Exhibit 99.1
Unaudited Pro Forma Condensed Consolidated Financial Statements
The following pro forma condensed financial statements reflect adjustments to Meredith Corporation’s (“Meredith”) historical financial information to depict the sale of its local media group (“LMG”) segment to a subsidiary of Gray Television, Inc. (“Gray”). This sale will be effected by (i) a spin-off, in which Meredith shareholders will receive interests in a newly formed wholly-owned subsidiary of Meredith (“NMG SpinCo”), which will hold Meredith’s national media group (“NMG”) and the corporate functions of Meredith, followed immediately by (ii) the merger of Meredith, holding the assets of the local media group segment, with a subsidiary of Gray (the “Transactions”)
The Transactions will be accounted for as a reverse spin-off, for reasons including that the legacy shareholders will continue to hold shares of common stock, par value $1.00 per share, of NMG SpinCo and shares of class B common stock, par value $1.00 per share, of NMG SpinCo and not shares of common stock, par value $1.00 per share, of Meredith (“Meredith Common Stock”) or shares of class B common stock, par value $1.00 per share, of Meredith (“Meredith Class B Stock”) and that senior management will continue to manage NMG SpinCo and not Meredith. The resulting accounting treatment is as though LMG is spun off and acquired by Gray, to leave behind NMG SpinCo, comprising NMG and the corporate functions, which is the reverse of the legal form of the Transactions.
The pro forma condensed financial statements include the following pro forma adjustments to the historical financial information of Meredith:
| • | Transaction Accounting Adjustments – Adjustments that reflect the application of required accounting for the Transactions and other related transactions as follows: |
| • | in the pro forma condensed balance sheet, as though they occurred as of March 31, 2021; and |
| • | in the pro forma condensed statements of earnings (loss), the effects of the above pro forma balance sheet adjustments assuming those adjustments were made as of July 1, 2019. |
| • | Autonomous Entity Adjustments – Adjustments that are necessary to reflect the operations and financial position of NMG SpinCo as an autonomous entity. |
Related transactions include certain other equity transactions that have occurred during or after the periods presented herein and are described in the notes to the pro forma condensed financial statements. The pro forma condensed statements of earnings (loss) for the years ended June 30, 2019 and 2018 present LMG on a discontinued operations basis because that presentation is not yet required in the historical financial statements for those periods.
The pro forma adjustments are based on factually supportable and available information and certain assumptions that management believes are reasonable. In the opinion of management, all necessary adjustments have been made in preparing the pro forma condensed financial statements. However, such adjustments are estimates and actual experience may differ from expectations. The pro forma condensed financial statements presented do not purport to represent what the results of operations or financial position of NMG SpinCo would actually have been had the Transactions and related transactions occurred on the dates noted above, or to project the results of operations or financial position of NMG SpinCo for any future periods. The pro forma condensed balance sheet does not give effect to, for example, cash generated by or used in operations, or collection of long-term receivables, after March 31, 2021.
The pro forma condensed financial statements have been derived from the historical audited consolidated financial statements of Meredith included in its Annual Report on Form 10-K for the year ended June 30, 2020, and from the historical unaudited condensed consolidated financial statements of Meredith included in its Quarterly Report on Form 10-Q for the quarter ended March 31, 2021.
The pro forma condensed financial statements should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the historical financial statements and related notes thereto of Meredith included in its Annual Report on Form 10-K for the year ended June 30, 2020 and its Quarterly Report on Form 10-Q for the quarter ended March 31, 2021.
1
Meredith Corporation
Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of March 31, 2021
| Transaction Accounting Adjustments | ||||||||||||||||||||
| Assets | (a) As Originally |
(b) Separation | (c) Other | Pro Forma | ||||||||||||||||
| (In millions) | ||||||||||||||||||||
Current assets | ||||||||||||||||||||
Cash and cash equivalents | $ | 230.7 | $ | (0.1) | $
| (67.0) (854.2) 751.2 (35.6) |
| | (1) (2) (3) (4) |
| $ | 25.0 | ||||||||
Accounts receivable, net | 486.4 | (138.1) | — | 348.3 | ||||||||||||||||
Inventories | 28.9 | — | — | 28.9 | ||||||||||||||||
Current portion of subscription acquisition costs | 205.5 | — | — | 205.5 | ||||||||||||||||
Other current assets | 61.4 | (9.5) | — | 51.9 | ||||||||||||||||
Total current assets | 1,012.9 | (147.7) | (205.6 | ) | 659.6 | |||||||||||||||
Property, plant, and equipment | 899.0 | (367.0) | — | 532.0 | ||||||||||||||||
Less accumulated depreciation | (531.0 | ) | 247.6 | — | (283.4 | ) | ||||||||||||||
Net property, plant, and equipment | 368.0 | (119.4) | — | 248.6 | ||||||||||||||||
Operating lease assets | 379.8 | (18.9) | — | 360.9 | ||||||||||||||||
Subscription acquisition costs | 181.0 | — | — | 181.0 | ||||||||||||||||
Other assets | 290.0 | (6.8) | (3.2 | ) | (3) | 280.0 | ||||||||||||||
Intangible assets, net | 1,568.3 | (720.0) | — | 848.3 | ||||||||||||||||
Goodwill | 1,719.2 | (81.4) | — | 1,637.8 | ||||||||||||||||
Total assets | $ | 5,519.2 | $ | (1,094.2) | $ | (208.8 | ) | $ | 4,216.2 | |||||||||||
See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
2
Meredith Corporation
Unaudited Pro Forma Condensed Consolidated Balance Sheet (continued)
As of March 31, 2021
| Transaction Accounting Adjustments | ||||||||||||||||||||
| Liabilities and Shareholders’ Equity | (a) As Originally Reported |
(b) Separation | (c) Other | Pro Forma | ||||||||||||||||
| (In millions except per share data) | ||||||||||||||||||||
Current liabilities | ||||||||||||||||||||
Current portion of long-term debt | $ | 4.1 | $ | — | $
| (4.1 18.1 | )
| | (2 (3 | ) ) | $ | 18.1 | ||||||||
Current portion of operating lease liabilities | 36.1 | (1.9 | ) | — | 34.2 | |||||||||||||||
Accounts payable | 141.7 | (30.0 | ) | — | 111.7 | |||||||||||||||
Accrued expenses and other liabilities | 188.5 | (47.6 | ) | 76.2 | (5 | ) | 217.1 | |||||||||||||
Current portion of unearned revenues | 376.2 | (3.7 | ) | — | 372.5 | |||||||||||||||
Total current liabilities | 746.6 | (83.2 | ) | 90.2 | 753.6 | |||||||||||||||
Long-term debt | 2,740.2 | — | | (2,740.2 733.1 | )
| | (2 (3 | ) ) | 733.1 | |||||||||||
Operating lease liabilities | 441.2 | (17.2 | ) | — | 424.0 | |||||||||||||||
Unearned revenues | 223.7 | — | — | 223.7 | ||||||||||||||||
Deferred income taxes | 468.6 | — | (76.2 | ) | (5 | ) | 392.4 | |||||||||||||
Other noncurrent liabilities | 205.0 | (10.7 | ) | — | 194.3 | |||||||||||||||
Total liabilities | 4,825.3 | (111.1 | ) | (1,993.1 | ) | 2,721.1 | ||||||||||||||
Shareholders’ equity | ||||||||||||||||||||
Series preferred stock, par value $1 per share | — | — | — | — | ||||||||||||||||
Common stock, par value $1 per share | 40.5 | — | — | 40.5 | ||||||||||||||||
Class B stock, par value $1 per share, convertible to common stock | 5.1 | — | — | 5.1 | ||||||||||||||||
Additional paid-in capital | 243.0 | — | (67.0 | ) | (1 | ) | 182.3 | |||||||||||||
| 6.3 | (7 | ) | ||||||||||||||||||
Retained earnings | 469.6 | (981.7 | ) | | 1,692.2 983.1 (824.0 (6.3 |
) ) | | (4 (4 (6 (7 | ) ) ) ) | 1,332.9 | ||||||||||
Accumulated other comprehensive loss | (64.3 | ) | (1.4 | ) | — | (65.7 | ) | |||||||||||||
Total shareholders’ equity | 693.9 | (983.1 | ) | 1,784.3 | 1,495.1 | |||||||||||||||
Total liabilities and shareholders’ equity | $ | 5,519.2 | $ | (1,094.2 | ) | $ | (208.8 | ) | $ | 4,216.2 | ||||||||||
See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
3
Meredith Corporation
Unaudited Pro Forma Condensed Consolidated Statement of Earnings
Nine months ended March 31, 2021
| Transaction Accounting Adjustments | ||||||||||||||||||||||||
| (In millions except per share data) | (a) As Originally | (b) Separation | (c) Other | (d) Autonomous | Pro Forma | |||||||||||||||||||
Revenues | ||||||||||||||||||||||||
Advertising related | $ | 1,187.2 | $ | (395.4 | ) | $ | — | $ | — | $ | 791.8 | |||||||||||||
Consumer related | 1,016.1 | (281.7 | ) | — | — | 734.4 | ||||||||||||||||||
Other | 56.2 | (10.8 | ) | — | — | 45.4 | ||||||||||||||||||
Total revenues | 2,259.5 | (687.9 | ) | — | — | 1,571.6 | ||||||||||||||||||
Operating expenses | ||||||||||||||||||||||||
Production, distribution, and editorial | 759.8 | (272.7 | ) | — | — | 487.1 | ||||||||||||||||||
Selling, general, and administrative | 946.5 | (123.7 | ) | (7.6 | ) | (8 | ) | 9.3 | 824.5 | |||||||||||||||
Acquisition, disposition, and restructuring related activities | (67.5 | ) | (7.3 | ) | — | — | (74.8 | ) | ||||||||||||||||
Depreciation and amortization | 134.4 | (22.0 | ) | — | — | 112.4 | ||||||||||||||||||
Total operating expenses | 1,773.2 | (425.7 | ) | (7.6 | ) | 9.3 | 1,349.2 | |||||||||||||||||
Income from operations | 486.3 | (262.2 | ) | 7.6 | (9.3 | ) | 222.4 | |||||||||||||||||
Non-operating income, net | 7.9 | (0.7 | ) | — | 0.3 | 7.5 | ||||||||||||||||||
Interest expense, net | (140.7 | ) | 0.1 | 104.9 | (3 | ) | — | (35.7 | ) | |||||||||||||||
Earnings from continuing operations before income taxes | 353.5 | (262.8 | ) | 112.5 | (9.0 | ) | 194.2 | |||||||||||||||||
Income tax expense | (83.6 | ) | 67.0 | (28.7 | ) | (9 | ) | 2.3 | (43.0 | ) | ||||||||||||||
Earnings from continuing operations | $ | 269.9 | $ | (195.8 | ) | $ | 83.8 | $ | (6.7 | ) | $ | 151.2 | ||||||||||||
Earnings from continuing operations attributable to common shareholders | $ | 256.3 | $ | (195.8 | ) | $
| 83.8 11.5 |
|
| (1 | ) | $ | (6.7 | ) | $ | 149.1 | ||||||||
Basic earnings per share attributable to common shareholders | ||||||||||||||||||||||||
Continuing operations | $ | 5.55 | $ | 3.23 | ||||||||||||||||||||
Basic average common shares outstanding | 46.2 | 46.2 | ||||||||||||||||||||||
Diluted earnings per share attributable to common shareholders | ||||||||||||||||||||||||
Continuing operations | $ | 5.53 | $ | 3.22 | ||||||||||||||||||||
Diluted average common shares outstanding | 46.3 | 46.3 | ||||||||||||||||||||||
See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
4
Meredith Corporation
Unaudited Pro Forma Condensed Consolidated Statement of Earnings
Year Ended June 30, 2020
| Transaction Accounting Adjustments | ||||||||||||||||||||||||
| (In millions except per share data) | (e) As | (b) Separation | (c) Other | (d) Autonomous | Pro Forma | |||||||||||||||||||
Revenues | ||||||||||||||||||||||||
Advertising related | $ | 1,399.0 | $ | (330.0 | ) | $ | — | $ | — | $ | 1,069.0 | |||||||||||||
Consumer related | 1,348.7 | (347.9 | ) | — | — | 1,000.8 | ||||||||||||||||||
Other | 100.9 | (13.5 | ) | — | — | 87.4 | ||||||||||||||||||
Total revenues | 2,848.6 | (691.4 | ) | — | — | 2,157.2 | ||||||||||||||||||
Operating expenses | ||||||||||||||||||||||||
Production, distribution, and editorial | 1,047.6 | (342.9 | ) | — | — | 704.7 | ||||||||||||||||||
Selling, general, and administrative | 1,259.1 | (145.2 | ) | | 6.3 (6.7 | ) | | (7) (8) |
| 14.8 | 1,128.3 | |||||||||||||
Acquisition, disposition, and restructuring related activities | 26.8 | (2.3 | ) | — | — | 24.5 | ||||||||||||||||||
Depreciation and amortization | 219.9 | (34.3 | ) | — | — | 185.6 | ||||||||||||||||||
Impairment of goodwill and other long-lived assets | 389.3 | (22.3 | ) | — | — | 367.0 | ||||||||||||||||||
Total operating expenses | 2,942.7 | (547.0 | ) | (0.4 | ) | 14.8 | 2,410.1 | |||||||||||||||||
Loss from operations | (94.1 | ) | (144.4 | ) | 0.4 | (14.8 | ) | (252.9 | ) | |||||||||||||||
Non-operating income, net | (1.3 | ) | (1.0 | ) | — | 0.4 | (1.9 | ) | ||||||||||||||||
Interest expense, net | (145.8 | ) | 1.2 | (17.0 | ) | (3) | — | (161.6 | ) | |||||||||||||||
Loss from continuing operations before income taxes | (241.2 | ) | (144.2 | ) | (16.6 | ) | (14.4 | ) | (416.4 | ) | ||||||||||||||
Income tax benefit | 32.2 | 36.8 | 4.2 | (9) | 3.7 | 76.9 | ||||||||||||||||||
Loss from continuing operations | $ | (209.0 | ) | $ | (107.4 | ) | $ | (12.4 | ) | $ | (10.7 | ) | $ | (339.5 | ) | |||||||||
Loss from continuing operations attributable to common shareholders | $ | (450.7 | ) | $ | (107.4 | ) | $ | (12.4 2.9 | ) |
| (1) (10) |
| $ | (10.7 | ) | $ | (576.4 | ) | ||||||
Basic loss per share attributable to common shareholders | ||||||||||||||||||||||||
Continuing operations | $ | (9.85 | ) | $ | (12.61 | ) | ||||||||||||||||||
Basic average common shares outstanding | 45.7 | 45.7 | ||||||||||||||||||||||
Diluted loss per share attributable to common shareholders | ||||||||||||||||||||||||
Continuing operations | $ | (9.85 | ) | $ | (12.61 | ) | ||||||||||||||||||
Diluted average common shares outstanding | 45.7 | 45.7 | ||||||||||||||||||||||
See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
5
Meredith Corporation
Unaudited Pro Forma Condensed Consolidated Statement of Earnings
Year Ended June 30, 2019
| (In millions except per share data) | (e) As Originally | (f) Reclassification | Pro Forma | |||||||||
Revenues | ||||||||||||
Advertising related | $ | 1,686.6 | $ | (448.6 | ) | $ | 1,238.0 | |||||
Consumer related | 1,416.8 | (316.4 | ) | 1,100.4 | ||||||||
Other | 85.1 | (9.1 | ) | 76.0 | ||||||||
Total revenues | 3,188.5 | (774.1 | ) | 2,414.4 | ||||||||
Operating expenses | ||||||||||||
Production, distribution, and editorial | 1,161.2 | (320.7 | ) | 840.5 | ||||||||
Selling, general, and administrative | 1,350.0 | (148.4 | ) | 1,201.6 | ||||||||
Acquisition, disposition, and restructuring related activities | 100.9 | (1.0 | ) | 99.9 | ||||||||
Depreciation and amortization | 247.6 | (32.1 | ) | 215.5 | ||||||||
Impairment of goodwill and other long-lived assets | 41.8 | — | 41.8 | |||||||||
Total operating expenses | 2,901.5 | (502.2 | ) | 2,399.3 | ||||||||
Income from operations | 287.0 | (271.9 | ) | 15.1 | ||||||||
Non-operating income, net | 24.2 | (2.2 | ) | 22.0 | ||||||||
Interest expense, net | (170.6 | ) | — | (170.6 | ) | |||||||
Income (loss) from continuing operations before income taxes | 140.6 | (274.1 | ) | (133.5 | ) | |||||||
Income tax benefit (expense) | (11.5 | ) | 69.9 | 58.4 | ||||||||
Earnings (loss) from continuing operations | $ | 129.1 | $ | (204.2 | ) | $ | (75.1 | ) | ||||
Earnings (loss) from continuing operations attributable to common shareholders | $ | 50.8 | $ | (204.2 | ) | $ | (153.4 | ) | ||||
Basic earnings (loss) per share attributable to common shareholders | ||||||||||||
Continuing operations | $ | 1.12 | $ | (3.39 | ) | |||||||
Basic average common shares outstanding | 45.3 | 45.3 | ||||||||||
Diluted earnings (loss) per share attributable to common shareholders | ||||||||||||
Continuing operations | $ | 1.12 | $ | (3.39 | ) | |||||||
Diluted average common shares outstanding | 45.5 | 45.3 | ||||||||||
See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
6
Meredith Corporation
Unaudited Pro Forma Condensed Consolidated Statement of Earnings
Year Ended June 30, 2018
| (In millions except per share data) | (e) As Originally | (f) Reclassification | Pro Forma | |||||||||
Revenues | ||||||||||||
Advertising related | $ | 1,190.7 | $ | (375.7 | ) | $ | 815.0 | |||||
Consumer related | 921.3 | (270.9 | ) | 650.4 | ||||||||
Other | 152.2 | (5.5 | ) | 146.7 | ||||||||
Total revenues | 2,264.2 | (652.1 | ) | 1,612.1 | ||||||||
Operating expenses | ||||||||||||
Production, distribution, and editorial | 868.0 | (287.7 | ) | 580.3 | ||||||||
Selling, general, and administrative | 987.5 | (149.2 | ) | 838.3 | ||||||||
Acquisition, disposition, and restructuring related activities | 170.1 | (0.4 | ) | 169.7 | ||||||||
Depreciation and amortization | 129.0 | (31.3 | ) | 97.7 | ||||||||
Impairment of goodwill and other long-lived assets | 22.7 | — | 22.7 | |||||||||
Total operating expenses | 2,177.3 | (468.6 | ) | 1,708.7 | ||||||||
Income (loss) from operations | 86.9 | (183.5 | ) | (96.6 | ) | |||||||
Non-operating income (expense), net | 0.7 | (2.5 | ) | (1.8 | ) | |||||||
Interest expense, net | (97.2 | ) | — | (97.2 | ) | |||||||
Loss from continuing operations before income taxes | (9.6 | ) | (186.0 | ) | (195.6 | ) | ||||||
Income tax benefit | 123.6 | 47.4 | 171.0 | |||||||||
Earnings (loss) from continuing operations | $ | 114.0 | $ | (138.6 | ) | $ | (24.6 | ) | ||||
Earnings (loss) from continuing operations attributable to common shareholders | $ | 81.0 | $ | (138.6 | ) | $ | (57.6 | ) | ||||
Basic earnings (loss) per share attributable to common shareholders | ||||||||||||
Continuing operations | $ | 1.80 | $ | (1.28 | ) | |||||||
Basic average common shares outstanding | 44.9 | 44.9 | ||||||||||
Diluted earnings (loss) per share attributable to common shareholders | ||||||||||||
Continuing operations | $ | 1.79 | $ | (1.28 | ) | |||||||
Diluted average common shares outstanding | 45.2 | 44.9 | ||||||||||
See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
7
Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements
| (a) | Amounts as originally reported by Meredith in its Quarterly Report on Form 10-Q for the quarter ended March 31, 2021. |
| (b) | Represents the elimination of the net assets and results of LMG, net of PeopleTV and MNI, both of which were historically reported under that segment but will be transferred to NMG immediately prior to the Transactions, together with certain other associated net assets that will be transferred in the Transactions. |
| (c) | Other transaction related pro forma adjustments are as follows: |
| (1) | On June 30, 2021, Meredith paid $67.0 million to redeem warrants to purchase up to 1,625,000 shares of Meredith Common Stock. The redemption of the warrants results in a $26.0 million reduction to the cash payment described in note (2) below. Income historically attributable to the redeemed warrants and eliminated in the pro forma condensed statements of earnings (loss) was as follows: |
(In millions) | Nine months ended March 31, 2021 | Year ended June 30, 2020 | ||||||
Income attributable to warrants | $ | 9.0 | $ | 2.8 | ||||
For the nine months ended March 31, 2021, an additional adjustment of $2.5 million is included to give effect to a redistribution of unallocated earnings to common shareholders that results from redemption of the warrants and settlement of other share-based compensation awards which historically participated in unallocated earnings. For the year ended June 30, 2020, an additional adjustment of $0.1 million is included to give effect to the elimination of dividends historically distributed on share-based compensation awards expected to be settled in the transaction.
| (2) | NMG SpinCo is required to make a cash payment of an amount that will result in the net debt (calculated as outstanding principal plus debt breakage fees minus LMG cash on hand to be transferred in the Transactions to Gray) being equal to $1,975.0 million, as adjusted for Meredith equity awards retired or issued prior to closing and as may be further adjusted downward for unpaid expenses incurred by Meredith. The cash payment depicted in the pro forma condensed financial statements is calculated as set forth below: |
| (In millions) | ||||||||
Carrying value of long-term debt at March 31, 2021 | ||||||||
Current portion of long-term debt | $ | 4.1 | ||||||
Long-term debt | 2,740.2 | |||||||
Total long-term debt | $ | 2,744.3 | ||||||
Unamortized discount and debt issuance costs relating to debt repaid in connection with the Transactions | 48.0 | |||||||
Debt breakage fees | 63.0 | |||||||
Pro forma closing net debt amount | 2,855.3 | |||||||
Adjusted target net debt | ||||||||
Target net debt | 1,975.0 | |||||||
Adjustment for warrant redemption – See note (1) | 26.0 | |||||||
less: Adjusted target net debt | (2,001.0 | ) | ||||||
Debt repaid with NMG SpinCo cash | 854.3 | |||||||
Adjustment for LMG cash on hand at March 31, 2021 | (0.1 | ) | ||||||
Net cash payment required | $ | 854.2 | ||||||
8
| (3) | Represents the impact of new debt facilities entered into by NMG SpinCo, as follows: |
| Pro forma outstanding as of March 31, 2021 (In millions) | Pro forma interest expense2 (In millions) | |||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
| Facility | Principal balance | Unamortized debt issuance costs | Carrying value | Interest terms1 | Nine months ended March 31, 2021 | Year ended June 30, 2020 | ||||||||||||||||||
$725 million term loan | $ | 725.0 | $ | (23.5 | ) | $ | 701.5 | L+5.25 | %3 | $ | 32.6 | $ | 44.3 | |||||||||||
$200 million revolving credit facility | 56.2 | (6.5 | ) | 49.7 | L+5.25 | % | 3.2 | 4.3 | ||||||||||||||||
Total long-term debt | 781.2 | (30.0 | ) | 751.2 | $ | 35.8 | $ | 48.6 | ||||||||||||||||
Current portion of long-term debt | (18.1 | ) | — | (18.1 | ) | |||||||||||||||||||
Long-term debt | $ | 763.1 | $ | (30.0 | ) | $ | 733.1 | |||||||||||||||||
1 L is an abbreviation for London Interbank Offered Rate (“LIBOR”) 2 Includes amortization of deferred debt issuance costs 3 LIBOR subject to a floor of 0.50% |
| |||||||||||||||||||||||
The extent to which the revolving credit facility is funded at closing will be dependent on the amount of the required cash payment described in note (2) above and available cash on hand as of that date, which will be impacted by factors including cash flows generated from or used in operations and collections of long-term receivables prior to closing. On a pro forma basis, giving consideration to historical cash on hand as of March 31, 2021, the required funding of the revolving credit facility is $56.2 million, calculated as follows:
| (In millions) | ||||||||
Debt repaid with NMG SpinCo cash | $ | 854.2 | ||||||
less: Cash on hand as of March 31, 2021 | (230.6 | ) | ||||||
Other cash expenditures | ||||||||
Warrant redemption | $ | 67.0 | ||||||
Estimated transaction fees | 32.0 | |||||||
Settlement of share-based awards | 3.6 | |||||||
Total other cash payments | 102.6 | |||||||
Pro forma NMG SpinCo cash balance as of March 31, 2021 | 25.0 | |||||||
Required net borrowing | 751.2 | |||||||
Debt issuance costs | 30.0 | |||||||
Required gross borrowing | 781.2 | |||||||
Term loan proceeds | (725.0 | ) | ||||||
Funding of revolving credit facility | $ | 56.2 | ||||||
9
Pro forma adjustments to interest expense are calculated as follows:
| (In millions) | Nine months ended March 31, 2021 | Year ended June 30, 2020 | ||||||
Interest expense on historical debt facilities | $ | (140.7 | ) | $ | (145.8 | ) | ||
Interest expense on new debt facilities | 35.8 | 48.6 | ||||||
Debt extinguishment costs | — | 63.0 | ||||||
Acceleration of amortization of debt issuance costs relating to debt repaid in connection with the Transactions | — | 48.0 | ||||||
Acceleration of amortization of debt issuance costs relating to terminated revolving credit facility ($0 outstanding) | — | 3.2 | ||||||
Net interest expense adjustment | $ | (104.9 | ) | $ | 17.0 | |||
The impact of a 1/8% increase or decrease in LIBOR on the new debt facilities would be as follows:
| Pro forma interest expense after a 1/8% change in LIBOR (In millions) | ||||||||||||||||
| Nine months ended March 31, 2021 | Year ended June 30, 2020 | |||||||||||||||
| Facility | Increase | Decrease | Increase | Decrease | ||||||||||||
$725 million term loan | $ | 32.6 | $ | 32.6 | $ | 44.3 | $ | 44.3 | ||||||||
$200 million revolving credit facility | 3.3 | 3.2 | 4.4 | 4.3 | ||||||||||||
Total | $ | 35.9 | $ | 35.8 | $ | 48.7 | $ | 48.6 | ||||||||
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| (4) | The gain on disposal is calculated as follows: |
| (In millions) | ||||||||
Cash consideration of $16.99 per share paid by Gray and distributed to holders of Meredith Common Stock and Meredith Class B Stock | $ | 824.0 | ||||||
Adjusted target net debt satisfied by Gray | 2,001.0 | |||||||
Net consideration | 2,825.0 | |||||||
LMG cash on hand sent to Gray in Transactions | 0.1 | |||||||
Assets and liabilities disposed of | ||||||||
Assets | $ | 1,094.2 | ||||||
Liabilities | (111.1 | ) | ||||||
less: Net assets disposed of | (983.1 | ) | ||||||
Unamortized discount and debt issuance costs | (51.2 | ) | ||||||
Debt breakage fees | (63.0 | ) | ||||||
Other transaction-related expenses | ||||||||
Estimated transaction fees1 | (32.0 | ) | ||||||
Settlement of share-based awards2 | (3.6 | ) | ||||||
Total other transaction-related expenses | (35.6 | ) | ||||||
Pro forma gain on disposal | $1,692.2 | |||||||
1 Transaction fees do not include advisor fees that are not contingent upon consummation of the Transactions 2 Amounts paid out for share-based compensation related to unvested NMG SpinCo awards held by LMG employees |
| |||||||
As a result of the legal form of the Transactions, it is anticipated that the gain on disposal will not result in incremental corporate income tax expense. Accordingly, the pro forma gain on sale has not been reduced by an income tax charge.
| (5) | Represents the establishment of a $76.2 million deferred tax asset related to NMG SpinCo unearned subscription revenue that is recognized for income tax purposes as a result of the Transactions and results in a corresponding income tax payable. |
| (6) | Represents cash distribution to shareholders of net proceeds from the Transactions. |
| (7) | Represents the effects of acceleration of share-based compensation expense for employees remaining with NMG SpinCo related to Meredith awards being canceled and paid out. |
| (8) | Represents reduction of share-based compensation expense for employees remaining with NMG SpinCo that is expected to result from the modification of awards in connection with the Transactions. |
| (9) | Represents income tax effects of all required adjustments using the Meredith’s statutory rate of 25.5% during the periods presented. |
| (10) | On June 30, 2020, Meredith redeemed all of its outstanding Series A preferred stock. Accordingly, the preferred stock is not contemplated in the Transactions. This adjustment gives effect to the redemption as of July 1, 2019 in the pro forma condensed statements of earnings (loss). |
| (d) | Represents incremental costs that, in the absence of action to avoid such costs (i.e., management’s intent to implement cost-savings initiatives to reduce the corporate burden on the business), would be expected to be incurred by NMG SpinCo as a standalone entity. The expenses include selling, general, and administrative corporate costs of Meredith that were historically allocated to LMG. |
| (e) | Amounts as originally reported by Meredith in its Annual Report on Form 10-K for the year ended June 30, 2020. |
| (f) | Represents the elimination from continuing operations of the results of LMG, net of PeopleTV and MNI, both of which were historically reported under that segment, but will be transferred to NMG immediately prior to the Transactions. As LMG is being disposed of in a spin-off transaction rather than by sale, those operations are not yet required to be presented as discontinued operations in the historical financial statements and accordingly are reclassified herein on a pro forma basis. |
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