Exhibit 99.2
TRIBUNE COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE FISCAL YEAR ENDED DECEMBER 29, 1996
INTRODUCTORY COMMENTS
On March 25, 1997, Tribune Company (the "Company") completed its
acquisition of Renaissance Communications Corp. ("Renaissance") for
approximately $1.1 billion in cash, or $36 per Renaissance common share.
Renaissance was a publicly traded company owning six television stations -WB
affiliates KDAF-Dallas and WDZL-Miami and Fox affiliates KTXL-Sacramento,
WXIN-Indianapolis, WTIC-Hartford and WPMT-Harrisburg. The Company financed the
acquisition with a combination of available cash, commercial paper and medium-
to long-term debt. The acquisition was accounted for as a purchase.
The Federal Communications Commission ("FCC") order granting the
Company's application to acquire the Renaissance stations contained waivers of
two FCC rules. First, the FCC temporarily waived its duopoly rule relating to
the overlap of WTIC's and WPMT's broadcast signals with those of other Tribune
stations. The temporary waivers were granted subject to the outcome of pending
FCC rulemaking that is expected to make duopoly waivers unnecessary. Second, the
FCC granted a 12-month waiver of its rule prohibiting television/newspaper
cross-ownership in the same market, relating to the Miami television station and
the Fort Lauderdale Sun-Sentinel. The Company has appealed the FCC's ruling on
the cross-ownership issue and a petition requesting a rulemaking procedure has
been filed with the FCC since the FCC issued the order. The Company cannot
predict the outcome of such FCC rulemaking or any such appeal.
The following unaudited pro forma condensed consolidated statement of
income gives pro forma effect to the acquisition of Renaissance by Tribune for
the fiscal year ended December 29, 1996 and includes the results of the Miami
station.
The pro forma condensed consolidated statement of income presented
herein also shows 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 1996 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 $.73 per share
on a primary basis.
The pro forma condensed consolidated statement of income also includes
the pro forma effects of five 1996 acquisitions, one 1997 disposition and one
1997 investment transaction. The 1996 acquisitions 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 $205 million in cash and NTC
Publishing Group ("NTC") for approximately $83 million in cash, and the
acquisition of San Diego television station KSWB in April 1996 for approximately
$72 million in cash. The 1997 disposition related to the Company's
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sale of its Farm Journal subsidiary for $17 million in cash at the beginning of
the second quarter. The 1997 investment transaction related to the Company's
March 1997 agreement to exercise an option for $21 million to increase its
equity ownership in The WB Television Network to 21.9% from 12.5%. The
Renaissance acquisition was reflected in the most recent Tribune Company
consolidated balance sheet filed with the Form 10-Q for the first quarter ended
March 30, 1997. Accordingly, this Form 8-K does not include a pro forma
condensed consolidated balance sheet.
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 statement of income. The pro forma
condensed consolidated statement of income assumes the transactions occurred at
the beginning of 1996 and only includes income from continuing operations. As
QUNO was accounted for as a discontinued operation in Tribune's 1996
consolidated financial statements, 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 statement of income may not be
indicative of the results that would have occurred if the transactions had
occurred at the beginning of 1996 or of results that may be attained in the
future. The purchase accounting for the Renaissance acquisition reflected in the
pro forma condensed consolidated statement of income is preliminary and will
likely change as appraisals are finalized and more facts become known. No
material adjustments are expected. The unaudited pro forma statement of income
does not reflect any synergies anticipated by the Company as a result of the
acquisitions. The pro forma condensed consolidated statement of income should be
read in association with the consolidated financial statements of Tribune
Company as set forth in its Annual Report on Form 10-K for the year ended
December 29, 1996 and its Form 10-Q for the quarter ended March 30, 1997, and of
Renaissance as set forth in Exhibit 99.1 hereto.
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TRIBUNE COMPANY AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE FISCAL YEAR ENDED DECEMBER 29, 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 $ 1,336,639 $ $ $ $ 1,336,639
Revenues Broadcasting and Entertainment 876,750 204,159 (22,733) (19,091)(a) 1,039,085
Education 192,316 13,584 205,900
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Total operating revenues 2,405,705 204,159 (9,149) (19,091) 2,581,624
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Operating Cost of sales (exclusive of items shown below) 1,172,664 95,098 (7,029) (25,383)(a) 1,235,350
Expenses Selling, general and administrative 600,072 38,036 8,501 6,292 (a) 652,901
Depreciation and amortization of intangible assets 142,893 14,933 (857) 30,214 (b) 187,183
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Total operating expenses 1,915,629 148,067 615 11,123 2,075,434
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Operating Profit 490,076 56,092 (9,764) (30,214) 506,190
Interest income 32,116 1,317 (4,017)(c) 29,416
Interest expense (47,779) (3,152) (1,084) (58,239)(d) (110,254)
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Income from Continuing Operations
Before Income Taxes 474,413 54,257 (10,848) (92,470) 425,352
Income taxes (191,663) (21,998) 3,708 30,212 (e) (179,741)
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Income from Continuing Operations 282,750 32,259 (7,140) (62,258) 245,611
Preferred dividends, net of tax (18,786) (18,786)
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Net Income from Continuing Operations
Attributable to Common Shares $ 263,964 $ 32,259 $ (7,140) $ (62,258) $ 226,825
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Net Income Per Share from Continuing Operations
Primary $ 2.15 $ 1.85
Fully diluted $ 1.97 $ 1.70
Shares Outstanding
Primary 122,842 122,842
Fully diluted 136,653 136,653
See Notes to Unaudited Pro Forma Condensed Consolidated Statement of Income.
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TRIBUNE COMPANY
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF INCOME
FOR THE FISCAL YEAR ENDED DECEMBER 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 and
an estimate of the incremental equity losses for the increase in ownership
in The WB Network to 21.9% from 12.5%. This column also includes the
reversal of the 1996 historical results of operations of Farm Journal,
which was sold in 1997.
(2) This column includes the pro forma adjustments to the unaudited condensed
consolidated statement of income for the fiscal year ended December 29,
1996 and reflects the following:
(a) The estimated adjustment to conform Renaissance accounting for barter
broadcast rights and national sales rep commissions consistent with
Tribune's methodology. This adjustment has no impact on operating
profit.
(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 1996
acquisitions to reflect twelve months of expense. The allocation of
purchase price for the Renaissance acquisition is preliminary and will
likely change as appraisals are finalized and more facts become known.
(c) The elimination of Renaissance interest income in 1996 as all available
cash is assumed to pay down commercial paper. The adjustment also
reflects the elimination of interest income earned on the amount of
debt prefunded by Tribune in 1996 for the Renaissance acquisition.
(d) The additional interest expense 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 5.8%. The 1996 acquisitions and the increased WB
investment are assumed to be financed with commercial paper at an
average rate of 5.4%. This pro forma adjustment also includes the
elimination of $4.2 million of interest expense incurred by the
acquired businesses and included in their historical financial
statements on debt that is assumed to be repaid at the date of
acquisition. Finally, the adjustment also includes $4.8 million of
interest savings from the QUNO and Farm Journal proceeds, assuming they
had been received at the beginning of the year. The QUNO proceeds were
approximately $427 million and Farm Journal proceeds were approximately
$17 million. The interest expense savings from the QUNO and Farm
Journal proceeds was calculated at an average commercial paper rate of
5.4%. The effect on pro forma net income of a 1/8% change in the
variable debt interest rate is $.6 million.
(e) 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.
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