Fall fueled by newspaper write-down, revs

How bad is the business outlook for Tribune Co.’s newspapers? Bad enough for the company to take a $3.8 billion goodwill writedown on the value of its newspaper assets, which include the Los Angeles Times, Chicago Tribune, Baltimore Sun and Orlando Sentinel.

In all, Tribune saw a $4.5 billion loss in its second quarter, according to figures the company released Wednesday. The red ink was fueled by the newspaper writedown, costs associated with its sale of the Long Island-based newspaper Newsday to Cablevision and an 11% decline in revenues in its publishing division, or an $83 million drop from the same period last year to $701 million.

Under Tribune’s intricate accounting, the company took a $692 million writedown on the sale of Newsday even as it received $630 million in cash for the newspaper from Cablevision under the sale agreement reached in May.

Tribune said the goodwill writedown on its newspapers would not affect its operating cash flow or its debt covenants with its banks. Tribune’s debt load remains a sizable $12.5 billion, which has spurred much speculation that the company’s declining revenues could push it into bankruptcy.

In the earnings announcement, Tribune CEO Sam Zell said the company had satisfied its debt obligation for the rest of this year, thanks in part to the coin it received for Newsday and by using $225 million of a $300 million loan agreement against future receivables that it struck in July. Zell said that the next big debt bill Tribune faces is a $593 million payment in June.

Tribune’s TV stations fared better than the newspapers, but the overall market’s woes were a drag on stations as well. Revenue at its 23 stations was up 2% from the same period in 2007 to $292 million. However, TV operating expenses climbed 7%, cutting into the stations’ operating cash flow, which dropped 8% to $92 million.

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