Exhibit 99.2
TRIBUNE COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
INTRODUCTORY COMMENTS
The following unaudited pro forma condensed consolidated financial
statements give pro forma 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 early 1997. Tribune expects to finance the acquisition with medium
to long-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 pro forma 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. In 1996, Tribune recorded an after-tax gain on the
sale of the discontinued operations of QUNO of $89.3 million, or $1.46 per share
on a primary basis.
The pro forma condensed consolidated statements of income also include
the pro forma 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 approximately $200 million in cash
and NTC Publishing Group (NTC) for approximately $82 million in cash, and the
acquisition of San Diego television station KSWB (formerly KTTY) in April 1996
for approximately $70.5 million in cash. Further, the 1995 pro forma 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 The Learning Company, Inc. (formerly 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 September 29, 1996 includes the pro forma effect of the
Renaissance acquisition.
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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 September 29,
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 at 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 September 29, 1996 for Tribune Company and September 30, 1996
for Renaissance.
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TRIBUNE COMPANY AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 29, 1996
(Unaudited)
(In thousands of dollars)
Historical (1)
-------------------------- Pro Forma Tribune
Assets Tribune Renaissance Adjustments Pro Forma
- -----------------------------------------------------------------------------------------------------------------------------
Current Cash and short-term investments $ 14,040 $ 13,238 $ (13,238)(a) $ 14,040
Assets Accounts receivable, net 365,723 37,667 403,390
Inventories 76,804 76,804
Broadcast rights 163,002 70,661 233,663
Prepaid expenses and other 22,967 3,747 26,714
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Total current assets 642,536 125,313 (13,238) 754,611
- -----------------------------------------------------------------------------------------------------------------------------
Properties Net properties 640,105 35,049 675,154
- -----------------------------------------------------------------------------------------------------------------------------
Other Broadcast rights 188,993 57,046 246,039
Assets Intangible assets, net 1,243,092 152,948 1,069,029 (b) 2,465,069
Investments and other assets 807,086 5,591 812,677
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Total other assets 2,239,171 215,585 1,069,029 3,523,785
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Total assets $3,521,812 $ 375,947 $1,055,791 $4,953,550
==============================================================================================================
Historical (1)
-------------------------- Pro Forma Tribune
Liabilities and Shareholders' Equity Tribune Renaissance Adjustments Pro Forma
- -----------------------------------------------------------------------------------------------------------------------------
Current Long-term debt due within one year $ 29,301 $ 10,027 $ (10,027)(c) $ 29,301
Liabilities Contracts payable for broadcast rights 177,891 80,386 258,277
Accounts payable and other current
liabilities 401,475 12,573 414,048
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Total current liabilities 608,667 102,986 (10,027) 701,626
- -----------------------------------------------------------------------------------------------------------------------------
Long-Term Debt (less portions due within one year) 896,553 16,304 1,158,232 (d) 2,054,785
(16,304)(c)
- -----------------------------------------------------------------------------------------------------------------------------
Other Deferred income taxes 193,918 4,263 110,000 (e) 308,181
Non-Current Contracts payable for broadcast rights 234,120 66,284 300,404
Liabilities Compensation and other obligations 135,215 135,215
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Total other non-current liabilities 563,253 70,547 110,000 743,800
- -----------------------------------------------------------------------------------------------------------------------------
Shareholders' Series B convertible preferred stock 312,470 312,470
Equity Common stock and additional paid-in capital 138,713 164,573 (164,573)(f) 138,713
Retained earnings 2,156,071 23,537 (23,537)(f) 2,156,071
Treasury stock (at cost) (1,019,893) (1,019,893)
Unearned compensation related to ESOP (245,532) (245,532)
Note receivable from warrant exercise (2,000) 2,000 (f)
Unrealized gain on investments 111,510 111,510
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Total shareholders' equity 1,453,339 186,110 (186,110) 1,453,339
--------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $3,521,812 $ 375,947 $1,055,791 $4,953,550
==============================================================================================================
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
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TRIBUNE COMPANY AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE QUARTERS ENDED SEPTEMBER 29, 1996
(Unaudited)
Historical (2)
--------------------------------------- Pro Forma Tribune
(In thousands, except per share data) Tribune Renaissance Other (1) Adjustments Pro Forma
- --------------------------------------------------------------------------------------------------------------------------------
Operating Publishing $ 980,612 $ $ $ $ 980,612
Revenues Broadcasting and Entertainment 663,380 149,384 4,413 817,177
Education 153,384 13,584 166,968
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Total operating revenues 1,797,376 149,384 17,997 1,964,757
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Operating Cost of sales (exclusive of
Expenses items shown below) 901,873 70,868 7,611 980,352
Selling, general and administrative 443,727 27,273 9,561 480,561
Depreciation and amortization of
intangible assets 103,515 11,253 235 22,318 (a) 137,321
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Total operating expenses 1,449,115 109,394 17,407 22,318 1,598,234
- --------------------------------------------------------------------------------------------------------------------------------
Operating Profit 348,261 39,990 590 (22,318) 366,523
Interest income 24,075 976 25,051
Interest expense (34,680) (2,737) (1,084) (57,146)(b) (95,647)
- --------------------------------------------------------------------------------------------------------------------------------
Income from Continuing Operations
Before Income Taxes 337,656 38,229 (494) (79,464) 295,927
Income taxes (136,751) (15,634) (289) 25,700 (c) (126,974)
- --------------------------------------------------------------------------------------------------------------------------------
Income from Continuing Operations 200,905 22,595 (783) (53,764) 168,953
Preferred dividends, net of tax (14,090) (14,090)
- --------------------------------------------------------------------------------------------------------------------------------
Net Income from Continuing Operations
Attributable to Common Shares $ 186,815 $ 22,595 $ (783) $ (53,764) $ 154,863
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Net Income Per Share from Continuing Operations
Primary $ 3.04 $ 2.52
Fully diluted $ 2.79 $ 2.33
Shares Outstanding
Primary 61,360 61,360
Fully diluted 68,255 68,255
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
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TRIBUNE COMPANY AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(Unaudited)
Historical (3)
--------------------------------- (2) Pro Forma Adjustments Tribune
(In thousands, except per share data) Tribune Renaissance Other(1) Dispositions Acquisitions Dispositions Pro Forma
- ------------------------------------------------------------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Cost of sales (exclusive of
Expenses 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
- ------------------------------------------------------------------------------------------------------------------------------------
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)
- ------------------------------------------------------------------------------------------------------------------------------------
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)
- ------------------------------------------------------------------------------------------------------------------------------------
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)
- ------------------------------------------------------------------------------------------------------------------------------------
Income from Continuing Operations
Attributable to Common Shares $ 226,617 $ 49,036 $ 13,261 $ 8,239 $(103,294) $15,153 $ 209,012
- ------------------------------------------------------------------------------------------------------------------------------------
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.
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TRIBUNE COMPANY
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
A. Unaudited Pro Forma Condensed Consolidated Balance Sheet as of
September 29, 1996.
(1) This column includes the pro forma adjustments to the September 29, 1996
unaudited condensed consolidated balance sheet and reflects the following:
(a) The existing cash of Renaissance is assumed to immediately reduce the
debt incurred to finance the acquisition.
(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 Renaissance is assumed to be repaid at acquisition
date.
(d) The issuance of approximately $1.2 billion in medium to long-term notes
and commercial paper necessary to finance the Renaissance acquisition
and to repay debt assumed.
(e) The estimated deferred taxes related to identifiable intangible assets
acquired.
(f) The elimination of Renaissance's equity accounts.
B. Unaudited Pro Forma Condensed Consolidated Statement of Income for the
First Three Quarters Ended September 29, 1996.
(1) The amounts in this column represent the historical 1996 results of
operations for Tribune's 1996 acquisitions (KHTV, EPC, NTC and KSWB) 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 three quarters ended
September 29, 1996 and reflects the following:
(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 1996
acquisitions to reflect nine months 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.
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(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 to long-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 5.4%. This pro forma adjustment also includes an amount
for additional interest expense for the acquisitions made during the
first three quarters of 1996, as if completed at the beginning of the
year, and the elimination of $3.8 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 an average commercial paper rate of
5.4%.
(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 KSWB'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. KSWB 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, KSWB, 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.
(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.
7
(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 to long-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 KSWB'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 $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. KSWB 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.
8