-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UZ0DSV1K9Ccfv9bztQSnSOW1QxZwfyXPXdttYkJBw2lJyrUpsdO9/PgQZ88nsitl ZJXfwQmg2T+3UM1rg+3E5Q== 0000726513-96-000031.txt : 19960729 0000726513-96-000031.hdr.sgml : 19960729 ACCESSION NUMBER: 0000726513-96-000031 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960726 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960726 SROS: CSX SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRIBUNE CO CENTRAL INDEX KEY: 0000726513 STANDARD INDUSTRIAL CLASSIFICATION: NEWSPAPERS: PUBLISHING OR PUBLISHING & PRINTING [2711] IRS NUMBER: 361880355 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08572 FILM NUMBER: 96599510 BUSINESS ADDRESS: STREET 1: 435 N MICHIGAN AVE CITY: CHICAGO STATE: IL ZIP: 60611 BUSINESS PHONE: 3122229100 8-K 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 July 26, 1996 ------------- Date of Report TRIBUNE COMPANY --------------- (Exact name of registrant as specified in its charter) Delaware -------- (State or other jurisdiction of incorporation) 1-8572 36-1880355 ------ ---------- (Commission File Number) (IRS Employer Identification No.) 435 North Michigan Avenue, Chicago, Illinois 60611 - -------------------------------------------- ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (312) 222-9100 Item 7. Financial Statements and Exhibits --------------------------------- (a) Financial Statements of Businesses Acquired On July 1, 1996, Tribune Company announced that it had entered into an Agreement and Plan of Merger to acquire Renaissance Communications Corp. The following financial statements of Renaissance Communications Corp. required by this Item 7(a) are included herein as Exhibit 99.1 and incorporated herein by reference: o the Annual Report on Form 10-K of Renaissance Communications Corp. for the year ended December 31, 1995 and o the Quarterly Report on Form 10-Q of Renaissance Communications Corp. for the quarter ended March 31, 1996. (b) Pro forma financial information The unaudited pro forma condensed consolidated balance sheet as of March 31,1996 and unaudited pro forma condensed consolidated income statements for the fiscal year ended December 31, 1995 and the quarter ended March 31, 1996, filed as Exhibit 99.2 hereto and incorporated by reference herein. (c) Exhibits 23 Consent of Ernst & Young LLP. 99.1 Financial statements of Renaissance Communications Corp. for the year ended December 31, 1995 and for the quarter ended March 31, 1996. 99.2 Unaudited pro forma condensed consolidated balance sheet as of March 31,1996 and unaudited pro forma condensed consolidated income statements for the fiscal year ended December 31, 1995 and the quarter ended March 31, 1996. 1 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TRIBUNE COMPANY By /s/ R. Mark Mallory ------------------- R. Mark Mallory Vice President and Controller July 26, 1996 2 EXHIBIT INDEX ------------- Exhibit No. Exhibit Description - ----------- ------------------- 23 Consent of Ernst & Young LLP. 99.1 Financial statements of Renaissance Communications Corp. set forth in the Annual Report on Form 10-K of Renaissance Communications Corp. for the year ended December 31, 1995 and Quarterly Report on Form 10-Q of Renaissance Communications Corp. for the quarter ended March 31, 1996. 99.2 Unaudited pro forma condensed consolidated balance sheet as of March 31,1996 and unaudited pro forma condensed consolidated income statements for the fiscal year ended December 31, 1995 and the quarter ended March 31, 1996. 3 EX-23 2 CONSENT OF ERNST & YOUNG LLP Exhibit 23 Consent of Independent Auditors We hereby consent to the inclusion in Form 8-K (Current Report) of Tribune Company dated July 26, 1996 and to the incorporation by reference in Forms S-3 (Registration No. 33-45793 and Registration No. 333-02831) of Tribune Company of our report dated February 9, 1996 with respect to the consolidated financial statements of Renaissance Communications Corp. included in its Annual Report and Form 10-K for the year ended December 31, 1995, filed with the Securities and Exchange Commission. /s/ ERNST & YOUNG LLP New York, New York July 26, 1996 EX-99.1 3 RENAISSANCE CONSOLIDATED FINANCIAL STATEMENTS Renaissance Communications Corp. Consolidated Financial Statements Years ended December 31, 1995, 1994 and 1993 Contents Report of Independent Auditors............................................ 1 Consolidated Balance Sheets............................................... 2 Consolidated Statements of Income......................................... 4 Consolidated Statements of Changes in Shareholders' Equity (Deficit)...... 5 Consolidated Statements of Cash Flows..................................... 7 Notes to Consolidated Financial Statements................................ 9 Report of Independent Auditors To the Shareholders and Board of Directors Renaissance Communications Corp. We have audited the accompanying consolidated balance sheets of Renaissance Communications Corp. as of December 31, 1995 and 1994 and the consolidated statements of income, changes in shareholders' equity (deficit), and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Renaissance Communications Corp. at December 31, 1995 and 1994 and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1995 in conformity with generally accepted accounting principles. ERNST & YOUNG LLP February 9, 1996 New York, New York 1 Renaissance Communications Corp. Consolidated Balance Sheets
December 31, 1995 1994 ------------------------------------ (In Thousands) Assets Current assets: Cash and cash equivalents $ 9,912 $ 10,129 Accounts receivable, less allowance for doubtful accounts of $2,128,000 and $1,828,000 in 1995 and 1994, respectively 41,258 37,341 Barter program rights 29,247 19,049 Program rights 35,451 26,301 Prepaid expenses and other current assets 3,464 3,871 ------------------------------------ Total current assets 119,332 96,691 Property, plant and equipment, net of accumulated depreciation 37,215 42,034 Barter program rights 14,247 6,699 Program rights 45,445 25,822 Intangible assets, net of accumulated amortization 158,858 132,864 Deferred financing costs, net of accumulated amortization of $2,642,000 and $2,139,000 in 1995 and 1994, respectively 3,131 4,505 Note receivable and other assets 4,331 5,029 ------------------------------------ Total assets $ 382,559 $313,644 ====================================
See accompanying notes. 2
December 31, 1995 1994 ----------------------------------- (In Thousands) Liabilities and shareholders' equity Current liabilities: Accounts payable $ 2,464 $ 2,974 Accrued expenses 8,325 7,059 Senior secured term loan 16,209 27,495 Barter program payable 29,247 19,049 Program payable 41,247 29,206 ----------------------------------- Total current liabilities 97,492 85,783 Senior secured term loan and revolving credit facility 47,546 71,755 Barter program payable 14,247 6,699 Program payable 54,563 34,843 Deferred income taxes 4,263 - Other noncurrent liabilities 301 302 Common shareholders' equity: Common Stock, par value $.01 per share, authorized 37,500,000 shares, issued and outstanding 30,037,206 and 19,792,816 shares in 1995 and 1994, respectively 300 198 Additional paid-in capital 162,273 161,526 Accumulated earnings (deficit) 1,574 (47,462) ----------------------------------- Total shareholders' equity 164,147 114,262 ----------------------------------- Total liabilities and shareholders' equity $ 382,559 $ 313,644 ===================================
3 Renaissance Communications Corp. Consolidated Statements of Income
Year ended December 31, 1995 1994 1993 ------------------------------------------------ (In Thousands, except per share amounts) Net revenue $148,062 $133,658 $105,570 Barter revenue 31,156 27,564 21,024 ------------------------------------------------ Total revenue 179,218 161,222 126,594 Operating expenses 14,628 13,685 10,979 Selling, general and administrative expenses 35,933 46,059 32,455 Amortization of program rights 35,585 30,179 30,262 Amortization of barter program rights 29,937 26,235 19,533 Depreciation and amortization 15,756 17,567 15,781 ------------------------------------------------ Total operating expenses 131,839 133,725 109,010 ------------------------------------------------ Profit from operations 47,379 27,497 17,584 Other income (expense) net 18,964 536 1,042 Interest income 1,356 949 686 Interest expense 7,137 10,254 13,115 ------------------------------------------------ Income before provision for income taxes and extraordinary item 60,562 18,728 6,197 Provision for income taxes 11,526 2,547 834 ------------------------------------------------ Income before extraordinary item 49,036 16,181 5,363 Extraordinary item: Loss on early extinguishment of debt - 2,403 1,707 ------------------------------------------------ Net income $ 49,036 $ 13,778 $ 3,656 ================================================ Income (loss) per common and common equivalent share before extraordinary item (Note 19) $ 1.60 $ 0.46 $ (1.21) Extraordinary item - (0.08) (0.24) ------------------------------------------------ Net income (loss) per common and common equivalent share $ 1.60 $ 0.38 $ (1.45) ================================================
See accompanying notes. 4 Renaissance Communications Corp. Consolidated Statements of Changes in Shareholders' Equity (Deficit) Years ended December 31, 1995, 1994 and 1993
Additional Accumulated Preferred Preferred Common Paid-In Unearned Earnings Series B Series D Stock Capital Compensation (Deficit) Total -------------------------------------------------------------------------------------------------- (In Thousands, except per share amounts) Balance at January 1, 1993 $ 486 $ - $ 45 $ 38,406 $ (1,000) $ (64,896) $ (26,959) Net income - - - - - 3,656 3,656 Issuance of stock: Series B 15 - - 1,485 - - 1,500 Series D - 100 - 49,900 - - 50,000 Issuance of stock dividends: Series B 62 - - (62) - - - Accretion of discount: Series A - - - (111) - - (111) Series C - - - (375) - - (375) Cash dividend: Series A - - - (390) - - (390) Redemption of stock: Series A - - - (565) - - (565) Exercise of warrants - - 1 157 - - 158 Non-cash compensation - - - 1,200 500 - 1,700 -------------------------------------------------------------------------------------------------- Balance at December 31, 1993 563 100 46 89,645 (500) (61,240) 28,614 --------------------------------------------------------------------------------------------------
5 Renaissance Communications Corp. Consolidated Statements of Changes in Shareholders' Equity (Deficit)(Continued) Years ended December 31, 1995, 1994 and 1993
Additional Accumulated Preferred Preferred Common Paid-In Unearned Earnings Series B Series D Stock Capital Compensation (Deficit) Total -------------------------------------------------------------------------------------------------- (In Thousands, except per share amounts) Net income - - - - - 13,778 13,778 Issuance of stock dividends: Series B 25 - - (25) - - - Issuance of common stock: Initial public offering - - 67 116,306 - - 116,373 Phantom Stock Plan - - 2 3,233 - - 3,235 Accretion of discount: Series C - - - (35) - - (35) Redemption of stock: Series B (588) - - (58,149) - - (58,737) Conversion of stock: Series D - (100) 75 25 - - - Exercise of warrants - - 8 1,108 - - 1,116 Non-cash compensation - - - 9,418 500 - 9,918 --------------------------------------------------------------------------------------------------- Balance at December 31, 1994 - - 198 161,526 - (47,462) 114,262 Net income - - - - - 49,036 49,036 Exercise of warrants - - 2 847 - - 849 3 for 2 stock split - - 100 (100) - - - --------------------------------------------------------------------------------------------------- Balance at December 31, 1995 $ - $ - $ 300 $ 162,273 $ - $ 1,574 $ 164,147 ===================================================================================================
See accompanying notes 6 Renaissance Communications Corp. Consolidated Statements of Cash Flows
Year ended December 31, 1995 1994 1993 ------------------------------------------------- (In Thousands) Cash flows from operating activities Net income $ 49,036 $ 13,778 $ 3,656 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 15,756 17,567 15,781 Amortization of program rights, net of barter 35,585 30,179 30,262 Amortization of discount on senior subordinated split coupon notes, subordinated program obligations and certain contracts payable 3 1,044 590 Non-cash compensation - 12,040 3,200 Provision for bad debts 585 732 503 Loss on early extinguishment of debt - 2,403 1,707 Loss (gain) on disposal of fixed assets 61 364 (4) Program payments (30,519) (28,200) (25,077) (Increases) decreases in assets and (decreases) increases in liabilities, net of effects from purchases and sales of stations: Accounts receivable (927) (10,587) (4,379) Prepaid expenses, other current assets and other assets (1,436) 245 570 Accounts payable (447) 185 (967) Accrued expenses 5,733 (892) (2,265) ------------------------------------------------- Total adjustments 24,394 25,080 19,921 ------------------------------------------------- Net cash provided by operating activities 73,430 38,858 23,577 ------------------------------------------------- Cash flows from investing activities Capital expenditures (4,838) (4,446) (3,746) Payment for exchange/acquisition, net of cash acquired (34,500) - (189,869) Program payments relating to acquisition/sale - - (18,699) Acquisition costs - - (3,000) Proceeds from sale of station - - 59,726 Proceeds from principal payments on note receivable 400 200 - ------------------------------------------------- Net cash used in investing activities (38,938) (4,246) (155,588) -------------------------------------------------
7 Renaissance Communications Corp. Consolidated Statements of Cash Flows (continued)
Year ended December 31, 1995 1994 1993 --------------------------------------------------- (In Thousands) Cash flows from financing activities Proceeds from senior secured term loan and revolving credit facility $ 34,500 $ - $ 250,000 Proceeds from issuance of Series D - - 50,000 Proceeds from initial public offering - 116,373 - Proceeds from exercise of warrants 849 1,116 158 Redemption of senior subordinated split coupon notes - - (23,581) Redemption of Series B - (58,737) - Redemption of Series C - (2,910) - Cost of financing - - (9,000) Principal payments on senior secured term loan and revolving credit facility (69,995) (80,994) (120,850) Principal payments on subordinated program obligations - (8,871) (3,797) Principal payments on other noncurrent liabilities (63) (125) (129) Redemption of Series A - - (5,000) Cash dividends on Series A - - (390) --------------------------------------------------- Net cash (used in) provided by financing activities (34,709) (34,148) 137,411 --------------------------------------------------- Net (decrease) increase in cash and cash equivalents (217) 464 5,400 Cash and cash equivalents Balance at the beginning of the period 10,129 9,665 4,265 --------------------------------------------------- Balance at the end of the period $ 9,912 $ 10,129 $ 9,665 =================================================== Supplemental disclosure of cash flow information Cash paid for interest $ 7,152 $ 9,752 $ 13,577 =================================================== Cash paid for income taxes $ 7,580 $ 2,101 $ 733 ===================================================
Supplemental schedule of noncash investing activities: On July 3, 1995 the Company exchanged its television station KDVR, Denver, Colorado, and approximately $34,500,000 in cash for Fox's television station KDAF, Dallas, Texas. (Note 3) See accompanying notes. 8 Renaissance Communications Corp. Notes to Consolidated Financial Statements December 31, 1995 1. Organization and Basis of Presentation Renaissance Communications Corp. (the "Company") was organized in 1988 to acquire a portfolio of television stations. The Company owns and operates the stations through wholly-owned subsidiaries. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries during the period owned by the Company. All significant intercompany items and transactions have been eliminated in consolidation. Certain prior year items have been restated to conform with the current period's presentation. On September 18, 1995, the Company's Board of Directors declared a 3-for-2 stock split, in the form of a 50% stock dividend of the Company's Common Stock, payable October 16, 1995 to shareholders of record on October 2, 1995. Share and per share data included on the Consolidated Statements of Income and Notes to Consolidated Financial Statements have been restated to retroactively reflect this split. On February 3, 1994, the Company issued 9,965,221 shares of Common Stock in an initial public offering. In connection with this offering, the first warrants that were issued to the Chief Executive Officer of the Company vested. The holders of the Series D Convertible Preferred Stock ("Series D") converted their holdings to common stock and holders of certain warrants exercised such warrants. The Company also paid out, in a combination of stock and cash, all Units of Phantom Stock granted to employees of the Company or its subsidiaries. In connection with its initial public offering, the Company's Common Stock was split 75 for 1. The consolidated financial statements have been restated to retroactively reflect this split. The net proceeds of this offering of $116,373,000 were used to redeem all of the Series B Exchangeable Preferred Stock ("Series B") and Series C Convertible Preferred Stock ("Series C"), and pay down $54,726,000 of the Senior Secured Term Loan. 2. Summary of Accounting Policies Program Rights Program rights consist of rights to broadcast films and tapes and are generally amortized based on the greater of amortization computed on a straight-line basis over the period of the agreement or amortization computed on an accelerated basis over the number of showings available per the agreement. The current portion of program rights represents the estimated 9 Renaissance Communications Corp. Notes to Consolidated Financial Statements (continued) 2. Summary of Accounting Policies (continued) amount to be amortized in the next 12 months. Amounts are presented at the lower of unamortized cost or net realizable value. Program rights and the related program liabilities to licensors are presented on an undiscounted basis. The program liability to licensors is classified as current or noncurrent in accordance with the payment terms of the various agreements. Commitments to purchase program rights are recorded when the program becomes available for broadcast. Barter Transactions Barter transactions represent the exchange of commercial air time for programming, merchandise or services. The transactions are recorded at the fair market value of the asset or service received. Revenue is recognized on barter transactions when the advertisements are broadcast; expenses are recorded when the asset or service received is utilized. Barter program rights and payables are recorded for barter programming transactions based upon the availability of the associated programming. Property, Plant and Equipment Depreciation of property, plant and equipment is calculated on the straight-line method over estimated useful lives of 3 to 40 years. Leasehold improvements are amortized on the straight-line method over the shorter of the lease term or estimated useful life of the asset. Intangible Assets and Deferred Financing Costs Intangible assets consist principally of covenants not-to-compete, station licenses, affiliation agreements, and the excess of cost over the fair value of net assets acquired relating to the purchases of the stations. Intangible assets are amortized on a straight-line basis. Deferred financing costs are amortized over the terms of the respective financings. Statements of Cash Flows For purposes of the Consolidated Statements of Cash Flows, the Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. The carrying amount of these items approximate fair value. 10 Renaissance Communications Corp. Notes to Consolidated Financial Statements (continued) 2. Summary of Accounting Policies (continued) Revenue Recognition The Company recognizes revenue from the sale of advertising at the time the advertisements are aired. Income Taxes For all periods presented, the Company accounted for income taxes pursuant to the Financial Accounting Standards Board Statement No. 109, "Accounting for Income Taxes." Risks and Uncertainties The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. Stock Compensation The Company accounts for its stock compensation arrangements under the provisions of Accounting Principles Board Statement No. 25, "Accounting for Stock Issued to Employees," and intends to continue to do so. 3. Exchange of Stations Effective July 3, 1995, the Company exchanged with Fox Television Stations, Inc. ("Fox") its television station KDVR, Denver, Colorado and approximately $34,500,000 in cash for Fox's television station KDAF, Dallas, Texas. The Company financed the exchange by borrowing an additional $34,500,000 under its revolving credit facility. The exchange was accounted for as a nonmonetary transaction since the cash paid was less than 25% of the fair market value of KDAF as determined by an independent appraisal. 11 Renaissance Communications Corp. Notes to Consolidated Financial Statements (continued) 3. Exchange of Stations (continued) The following table presents (in thousands, except per share amounts) the unaudited pro forma results of operations of the Company for the year ended December 31,1995 and 1994 as if the exchange of KDVR for KDAF had occurred on January 1, 1994. The pro forma results are not necessarily indicative of what would have been reported had such events actually occurred on January 1, 1994, nor of the Company's future results. In addition, the results of operations of KDAF include the operations of KDAF for the period owned by Fox as a Fox affiliate; however, KDAF is not a Fox affiliate under the Company. No pro forma adjustments have been made with respect to the affiliation switch.
Year ended December 31 1995 1994 --------------------------- (Unaudited) Total revenue $187,284 $178,012 Income before extraordinary item 51,723 29,899 Net income 51,723 27,496 Income per common and common equivalent share before extraordinary item $1.68 $1.05
4. Acquisition of Stations Effective March 1, 1993, the Company acquired the assets of a group of four Fox affiliated television stations (WATL, WXIN, WTIC and KDVR) for $192,000,000 in cash, $2,500,000 in Series C Convertible Preferred Stock plus the assumption of program obligations totaling approximately $48,000,000. The purchase price, net of assumed liabilities, was allocated principally to program rights ($30,000,000), property, plant and equipment ($40,000,000), a non-compete agreement with a 5-year life ($30,000,000) and other intangible assets with a 40-year life ($95,000,000). In connection with the acquisition and associated refinancing, the Company paid the outstanding balance on the existing new Senior Secured Term Loan of $51,094,000 resulting in an extraordinary loss of $1,164,000, repurchased at a premium the remaining $22,390,000 face amount of the senior subordinated split coupon notes resulting in an extraordinary loss of $1,921,000 and prepaid certain program obligations of WTXX and the acquired stations resulting in an extraordinary gain of $1,378,000. 12 Renaissance Communications Corp. Notes to Consolidated Financial Statements (continued) 4. Acquisition of Stations (continued) The acquisition was accounted for as a purchase and the net assets acquired and related covenants not-to-compete were recorded at their fair value at the date of acquisition. On June 30, 1995, the Company entered into a merger agreement with Outlet Communications, Inc. ("Outlet") to acquire all of Outlet's common stock. On July 28, 1995, the National Broadcasting Company ("NBC") made an offer to acquire Outlet for consideration in excess of the Company's agreement with Outlet. On August 2, 1995, the Company entered into a settlement agreement with NBC receiving $20,000,000, which was recorded, net of related expenses, as other income. 5. Sales of Stations On May 28, 1993, the Company sold the assets of WATL for $59,726,000 in cash plus the assumption of program obligations totaling approximately $16,000,000. No gain or loss was recognized on the transaction. Under the agreement, the Company has agreed not to compete with the buyer for a period of five years. Due to the fact that WATL was purchased with the intention of being sold within a year of its purchase, the results of operation between the date of purchase and the date of sale (income of $107,000) was treated as an adjustment to the purchase price of the remaining stations that were acquired effective March 1, 1993. Concurrent with the acquisition of the four stations in March 1993, the Company sold certain assets of WTXX for a promissory note in the amount of $3,601,000 bearing interest at 10%, payable over 22 years. A loss of $23,500,000 relating to this sale was reflected in the Company's consolidated financial statements in 1992. As of December 31, 1995, the Company has payables and contractual liabilities relating to the disposal of WTXX totaling $1,269,000. 13 Renaissance Communications Corp. Notes to Consolidated Financial Statements (continued) 5. Sales of Stations (continued) The following table presents (in thousands, except per share amounts) the unaudited pro forma results of operations for the year ended December 31, 1993 as if the acquisition of the four stations in March 1993, and the sales of WATL and WTXX had occurred on January 1, 1993. These pro forma results are not necessarily indicative of what would have occurred had the acquisitions and sales been made at January 1, 1993 or of results which may occur in the future.
Year ended December 31, 1993 ----------------------- (Unaudited) Total revenue $131,830 Income before extraordinary item 2,714 Net income 1,007 Income per common and common equivalent share before extraordinary item 0.17
6. Property, Plant and Equipment Property, plant and equipment, at cost, at December 31, 1995 and 1994 consist of the following (in thousands):
1995 1994 --------------------------------- Land, buildings and improvements $ 13,712 $ 12,993 Broadcasting equipment 50,397 51,340 Office furniture, equipment and other 6,167 5,879 --------------------------------- 70,276 70,212 Less accumulated depreciation and amortization (33,061) (28,178) --------------------------------- $ 37,215 $ 42,034 =================================
14 Renaissance Communications Corp. Notes to Consolidated Financial Statements (continued) 7. Intangible Assets Intangible assets, at cost, at December 31, 1995 and 1994 consist of the following (in thousands):
Amortization Period 1995 1994 ------------------------------------------------ Acquisition costs 40 years $ 2,940 $ 4,075 Non-compete agreement 5 years 16,006 20,606 Station licenses 40 years 92,158 46,934 Fox affiliation 40 years 26,647 35,827 Other various 1,467 1,682 Excess of cost over fair value of net assets acquired 40 years 43,052 43,476 ------------------------------ 182,270 152,600 Less accumulated amortization (23,412) (19,736) ------------------------------ $158,858 $132,864 ==============================
8. Senior Secured Term Loan and Revolving Credit Facility The Company's long-term debt at December 31, 1995 and 1994 is as follows (in thousands):
1995 1994 --------------------------------- Senior secured term loan and revolving credit facility $63,755 $99,250 Less amount payable in one year 16,209 27,495 --------------------------------- $47,546 $71,755 =================================
In connection with the acquisition of the television stations in March 1993, the Company repaid in full the outstanding balance of the then existing Senior Secured Term Loan and entered into a new credit agreement. The new Senior Secured Term Loan is payable in installments on June 30, September 30 and December 31 of each year through December 31, 1998. Interest is payable on the new Senior Secured Term Loan on the outstanding principal balance at either the Prime rate, or the LIBOR rate plus various margins of up to 1.25% based upon the ratio of the total funded debt to the previous 12 months cash flow, as defined, and the base rate selected by the Company. Interest is payable quarterly unless the Company selects the LIBOR or Certificate of Deposit rate and the contracted interest period is less than 90 days. 15 Renaissance Communications Corp. Notes to Consolidated Financial Statements (continued) 8. Senior Secured Term Loan and Revolving Credit Facility (continued) The interest rate on the Senior Secured Term Loan was 6.69% at December 31, 1995. The average interest rate accrued during 1995, 1994 and 1993 was 7.80%, 6.83% and 6.05% respectively. Each subsidiary has guaranteed repayment of its applicable portion of principal and interest. The carrying amount of the Senior Secured Term Loan approximates its fair value. The Company entered into various interest rate cap protection agreements with certain of its banks with respect to the Senior Secured Term Loan which enabled the Company to limit interest costs with respect to $100,000,000 of its indebtedness for a period of two years beginning June 23, 1993. Pursuant to the terms of the agreements, if the actual LIBOR rate exceeded the base rate of 6%, the Company was paid the rate differential. No such interest rate cap protection agreements are currently in place. Prior to 1995, prepayment of the Senior Secured Term Loan was required in any given year in an amount equal to 65% of the excess cash flow of the Company and its subsidiaries, as defined. In accordance with this requirement, $12,077,000 was prepaid in 1995 relating to excess cash flow in 1994 and such amount was included in the current portion of the Senior Secured Term Loan. A Revolving Credit Facility of $50,000,000 is available through December 31, 1999. As of December 31, 1995, $40,750,000 was available under this facility and at the option of the Company may be used to pay a portion of the Senior Secured Term Loan. The interest rate provisions under the Revolving Credit Facility are the same as those under the Senior Secured Term Loan. A commitment fee of 1/4 of 1% on the unused balance is due quarterly. Up to $15,000,000 of this Revolving Credit Facility can be used to issue letters of credit. The Company is required to pay a fee of 2.50% per annum on the outstanding letters of credit. The Company has pledged as collateral the stock held in each of its subsidiaries, including rights to all future dividends and other distributions on the stock collateral, and all intercompany advances payable which are secured by the assets of each respective subsidiary. 16 Renaissance Communications Corp. Notes to Consolidated Financial Statements (continued) 8. Senior Secured Term Loan and Revolving Credit Facility (continued) Maturities of long-term debt for the years ending December 31 are as follows (in thousands): 1996 $ 16,209 1997 17,000 1998 21,546 1999 9,000 ------------- $ 63,755 ============= The credit agreement contains certain restrictive covenants relating to the maintenance of working capital, current ratio, and debt coverage and certain covenants that place limitations on additional investments, indebtedness, guarantees and contingent liabilities, sale of assets and mergers and acquisitions. The terms of the Company's credit agreement also prohibit the Company from paying dividends on its Common Stock. 9. Subordinated Program Obligations In connection with the acquisition of WTXX and WDZL, the Company entered into certain agreements with program distributors to defer payment of certain assumed program liabilities which had stated interest rates ranging from 8% to 11% with various interest and principal payment terms. The Company recorded the subordinated program obligations providing an effective interest rate of 15%. The interest rate method was utilized to amortize the discount. During 1994, the Company repaid all outstanding subordinated program liabilities. 10. Program Payable The Company has obligations to various syndicators and distributors in accordance with current contracts for the rights to broadcast programs. Payments scheduled under contracts for programs available for broadcast at December 31, 1995 are as follows (in thousands): 1996 $41,247 1997 29,372 1998 19,604 1999 5,157 2000 and thereafter 430 ------------- $95,810 ============= 17 Renaissance Communications Corp. Notes to Consolidated Financial Statements (continued) 11. Commitments and Contingencies The Company has assumed or has entered into commitments for future syndicated and feature movie programming. Future payments associated with these commitments for the years ending December 31 are as follows (in thousands): 1996 $ 2,644 1997 8,450 1998 14,262 1999 20,406 2000 and thereafter 20,560 ------------- $66,322 ============= The Company currently and from time to time is involved in litigation incidental to the conduct of its business. The Company is not a party to any lawsuit or proceeding which, in the opinion of management, is likely to have a material adverse effect on the financial condition or results of operations of the Company. 12. Preferred Stock The Company had three series of preferred stock which were redeemed in February 1994. The Series B and the Series D were owned by the majority owner. The Series C was issued to the seller of the television stations acquired in March 1993. In connection with the initial public offering, all of the outstanding shares of the Series B were redeemed for a total of $58,737,000, all of the outstanding shares of Series C were redeemed for $2,910,000 and all of the outstanding shares of Series D were converted into 11,250,000 shares of the Company's common stock. 13. Common Stock Warrants Common stock warrants were issued to the Chief Executive Officer of the Company and to certain key members of management (and a former member of management), which entitle the Chief Executive Officer and such members (and former member) of management to purchase from the majority owner of the Company's Common Stock at an exercise price of $.89 per share, 675,000 shares of the Company's $.01 par value common stock owned by the majority owner. In addition, the holders were entitled to purchase from the majority owner the pro rata number of shares acquired by the majority owner from October 28, 1988 to the expiration of 18 Renaissance Communications Corp. Notes to Consolidated Financial Statements (continued) 13. Common Stock Warrants (continued) the common stock warrants to prevent dilution of their interests. The first warrant fully vested upon completion of the initial public offering. During 1995, all of these warrants were exercised. The second warrant entitled the Chief Executive Officer to purchase from the Company at an exercise price of $.89 per share, additional shares of the Company's Common Stock. The second warrant could be exercised upon the occurrence of certain future events and expires seven years after issuance or upon the occurrence of certain other events. On March 18, 1993, the second warrant was exchanged for 22,500 shares of Series B and new warrants. The Series B shares were immediately sold to the majority owner for $1,500,000, which amount was charged to non-cash compensation in 1993. These new warrants entitle the holders to purchase from the Company through 1999 up to 900,000 shares of the Company's common stock at an exercise price of $6.67 per share. During 1995 and 1994, 100,000 and 50,000, respectively, of such warrants were exercised. As of December 31, 1995 there were 750,000 of these warrants still outstanding. Prior to March 15, 1995, the holders of the new warrants could elect, in lieu of paying the exercise price, to receive a number of shares of Common Stock on the date of exercise. Such number is based on the fair market value of the warrants divided by the fair market value of a share of Common Stock at such date. Effective March 15, 1995, these warrants were amended to limit the cashless exercise feature of the warrants so that there will be no additional non-cash compensation. During 1994 and 1993 non-cash compensation of $9,918,000 and $3,200,000, respectively was recorded relating to warrants earned and was reflected as a credit to paid-in capital. Warrants to purchase 1,687,500 shares of Common Stock (the "Noteholder Warrants") were issued in 1989. The exercise price of Noteholder Warrants was $.89 per share and was subject to additional adjustment, along with the number of shares issuable upon exercise of a warrant, upon the occurrence of certain dilutive events. During 1995 and 1994, 254,250 and 1,256,063 shares of Common Stock, respectively, were issued upon exercise of these warrants. At December 31, 1995, there were no Noteholder Warrants outstanding. 19 Renaissance Communications Corp. Notes to Consolidated Financial Statements (continued) 14. Income Taxes The Company files a consolidated federal income tax return and separate income tax returns for state and local purposes. The 1995, 1994 and 1993 provisions consist of federal, state and local taxes as follows (in thousands):
1995 1994 1993 ---------------------------------------------- Current: Federal (AMT in 1994) $ 4,261 $ 600 $ - State 3,002 1,947 834 ---------------------------------------------- Total current 7,263 2,547 834 Deferred: Federal 4,263 - - State - - - ---------------------------------------------- Total deferred 4,263 - - ---------------------------------------------- Total tax provision $11,526 $2,547 $ 834 ==============================================
The 1995 federal provision includes the utilization of net operating loss carryforwards. The alternative minimum tax arose in 1994 because net operating loss carryforwards may be used to offset only 90% of a corporation's alternative minimum taxable income. As of December 31, 1995 the Company has no remaining net operating loss carryforwards for federal income tax purposes. As of December 31, 1994 and 1993 the Company had a cumulative net operating loss carryforward for federal tax purposes of $35,405,000 and $58,236,000, respectively. 20 Renaissance Communications Corp. Notes to Consolidated Financial Statements (continued) 14. Income Taxes (continued) Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities as of December 31, 1995 and 1994 are as follows (in thousands):
1995 1994 ----------------------------------- Deferred tax assets: Non-cash compensation $ 5,428 $ 5,206 Amortization of program rights 2,196 1,726 Net operating loss carryforwards - 12,391 Other 1,008 921 ----------------------------------- Total deferred tax assets 8,632 20,244 Valuation allowance - (11,800) ----------------------------------- Net deferred tax assets 8,632 8,444 ----------------------------------- Deferred tax liabilities: Basis difference in broadcasting intangibles 8,969 4,942 Accelerated depreciation 3,878 3,454 Other 48 48 ----------------------------------- Total deferred tax liabilities 12,895 8,444 ----------------------------------- Net deferred taxes $ 4,263 $ - ===================================
Below is a reconciliation of income tax computed at the U.S. federal statutory rate to the provision for income taxes (in thousands):
1995 1994 1993 --------------------------------------------- Income tax expense (benefit) at statutory federal rate $21,197 $6,555 $1,352 State and local taxes, net of federal benefit 1,951 1,265 542 Goodwill amortization 380 380 376 Federal AMT - 600 - Valuation allowance (11,800) (6,253) (1,436) Other (202) - - --------------------------------------------- Provision for income taxes $11,526 $2,547 $ 834 =============================================
21 Renaissance Communications Corp. Notes to Consolidated Financial Statements (continued) 15. Leases Future minimum rental commitments for noncancellable operating leases of premises and equipment are as follows for the years ending December 31 (in thousands): 1996 $ 1,015 1997 954 1998 879 1999 878 2000 and thereafter 4,933 --------------- $ 8,659 =============== The rental expense for all operating leases in 1995, 1994 and 1993 amounted to $1,059,000, $1,079,000 and $910,000, respectively. Certain of the Company's leases are subject to renewal options and escalation clauses. 16. Phantom Stock Plan Under the Phantom Stock Plan grants of "Units" were made by the Compensation Committee of the Board of Directors to officers and other employees of the Company. Each Unit is intended to be the equivalent of one share of Common Stock but without having any voting, dividend or other stockholder rights that would attach to actual shares of Common Stock. As a result of the initial public offering, all outstanding Units vested and in November 1994 the Company redeemed all Units of Phantom Stock for a combination of cash and 255,433 shares of Common Stock. In 1994, compensation expense of $2,122,000 was recorded relating to the Phantom Stock Plan and in 1993 there was no compensation expense. 17. Employee Savings Plan The Company has a defined contribution savings and investment plan for substantially all of its employees. Under the plan, the Company matches one-half of contributions of eligible employees up to 4% of their eligible salary. For the years ended December 31, 1995, 1994 and 1993 the Company incurred total expenses of $335,000, $314,000 and $234,000, respectively, under the plan. 22 Renaissance Communications Corp. Notes to Consolidated Financial Statements (continued) 18. Stock Option Plan Effective December 31, 1993, the Company's Board of Directors adopted a Stock Option Plan pursuant to which options for shares of Common Stock or related stock appreciation rights may be granted to employees of the Company. The maximum number of shares of Common Stock reserved for issuance under the Stock Option Plan is 675,000. The Stock Option Plan provides that options granted thereunder will vest over five years, commencing one year following their grant, and will be exercisable for a period of up to 10 years. Stock appreciation rights generally will be exercisable at the same time and subject to the same conditions as the related option. The exercise price of options may be paid in cash or shares of Common Stock and the committee may provide for loans of the option exercise price to the optionee, secured by a pledge of Common Stock with a fair market value at least equal to the loan. On December 31, 1993 options to purchase an aggregate of 399,000 shares of Common Stock at an exercise price of $12.67 per share were granted and on November 17, 1995 the remaining options to purchase an aggregate of 276,000 shares of Common Stock at an exercise price of $19.50 per share were granted. As of December 31, 1995 no options were exercised, expired, or canceled. No compensation expense was recorded in 1995 and 1994 relating to the Stock Option Plan. 19. Net Income (Loss) Per Common and Common Equivalent Share Net income (loss) per common and common equivalent share is determined by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding. In 1994 and 1993, the income (loss) available to common shareholders is based on the net income (loss) after the dividend requirement on preferred stock of $3,132,000 and $13,116,000, respectively. The calculation of weighted average common shares outstanding includes the following: 1) in 1995, the average number of shares outstanding of 29,826,892 shares plus the net number of shares presumed issued relating to outstanding options and warrants under the treasury stock method of 875,439 shares; 2) in 1994, the average number of shares outstanding of 27,534,444 shares plus the net number of shares presumed issued relating to outstanding options and warrants under the treasury stock method of 815,473 shares; and 3) in 1993, 6,897,656 average common shares outstanding as all other potential common equivalent shares would have an antidilutive effect on the net loss per common share. 23 Renaissance Communications Corp. Notes to Consolidated Financial Statements (continued) 20. Quarterly Financial Data (Unaudited) The following summarizes the Company's results of operations for each quarter of 1995 and 1994 (in thousands, except per share amounts). The income (loss) per common and common equivalent share computation for each quarter and the year are separate calculations. Accordingly, the sum of the quarterly income (loss) per common and common equivalent share amounts may not equal the income (loss) per common and common equivalent share for the year.
First Second Third Fourth 1995 Quarter Quarter Quarter Quarter Year ----------------------------------------------------------------------- Total revenue $37,269 $44,386 $44,000 $53,563 $179,218 Profit from operations 7,694 15,324 10,780 13,581 47,379 Net income 5,213 12,586 23,448 7,789 49,036 Net income per common and common equivalent share $ 0.17 $ 0.41 $ 0.76 $ 0.25 $ 1.60 First Second Third Fourth 1994 Quarter Quarter Quarter Quarter Year ----------------------------------------------------------------------- Total revenue $31,829 $40,170 $39,834 $49,389 $161,222 (Loss) profit from operations (4,872) 9,932 7,052 15,385 27,497 (Loss) income before extraordinary item (7,094) 7,059 4,089 12,127 16,181 Net (loss) income (9,497) 7,059 4,089 12,127 13,778 (Loss) income per common and common equivalent share before extraordinary item $ (0.50) $ 0.23 $ 0.13 $ 0.40 $ 0.46 Net (loss) income per common and common equivalent share $ (0.61) $ 0.23 $ 0.13 $ 0.40 $ 0.38
21. Pending Transaction In March 1994, the Company entered into an agreement to sell the voting common stock of the subsidiary that holds the FCC license of WTIC ("61 Licensee") in order to comply with FCC regulations which prohibit it from controlling the FCC license because the majority owner 24 Renaissance Communications Corp. Notes to Consolidated Financial Statements (continued) 21. Pending Transaction (continued) of the Company owns newspapers within the service area of WTIC. The Company will retain a 98% nonvoting interest in 61 Licensee and will continue to consolidate the results of WTIC, including 61 Licensee. The transaction is subject to the consent of the FCC. An application for such consent is pending before the FCC. In the event the present proposal is not accepted by the FCC, the Company either will revise the present proposal in an attempt to gain approval of the FCC or propose other alternatives. Any such proposal will be developed only after the FCC acts or otherwise expresses definitive views on the present proposed transaction. If the Company is unable to provide any proposal which is acceptable to the FCC, then the Company might have to sell 61 Licensee. As of December 31, 1995, the total assets and liabilities of WTIC were $92,159,000 and $70,208,000, respectively, and for the year ended December 31, 1995, the total revenue and contribution to earnings were $30,261,000 and $7,515,000, respectively. 25 Renaissance Communications Corp. Consolidated Financial Statements (Unaudited) Three Months Ended March 31, 1995 Contents Consolidated Balance Sheets............................................... 26 Consolidated Statements of Income......................................... 28 Consolidated Statement of Changes in Shareholders' Equity ................ 29 Consolidated Statements of Cash Flows..................................... 30 Notes to Consolidated Financial Statements................................ 31 Renaissance Communications Corp. Consolidated Balance Sheets
March 31, December 31, 1996 1995 (Unaudited) (Audited) ---------------------------------------------- (in thousands) Assets Current assets: Cash and cash equivalents $13,402 $9,912 Accounts receivable, less allowance for doubtful accounts of $2,241,000 and $2,128,000 in 1996 and 1995, respectively 33,273 41,258 Barter program rights 24,490 29,247 Program rights 31,718 35,451 Prepaid expenses and other current assets 3,024 3,464 ---------------------------------------------- Total current assets 105,907 119,332 Property, plant and equipment, net of accumulated depreciation of $34,605,000 and $33,061,000 in 1996 and 1995, respectively 36,400 37,215 Barter program rights 11,987 14,247 Program rights 41,263 45,445 Intangible assets, net of accumulated amortization of $25,275,000 and $23,412,000 in 1996 and 1995, respectively 156,995 158,858 Deferred financing costs, net of accumulated amortization of $3,212,000 and $2,642,000 in 1996 and 1995, respectively 2,561 3,131 Note receivable and other assets 4,225 4,331 ---------------------------------------------- Total assets $359,338 $382,559 ==============================================
See accompanying notes 26 Renaissance Communications Corp. Consolidated Balance Sheets (Continued)
March 31, December 31, 1996 1995 (Unaudited) (Audited) ---------------------------------------------- (in thousands) Liabilities and shareholders' equity Current liabilities: Accounts payable $1,747 $2,464 Accrued expenses 11,242 8,325 Senior secured term loan 14,137 16,209 Barter program payable 24,490 29,247 Program payable 40,135 41,247 ---------------------------------------------- Total current liabilities 91,751 97,492 Senior secured term loan and revolving credit facility 33,618 47,546 Barter program payable 11,987 14,247 Program payable 48,501 54,563 Deferred income taxes 4,263 4,263 Other noncurrent liabilities 300 301 Common shareholders' equity: Common Stock, par value $.01 per share, authorized 37,500,000 shares, issued and outstanding 30,037,206 shares in 1996 and 1995 300 300 Additional paid-in capital 162,273 162,273 Accumulated earnings 6,345 1,574 ---------------------------------------------- Total shareholders' equity 168,918 164,147 ---------------------------------------------- Total liabilities and shareholders' equity $359,338 $382,559 ==============================================
See accompanying notes 27 Renaissance Communications Corp. Consolidated Statements of Income (Unaudited)
Three Months ended March 31, 1996 1995 -------------------------------------------------------- (in thousands, except per share amounts) Net revenue $36,173 $30,392 Barter revenue 9,174 6,877 -------------------------------------------------------- Total revenue 45,347 37,269 Operating expenses 3,921 3,506 Selling, general and administrative expenses 8,744 7,968 Amortization of program rights 10,464 7,202 Amortization of barter program rights 8,908 6,594 Depreciation and amortization 3,771 4,305 -------------------------------------------------------- Total operating expenses 35,808 29,575 -------------------------------------------------------- Profit from operations 9,539 7,694 Other income (expense) net (57) 4 Interest income 291 374 Interest expense (1,149) (2,307) -------------------------------------------------------- Income before provision for income taxes and extraordinary item 8,624 5,765 Provision for income taxes 3,631 552 -------------------------------------------------------- Income before extraordinary item 4,993 5,213 Extraordinary item: Loss on early extinguishment of debt, net of taxes 222 0 -------------------------------------------------------- Net income $4,771 $5,213 ======================================================== Net income per common and common equivalent share before extraordinary loss $0.16 $0.17 Extraordinary loss 0.01 0.00 -------------------------------------------------------- Net income per common and common equivalent share $0.15 $0.17 ======================================================== Shares used in earnings per share calculation 30,802 30,679 ========================================================
See accompanying notes 28 Renaissance Communications Corp. Consolidated Statement of Changes in Shareholders' Equity Three months ended March 31, 1996 (Unaudited)
Additional Common Paid-In Accumulated Stock Capital Earnings Total ----------------------------------------------------------------------------------------- (in thousands) Balance at December 31, 1995 $300 $162,273 $1,574 $164,147 Net Income 4,771 4,771 ----------------------------------------------------------------------------------------- Balance at March 31, 1996 $300 $162,273 $6,345 $168,918 =========================================================================================
See accompanying notes 29 Renaissance Communications Corp. Consolidated Statements of Cash Flows (Unaudited)
Three months ended March 31, 1996 1995 ---------------------------------------------------- (in thousands) Cash flows from operating activities: Net income $4,771 $5,213 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 3,771 4,305 Amortization of program rights, net of barter 10,464 7,202 Amortization of discount on certain contracts payable - 2 Provision for bad debts 139 144 Loss on early extinguishment of debt, net of taxes 222 - Gain (loss) on disposal of fixed assets 57 (4) Program payments (9,725) (7,582) Decreases (increases) in assets and increases (decreases) in liabilities: Accounts receivable 7,846 10,236 Prepaid expenses, other current assets and other assets 346 (977) Accounts payable (717) (603) Accrued expenses 3,071 210 ---------------------------------------------------- Total adjustments 15,474 12,933 ---------------------------------------------------- Net cash provided by operating activities 20,245 18,146 Cash flows from investing activities: Capital expenditures (955) (1,101) Proceeds from principal payment on note receivable 200 200 ---------------------------------------------------- Net cash used in investing activities (755) (901) ---------------------------------------------------- Cash flows from financing activities: Principal payments on senior secured term loan and revolving credit facility (16,000) (19,077) Principal payments on other noncurrent liabilities - (31) ---------------------------------------------------- Net cash used in financing activities (16,000) (19,108) ---------------------------------------------------- Net increase (decrease) in cash and cash equivalents 3,490 (1,863) Cash and cash equivalents Balance at the beginning of the period 9,912 10,129 ---------------------------------------------------- Balance at the end of the period $13,402 $8,266 ====================================================
See accompanying notes 30 Renaissance Communications Corp. Notes to Consolidated Financial Statements (Unaudited) 1. Financial Statement Presentation -------------------------------- As of March 31, 1996, Renaissance Communications Corp. (the "Company") owned and operated six television stations: KDAF, Dallas, Texas; WDZL, Miami/Ft. Lauderdale, Florida; KTXL, Sacramento, California; WTIC, Hartford/New Haven, Connecticut; WXIN, Indianapolis, Indiana; and WPMT, Harrisburg, Pennsylvania. The interim financial statements presented herein include the accounts of the Company and its wholly owned subsidiaries for the period of time they were owned and operated by the Company. All significant intercompany items and transactions are eliminated in consolidation. In the opinion of management, the accompanying unaudited consolidated financial statements contain all the normal recurring adjustments necessary for a fair presentation of the results for the interim periods presented. The results for the interim period are not necessarily indicative of the results to be expected for the full year. 2. Pending Transaction ------------------- In March 1994, the Company entered into an agreement to sell the voting common stock of the subsidiary that holds the FCC license of WTIC ("61 Licensee") in order to comply with FCC regulations which prohibit it from controlling the FCC license because the majority owner of the Company owns newspapers within the service area of WTIC. The Company will retain a 98% nonvoting interest in 61 Licensee and will continue to consolidate the results of WTIC, including 61 Licensee. The transaction is subject to the consent of the FCC. An application for such consent is pending before the FCC. In the event the present proposal is not accepted by the FCC, the Company either will revise the present proposal in an attempt to gain approval of the FCC or propose other alternatives. Any such proposal will be developed only after the FCC acts or otherwise expresses definitive views on the present proposed transaction. If the Company is unable to provide any proposal which is acceptable to the FCC, then the Company might have to sell 61 Licensee. 31 EX-99.2 4 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED F/S 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 - ------------------------------------------------------------------------------------------------------------------------------------ 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 --------------------------------------------------------------------------------------------------------------------- Total current assets 602,165 105,907 3,517 (14,974) 696,615 - ------------------------------------------------------------------------------------------------------------------------------------ Properties Net properties 650,415 36,400 1,239 688,054 - ------------------------------------------------------------------------------------------------------------------------------------ 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 --------------------------------------------------------------------------------------------------------------------- Total other assets 2,180,409 217,031 1,155,022 3,552,462 --------------------------------------------------------------------------------------------------------------------- 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 - ------------------------------------------------------------------------------------------------------------------------------------ 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 --------------------------------------------------------------------------------------------------------------------- Total current liabilities 733,668 91,751 10,189 (23,570) 812,038 - ------------------------------------------------------------------------------------------------------------------------------------ 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) - ------------------------------------------------------------------------------------------------------------------------------------ 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 --------------------------------------------------------------------------------------------------------------------- Total other non-current liabilities 551,846 65,051 261 109,739 726,897 - ------------------------------------------------------------------------------------------------------------------------------------ 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 ---------------------------------------------------------------------------------------------------------------------- Total shareholders' equity 1,385,948 168,918 (22,710) (146,208) 1,385,948 ---------------------------------------------------------------------------------------------------------------------- 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 - ------------------------------------------------------------------------------------------------------------------------------------ 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 --------------------------------------------------------------------------------------------------------------------- Total operating revenues 537,122 45,347 17,485 599,954 - ------------------------------------------------------------------------------------------------------------------------------------ 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 --------------------------------------------------------------------------------------------------------------------- Total operating expenses 450,047 35,865 16,768 8,968 511,648 - ------------------------------------------------------------------------------------------------------------------------------------ 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) - ------------------------------------------------------------------------------------------------------------------------------------ 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) - ------------------------------------------------------------------------------------------------------------------------------------ Income from Continuing Operations 50,379 4,993 (552) (18,539) 36,281 Preferred dividends, net of tax (4,696) (4,696) - ------------------------------------------------------------------------------------------------------------------------------------ Net Income from Continuing Operations Attributable to Common Shares $ 45,683 $ 4,993 $ (552) $ (18,539) $ 31,585 - ------------------------------------------------------------------------------------------------------------------------------------ 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 - ------------------------------------------------------------------------------------------------------------------------------------ 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 ------------------------------------------------------------------------------------------------------------------------ Total operating revenues 2,244,674 179,218 150,266 (34,867) 8,066 2,547,357 - ------------------------------------------------------------------------------------------------------------------------------------ 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) ------------------------------------------------------------------------------------------------------------------------ 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. 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 -----END PRIVACY-ENHANCED MESSAGE-----