Exhibit 99.2
TRIBUNE COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
INTRODUCTORY COMMENTS
The following unaudited pro forma condensed consolidated financial
statements give effect to the pending acquisition of Renaissance Communications
Corp. ("Renaissance") by Tribune Company ("Tribune" or the "Company"). On July
1, 1996, Tribune announced it had agreed to acquire Renaissance for $36 per
Renaissance common share, or approximately $1.1 billion in cash. The transaction
is subject to certain closing conditions, including Federal Communications
Commission and other regulatory approval, and is expected to close in 1997.
Tribune expects to finance the acquisition with medium-term borrowings and
commercial paper. The acquisition will be accounted for as a purchase.
The pro forma condensed consolidated statements of income presented
herein also show the effects of the March 1, 1996, sale of the Company's
holdings of QUNO Corporation ("QUNO"), a Canadian newsprint company, as part of
QUNO's merger with Donohue Inc. At the time of the merger, the Company owned
approximately 34% of QUNO's common stock plus $138.8 million in QUNO convertible
debt. Tribune's investment in QUNO was accounted for as a discontinued operation
in the Company's 1995 consolidated financial statements. The Company's gross
proceeds from the sale were approximately $427 million, consisting of $284
million in cash, $74 million in short-term notes and $69 million in Donohue
common stock. Tribune sold the notes and common stock for cash shortly after the
transaction. The proceeds were used to pay down debt and to fund 1996
acquisitions. The after-tax proceeds from the sale were approximately $331
million. Tribune recorded an after-tax gain on the sale of the discontinued
operations of QUNO of $89.3 million, or $1.45 per share on a primary basis, in
the first quarter of 1996.
The pro forma condensed consolidated statements of income also include
the effects of five 1996 acquisitions. These include the acquisition of Houston
television station KHTV in January 1996 for approximately $102 million in cash,
the acquisition of the remaining minority interest in Philadelphia television
station WPHL in February 1996 for approximately $23 million in cash, the
acquisition of two education publishers in March 1996-- Educational Publishing
Corporation (EPC) for $200 million in cash and NTC Publishing Group (NTC) for
$82 million in cash, and the acquisition of San Diego television station KTTY in
April 1996 for $70.5 million in cash. Further, the 1995 condensed consolidated
statement of income includes the pro forma effects of the 1995 acquisitions of
Jamestown Publishers-acquired in May for approximately $6 million in cash and
Everyday Learning-acquired in August for approximately $25 million in cash; the
1995 dispositions of Times Advocate Company-sold in July for $16 million in cash
and Compton's NewMedia-sold in December for an interest in SoftKey International
Inc. (see note 3 to the Company's audited consolidated financial statements for
the year ended December 31, 1995 for a full discussion of this transaction); and
various 1995 equity investments, including Qwest Broadcasting LLC (33%) and The
Warner Bros. Television Network (12.5%). All of these acquisitions were
accounted for as purchases. The 1995 pro forma statement of income also includes
the pro forma effect of a Renaissance television station exchange which occurred
in July 1995 whereby Renaissance exchanged its Denver television station and
approximately $34.5 million in cash for a Dallas station. The pro forma
condensed consolidated balance sheet as of March 31, 1996 includes the effect of
the Renaissance and KTTY acquisitions.
1
The pro forma information is based on historical financial statements
of the Company after adjusting for the transactions and assumptions as set forth
in the accompanying notes to the pro forma statements. The pro forma condensed
consolidated balance sheet assumes the transactions occurred at March 31, 1996,
and the pro forma condensed consolidated statements of income assume the
transactions occurred at the beginning of the periods presented. The pro forma
condensed consolidated statements of income only include income from continuing
operations. As QUNO was accounted for as a discontinued operation in Tribune's
1995 consolidated financial statements, all income from QUNO, including the
interest income on the convertible debenture, was reflected as income from
discontinued operations of QUNO and reported as a separate amount in the
consolidated statement of income. Therefore, the pro forma adjustments for QUNO
include only a pro forma interest expense adjustment for the proceeds received,
and the related tax effect.
The pro forma condensed consolidated financial statements may not be
indicative of the results that would have occurred if the transactions had
occurred during the periods presented or the respective dates of the financial
statements, as the case may be, or results which may be attained in the future.
The purchase accounting adjustments reflected in these pro forma condensed
consolidated financial statements are preliminary and will change as appraisals
are completed and more facts become known. The purchase accounting adjustments
represent the Company's preliminary determination of the adjustments necessary
to present fairly the Company's pro forma results of operations and financial
position and are based upon available information and certain assumptions
considered reasonable under the circumstances. The unaudited pro forma
statements do not reflect any synergies anticipated by the Company as a result
of the acquisitions. The pro forma condensed consolidated statements should be
read in association with the consolidated financial statements of the Company
and Renaissance as set forth in their Annual Reports on Form 10-K for the year
ended December 31, 1995 and their Quarterly Reports on Form 10-Q for the quarter
ended March 31, 1996.
2
TRIBUNE COMPANY AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1996
(Unaudited)
(In thousands of dollars)
Historical (1)
-------------------------------------- Pro Forma Tribune
Assets Tribune Renaissance KTTY Adjustments Pro Forma
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Current Cash and short-term investments $ 14,391 $ 13,402 $ 1,572 $ (14,974)(a) $ 14,391
Assets Accounts receivable, net 294,248 33,273 1,055 328,576
Inventories 90,076 90,076
Broadcast rights 176,315 56,208 850 233,373
Prepaid expenses and other 27,135 3,024 40 30,199
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Total current assets 602,165 105,907 3,517 (14,974) 696,615
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Properties Net properties 650,415 36,400 1,239 688,054
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Other Broadcast rights 172,080 53,250 225,330
Assets Intangible assets, net 1,182,240 156,995 1,155,022 (b) 2,494,257
Investments and other assets 826,089 6,786 832,875
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Total other assets 2,180,409 217,031 1,155,022 3,552,462
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Total assets $ 3,432,989 $ 359,338 $ 4,756 $ 1,140,048 $ 4,937,131
=====================================================================================================================
Historical (1)
-------------------------------------- Pro Forma Tribune
Liabilities and Shareholders' Equity Tribune Renaissance KTTY Adjustments Pro Forma
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Current Long-term debt due within one year $ 28,359 $ 14,137 $ 1,687 $ (15,824)(c) $ 28,359
Liabilities Contracts payable for broadcast rights 188,637 64,625 255 253,517
Accounts payable and other current
liabilities 516,672 12,989 8,247 (7,746)(d) 530,162
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Total current liabilities 733,668 91,751 10,189 (23,570) 812,038
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Long-Term Debt (less portions due within one year) 761,527 33,618 17,016 1,250,721 (e) 2,012,248
(50,634)(c)
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Other Deferred income taxes 197,865 4,263 110,000 (f) 312,128
Non-Current Contracts payable for broadcast rights 219,330 60,488 261 (261)(d) 279,818
Liabilities Compensation and other obligations 134,651 300 134,951
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Total other non-current liabilities 551,846 65,051 261 109,739 726,897
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Shareholders' Series B convertible preferred stock
Equity (without par value) 312,470 312,470
Common stock and additional paid-in capital 130,358 162,573 2,180 (164,753)(g) 130,358
Retained earnings 2,051,588 6,345 (24,890) 18,545 (g) 2,051,588
Treasury stock (at cost) (1,006,848) (1,006,848)
Unearned compensation related to ESOP (247,281) (247,281)
Unrealized gain on investments 145,661 145,661
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Total shareholders' equity 1,385,948 168,918 (22,710) (146,208) 1,385,948
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Total liabilities and shareholders' equity $ 3,432,989 $ 359,338 $ 4,756 $ 1,140,048 $ 4,937,131
======================================================================================================================
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
3
TRIBUNE COMPANY AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE FIRST QUARTER ENDED MARCH 31, 1996
(Unaudited)
Historical (2)
---------------------------------------- Pro Forma Tribune
(In thousands, except per share data) Tribune Renaissance Other (1) Adjustments Pro Forma
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Operating Publishing $ 327,333 $ $ $ $ 327,333
Revenues Broadcasting and Entertainment 187,195 45,347 3,901 236,443
Education 22,594 13,584 36,178
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Total operating revenues 537,122 45,347 17,485 599,954
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Operating Cost of sales (exclusive of items
Expenses shown below) 282,874 23,293 7,239 313,406
Selling, general and administrative 136,031 8,801 9,305 154,137
Depreciation and amortization of
intangible assets 31,142 3,771 224 8,968 (a) 44,105
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Total operating expenses 450,047 35,865 16,768 8,968 511,648
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Operating Profit 87,075 9,482 717 (8,968) 88,306
Interest income 8,550 291 8,841
Interest expense (10,955) (1,149) (980) (18,551)(b) (31,635)
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Income from Continuing Operations
Before Income Taxes 84,670 8,624 (263) (27,519) 65,512
Income taxes (34,291) (3,631) (289) 8,980 (c) (29,231)
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Income from Continuing Operations 50,379 4,993 (552) (18,539) 36,281
Preferred dividends, net of tax (4,696) (4,696)
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Net Income from Continuing Operations
Attributable to Common Shares $ 45,683 $ 4,993 $ (552) $ (18,539) $ 31,585
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Net Income Per Share from Continuing Operations
Primary $ .74 $ .51
Fully diluted $ .69 $ .48
Shares Outstanding
Primary 61,716 61,716
Fully diluted 68,165 68,165
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
4
TRIBUNE COMPANY AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(Unaudited)
Historical (3)
(In thousands, ----------------------------------------- (2) Pro Forma Adjustments Tribune
except per share data) Tribune Renaissance Other (1) Dispositions Acquisitions Dispositions Pro Forma
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Operating Publishing $ 1,312,767 $ $ $ (8,501) $ $ $ 1,304,266
Revenues Broadcasting and
Entertainment 828,806 179,218 39,729 8,066 (a) 1,055,819
Education 103,101 110,537 (26,366) 187,272
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Total operating
revenues 2,244,674 179,218 150,266 (34,867) 8,066 2,547,357
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Operating Cost of sales
Expenses (exclusive of
items shown below) 1,164,609 80,150 61,861 (19,257) (1,339)(a) 1,286,024
Selling, general and
administrative 553,868 35,933 61,775 (24,652) 833 (a) 627,757
Depreciation and
amortization of
intangible assets 120,986 15,756 2,050 (4,455) 40,792 (b) 174,791
(338)(a)
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Total operating
expenses 1,839,463 131,839 125,686 (48,364) 39,948 2,088,572
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Operating Profit 405,211 47,379 24,580 13,497 (31,882) 458,785
Other 14,672 18,964 600 (c) 34,236
Interest income 14,465 1,356 4 3,559 (d) 19,384
Interest expense (21,814) (7,137) (6,079) (103,051)(e) 24,346 (f) (113,735)
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Income from Continuing Operations
Before Income Taxes 412,534 60,562 18,505 13,497 (131,374) 24,946 398,670
Income taxes (167,076) (11,526) (5,244) (5,258) 28,080 (g) (9,793)(g) (170,817)
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Income from Continuing Operations 245,458 49,036 13,261 8,239 (103,294) 15,153 227,853
Preferred dividends, net of tax (18,841) (18,841)
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Income from Continuing Operations
Attributable to Common Shares $ 226,617 $ 49,036 $ 13,261 $ 8,239 $ (103,294) $ 15,153 $ 209,012
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Net Income Per Share from Continuing Operations
Primary $ 3.50 $ 3.23
Fully diluted $ 3.22 $ 2.98
Shares Outstanding
Primary 64,790 64,790
Fully diluted 71,506 71,506
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
5
TRIBUNE COMPANY
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
A. Unaudited Pro Forma Condensed Consolidated Balance Sheet as of
March 31, 1996.
(1) This column includes the pro forma adjustments to the unaudited condensed
consolidated balance sheet and reflects the following:
(a) The existing cash of the businesses acquired is assumed to immediately
reduce the debt incurred to finance the acquisitions.
(b) The excess of acquisition cost over the fair value of net tangible
assets acquired (i.e., goodwill and other intangible assets). This
adjustment assumes no adjustments to net properties, broadcast rights,
or other assets and liabilities. The allocation of purchase price for
the Renaissance acquisition is very preliminary and will change as
appraisals are completed and more facts become known.
(c) The existing debt of acquired businesses is assumed to be repaid at
acquisition date.
(d) The elimination of liabilities not assumed in the acquisition of
television station KTTY-San Diego.
(e) The issuance of approximately $1.2 billion in medium-term notes and
commercial paper necessary to finance the acquisitions. This amount is
made up of the following: Renaissance ($1.1 billion), KTTY ($71
million) and estimated acquisition costs ($10 million).
(f) The estimated deferred taxes related to identifiable intangible assets
acquired.
(g) The elimination of the acquired businesses' equity accounts.
B. Unaudited Pro Forma Condensed Consolidated Statement of Income for the
First Quarter Ended March 31, 1996.
(1) The amounts in this column represent the historical first quarter 1996
results of operations of KTTY and the results of operations for Tribune's
first quarter 1996 acquisitions (KHTV, EPC and NTC) from the beginning of
the year until their respective dates of acquisition.
(2) This column includes the pro forma adjustments to the unaudited condensed
consolidated statement of income for the first quarter ended March 31, 1996
and reflects the following:
6
(a) The amortization of the estimated excess of acquisition cost over the
fair value of net tangible assets acquired. The assumed lives for this
excess range from 5 to 40 years with most over 40, including all of the
Renaissance excess. This includes an adjustment for the first quarter
1996 acquisitions to reflect a full quarter of expense. The allocation
of purchase price for the Renaissance acquisition is very preliminary
and will change as appraisals are completed and more facts become
known.
(b) Additional interest expense for the 1996 acquisitions resulting from
increased debt levels. The Renaissance acquisition is assumed to be
financed with both commercial paper and medium-term notes, at an
average interest rate of approximately 7%. The other 1996 acquisitions
are assumed to be financed with commercial paper at an average rate of
5.44%. This pro forma adjustment also includes an amount for additional
interest expense for the acquisitions made during the first quarter of
1996, as if completed at the beginning of the year, and the elimination
of $2.1 million of interest expense incurred by the acquired businesses
and included in their historical financial statements. This represents
interest expense on debt that is assumed to be repaid at the date of
acquisition. Finally, the adjustment also includes $3.9 million of
interest savings from the QUNO proceeds, assuming they had been
received at the beginning of the year. The QUNO proceeds were
approximately $427 million and were assumed to be used to finance the
1996 acquisitions. The interest expense savings from the QUNO proceeds
was calculated at the average first quarter 1996 commercial paper rate
of 5.44%.
(c) This adjustment represents the income tax effect of the pro forma
adjustments and a pro forma amount for income taxes on NTC's and KTTY's
earnings. The effective tax rate on the pro forma adjustments differs
from the Company's federal statutory tax rate of 35% due to
non-deductible amortization of intangible assets and state taxes. NTC
was a partnership and as such recorded no income tax expense in the
period in 1996 prior to Tribune's acquisition. If the Company had
acquired NTC at the beginning of the period, income tax expense would
have been recorded. KTTY recorded no tax benefit related to its 1996
pre-acquisition loss. Tribune would have realized the benefit of such
loss, therefore the tax benefit would have been recorded.
C. Unaudited Pro Forma Condensed Consolidated Statement of Income for the
Fiscal Year Ended December 31, 1995.
(1) The amounts in this column represent the historical 1995 results of
operations of Tribune's 1996 acquisitions - KHTV, KTTY, EPC and NTC. This
column also includes the results of operations of the 1995 acquisitions
from the beginning of 1995 until their respective dates of acquisition, and
an estimate of equity income/loss for those equity method investments
entered into during 1995, for the portion of 1995 preceding the Company's
investment.
(2) The amounts in this column represent the historical 1995 results of
operations of Times Advocate Company and Compton's NewMedia until their
respective dates of sale. These results exclude the non-recurring pretax
loss of $7.5 million recorded on the Times Advocate sale and the
non-recurring pretax gain of $6.9 million recorded on the Compton's sale.
Income before income taxes does not reflect any allocations of corporate
administration and interest expenses.
7
(3) These columns include the pro forma adjustments to the 1995 unaudited
condensed consolidated statement of income and reflect the following:
(a) The pro forma effect, as disclosed in the Renaissance consolidated
financial statements for the year ended December 31, 1995 and in a Form
8-K dated June 30, 1995, of the Renaissance television station swap.
Effective July 3, 1995, Renaissance exchanged its KDVR-Denver station
and approximately $34.5 million in cash for the KDAF-Dallas station.
(b) The amortization of the estimated excess of acquisition cost over the
fair value of net tangible assets acquired. The assumed lives for this
excess range from 5 to 40 years with most over 40, including all of the
Renaissance excess. This includes an adjustment for the 1995
acquisitions to reflect a full year of expense. The allocation of
purchase price for the Renaissance acquisition is very preliminary and
will change as appraisals are completed and more facts become known.
(c) The non-recurring net pretax loss for the Times Advocate and Compton's
dispositions included in the 1995 historical consolidated statement of
income. Tribune recorded a $7.5 million loss on the sale of Times
Advocate and a $6.9 million gain on the sale of Compton's. The 1995 pro
forma income statement has not been adjusted to remove a non-recurring
gain included in the Renaissance consolidated financial statements for
1995 of $19 million that relates to a settlement, net of expenses,
received by Renaissance in 1995 for an acquisition that did not occur
because of a higher offer. This amount contributes approximately $.18
per share to the pro forma primary net income per share in 1995.
(d) Interest income from the Qwest convertible notes. The Company's
investment in Qwest is comprised of a $7 million equity interest (33%)
and $63 million in 6% convertible notes.
(e) Additional interest expense for the 1996 acquisitions resulting from
increased debt levels. The Renaissance acquisition is assumed to be
financed with both commercial paper and medium-term notes, at an
average interest rate of approximately 7%. The other 1996 acquisitions
are assumed to be financed with commercial paper at an average rate of
5.9%. The 1996 acquisitions and investments that were assumed to have
occurred at the beginning of the year totaled $1.6 billion. This pro
forma adjustment also includes an amount for additional interest
expense for the acquisitions and investments made during 1995, as if
completed at the beginning of the year, and the elimination of $13.2
million of interest expense incurred by the acquired businesses
included in their historical financial statements. This represents
interest expense on debt that was either repaid at the date of
acquisition or not assumed by Tribune.
(f) Interest savings from the QUNO and Times Advocate proceeds. These
proceeds were assumed to be used to finance the acquisitions, and
therefore the interest expense savings was calculated at an average
commercial paper rate of 5.9%.
(g) These adjustments represent the income tax effects of the pro forma
adjustments and a pro forma amount for income taxes on Renaissance's,
NTC's and KTTY's earnings. The effective tax rate on the pro forma
adjustments differs from the Company's federal statutory tax rate of
35% due to non-deductible amortization of intangible assets and state
taxes. Renaissance reversed
8
$11.8 million of a tax valuation allowance in 1995. Under Tribune's
purchase accounting, this valuation allowance would not have reversed
into Tribune's income in 1995. Therefore, this $11.8 million is
eliminated as a pro forma adjustment. NTC was a partnership and as such
recorded no income tax expense. If the Company had acquired NTC at the
beginning of 1995, income tax expense would have been recorded. KTTY
recorded no tax benefit related to its 1995 loss. Tribune would have
realized the benefit of such loss, therefore the tax benefit would have
been recorded.
9