     |                                      |       |                   | —     |                   |       |   | — |   |   |   | — |   |   |
| Tax benefits on stock options exercised                                                               |       | 4,256      |       | —       |       |                   | —     |                                      |       |                   | —     |                   |       |   | — |   |   |   | — |   |   |
| Shares tendered as payment for options exercised                                                      |       | (138       | )          | (79          | )          |                   | —     |                                      |       |                   | —     |                   |       |   | — |   |   |   | — |   |   |
| Stock-based compensation                                                                              |       | 31,645     |       | —       |       |                   | —     |                                      |       |                   | —     |                   |       |   | — |   |   |   | — |   |   |
| TMCT transactions (see Note 7)                                                                   |       | (267,978   | )          | —       |       |                   | —     |                                      |       |                   | (44,260    | )                      |       |   | (38,097 | ) |   |   | (24,510 | ) |   |
| Purchases of treasury stock                                                                           |       | (2,249,395 | )          | —       |       |                   | —     |                                      |       |                   | —     |                   |       |   | — |   |   |   | — |   |   |
| Retirement of treasury stock                                                                          |       | —     |       | (79,416      | )          |                   | —     |                                      |       |                   | —     |                   |       |   | — |   |   |   | — |   |   |
| **Balance  at Dec. 31, 2006**                                                                    |       | $          | 4,319,616  |         | $          | 3,138,313              |       |                                      | $          | (367,385               | )          |                   |       | $ | — |   |   |   | $ | — |   |   |   | $ | — |   |   |

----

(1)       Amountsare net of treasury stock.

See Notes to Consolidated Financial Statements.

74

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**   **
|                                                                                                        | ** ** | **Common Stock and**           | ** ** | ** **                          | ** ** | ** **         | ** ** |
|--------------------------------------------------------------------------------------------------------|------------|------------------------------------------|------------|-------------------------------------|------------|--------------------|------------|
| ** **                                                                                             | ** ** | **Additional Paid-In Capital** | ** ** | **Treasury Common Stock** | ** ** |
| ** **                                                                                             | ** ** | **Amount**                               | ** ** | ** **                          | ** ** | **Amount**         | ** ** | ** ** | ** ** |
| ** **                                                                                             | ** ** | **(at cost)**                       | ** ** | **Shares**                          | ** ** | **(at cost)** | ** ** | **Shares** | ** ** |
| **Balance  at Dec. 28, 2003**                                                                     |       | $                                        | 6,924,484  |                                | 412,370    |               | $          | (3,025,203 | ) | (84,073 | ) |
| Comprehensive  income:                                                                                 |       |                                     |       |                                |       |               |       |   |   |
| Net  income                                                                                            |       | —                                   |       | —                              |       | —             |       | — |   |
| Other  comprehensive income:                                                                           |       |                                     |       |                                |       |               |       |   |   |
| Change in unrealized  gain on securities, net                                                          |       | —                                   |       | —                              |       | —             |       | — |   |
| Change in minimum  pension liabilities, net                                                            |       | —                                   |       | —                              |       | —             |       | — |   |
| Change in  foreign currency translation adjustments, net                                               |       | —                                   |       | —                              |       | —             |       | — |   |
| Comprehensive  income                                                                                  |       | —                                   |       | —                              |       | —             |       | — |   |
| Dividends  declared:                                                                                   |       |                                     |       |                                |       |               |       |   |   |
| Common  ($.48 per share)                                                                               |       | —                                   |       | —                              |       | —             |       | — |   |
| Series C,  D-1 and D-2 preferred                                                                  |       | —                                   |       | —                              |       | —             |       | — |   |
| Shares  issued under option and stock plans                                                            |       | 167,563                                  |       | 5,006                               |       | 75,057             |       | 1,726 |   |
| Tax  benefit on stock options exercised                                                                |       | 32,819                                   |       | —                              |       | —             |       | — |   |
| Shares tendered as  payment for options exercised                                                      |       | (13,309                                  | )          | (1,335                              | )          | (59,285            | )          | (1,095 | ) |
| Purchases  of treasury stock                                                                           |       | —                                   |       | —                              |       | (734,086           | )          | (15,526 | ) |
| Retirement  of treasury stock                                                                          |       | (193,052                                 | )          | (15,526                             | )          | 731,617            |       | 15,526 |   |
| **Balance  at Dec. 26, 2004**                                                                     |       | $                                        | 6,918,505  |                                | 400,515    |               | $          | (3,011,900 | ) | (83,442 | ) |
| Comprehensive  income:                                                                                 |       |                                     |       |                                |       |               |       |   |   |
| Net  income                                                                                            |       | —                                   |       | —                              |       | —             |       | — |   |
| Other  comprehensive income:                                                                           |       |                                     |       |                                |       |               |       |   |   |
| Change in unrealized  gain on securities, net                                                          |       | —                                   |       | —                              |       | —             |       | — |   |
| Change in minimum  pension liabilities, net                                                            |       | —                                   |       | —                              |       | —             |       | — |   |
| Change in  foreign currency translation adjustments, net                                               |       | —                                   |       | —                              |       | —             |       | — |   |
| Comprehensive  income                                                                                  |       | —                                   |       | —                              |       | —             |       | — |   |
| Dividends  declared:                                                                                   |       |                                     |       |                                |       |               |       |   |   |
| Common  ($.72 per share)                                                                               |       | —                                   |       | —                              |       | —             |       | — |   |
| Series C,  D-1 and D-2 preferred                                                                  |       | —                                   |       | —                              |       | —             |       | — |   |
| Shares  issued under option and stock plans                                                            |       | 51,102                                   |       | 1,814                               |       | —             |       | — |   |
| Tax  benefit on stock options exercised                                                                |       | 5,395                                    |       | —                              |       | —             |       | — |   |
| Shares tendered as  payment for options exercised                                                      |       | (332                                     | )          | (26                                 | )          | —             |       | — |   |
| Purchases  of treasury stock                                                                           |       | —                                   |       | —                              |       | (443,774           | )          | (12,181 | ) |
| Retirement  of treasury stock                                                                          |       | (153,867                                 | )          | (12,181                             | )          | 440,093            |       | 12,181 |   |
| **Balance  at Dec. 25, 2005**                                                                     |       | $                                        | 6,820,803  |                                | 390,122    |               | $          | (3,015,581 | ) | (83,442 | ) |
| Comprehensive  income:                                                                                 |       |                                     |       |                                |       |               |       |   |   |
| Net  income                                                                                            |       | —                                   |       | —                              |       | —             |       | — |   |
| Other  comprehensive income                                                                            |       |                                     |       |                                |       |               |       |   |   |
| Change in unrealized  gain on securities, net                                                          |       | —                                   |       | —                              |       | —             |       | — |   |
| Change in minimum  pension liabilities, net                                                            |       | —                                   |       | —                              |       | —             |       | — |   |
| Change in  foreign currency translation adjustments, net                                               |       | —                                   |       | —                              |       | —             |       | — |   |
| Comprehensive  income                                                                                  |       | —                                   |       | —                              |       | —             |       | — |   |
| Adjustments,  net of tax, for initial adoption of FAS No. 158 (see Note 1 and  Note 14) |       | —                                   |       | —                              |       | —             |       | — |   |
| Dividends  declared:                                                                                   |       |                                     |       |                                |       |               |       |   |   |
| Common  ($.72 per share)                                                                               |       | —                                   |       | —                              |       | —             |       | — |   |
| Series C,  D-1 and D-2 preferred                                                                  |       | —                                   |       | —                              |       | —             |       | — |   |
| Shares  issued under option and stock plans                                                            |       | 38,714                                   |       | 1,665                               |       | —             |       | — |   |
| Tax  benefits on stock options exercised                                                               |       | 4,256                                    |       | —                              |       | —             |       | — |   |
| Shares tendered as  payment for options exercised                                                      |       | (59                                      | )          | (4                                  | )          | —             |       | — |   |
| Stock-based  compensation                                                                              |       | 31,645                                   |       | —                              |       | —             |       | — |   |
| TMCT  transactions (see Note 7)                                                                   |       | —                                   |       | —                              |       | (161,111           | )          | 1,550 |   |
| Purchases  of treasury stock                                                                           |       | —                                   |       | —                              |       | (2,249,395         | )          | (70,684 | ) |
| Retirement  of treasury stock                                                                          |       | (58,330                                  | )          | (4,604                              | )          | 137,746            |       | 4,604 |   |
| **Balance  at Dec. 31, 2006**                                                                     |       | $                                        | 6,837,029  |                                | 387,179    |               | $          | (5,288,341 | ) | (147,972 | ) |

 

75

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**TRIBUNE COMPANY AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands of dollars)**

| ** **                                                                                           | ** ** | **Year Ended**              | ** ** |
|------------------------------------------------------------------------------------------------------|------------|-----------------------------|------------|
| ** **                                                                                           | ** ** | **Dec. 31, 2006** | ** ** | **Dec. 25, 2005** | ** ** | **Dec. 26, 2004** | ** ** |
| **Operations**                                                                                       |       |                        |       |   |   |   |   |   |   |   |   |   |   |
| Net income                                                                                           |       |                        | $          | 593,995 |   |   |   | $ | 534,689 |   |   |   | $ | 555,536 |   |   |
| Adjustments to reconcile net income to net cash  provided by operations:                             |       |                        |       |   |   |   |   |   |   |   |   |   |   |
| Stock-based  compensation                                                                            |       |                        | 31,927     |   |   |   | — |   |   |   | — |   |   |
| Pension costs in  excess of contributions                                                            |       |                        | 20,611     |   |   |   | 13,355 |   |   |   | 7,677 |   |   |
| (Gain) loss on  change in fair values of derivatives and related investments                         |       |                        | (11,088    | ) |   |   | (62,184 | ) |   |   | 18,497 |   |   |
| Loss on early debt  retirement                                                                       |       |                        | —     |   |   |   | — |   |   |   | 140,506 |   |   |
| Gain on TMCT  transactions                                                                           |       |                        | (59,596    | ) |   |   | — |   |   |   | — |   |   |
| Gain on sales of  investments, net                                                                   |       |                        | (36,732    | ) |   |   | (6,780 | ) |   |   | (20,347 | ) |   |
| Loss on investment  write-downs                                                                      |       |                        | —     |   |   |   | — |   |   |   | 5,599 |   |   |
| Other non-operating  (gain) loss, net                                                                |       |                        | 4,447      |   |   |   | (897 | ) |   |   | 789 |   |   |
| Cumulative effect  of change in accounting principle, net of tax                                     |       |                        | —     |   |   |   | — |   |   |   | 17,788 |   |   |
| Depreciation                                                                                         |       |                        | 209,341    |   |   |   | 224,625 |   |   |   | 214,226 |   |   |
| Amortization of  intangible assets                                                                   |       |                        | 20,002     |   |   |   | 19,195 |   |   |   | 18,863 |   |   |
| Loss on sales of  discontinued operations                                                            |       |                        | 48,238     |   |   |   | — |   |   |   | — |   |   |
| Net income on  equity investments                                                                    |       |                        | (80,773    | ) |   |   | (41,209 | ) |   |   | (17,931 | ) |   |
| Distributions from  equity investments                                                               |       |                        | 65,302     |   |   |   | 48,883 |   |   |   | 14,439 |   |   |
| Deferred income taxes                                                                                |       |                        | (112,600   | ) |   |   | 93,071 |   |   |   | 40,006 |   |   |
| Tax benefit on  stock options exercised                                                              |       |                        | 4,256      |   |   |   | 5,395 |   |   |   | 32,819 |   |   |
| Changes in working  capital items excluding effects from acquisitions and dispositions:              |       |                        |       |   |   |   |   |   |   |   |   |   |   |
| Accounts  receivable                                                                                 |       |                        | 20,668     |   |   |   | 51,773 |   |   |   | 17,220 |   |   |
| Inventories,  prepaid expenses and other current assets                                              |       |                        | 5,310      |   |   |   | 4,293 |   |   |   | (800 | ) |   |
| Accounts payable,  employee compensation and benefits, deferred income and accrued  liabilities |       |                        | (25,798    | ) |   |   | 2,464 |   |   |   | 14,656 |   |   |
| Income taxes                                                                                         |       |                        | 39,707     |   |   |   | 6,177 |   |   |   | 2,007 |   |   |
| Change in  broadcast rights, net of liabilities                                                      |       |                        | 2,056      |   |   |   | (16,329 | ) |   |   | 6,558 |   |   |
| Change in Matthew  Bender and Mosby tax reserve                                                      |       |                        | —     |   |   |   | (221,133 | ) |   |   | 5,997 |   |   |
| Other, net                                                                                           |       |                        | 48,491     |   |   |   | 3,965 |   |   |   | (915 | ) |   |
| Net cash provided  by operations                                                                     |       |                        | 787,764    |   |   |   | 659,353 |   |   |   | 1,073,190 |   |   |
| **Investments**                                                                                      |       |                        |       |   |   |   |   |   |   |   |   |   |   |
| Capital  expenditures                                                                                |       |                        | (221,907   | ) |   |   | (205,945 | ) |   |   | (217,348 | ) |   |
| Acquisitions                                                                                         |       |                        | (48,144    | ) |   |   | (4,207 | ) |   |   | (551 | ) |   |
| Investments                                                                                          |       |                        | (174,085   | ) |   |   | (78,071 | ) |   |   | (48,831 | ) |   |
| Matthew Bender and  Mosby tax liability allocated to goodwill (Note 13)                         |       |                        | —     |   |   |   | (459,116 | ) |   |   | — |   |   |
| Proceeds from  sales of subsidiaries, investments and real estate                                    |       |                        | 470,608    |   |   |   | 22,534 |   |   |   | 40,232 |   |   |
| Net cash provided  by (used for) investments                                                         |       |                        | 26,472     |   |   |   | (724,805 | ) |   |   | (226,498 | ) |   |
| **Financing**                                                                                        |       |                        |       |   |   |   |   |   |   |   |   |   |   |
| Borrowings under  bridge credit facility                                                             |       |                        | 1,600,000  |   |   |   | — |   |   |   | — |   |   |
| Repayments under  bridge credit facility                                                             |       |                        | (290,000   | ) |   |   | — |   |   |   | — |   |   |
| Long-term  borrowings                                                                                |       |                        | 1,500,829  |   |   |   | 777,660 |   |   |   | — |   |   |
| Repayments of long-term  debt                                                                        |       |                        | (319,055   | ) |   |   | (198,880 | ) |   |   | (823,028 | ) |   |
| (Repayments)  issuances of commercial paper, net                                                     |       |                        | (826,513   | ) |   |   | 150,326 |   |   |   | 773,206 |   |   |
| Premium on early  debt retirement                                                                    |       |                        | —     |   |   |   | — |   |   |   | (137,331 | ) |   |
| Debt issuance  costs                                                                                 |       |                        | (29,881    | ) |   |   | (4,762 | ) |   |   | — |   |   |
| Sales of common  stock to employees, net                                                             |       |                        | 37,177     |   |   |   | 41,374 |   |   |   | 111,896 |   |   |
| Purchases of  Tribune common stock                                                                   |       |                        | (2,262,268 | ) |   |   | (440,093 | ) |   |   | (731,617 | ) |   |
| Dividends                                                                                            |       |                        | (200,949   | ) |   |   | (233,474 | ) |   |   | (163,010 | ) |   |
| Net cash provided  by (used for) financing                                                           |       |                        | (790,660   | ) |   |   | 92,151 |   |   |   | (969,884 | ) |   |
| **Net  Increase (Decrease) in Cash and Cash Equivalents**                                            |       |                        | 23,576     |   |   |   | 26,699 |   |   |   | (123,192 | ) |   |
| Cash and cash  equivalents, beginning of year                                                        |       |                        | 151,110    |   |   |   | 124,411 |   |   |   | 247,603 |   |   |
| Cash and cash  equivalents, end of year                                                              |       |                        | $          | 174,686 |   |   |   | $ | 151,110 |   |   |   | $ | 124,411 |   |   |

 

See Notes to Consolidated Financial Statements.

76

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**TRIBUNE COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTINGPOLICIES**

The significant accountingpolicies of Tribune Company and subsidiaries (the “Company”), as summarizedbelow, conform with accounting principles generally accepted in the UnitedStates of America and reflect practices appropriate to the Company’sbusinesses.

**Nature of Operations—**The Companyis a media and entertainment company. Through its subsidiaries, the Company isengaged in newspaper publishing, television and radio broadcasting andentertainment.

**Fiscal Year—**The Company’s fiscalyear ends on the last Sunday in December. The Company’s 2006 fiscal year endedon Dec. 31, 2006, and encompassed a 53-week period. Fiscal years2005 and 2004 each encompassed a 52-week period.

**Principles of Consolidation—**Theconsolidated financial statements include the accounts of Tribune Company andall majority-owned subsidiaries. In general, investments comprising 20 to50 percent of the voting stock of companies and certain partnershipinterests are accounted for using the equity method. All other investments aregenerally accounted for using the cost method. All significant intercompanytransactions are eliminated.

The Company evaluates itsinvestments and other transactions for consolidation under the provisions ofFinancial Accounting Standards Board (“FASB”) Interpretation No. 46R, “Consolidationof Variable Interest Entities” (“FIN 46R”). The Company holds significantvariable interests, as defined by FIN 46R, in Classified Ventures, LLC,ShopLocal, LLC (formerly CrossMedia Services, Inc.) and Topix, LLC, butthe Company has determined that it is not the primary beneficiary of theseentities. The Company’s maximum loss exposure related to these entities islimited to its equity investments in Classified Ventures, LLC, ShopLocal, LLCand Topix, LLC, which were $44 million, $31 million, and$26 million, respectively, at Dec. 31, 2006. At Dec. 25, 2005,the Company’s equity investments in Classified Ventures, LLC, ShopLocal, LLCand Topix, LLC were $42 million, $25 million and $15 million,respectively. The Company continues to hold an investment in CareerBuilder,LLC, which no longer meets the definition of a variable interest entity.

**Presentation—**On June 5,2006, the Company announced the sale of WATL-TV, Atlanta and on June 19,2006 announced the sale of WCWN-TV, Albany. The sale of WATL-TV, Atlanta closedon Aug. 7, 2006. On Sept. 14, 2006, the Company announced the sale ofWLVI-TV, Boston. The Albany and Boston station sales closed on Dec. 6,2006 and Dec. 19, 2006, respectively. The results of operations of each ofthese businesses have been reported as discontinued operations in theaccompanying consolidated statements of income. Prior year consolidatedstatements of income have been reclassified to conform to the current yearpresentation of these businesses as discontinued operations. See Note 3 forfurther discussion. In addition, certain other prior year financial informationhas been reclassified to conform to the current year presentation.

**Revenue Recognition—**The Company’sprimary sources of revenue are from the sales of advertising space in publishedissues of its newspapers and on interactive websites owned by, or affiliatedwith, the Company; distribution of preprinted advertising inserts in itsnewspapers; sales of newspapers to distributors and individual subscribers; andsales of airtime on its television and radio stations. Newspaper advertisingrevenue is recorded, net of agency commissions, when advertisements arepublished in newspapers. Website advertising revenue is recognized ratably overthe contract period or as services are delivered, as appropriate. Proceeds fromsubscriptions are deferred and are included in revenue on a pro-rata basis overthe term of the subscriptions. Broadcast revenue is recorded, net of agencycommissions, when commercials are aired. The Company records rebates whenearned as a reduction of advertising revenue.

77

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**TRIBUNE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

**Use of Estimates—**The preparationof financial statements in conformity with accounting principles generallyaccepted in the United States of America requires management to make estimatesand assumptions that affect the amounts reported in the financial statementsand accompanying notes. Actual results could differ from these estimates.

**Cash and Cash Equivalents—**Cashand cash equivalents are stated at cost, which approximates market value.Investments with original maturities of three months or less at the time ofpurchase are considered to be cash equivalents.

**Accounts Receivable—**The Company’saccounts receivable are primarily due from advertisers. Credit is extendedbased on an evaluation of each customer’s financial condition, and generallycollateral is not required. The Company maintains an allowance foruncollectible accounts, rebates and volume discounts. This allowance isdetermined based on historical write-off experience and any known specificcollectibility exposures.

**Inventories—**Inventories arestated at the lower of cost or market. Cost is determined on the last-in,first-out (“LIFO”) basis for newsprint and on the first-in, first-out (“FIFO”)basis for all other inventories.

**Broadcast Rights—**Broadcastrights consist principally of rights to broadcast syndicated programs, sportsand feature films and are stated at the lower of cost or estimated netrealizable value. The total cost of these rights is recorded as an asset and aliability when the program becomes available for broadcast. Syndicated programrights that have limited showings are generally amortized using an acceleratedmethod as programs are aired. Sports and feature film rights are amortizedusing the straight-line method. The current portion of broadcast rightsrepresents those rights available for broadcast that are expected to beamortized in the succeeding year.

The Company maintains anallowance for programming that is not expected to be aired by the end of thecontract period. This allowance for excess programming inventory is based on aprogram-by-program review of the Company’s five-year broadcast plans andhistorical write-off trends. The total reserve balance at Dec. 31, 2006and Dec. 25 2005 was $4 million. Actual write-offs in 2006 and 2005were $.4 million and $1 million, respectively. Future write-offs can vary basedon changes in consumer viewing trends and the availability and costs of otherprogramming.

**Properties—**Property,plant and equipment are stated at cost. The Company capitalizes major property,plant and equipment additions, improvements and replacements, as well asinterest incurred during construction of major facilities and equipment.Depreciation is computed using the straight-line method over the followingestimated useful lives: 10 to 40 years for buildings, 7 to 20 yearsfor newspaper printing presses and 3 to 10 years for all other equipment.Expenditures for repairs and maintenance of existing assets are charged toexpense as incurred.

**Goodwilland Other Intangible Assets—**Goodwill and other intangibleassets are summarized in Note 6. The Company periodically reviews goodwilland certain intangible assets no longer being amortized for impairment inaccordance with Financial Accounting Standard (“FAS”) No. 142, “Goodwilland Other Intangible Assets.” Under FAS No. 142, the impairment review ofgoodwill and other intangible assets not subject to amortization must be basedgenerally on fair values.

The Company performs itsannual impairment review in the fourth quarter of each year. The estimated fairvalue of the reporting units to which goodwill is allocated is determined usingmultiples of operating cash flows for purposes of analyzing goodwill forimpairment. A significant decline in multiples and/or operating cash flows fora reporting unit could result in a non-cash impairment charge under FAS No. 142.The estimated fair values of other assets subject to the annual impairmentreview, which include newspaper mastheads and Federal Communications Commission(“FCC”) licenses, are calculated based 

78

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**TRIBUNE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

onprojected future discounted cash flow analyses. The development of marketmultiples and cash flow projections used in the analyses requires the use ofassumptions, including assumptions regarding revenue and market growth. Theanalyses use discount rates based on specific economic factors in the publishingand broadcasting industries. These assumptions reflect the Company’s bestestimates, but these items involve inherent uncertainties based on marketconditions generally outside of the Company’s control.

In the fourth quarter of2004, the Company elected to early adopt the provisions of the FASB’s EmergingIssues Task Force Topic No. D-108, which requires the use of adirect valuation method for valuing intangible assets, such as FCC licenses,and reviewing them for impairment. Historically, the Company had been using aresidual valuation method to review its FCC licenses for impairment each year.A direct valuation method generally results in a lower valuation than does aresidual valuation method. The effect of changing to a direct valuation methodfor the 2004 FCC licenses impairment review was a pretax charge of$29 million ($18 million after-tax). The charge was recorded in thefourth quarter of 2004 as a cumulative effect of a change in accountingprinciple in the consolidated statements of income.

**Impairment Review of Long-Lived Assets—**In accordance with FAS No. 144, “Accountingfor the Impairment or Disposal of Long-Lived Assets,” the Company evaluates thecarrying value of long-lived assets to be held and used whenever events orchanges in circumstances indicate that the carrying amount of a long-livedasset or asset group may be impaired. The carrying value of a long-lived assetor asset group is considered impaired when the projected future undiscountedcash flows to be generated from the asset or asset group over its remainingdepreciable life are less than its current carrying value.

**Investments—**The Company recordsits investments in debt and equity securities at fair value, except for debtsecurities that the Company intends to hold to maturity and equity securitiesthat are accounted for under the equity method or that are issued by privatecompanies. Except for 16 million Time Warner shares (see “DerivativeInstruments” below), investments are currently classified asavailable-for-sale, and accordingly, the difference between cost and fairvalue, net of related tax effects, is recorded in the accumulated othercomprehensive income (loss) component of shareholders’ equity.

**Derivative Instruments—**FAS No. 133,“Accounting for Derivative Instruments and Hedging Activities,” requires allderivative instruments to be recorded in the balance sheet at fair value.Changes in the fair value of derivative instruments are recognized periodicallyin income. The provisions of FAS No. 133 affect the Company’s accountingfor its 8 million Exchangeable Subordinated Debentures due 2029 (“PHONES”)and its interest rate swap related to its $100 million 7.5% debentures(see Note 9).

Under the provisions ofFAS No. 133, the initial value of the PHONES was split into a debtcomponent and a derivative component. Changes in the fair value of thederivative component of the PHONES are recorded in the statement of income.Beginning in the second quarter of 1999, changes in the fair value of therelated 16 million Time Warner shares are also recorded in the statementof income and should at least partially offset changes in the fair value of thederivative component of the PHONES. However, there have been, and may continueto be, periods with significant non-cash increases or decreases to the Company’snet income pertaining to the PHONES and the related Time Warner shares.

The carrying values of theCompany’s derivative instruments approximate fair value. The fair values of thePHONES were determined by reference to market values resulting from trading ona national securities exchange.

The Company’s interestrate swap is a fair value hedge and is used to manage exposure to market riskassociated with changes in interest rates. The changes in fair value of theswap agreement and the related debt instrument are recorded in income. Changesin the fair value of the swap agreement offset changes in the fair value of therelated debt (see Note 9).

79

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**TRIBUNE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

**Pension Plans and Other Postretirement Benefits—**Retirementbenefits are provided to employees through pension plans sponsored either bythe Company or by unions. Under the Company-sponsored plans, pensionbenefits are primarily a function of both the years of service and the level ofcompensation for a specified number of years, depending on the plan. It is theCompany’s policy to fund the minimum for Company-sponsored pension plansas required by ERISA. Contributions made to union-sponsored plans are basedupon collective bargaining agreements.

The Company also providescertain health care and life insurance benefits for retired employees. Theexpected cost of providing these benefits is accrued over the years that theemployees render services. It is the Company’s policy to fund postretirementbenefits as claims are incurred.

In September 2006,the FASB issued FAS No. 158, “Employers’ Accounting for Defined BenefitPension and Other Postretirement Plans, an amendment of FASB Statements No. 87,88, 106 and 132(R)”, which requires an employer to recognize the overfunded orunderfunded status of a defined benefit  pension or other postretirement plan (otherthan a multiemployer plan) as an asset or liability in its statement offinancial position and to recognize changes in that funded status in the yearin which changes occur through comprehensive income. The Statement alsorequires an employer to measure the funded status of a plan as of the date ofits year-end statement of financial position, with limited exceptions.Additional minimum pension liabilities and related intangible assets previouslyrecognized under FAS No. 87, “Employers’ Accounting for Pensions”, arereversed upon adoption. The Company adopted the provisions of FAS No. 158as of Dec. 31, 2006.

Additional information pertaining to the Company’spension plans and other postretirement benefits and to the Company’s adoptionof FAS No. 158 is provided in Note 14. The following table summarizes theimpact of the adoption of FAS No. 158 on the Company’s consolidatedbalance sheet as of Dec. 31, 2006 (in thousands):

| ** **                                      | ** ** | ** **                                                       | ** ** | **Adjustments Due to Adoption  of FAS No. 158** | ** ** | ** **             | ** ** |
|-------------------------------------------------|------------|------------------------------------------------------------------|------------|------------------------------------------------------|------------|------------------------|------------|
| ** **                                      | ** ** | **Prior to  Adoption of   FAS No. 158** | ** ** | **Reversal of  Minimum  Pension  Liabilities**  | ** ** | **Pension Plans** | ** ** | **Other  Postretirement  Benefits** | ** ** | **As Reported at  Dec. 31, 2006** | ** ** |
| Prepaid pension costs                           |       | $                                                                | 850,771    |                                                 |       | $                      | —     |   |   |   | $ | (557,316 | ) |   |   | $ | — |   |   |   | $ | 293,455 |   |   |
| Total assets                                    |       | 13,958,088                                                       |       |                                                 | —     |                   |       |   | (557,316 | ) |   |   | — |   |   |   | 13,400,772 |   |   |
| Non-current deferred  income taxes              |       | 2,208,582                                                        |       |                                                 | 5,699      |                   |       |   | (246,953 | ) |   |   | 7,344 |   |   |   | 1,974,672 |   |   |
| Employee compensation  and benefits             |       | 194,001                                                          |       |                                                 | (14,613    | )                      |       |   | 6,163 |   |   |   | — |   |   |   | 185,551 |   |   |
| Deferred compensation  and benefits             |       | 341,284                                                          |       |                                                 | —     |                   |       |   | 69,733 |   |   |   | (18,830 | ) |   |   | 392,187 |   |   |
| Total liabilities                               |       | 9,272,613                                                        |       |                                                 | (8,914     | )                      |       |   | (171,057 | ) |   |   | (11,486 | ) |   |   | 9,081,156 |   |   |
| Accumulated other  comprehensive income (loss)  |       | (1,526                                                           | )          |                                                 | 8,914      |                   |       |   | (386,259 | ) |   |   | 11,486 |   |   |   | (367,385 | ) |   |
| Total shareholders’  equity                |       | 4,685,475                                                        |       |                                                 | 8,914      |                   |       |   | (386,259 | ) |   |   | 11,486 |   |   |   | 4,319,616 |   |   |
| Total liabilities and shareholders’ equity |       | $                                                                | 13,958,088 |                                                 |       | $                      | —     |   |   |   | $ | (557,316 | ) |   |   | $ | — |   |   |   | $ | 13,400,772 |   |   |

**Self-Insurance—**The Companyself-insures for certain employee medical and disability income benefits,workers’ compensation costs and automobile and general liability claims. Therecorded liabilities for self-insured risks are calculated using actuarialmethods and are not discounted. The recorded liabilities for self-insured riskstotaled $115 million and $113 million at Dec. 31, 2006 and Dec. 25,2005, respectively.

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**TRIBUNE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

**DeferredIncome—**Deferred income arises in the normal course ofbusiness from advance subscription payments for newspapers, interactiveadvertising sales and prepaid ticket revenue related to the Chicago Cubs.Deferred income is recognized in the period it is earned.

**Stock-Based Compensation—**In the first quarter of 2006, the Companyadopted FAS No. 123R, “Share-Based Payment,” which supersededAccounting Principles Board (“APB”) Opinion No. 25, FAS No. 123 andrelated interpretations. FAS No. 123R requires the Company to expense stock-basedcompensation in its income statement. Under FAS No. 123R, stock-basedcompensation cost is measured at the grant date based on the estimated fairvalue of the award. The Company uses the Black-Scholes option-pricingmodel to determine the fair value of each stock option it grants. The Black-Scholesmodel includes assumptions regarding dividend yields, expected volatility,expected lives and risk-free interest rates. These assumptions reflect theCompany’s best estimates, but they involve certain risks, trends and uncertainties,which in some instances are outside of the control of the Company. As a result,if other assumptions had been used, stock-based compensation could havebeen materially impacted. Furthermore, if the Company uses differentassumptions in future periods, stock-based compensation expense could bematerially impacted. The Company adopted FAS No. 123R utilizing themodified prospective application method and did not restate prior years.Additional information on the accounting for stock-based compensation inaccordance with FAS No. 123R is provided in Note 16.

Prior to the adoption of FAS No. 123R, theCompany accounted for its stock-based compensation plans in accordance with APBNo. 25 and related interpretations. Under APB No. 25, no compensationexpense was recorded because the exercise price of employee stock optionsequaled the market price of the underlying stock on the date of grant. Underthe provisions of APB No. 25, the Company was not required to recognizecompensation expense for its Employee Stock Purchase Plan.

Under FAS No. 123, “Accounting for Stock-BasedCompensation,” as amended by FAS No. 148, compensation cost was measuredat the grant date based on the estimated fair value of the award and wasrecognized as compensation expense over the vesting period. Had compensationcost for the Company’s stock-based compensation plans been determinedconsistent with FAS No. 123 prior to the adoption of FAS No. 123R in2006, the Company’s 2005 and 2004 net income and earnings per share (“EPS”)would have been reduced to the following pro forma amounts (in thousands,except per share data):

| ** **                                                              | ** ** | **2005** | ** ** | **2004** | ** ** |
|-------------------------------------------------------------------------|------------|----------|------------|----------|------------|
| Net income, as  reported                                                |       |     | $          | 534,689  |       |   |   | $ | 555,536 |   |   |
| Less: Pro forma stock-based  employee compensation expense, net of tax: |       |     |       |     |       |   |   |   |   |
| General options                                                         |       |     | (89,508    | )        |       |   | (49,887 | ) |   |
| Replacement options                                                     |       |     | (1,242     | )        |       |   | (17,245 | ) |   |
| Employee Stock Purchase Plan                                            |       |     | (3,361     | )        |       |   | (3,808 | ) |   |
| Total pro forma  stock-based employee compensation expense, net of tax  |       |     | (94,111    | )        |       |   | (70,940 | ) |   |
| Pro forma net  income                                                   |       |     | 440,578    |     |       |   | 484,596 |   |   |
| Preferred  dividends                                                    |       |     | (8,364     | )        |       |   | (8,308 | ) |   |
| Pro forma net  income attributable to common shares                     |       |     | $          | 432,214  |       |   |   | $ | 476,288 |   |   |
| Net income per share:                                                   |       |     |       |     |       |   |   |   |   |
| Basic EPS:                                                              |       |     |       |     |       |   |   |   |   |
| As reported                                                             |       |     | $          | 1.68     |       |   |   | $ | 1.70 |   |   |
| Pro forma                                                               |       |     | $          | 1.38     |       |   |   | $ | 1.48 |   |   |
| Diluted EPS:                                                            |       |     |       |     |       |   |   |   |   |
| As reported                                                             |       |     | $          | 1.67     |       |   |   | $ | 1.67 |   |   |
| Pro forma                                                               |       |     | $          | 1.37     |       |   |   | $ | 1.46 |   |   |

 

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**TRIBUNE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

In determining the proforma compensation cost under the fair value method of FAS No. 123, usingthe Black-Scholes option-pricing model, the following weighted averageassumptions were used for general awards and replacement options:

| ** **                       | ** ** | **2005**            | ** ** | **2004**                 | ** ** |
|----------------------------------|------------|---------------------|------------|--------------------------|------------|
| ** **                       | ** ** | **General  Awards** | ** ** | **Replacement  Options** | ** ** | **General  Awards** | ** ** | **Replacement  Options** | ** ** |
| Risk-free interest  rate         |       |                | 3.7        | %                        |       |   | 3.3 | % |   |   | 3.2 | % |   |   | 1.7 | % |   |
| Expected dividend yield          |       |                | 1.8        | %                        |       |   | 1.8 | % |   |   | 1.0 | % |   |   | 1.0 | % |   |
| Expected stock price  volatility |       |                | 28.1       | %                        |       |   | 22.8 | % |   |   | 31.1 | % |   |   | 25.4 | % |   |
| Expected life (in years)         |       |                | 5          |                     |       |   | 3 |   |   |   | 5 |   |   |   | 2 |   |   |
| Weighted average fair value      |       |                | $          | 10.49                    |       |   |   | $ | 6.96 |   |   |   | $ | 15.45 |   |   |   | $ | 7.46 |   |   |
|                                  |            |                     |            |                          |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

On June 24, 2005, theCompany accelerated the vesting of certain stock options granted on Feb. 11,2003 and Feb. 10, 2004, totaling 2.4 million in each year. Unvested stockoptions awarded to the then current executive officers of the Company on thesegrant dates, which aggregated 0.8 million and 0.6 million, respectively,were not accelerated at that time. On Dec. 16, 2005, the Companyaccelerated the vesting of all stock options granted on Feb. 8, 2005,totaling 3.5 million, and the remaining unvested stock 

options granted to thethen current executive officers of the Company on Feb. 11, 2003 and Feb. 10,2004, totaling 0.4 million in both years. All other terms and conditions of thestock option grants remain unchanged.

In accordance with APB No. 25 and relatedinterpretations, the acceleration of vesting of these stock options did notrequire accounting recognition in the Company’s income statement. The exerciseprices of the 2003, 2004 and 2005 grants were $45.90, $52.05 and $40.59,respectively, and the Company’s closing stock prices on the June 24, 2005and Dec. 16, 2005 dates of acceleration were $35.64 and $30.80,respectively. The impact of the accelerated vesting was to increase pro formastock-based compensation by $82 million, or $50 million net oftax, in 2005.

The accelerated vesting of these stock options was oneof several actions taken by the Company in 2004 and 2005 to reduce thestock-based compensation expense that would have otherwise been recorded withthe adoption of FAS No. 123R. The Company reduced the number of stockoptions granted in 2004 and 2005 by approximately 45%. Also, beginning in 2004,option grants have 8-year terms, down from 10 years for grants inprevious years, and do not have a replacement option feature.

**Income Taxes—****Provisions**forfederal and state income taxes are calculated on reported pretax earnings basedon current tax laws and also include, in the current period, the cumulativeeffect of any changes in tax rates from those used previously in determining deferredtax assets and liabilities. Taxable income reported to the taxing jurisdictionsin which the Company operates often differs from pretax earnings because someitems of income and expense are recognized in different time periods for incometax purposes. The Company provides deferred taxes on these temporarydifferences in accordance with FAS No. 109, “Accounting for Income Taxes.”Taxable income also may differ from pretax earnings due to statutory provisionsunder which specific revenues are exempt from taxation and specific expensesare not allowable as deductions. The Company establishes reserves for incometax when it is probable that one or more of the taxing authorities willchallenge and disallow a position taken by the Company in its income taxreturns and the resulting liability is estimable. The consolidated taxprovision and related accruals include estimates of the potential taxes andrelated interest as deemed appropriate. These estimates are reevaluated andadjusted, if appropriate, on a quarterly basis. Although management believesits estimates and judgments are reasonable, the resolutions of the Company’stax issues are unpredictable and could result in tax liabilities that aresignificantly higher or lower than that which has been provided by the Company.

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**TRIBUNE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

**Comprehensive Income—****Comprehensive** incomeconsists of net income and other gains and losses affecting shareholders’equity that, under accounting principles generally accepted in the UnitedStates of America, are excluded from net income. Other comprehensive income(loss) primarily includes gains and losses on marketable securities classifiedas available-for-sale and the change in minimum pension liabilities. Beginningin the Company’s 2007 fiscal year, and as a result of the Company’s adoption ofFAS No. 158 as of Dec. 31, 2006, other comprehensive income (loss)will no longer include the change in minimum pension liabilities, but willinclude changes in unrecognized benefit cost gains and losses. The Company’scomprehensive income (loss) is summarized in Note 17.

**New Accounting Standards—****In**February 2006,the FASB issued FAS No. 155, “Accounting for Certain Hybrid FinancialInstruments,” which allows the Company to elect to account for its PHONESobligation as a single financial instrument recorded at fair value each period.Changes in the fair value of the PHONES, as determined by the quoted marketprice, would be reflected in the Company’s results of operations. The Companyis currently evaluating whether it will elect to adopt FAS No. 155 orcontinue to account for the PHONES under the provisions of FAS No. 133. Ifthe Company makes the election, the Company would be required to adopt FASNo. 155 in the first quarter of 2007.

In June 2006, the FASB issued InterpretationNo. 48, “Accounting for Uncertainty in Income Taxes (“FIN 48”), whichclarifies the accounting for uncertainty in income taxes. FIN 48 prescribes arecognition threshold and measurement attribute for the financial statementrecognition and measurement of a tax position taken or expected to be taken ina tax return. FIN 48 requires that the Company recognize, in the financialstatements, the impact of a tax position, if that position is more likely thannot of being sustained on audit, based on the technical merits of the position.FIN 48 also provides guidance on derecognition, classification, interest andpenalties, accounting in interim periods and disclosure. The provisions ofFIN 48 are effective for fiscal years beginning after Dec. 15, 2006,with the cumulative effect of the change in accounting principle recorded as anadjustment to opening retained earnings. The Company does not expect theadoption of FIN 48 will have a material effect on its consolidated financialstatements.

In September 2006, the FASB issued FASNo. 157, “Fair Value Measurements,” which defines fair value, establishesa framework for measuring fair value and expands disclosures about fair valuemeasurements. The provisions of FAS No. 157 are effective for financialstatements issued for fiscal years beginning after Nov. 15, 2007 andinterim periods beginning within these fiscal years. Accordingly, the Companywill be required to adopt FAS No. 157 in the first quarter of 2008. TheCompany is currently evaluating the impact of adopting FAS No. 157 on itsconsolidated financial statements.

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**TRIBUNE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

**Earnings Per Share (“EPS”)—****Basic**EPS iscomputed by dividing net income attributable to common shares by the weightedaverage number of common shares outstanding during the period. The Company’sstock-based awards and convertible securities are included in the calculationof diluted EPS unless their effects are antidilutive. In all of the diluted EPScalculations presented below, weighted average shares outstanding were adjustedfor the dilutive effect of stock-based compensation awards. All of the Company’sSeries C, D-1 and D-2 preferred shares were issued to and heldby TMCT, LLC and TMCT II, LLC. In connection with a restructuring of theselimited liability companies, all of these preferred shares were distributed tothe Company on Sept. 22, 2006. As a result, the Company has no preferred sharesoutstanding effective as of Sept. 22, 2006. In the 2006, 2005 and 2004calculations of diluted EPS, 2.6 million, 2.9 million and2.3 million shares, respectively, of the Company’s Series C, D-1and D-2 convertible preferred stocks, and 34.0 million, 35.5 millionand 10.6 million shares, respectively, of the Company’s outstandingoptions were not reflected because their effects were antidilutive.

In connection with the adoption of FAS 123R, theCompany elected to calculate its windfall pool of available tax benefits underthe long-form method. This windfall pool of available tax benefits is utilized whencalculating, under the treasury stock method, the dilutive impact of theCompany’s share-based awards that are accounted for in accordance with FAS123R.

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**TRIBUNE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

The computations of basicand diluted EPS were as follows (in thousands, except per share data):

| ** **                                                                                     | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| **Basic EPS**                                                                                  |       |     |       |     |       |     |       |
| Income from  continuing operations before cumulative effect of change in accounting  principle |       | $        | 660,853    |     | $          | 522,789  |       | $ | 554,376 |   |
| Income (loss)  from discontinued operations, net of tax                                        |       | (66,858  | )          | 11,900   |       | 18,948   |       |
| Cumulative effect  of change in accounting principle, net of tax                               |       | —   |       | —   |       | (17,788  | )          |
| Net income                                                                                     |       | $        | 593,995    |     | $          | 534,689  |       | $ | 555,536 |   |
| Preferred  dividends                                                                           |       | (6,309   | )          | (8,364   | )          | (8,308   | )          |
| Net income  attributable to common shares                                                      |       | $        | 587,686    |     | $          | 526,325  |       | $ | 547,228 |   |
| Weighted average  common shares outstanding                                                    |       | 272,672  |       | 312,880  |       | 322,420  |       |
| Basic EPS:                                                                                     |       |     |       |     |       |     |       |
| Continuing  operations before cumulative effect of change in accounting principle              |       | $        | 2.40       |     | $          | 1.64     |       | $ | 1.69 |   |
| Discontinued  operations                                                                       |       | (0.25    | )          | .04      |       | .06      |       |
| Cumulative effect  of change in accounting principle, net of tax                               |       | —   |       | —   |       | (.05     | )          |
| Net income                                                                                     |       | $        | 2.16       |     | $          | 1.68     |       | $ | 1.70 |   |
| **Diluted  EPS**                                                                               |       |     |       |     |       |     |       |
| Income from  continuing operations before cumulative effect of change in accounting  principle |       | $        | 660,853    |     | $          | 522,789  |       | $ | 554,376 |   |
| Income (loss)  from discontinued operations, net of tax                                        |       | (66,858  | )          | 11,900   |       | 18,948   |       |
| Cumulative effect  of change in accounting principle, net of tax                               |       | —   |       | —   |       | (17,788  | )          |
| Net income                                                                                     |       | $        | 593,995    |     | $          | 534,689  |       | $ | 555,536 |   |
| Preferred  dividends                                                                           |       | (6,309   | )          | (8,364   | )          | (8,308   | )          |
| Net income  attributable to common shares                                                      |       | $        | 587,686    |     | $          | 526,325  |       | $ | 547,228 |   |
| Weighted average  common shares outstanding                                                    |       | 272,672  |       | 312,880  |       | 322,420  |       |
| Adjustment for  stock-based awards, net                                                        |       | 1,739    |       | 2,458    |       | 4,817    |       |
| Adjusted weighted  average common shares outstanding                                           |       | 274,411  |       | 315,338  |       | 327,237  |       |
| Diluted EPS:                                                                                   |       |     |       |     |       |     |       |
| Continuing  operations before cumulative effect of change in accounting principle              |       | $        | 2.39       |     | $          | 1.63     |       | $ | 1.67 |   |
| Discontinued  operations                                                                       |       | (0.24    | )          | .04      |       | .06      |       |
| Cumulative effect  of change in accounting principle, net of tax                               |       | —   |       | —   |       | (.05     | )          |
| Net income                                                                                     |       | $        | 2.14       |     | $          | 1.67     |       | $ | 1.67 |   |

 

**NOTE 2: CHANGESIN OPERATIONS AND NON-OPERATING ITEMS**

**Acquisitions—****The**Companyhad no significant acquisitions in 2006, 2005 and 2004. The results of acquiredcompanies are included in the consolidated statements of income since theirrespective dates of acquisition.

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**TRIBUNE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

**Supplemental Cash FlowInformation—****Information**foracquisitions made in 2006, 2005 and 2004 is summarized in the table below (inthousands):

| ** **                        | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|-----------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Fair value of  assets acquired(1) |       | $        | 48,144     |     | $          | 4,207    |       | $ | 854 |   |
| Liabilities  assumed              |       | —   |       | —   |       | (303     | )          |
| Net cash paid                     |       | $        | 48,144     |     | $          | 4,207    |       | $ | 551 |   |

 

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(1)             Includes intangible assets, net ofacquisition-related deferred taxes.

Cashpaid for interest and income taxes in 2006, 2005 and 2004 is summarized below(in thousands):

| ** **      | ** ** | **2006** | ** ** | **2005** | ** ** | **2004**  | ** ** |
|-----------------|------------|----------|------------|----------|------------|-----------|------------|
| Interest        |       | $        | 238,894    |     | $          | 134,955   |       | $ | 138,392 |   |
| Income taxes(1) |       | $        | 408,507    |     | $          | 1,157,243 |       | $ | 286,129 |   |

 

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(1)             In 2005, the Company paid $880 million to theInternal Revenue Service, representing the federal tax and interest owed on theMatthew Bender and Mosby transactions (see Note 13).

**Consolidation of *Los Angeles Times*’ Production Operations**

In December 2005, the *Los Angeles Times* announced it would close its San FernandoValley printing facility in January 2006 and consolidate production at itsremaining three facilities in Los Angeles, Costa Mesa, and Irwindale,California. The closing of the printing facility resulted in the elimination ofapproximately 120 positions from across the *LosAngeles Times’* production facilities.

As a result of the facility closing, the Companyreclassified the San Fernando Valley printing facility land and building asheld for sale at Dec. 25, 2005. The Company recorded a $2 millionpretax charge in the fourth quarter of 2005 to reduce the carrying value of theSan Fernando Valley printing facility’s land and building to $24 million,representing the estimated fair value of the assets less costs to sell theassets. On Oct. 30, 2006, the Company sold the San Fernando Valley landand building for net proceeds of approximately $24 million.

The Company evaluated the machinery and equipment atthe San Fernando Valley printing facility and determined that press and otherrelated equipment with a net book value of $16 million would be abandoned.Therefore, the Company reduced its estimate of the useful life of the press andother related equipment and recorded accelerated depreciation of $16 millionin the fourth quarter of 2005. The Company idled the remaining San FernandoValley machinery and equipment, which had a net book value of $26 millionat Dec. 31, 2006 and $34 million at Dec. 25, 2005. The Company iscontinuing to depreciate the remaining idled equipment. In the fourth quarterof 2006, the Company disposed of and wrote off $4 million of the idledequipment that had previously been designated for redeployment at Dec. 25,2005. The Company is currently evaluating alternative uses of the remainingidled equipment, which will most likely be redeployed elsewhere in thepublishing segment.

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**TRIBUNE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

TheCompany recorded a pretax charge in the fourth quarter of 2005 of$22 million, excluding severance related costs, as a result of itsdecision to close the San Fernando Valley printing facility. A summary of thesignificant components of the $22 million pretax charge in 2005 is asfollows (in thousands):

| Accelerated depreciation on machinery and equipment |   | $     | 16,109 |   |
|------------------------------------------------------------------------------|--------|-------|--------|--------|
| Impairment of  assets held for sale                                          |   | 2,127 |   |
| Other                                                                        |   | 3,992 |   |
| Total                                                                        |   | $     | 22,228 |   |

 

**Acquisition ofAdditional Equity in CareerBuilder, ShopLocal and Topix**

In August 2006, theCompany completed its acquisition of additional equity interests in each ofCareerBuilder, LLC, ShopLocal, LLC (formerly CrossMedia Services, Inc.)and Topix, LLC for an aggregate purchase price of $155 million. The negotiatedequity purchases followed the exercise of call options by the Company andGannett Co., Inc. on Knight-Ridder, Inc.’s equity ownership in thethree online businesses after The McClatchy Company’s announcement of itsproposed acquisition of Knight-Ridder, Inc. As a result of thistransaction, the Company and Gannett Co., Inc. each increased theirrespective ownership of CareerBuilder, LLC and ShopLocal, LLC to 42.5% with TheMcClatchy Company retaining a 15% interest in both entities. Additionally, eachof the Company’s and Gannett Co., Inc.’s interest in Topix, LLC increasedto 31.9%. As a result of subsequent funding, the current ownership of Topix,LLC is approximately 33.7% for both the Company and Gannett Co., Inc.,11.9% for The McClatchy Company and 20.7% for management of Topix, LLC.

**Employee Reductions**

The Company reduced its staffing levels byapproximately 450 positions in 2006, primarily at publishing, and recorded apretax charge of $9 million. In 2005, the Company reduced its staffing levelsby approximately 900 positions and recorded a pretax charge of $45 million($43 million at publishing, $1 million at broadcasting andentertainment and $1 million at corporate). The eliminations in 2005included 120 positions as a result of closing the *Los Angeles Times*’ San Fernando Valley printing facility, asdiscussed above.  The Company recorded apretax charge of $41 million in 2004 related to the elimination ofapproximately 600 positions in its publishing segment. The Company had a currentliability of approximately $7 million at Dec. 31, 2006 and $37 million at Dec.25, 2005 related to these employee reductions.

**Non-Operating Items—****Fiscal**years2006, 2005 and 2004 included several non-operating items.

Non-operatingitems for 2006 are summarized as follows (in thousands):

| ** **                                                            | ** ** | **Proceeds** | ** ** | **Pretax  Gain  (Loss)** | ** ** | **After-tax  Gain  (Loss)** | ** ** |
|-----------------------------------------------------------------------|------------|--------------|------------|--------------------------|------------|-----------------------------|------------|
| Gain on change in fair  values of derivatives and related investments |       | $            | —     |                     | $          | 11,088                      |       | $ | 6,764 |   |
| Gain on TMCT  transactions                                            |       | —       |       | 59,596                   |       | 47,988                      |       |
| Gain on sales of  investments, net                                    |       | 82,903       |       | 36,732                   |       | 22,339                      |       |
| Other, net                                                            |       | —       |       | (4,447                   | )          | (1,044                      | )          |
| Income tax adjustments                                                |       | —       |       | —                   |       | 33,563                      |       |
| Total non-operating items                                             |       | $            | 82,903     |                     | $          | 102,969                     |       | $ | 109,610 |   |

 

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**TRIBUNE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

The 2006 change in the fair values of derivatives andrelated investments pertained entirely to the Company’s PHONES and related TimeWarner investment. The $11 million non-cash pretax gain resulted primarilyfrom a $66 million increase in the fair value of 16 million shares ofTime Warner common stock, which was partially offset by a $52 millionincrease in the fair value of the derivative component of the Company’s PHONES.

In 2006, the Company recorded a one-time gain of $48million, net of tax, as a result of transactions related to its investments inTMCT, LLC and TMCT II, LLC (see Note 7). In addition, the Company sold 2.8million shares of Time Warner common stock unrelated to the PHONES for netproceeds of $46 million and recorded a pretax gain on sale of $19 million, andsold its investment in BrassRing for net proceeds of $27 million andrecorded a pretax gain of $17 million.

Also in 2006, the Company recorded a favorable $34million income tax expense adjustment, most of which related to the Company’sPHONES as a result of reaching an agreement with the Internal Revenue Serviceappeals office pertaining to the deduction of interest expense on the PHONES(see Note 13).

Non-operatingitems for 2005 are summarized as follows (in thousands):

| ** **                                                            | ** ** | **Proceeds** | ** ** | **Pretax  Gain** | ** ** | **After-tax  Gain  (Loss)** | ** ** |
|-----------------------------------------------------------------------|------------|--------------|------------|------------------|------------|-----------------------------|------------|
| Gain on change in fair  values of derivatives and related investments |       | $            | —     |             | $          | 62,184                      |       | $ | 37,932 |   |
| Gain on sales of investments,  net                                    |       | 17,368       |       | 6,780            |       | 4,136                       |       |
| Other, net                                                            |       | 5,166        |       | 897              |       | 547                         |       |
| Income tax adjustments                                                |       | —       |       | —           |       | (138,664                    | )          |
| Total non-operating items                                             |       | $            | 22,534     |             | $          | 69,861                      |       | $ | (96,049 | ) |

 

The 2005 change in the fair values of derivatives andrelated investments pertained entirely to the Company’s PHONES and related TimeWarner investment. The $62 million non-cash pretax gain resulted primarilyfrom an $87 million decrease in the fair value of the derivative componentof the Company’s PHONES, which was partially offset by a $23 milliondecrease in the fair value of 16 million shares of Time Warner commonstock.

As a result of the United States Tax Court opinionissued on Sept. 27, 2005 related to the Matthew Bender tax dispute, theCompany recorded additional income tax expense of $150 million in thethird quarter of 2005 (see Note 13). In the first quarter of 2005, theCompany reduced its income tax expense and liabilities by a total of$12 million as a result of favorably resolving certain other federal incometax issues.

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**TRIBUNE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

Non-operatingitems for 2004 are summarized as follows (in thousands):

| ** **                                                            | ** ** | **Proceeds** | ** ** | **Pretax  Gain (Loss)** | ** ** | **After-tax  Gain (Loss)** | ** ** |
|-----------------------------------------------------------------------|------------|--------------|------------|------------------------------|------------|---------------------------------|------------|
| Loss on change in  fair values of derivatives and related investments |       | $            | —     |                         | $          | (18,497                         | )          |   | $ | (11,283 | ) |   |
| Loss on early  debt retirement                                        |       | —       |       | (140,506                     | )          |                            | (87,549    | ) |   |
| Gain on sales of  investments, net                                    |       | 23,973       |       | 20,347                       |       |                            | 12,412     |   |   |
| Loss on  investment write-downs and other, net                        |       | 16,259       |       | (6,388                       | )          |                            | (3,897     | ) |   |
| Total non-operating  items                                            |       | $            | 40,232     |                         | $          | (145,044                        | )          |   | $ | (90,317 | ) |   |

 

The 2004 change in thefair values of derivatives and related investments pertained entirely to theCompany’s PHONES and related Time Warner investment. The $18 millionnon-cash pretax loss resulted from a $39 million increase in the fairvalue of the derivative component of the Company’s PHONES, which was partiallyoffset by a $21 million increase in the fair value of 16 millionshares of Time Warner common stock.

In 2004, the Companyredeemed all of its outstanding $400 million ($396 million net ofunamortized discount) 7.45% debentures due 2009 and retired $66 million($64 million net of unamortized discount) of its 7.25% debentures due 2013and $165 million ($160 million net of unamortized discount) of its6.61% debentures due 2027 through cash tender offers. The Company paidapproximately $760 million to retire this debt and, as a result, recordeda one-time, pretax loss of $141 million in 2004. The Company funded thesetransactions with cash and the issuance of commercial paper.

The 2004 gain on sales ofinvestments related primarily to the sale of the Company’s 50% interest in *La Opinión* for $20 million, resultingin a pretax gain of $18 million.

**NOTE 3: DISCONTINUEDOPERATIONS AND ASSETS HELD FOR SALE**

**Sales of WATL-TV, Atlanta, WCWN-TV, Albany andWLVI-TV, Boston—****On** June 5, 2006, the Companyannounced the sale of WATL-TV, Atlanta to Gannett Co., Inc. for $180million. The sale closed on Aug. 7, 2006. On June 19, 2006, theCompany announced the sale of WCWN-TV, Albany to Freedom Communications, Inc.for $17 million. The sale closed on Dec. 6, 2006. On Sept. 14, 2006, theCompany announced the sale of WLVI-TV, Boston, to Sunbeam Television Corp. for$113.7 million. The sale closed on Dec. 19, 2006.

These businesses wereconsidered components of the Company’s broadcasting and entertainment segmentas their operations and cash flows could be clearly distinguished,operationally and for financial reporting purposes, from the rest of theCompany. The operations and cash flows of these businesses have been eliminatedfrom the ongoing operations of the Company as a result of the sales, and theCompany will not have any significant continuing involvement in theiroperations. Accordingly, the results of operations of each of these businesseshave been reported as discontinued operations in the consolidated statements ofincome. Prior year consolidated statements of income have been reclassified toconform to the current year presentation of discontinued operations.

In conjunction with thesales of WATL-TV, Atlanta and WCWN-TV, Albany, the Company recorded in thesecond quarter of 2006 a pretax loss totaling $90 million, including $80million of allocated television group goodwill, to write down the net assets ofthe stations to estimated fair value, less costs to sell. The Companysubsequently reduced the pretax loss on sales of the Atlanta and Albanystations during the third quarter of 2006 by $1 million. In addition, theCompany recorded in the fourth quarter of 2006 a pretax 

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gain of$41 million, including $45 million of allocated television group goodwill, forthe sale of the Boston station. In accordance with FAS No. 142, “Goodwilland Other Intangible Assets”, the Company aggregates all of its televisionstations into one reporting unit for goodwill accounting purposes. FAS No. 142requires the Company to allocate a portion of its total television groupgoodwill to stations that are to be sold on a relative fair value basis. Thenet pretax loss on sales of the three stations sold during 2006 was $48million, including $125 million of allocated television group goodwill.

Selectedfinancial information related to discontinued operations for 2006, 2005 and2004 is summarized as follows (in thousands, except per share data):

| ** **                                                      | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|-----------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Operating  revenues                                             |       |     | $          | 64,870   |       |     |       | $ | 84,334 |   |   |   | $ | 94,816 |   |   |
| Operating profit(1)                                             |       |     | $          | 2,300    |       |     |       | $ | 19,632 |   |   |   | $ | 31,011 |   |   |
| Loss on sales of  discontinued operations                       |       |     | (48,238    | )        |       |     | —     |   |   |   | — |   |   |
| Income (loss)  from discontinued operations before income taxes |       |     | (45,938    | )        |       |     | 19,632     |   |   |   | 31,011 |   |   |
| Income taxes(2)                                                 |       |     | (20,920    | )        |       |     | (7,732     | ) |   |   | (12,063 | ) |   |
| Income (loss)  from discontinued operations, net of tax.        |       |     | $          | (66,858  | )          |     |       | $ | 11,900 |   |   |   | $ | 18,948 |   |   |
| Income (loss) from  discontinued operations per share:          |       |     |       |     |       |     |       |   |   |   |   |   |   |
| Basic                                                           |       |     | $          | (.25     | )          |     |       | $ | .04 |   |   |   | $ | .06 |   |   |
| Diluted                                                         |       |     | $          | (.24     | )          |     |       | $ | .04 |   |   |   | $ | .06 |   |   |

 

(1)  Operating profit for 2006 included $6 millionof severance and related charges incurred as a result of the sales of the threetelevision stations.

(2)  Income taxes for 2006 included a tax benefitof $12 million related to the $89 million pretax loss on sales of the Atlantaand Albany stations. The $12 million tax benefit was only 13% of the pretaxloss because most of the $80 million goodwill allocation, which is included inthe loss, is not deductible for income tax purposes. Income taxes for 2006 alsoincluded a tax expense of $32 million related to the $41 million pretax gain onsale of the Boston station. The $32 million tax expense was 77% of the pretaxgain because most of the $45 million goodwill allocation included in the Bostongain is not deductible for income tax purposes.

**Assets Held for Sale—****In******December 2006, the Company entered into a non-bindingagreement to sell the land and building of one of its production facilities.The $5 million carrying value of the land and building of this facility approximatesfair value less costs to sell and is included in non-current assets held forsale at Dec. 31, 2006. The Company expects to complete this sale sometimeduring the third quarter of 2007.

In February 2007, the Company sold itsinteractive program guide assets, including software and a portfolio of patents(collectively the “IPG intellectual property”). Accordingly, the $4 millioncarrying value of the intangible assets related to the IPG intellectualproperty is included in non-current assets held for sale at Dec. 31, 2006.The Company received net proceeds of approximately $10 million and will recorda pretax gain on sale of approximately $6 million in the first quarter of2007.

Non-current assets heldfor sale of $24 million at Dec. 25, 2005 pertained entirely to the Company’sSan Fernando Valley, California printing facility, which was sold in October 2006for net proceeds of approximately $24 million. See Note 2 for additionalinformation related to the shutdown and subsequent sale of this facility.

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**TRIBUNE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

**NOTE 4: *NEWSDAY *AND *HOY*, NEW YORK CHARGE**

In February 2004, a purported class actionlawsuit was filed in New York Federal Court by certain advertisers of *Newsday* and *Hoy*, New York, alleging that they were overcharged foradvertising as a result of inflated circulation numbers at these twopublications. The purported class action also alleges that entities that paid a*Newsday* subsidiary to deliveradvertising flyers were overcharged. In July 2004, another lawsuit wasfiled in New York Federal Court by certain advertisers of *Newsday* alleging damages resulting frominflated *Newsday* circulationnumbers as well as federal and state antitrust violations. The Company isvigorously defending these suits.

On June 17, 2004, the Company publicly disclosedthat it would reduce its reported circulation for both *Newsday* and *Hoy*, New York for the 12-month period endingSept. 30, 2003 and the six-month period ending March 31, 2004. Thecirculation adjustments were the result of a review of reported circulation at *Newsday* and *Hoy*, New York, conducted by the Company’s internal auditstaff and the Audit Bureau of Circulations (“ABC”). Subsequent to the June 17th disclosure, the Company continued its internalreview and found additional misstatements for these time periods, as well asmisstatements that impacted the 12-month period ending Sept. 30,2002. On Sept. 10, 2004, the Company announced additional revisions to thecirculation figures for *Newsday*and *Hoy*, New York, for the 12-monthperiod ending Sept. 30, 2003 and the six-month period ending March 31,2004.

As a result of misstatements of reported circulationat *Newsday* and *Hoy*, New York, the Company recorded atotal pretax charge of $90 million in 2004 as its estimate of the probablecost to settle with advertisers. The Company will continue to evaluate theadequacy of this charge on an ongoing basis.

A summary of theactivity with respect to the *Newsday*and *Hoy*, New York, advertisersettlement accrual is as follows (in millions):

| Advertiser  settlement accrual balance at Dec. 28, 2003 |   | $   | — |   |
|--------------------------------------------------------------|--------|-----|--------|--------|
| 2004 provision                                               |   | 90  |   |
| 2004 payments                                                |   | (41 | )      |
| Advertiser  settlement accrual balance at Dec. 26, 2004 |   | 49  |   |
| 2005 payments                                                |   | (34 | )      |
| Advertiser  settlement accrual balance at Dec. 25, 2005 |   | 15  |   |
| 2006 payments                                                |   | (8  | )      |
| Advertiser settlement  accrual balance at Dec. 31, 2006 |   | $   | 7      |   |

 

In addition to the advertiser lawsuits, several classaction and shareholder derivative suits were filed against the Company andcertain of its current and former directors and officers as a result of thecirculation misstatements at *Newsday*and *Hoy*, New York. These suitsalleged breaches of fiduciary duties and other managerial and director failingsunder Delaware law, the federal securities laws and ERISA. The consolidatedshareholder derivative suit filed in Illinois state court in Chicago wasdismissed with prejudice on March 10, 2006, and the dismissal is currentlybeing appealed to the Illinois State Court of Appeals. The consolidatedsecurities class action lawsuit and the consolidated ERISA class action lawsuitfiled in Federal District Court in Chicago were both dismissed with prejudiceon Sept. 29, 2006, and the dismissals are currently being appealed to theUnited States Court of Appeals for the Seventh Circuit. The Company believesthese suits are without merit and will continue to vigorously defend them.

On May 30, 2006, the Securities and ExchangeCommission (“SEC”) concluded its inquiry into circulation practices at *Newsday*and *Hoy*, New York. In closing its inquiry, the SEC ordered theCompany 

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to cease and desist fromviolating statutory provisions related to its record keeping and reporting. Nofines or other sanctions were levied against the Company. The Company consentedto the order without admitting or denying any of the Commission’s findings. TheSEC acknowledged the prompt internal investigation and remedial acts undertakenby the Company and the cooperation the Company afforded the Commission’s staffthroughout its investigation.

The United States Attorneyfor the Eastern District of New York and the Nassau County District Attorneyare continuing their inquiries into the circulation practices at *Newsday* and *Hoy*, New York. To date, nine former employees andcontractors of *Newsday* and *Hoy,*New York, have pleaded guilty tovarious criminal charges in connection with the fraudulent circulationpractices uncovered by the Company. The Company is cooperating fully with theseinquiries. At the date of this report, the Company cannot predict withcertainty the outcome of these inquiries.

**NOTE 5: INVENTORIES**

Inventoriesconsisted of the following (in thousands):

| ** **          | ** ** | **Dec. 31, 2006** | ** ** | **Dec. 25, 2005** | ** ** |
|---------------------|------------|-----------------------------|------------|-----------------------------|------------|
| Newsprint           |       |                        | $          | 28,629                      |       |   |   | $ | 32,672 |   |   |
| Supplies and  other |       |                        | 12,333     |                        |       |   | 11,431 |   |   |
| Total inventories   |       |                        | $          | 40,962                      |       |   |   | $ | 44,103 |   |   |

 

Newsprint inventoriesvalued under the LIFO method were less than current cost by approximately$15 million at Dec. 31, 2006 and $14 million at Dec. 25,2005.

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**NOTE 6: GOODWILLAND OTHER INTANGIBLE ASSETS**

Goodwilland other intangible assets at Dec. 31, 2006 and Dec. 25, 2005consisted of the following (in thousands):

| ** **                                                            | ** ** | ** **        | ** ** | **Dec. 31, 2006**   | ** ** | ** **      | ** ** | ** **        | ** ** | **Dec. 25, 2005**   | ** ** | ** **      | ** ** |
|-----------------------------------------------------------------------|------------|-------------------|------------|-------------------------------|------------|-----------------|------------|-------------------|------------|-------------------------------|------------|-----------------|------------|
| ** **                                                            | ** ** | **Gross  Amount** | ** ** | **Accumulated  Amortization** | ** ** | **Net  Amount** | ** ** | **Gross  Amount** | ** ** | **Accumulated  Amortization** | ** ** | **Net  Amount** | ** ** |
| **Intangible assets subject to  amortization**                        | ** ** |              | ** ** | ** **                    |       |            | ** ** | ** **        |       | ** **                    | ** ** | ** **      | ** ** |   | ** ** | ** ** |   | ** ** | ** ** |
| Subscribers (useful life of 15 to 20 years)                      |       |              | $          | 190,660                       | ** ** |            |       | $                 | (72,126    | )                             |       | $               | 118,534    |   | $ | 190,657 |   |   | $ | (62,110 | ) |   | $ | 128,547 |   |
| Network affiliation agreements (useful life of  40 years)(1)     |       |              | 278,034    | ** **                    |       |            | (22,614    | )                 |       | 255,420                       |       | 290,320         |       |   | (16,330 | ) |   | 273,990 |   |
| Other (useful life of 3 to 40 years)                             |       |              | 25,128     | ** **                    |       |            | (8,717     | )                 |       | 16,411                        |       | 23,482          |       |   | (6,696 | ) |   | 16,786 |   |
| Total                                                                 |       |              | $          | 493,822                       | ** ** |            |       | $                 | (103,457   | )                             |       | 390,365         |       | $ | 504,459 |   |   | $ | (85,136 | ) |   | 419,323 |   |
| **Goodwill and other intangible  assets not subject to amortization** | ** ** |              | ** ** | ** **                    |       |            | ** ** | ** **        |       | ** **                    | ** ** | ** **      | ** ** |   | ** ** | ** ** |   | ** ** | ** ** |
| Goodwill                                                              |       |              |       | ** **                    |       |            |       |              |       |                          |       |            |       |   |   |   |   |   |   |
| Publishing                                                            |       |              |       | ** **                    |       |            |       |              |       | 4,395,967                     |       |            |       |   |   |   |   | 4,380,483 |   |
| Broadcasting and entertainment                                        |       |              |       | ** **                    |       |            |       |              |       | 1,441,241                     |       |            |       |   |   |   |   | 1,566,659 |   |
| Total goodwill                                                        |       |              |       | ** **                    |       |            |       |              |       | 5,837,208                     |       |            |       |   |   |   |   | 5,947,142 |   |
| Newspaper mastheads                                                   |       |              |       | ** **                    |       |            |       |              |       | 1,575,814                     |       |            |       |   |   |   |   | 1,575,814 |   |
| FCC licenses                                                          |       |              |       | ** **                    |       |            |       |              |       | 871,946                       |       |            |       |   |   |   |   | 1,084,654 |   |
| Tradename                                                             |       |              |       | ** **                    |       |            |       |              |       | 7,932                         |       |            |       |   |   |   |   | 7,932 |   |
| Total                                                                 |       |              |       | ** **                    |       |            |       |              |       | 8,292,900                     |       |            |       |   |   |   |   | 8,615,542 |   |
| Total goodwill and  other intangible assets                           |       |              |       | ** **                    |       |            |       |              |       | $                             | 8,683,265  |            |       |   |   |   |   |   | $ | 9,034,865 |   |

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(1)    Networkaffiliation agreements, net of accumulated amortization, included$179 million related to Fox affiliations, $74 million related to CWaffiliations and $2 million related to MyNetworkTV affiliations as of Dec. 31,2006.

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Thechanges in the carrying amounts of intangible assets during the years ended Dec. 31,2006 and Dec. 25, 2005 were as follows (in thousands):

| ** **                                                                       | ** ** | **Publishing** | ** ** | **Broadcasting and  Entertainment** | ** ** | **Total** | ** ** |
|----------------------------------------------------------------------------------|------------|----------------|------------|------------------------------------------|------------|-----------|------------|
| **Intangible assets subject to  amortization**                                   |       |           |       |                                     |       |      |       |   |   |
| Balance as of  Dec. 26, 2004                                                |       | $              | 92,215     |                                     |       | $         | 346,064    |   |   | $ | 438,279 |   |
| Amortization  expense                                                            |       | (7,231         | )          |                                     | (11,657    | )         |       | (18,888 | ) |
| Amortizable  intangibles acquired during year                                    |       | 239            |       |                                     | —     |      |       | 239 |   |
| Sales of discontinued  operations (see Note 3)                              |       | —         |       |                                     | (307       | )         |       | (307 | ) |
| Balance as of  Dec. 25, 2005                                                |       | $              | 85,223     |                                     |       | $         | 334,100    |   |   | $ | 419,323 |   |
| Amortization  expense                                                            |       | (8,258         | )          |                                     | (11,555    | )         |       | (19,813 | ) |
| Assets held for  sale, net (IPG intellectual property)                           |       | (4,002         | )          |                                     | —     |      |       | (4,002 | ) |
| Amortizable  intangibles acquired during year                                    |       | 6,452          |       |                                     | —     |      |       | 6,452 |   |
| Sales of  discontinued operations (see Note 3)                                   |       | —         |       |                                     | (11,595    | )         |       | (11,595 | ) |
| Balance as of  Dec. 31, 2006                                                |       | $              | 79,415     |                                     |       | $         | 310,950    |   |   | $ | 390,365 |   |
| **Goodwill**                                                                     |       |           |       |                                     |       |      |       |   |   |
| Balance as of  Dec. 26, 2004                                                |       | $              | 3,920,720  |                                     |       | $         | 1,566,659  |   |   | $ | 5,487,379 |   |
| Goodwill acquired  during year                                                   |       | 4,147          |       |                                     | —     |      |       | 4,147 |   |
| Adjustment for  tax resolutions(1)                                               |       | (3,500         | )          |                                     | —     |      |       | (3,500 | ) |
| Adjustment  related to Matthew Bender and Mosby tax liability (see Note 13) |       | 459,116        |       |                                     | —     |      |       | 459,116 |   |
| Balance as of  Dec. 25, 2005                                                |       | $              | 4,380,483  |                                     |       | $         | 1,566,659  |   |   | $ | 5,947,142 |   |
| Goodwill acquired  during year                                                   |       | 45,477         |       |                                     | —     |      |       | 45,477 |   |
| Sales of  discontinued operations (see Note 3)                              |       | —         |       |                                     | (125,418   | )         |       | (125,418 | ) |
| Adjustment for  tax resolutions(1)                                               |       | (28,186        | )          |                                     | —     |      |       | (28,186 | ) |
| Other                                                                            |       | (1,807         | )          |                                     | —     |      |       | (1,807 | ) |
| Balance as of  Dec. 31, 2006                                                |       | $              | 4,395,967  |                                     |       | $         | 1,441,241  |   |   | $ | 5,837,208 |   |
| **Other  intangible assets not subject to amortization**                         |       |           |       |                                     |       |      |       |   |   |
| Balance as of  Dec. 25, 2005 and Dec. 26, 2004                         |       | $              | 1,583,746  |                                     |       | $         | 1,084,654  |   |   | $ | 2,668,400 |   |
| Sales of discontinued  operations (see Note 3)                              |       | —         |       |                                     | (212,708   | )         |       | (212,708 | ) |
| Balance as of  Dec. 31, 2006                                                |       | $              | 1,583,746  |                                     |       | $         | 871,946    |   |   | $ | 2,455,692 |   |
| Total goodwill and other  intangibles as of Dec. 31, 2006                   |       | $              | 6,059,128  |                                     |       | $         | 2,624,137  |   |   | $ | 8,683,265 |   |

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(1)       Adjustmentfor the resolution of uncertain income tax positions related to the TimesMirror Company acquisition.

Estimated annualamortization expense will be approximately $20 million for each of thenext five years, excluding the effects of any acquisitions or dispositionssubsequent to Dec. 31, 2006.

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**NOTE 7: TMCT andTMCT II**

As a result of the Company’s acquisition of The TimesMirror Company (“Times Mirror”) in 2000, the Company holds investment interestsin TMCT, LLC (“TMCT”) and TMCT II, LLC (“TMCT II”). TMCT and TMCT II wereformed in 1997 and 1999, respectively, as a result of transactions involvingagreements between Times Mirror and its largest shareholders, Chandler Trust No. 1and Chandler Trust No. 2 (collectively, the “Chandler Trusts”). The TimesMirror acquisition resulted in the Chandler Trusts becoming significantshareholders of the Company. The TMCT and TMCT II LLC agreements have nospecific term, and the dissolution, determination of liquidation values anddistribution of assets require the mutual consent of the Company and theChandler Trusts.

The collective assets of TMCT and TMCT II as of Dec. 25,2005 included approximately 51.4 million shares of the Company’s common stockand 1.1 million shares of the Company’s preferred stock, representing all ofthe Company’s issued Series C, D-1 and D-2 preferred stock.The TMCT and TMCT II assets also include a variety of fixed income andequity investments. In addition, TMCT owns eight real properties that areleased to the Company. Additional financial information pertaining to TMCT andTMCT II is provided below.

**TMCT Transactions—****On**Sept. 21,2006, the Company and the Chandler Trusts entered into agreements to restructureTMCT and TMCT II. Under the terms of the agreements, the Company received onSept. 22, 2006, a total of 38.9 million shares of the Company’s commonstock and all 1.1 million shares of the Company’s preferred stock heldcollectively by TMCT and TMCT II. As a result, the Company’s interests in each of TMCT and TMCT II were reduced toapproximately 5%. The Sept. 21, 2006 agreements also provided forcertain put and call options, which are exercisable at fair market valuebeginning in September 2007, relating to the Company’s remaining ownershipinterests in TMCT and TMCT II. As a result of the transactions, theCompany in the third quarter of 2006 recorded a one-time, non-operating gain of$48 million, net of tax; increased its common treasury stock by $161 millionand its preferred treasury stock by $107 million; and reduced its combinedinvestment in TMCT and TMCT II by $195 million.

On Oct. 20, 2006, the remaining 12.4 millionshares of the Company’s common stock held by TMCT and TMCT II were distributedto the Company and the Chandler Trusts in accordance with their respectiveownership interests. The Company received 0.6 million shares and the ChandlerTrusts received 11.8 million shares.

The Company and the Chandler Trusts share in the cashflows of the various assets held by TMCT and TMCT II. Prior to the Sept. 22,2006 transactions, the cash flows from the Tribune common and preferred sharesheld by TMCT and TMCT II were largely allocated to the Company, while the cashflows from the other assets were largely allocated to the Chandler Trusts. As aresult, the Company included in treasury stock 80% of the Tribune common andpreferred shares held by TMCT and TMCT II. In addition, 80% of thedividends on the preferred and common shares held by TMCT and TMCT II wereeffectively eliminated. Following the Sept. 22, 2006 transactions anduntil the Oct. 20, 2006 distribution, the Company included in treasurystock approximately 5% of the Tribune common shares held by TMCT and TMCT II.As a result of the transactions, the Company no longer has any shares of its Series C,D-1 and D-2 preferred stock outstanding, and the Company’s commonshares outstanding increased by 1.6 million.

**TMCT—****At**Dec. 31,2006 and Dec. 25, 2005, the assets of TMCT included eight real properties(“Real Properties”) leased to the Company and a portfolio of fixed income andequity investments (“TMCT 

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Portfolio”). The TMCT assets at Dec. 25, 2005also included 13 million shares of the Company’s common stock and 442,596shares of the Company’s Series C preferred stock (collectively, “TMCT Shares”).As discussed above, all of the TMCT Shares were distributed to the Company andthe Chandler Trusts in 2006. TMCT has no outstanding debt. The estimatedfair market values of the TMCT Shares and TMCT Portfolio at Dec. 31, 2006and Dec. 25, 2005 are shown in the table below (in thousands):

| ** **     | ** ** | **TMCT Asset Information  (unaudited)** | ** ** |
|----------------|------------|---------------------------------------------------|------------|
| ** **     | ** ** | **Dec. 31, 2006**                       | ** ** | **Dec. 25, 2005** | ** ** |
| TMCT Shares    |       |                                              | $          | — |   |   |   | $ | 602,900 |   |   |
| TMCT Portfolio |       |                                              | $          | 265,200 |   |   |   | $ | 260,800 |   |   |

 

The Company accounts for the Real Properties lease asa property-financing obligation in its consolidated balance sheet. Under theterms of the original lease agreement, the Company had the option to purchaseall of the Real Properties for their fair market value on Aug. 8, 2009,the end of the current lease term. In connection with the TMCT restructuringdiscussed above, the Company and TMCT amended the lease agreement on Sept. 22,2006. Under the terms of the amended lease, the Company was granted anaccelerated option to acquire the eight properties during the month of January 2008for $175 million. The Company was also granted an option to acquire theleased properties from Feb. 8, 2008 to three months prior to theexpiration of the amended lease. If the Company does not elect to purchase theReal Properties, the Company may elect to extend the lease for two additional 12-yearlease terms, with fair market value purchase options at the end of each term.The Sept. 22, 2006 lease amendment extended the properties’ current fixedrental rate through the first additional 12-year lease term. A fairmarket rental rate would be payable during the second additional 12-yearlease term.

Summarizedincome and expense information for TMCT is shown in the following table for theyears ended Dec. 31, 2006, Dec. 25, 2005 and Dec. 26, 2004 (inthousands):

| ** **                                   | ** ** | **TMCT Income and Expense  Information (unaudited)** | ** ** |
|----------------------------------------------|------------|--------------------------------------------------------------------------|------------|
| ** **                                   | ** ** | **2006**                                                                 | ** ** | **2005** | ** ** | **2004** | ** ** |
| TMCT Shares  dividend income                 |       | $                                                                        | 20,030     |   | $ | 26,706 |   | $ | 23,705 |   |
| Real Properties  lease income                |       | 24,166                                                                   |       | 24,166 |   | 24,166 |   |
| TMCT Portfolio  interest and dividend income |       | 12,043                                                                   |       | 9,508 |   | 9,949 |   |
| TMCT Portfolio  net realized gains           |       | 3,956                                                                    |       | 835 |   | 2,670 |   |
| Total                                        |       | $                                                                        | 60,195     |   | $ | 61,215 |   | $ | 60,490 |   |
| TMCT operating expenses                      |       | $                                                                        | (9,629     | ) | $ | (9,301 | ) | $ | (9,983 | ) |

 

The Company accounts for its investment in the TMCTPortfolio under the equity method. The Company’s investment inTMCT totaled $24 million, $83 million and $82 million at Dec. 31,2006, Dec. 25, 2005 and Dec. 26, 2004, respectively. In 2006, 2005and 2004, the Company recognized equity income of $2 million in each yearrelated to the TMCT Portfolio.

**TMCT II—****At**Dec. 31,2006 and Dec. 25, 2005, the assets of TMCT II included a portfolio offixed income investments that were funded with the proceeds from the redemptionof six unrelated real estate investment trust interests in 2004 and two in 2005(“REIT Portfolio”); a portfolio of fixed income and equity investments (“TMCT IIPortfolio”); and a portfolio of venture capital and private equity investments(“Venture Capital Portfolio”). The TMCT II assets at Dec. 25, 2005 alsoincluded 39 million 

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**TRIBUNE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

shares of the Company’s common stock, 380,972 sharesof the Company’s Series D-1 preferred stock and 245,100 shares ofthe Company’s Series D-2 preferred stock (collectively, “TMCT IIShares”). As discussed above, all of the TMCT II Shares were distributed to theCompany and the Chandler Trusts in 2006. TMCT II has no outstanding debt.The estimated fair market values of the TMCT II assets at Dec. 31,2006 and Dec. 25, 2005 are shown in the table below (in thousands):

| ** **                 | ** ** | **TMCT II Asset Information  (unaudited)** | ** ** |
|----------------------------|------------|-----------------------------------------------------------|------------|
| ** **                 | ** ** | **Dec. 31, 2006**                               | ** ** | **Dec. 25, 2005** | ** ** |
| TMCT II  Shares       |       |                                                      | $          | — |   |   | $ | 1,498,800 |   |
| REIT Portfolio             |       |                                                      | $          | 591,900 |   |   | $ | 593,300 |   |
| TMCT II Portfolio     |       |                                                      | $          | 114,600 |   |   | $ | 112,300 |   |
| Venture Capital  Portfolio |       |                                                      | $          | 222,500 |   |   | $ | 260,400 |   |

 

Summarizedincome and expense information for TMCT II is shown in the following tablefor the years ended Dec. 31, 2006, Dec. 25, 2005 and Dec. 26,2004 (in thousands):

| ** **                                                                                | ** ** | **TMCT II Income and Expense  Information (unaudited)** | ** ** |
|-------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------|------------|
| ** **                                                                                | ** ** | **2006**                                                                         | ** ** | **2005** | ** ** | **2004** | ** ** |
| TMCT II  Shares dividend income                                                      |       | $                                                                                | 37,204     |   | $ | 48,853 |   | $ | 38,809 |   |
| REIT Portfolio  income                                                                    |       | 37,409                                                                           |       | 38,417 |   | 51,520 |   |
| TMCT II  Portfolio and Venture Capital Portfolio interest and dividend income        |       | 8,907                                                                            |       | 8,244 |   | 5,126 |   |
| TMCT II  Portfolio, Venture Capital Portfolio and REIT Portfolio net realized losses |       | (7,902                                                                           | )          | (778 | ) | (21,192 | ) |
| Total                                                                                     |       | $                                                                                | 75,618     |   | $ | 94,736 |   | $ | 74,263 |   |
| TMCT II  operating expenses                                                          |       | $                                                                                | (9,897     | ) | $ | (11,319 | ) | $ | (10,286 | ) |

 

The Company accounts for its investments in the REITPortfolio, the TMCT II Portfolio and the Venture Capital Portfolio underthe equity method. The Company’s investment in TMCT II totaled $42 millionat Dec. 31, 2006, $196 million at Dec. 25, 2005 and$198 million at Dec. 26, 2004. The Company recognized equity incomerelated to the REIT Portfolio, TMCT II Portfolio and Venture CapitalPortfolio investments of $6 million in 2006, $8 million in 2005 and$9 million in 2004.

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**TRIBUNE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

**NOTE 8: INVESTMENTS**

Investmentsconsisted of the following (in thousands):

| ** **                                      | ** ** | **Dec. 31, 2006** | ** ** | **Dec. 25, 2005** | ** ** |
|-------------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| Time Warner stock  related to PHONES debt       |       |                        | $          | 348,480                     |       |   |   | $ | 282,880 |   |   |
| Other cost method  investments                  |       |                        | 14,150     |                        |       |   | 59,355 |   |   |
| Equity  investments in TMCT and TMCT II(1) |       |                        | 66,016     |                        |       |   | 279,766 |   |   |
| Other equity  method investments                |       |                        | 484,584    |                        |       |   | 293,542 |   |   |
| Total investments                               |       |                        | $          | 913,230                     |       |   |   | $ | 915,543 |   |   |

----

 

(1)       See Note 7 for further discussion.

Cost method investments in public companies and debtsecurities were recorded at fair value in the consolidated balance sheets. At Dec. 31,2006, the Company’s cost method investments included public companies, mainlyTime Warner, and private companies. In the third quarter of 2006, the Companysold 2.8 million shares of Time Warner common stock unrelated to the PHONES fornet proceeds of $46 million and recorded a pretax gain on sale of $19 million.The cost basis of the Time Warner shares sold was determined using the specificidentification method. The investment in Time Warner at Dec. 31, 2006consisted of 16.3 million shares, mostly related to the PHONES (seeNotes 1 and 9).

TheCompany’s equity method investments at Dec. 31, 2006 included thefollowing private companies:

| **Company**                            | ** ** | ** ** | ** ** | **% Owned** | ** ** |
|----------------------------------------|------------|------------|------------|------------------|------------|
| CareerBuilder,  LLC                    |       |       | 43         | %                |       |
| California  Independent Postal Systems |       |       | 50         | %                |       |
| Classified  Ventures, LLC              |       |       | 28         | %                |       |
| Comcast SportsNet  Chicago             |       |       | 25         | %                |       |
| Consumer Networks                      |       |       | 17         | %                |       |
| ShopLocal, LLC                         |       |       | 43         | %                |       |
| Legacy.com                             |       |       | 40         | %                |       |
| TMCT, LLC(1)                           |       |       | 5          | %                |       |
| TMCT II,  LLC(1)                  |       |       | 5          | %                |       |
| Topix, LLC                             |       |       | 34         | %                |       |
| TV Food Network                        |       |       | 31         | %                |       |

----

 

(1)       See Note 7 for further discussion.

The Company does not guarantee any indebtedness forany of its investees. In the third quarter of 2006, the Company recorded aone-time gain of $48 million, net of tax, as a result of transactions relatedto its investments in TMCT, LLC and TMCT II, LLC (see Note 7). In the fourthquarter of 2006, the Company sold its 27% interest in BrassRing, resulting in apretax gain of $17 million. During 2005, the Company sold certain investmentsresulting in a pretax gain of $7 million. During 2004, the Company soldits 50% interest in La Opinion for $20 million and recorded a pretax gain of$18 million.

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**TRIBUNE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

For investmentsclassified as available-for-sale and recorded at fair value under FAS No. 115,the aggregate cost basis, unrealized gain and fair value were as follows (inthousands):

| ** **                    | ** ** | **Dec. 31, 2006** | ** ** | **Dec. 25, 2005** | ** ** |
|-------------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                    | ** ** | **Cost  Basis**        | ** ** | **Unrealized  Gain**   | ** ** | **Fair  Value** | ** ** | **Cost  Basis** | ** ** | **Unrealized  Gain** | ** ** | **Fair  Value** | ** ** |
| Marketable equity  securities |       | $                      | 2,335      |                   |       | $ | 11,562 |   |   | $ | 13,897 |   | $ | 27,521 |   |   | $ | 26,964 |   |   | $ | 54,485 |   |
|                               |            |                        |            |                        |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

The difference betweencost and fair value, net of related tax effects, is recorded in the accumulatedother comprehensive income (loss) component of shareholders’ equity andamounted to a net gain of $7 million at Dec. 31, 2006 and$16 million at Dec. 25, 2005. The cost bases of the investments inthe tables above are net of write-downs recorded in the consolidatedstatements of income.

**NOTE 9: DEBT**

Debtconsisted of the following (in thousands):

| ** **                                                                                          | ** ** | **Dec. 31, 2006** | ** ** | **Dec. 25, 2005** | ** ** |
|-----------------------------------------------------------------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| Borrowings under  bridge credit facility due 2007, interest rate of 6.2%                            |       | $                           | 1,310,000  |                        | $          | — |   |
| Term loan due  2011, interest rate of 6.2%                                                          |       | 1,500,000                   |       | —                      |       |
| Commercial paper,  weighted average interest rate of 5.9% in 2006 and 4.4% in 2005                  |       | 97,019                      |       | 923,532                     |       |
| Medium-term  notes, weighted average interest rate of 5.6% in 2006 and 6.2% in 2005, due  2006-2008 |       | 262,585                     |       | 555,585                     |       |
| Property  financing obligation, effective interest rate of 7.7%, expiring 2009 (see  Note 7)   |       | 55,711                      |       | 60,372                      |       |
| 4.875% notes due  2010, net of unamortized discount of $564 and $718, respectively                  |       | 449,436                     |       | 449,282                     |       |
| 7.25% debentures  due 2013, net of unamortized discount of $2,137 and $2,478, respectively          |       | 79,946                      |       | 79,605                      |       |
| 5.25% notes due  2015, net of unamortized discount of $1,362 and $1,519, respectively               |       | 328,638                     |       | 328,481                     |       |
| 7.5% debentures  due 2023, net of unamortized discount of $3,969 and $4,204, respectively           |       | 94,781                      |       | 94,546                      |       |
| 6.61% debentures  due 2027, net of unamortized discount of $2,200 and $2,305, respectively          |       | 82,760                      |       | 82,655                      |       |
| 7.25% debentures  due 2096, net of unamortized discount of $18,116 and $18,304, respectively        |       | 129,884                     |       | 129,696                     |       |
| Interest rate  swap                                                                                 |       | 24,600                      |       | 29,714                      |       |
| Other notes and  obligations                                                                        |       | 16,898                      |       | 18,553                      |       |
| Total debt  excluding PHONES                                                                        |       | 4,432,258                   |       | 2,752,021                   |       |
| Less debt due  within one year                                                                      |       | (1,429,007                  | )          | (302,460                    | )          |
| Long-term  debt excluding PHONES                                                                    |       | 3,003,251                   |       | 2,449,561                   |       |
| 2% PHONES debt  related to Time Warner stock, due 2029                                              |       | 572,960                     |       | 509,701                     |       |
| Total long-term  debt                                                                               |       | $                           | 3,576,211  |                        | $          | 2,959,262 |   |

 

**CreditAgreements—****On** June 19, 2006, the Companyentered into a five-year credit agreement and a 364-day bridge creditagreement, both of which were amended and restated on June 27, 2006. Thefive-

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**TRIBUNE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

year credit agreementprovides for a $1.5 billion unsecured term facility, of which $250 million wasavailable and used to refinance the medium-term notes that matured on Nov. 1,2006, and a $750 million unsecured revolving facility. The 364-day bridgecredit agreement provided for a $2.15 billion unsecured bridge facility.

The Company entered into these agreements to financethe Company’s tender offer initiated on May 30, 2006 (see Note 15); torepurchase shares of the Company’s common stock from the Robert R. McCormickTribune Foundation and Cantigny Foundation (see Note 15); to repurchase sharesof the Company’s common stock pursuant to open market or privately negotiatedtransactions; to refinance certain indebtedness; and to pay fees and expensesincurred in connection with the repurchases. In addition, the revolvingfacility is available for working capital and general corporate purposes,including acquisitions.

In general, borrowings under the credit agreementsbear interest at a rate equal to LIBOR plus a spread ranging from 0.35% to1.25%. The applicable spread is determined on the basis of the Company’s debtratings by S&P and Moody’s. The Company’s debt ratings are also used indetermining the annual facility fee, which may range from 0.07% to 0.25% of theaggregate unused commitments. In addition, the Company has agreed to paycustomary fees to the lenders under the credit agreements.

As of Dec 31, 2006, the Company had outstandingborrowings of $1.5 billion and $1.3 billion under the term facility and thebridge facility, respectively, and the Company had no borrowings under therevolving facility. As of Dec. 31, 2006, the applicable interest rate onboth the term facility and the bridge facility was 6.2%. The credit agreementscontain certain restrictive covenants, including financial covenants thatrequire the Company to maintain a maximum total leverage ratio and a minimuminterest coverage ratio. At Dec. 31, 2006, the Company was in compliancewith the covenants.

**OtherLong-Term Debt Issuance—****In** 2005, the Company issued$450 million ($449 million net of unamortized discount) 4.875% notesdue 2010 and $330 million ($328 million net of unamortized discount)5.25% notes due 2015. The proceeds from the issuance were used to repaycommercial paper.

**Medium-TermNotes—****Notes** issued under these programs maynot be redeemed by the Company prior to maturity.

**InterestRate Swap—****The** Company is currently a partyto one interest rate swap agreement. This swap agreement relates to the$100 million 7.5% debentures due in 2023 and effectively converts thefixed 7.5% rate to a variable rate based on LIBOR.

**DebtDue Within One Year—****Debt due within one year** at Dec. 31,2006 includes $1.31 billion of borrowings under the 364-day bridgecredit agreement, $97 million of commercial paper and $22 million ofproperty financing and other obligations.

**ExchangeableSubordinated Debentures due 2029 (“PHONES”)—****In** 1999, the Companyissued 8 million PHONES for an aggregate principal amount of approximately$1.3 billion. The principal amount was equal to the value of16 million shares of Time Warner common stock at the closing price of$78.50 per share on April 7, 1999. Quarterly interest payments are made tothe PHONES holders at an annual rate of 2% of the initial principal. TheCompany records both cash and non-cash interest expense on the discounted debtcomponent of the PHONES. The PHONES debenture agreement requires principalpayments equal to any dividends declared on the 16 million shares of TimeWarner common stock. Time Warner declared total dividends of $.21 per share in2006 and $.10 per share in 2005. The Company 

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records the dividends itreceives on its Time Warner common stock as dividend income and accounts forthe related payment to the PHONES holders as principal reduction.

The Company may redeem the PHONES at any time for thehigher of the principal value of the PHONES ($156.47 per PHONES at Dec. 31,2006) or the then market value of two shares of Time Warner common stock,subject to certain adjustments. At any time, holders of the PHONES may exchangea PHONES for an amount of cash equal to 95% (or 100% under certaincircumstances) of the market value of two shares of Time Warner common stock.At Dec. 31, 2006, the market value per PHONES was $68.65, and the marketvalue of two shares of Time Warner common stock was $43.56.

Under the provisions of FAS No. 133, the PHONESconsist of a discounted debt component, which is presented at book value, and aderivative component, which is presented at fair value. Changes in the fairvalue of the derivative component of the PHONES are recorded in the statementof income. The fair value of the derivative component of the PHONES debt iscalculated as the difference between the quoted market value of the PHONES andthe estimated fair value of the discounted debt component of the PHONES. Thefair value of the discounted debt component of the PHONES is calculated basedon an estimate of the current interest rate available to the Company for debtof the same remaining maturity and similar terms to the PHONES. The book valueof the discounted debt component is based on the prevailing interest rate(8.125%) at issuance of the PHONES. The market value of the PHONES, which aretraded on the New York Stock Exchange, was $549 million and$592 million at Dec. 31, 2006 and Dec. 25, 2005, respectively.

Thediscounted debt component and derivative component of the PHONES were asfollows (in thousands):

| ** **                                           | ** ** | **Dec. 31, 2006** | ** ** | **Dec. 25, 2005** | ** ** |
|------------------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| PHONES Debt:                                         |       |                        |       |                        |       |   |   |   |   |
| Discounted debt component (at book value)            |       |                        | $          | 465,280                     |       |   |   | $ | 454,038 |   |   |
| Derivative component (at estimated fair value)       |       |                        | 107,680    |                        |       |   | 55,663 |   |   |
| Total                                                |       |                        | $          | 572,960                     |       |   |   | $ | 509,701 |   |   |
| Time Warner stock  related to PHONES (at fair value) |       |                        | $          | 348,480                     |       |   |   | $ | 282,880 |   |   |

 

If the PHONES are exchanged in the next year, theCompany intends to refinance the PHONES, and has the ability to do so on along-term basis through its existing revolving credit agreements. Accordingly,the PHONES have been classified as long-term.

**Maturities—****Debt** at Dec. 31,2006 matures as shown below (in thousands):

| 2007       |   | $         | 1,429,007 |   |
|------------|--------|-----------|-----------|--------|
| 2008       |   | 287,023   |      |
| 2009       |   | 15,851    |      |
| 2010       |   | 451,246   |      |
| 2011       |   | 1,832,963 |      |
| Thereafter |   | 989,128   |      |
| Total      |   | $         | 5,005,218 |   |

 

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**NOTE 10: CONTRACTSPAYABLE FOR BROADCAST RIGHTS**

Contractspayable for broadcast rights are classified as current or long-term liabilitiesin accordance with the payment terms of the contracts. Required payments undercontractual agreements for broadcast rights recorded at Dec. 31, 2006 areshown in the table below (in thousands):

| 2007       |   | $       | 317,945 |   |
|------------|--------|---------|---------|--------|
| 2008       |   | 163,374 |    |
| 2009       |   | 123,766 |    |
| 2010       |   | 73,052  |    |
| 2011       |   | 40,984  |    |
| Thereafter |   | 24,751  |    |
| Total      |   | $       | 743,872 |   |

 

**NOTE 11: FAIR VALUEOF FINANCIAL INSTRUMENTS**

Estimatedfair values and carrying amounts of the Company’s financial instruments are asfollows (in thousands):

| ** **                              | ** ** | **Dec. 31, 2006** | ** ** | **Dec. 25, 2005** | ** ** |
|-----------------------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                              | ** ** | **Fair  Value**        | ** ** | **Carrying  Amount**   | ** ** | **Fair  Value** | ** ** | **Carrying  Amount** | ** ** |
| Cost method  investments                |       | $                      | 365,445    |                   | $          | 362,630 |   | $ | 348,791 |   | $ | 342,235 |   |
| Debt                                    |       | $                      | 4,904,390  |                   | $          | 5,005,218 |   | $ | 3,369,007 |   | $ | 3,261,722 |   |
| Contracts payable for  broadcast rights |       | $                      | 696,363    |                   | $          | 743,872 |   | $ | 796,278 |   | $ | 858,808 |   |

 

The following methods and assumptions were used toestimate the fair value of each category of financial instruments.

**CostMethod Investments—****Cost** method investments in publiccompanies were recorded at fair value in the consolidated balance sheets (seeNotes 1 and 8). Cost method investments in private companies were recordedat cost, net of write-downs, and fair value was generally estimated basedon prices recently paid for shares in those companies.

**Debt—****Fair** value wasestimated based on quoted market prices for similar issues or on current ratesavailable to the Company for debt of the same remaining maturities and similarterms. The carrying value of the Company’s derivative instruments approximatesfair value. The fair value of the PHONES was determined by reference to themarket value resulting from trading on a national securities exchange.

**Contracts Payable forBroadcast Rights—****Fair** value was estimated using thediscounted cash flow method.

**NOTE 12:COMMITMENTS AND CONTINGENCIES**

The Company has entered into commitments for broadcastrights that are not currently available for broadcast and are therefore notincluded in the financial statements. These commitments totaled$682 million at Dec. 31, 2006. Payments for broadcast rightsgenerally commence when the programs become available for broadcast.

TheCompany had commitments totaling $536 million at Dec. 31, 2006related to the purchase of property, plant and equipment and talent contracts.In addition, under its current agreement with Abitibi 

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Consolidated Inc., the Company has a commitmentto purchase 369,000 metric tons of newsprint each year over the next threeyears based on market prices at the time of purchase. The Company leasescertain equipment and office and production space under various operatingleases. Net lease expense from continuing operations was $56 million in2006, $57 million in 2005 and $55 million in 2004. The table belowpresents the future minimum lease payments to be made under non-cancelableoperating leases at Dec. 31, 2006 (in thousands):

| 2007       |   | $      | 62,149  |   |
|------------|--------|--------|---------|--------|
| 2008       |   | 55,835 |    |
| 2009       |   | 47,350 |    |
| 2010       |   | 34,370 |    |
| 2011       |   | 23,844 |    |
| Thereafter |   | 45,878 |    |
| Total      |   | $      | 269,426 |   |

 

The Company and itssubsidiaries are defendants from time to time in actions for matters arisingout of their business operations. In addition, the Company and its subsidiariesare involved from time to time as parties in various regulatory, environmentaland other proceedings with governmental authorities and administrative agencies.See Note 4 for a discussion of potential liability related to *Newsday* and *Hoy*, New York, and see Note 13 for a discussion ofpotential income tax liabilities. The Company does not believe that any othermatters or proceedings presently pending will have a material adverse effect onits consolidated financial position, results of operations or liquidity.

**NOTE 13: INCOMETAXES**

Thefollowing is a reconciliation of income taxes computed at the U.S. federalstatutory rate to income taxes reported for continuing operations in theconsolidated statements of income (in thousands):

| ** **                                                                                                      | ** ** | **2006** | ** ** | **2005** | ** ** | **2004**  | ** ** |
|-----------------------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|-----------|------------|
| Income from  continuing operations before income taxes and cumulative effect of change in  accounting principle |       | $        | 1,008,995  |     | $          | 1,090,609 |       | $ | 910,100 |   |
| Federal income  taxes at 35%                                                                                    |       | $        | 353,148    |     | $          | 381,713   |       | $ | 318,535 |   |
| State and local  income taxes, net of federal tax benefit                                                       |       | 30,581   |       | 37,881   |       | 31,549    |       |
| Matthew  Bender/Mosby adjustment                                                                                |       | —   |       | 150,493  |       | —    |       |
| Income tax  settlements and adjustments                                                                         |       | (33,563  | )          | (11,829  | )          | —    |       |
| Other                                                                                                           |       | (2,024   | )          | 9,562    |       | 5,640     |       |
| Income taxes  reported                                                                                          |       | $        | 348,142    |     | $          | 567,820   |       | $ | 355,724 |   |
| Effective tax rate                                                                                              |       | 34.5     | %          | 52.1     | %          | 39.1      | %          |

 

In 2006, the Company recorded a favorable $34 millionincome tax expense adjustment, most of which related to the Company’s PHONES asa result of reaching an agreement with the Internal Revenue Service appealsoffice pertaining to the deduction of interest expense on the PHONES (see “PHONESInterest” discussion below). In 2005, the Company increased its income taxexpense by $150 million as a result of the Matthew Bender Tax Courtdecision (see “Matthew Bender and Mosby Tax Liability” discussion below) andreduced its income tax expense by $12 million as a result of resolvingcertain federal income tax issues.

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Componentsof income tax expense charged to income from continuing operations were asfollows (in thousands):

| ** **          | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|---------------------|------------|----------|------------|----------|------------|----------|------------|
| Currently  payable: |       |     |       |     |       |     |       |
| U.S. federal        |       | $        | 287,455    |     | $          | 436,362  |       | $ | 273,770 |   |
| State and local     |       | 43,907   |       | 44,710   |       | 42,289   |       |
| Sub-total           |       | 331,362  |       | 481,072  |       | 316,059  |       |
| Deferred:           |       |     |       |     |       |     |       |
| U.S. federal        |       | 13,639   |       | 72,716   |       | 32,767   |       |
| State and local     |       | 3,141    |       | 14,032   |       | 6,898    |       |
| Sub-total           |       | 16,780   |       | 86,748   |       | 39,665   |       |
| Total               |       | $        | 348,142    |     | $          | 567,820  |       | $ | 355,724 |   |

 

Significantcomponents of the Company’s net deferred tax liabilities were as follows (inthousands):

| ** **                                                      | ** ** | **Dec. 31, 2006** | ** ** | **Dec. 25, 2005** | ** ** |
|-----------------------------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| Net properties                                                  |       | $                           | 214,770    |                        | $          | 239,821 |   |
| Net intangible  assets                                          |       | 1,209,999                   |       | 1,252,851                   |       |
| Pensions                                                        |       | 74,891                      |       | 316,467                     |       |
| Investments                                                     |       | 406,409                     |       | 417,214                     |       |
| PHONES interest                                                 |       | 219,552                     |       | 267,885                     |       |
| Other future  taxable items                                     |       | 18,325                      |       | 25,880                      |       |
| Total deferred  tax liabilities                                 |       | 2,143,946                   |       | 2,520,118                   |       |
| Broadcast rights                                                |       | (5,262                      | )          | (4,968                      | )          |
| Postretirement  and postemployment benefits other than pensions |       | (54,990                     | )          | (64,579                     | )          |
| Deferred compensation                                           |       | (84,288                     | )          | (76,901                     | )          |
| Other accrued  liabilities                                      |       | (55,270                     | )          | (89,642                     | )          |
| Accrued employee  compensation and benefits                     |       | (7,462                      | )          | (9,731                      | )          |
| Accounts  receivable                                            |       | (13,211                     | )          | (15,834                     | )          |
| Other future  deductible items                                  |       | (18,327                     | )          | (15,639                     | )          |
| State operating  loss carryforwards                             |       | (42,371                     | )          | (34,391                     | )          |
| Valuation  allowances on state operating loss carryforwards     |       | 37,457                      |       | 29,926                      |       |
| Total deferred  tax assets                                      |       | (243,724                    | )          | (281,759                    | )          |
| Net deferred tax  liability                                     |       | $                           | 1,900,222  |                        | $          | 2,238,359 |   |

 

**OperatingLoss Carryforwards—****At** Dec. 31, 2006, the Companyhad approximately $823 million of operating loss carryforwards for stateincome tax purposes. These carryforwards arose in certain states primarily as aresult of intercompany interest expense, royalty expense and management feesallocated to the Company’s various subsidiaries, and expire between 2007 and2026. The deferred tax assets related to these carryforwards totaledapproximately $42 million, net of federal taxes, at Dec. 31, 2006.However, the Company believes it is more likely than not that $37 millionof the deferred tax assets will not be realized because the relatedcarryforwards will expire before being utilized. Therefore, in accordance withFAS No. 109, “Accounting for Income Taxes,” the Company has establishedvaluation allowances of $37 million 

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**TRIBUNE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

on the deferred tax assetsrelated to the state carryforwards. The state operating loss carryforwardsincreased in 2006 because the Company generated additional tax losses incertain states.

**MatthewBender and Mosby Tax Liability—****During** 1998, TimesMirror, which was acquired by the Company in 2000, disposed of its MatthewBender and Mosby subsidiaries in separate transactions, which were structuredto qualify as tax-free reorganizations under the Internal Revenue Code. TheCompany believes these transactions were completed on a tax-free basis.However, the Internal Revenue Service (“IRS”) audited the transactions anddisagreed with the position taken by Times Mirror. In the fourth quarter of2001, the Company received an IRS adjustment to increase Times Mirror’s 1998taxable income by approximately $1.6 billion. The Company filed a petitionin the United States Tax Court in November 2002 to contest the IRSposition, and in December 2004, the Company presented its position in TaxCourt.

On Sept. 27, 2005, the Tax Court issued anopinion contrary to the Company’s position and determined that the MatthewBender transaction was a taxable sale. In January 2006, the Tax Courtextended its opinion in the Matthew Bender case to the Mosby transaction giventhe similarity of the two transactions. Taxes and related interest for both theMatthew Bender and Mosby transactions totaled approximately $1 billion.Over time, deductions for state taxes and interest are expected to reduce thenet cash outlay to approximately $840 million.

The Company has appealed the Tax Court ruling to theUnited States Court of Appeals for the Seventh Circuit. The Company does notexpect a ruling before the second half of 2007. The Company cannot predict withcertainty the outcome of this appeal.

Times Mirror established a tax reserve of$180 million in 1998 when it entered into the transactions. The reserverepresented Times Mirror’s best estimate of the amount the expected IRS andstate income tax claims could be settled for based upon an analysis of thefacts and circumstances surrounding the issue. In accordance with EmergingIssues Task Force (“EITF”) Issue No. 93-7, “Uncertainties Related toIncome Taxes in a Purchase Business Combination,” the Company treated this itemas an uncertain tax position at the time of the Times Mirror acquisition in2000 and concluded that the estimate determined by Times Mirror was the mostappropriate estimate of the exposure. The Company maintained this initialreserve, plus interest, and evaluated the adequacy of the reserve on a periodicbasis. At Dec. 26, 2004, the reserve, including pretax interest of $66million, totaled $246 million ($221 million after considering the tax benefitof the interest). In 2005, prior to the Tax Court ruling, the Company recordedadditional after-tax interest of $7 million on the reserve.

As a result of the Tax Court ruling, the Companyincreased its tax reserve by an additional $609 million in the thirdquarter of 2005 by recording additional income tax expense of$150 million, representing additional after-tax interest applicable to thepost-acquisition period, and goodwill of $459 million. In accordance withEITF No. 93-7, the Company adjusted goodwill because the taxcontingencies existed at the time of the Times Mirror acquisition. OnSept. 30, 2005, the Company paid $880 million to the IRS,representing the federal tax and interest owed on the transactions, andfinanced the payment through the issuance of commercial paper. On Feb. 10,2006, the Company made a California state tax and interest payment ofapproximately $86 million ($55 million after considering the federal taxbenefit of the state taxes and interest). The Company expects to make theremaining state tax and interest payments during 2007 and 2008.

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**TRIBUNE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

Asummary of the activity with respect to the Matthew Bender and Mosby taxliability is as follows (in millions):

| Liability at  Dec. 26, 2004:                                                                                |   |   |   |
|------------------------------------------------------------------------------------------------------------------|--------|--------|--------|
| Tax                                                                                                              |   | $      | 180    |   |
| After-tax interest ($66 million pretax)                                                                     |   | 41     |   |
| Liability at  Dec. 26, 2004 (included in “other obligations”)                                     |   | 221    |   |
| After-tax interest recorded in income tax  expense in the first three quarters of 2005 ($11 million pretax) |   | 7      |   |
| Additional  reserve recorded as a result of the Tax Court ruling:                                                |   |   |   |
| Charged to income tax expense                                                                                    |   | 150    |   |
| Additional goodwill                                                                                              |   | 459    |   |
| Liability at  Sept. 25, 2005                                                                                |   | 837    |   |
| Federal tax and  interest paid on Sept. 30, 2005:                                                           |   |   |   |
| Federal tax                                                                                                      |   | (542   | )      |
| After-tax interest ($338 million pretax)                                                                    |   | (210   | )      |
| After-tax interest recorded in income tax  expense in the fourth quarter of 2005 ($3 million pretax)        |   | 2      |   |
| Liability at  Dec. 25, 2005                                                                                 |   | 87     |   |
| After-tax interest ($4 million pretax)                                                                           |   | 3      |   |
| California tax  and interest paid in February 2006:                                                         |   |   |   |
| State tax ($55 million pretax)                                                                                   |   | (36    | )      |
| After-tax interest ($31 million pretax)                                                                     |   | (19    | )      |
| Liability at  Dec. 31, 2006 (included in “other current liabilities”)                             |   | $      | 35     |   |

 

**PHONESInterest—****In** connection with the routineexamination of the Company’s federal income tax returns for 2000 through 2003,the IRS proposed that the Company capitalize the interest on the PHONES asadditional tax basis in the Company’s 16 million shares of Time Warnercommon stock, rather than allowing the Company to currently deduct suchinterest. The National Office of the IRS has issued a Technical Advice Memorandumthat supports the proposed treatment. The Company disagrees with the IRS’sposition and requested that the IRS administrative appeals office review theissue. The effect of the treatment proposed by the IRS would be to increase theCompany’s tax liability by approximately $189 million for the period 2000through 2003 and by approximately $177 million for the period 2004 through2006. If the IRS were to prevail in its proposed treatment, there would be noeffect on the Company’s reported income for any of these periods. The potentialtax payments would be recorded as a reduction in the Company’s deferred taxliability, and the Company has accrued the interest that would be assessed onthese potential payments.

During the fourth quarter of 2006, the Company reachedan agreement with the IRS appeals office regarding the deductibility of thePHONES interest expense. The agreement will apply for the tax years 2000through 2029. Under the terms of the agreement reached with the IRS appealsoffice, the Company paid approximately $81 million of tax plus interest for taxyears 2000 through 2005. The tax payments were recorded as a reduction in theCompany’s deferred tax liability, and the interest was recorded as a reductionin the Company’s income tax reserves. The agreement reached with the appealsoffice may be reviewed by the Joint Committee on Taxation.

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**TRIBUNE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

**IncomeTax Reserves—****The** Company’s liability forestimated federal and state audit adjustments, including after-tax interest,was approximately $84 million and $96 million at Dec. 31, 2006and Dec. 25, 2005, respectively. These amounts are included in “otherobligations” in the Company’s consolidated balance sheet. The liabilitydeclined in 2006 due to the settlement of certain federal and state income taxaudits and the PHONES agreement with the IRS appeals office, partially offsetby an increase to the liability related to the TMCT transactions discussed inNote 7.

Although managementbelieves its estimates and judgments are reasonable, the resolutions of the Company’stax issues are unpredictable and could result in tax liabilities that aresignificantly higher or lower than that which has been provided by the Company.

**NOTE 14: PENSIONAND OTHER POSTRETIREMENT BENEFITS**

**EmployeePension Plans—****In** connection with theestablishment of the Tribune Company ESOP in 1988, Tribune amended its company-sponsoredpension plan for employees not covered by a collective bargaining agreement.The Tribune Company pension plan continued to provide substantially the samepension benefits as under the pre-amended plan until December 1998. Afterthat date, Tribune pension benefit credits were frozen in terms of pay andservice.

In connection with the Times Mirror acquisition, theCompany assumed defined benefit pension plans and various other contributoryand non-contributory retirement plans covering substantially all of TimesMirror’s former employees. In general, benefits under the Times Mirror definedbenefit plans were based on years of service and the employee’s compensation duringthe last five years of employment. In December 2005, the pension planbenefits for former Times Mirror non-union and non-Newsday employees werefrozen. As a result of the plan freeze, a pretax curtailment gain of$18 million was recorded in 2005. On March 31, 2006, the pension planbenefits for Newsday union and non-union employees were frozen. Benefitsprovided by Times Mirror’s Employee Stock Ownership Plan (“Times Mirror ESOP”)are coordinated with certain pension benefits and, as a result, the definedbenefit plan obligations are net of the actuarially equivalent value of thebenefits earned under the Times Mirror ESOP. The maximum offset is equal to thevalue of the benefits earned under the defined benefit plan.

The Company also maintains several small plans forother employees. The Company’s portion of assets and liabilities for multi-employerunion pension plans is not determinable.

**PostretirementBenefits Other Than Pensions—****The** Company providespostretirement health care and life insurance benefits to eligible employeesunder a variety of plans. The various plans have significantly differentprovisions for lifetime maximums, retiree cost-sharing, health care providers,prescription drug coverage and other benefits.

**Obligationsand Funded Status—****As** discussed in Note 1, the Company adopted FAS No. 158, “Employers’Accounting for Defined Benefit Pension and Other Postretirement Plans, anamendment of FASB Statements No. 87, 88, 106 and 132(R)”, as of Dec. 31, 2006. FAS No. 158requires the Company to recognize the overfunded or underfunded statusof its defined benefit pension and other postretirement plans as an asset orliability in its statement of financial position and to recognize changes inthat funded status in the year in which changes occur through comprehensiveincome. See Note 1 for a summary of the impact the adoption of FAS 158 had onthe Company’s consolidated balance sheet as of Dec. 31, 2006. Prior to Dec. 31,2006, the Company accounted for its defined benefit pension plans under FAS No. 87,“Employers’ Accounting for Pensions” and accounted for its other postretirementbenefit plans under FAS No. 106, “Employers’ Accounting for PostretirementBenefits Other Than Pensions”.

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**TRIBUNE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

Summarizedinformation for the Company’s defined benefit pension and other postretirementplans is provided below (in thousands):

| ** **                                           | ** ** | **Pension Plans**      | ** ** | **Other Postretirement  Plans** | ** ** |
|------------------------------------------------------|------------|-----------------------------|------------|--------------------------------------|------------|
| ** **                                           | ** ** | **Dec. 31, 2006** | ** ** | **Dec. 25, 2005**          | ** ** | **Dec. 31, 2006** | ** ** | **Dec. 25, 2005** | ** ** |
| Change in benefit  obligations:                      |       |                        |       |                                 |       |   |   |   |   |   |   |   |   |
| Projected benefit  obligations, beginning of year    |       | $                           | 1,599,129  |                                 | $          | 1,461,180 |   |   | $ | 140,465 |   |   |   | $ | 191,540 |   |   |
| Service cost                                         |       | 3,934                       |       | 25,160                               |       |   | 1,335 |   |   |   | 1,469 |   |   |
| Interest cost                                        |       | 84,349                      |       | 81,436                               |       |   | 7,367 |   |   |   | 7,774 |   |   |
| Plan amendments                                      |       | —                      |       | —                               |       |   | — |   |   |   | 97 |   |   |
| Curtailment gain                                     |       | —                      |       | (44,566                              | )          |   | — |   |   |   | — |   |   |
| Special  termination benefits                        |       | 1,382                       |       | 1,434                                |       |   | — |   |   |   | — |   |   |
| Impact of  Medicare Reform Act                       |       | —                      |       | —                               |       |   | 1,200 |   |   |   | — |   |   |
| Actuarial (gain)  loss                               |       | (57,317                     | )          | 156,385                              |       |   | 3,471 |   |   |   | (45,095 | ) |   |
| Benefits paid                                        |       | (84,566                     | )          | (81,900                              | )          |   | (14,006 | ) |   |   | (15,320 | ) |   |
| Projected benefit  obligations, end of year          |       | 1,546,911                   |       | 1,599,129                            |       |   | 139,832 |   |   |   | 140,465 |   |   |
| Change in plans’ assets:                        |       |                        |       |                                 |       |   |   |   |   |   |   |   |   |
| Fair value of  plans’ assets, beginning of year |       | 1,598,398                   |       | 1,559,351                            |       |   | — |   |   |   | — |   |   |
| Actual return on  plans’ assets                 |       | 243,209                     |       | 113,769                              |       |   | — |   |   |   | — |   |   |
| Employer  contributions                              |       | 7,429                       |       | 7,178                                |       |   | 14,006 |   |   |   | 15,320 |   |   |
| Benefits paid                                        |       | (84,566                     | )          | (81,900                              | )          |   | (14,006 | ) |   |   | (15,320 | ) |   |
| Fair value of  plans’ assets, end of year       |       | 1,764,470                   |       | 1,598,398                            |       |   | — |   |   |   | — |   |   |
| Funded (under  funded) status of the plans           |       | $                           | 217,559    |                                 | (731       | ) |   | $ | (139,832 | ) |   |   | (140,465 | ) |   |
| Unrecognized net  actuarial loss (gain)              |       |                        |       | 869,596                              |       |   |   |   |   |   | (12,659 | ) |   |
| Unrecognized  prior service cost                     |       |                        |       | 2,518                                |       |   |   |   |   |   | (11,213 | ) |   |
| Unrecognized  transition asset                       |       |                        |       | (1                                   | )          |   |   |   |   |   | — |   |   |
| Prepaid (accrued)  benefit cost                      |       |                        |       | $                                    | 871,382    |   |   |   |   |   |   | $ | (164,337 | ) |   |

 

Amountsrecognized in the statement of financial position at Dec. 31, 2006consisted of (in thousands):

| ** **                          | ** ** | **Pension Plans** | ** ** | **Other Postretirement  Plans** | ** ** |
|-------------------------------------|------------|------------------------|------------|--------------------------------------|------------|
| Prepaid pension  costs              |       |                   | $          | 293,455                              |       |   |   | $ | — |   |   |
| Employee  compensation and benefits |       |                   | (6,163     | )                                    |       |   | — |   |   |
| Deferred  compensation and benefits |       |                   | (69,733    | )                                    |       |   | (139,832 | ) |   |
| Net amount recognized               |       |                   | $          | 217,559                              |       |   |   | $ | (139,832 | ) |   |

 

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**TRIBUNE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

Amountsincluded in prepaid (accrued) benefit costs at Dec. 25, 2005 consisted of(in thousands):

| ** **                                     | ** ** | **Pension Plans** | ** ** | **Other Postretirement  Plans** | ** ** |
|------------------------------------------------|------------|------------------------|------------|--------------------------------------|------------|
| Prepaid benefit  costs                         |       |                   | $          | 908,895                              |       |   |   | $ | — |   |   |
| Accrued benefit  costs                         |       |                   | (83,759    | )                                    |       |   | (164,337 | ) |   |
| Intangible asset                               |       |                   | 507        |                                 |       |   | — |   |   |
| Accumulated other  comprehensive income (loss) |       |                   | 45,739     |                                 |       |   | — |   |   |
| Net amount recognized                          |       |                   | $          | 871,382                              |       |   |   | $ | (164,337 | ) |   |

 

The accumulated benefit obligation, which excludes theimpact of future compensation increases, for all defined benefit pension planswas $1,543 million and $1,566 million at Dec. 31, 2006 and Dec. 25,2005, respectively. The projected benefit obligation at Dec. 31, 2006includes $1,473 million related to the Company’s qualified pension plansand $74 million related to its non-qualified plans. The Company’snon-qualified plans are not funded.

Thecomponents of net periodic benefit cost for Company-sponsored plans wereas follows (in thousands):

| ** **                             | ** ** | **Pension Plans** | ** ** | **Other Postretirement Plans** | ** ** |
|----------------------------------------|------------|------------------------|------------|------------------------------------------|------------|
| ** **                             | ** ** | **2006**               | ** ** | **2005**                                 | ** ** | **2004** | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
| Service cost                           |       | $                      | 3,934      |                                     | $          | 25,160 |   | $ | 21,177 |   | $ | 1,335 |   | $ | 1,469 |   | $ | 1,752 |   |
| Interest cost                          |       | 84,349                 |       | 81,436                                   |       | 80,474 |   | 7,367 |   | 7,774 |   | 10,323 |   |
| Expected return  on plans’ assets |       | (128,836               | )          | (127,346                                 | )          | (131,118 | ) | — |   | — |   | — |   |
| Recognized  actuarial loss             |       | 67,018                 |       | 59,095                                   |       | 44,533 |   | (127 | ) | — |   | — |   |
| Amortization of  prior service costs   |       | 220                    |       | (1,415                                   | )          | (1,834 | ) | (1,444 | ) | (1,444 | ) | (1,314 | ) |
| Amortization of  transition asset      |       | (1                     | )          | (5                                       | )          | (5 | ) | — |   | (439 | ) | — |   |
| Special  termination benefits(1)       |       | 1,382                  |       | 1,434                                    |       | 1,440 |   | — |   | — |   | — |   |
| Curtailment gain                       |       | —                 |       | (17,825                                  | )          | — |   | — |   | — |   | — |   |
| Net periodic benefit  cost             |       | $                      | 28,066     |                                     | $          | 20,534 |   | $ | 14,667 |   | $ | 7,131 |   | $ | 7,360 |   | $ | 10,761 |   |

----

(1)       Costsrelated to position eliminations.

Thechanges in minimum pension liabilities included in other comprehensive income(loss) for Company-sponsored plans were as follows (in thousands):

| ** **                                                                                | ** ** | **Pension Plans** | ** ** | **Other Postretirement  Plans** | ** ** |
|-------------------------------------------------------------------------------------------|------------|------------------------|------------|--------------------------------------|------------|
| ** **                                                                                | ** ** | **2006**               | ** ** | **2005**                             | ** ** | **2004** | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
| Change in minimum  pension liabilities included in other comprehensive income, net of tax |       | $                      | 18,987     |                                 | $          | (20,597 | ) | $ | (1,700 | ) |   | $ | — |   |   |   | $ | — |   |   |   | $ | — |   |   |
|                                                                                           |            |                        |            |                                      |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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**TRIBUNE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

 

Amountsrecognized in the accumulated other comprehensive income (loss) component ofshareholders’ equity for Company-sponsored plans as a result of theadoption of FAS No. 158 as of Dec. 31, 2006 were as follows (inthousands):

| ** **                                             | ** ** | **Pension Plans** | ** ** | **Other  Postretirement  Plans** | ** ** | **Total** | ** ** |
|--------------------------------------------------------|------------|------------------------|------------|----------------------------------|------------|-----------|------------|
| Unrecognized net  actuarial gains (losses), net of tax |       |                   | $          | (384,859                         | )          |      |       | $ | 5,527 |   |   | $ | (379,332 | ) |
| Unrecognized prior  service costs, net of tax          |       |                   | (1,400     | )                                |       |      | 5,959      |   |   | 4,559 |   |
| Total                                                  |       |                   | $          | (386,259                         | )          |      |       | $ | 11,486 |   |   | $ | (374,773 | ) |

 

During 2007, the Company expects to recognize as partof its net periodic pension benefit cost approximately $51.3 million of netactuarial losses and $.2 million of prior service costs that are included,after taxes, in the accumulated other comprehensive income (loss) component ofshareholders’ equity at Dec. 31, 2006.

**Assumptions—****Weighted** averageassumptions used each year in accounting for pension benefits and otherpostretirement benefits were:

| ** **                                        | ** ** | **Pension  Plans** | ** ** | **Other  Postretirement  Plans** | ** ** |
|---------------------------------------------------|------------|--------------------|------------|----------------------------------|------------|
| ** **                                        | ** ** | **2006**           | ** ** | **2005**                         | ** ** | **2006** | ** ** | **2005** | ** ** |
| Discount rate for  expense                        |       | 5.50               | %          | 5.75                             | %          | 5.50 | % | 5.75 | % |
| Discount rate for  obligations                    |       | 5.75               | %          | 5.50                             | %          | 5.75 | % | 5.50 | % |
| Increase in  future salary levels for expense     |       | 3.50               | %          | 3.50                             | %          | — |   | — |   |
| Increase in  future salary levels for obligations |       | 3.50               | %          | 3.50                             | %          | — |   | — |   |
| Long-term rate of  return on plans’ assets   |       | 8.50               | %          | 8.50                             | %          | — |   | — |   |

 

The Company used a building block approach todetermine its current 8.5% assumption for the long-term expected rate of returnon pension plan assets. Based on historical market studies, the Company’slong-term expected returns for equity and fixed income securities approximate10% and 6%, respectively. The Company’s current 2007 target asset allocationfor pension plan assets is 75% in equity securities and 25% in fixed incomesecurities and other. The Company bases the rate used for discounting futurebenefit obligations and calculating interest cost on an index of Aa-ratedcorporate bonds.  The duration of thebonds in the index approximates the timing of future payments for the Company’sbenefit obligations.

Prior to the adoption of FAS No. 158, the Company’sprepaid pension asset at Dec. 31, 2006 and Dec. 25, 2005 included anunrecognized net actuarial loss of $631 million and $870 million,respectively. A significant portion of this net actuarial loss resulted fromthe difference between the Company’s expected returns on plan assets and theactual losses on plan assets in 2002 and 2001. Expected returns on plan assetswere $158 million and $176 million in 2002 and 2001, respectively;actual losses were $161 million and $113 million, respectively. Uponadoption of FAS No. 158, the Company recognized the $631 million of actuariallosses, after taxes, in the accumulated other comprehensive income (loss)component of shareholders’ equity at Dec. 31, 2006. In accordance with FASNo. 87, the actuarial loss will be recognized in net periodic pensionexpense over approximately 11 years, representing the estimated averageremaining service period of active employees expected to receive benefits, withcorresponding adjustments made to accumulated other comprehensive income (loss)in accordance with FAS No. 158. The Company’s policy is 

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to incorporate asset-relatedgains and losses into the asset value used to calculate the expected return onplan assets and into the calculation of amortization of unrecognized netactuarial loss over a four-year period.

**Plan Assets—****The** Company’spension plans’ asset allocations at Dec. 31, 2006 and Dec. 25, 2005were as follows (in millions):

| ** **              | ** ** | **Plan Assets** | ** ** |
|-------------------------|------------|----------------------|------------|
| **Asset Category** | ** ** | ** **           | ** ** | **Dec. 31, 2006** | ** ** | **Dec. 25, 2005** | ** ** |
| Equity securities       |       | $                    | 1,344      |   | 76.2% |   | $ | 1,186 |   | 74.2% |   |
| Fixed income securities |       | 334                  |       | 18.9% |   | 329 |   | 20.6% |   |
| Other                   |       | 86                   |       | 4.9% |   | 83 |   | 5.2% |   |
| Total                   |       | $                    | 1,764      |   | 100% |   | $ | 1,598 |   | 100% |   |
|                         |            |                      |            |  |  |  |  |  |  |  |  |  |  |

 

**HealthCare Cost Trend Rates—****For** purposes of measuring 2006postretirement health care costs, a 9.0% annual rate of increase in the percapita cost of covered health care benefits was assumed for 2006. The rate wasassumed to decrease gradually to 5.0% for 2010 and remain at that levelthereafter. For purposes of measuring health care obligations at Dec. 31,2006, a 9.0% annual rate of increase in the per capita cost of covered healthcare benefits was assumed for 2007. The rate was assumed to decrease graduallyto 5.0% for 2012 and remain at that level thereafter. On Dec. 8, 2003, theMedicare Prescription Drug, Improvement and Modernization Act of 2003 (“Act”)were signed into law. The Act resulted in a $15 million reduction in theaccumulated other postretirement obligations for prior service costs in 2004and a $1 million reduction in net periodic postretirement benefit costs.

Assumedhealth care cost trend rates have a significant effect on the amounts reportedfor health care plans. As of the date of this report, a 1% change in assumedhealth care cost trend rates would have the following effects (in thousands):

| ** **                      | ** ** | **1% Increase** | ** ** | **1% Decrease** | ** ** |
|---------------------------------|------------|----------------------|------------|----------------------|------------|
| Service cost and  interest cost |       |                 | $          | 415                  |       |   |   | $ | (368 | ) |   |
| Projected benefit obligation    |       |                 | $          | 7,486                |       |   |   | $ | (6,624 | ) |   |

 

**CashFlows—****The******Companycontributed $7 million to certain of its union and non-qualified pensionplans and $14 million to its other postretirement plans in 2006. TheCompany plans to contribute $8 million to certain of its union andnon-qualified pension plans and $13 million to its other postretirementplans in 2007.

**Expected Future BenefitPayments—****The** following benefit payments,which reflect expected future service, as appropriate, are expected to be paid(in thousands):

| ** ** | ** ** | **Pension  Benefits** | ** ** | **Other  Postretirement  Benefits** | ** ** |
|------------|------------|-----------------------|------------|-------------------------------------|------------|
| 2007       |       |                  | $          | 79,967                              |       |   |   | $ | 14,211 |   |   |
| 2008       |       |                  | 81,579     |                                |       |   | 14,233 |   |   |
| 2009       |       |                  | 84,233     |                                |       |   | 14,310 |   |   |
| 2010       |       |                  | 87,050     |                                |       |   | 14,488 |   |   |
| 2011       |       |                  | 89,421     |                                |       |   | 14,619 |   |   |
| 2012-2016  |       |                  | 495,915    |                                |       |   | 69,089 |   |   |

 

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**NOTE 15: CAPITALSTOCK AND SHARE PURCHASE RIGHTS PLAN**

Under the Company’s Restated Certificate of Incorporation,12 million shares of preferred stock are authorized. Preferred stock isissuable in series under terms and conditions determined by the Company’s Boardof Directors.

**Series C,D-1 and D-2 Convertible Preferred Stock—****In******connection with the June 12, 2000 merger with TimesMirror, outstanding shares of Times Mirror cumulative, non-voting preferredstock were converted into shares of Tribune preferred stock with similar terms.A total of 213,733 shares of the Company’s Series C-1, D-1 andD-2 convertible preferred stock, net of treasury stock, were issued dueto the conversion.  The Series C, D-1and D-2 convertible preferred stocks related to Times Mirrorrecapitalization transactions whereby TMCT, LLC and TMCT II, LLC (seeNote 7) were formed. In connection with a restructuring of TMCT, LLC andTMCT II, LLC, all of these preferred shares were distributed to the Company onSept. 22, 2006. As a result, the Company has no preferred shares outstandingeffective as of Sept. 22, 2006. Series C convertible preferred stock was cumulative, non-votingpreferred stock, which was entitled to annual dividends of 8%, based onliquidation value. Dividends for Series D-1 and D-2 preferred stock werepaid at the annual rate of 6.91%, 6.67% and 6.44% in 2006, 2005, and 2004,respectively. The Series C, D-1 and D-2 preferred stocks were convertible intothe Company’s common stock in 2025 and thereafter. The conversion factor wascalculated by dividing $500 plus accrued and unpaid dividends by the averageclosing prices of the Company’s common stock for the 20 trading daysimmediately preceding the conversion date.

**Common and Treasury Stock—****At** Feb. 16,2007, there were 3,787 holders of record. The following table summarizes theCompany’s common stock repurchases during 2006 (in thousands):

| ** **                                                                           | ** ** | **Shares** | ** ** | **Cost**  | ** ** |
|--------------------------------------------------------------------------------------|------------|------------|------------|-----------|------------|
| Repurchases in the first  quarter                                                    |       | 4,604      |       | $         | 137,746    |   |
| Tender offer repurchases                                                             |       | 45,027     |       | 1,468,270 |       |
| Repurchases from the  Robert R. McCormick Tribune Foundation and Cantigny Foundation |       | 10,000     |       | 325,300   |       |
| Repurchases subsequent  to the tender offer                                          |       | 11,053     |       | 330,952   |       |
| Total common stock repurchases                                                       |       | 70,684     |       | $         | 2,262,268  |   |

 

On May 30, 2006, the Company initiated a modified“Dutch Auction” tender offer to repurchase up to 53 million shares of itscommon stock at a price per share not greater than $32.50 and not less than$28.00. The tender offer closed on June 26, 2006, and the Company acquired45 million shares of its common stock on July 5, 2006 at a price of $32.50per share before transaction costs. The Company also acquired 10 million sharesof its common stock from the Robert R. McCormick Tribune Foundation and theCantigny Foundation on July 12, 2006 at a price of $32.50 per share beforetransaction costs. The Robert R. McCormick Tribune Foundation and the CantignyFoundation are affiliated non-profit organizations, which together held 13.6%of the Company’s outstanding shares when the tender offer was launched. In connectionwith the tender offer, the board of directors also authorized the repurchase ofan additional 12 million shares of the Company’s common stock commencing on theeleventh business day following the completion of the tender offer. In thethird quarter of 2006, the Company repurchased an additional 11.1 millionshares under that authorization at a weighted average cost of $29.94 per share.In addition, the Company repurchased and retired 4.6 million shares of itscommon stock in the first quarter of 2006.

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**TRIBUNE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

During 2005, the Company repurchased and retired12.2 million shares of its common stock in the open market for$440 million. During 2004, the Company repurchased and retired15.5 million shares of its common stock in the open market for $732 million.At Dec. 31, 2006, 60.7 million treasury shares were held bysubsidiaries of the Company.

**Share Purchase Rights Plan—****In** December 1997,the Company adopted a Share Purchase Rights Plan that replaced a similaragreement. The plan provides for a dividend of one right on each outstandingshare of the Company’s common stock. Each right will entitle stockholders tobuy one two-hundredth of a share of Series A Junior Participatingpreferred stock at an exercise price of $125. These rights expire Jan. 5,2008. The rights have no voting rights and are not exercisable until10 days after the occurrence of certain triggering events, upon which theholders of the rights are entitled to purchase either the common stock of anacquirer or additional common stock of the Company at a discounted price. Therights are redeemable at the option of the Company for $.005 per right. TheCompany has established a series of two million shares of Series AJunior Participating Preferred Stock in connection with the plan, none of whichhave been issued.

**NOTE 16: INCENTIVECOMPENSATION AND STOCK PLANS**

**DefinedContribution Plans—****The** Company maintains variousqualified 401(k) savings plans, which permit eligible employees to makevoluntary contributions on a pretax basis. The plans allow participants toinvest their savings in various investments including the Company’s commonstock. In 2004, the Company enhanced its primary 401(k) plan to include alarger Company contribution. This new plan was designed to replace the Company’sEmployee Stock Ownership Plan that was fully allocated at the end of 2003. In2006, the Company amended its primary 401(k) plan to make a portion of theCompany’s contributions discretionary. Amounts charged to expense for all ofthe Company’s defined contribution plans totaled $65 million in 2006, $59 millionin 2005 and $60 million in 2004.

**EmployeeStock Purchase Plan—****This plan permits eligible employees to purchase theCompany’s common stock at 85% of market price. The Company incurred charges of$.2 million in 2006, 2005 and 2004 related to the administration of thisplan. During 2006, 2005 and 2004, 598,186, 682,624 and 617,651 shares,respectively, were sold to employees under this plan. A total of16 million shares can be purchased under this plan. As of Dec. 31,2006, a total of 2.5 million shares remained available for sale. Theweighted average fair value of shares sold in 2006 was $30.64.**

**TribuneCompany Incentive Compensation Plan—****In 1997, the 1992 Long-Term IncentivePlan was replaced with the 1997 Incentive Compensation Plan, which was amendedand restated in 2004 as the Tribune Company Incentive Compensation Plan (the “IncentivePlan”). At Dec. 31, 2006, there were no options outstanding under the 1992plan. The Incentive Plan provides for the granting of awards to eligibleemployees in any one or combination of stock options, performance equityprogram awards and annual management incentive program bonuses. AtDec. 31, 2006, options outstanding under the Incentive Plan totaled35.9 million shares, of which 32.4 million shares were exercisable.At Dec. 31, 2006, a total of 33.9 million shares were available for awardunder the Incentive Plan. The stock options assumed in the Times Mirroracquisition are fully vested and exercisable. At Dec. 31, 2006, theconverted Times Mirror stock options outstanding and exercisable totaled6.2 million shares.  Beginning in2007, the Company intends to reissue shares from treasury stock for the exerciseof its outstanding stock options and the vesting of restricted stock units anddividend equivalent units.**

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**TRIBUNE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

In the first quarter of 2006, the Company adopted FAS No. 123R,“Share-Based Payment,” which superseded Accounting Principles Board (“APB”)Opinion No. 25, FAS No. 123 and related interpretations. FAS No. 123Rrequires the Company to expense stock-based compensation in its incomestatement. Under FAS No. 123R, stock-based compensation cost is measuredat the grant date based on the estimated fair value of the award. The Companyadopted FAS No. 123R in the first quarter of 2006 using the modifiedprospective application method and did not restate prior years. FAS No. 123Rrequires stock-based compensation expense to be recognized over the period fromthe date of grant to the date when the award is no longer contingent on theemployee providing additional service (the “substantive vesting period”). The IncentivePlan provides that awards generally vest upon the death, disability or retirementof an employee. As a result, stock-based grants issued to retirement eligibleemployees are required to be expensed immediately.

Prior to the adoption of FAS No. 123R, theCompany accounted for its stock-based compensation plans in accordance with APBNo. 25 and related interpretations. Under APB No. 25, no compensationexpense was recorded because the exercise price of employee stock optionsequaled the market price of the underlying stock on the date of grant. Underthe provisions of APB No. 25, the Company was not required to recognizecompensation expense for its Employee Stock Purchase Plan. See Note 1 for proforma stock-based compensation expense calculated under FAS No. 123 for2005 and 2004.

Thefollowing table summarizes the impact of the adoption of FAS 123R on theCompany’s consolidated statement of income for the year ended Dec. 31,2006 (in thousands except per share data):

| Stock-based compensation  expense:                        |   |    |    |
|-----------------------------------------------------------|--------|---------|---------|
| Options                                                   |   | $       | 8,774   |   |
| Restricted stock units(1)                                 |   | 20,117  |    |
| Employee stock purchase  plan                             |   | 2,704   |    |
| Total stock-based  compensation expense                   |   | 31,595  |    |
| Income tax benefit                                        |   | (12,322 | )       |
| Total impact on net  income from continuing operations    |   | (19,273 | )       |
| Impact on discontinued  operations, net of tax            |   | (134    | )       |
| Total impact on net  income                               |   | $       | (19,139 | ) |
| Impact on earnings per  share from continuing operations: |   |    |    |
| Basic                                                     |   | $       | .07     |   |
| Diluted                                                   |   | $       | .07     |   |

 

(1)         Expense for restrictedstock units would have been recorded under APB No. 25

Total stock-basedcompensation costs included $.2 million of costs related to discontinuedoperations and $.1 million of capitalized costs for a total of$31.9 million in 2006. A deferred tax asset of $11 million was recordedrelated to stock-based compensation costs during 2006.

As of Dec. 31,2006, the Company had not yet recognized compensation cost on the followingnon-vested awards (in thousands):

| ** **             | ** ** | **Non-vested**   | ** ** | **Remaining**               | ** ** |
|------------------------|------------|------------------|------------|-----------------------------|------------|
| ** **             | ** ** | **Compensation** | ** ** | **Recognition Period** | ** ** |
| Options                |       |             | $          | 5,478                       |       |   |   | 2.12 years |   |   |
| Restricted stock units |       |             | 23,214     |                        |       |   | 2.12 years |   |   |
| Total                  |       |             | $          | 28,692                      |       |   |   |   |   |   |

 

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**TRIBUNE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

Indetermining the fair value of compensation cost, the Company values restrictedstock unit awards at the quoted closing market price on the date of grant. Thefair value of stock option awards is determined using the Black-Scholesoption-pricing model, which incorporated the assumptions in the following tablefor general and replacement awards granted during 2006, 2005 and 2004. Therisk-free rate is based on the U.S. Treasury yield curve in effect at the timeof grant. Expected volatility is based on actual historical volatility.Expected life is based on historical experience and consideration of changes inoption terms.

| ** **                       | ** ** | **2006**            | ** ** | **2005**                | ** ** | **2004**            | ** ** |
|----------------------------------|------------|---------------------|------------|-------------------------|------------|---------------------|------------|
| ** **                       | ** ** | **General  Awards** | ** ** | **Replacement  Awards** | ** ** | **General  Awards** | ** ** | **Replacement  Awards** | ** ** | **General  Awards** | ** ** | **Replacement  Awards** | ** ** |
| Risk-free interest  rate         |       |                | 4.6        | %                       |       |                | *          |   |   |   | 3.7 | % |   |   | 3.3 | % |   |   | 3.2 | % |   |   | 1.7 | % |   |
| Expected dividend yield          |       |                | 2.5        | %                       |       |                | *          |   |   |   | 1.8 | % |   |   | 1.8 | % |   |   | 1.0 | % |   |   | 1.0 | % |   |
| Expected stock price  volatility |       |                | 22.0       | %                       |       |                | *          |   |   |   | 28.1 | % |   |   | 22.8 | % |   |   | 31.1 | % |   |   | 25.4 | % |   |
| Expected life (in years)         |       |                | 4          |                    |       |                | *          |   |   |   | 5 |   |   |   | 3 |   |   |   | 5 |   |   |   | 2 |   |   |
| Weighted average fair value      |       |                | $          | 5.96                    |       |                |       | * |   |   |   | $ | 10.49 |   |   |   | $ | 6.96 |   |   |   | $ | 15.45 |   |   |   | $ | 7.46 |   |   |
|                                  |            |                     |            |                         |            |                     |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

*No replacement awards were granted in 2006

Under the Incentive Plan, the exercise price of astock option award may not be less than the market price of the Company’scommon stock at the time the stock option award is granted. Stock option awardsare exercisable not less than six months or more than 10 years after the datethe stock option award is granted. General stock option awards granted after2003 have an 8-year term. General stock option awards granted under thePlan prior to 2006 vest in annual 25% increments beginning one year from thedate of the grant. General stock option awards granted under the Plan in 2006vest in annual 33% increments beginning one year from the date of the grant.

Under certain circumstances, replacement options aregranted when a participant pays the exercise price of a stock option andrelated tax withholding obligations with previously acquired shares of commonstock. The number of replacement options granted is equal to the number ofshares used to pay the exercise price and related tax withholding obligations.The exercise price of a replacement option is equal to the market price of theunderlying stock on the date of grant, and the term is equal to the remainingterm of the original option. Replacement options vest one year from the date ofgrant. Beginning in 2004, general stock option awards do not have a replacementstock option award feature.

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**TRIBUNE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

Asummary of activity and weighted average exercise prices and fair valuesrelated to general stock option awards follows (shares in thousands):

| ** **                      | ** ** | **General Options(1)** | ** ** |
|---------------------------------|------------|-----------------------------|------------|
| ** **                      | ** ** | **2006**                    | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                      | ** ** | **Shares**                  | ** ** | **Weighted  Avg.  Exercise  Price** | ** ** | **Weighted  Avg. Fair  Value** | ** ** | **Shares** | ** ** | **Weighted  Avg.  Exercise  Price** | ** ** | **Weighted  Avg. Fair  Value** | ** ** | **Shares** | ** ** | **Weighted  Avg.  Exercise  Price** | ** ** | **Weighted  Avg. Fair  Value** | ** ** |
| Outstanding,  beginning of year |       |                        | 34,489     |   |   |   | $ | 38.35 |   |   |   | $ | 15.03 |   |   |   | 32,991 |   |   |   | $ | 37.92 |   |   |   | $ | 15.59 |   |   |   | 34,117 |   |   |   | $ | 35.76 |   |   |   | $ | 15.50 |   |   |
| Granted                         |       |                        | 1,938      |   |   |   | 31.16 |   |   |   | 5.96 |   |   |   | 3,780 |   |   |   | 40.30 |   |   |   | 10.64 |   |   |   | 4,102 |   |   |   | 51.95 |   |   |   | 15.44 |   |   |
| Exercised                       |       |                        | (1,101     | ) |   |   | 21.24 |   |   |   | 20.25 |   |   |   | (993 | ) |   |   | 23.96 |   |   |   | 18.40 |   |   |   | (4,667 | ) |   |   | 33.33 |   |   |   | 15.00 |   |   |
| Canceled/forfeited              |       |                        | (1,884     | ) |   |   | 42.13 |   |   |   | 13.57 |   |   |   | (1,289 | ) |   |   | 43.57 |   |   |   | 13.68 |   |   |   | (561 | ) |   |   | 43.81 |   |   |   | 14.05 |   |   |
| Outstanding, end  of year       |       |                        | 33,442     |   |   |   | 38.30 |   |   |   | 14.38 |   |   |   | 34,489 |   |   |   | 38.35 |   |   |   | 15.03 |   |   |   | 32,991 |   |   |   | 37.92 |   |   |   | 15.59 |   |   |
| Exercisable, end  of year(2)    |       |                        | 31,469     |   |   |   | $ | 38.75 |   |   |   | $ | 14.93 |   |   |   | 32,993 |   |   |   | $ | 38.28 |   |   |   | $ | 15.08 |   |   |   | 20,610 |   |   |   | $ | 33.13 |   |   |   | $ | 16.35 |   |   |

----

(1)       Includesoptions assumed in the Times Mirror acquisition.

(2)       In2005, the Company accelerated the vesting of approximately nine million optionsgranted in 2003, 2004 and 2005 (see Note 1).

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**TRIBUNE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

A summary of activity andweighted average exercise prices and fair values related to replacement optionsfollows (shares in thousands):

| ** **                       | ** ** | **Replacement Options** | ** ** |
|----------------------------------|------------|------------------------------|------------|
| ** **                       | ** ** | **2006**                     | ** ** | **2005** | ** ** | **2004** | ** ** |
| ** **                       | ** ** | **Shares**                   | ** ** | **Weighted  Avg.  Exercise  Price** | ** ** | **Weighted  Avg. Fair  Value** | ** ** | **Shares** | ** ** | **Weighted  Avg.  Exercise  Price** | ** ** | **Weighted  Avg. Fair  Value** | ** ** | **Shares** | ** ** | **Weighted  Avg.  Exercise  Price** | ** ** | **Weighted  Avg.Fair  Value** | ** ** |
| Outstanding, beginning of   year |       |                         | 9,520      |   |   |   | $ | 47.79 |   |   |   | $ | 8.06 |   |   |   | 10,845 |   |   |   | $ | 47.79 |   |   |   | $ | 8.11 |   |   |   | 10,420 |   |   |   | $ | 46.08 |   |   |   | $ | 8.27 |   |   |
| Granted                          |       |                         | —     |   |   |   | — |   |   |   | — |   |   |   | 13 |   |   |   | 41.83 |   |   |   | 6.96 |   |   |   | 2,428 |   |   |   | 51.16 |   |   |   | 7.46 |   |   |
| Exercised                        |       |                         | —     |   |   |   | — |   |   |   | — |   |   |   | (20 | ) |   |   | 42.20 |   |   |   | 8.43 |   |   |   | (1,274 | ) |   |   | 41.48 |   |   |   | 8.16 |   |   |
| Canceled/forfeited               |       |                         | (2,335     | ) |   |   | 46.83 |   |   |   | 8.13 |   |   |   | (1,318 | ) |   |   | 47.93 |   |   |   | 8.46 |   |   |   | (729 | ) |   |   | 46.48 |   |   |   | 8.14 |   |   |
| Outstanding, end of year         |       |                         | 7,185      |   |   |   | 48.10 |   |   |   | 8.04 |   |   |   | 9,520 |   |   |   | 47.79 |   |   |   | 8.06 |   |   |   | 10,845 |   |   |   | 47.79 |   |   |   | 8.11 |   |   |
| Exercisable, end  of year        |       |                         | 7,185      |   |   |   | $ | 48.10 |   |   |   | $ | 8.04 |   |   |   | 9,507 |   |   |   | $ | 47.80 |   |   |   | $ | 8.06 |   |   |   | 8,589 |   |   |   | $ | 46.92 |   |   |   | $ | 8.29 |   |   |

 

The weighted average remaining contractual term ofgeneral and replacement stock option awards was approximately 4.1 years for alloutstanding awards and approximately 4.0 years for exercisable awards as of Dec. 31,2006.

The total intrinsic value (the excess of the marketprice over the exercise price) was approximately****$49** **millionfor general and replacement stock option awards outstanding and exercisable asof Dec. 31, 2006. The total intrinsic value for stock options exercised in2006 was approximately $11 million. In addition, the Company realizedapproximately $4 million of tax benefits and received approximately$22 million from the exercise of stock options during 2006.

The following tablesummarizes information about general options outstanding and general optionsexercisable at Dec. 31, 2006 (shares in thousands):

| ** **                              | ** ** | **General Options(1)**  | ** ** |
|-----------------------------------------|------------|------------------------------|------------|
| ** **                              | ** ** | **Options Outstanding** | ** ** | **Options Exercisable** | ** ** |
| **Range of  Exercise Prices** | ** ** | **Number  Outstanding**      | ** ** | **Weighted Avg.  Remaining  Life** | ** ** | **Weighted Avg.  Exercise Price** | ** ** | **Number  Exercisable** | ** ** | **Weighted  Avg.  Exercise  Price** | ** ** |
| $12.32-$24.35                           |       |                         | 5,968      |   |   |   | 3.9 |   |   |   | $ | 22.60 |   |   |   | 5,968 |   |   |   | $ | 22.60 |   |   |
| $24.36-$39.93                           |       |                         | 6,105      |   |   |   | 4.5 |   |   |   | $ | 34.20 |   |   |   | 4,143 |   |   |   | $ | 35.49 |   |   |
| $39.94-$40.50                           |       |                         | 8,420      |   |   |   | 4.4 |   |   |   | $ | 40.36 |   |   |   | 8,420 |   |   |   | $ | 40.36 |   |   |
| $40.51-$52.50                           |       |                         | 12,949     |   |   |   | 5.6 |   |   |   | $ | 46.13 |   |   |   | 12,938 |   |   |   | $ | 46.13 |   |   |
| Totals                                  |       |                         | 33,442     |   |   |   | 4.8 |   |   |   | $38.30 |   |   |   | 31,469 |   |   |   | $ | 38.75 |   |   |

----

(1)             Includes options assumed in the Times Mirroracquisition.

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**TRIBUNE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

Thefollowing table summarizes information about replacement options outstandingand replacement options exercisable at Dec. 31, 2006 (shares inthousands):

| ** **                              | ** ** | **Replacement Options** | ** ** |
|-----------------------------------------|------------|------------------------------|------------|
| ** **                              | ** ** | **Options Outstanding** | ** ** | **Options Exercisable** | ** ** |
| **Range of  Exercise Prices** | ** ** | **Number  Outstanding**      | ** ** | **Weighted Avg.  Remaining Life** | ** ** | **Weighted Avg.  Exercise Price** | ** ** | **Number  Exercisable** | ** ** | **Weighted  Avg.  Exercise  Price** | ** ** |
| $30.44-$42.61                           |       |                         | 497        |   |   |   | 1.7 |   |   |   | $ | 41.34 |   |   |   | 497 |   |   |   | $ | 41.34 |   |   |
| $42.62-$48.70                           |       |                         | 3,149      |   |   |   | 2.0 |   |   |   | $ | 45.84 |   |   |   | 3,149 |   |   |   | $ | 45.84 |   |   |
| $48.71-$60.88                           |       |                         | 3,539      |   |   |   | 3.1 |   |   |   | $ | 51.06 |   |   |   | 3,539 |   |   |   | $ | 51.06 |   |   |
| Totals                                  |       |                         | 7,185      |   |   |   | 2.5 |   |   |   | $ | 48.10 |   |   |   | 7,185 |   |   |   | $ | 48.10 |   |   |

 

The Incentive Plan alsoallows the Company to grant restricted stock units. The Company did not grantrestricted stock units prior to 2006. In 2006, the Company granted restrictedstock units which vest either in annual 33% increments beginning one year fromthe date of the grant, or 100% three years from the date of grant. Eachrestricted stock unit represents the Company’s obligation to deliver to theholder one share of common stock upon vesting.

Holders of restrictedstock units will also receive dividend equivalent units until the restricted stockunits vest. The number of dividend equivalent units granted for each restrictedstock unit is calculated based on the value of the dividends per share paid onTribune’s common stock and the closing price of Tribune stock on the dividendpayment date. The dividend equivalent units vest with the underlying restrictedstock units. In accordance with the provisions of FAS No. 123R, theCompany does not record compensation expense for the dividend equivalent unitsgranted. The dilutive effect of the dividend equivalent units is included inthe Company’s calculation of diluted earnings per share.

Asummary of restricted stock unit and dividend equivalent unit activity andweighted average fair values follows (shares in thousands):

| ** **                                      | ** ** | **2006**   | ** ** | **2005**                                   | ** ** | **2004**   | ** ** |
|-------------------------------------------------|------------|------------|------------|--------------------------------------------|------------|------------|------------|
| ** **                                      | ** ** | **Shares** | ** ** | **Weighted  Avg. Fair  Value *** | ** ** | **Shares** | ** ** | **Weighted  Avg. Fair  Value *** | ** ** | **Shares** | ** ** | **Weighted  Avg. Fair  Value *** | ** ** |
| Outstanding and  nonvested,   beginning of year |       |       | —     |                                       |       |       | —     |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |
| Restricted stock  units granted                 |       |       | 1,523      |                                       |       |       | $          | 31.18 |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |
| Dividend  equivalent units granted              |       |       | 34         |                                       |       |       | —     |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |
| Forfeited                                       |       |       | (33        | )                                          |       |       | $          | 31.16 |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |
| Outstanding and  nonvested, end of year         |       |       | 1,524      |                                       |       |       | $          | 31.18 |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |

----

*Represents weightedaverage fair value of restricted stock units at date of grant or assumption.

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**TRIBUNE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

**NOTE 17:**COMPREHENSIVEINCOME

Comprehensive income reflects all changes in the netassets of the Company during the period from transactions and other events andcircumstances, except those resulting from stock issuances, stock repurchasesand dividends. The Company’s comprehensive income includes net income, thechange in minimum pension liabilities, unrealized gains and losses onmarketable securities classified as available-for-sale, and foreign currencytranslation adjustments. Beginning in the Company’s 2007 fiscal year, and as aresult of the Company’s adoption of FAS No. 158 as of Dec. 31, 2006,other comprehensive income (loss) will no longer include the change in minimumpension liabilities, but will include changes in unrecognized benefit costgains and losses. The Company’s comprehensive income was as follows (inthousands):

| ** **                                                                                                                      | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Net income                                                                                                                      |       | $        | 593,995    |     | $          | 534,689  |       | $ | 555,536 |   |
| Change in minimum  pension liabilities, net of taxes of ($12,139), $13,168 and $1,116,  respectively                            |       | 18,987   |       | (20,597  | )          | (1,700   | )          |
| Unrealized gain (loss) on marketable securities:                                                                                |       |     |       |     |       |     |       |
| Unrealized holding gain (loss)  arising during the period, net of taxes of $1,234, ($2,098), and $612,  respectively            |       | 1,929    |       | (3,282   | )          | 796      |       |
| Adjustment for (gain)  loss on investment sales included in net income, net of taxes of ($7,241),  $116 and ($64), respectively |       | (11,325  | )          | (181     | )          | 100      |       |
| Unrealized gain (loss)  on marketable securities, net of taxes                                                                  |       | (9,396   | )          | (3,463   | )          | 896      |       |
| Change in foreign  currency translation adjustments, net of taxes of   $117, ($45) and $75, respectively                        |       | 183      |       | (70      | )          | 118      |       |
| Other comprehensive  income (loss)                                                                                              |       | 9,774    |       | (24,130  | )          | (686     | )          |
| Comprehensive income                                                                                                            |       | $        | 603,769    |     | $          | 510,559  |       | $ | 554,850 |   |

 

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**TRIBUNE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

 

Accumulated other comprehensive income (loss) is aseparate component of shareholders’ equity on the Company’s balance sheet. Areconciliation of the components of accumulated other comprehensive income(loss) is as follows (in thousands):

| ** **                                                     | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|----------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Minimum pension  liabilities, net of tax:                      |       |     |       |     |       |     |       |
| Balance, beginning of year                                     |       | $        | (27,901    | )        | $          | (7,304   | )          | $ | (5,604 | ) |
| Current year change prior to adoption of FAS  No. 158     |       | 18,987   |       | (20,597  | )          | (1,700   | )          |
| Change due to adoption of FAS No. 158                     |       | 8,914    |       | —   |       | —   |       |
| Balance, end of year                                           |       | —   |       | (27,901  | )          | (7,304   | )          |
| Unrecognized benefit  cost gains and (losses), net of tax:     |       |     |       |     |       |     |       |
| Balance, beginning of year                                     |       | —   |       | —   |       | —   |       |
| Change due to adoption of FAS No. 158                     |       | (374,773 | )          | —   |       | —   |       |
| Balance, end of year                                           |       | (374,773 | )          | —   |       | —   |       |
| Unrealized gain (loss),  net of tax, on marketable securities: |       |     |       |     |       |     |       |
| Balance, beginning of year                                     |       | 16,447   |       | 19,910   |       | 19,014   |       |
| Current year change                                            |       | (9,396   | )          | (3,463   | )          | 896      |       |
| Balance, end of year                                           |       | 7,051    |       | 16,447   |       | 19,910   |       |
| Foreign currency  translation adjustments, net of tax:         |       |     |       |     |       |     |       |
| Balance, beginning of year                                     |       | 154      |       | 224      |       | 106      |       |
| Current year change                                            |       | 183      |       | (70      | )          | 118      |       |
| Balance, end of year                                           |       | 337      |       | 154      |       | 224      |       |
| Accumulated other  comprehensive income (loss)                 |       | $        | (367,385   | )        | $          | (11,300  | )          | $ | 12,830 |   |

 

The adoption of FAS No. 158resulted in a net increase in accumulated other comprehensive loss, and acorresponding net decrease in shareholders’ equity, of $366 million at Dec. 31,2006 (see Notes 1 and 14 for additional information on the impact of theadoption of FAS No. 158).

**NOTE 18: BUSINESSSEGMENTS**

Tribune Company is a mediaand entertainment company that conducts its operations through two businesssegments: publishing and broadcasting and entertainment. In addition, certainadministrative activities are reported and included under corporate. Thesesegments reflect the manner in which the Company sells its products to themarketplace and the manner in which it manages its operations and makesbusiness decisions.

**Publishing—****Tribune Publishing operates 11market-leading daily newspapers and related businesses, distributesentertainment listings and syndicated content, operates a 24-hour cable newschannel, and manages the websites of Tribune’s daily newspapers and televisionstations, along with other branded sites targeting specific communities ofinterest. The daily newspapers are the *Los Angeles Times*;*Chicago Tribune*; *Newsday*;serving Nassau and Suffolk counties on Long Island, New York and theborough of Queens, New York; *South Florida Sun-Sentinel*;*Orlando Sentinel*; *The Sun*;*Hartford Courant*; *The MorningCall*,**serving Pennsylvania’s LehighValley; *Daily Press*,**servingthe Virginia Peninsula; and *The Advocate*and *Greenwich Time*, each servingConnecticut’s Fairfield County.**

120

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**TRIBUNE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

**Broadcastingand Entertainment—****The** Company’s broadcastingoperations currently consist of The CW Network affiliates in New York, LosAngeles, Chicago, Dallas, Washington D.C., Houston, Miami, Denver,St. Louis, Portland, Indianapolis, San Diego, Hartford, and New Orleans;FOX television affiliates in Seattle, Sacramento, Indianapolis, Hartford, GrandRapids and Harrisburg; MyNetwork affiliates in Philadelphia and Seattle; an ABCtelevision affiliate in New Orleans; and one radio station in Chicago. TheCompany’s affiliates of the CW Network and MyNetworkTV were formerly affiliatesof the WB Television Network. On Jan. 24, 2006, the Company announced thatit had reached a 10-year agreement to affiliate 16 of its former WBNetwork affiliated stations with a new broadcast network, The CW Network, whichlaunched in the fall of 2006. The WB Network shut down at that time. In thesecond quarter of 2006, the Company announced that its other three former WBNetwork affiliates (Atlanta, Philadelphia and Seattle) would become affiliatesof the new broadcast network, MyNetworkTV, which was launched in September 2006by FOX Television Stations Network Inc. and Twentieth Century Television. TheCompany subsequently sold its Atlanta affiliate in August 2006 and its CWNetwork affiliates in Boston and Albany in December 2006 (see Note 3 foradditional information on the sales of these stations). Entertainmentoperations include Tribune Entertainment, which distributes its own programmingtogether with programming licensed from third parties, and the Chicago Cubsbaseball team.

No single customerprovides more than 10% of the Company’s revenue. In determining operatingprofit for each segment, none of the following items have been added ordeducted: interest and dividend income, interest expense, equity income andloss, non-operating items or income taxes. Assets represent those tangible andintangible assets used in the operations of each segment. Corporate assetsinclude cash and the Company’s investment portfolio.

121

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**TRIBUNE COMPANY AND SUBSIDIARIESBUSINESS SEGMENTS(In thousands of dollars)**

| ** **                              | ** ** | **2006**   | ** ** | **2005**   | ** ** | **2004**   | ** ** |
|-----------------------------------------|------------|------------|------------|------------|------------|------------|------------|
| **Operating Revenues**                  |       |       |       |       |       |       |       |
| Publishing                              |       | $          | 4,092,562  |       | $          | 4,096,850  |       | $ | 4,129,850 |   |
| Broadcasting and entertainment          |       | 1,425,146  |       | 1,414,433  |       | 1,501,581  |       |
| Total operating revenues                |       | $          | 5,517,708  |       | $          | 5,511,283  |       | $ | 5,631,431 |   |
| **Operating Profit (Loss)(1)**          | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Publishing                              |       | $          | 749,189    |       | $          | 759,713    |       | $ | 726,207 |   |
| Broadcasting and entertainment          |       | 391,533    |       | 416,891    |       | 513,289    |       |
| Corporate expenses                      |       | (55,712    | )          | (49,413    | )          | (52,218    | )          |
| Total operating profit                  |       | $          | 1,085,010  |       | $          | 1,127,191  |       | $ | 1,187,278 |   |
| **Depreciation**                        |       |       |       |       |       |       |       |
| Publishing(2)                           |       | $          | 166,005    |       | $          | 183,695    |       | $ | 171,599 |   |
| Broadcasting and entertainment          |       | 39,815     |       | 36,828     |       | 38,327     |       |
| Corporate                               |       | 1,380      |       | 1,630      |       | 1,635      |       |
| Total depreciation                      |       | $          | 207,200    |       | $          | 222,153    |       | $ | 211,561 |   |
| **Amortization of Intangible  Assets**  |       |       |       |       |       |       |       |
| Publishing                              |       | $          | 8,258      |       | $          | 7,231      |       | $ | 7,430 |   |
| Broadcasting and entertainment          |       | 11,555     |       | 11,657     |       | 11,126     |       |
| Total amortization of intangible assets |       | $          | 19,813     |       | $          | 18,888     |       | $ | 18,556 |   |
| **Capital Expenditures**                |       |       |       |       |       |       |       |
| Publishing                              |       | $          | 173,459    |       | $          | 163,317    |       | $ | 171,435 |   |
| Broadcasting and entertainment          |       | 42,227     |       | 36,851     |       | 35,266     |       |
| Corporate                               |       | 6,221      |       | 5,777      |       | 10,647     |       |
| Total capital expenditures              |       | $          | 221,907    |       | $          | 205,945    |       | $ | 217,348 |   |
| **Assets**                              |       |       |       |       |       |       |       |
| Publishing                              |       | $          | 8,512,512  |       | $          | 8,637,176  |       | $ | 8,218,516 |   |
| Broadcasting and entertainment          |       | 3,987,449  |       | 4,425,135  |       | 4,444,988  |       |
| Corporate                               |       | 900,811    |       | 1,483,931  |       | 1,491,928  |       |
| Total assets                            |       | $          | 13,400,772 |       | $          | 14,546,242 |       | $ | 14,155,432 |   |

----

(1)          Operating profit for each segment excludesinterest and dividend income, interest expense, equity income and loss, non-operatingitems and income taxes.

(2)          Publishing depreciation for 2005 includes$16 million of accelerated depreciation expense related to the shut downof the *Los Angeles Times’*San Fernando Valley printing facility (see Note 2).

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**TRIBUNE COMPANY AND SUBSIDIARIES2006 QUARTERLY RESULTS (Unaudited)(In thousands of dollars, except per share data)**

| ** **                                                                      | ** ** | **Quarters** | ** **  | **2006**   | ** ** |
|---------------------------------------------------------------------------------|------------|--------------|-------------|------------|------------|
| ** **                                                                      | ** ** | **First**    | ** **  | **Second** | ** ** | **Third** | ** ** | **Fourth** | ** ** | **Total** | ** ** |
| **Operating Revenues**                                                          |       |         |        |       |       |   |   |   |   |   |   |
| Publishing                                                                      |       | $            | 996,529     |       | $          | 1,028,303 |   | $ | 956,480 |   | $ | 1,111,250 |   | $ | 4,092,562 |   |
| Broadcasting and entertainment                                                  |       | 284,102      |        | 392,886    |       | 392,555 |   | 355,603 |   | 1,425,146 |   |
| Total operating revenues                                                        |       | $            | 1,280,631   |       | $          | 1,421,189 |   | $ | 1,349,035 |   | $ | 1,466,853 |   | $ | 5,517,708 |   |
| **Operating Profit**                                                            |       |         |        |       |       |   |   |   |   |   |   |
| Publishing                                                                      |       | $            | 174,222     |       | $          | 208,657 |   | $ | 141,232 |   | $ | 225,078 |   | $ | 749,189 |   |
| Broadcasting and entertainment                                                  |       | 67,451       |        | 110,396    |       | 107,800 |   | 105,886 |   | 391,533 |   |
| Corporate expenses                                                              |       | (20,363      | )           | (14,020    | )          | (13,718 | ) | (7,611 | ) | (55,712 | ) |
| Total operating profit                                                          |       | 221,310      |        | 305,033    |       | 235,314 |   | 323,353 |   | 1,085,010 |   |
| Net income on equity investments                                                |       | 6,548        |        | 26,017     |       | 18,743 |   | 29,465 |   | 80,773 |   |
| Interest and dividend income                                                    |       | 2,180        |        | 2,472      |       | 4,678 |   | 4,815 |   | 14,145 |   |
| Interest expense                                                                |       | (48,772      | )           | (47,279    | )          | (84,324 | ) | (93,527 | ) | (273,902 | ) |
| Gain (loss) on change in fair values of derivatives  and related investments(1) |       | (10,317      | )           | (6,121     | )          | (17,746 | ) | 45,272 |   | 11,088 |   |
| Gain on TMCT transactions(1)                                                    |       | —       |        | —     |       | 59,596 |   | — |   | 59,596 |   |
| Gain (loss) on sales of investments, net(1)                                     |       | 3,466        |        | (161       | )          | 17,507 |   | 15,920 |   | 36,732 |   |
| Other non-operating gain (loss), net(1)                                         |       | (6,846       | )           | (442       | )          | 4,168 |   | (1,327 | ) | (4,447 | ) |
| **Income from Continuing Operations Before Income  Taxes**                      |       | 167,569      |        | 279,519    |       | 237,936 |   | 323,971 |   | 1,008,995 |   |
| Income taxes(1)                                                                 |       | (65,718      | )           | (116,385   | )          | (74,154 | ) | (91,885 | ) | (348,142 | ) |
| **Income from Continuing Operations**                                           |       | 101,851      |        | 163,134    |       | 163,782 |   | 232,086 |   | 660,853 |   |
| **Income (Loss) from Discontinued Operations, net  of tax**                     |       | 913          |        | (75,300    | )          | 558 |   | 6,971 |   | (66,858 | ) |
| **Net Income**                                                                  |       | 102,764      |        | 87,834     |       | 164,340 |   | 239,057 |   | 593,995 |   |
| Preferred dividends                                                             |       | (2,103       | )           | (2,103     | )          | (2,103 | ) | — |   | (6,309 | ) |
| **Net Income Attributable to Common Shares**                                    |       | $            | 100,661     |       | $          | 85,731 |   | $ | 162,237 |   | $ | 239,057 |   | $ | 587,686 |   |
| **Earnings Per Share(2)**                                                       | ** ** | ** **   | ** **  | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Basic:                                                                          |       |         |        |       |       |   |   |   |   |   |   |
| Continuing Operations                                                           |       | $            | .33         |       | $          | .53 |   | $ | .65 |   | $ | .97 |   | $ | 2.40 |   |
| Discontinued Operations                                                         |       | —       |        | (.25       | )          | — |   | .03 |   | (.25 | ) |
| Net income                                                                      |       | $            | .33         |       | $          | .28 |   | $ | .66 |   | $ | 1.00 |   | $ | 2.16 |   |
| Diluted:                                                                        |       |         |        |       |       |   |   |   |   |   |   |
| Continuing Operations                                                           |       | $            | .33         |       | $          | .53 |   | $ | .65 |   | $ | .96 |   | $ | 2.39 |   |
| Discontinued Operations                                                         |       | —       |        | (.25       | )          | — |   | .03 |   | (.24 | ) |
| Net income                                                                      |       | $            | .33         |       | $          | .28 |   | $ | .65 |   | $ | .99 |   | $ | 2.14 |   |
| **Common Dividends Per Share**                                                  |       | $            | .18         |       | $          | .18 |   | $ | .18 |   | $ | .18 |   | $ | .72 |   |
| **Common  Stock Price (High-Low)**                                              |       | $            | 27.79-31.84 |       | $          | 27.09-32.94 |   | $ | 28.66-34.28 |   | $ | 30.74-33.99 |   |   |   |

----

**Notes toQuarterly Results:**

(1)        See Note 2 to the consolidated financialstatements for information pertaining to non-operating items recorded in 2006and 2005.

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**TRIBUNE COMPANY AND SUBSIDIARIES2005 QUARTERLY RESULTS (Unaudited)(In thousands of dollars, except per share data)**

| ** **                                                                      | ** ** | **Quarters** | ** **  | **2005**   | ** ** |
|---------------------------------------------------------------------------------|------------|--------------|-------------|------------|------------|
| ** **                                                                      | ** ** | **First**    | ** **  | **Second** | ** ** | **Third** | ** ** | **Fourth** | ** ** | **Total** | ** ** |
| **Operating Revenues**                                                          |       |         |        |       |       |   |   |   |   |   |   |
| Publishing                                                                      |       | $            | 1,005,512   |       | $          | 1,038,624 |   | $ | 980,354 |   | $ | 1,072,360 |   | $ | 4,096,850 |   |
| Broadcasting and entertainment                                                  |       | 289,593      |        | 401,855    |       | 403,349 |   | 319,636 |   | 1,414,433 |   |
| Total operating revenues                                                        |       | $            | 1,295,105   |       | $          | 1,440,479 |   | $ | 1,383,703 |   | $ | 1,391,996 |   | $ | 5,511,283 |   |
| **Operating Profit**                                                            |       |         |        |       |       |   |   |   |   |   |   |
| Publishing                                                                      |       | $            | 198,539     |       | $          | 217,651 |   | $ | 169,730 |   | $ | 173,793 |   | $ | 759,713 |   |
| Broadcasting and entertainment                                                  |       | 62,353       |        | 128,370    |       | 126,866 |   | 99,302 |   | 416,891 |   |
| Corporate expenses                                                              |       | (13,448      | )           | (13,472    | )          | (13,108 | ) | (9,385 | ) | (49,413 | ) |
| Total operating profit                                                          |       | 247,444      |        | 332,549    |       | 283,488 |   | 263,710 |   | 1,127,191 |   |
| Net income on equity investments                                                |       | 471          |        | 11,897     |       | 8,051 |   | 20,790 |   | 41,209 |   |
| Interest and dividend income                                                    |       | 1,082        |        | 1,165      |       | 2,888 |   | 2,404 |   | 7,539 |   |
| Interest expense                                                                |       | (35,091      | )           | (35,367    | )          | (38,617 | ) | (46,116 | ) | (155,191 | ) |
| Gain (loss) on change in fair values of derivatives  and related investments(1) |       | (2,253       | )           | 61,803     |       | 27,120 |   | (24,486 | ) | 62,184 |   |
| Gain on sales of investments, net(1)                                            |       | 1,109        |        | 1,299      |       | 487 |   | 3,885 |   | 6,780 |   |
| Other non-operating gain (loss), net(1)                                         |       | (2,700       | )           | 3,794      |       | (432 | ) | 235 |   | 897 |   |
| **Income from Continuing Operations Before Income  Taxes**                      |       | 210,062      |        | 377,140    |       | 282,985 |   | 220,422 |   | 1,090,609 |   |
| Income taxes(1)                                                                 |       | (70,031      | )           | (147,254   | )          | (261,298 | ) | (89,237 | ) | (567,820 | ) |
| **Income from Continuing Operations**                                           |       | 140,031      |        | 229,886    |       | 21,687 |   | 131,185 |   | 522,789 |   |
| **Income from Discontinued Operations, net of tax**                             |       | 2,814        |        | 3,506      |       | 2,324 |   | 3,256 |   | 11,900 |   |
| **Net Income**                                                                  |       | 142,845      |        | 233,392    |       | 24,011 |   | 134,441 |   | 534,689 |   |
| Preferred dividends                                                             |       | (2,090       | )           | (2,090     | )          | (2,090 | ) | (2,094 | ) | (8,364 | ) |
| **Net Income Attributable to Common Shares**                                    |       | $            | 140,755     |       | $          | 231,302 |   | $ | 21,921 |   | $ | 132,347 |   | $ | 526,325 |   |
| **Earnings Per Share(2)**                                                       | ** ** | ** **   | ** **  | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Basic:                                                                          |       |         |        |       |       |   |   |   |   |   |   |
| Continuing Operations                                                           |       | $            | .43         |       | $          | .72 |   | $ | .06 |   | $ | .42 |   | $ | 1.64 |   |
| Discontinued Operations                                                         |       | .01          |        | .01        |       | .01 |   | .01 |   | .04 |   |
| Net income                                                                      |       | $            | .44         |       | $          | .73 |   | $ | .07 |   | $ | .43 |   | $ | 1.68 |   |
| Diluted:                                                                        |       |         |        |       |       |   |   |   |   |   |   |
| Continuing Operations                                                           |       | $            | .43         |       | $          | .72 |   | $ | .06 |   | $ | .42 |   | $ | 1.63 |   |
| Discontinued Operations                                                         |       | .01          |        | .01        |       | .01 |   | .01 |   | .04 |   |
| Net income                                                                      |       | $            | .44         |       | $          | .73 |   | $ | .07 |   | $ | .43 |   | $ | 1.67 |   |
| **Common Dividends Per Share**                                                  |       | $            | .18         |       | $          | .18 |   | $ | .18 |   | $ | .18 |   | $ | .72 |   |
| **Common  Stock Price (High-Low)**                                              |       | $            | 42.37-38.59 |       | $          | 40.14-35.02 |   | $ | 39.56-34.53 |   | $ | 36.15-30.05 |   |   |   |

----

**Notes to Quarterly Results:**

(2)             The total of the 2006 and 2005 quarters may not equalthe respective full year amounts for earnings per share due to differences inthe weighted average number of shares outstanding used in the computations forthe respective periods. Per share amounts for the respective quarters and yearshave been computed using the average number of common shares outstanding foreach period. Diluted earnings per share is adjusted for the dilutive effect ofthe Company’s common stock equivalents. The calculation may change each quarterdepending on whether the common stock equivalents are antidilutive for thatperiod.

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125

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**TRIBUNE COMPANY AND SUBSIDIARIESFIVE YEAR FINANCIAL SUMMARY(In thousands of dollars, except per share data)**
|                                                                                                                     | ** ** | **2006**  | ** ** | **2005**  | ** ** |
|---------------------------------------------------------------------------------------------------------------------|------------|-----------|------------|-----------|------------|
| **Operating Revenues**                                                                                              |       |      |       |      |       |
| Publishing                                                                                                          |       | $         | 4,092,562  |      | $          | 4,096,850 |   |
| Broadcasting and entertainment                                                                                      |       | 1,425,146 |       | 1,414,433 |       |
| Total operating revenues                                                                                            |       | $         | 5,517,708  |      | $          | 5,511,283 |   |
| **Operating Profit**                                                                                                |       |      |       |      |       |
| Publishing                                                                                                          |       | $         | 749,189    |      | $          | 759,713 |   |
| Broadcasting and entertainment                                                                                      |       | 391,533   |       | 416,891   |       |
| Corporate expenses                                                                                                  |       | (55,712   | )          | (49,413   | )          |
| Restructuring charges(1)                                                                                            |       | —    |       | —    |       |
| Total operating profit                                                                                              |       | 1,085,010 |       | 1,127,191 |       |
| Net income (loss) on equity investments                                                                             |       | 80,773    |       | 41,209    |       |
| Interest and dividend income                                                                                        |       | 14,145    |       | 7,539     |       |
| Interest expense                                                                                                    |       | (273,902  | )          | (155,191  | )          |
| Non-operating items                                                                                                 |       | 102,969   |       | 69,861    |       |
| **Income from Continuing Operations Before Income  Taxes and Cumulative Effect of Changes in Accounting Principle** |       | 1,008,995 |       | 1,090,609 |       |
| Income taxes                                                                                                        |       | (348,142  | )          | (567,820  | )          |
| **Income from Continuing Operations Before  Cumulative Effect of Changes in Accounting Principle**                  |       | 660,853   |       | 522,789   |       |
| Income (Loss) from Discontinued Operations, net of  tax(2)                                                          |       | (66,858   | )          | 11,900    |       |
| Cumulative effect of changes in accounting principle,  net of tax(3)                                                |       | —    |       | —    |       |
| **Net Income(4)**                                                                                                   |       | $         | 593,995    |      | $          | 534,689 |   |
| **Share  Information**                                                                                              |       |      |       |      |       |
| Basic earnings per share                                                                                            |       |      |       |      |       |
| Continuing operations before cumulative effect of  changes in accounting principle                                  |       | $         | 2.40       |      | $          | 1.64 |   |
| Discontinued operations                                                                                             |       | (0.25     | )          | 0.04      |       |
| Cumulative effect of changes in accounting principle                                                                |       | —    |       | —    |       |
| Net income                                                                                                          |       | $         | 2.16       |      | $          | 1.68 |   |
| Diluted earnings per  share                                                                                         |       |      |       |      |       |
| Continuing operations before cumulative effect of  changes in accounting principle                                  |       | $         | 2.39       |      | $          | 1.63 |   |
| Discontinued operations                                                                                             |       | (0.24     | )          | 0.04      |       |
| Cumulative effect of changes in accounting principle                                                                |       | —    |       | —    |       |
| Net income                                                                                                          |       | $         | 2.14       |      | $          | 1.67 |   |
| Common dividends per share                                                                                          |       | $         | 0.72       |      | $          | 0.72 |   |
| Weighted average common shares outstanding (000’s)                                                             |       | 272,672   |       | 312,880   |       |
| **Financial Ratios**                                                                                                |       |      |       |      |       |
| Operating profit margin                                                                                             |       | 19.7      | %          | 20.5      | %          |
| Debt to capital including PHONES(5)                                                                                 |       | 44        | %          | 26        | %          |
| Debt to capital excluding PHONES(5)                                                                                 |       | 41        | %          | 23        | %          |
| **Financial Position and Other  Data**                                                                              |       |      |       |      |       |
| Total assets                                                                                                        |       | $         | 13,400,772 |      | $          | 14,546,242 |   |
| Long-term debt including PHONES                                                                                     |       | 3,576,211 |       | 2,959,262 |       |
| Long-term debt excluding PHONES                                                                                     |       | 3,003,251 |       | 2,449,561 |       |
| Shareholders’ equity                                                                                           |       | 4,319,616 |       | 6,725,551 |       |
| Capital  expenditures                                                                                               |       | 221,907   |       | 205,945   |       |

----

(1)           During the second quarter of 2001, the Companyannounced a voluntary employee retirement program. The Company implemented thisprogram as well as various other cost reduction initiatives throughout theremainder of 2001 and the first quarter of 2002. The restructuring chargesrelated to these programs decreased 2002 full year net income by $17 millionand diluted EPS by $.05.

(2)           Includes income from operations and net loss on salesof WATL-TV, Atlanta, WCWN-TV, Albany, and WLVI-TV, Boston. See Note 3 tothe consolidated financial statements for additional information pertaining todiscontinued operations.

(3)           The cumulative effect of adopting a newaccounting pronouncement for the valuation of certain intangible assetsdecreased net income by $18 million in 2004. The cumulative effect ofadopting a new accounting pronouncement for goodwill and other intangibleassets decreased net income by $166 million in 2002.

126

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**   **
|                                                                                                                      | ** ** | **2004**  | ** ** | **2003**  | ** ** | **2002**   | ** ** |
|----------------------------------------------------------------------------------------------------------------------|------------|-----------|------------|-----------|------------|------------|------------|
| **Operating  Revenues**                                                                                              |       |      |       |      |       |       |       |
| Publishing                                                                                                           |       | $         | 4,129,850  |      | $          | 4,036,920  |       | $ | 3,940,478 |   |
| Broadcasting  and entertainment                                                                                      |       | 1,501,581 |       | 1,457,496 |       | 1,344,799  |       |
| Total  operating revenues                                                                                            |       | $         | 5,631,431  |      | $          | 5,494,416  |       | $ | 5,285,277 |   |
| **Operating  Profit**                                                                                                |       |      |       |      |       |       |       |
| Publishing                                                                                                           |       | $         | 726,207    |      | $          | 885,306    |       | $ | 851,417 |   |
| Broadcasting  and entertainment                                                                                      |       | 513,289   |       | 491,733   |       | 437,008    |       |
| Corporate  expenses                                                                                                  |       | (52,218   | )          | (53,351   | )          | (45,770    | )          |
| Restructuring  charges(2)                                                                                            |       | —    |       | —    |       | (27,253    | )          |
| Total  operating profit                                                                                              |       | 1,187,278 |       | 1,323,688 |       | 1,215,402  |       |
| Net  income (loss) on equity investments                                                                             |       | 17,931    |       | 5,590     |       | (40,875    | )          |
| Interest  and dividend income                                                                                        |       | 3,053     |       | 6,048     |       | 8,818      |       |
| Interest  expense                                                                                                    |       | (153,118  | )          | (198,123  | )          | (213,309   | )          |
| Non-operating  items and minority interest expense                                                                   |       | (145,044  | )          | 241,247   |       | (63,211    | )          |
| **Income  from Continuing Operations Before Income Taxes and Cumulative Effect of  Changes in Accounting Principle** |       | 910,100   |       | 1,378,450 |       | 906,825    |       |
| Income  taxes                                                                                                        |       | (355,724  | )          | (509,214  | )          | (318,218   | )          |
|                                                                                                                 |       | 554,376   |       | 869,236   |       | 588,607    |       |
| Discontinued  Operations of sold Television Stations, net of tax                                                     |       | 18,948    |       | 22,143    |       | 19,972     |       |
| Cumulative  effect of changes in accounting principles, net of tax(3)                                                |       | (17,788   | )          | —    |       | (165,587   | )          |
| **Net  Income(4)**                                                                                                   |       | $         | 555,536    |      | $          | 891,379    |       | $ | 442,992 |   |
| **Share  Information**                                                                                               |       |      |       |      |       |       |       |
| Basic  earnings per share                                                                                            |       |      |       |      |       |       |       |
| Continuing  operations before cumulative effect of changes in accounting principle                                   |       | $         | 1.69       |      | $          | 2.71       |       | $ | 1.87 |   |
| Discontinued  operations                                                                                             |       | 0.06      |       | 0.07      |       | 0.07       |       |
| Cumulative effect of changes  in accounting principle                                                                |       | (.05      | )          | —    |       | (.55       | )          |
| Net  income                                                                                                          |       | $         | 1.70       |      | $          | 2.78       |       | $ | 1.38 |   |
| Diluted  earnings per share                                                                                          |       |      |       |      |       |       |       |
| Continuing  operations before cumulative effect of changes in accounting principle                                   |       | $         | 1.67       |      | $          | 2.54       |       | $ | 1.73 |   |
| Discontinued  operations                                                                                             |       | 0.06      |       | 0.07      |       | 0.06       |       |
| Cumulative effect of  changes in accounting principle                                                                |       | (.05      | )          | —    |       | (.50       | )          |
| Net income                                                                                                           |       | $         | 1.67       |      | $          | 2.61       |       | $ | 1.30 |   |
| Common  dividends per share                                                                                          |       | $         | 0.48       |      | $          | 0.44       |       | $ | 0.44 |   |
| Weighted average  common shares outstanding (000’s)                                                             |       | 322,420   |       | 311,295   |       | 301,932    |       |
| **Financial  Ratios**                                                                                                |       |      |       |      |       |       |       |
| Operating  profit margin                                                                                             |       | 21.1      | %          | 24.1      | %          | 23.0       | %          |
| Debt to  capital including PHONES(5)                                                                                 |       | 22        | %          | 22        | %          | 29         | %          |
| Debt to  capital excluding PHONES(5)                                                                                 |       | 18        | %          | 18        | %          | 26         | %          |
| **Financial  Position and Other Data**                                                                               |       |      |       |      |       |       |       |
| Total  assets                                                                                                        |       | $         | 14,155,432 |      | $          | 14,280,152 |       | $ | 13,974,048 |   |
| Long-term  debt excluding PHONES                                                                                     |       | 2,317,933 |       | 2,381,617 |       | 3,260,795  |       |
| Long-term  debt excluding PHONES                                                                                     |       | 1,733,053 |       | 1,846,337 |       | 2,737,355  |       |
| Shareholders’  equity                                                                                           |       | 6,836,844 |       | 7,028,124 |       | 6,119,235  |       |
| Capital  expenditures                                                                                                |       | 217,348   |       | 193,535   |       | 186,737    |       |

----

(4)           See Note 2 to the consolidated financialstatements for information pertaining to non-operating items recorded in 2006,2005 and 2004. Fiscal year 2003 included the following after-tax non-operatingitems; gain on changes in fair values of derivatives and related investments of$52 million, gain on sales of subsidiaries and investments of$90 million, loss on investment write-downs of $6 million, gainon insurance recoveries of $14 million, an other non-operating loss of$2 million and a favorable income tax settlement adjustment of$25 million, totaling a gain of $173 million, or $.52 per dilutedshare. Fiscal year 2002 included the following after-tax non-operating items;loss on changes in fair values of derivatives and related investments of$98 million, gain on sales of subsidiaries and investments of$65 million, loss on investment write-downs of $11 million,other non-operating gain of $6 million and a favorable income taxsettlement adjustment of $29 million, totaling a loss of $9 million,or $.02 per diluted share.

(5)           Capitalcomprises total debt, non-current deferred income taxes and shareholders’equity.

127

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**TRIBUNE COMPANY AND SUBSIDIARIESSCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS AND RESERVES(In thousands of dollars)**

| **Description**                                               | ** ** | ** ** | ** ** | **Balance at  Beginning  of Period** | ** ** | **Additions  Charged to  Costs and  Expenses** | ** ** | **Additions  Recorded  Upon  Acquisitions** | ** ** | **Deductions(1)** | ** ** | **Balance  at End  of Period** | ** ** |
|---------------------------------------------------------------|------------|------------|------------|------------------------------------------------|------------|----------------------------------------------------------|------------|---------------------------------------------|------------|-------------------|------------|------------------------------------------|------------|
| Valuation accounts  deducted from assets to which they apply: |       |       |       |                                           |       |                                                     |       |                                        |       |              |       |                                     |       |   |   |   |   |   |   |
| **Year ended Dec. 31, 2006**                             |       |       |       |                                           |       |                                                     |       |                                        |       |              |       |                                     |       |   |   |   |   |   |   |
| Accounts  receivable allowances:                              |       |       |       |                                           |       |                                                     |       |                                        |       |              |       |                                     |       |   |   |   |   |   |   |
| Bad debts                                                     |       |       | $          | 29,977                                         |       |                                                     |       | $                                           | 49,143     |              |       |                                     | $          | — |   |   |   | $ | 57,179 |   |   | $ | 21,941 |   |
| Rebates, volume discounts and other                           |       |       | 12,581     |                                           |       |                                                     | 31,410     |                                        |       |              | 55         |                                     |       |   | 32,216 |   |   | 11,830 |   |
| Total                                                         |       |       | $          | 42,558                                         |       |                                                     |       | $                                           | 80,553     |              |       |                                     | $          | 55 |   |   |   | $ | 89,395 |   |   | $ | 33,771 |   |
| **Year ended Dec. 25, 2005**                             |       |       |       |                                           |       |                                                     |       |                                        |       |              |       |                                     |       |   |   |   |   |   |   |
| Accounts  receivable allowances:                              |       |       |       |                                           |       |                                                     |       |                                        |       |              |       |                                     |       |   |   |   |   |   |   |
| Bad debts                                                     |       |       | $          | 35,837                                         |       |                                                     |       | $                                           | 53,383     |              |       |                                     | $          | — |   |   |   | $ | 59,243 |   |   | $ | 29,977 |   |
| Rebates, volume discounts and other                           |       |       | 13,670     |                                           |       |                                                     | 27,131     |                                        |       |              | —     |                                     |       |   | 28,220 |   |   | 12,581 |   |
| Total                                                         |       |       | $          | 49,507                                         |       |                                                     |       | $                                           | 80,514     |              |       |                                     | $          | — |   |   |   | $ | 87,463 |   |   | $ | 42,558 |   |
| **Year ended Dec. 26, 2004**                             |       |       |       |                                           |       |                                                     |       |                                        |       |              |       |                                     |       |   |   |   |   |   |   |
| Accounts  receivable allowances:                              |       |       |       |                                           |       |                                                     |       |                                        |       |              |       |                                     |       |   |   |   |   |   |   |
| Bad debts                                                     |       |       | $          | 34,024                                         |       |                                                     |       | $                                           | 60,072     |              |       |                                     | $          | — |   |   |   | $ | 58,259 |   |   | $ | 35,837 |   |
| Rebates, volume discounts and other                           |       |       | 15,444     |                                           |       |                                                     | 33,338     |                                        |       |              | —     |                                     |       |   | 35,112 |   |   | 13,670 |   |
| Total                                                         |       |       | $          | 49,468                                         |       |                                                     |       | $                                           | 93,410     |              |       |                                     | $          | — |   |   |   | $ | 93,371 |   |   | $ | 49,507 |   |

----

(1)             Deductions for the year ended Dec. 31, 2006 includedapproximately $521 due to the sales of discontinued operations. See Note 3for additional information on the sales of discontinued operations.

128

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**ITEM 9.**                CHANGESIN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

**ITEM 9A.**        CONTROLSAND PROCEDURES

**ConclusionRegarding the Effectiveness of Disclosure Controls and Procedures**

Under the supervision andwith the participation of the Company’s management, including its principalexecutive officer and principal financial officer, the Company conducted anevaluation of its disclosure controls and procedures, as such term is definedin Exchange Act Rules 13a-15(e) and 15d-15(e), as of Dec. 31,2006. Based upon that evaluation, the principal executive officer and principalfinancial officer have concluded that the Company’s disclosure controls andprocedures are effective.

**Management’s Reporton Internal Control Over Financial Reporting**

The Company’s management is responsible forestablishing and maintaining adequate internal control over financialreporting, as such term is defined in Exchange Act Rule 13a-15(f).Under the supervision and with the participation of the Company’s management,including its principal executive officer and principal financial officer, theCompany conducted an evaluation of the effectiveness of the design andoperation of internal control over financial reporting based on criteriaestablished in *Internal Control—IntegratedFramework* issued by the Committee of Sponsoring Organizations of theTreadway Commission (“COSO”). Based on that evaluation, the Company’smanagement concluded that internal control over financial reporting waseffective as of Dec. 31, 2006. Management’s assessment of theeffectiveness of internal control over financial reporting as of Dec. 31,2006 has been audited by PricewaterhouseCoopers, LLP, an independent registeredpublic accounting firm, as stated in their report included in Item 8.

The Company’s internalcontrol over financial reporting is a process designed to provide reasonableassurance regarding the reliability of financial reporting and the preparationof financial statements for external purposes in accordance with accountingprinciples generally accepted in the United States of America. Because of its inherentlimitations, internal control over financial reporting may not prevent ordetect misstatements. Also, projections of any evaluation of effectiveness to futureperiods are subject to the risk that controls may become inadequate because ofchanges in conditions, or that the degree of compliance with policies orprocedures may deteriorate.

**Changes in InternalControl Over Financial Reporting**

There has been no changein the Company’s internal control over financial reporting that occurred duringthe Company’s fiscal quarter ended Dec. 31, 2006 that has materiallyaffected, or is reasonably likely to materially affect, the Company’s internalcontrol over financial reporting.

**ITEM 9B.**       OTHERINFORMATION

**None.**

**PART III**

**ITEM 10.**         DIRECTORS,EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The information containedunder the heading “Executive Officers of the Company” in Item 1 hereof,and the information contained under the headings “Stock Ownership—Section 16(a) BeneficialOwnership Reporting Compliance,” “Corporate Governance—Overview,” “CorporateGovernance—Communicating with the Board of Directors” and “Board of Directors”in the definitive Proxy Statement for the Company’s May 9, 2007 Annual Meetingof Shareholders is incorporated herein by reference.

129

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**ITEM 11.**         EXECUTIVECOMPENSATION.

The information containedunder the headings “Executive Compensation”, “2006 Non-Employee DirectorCompensation” and “Board of Directors—Certain Relationships and Related PartyTransactions—Compensation Committee Interlocks and Insider Participation” inthe definitive Proxy Statement for the Company’s May 9, 2007 AnnualMeeting of Shareholders is incorporated herein by reference.

**ITEM 12.**         SECURITYOWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERS.

The information containedunder the headings “Stock Ownership—Management Ownership” and “Stock Ownership—PrincipalShareholders” in the definitive Proxy Statement for the Company’s May 9, 2007Annual Meeting of Shareholders is incorporated herein by reference.

**Equity CompensationPlan Information Table**

Thefollowing table provides information as of Dec. 31, 2006 regarding thenumber of shares of Tribune common stock that may be issued under Tribune’sequity compensation plans.

| ** **                                                  | ** ** | **(a)**    | ** ** | **(b)**                                                                                                                                              | ** ** | **(c)**                                                                                                     | ** ** |
|-------------------------------------------------------------|------------|------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------|------------|
| **Plan Category(1)**                                   | ** ** | ** ** | ** ** | **Number of securities to  be issued upon exercise  of outstanding options,  warrants and rights** | ** ** | **Weighted-average  exercise price of  outstanding options,  warrants and rights** | ** ** | **Number of securities  remaining available for  future issuance under  equity compensation plans  (excluding securities  reflected in column (a))** | ** ** |
| Equity  compensation plans approved by security holders     |       |       | 36,391,398 | (2)                                                                                                                                                  |       |                                                                                                        | $          | 43.18 | (3) |   |   | 36,453,519 | (4) |   |
| Equity  compensation plans not approved by security holders |       |       | —     |                                                                                                                                                 |       |                                                                                                        | —     |   |   |   | — |   |   |
| Total                                                       |       |       | 36,391,398 | (2)                                                                                                                                                  |       |                                                                                                        | $          | 43.18 | (3) |   |   | 36,453,519 | (4) |   |
|                                                             |            |            |            |                                                                                                                                                      |            |                                                                                                             |            |  |  |  |  |  |  |  |  |  |

----

(1)       Thetable does not include information regarding the following equity compensationplans:

401(k) Plans: As of Dec. 31, 2006, there were anaggregate of 16,996,624 shares of Tribune common stock outstanding and held inthe Tribune Company 401(k) Savings and Profit Sharing Plan, the TimesMirror Savings Plus Plan and the other 401(k) plans available to Tribuneemployees.

TimesMirror Plans: As of Dec. 31, 2006, there were an aggregate of 6,228,104shares of Tribune common stock issuable upon exercise of stock options grantedunder equity compensation plans assumed in connection with the merger of TheTimes Mirror Company into Tribune on June 12, 2000. The weighted-averageexercise price of these shares is $22.64. No grants have been made under theseplans since the time of the merger and none will be issued in the future.

(2)       Consistsof 34,398,769 outstanding stock options, 1,490,625 outstanding restricted stockunits and 33,189 outstanding dividend equivalent units relating to therestricted stock units, all of which were issued under Tribune equitycompensation plans, 367,273 outstanding stock equivalents under the Tribunebonus deferral plan (the “Bonus Deferral Plan”) and 101,542 shares held indeferral accounts under the Tribune Company 1996 Nonemployee Director StockCompensation Plan (the “Director Plan”). The restricted stock units arecredited with dividend equivalent units, and neither the restricted stock unitsnor the dividend equivalent units have voting rights prior to conversion intoshares of common stock. The stock equivalents in deferral accounts under boththe Bonus Deferral Plan and the Director Plan do not have voting rights, butare credited with dividend equivalents. The Bonus Deferral Plan permits thedeferral of cash or stock awards made under the Tribune Company IncentiveCompensation Plan (the “Incentive Plan”) into either an interest bearing orstock equivalent account. Deferrals in the stock equivalent account are valuedas if each deferral were invested in Tribune common stock as of the deferraldate, and are paid out only in shares of Tribune common stock, on a one-for-onebasis. Shares issued under this plan are attributed to the Incentive Plan andreduce the number of shares available for issuance under that plan. TheDirector Plan permits directors to defer stock awards into deferral accounts.The deferred awards and shares acquired upon reinvestment of dividends aredistributed to the director after termination of his or her Board service. Thestock equivalents in deferral accounts under both the Bonus Deferral Plan andthe Director Plan do not have voting rights, but are credited with dividendequivalents.

130

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(3)       Measuredonly with respect to the 34,398,769 stock options included in this table.Restricted stock units and the related dividend equivalent units and the stockequivalents in deferral accounts do not have exercise prices.

(4)       Consists of 33,967,498shares of Tribune common stock available for issuance under Tribune Companyequity compensation plans and 2,486,021 shares available for issuance under theTribune Company Employee Stock Purchase Plan (the “ESPP”). Under the ESPP,Tribune employees may purchase Tribune common stock through payroll deductions.On the third Wednesday of each month, shares of common stock are purchased forthe accounts of participants at a per share price equal to 85% of the fairmarket value of Tribune common stock on that date. Participants may withdrawfrom the plan at any time prior to the purchase date.

**ITEM 13.**         CERTAINRELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

The information containedunder the headings “Board of Directors—Certain Relationships and Related PartyTransactions,” and “Corporate Governance—Director Independence and PolicyRegarding Related Party Transactions” in the definitive Proxy Statement for theCompany’s May 9, 2007 Annual Meeting of Shareholders is incorporatedherein by reference.

**ITEM 14.**         PRINCIPALACCOUNTANT FEES AND SERVICES.

The information containedunder the headings “Board of Directors—Board, Board Committees and Meetings—AuditCommittee,” “Audit Committee—Policy on Audit Committee Pre-Approval of Audit,Audit-Related and Permissible Non-Audit Services of IndependentAccountants” and “Audit Committee—Fees Paid to Independent Accountants” in thedefinitive Proxy Statement for the Company’s May 9, 2007 Annual Meeting ofShareholders is incorporated herein by reference.

**PART IV**

**ITEM 15.**         EXHIBITSAND FINANCIAL STATEMENT SCHEDULES.

| (a)(1)&(2) |   | Financial  Statements and Financial Statement Schedule filed as part of this report         |   |
|----------------|--------|---------------------------------------------------------------------------------------------|--------|
|           |   | See Index to Financial Statements and Financial  Statement Schedule on page 55 hereof. |   |
| (a)(3)         |   | Index to Exhibits filed as part of this report                                              |   |
|           |   | See Exhibit Index on pages 134 to 138  hereof.                                    |   |
| (b)            |   | Exhibits                                                                                    |   |
|           |   | See Exhibit Index on pages 134 to 138  hereof.                                    |   |
| (c)            |   | Financial Statement Schedule                                                                |   |
|           |   | See Index to  Financial Statements and Financial Statement Schedule on page 65 hereof. |   |

 

 

131

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**SIGNATURES**

Pursuantto the requirements of Section 13 or 15(d) of the Securities ExchangeAct of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized, on Feb. 26, 2007.

|        | TRIBUNE COMPANY                                  |
|--------|--------------------------------------------------|
|   | (Registrant)                                     |
|   | /s/  DENNIS J. FITZSIMONS                        |
|   | Dennis J.  FitzSimons                            |
|   | Chairman,  President and Chief Executive Officer |

 

Pursuantto the requirements of the Securities Exchange Act of 1934, this report hasbeen signed below by the following persons on behalf of the registrant and inthe capacities indicated on Feb. 26, 2007.
|                           | **Signature** | ** **                                                                       | ** ** | ** ** | **Title** | ** ** |
|---------------------------|---------------|----------------------------------------------------------------------------------|------------|------------|-----------|------------|
| /s/ DENNIS J.  FITZSIMONS |          | Chairman,  President, Chief Executive Officer and Director                       |
| Dennis  J. FitzSimons     |          |
| /s/ DONALD C.  GRENESKO   |          | Senior Vice President/Finance and Administration  (principal  financial officer) |
| Donald  C. Grenesko       |          |
| /s/ R. MARK  MALLORY      |          | Vice President  and Controller (principal accounting officer)                    |
| R.  Mark Mallory          |          |
| /s/ JEFFREY  CHANDLER     |          | Director                                                                         |
| Jeffrey  Chandler         |          |
| /s/ ROGER  GOODAN         |          | Director                                                                         |
| Roger  Goodan             |          |
| /s/ BETSY D.  HOLDEN      |          | Director                                                                         |
| Betsy D. Holden           |          |

132

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| /s/ WILLIAM A. OSBORN    |   | Director |
|--------------------------|--------|----------|
| William A. Osborn        |   |
| /s/ J. CHRISTOPHER REYES |   | Director |
| J. Christopher Reyes     |   |
| /s/ DUDLEY S. TAFT       |   | Director |
| Dudley S. Taft           |   |

 

133

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**TRIBUNECOMPANY**

**EXHIBIT INDEX**

Exhibitsmarked with an asterisk (*) are incorporated by reference to documentspreviously filed by Tribune Company with the Securities and ExchangeCommission, as indicated. Exhibits marked with a circle (o) aremanagement contracts or compensatory plan contracts or arrangements filedpursuant to Item 601(b)(10)(iii)(A) of Regulation S-K. All otherdocuments listed are filed with this Report.

| Number      | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                         |
|-------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1 *  |       | Amended and Restated Certificate of Incorporation of  Tribune Company, dated June 12, 2000 (Exhibit 3.1 to Annual Report  on Form 10-K for 2001)                                                                                                                                                                                                         |
|        |       |                                                                                                                                                                                                                                                                                                                                                                    |
| 3.1a * |       | Amended Certificate of Designation of Series A  Junior Participating Preferred Stock, dated June 12, 2000  (Exhibit 3.1a to Current Report on Form 8-K dated  June 12, 2000)                                                                                                                                                                   |
|        |       |                                                                                                                                                                                                                                                                                                                                                                    |
| 3.1b * |       | Amended Certificate of Designation of Series D-1  Preferred Stock, dated February 13, 2001 (Exhibit 3.1d to Annual  Report on Form 10-K for 2000)                                                                                                                                                                                                   |
|        |       |                                                                                                                                                                                                                                                                                                                                                                    |
| 3.2 *  |       | By-Laws of Tribune Company, as amended and in  effect on October 19, 2005 (Exhibit 99 to Current Report on  Form 8-K dated October 21, 2005)                                                                                                                                                                                                        |
|        |       |                                                                                                                                                                                                                                                                                                                                                                    |
| 4.1 *  |       | Rights Agreement between Tribune Company and First  Chicago Trust Company of New York, as Rights Agent, dated as of  December 12, 1997 (Exhibit 1 to Current Report on Form 8-K  dated December 12, 1997)                                                                                                                                           |
|        |       |                                                                                                                                                                                                                                                                                                                                                                    |
| 4.1a * |       | Amendment No. 1, dated as of June 12,  2000, to the Rights Agreement between Tribune Company and First Chicago Trust  Company of New York, as Rights Agent (Exhibit 4.1 to Current Report on  Form 8-K dated June 12, 2000)                                                                                                                    |
|        |       |                                                                                                                                                                                                                                                                                                                                                                    |
| 4.1b*       |       | Amendment No. 2, dated as of September 21,  2006, to the Rights Agreement between Tribune Company and Computershare Trust  Company, N.A. (formerly known as EquiServe Trust Company, N.A., formerly  known as First Chicago Trust Company of New York), as Rights Agent  (Exhibit 4.1 to Current Report on Form 8-K dated  September 21, 2006) |
|        |       |                                                                                                                                                                                                                                                                                                                                                                    |
| 4.2 *  |       | Indenture, dated as of March 1, 1992, between  Tribune Company and Citibank, N.A. (successor to Bank of New York, Bank  of Montreal Trust Company and Continental Bank, N.A.), as Trustee  (Exhibit 4.1 to Registration Statement on Form S-3,  Registration No. 333-02831)                                                               |
|        |       |                                                                                                                                                                                                                                                                                                                                                                    |
| 4.3 *  |       | Indenture, dated as of January 1, 1997, between  Tribune Company and Citibank, N.A. (successor to Bank of New York), as Trustee  (Exhibit 4 to Current Report on Form 8-K dated  January 14, 1997)                                                                                                                                             |
|        |       |                                                                                                                                                                                                                                                                                                                                                                    |
| 4.4 *  |       | Indenture, dated as of April 1, 1999, between  Tribune Company and Citibank, N.A. (successor to Bank of New York and  Bank of Montreal Trust Company), as Trustee for the PHONES securities  (Exhibit 4 to Current Report on Form 8-K dated April 5,  1999)                                                                                    |
|        |       |                                                                                                                                                                                                                                                                                                                                                                    |

134

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| 4.5 *  |   | Indenture, dated January 30, 1995, between  Tribune Company (successor to The Times Mirror Company) and  Citibank, N.A. (successor to The Bank of New York, Wells Fargo Bank, N.A.  and First Interstate Bank of California), as Trustee for the 71¤4%  Debentures due 2013 and 71¤2%  Debentures due 2023 (Exhibit 4.1 to The Times Mirror Company’s Annual  Report on Form 10-K for 1995) |
|-------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 4.5a * |   | First Supplemental Indenture, dated as of  June 12, 2000, among Tribune Company, The Times Mirror Company and The  Bank of New York, as Trustee (Exhibit 4.13 to Current Report on  Form 8-K dated June 12, 2000)                                                                                                                                                                                               |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 4.6 *  |   | Indenture, dated March 19, 1996, between  Tribune Company (successor to The Times Mirror Company) and  Citibank, N.A., as Trustee for the 6.61% Debentures due 2027 and the 71¤4%  Debentures due 2096 (Exhibit 4.1 to The Times Mirror Company’s Current  Report on Form 8-K dated March 13, 1996)                                                                                              |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 4.6a * |   | First Supplemental Indenture, dated as of  October 19, 1999, between The Times Mirror Company and  Citibank, N.A., as Trustee (Exhibit 4.3 to The Times Mirror  Company’s Current Report on Form 8-K dated October 19, 1999)                                                                                                                                                                          |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 4.6b * |   | Second Supplemental Indenture, dated as of  June 12, 2000, among Tribune Company, The Times Mirror Company and  Citibank, N.A., as Trustee (Exhibit 4.12 to Current Report on  Form 8-K dated June 12, 2000)                                                                                                                                                                                               |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 4.7 *  |   | Agreement of Resignation, Appointment and  Assumption, dated as of September 4, 2002, among Tribune Company, The  Bank of New York and Citibank, N.A., appointing Citibank, N.A. as  Trustee under the Indentures dated March 1, 1992, January 30, 1995,  January 1, 1997 and April 1, 1999 (Exhibit 4.7 to Annual  Report on Form 10-K for 2004)                                      |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 4.8 *  |   | Form of Exchangeable Subordinated Debenture due  2029 relating to the PHONES securities (Exhibit 4 to Current Report on  Form 8-K dated April 13, 1999)                                                                                                                                                                                                                                                         |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 4.9 *  |   | Specimen Note for 71¤4%  Debenture due 2013 (Exhibit 4.2 to The Times Mirror Company’s Annual  Report on Form 10-K for 1995)                                                                                                                                                                                                                                                                                    |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 4.10 * |   | Specimen Note for 71¤2%  Debenture due 2023 (Exhibit 4.3 to The Times Mirror Company’s Annual  Report on Form 10-K for 1995)                                                                                                                                                                                                                                                                                    |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 4.11 * |   | Officers’ Certificate, dated November 13, 1996,  establishing the terms of the 71¤4%  Debentures due 2096 and attaching the specimen Form of Debenture  (Exhibit 4.2 to The Times Mirror Company’s Current Report on Form 8-K  dated November 7, 1996)                                                                                                                                      |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 4.12 * |   | Officers’ Certificate, dated September 9, 1997,  establishing the terms of the 6.61% Debentures due 2027, and the specimen  Form of Debenture (Exhibit 4.2 to The Times Mirror Company’s  Current Report on Form 8-K dated September 4, 1997)                                                                                                                                                    |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 4.13 * |   | Form of Note relating to Tribune Company’s  4.875% Notes due 2010 (Exhibit 4.1a to Current Report on Form 8-K  dated August 10, 2005)                                                                                                                                                                                                                                                                      |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                |

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| 4.14 * |   | Form of Note relating to Tribune Company’s  5.25% Notes due 2015 (Exhibit 4.1b to Current Report on Form 8-K  dated August 10, 2005)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|-------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 4.15*       |   | Amended and Restated Credit Agreement dated as of  June 27, 2006 by and among Tribune Company, as borrower, the lenders  party thereto, Citicorp North America, Inc., as administrative agent,  Merrill Lynch, Pierce, Fenner & Smith Incorporated, as syndication  agent, JPMorgan Chase Bank, N.A., Bank of America, N.A., Morgan Stanley Bank  and The Bank of Tokyo-Mitsubishi UFJ, Ltd., Chicago Branch, as  co-documentation agents, and Citigroup Global Markets Inc., Merrill  Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan  Securities Inc., as joint lead arrangers and joint bookrunners  (Exhibit (b)(5) to Amendment No. 7 to Schedule TO dated  June 28, 2006)                                                               |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 4.16*       |   | Amendment No. 1 dated as of July 10, 2006  to the Amended and Restated Credit Agreement dated as of June 27, 2006  by and among Tribune Company, as borrower, the lenders party thereto,  Citicorp North America, Inc., as administrative agent, Merrill Lynch,  Pierce, Fenner & Smith Incorporated, as syndication agent, JPMorgan  Chase Bank, N.A., Bank of America, N.A., Morgan Stanley Bank and The Bank of  Tokyo-Mitsubishi UFJ, Ltd., Chicago Branch, as co-documentation agents,  and Citigroup Global Markets Inc., Merrill Lynch, Pierce,  Fenner & Smith Incorporated and J.P. Morgan Securities Inc., as  joint lead arrangers and joint bookrunners (Exhibit 10.2 to Quarterly  Report on Form 10-Q for the quarter ended June 25, 2006) |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 4.17*       |   | Amended and Restated Bridge Credit Agreement dated  as of June 27, 2006 by and among Tribune Company, as borrower, the  lenders party thereto, Citicorp North America, Inc., as administrative  agent, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as  syndication agent, JPMorgan Chase Bank, N.A., as documentation agent, and  Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner &  Smith Incorporated and J.P. Morgan Securities Inc., as joint lead  arrangers and joint bookrunners (Exhibit (b)(6) to Amendment  No. 7 to Schedule TO dated June 28, 2006)                                                                                                                                                                               |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 4.18*       |   | Amendment No. 1 dated as of July 10, 2006  to the Amended and Restated Bridge Credit Agreement dated as of June 27,  2006 by and among Tribune Company, as borrower, the lenders party thereto,  Citicorp North America, Inc., as administrative agent, Merrill Lynch,  Pierce, Fenner & Smith Incorporated, as syndication agent, JPMorgan  Chase Bank, N.A., as documentation agent, and Citigroup Global Markets Inc.,  Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan  Securities Inc., as joint lead arrangers and joint bookrunners  (Exhibit 10.4 to Quarterly Report on Form 10-Q for the  quarter ended June 25, 2006)                                                                                                           |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 4.19*       |   | Amendment No. 2 dated as of July 21, 2006  to the Amended and Restated Bridge Credit Agreement dated as of June 27,  2006, as amended, by and among Tribune Company, as borrower, the lenders  party thereto, Citicorp North America, Inc., as administrative agent, Merrill  Lynch, Pierce, Fenner & Smith Incorporated, as syndication agent,  JPMorgan Chase Bank, N.A., as documentation agent, and Citigroup Global  Markets Inc., Merrill Lynch, Pierce, Fenner & Smith  Incorporated and J.P. Morgan Securities Inc., as joint lead arrangers  and joint bookrunners (Exhibit 10.5 to Quarterly Report on Form 10-Q  for the quarter ended June 25, 2006)                                                                                              |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |

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| 4.20          |   | Amendment No. 3 dated as of January 22,  2007 to the Amended and Restated Bridge Credit Agreement dated as of  June 27, 2006, as amended, by and among Tribune Company, as borrower,  the lenders party thereto, Citicorp North America, Inc., as  administrative agent, Merrill Lynch, Pierce, Fenner & Smith  Incorporated, as syndication agent, JPMorgan Chase Bank, N.A., as  documentation agent, and Citigroup Global Markets Inc., Merrill Lynch,  Pierce, Fenner & Smith Incorporated and J.P. Morgan  Securities Inc., as joint lead arrangers and joint bookrunners |
|---------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.1 o*  |   | Tribune Company Supplemental Retirement Plan, as  amended and restated October 18, 2006 (Exhibit 10.3 to Current  Report on Form 8-K dated October 18, 2006)                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.2 o*  |   | Tribune Company Directors’ Deferred Compensation  Plan, as amended and restated effective as of January 1, 2005  (Exhibit 10.2 to Current Report on Form 8-K dated  December 22, 2005)                                                                                                                                                                                                                                                                                                                                                                                                                |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.3 o*  |   | The Times Mirror Company Deferred Compensation Plan  for Non-Employee Directors (Exhibit 10.7 to The Times Mirror  Company’s Annual Report on Form 10-K for 1994)                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.4 o*  |   | Tribune Company Bonus Deferral Plan, as amended and  restated as of October 18, 2006 (Exhibit 10.1 to Current Report on  Form 8-K dated October 18, 2006)                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.5 o*  |   | Tribune Company 1992 Long-Term Incentive Plan,  effective as of April 29, 1992, as amended April 19, 1994  (Exhibit 10.11 to Annual Report on Form 10-K for 1994)                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.5a o* |   | Amendment of Tribune Company 1992 Long-Term  Incentive Plan, effective October 24, 2000 (Exhibit 10.6a to Annual  Report on Form 10-K for 2000)                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.6 o*  |   | Tribune Company Executive Financial Counseling Plan,  effective October 19, 1988, as amended January 1, 1994  (Exhibit 10.13 to Annual Report on Form 10-K for 1993)                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.7 o   |   | Tribune Company Transitional Compensation Plan for  Executive Employees, amended and restated effective as of July 19, 2006                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.8 o*  |   | Tribune Company Supplemental Defined Contribution  Plan, as amended and effective as of October 18, 2006 (Exhibit 10.2  to Current Report on Form 8-K dated October 18, 2006)                                                                                                                                                                                                                                                                                                                                                                                                                              |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.9 o*  |   | Tribune Company Employee Stock Purchase Plan, as  amended and restated July 27, 1999 (Exhibit 10.10 to Annual Report  on Form 10-K for 1999)                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.9a o* |   | First Amendment to Tribune Company Employee Stock  Purchase Plan, as amended and restated July 27, 1999  (Exhibit 10.10a to Quarterly Report on Form 10-Q for the  quarter ended September 24, 2000)                                                                                                                                                                                                                                                                                                                                                                                                       |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.9b o* |   | Second Amendment to Tribune Company Employee Stock  Purchase Plan, effective as of May 7, 2002 (Exhibit 10.8b to Annual  Report on Form 10-K for 2002)                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10.10 o* |   | Tribune Company 1995 Nonemployee Director Stock  Option Plan, as amended and restated effective December 9, 2003  (Exhibit 10.9 to Annual Report on Form 10-K for 2003)                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |

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| 10.11 o*  |   | Tribune Company 1996 Nonemployee Director Stock  Compensation Plan, as amended and restated effective January 1, 2005  (Exhibit 10.4 to Current Report on Form 8-K dated  December 22, 2005)                                                                                                                                                                                         |
|----------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                     |
| 10.12 o*  |   | Tribune Company Incentive Compensation Plan, as  amended and restated effective May 12, 2004 (Exhibit 10.1 to  Quarterly Report on Form 10-Q for the quarter ended June 27,  2004)                                                                                                                                                                                                   |
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                     |
| 10.12a o* |   | Form of Notice of Grant and Stock Option Term  Sheet (Exhibit 10.1 to Current Report on Form 8-K dated  February 11, 2005)                                                                                                                                                                                                                                                           |
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                     |
| 10.12b o* |   | Form of Restricted Stock Unit Award Notice  (Exhibit 10.1 to Current Report on Form 8-K dated  February 21, 2006)                                                                                                                                                                                                                                                                    |
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                     |
| 10.13 o*  |   | The Times Mirror Company 1997 Directors Stock Option  Plan (Exhibit 10.15 to The Times Mirror Company’s Annual Report on  Form 10-K for 1996)                                                                                                                                                                                                                                             |
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                     |
| 10.14*         |   | Distribution Agreement, dated September 21,  2006, by and among TMCT, LLC, Tribune Company, Candle Holdings Corporation,  Fortify Holdings Corporation, Chandler Trust No. 1, and Chandler Trust  No. 2 (Exhibit 10.1 to Current Report on Form 8-K dated  September 21, 2006)                                                                                             |
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                     |
| 10.15*         |   | Distribution Agreement, dated September 21,  2006, by and among TMCT II, LLC, Tribune Company, Fortification Holdings  Corporation, Wick Holdings Corporation, Eagle New Media Investments, LLC,  Eagle Publishing Investments, LLC, Chandler Trust No. 1, and  Chandler Trust No. 2 (Exhibit 10.3 to Current Report on Form 8-K  dated September 21, 2006) |
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                     |
| 10.16 *   |   | Amended and Restated Lease Agreement between TMCT,  LLC and Tribune Company, dated September 22, 2006 (Exhibit 10.5 to  Current Report on Form 8-K dated September 21, 2006)                                                                                                                                                                                                         |
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                     |
| 14 *      |   | Code of Ethics for CEO and Senior Financial Officers  (Exhibit 14 to Annual Report on Form 10-K for 2003)                                                                                                                                                                                                                                                                                      |
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                     |
| 21             |   | Table of Subsidiaries of Tribune Company                                                                                                                                                                                                                                                                                                                                                                 |
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                     |
| 23             |   | Consent of Independent Registered Public Accounting  Firm                                                                                                                                                                                                                                                                                                                                                |
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                     |
| 31.1           |   | Rule 13a-14 Certification of Chief  Executive Officer                                                                                                                                                                                                                                                                                                                                               |
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                     |
| 31.2           |   | Rule 13a-14 Certification of Chief  Financial Officer                                                                                                                                                                                                                                                                                                                                               |
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                     |
| 32.1           |   | Section 1350 Certification of Chief Executive  Officer                                                                                                                                                                                                                                                                                                                                              |
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                     |
| 32.2           |   | Section 1350 Certification of Chief Financial  Officer                                                                                                                                                                                                                                                                                                                                              |
|           |   |                                                                                                                                                                                                                                                                                                                                                                                                     |
| 99             |   | Form 11-K financial statements for the  KPLR, Inc. 401(k) Plan, the Times Mirror Savings Plus Plan, the  Tribune Broadcasting Retirement Plan, the Tribune Company Defined  Contribution Retirement Plan and the Tribune Company 401(k) Savings and  Profit Sharing Plan (to be filed by amendment)                                                                                  |

 

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