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
<PAGE>
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
<PAGE>
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
<PAGE>
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
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
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
<PAGE>
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
<PAGE>
Renaissance Communications Corp.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31,
1995 1994
------------------------------------
(In Thousands)
<S> <C> <C>
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
====================================
</TABLE>
See accompanying notes.
2
<PAGE>
<TABLE>
<CAPTION>
December 31,
1995 1994
-----------------------------------
(In Thousands)
<S> <C> <C>
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
===================================
</TABLE>
3
<PAGE>
Renaissance Communications Corp.
Consolidated Statements of Income
<TABLE>
<CAPTION>
Year ended December 31,
1995 1994 1993
------------------------------------------------
(In Thousands, except per share amounts)
<S> <C> <C> <C>
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)
================================================
</TABLE>
See accompanying notes.
4
<PAGE>
Renaissance Communications Corp.
Consolidated Statements of Changes in Shareholders' Equity (Deficit)
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Additional Accumulated
Preferred Preferred Common Paid-In Unearned Earnings
Series B Series D Stock Capital Compensation (Deficit) Total
--------------------------------------------------------------------------------------------------
(In Thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
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
--------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
Renaissance Communications Corp.
Consolidated Statements of Changes in Shareholders' Equity (Deficit)(Continued)
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Additional Accumulated
Preferred Preferred Common Paid-In Unearned Earnings
Series B Series D Stock Capital Compensation (Deficit) Total
--------------------------------------------------------------------------------------------------
(In Thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
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
===================================================================================================
</TABLE>
See accompanying notes
6
<PAGE>
Renaissance Communications Corp.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31,
1995 1994 1993
-------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
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)
-------------------------------------------------
</TABLE>
7
<PAGE>
Renaissance Communications Corp.
Consolidated Statements of Cash Flows (continued)
<TABLE>
<CAPTION>
Year ended December 31,
1995 1994 1993
---------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
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
===================================================
</TABLE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<TABLE>
<CAPTION>
Year ended December 31
1995 1994
---------------------------
(Unaudited)
<S> <C> <C>
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
</TABLE>
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
<PAGE>
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
<PAGE>
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.
<TABLE>
<CAPTION>
Year ended
December 31, 1993
-----------------------
(Unaudited)
<S> <C>
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
</TABLE>
6. Property, Plant and Equipment
Property, plant and equipment, at cost, at December 31, 1995 and 1994 consist of
the following (in thousands):
<TABLE>
<CAPTION>
1995 1994
---------------------------------
<S> <C> <C>
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
=================================
</TABLE>
14
<PAGE>
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):
<TABLE>
<CAPTION>
Amortization
Period 1995 1994
------------------------------------------------
<S> <C> <C> <C>
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
==============================
</TABLE>
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):
<TABLE>
<CAPTION>
1995 1994
---------------------------------
<S> <C> <C>
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
=================================
</TABLE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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):
<TABLE>
<CAPTION>
1995 1994 1993
----------------------------------------------
<S> <C> <C> <C>
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
==============================================
</TABLE>
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
<PAGE>
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):
<TABLE>
<CAPTION>
1995 1994
-----------------------------------
<S> <C> <C>
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 $ -
===================================
</TABLE>
Below is a reconciliation of income tax computed at the U.S. federal statutory
rate to the provision for income taxes (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
---------------------------------------------
<S> <C> <C> <C>
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
=============================================
</TABLE>
21
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<TABLE>
<CAPTION>
First Second Third Fourth
1995 Quarter Quarter Quarter Quarter Year
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
</TABLE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
Renaissance Communications Corp.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
(Unaudited) (Audited)
----------------------------------------------
(in thousands)
<S> <C> <C>
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
==============================================
</TABLE>
See accompanying notes
26
<PAGE>
Renaissance Communications Corp.
Consolidated Balance Sheets (Continued)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
(Unaudited) (Audited)
----------------------------------------------
(in thousands)
<S> <C> <C>
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
==============================================
</TABLE>
See accompanying notes
27
<PAGE>
Renaissance Communications Corp.
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three Months ended March 31,
1996 1995
--------------------------------------------------------
(in thousands, except per share amounts)
<S> <C> <C>
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
========================================================
</TABLE>
See accompanying notes
28
<PAGE>
Renaissance Communications Corp.
Consolidated Statement of Changes in Shareholders' Equity
Three months ended March 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Additional
Common Paid-In Accumulated
Stock Capital Earnings Total
-----------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
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
=========================================================================================
</TABLE>
See accompanying notes
29
<PAGE>
Renaissance Communications Corp.
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
1996 1995
----------------------------------------------------
(in thousands)
<S> <C> <C>
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
====================================================
</TABLE>
See accompanying notes
30
<PAGE>
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
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
<PAGE>
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
<PAGE>
TRIBUNE COMPANY AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
(In thousands of dollars)
Historical (1)
-------------------------------------- Pro Forma Tribune
Assets Tribune Renaissance KTTY Adjustments Pro Forma
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
======================================================================================================================
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
3
<PAGE>
TRIBUNE COMPANY AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE FIRST QUARTER ENDED MARCH 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Historical (2)
---------------------------------------- Pro Forma Tribune
(In thousands, except per share data) Tribune Renaissance Other (1) Adjustments Pro Forma
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
4
<PAGE>
TRIBUNE COMPANY AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
Historical (3)
(In thousands, ----------------------------------------- (2) Pro Forma Adjustments Tribune
except per share data) Tribune Renaissance Other (1) Dispositions Acquisitions Dispositions Pro Forma
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
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
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
5
<PAGE>
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
<PAGE>
(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
<PAGE>
(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
<PAGE>
$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
