<PAGE> 1
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
DATE OF REPORT: NOVEMBER 24, 1998
THE SEAGRAM COMPANY LTD.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Canada 1-2275 None
- ------------------------------- ----------------------- ------------------
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification No.)
1430 Peel Street, Montreal, Quebec, Canada H3A 1S9
- ------------------------------------------- ----------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (514) 849-5271
------------------
</TABLE>
<PAGE> 2
Item 5. Other Events
Filed as part of this Current Report on Form 8-K and incorporated by
reference herein are pro forma financial statements of The Seagram Company Ltd.
(the "Corporation") which give effect to the sale of Tropicana Products, Inc.
and the Corporation's global juice business on August 25, 1998 and the proposed
acquisition of PolyGram N.V. ("PolyGram") which is expected to be completed in
December 1998. The pro forma financial statements should be read in conjunction
with the historical financial statements of the Corporation and PolyGram.
Incorporated by reference herein are the unaudited consolidated interim
financial reports of PolyGram for the six months ended June 30, 1998 and June
30, 1997 and the nine months ended September 30, 1998 and September 30, 1997
contained in PolyGram's Reports on Form 6-K dated July 22, 1998 and October 21,
1998 (the "Unaudited Interim Financial Reports").
Item 7. Financial Statements and Exhibits.
(b) Pro Forma Financial Information
(1) Unaudited pro forma consolidated balance sheet as of September 30,
1998 and unaudited pro forma consolidated income statements for
the three months ended September 30, 1998 and for the fiscal year
ended June 30, 1998.
(c) Exhibits
(99.1) Unaudited Supplementary Pro Forma Financial Information
(99.2) PolyGram's Unaudited Interim Financial Reports
(incorporated by reference to PolyGram's Reports on Form
6-K dated July 22, 1998 and October 21, 1998).
2
<PAGE> 3
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.
THE SEAGRAM COMPANY LTD.
By /s/ Neal B. Cravens
--------------------
Neal B. Cravens
Senior Vice President, Finance
Date: November 24, 1998
3
<PAGE> 4
THE SEAGRAM COMPANY LTD.
CURRENT REPORT ON FORM 8-K
Index to Financial Statements
Unaudited Pro Forma Financial Information of The Seagram Company Ltd.:
Unaudited Pro Forma Consolidated Balance Sheet as of September 30,
1998.
Unaudited Pro Forma Consolidated Income Statement for the Three
Months Ended September 30, 1998.
Unaudited Pro Forma Consolidated Income Statement for the Fiscal Year
Ended June 30, 1998.
4
<PAGE> 5
THE SEAGRAM COMPANY LTD.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
On August 25, 1998, The Seagram Company Ltd. (the "Corporation") completed
the sale of Tropicana Products, Inc. and the Corporation's global juice business
("Tropicana") to PepsiCo, Inc. for cash proceeds of approximately $3.3 billion.
The proceeds from the Tropicana sale will be used by the Corporation to provide
part of the financing for the Corporation's acquisition of PolyGram N.V.
("PolyGram") which is expected to close in December 1998. In connection with the
PolyGram transaction, the Corporation has commenced an offer (the "Offer") to
acquire all issued shares, par value NLG 0.50 per share ("PolyGram Shares"), of
PolyGram for per share consideration, at the election of each holder of PolyGram
Shares, of either (i) 1.3772 common shares without nominal or par value
("Seagram Shares") of the Corporation (the "Share Consideration") or (ii) NLG
115, net to the seller in cash (the "Cash Consideration"); provided, that Share
Consideration shall be paid in respect of 34,783,758 PolyGram Shares and Cash
Consideration shall be paid in respect to all other tendered PolyGram Shares.
The Offer is subject to several customary conditions, including that at least 95
percent of PolyGram's issued share capital be tendered and the absence of
defined materially adverse changes or events. The Offer and withdrawal rights
will expire on December 4, 1998, unless extended.
The following Unaudited Pro Forma Consolidated Balance Sheet as of
September 30, 1998 and Unaudited Pro Forma Consolidated Statements of Income for
the three months ended September 30, 1998 and for the fiscal year ended June 30,
1998 illustrate (i) the effect of the Offer as if it had been consummated on
September 30, 1998 for the Unaudited Pro Forma Consolidated Balance Sheet and
(ii) the effect of the sale of Tropicana, the Offer and the other transactions
described below as if each had been consummated on July 1, 1997 for the
Unaudited Pro Forma Consolidated Statement of Income for the three months ended
September 30, 1998 and (iii) the effect of the sale of Tropicana, the offer and
the other transactions described below as if such transactions had been
consummated on July 1, 1997 for the Unaudited Pro Forma Consolidated Statement
of Income for the fiscal year ended June 30, 1998. For purposes of the following
Unaudited Pro Forma Consolidated Financial Statements, the total purchase price
of the Offer of NLG 20.7 billion is converted to US Dollars at a rate of 2.0
Dutch Guilders to 1.0 US Dollar, the payment of which is reflected as Cash
Consideration of $8.35 billion and the issuance of 47,904,191 Seagram Shares
valued at $2.0 billion (assuming that all PolyGram Shares are acquired in the
Offer). The Offer will be accounted for as a purchase.
The other transactions referred to in the immediately preceding paragraph
are:
- On October 21, 1997, the acquisition by Universal Studios, Inc.
("Universal") of an incremental 50% interest in the USA Networks
partnership, including the Sci-Fi Channel, for $1.7 billion in cash (the
"USA Networks Transaction"). The USA Networks Transaction was accounted
for under the purchase method of accounting. The cost of the acquisition
was allocated on the basis of the estimated fair market value of the
assets acquired and liabilities assumed. This valuation resulted in $1.6
billion of unallocated excess of cost over fair value of assets acquired
which was being amortized over 40 years, and
- On February 12, 1998, the sale of a 50% interest in USA Networks to USA
Networks, Inc. ("USAi") and the contribution of the remaining 50%
interest in USA Networks and the majority of the television assets
("UTV") of Universal, including all of Universal's domestic television
production and distribution operations and 50% of the international
operations of USA Networks, to USANi LLC (the "LLC") in a transaction
(the "USAi Transaction") in which Universal received cash, 13.5 million
shares of USAi (after giving effect to the 2 for 1 split of USAi stock on
March 26, 1998), consisting of approximately 7.1 million shares of common
stock and 6.4 million shares of Class B common stock which in the
aggregate represented a 10.7% equity interest in USAi at date of
acquisition, and a 45.8% interest in the LLC which is exchangeable for
USAi common stock and Class B common stock. The USAi Transaction resulted
in $82 million of unallocated excess cost over fair value of assets
acquired which is being amortized over 40 years. The investment in
7.1 million shares of USAi common stock held by Universal at June 30,
1998 is accounted for at market value ($178 million at June 30, 1998) and
has an underlying historical cost of $142 million. The investment in the
6.4 million shares of Class B common stock of USAi is carried at its
historical cost of $128 million. The investment in the LLC is included in
investments in unconsolidated companies on the consolidated balance sheet
and is accounted for under the equity method.
No adjustment has been included in the pro forma amounts for any
anticipated cost savings or other synergies.
Pursuant to the agreement relating to the acquisition of PolyGram, PolyGram
has retained a financial advisor for the purpose of selling PolyGram's film
division as promptly as practicable. On November 10, 1998, Seagram and PolyGram
entered into an agreement with a subsidiary of Metro-Goldwyn-Mayer Inc. ("MGM")
with respect to the previously announced agreement in principle to sell certain
library assets of PolyGram's film division to a subsidiary of MGM following
Seagram's acquisition of PolyGram. Discussions with other parties regarding the
sale of certain other library assets of PolyGram's film division have taken
place, and Seagram is continuing to examine strategic alternatives regarding the
film division's production and distribution operations. No adjustment has been
included in the pro forma amounts for any sale of PolyGram film division assets.
These Unaudited Pro Forma Consolidated Financial Statements should be read
in conjunction with (i) the historical financial statements of PolyGram
(including the notes thereto) contained in PolyGram's Annual Report on Form 20-F
for the year ended December 31, 1997; (ii) the PolyGram unaudited consolidated
interim financial data contained in PolyGram's Reports on Form 6-K dated July
22, 1998 and October 21, 1998, which are incorporated by reference herein,(iii)
the historical financial statements of Seagram contained in Seagram's Annual
Report on Form 10-K for the fiscal year ended June 30, 1998, as amended and (iv)
the historical unaudited consolidated financial statements of Seagram contained
in Seagram's Quarterly Report on Form 10-Q for the quarter ended September 30,
1998.
The Unaudited Pro Forma Consolidated Financial Statements are presented for
comparative purposes only and are not intended to be indicative of actual
consolidated results of operations or consolidated financial position that would
have been achieved had the sale of Tropicana, the Offer, the USA Networks
Transaction and the USAi Transaction been consummated as of the dates indicated
above nor do they purport to indicate results which may be attained in the
future.
5
<PAGE> 6
December 31, 1997; (ii) the PolyGram unaudited consolidated interim financial
data contained in PolyGram's Reports on Form 6-K dated July 22, 1998 and October
31, 1998, which are incorporated by reference herein; and (iii) the historical
financial statements of Seagram contained in Seagram's Annual Report on Form
10-K for the fiscal year ended June 30, 1998, as amended and (iv) the historical
unaudited consolidated financial statements of Seagram contained in Seagram's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1998.
The Unaudited Pro Forma Consolidated Financial Statements are presented for
comparative purposes only and are not intended to be indicative of actual
consolidated results of operations or consolidated financial position that would
have been achieved had the sale of Tropicana, the Offer, the USA Networks
Transaction and the USAi Transaction been consummated as of the dates indicated
above nor do they purport to indicate results which may be attained in the
future.
<PAGE> 7
THE SEAGRAM COMPANY LTD. AND SUBSIDIARY COMPANIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1998
(UNITED STATES DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
POLYGRAM POLYGRAM SEAGRAM
SEAGRAM FINANCIAL PRO FORMA CONSOLIDATED
HISTORICAL STATEMENTS(a) ADJUSTMENTS PRO FORMA
---------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash and short-term investments at
cost................................... $ 3,753 $ 98 $5,207(b) $ 708
(8,350)(c)
Receivables, net......................... 2,216 1,268 -- 3,484
Inventories.............................. 2,734 154 -- 2,888
Film costs, net of amortization.......... 304 194 -- 498
Deferred income taxes.................... 294 216 -- 510
Prepaid expenses and other current
assets................................. 683 528 (188)(d) 1,023
------- ------ ------- -------
TOTAL CURRENT ASSETS................... 9,984 2,458 (3,331) 9,111(k)
------- ------ ------- -------
Common stock of DuPont...................... 925 -- -- 925
Common stock of USAi........................ 266 -- -- 266
Film costs, net of amortization............. 1,292 315 -- 1,607
Artists' contracts, advances and other
entertainment assets..................... 860 1,265 2,800(e) 4,925
Property, plant and equipment, net.......... 2,759 405 -- 3,164
Investment in unconsolidated companies...... 3,836 69 -- 3,905
Excess of cost over fair value of assets
acquired................................. 3,109 1,060 6,544(e) 10,713
Deferred charges and other assets........... 651 68 -- 719
------- ------ ------- -------
$23,682 $5,640 $ 6,013 $35,335(k)
======= ====== ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term borrowings and indebtedness
payable within one year................ $ 1,820 $ 482 $ 707(f) $ 3,009
Accrued royalties and participations..... 738 911 -- 1,649
Payables and accrued liabilities......... 2,043 1,037 95(g) 3,175
Income and other taxes................... 525 47 -- 572
------- ------ ------- -------
TOTAL CURRENT LIABILITIES.............. 5,126 2,477 802 8,405(k)
------- ------ ------- -------
Long-term indebtedness...................... 2,266 76 4,500(h) 6,842
Accrued royalties and participations........ 453 187 -- 640
Deferred income taxes....................... 2,541 271 1,064(e) 3,876
Other credits............................... 1,044 242 -- 1,286
Minority interest........................... 1,923 34 -- 1,957
Shareholders' equity
Shares without par value................. 859 2,353 (2,353)(i) 2,859
2,000(j)
Cumulative currency translation
adjustments............................ (382) -- -- (382)
Cumulative gain on equity securities
after tax.............................. 477 -- -- 477
Retained earnings........................ 9,375 -- -- 9,375
------- ------ ------- -------
TOTAL SHAREHOLDERS' EQUITY............. 10,329 2,353 (353) 12,329
------- ------ ------- -------
$23,682 $5,640 $ 6,013 $35,335
======= ====== ======= =======
</TABLE>
6
<PAGE> 8
THE SEAGRAM COMPANY LTD. AND SUBSIDIARY COMPANIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998
(UNITED STATES DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
-------------------------------------------
POLYGRAM SEAGRAM
SEAGRAM TROPICANA FINANCIAL POLYGRAM CONSOLIDATED
HISTORICAL ADJUSTMENTS STATEMENTS(l) ADJUSTMENTS PRO FORMA
---------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues...................... $ 2,247 $1,343 $ 3,590
Cost of revenues.............. 1,282 741 $ 83(m) 2,106
Selling, general and
administrative
expenses.................... 786 533 41(n) 1,360
------- ------ ------- -------
Operating income.............. 179 69 (124) 124(k)
Interest, net and
other..................... 41 11 90(o) 142
------- ------ ------- -------
138 58 (214) (18)
Provision (benefit)
for income taxes.......... 87 (11) (64)(p) 12
Minority interest
charge (credit)........... 6 (4) (6)(q) (4)
Equity earnings (loss)
from unconsolidated
companies................... 50 (2) -- 48
------- ------ ------- -------
Income (loss) from
continuing
operations................ $ 95 $ 71 $ (144) $ 22
Discontinued Tropicana
operations:
Loss from discontinued
operations (net of
taxes of $0) (3) 3 (r) -- -- --
Gain on sale of discontinued
operations (net of taxes
of $373)................. 1,072 (1,072)(s) -- -- --
------- ------- ------- ------- -------
1,069 (1,069) -- -- --
------- ------- ------ ------- -------
Net income (loss)............. $ 1,164 $(1,069) $ 71 $ (144) $ 22(k)
======= ======= ====== ======= =======
Basic earnings per share
Income from continuing
operations................ $ .27 $ .06
Income from
discontinued
Tropicana
operations, after
tax....................... 3.08 --
------- -------
Net income.................. $ 3.35 $ .06
======= =======
Diluted earnings per
share
Income from continuing
operations................ $ .27 $ .06
Income from
discontinued
Tropicana
operations, after
tax....................... 3.06 --
------- -------
Net income.................. $ 3.33 $ .06
======= =======
Shares (in thousands)
Weighted average
shares
outstanding............... 347,360 47,904(j) 395,264
Dilutive potential
common shares............. 2,593 2,593
------- -------
Adjusted weighted
average shares
outstanding............... 349,953 397,857
======= =======
</TABLE>
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<PAGE> 9
THE SEAGRAM COMPANY LTD. AND SUBSIDIARY COMPANIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE FISCAL YEAR ENDED JUNE 30, 1998
(UNITED STATES DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS PRO FORMA ADJUSTMENTS
----------------- --------------------------------------------
UTV AND SEAGRAM/ POLYGRAM SEAGRAM
SEAGRAM USA USAI & USAI TROPICANA FINANCIAL POLYGRAM CONSOLIDATED
HISTORICAL NETWORKS OTHER PRO FORMA ADJUSTMENTS(r) STATEMENTS(l) ADJUSTMENTS PRO FORMA
---------- -------- ------ --------- -------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $ 9,474 $(376)(t) $ 11(v) $9,109 $5,559 $14,668
Cost of revenues........ 5,525 (232)(t) 5,293 3,045 $ 347(m) 8,685
Selling, general and
administrative
expenses.............. 3,396 (53)(t) 8(v) 3,351 2,156 169(n) 5,676
------- ----- ---- ------ ------ ------ ------- -------
Operating income........ 553 (91) 3 465 358 (516) 307(k)
Interest, net and
other............... 228 (38)(t) 21(w) 211 14 360(o) 585
Gain on sale of Time
Warner shares......... 926 -- -- 926 926
Gain on USAi
transaction........... 360 -- -- 360 360
------- ----- ---- ------ ------ ------ ------- -------
1,611 (53) (18) 1,540 344 (876) 1,008
Provision (benefit)
for income taxes.... 638 (14) 3(p) 627 102 (258)(p) 471
Minority interest
charge (credit)..... 48 (10)(t) 6(q) 44 11 (35)(q) 20
Equity (loss) earnings
from unconsolidated
companies............. (45) 31(t) 19(u) 5 (11) (6)
------- ----- ---- ------ ------ ------ ------- -------
Income (loss) from
continuing
operations.......... $ 880 $ 2 $ (8) $ 874 $ 220 $ (583) $ 511
Income from
discontinued
Tropicana
operations, after
tax................. 66 -- -- 66 $ (66) -- -- --
------- ----- ---- ------ ------ ------ ------- -------
Net income (loss)....... $ 946 $ 2 $ (8) $ 940 $ (66) $ 220 $ (583) $ 511(k)
======= ===== ==== ====== ====== ====== ======= =======
Basic earnings per share
Income from continuing
operations.......... $ 2.51 $ 1.28
Income from
discontinued
Tropicana
operations, after
tax................. .19 --
------- -------
Net income............ $ 2.70 $ 1.28
======= =======
Diluted earnings per
share
Income from continuing
operations.......... $ 2.49 $ 1.27
Income from
discontinued
Tropicana
operations, after
tax................. .19 --
------- -------
Net income............ $ 2.68 $ 1.27
======= =======
Shares (in thousands)
Weighted average
shares
outstanding......... 349,874 47,904(j) 397,778
Dilutive potential
common shares....... 3,731 3,731
------- -------
Adjusted weighted
average shares
outstanding......... 353,605 401,509
======= =======
</TABLE>
4
<PAGE> 10
NOTES TO SEAGRAM PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
(a) The PolyGram financial statements have been converted to U.S. GAAP and
certain reclassifications have been made to conform to Seagram's account
classifications. The balance sheet has been converted at a rate of 1.8794
Dutch Guilders to 1.0 US Dollar.
(b) Reflects the cash proceeds from short term borrowings and long term
borrowings.
(c) Reflects the cash paid to PolyGram shareholders in the Offer.
(d) Reflects option premiums for the purchase of various currency options to
hedge Seagram's currency exposure given that the cash consideration payable
in the Offer is payable in Dutch Guilders. Seagram has purchased options to
sell $6.8 billion in exchange for Deutsch Marks, which are being used as a
proxy for Dutch Guilders due to the greater liquidity available in the
German currency, at strike prices equivalent to the forward rates at the
times of purchase. These options mature on various dates near the expected
close of the Offer.
(e) Reflects preliminary estimates of the revaluation of artist contracts,
catalogs and music publishing to fair value and the associated deferred tax
liability and the unallocated amount of the excess of the purchase price
over the fair value of PolyGram assets acquired. Seagram is currently
evaluating the fair value of certain assets to be acquired and liabilities
to be assumed. Upon completion of this valuation, Seagram will make a final
allocation of the excess purchase price over fair value, which may include
adjustments to the preliminary estimates referenced above. Accordingly, the
purchase accounting allocation is preliminary and has been made solely for
the purpose of developing the unaudited pro forma consolidated financial
information.
(f) Reflects the short-term borrowings to finance the Offer.
(g) Reflects financing and transaction costs incurred as a result of the
Offer.
(h) Reflects the long-term borrowings to finance the Offer.
(i) Reflects the elimination of historical PolyGram equity.
(j) Reflects the issuance of 47,904,191 Seagram Shares at $41.75 per share to
PolyGram shareholders in the Offer.
(k) Includes PolyGram's film division balances which represent approximately
five percent of Seagram pro forma current assets, approximately two percent
of Seagram pro forma total assets, approximately five percent of Seagram
pro forma current liabilities and approximately two percent of Seagram pro
forma total liabilities. The operating loss and net loss for PolyGram's
film division for the three months ended September 30, 1998 were $38
million and $48 million, respectively. The operating loss and net loss for
PolyGram's film division for the twelve months ended June 30, 1998 were
$102 million and $150 million, respectively.
(l) The PolyGram financial statements for the three months ended September 30,
1998 and the twelve months ended June 30, 1998 have been converted to U.S.
GAAP and certain reclassifications have been made to conform to Seagram's
account classifications. The income statement has been converted to US
Dollars at an average rate of 1.9868 Dutch Guilders to one US Dollar for
the three months ended September 30, 1998, and at an average rate of
2.01812 Dutch Guilders to one US Dollar for the twelve months ended June
30, 1998.
(m) Reflects the amortization, on an accelerated basis over periods from 14 to
20 years, of the $2.8 billion revaluation to fair value of artist
contracts, catalogs and music publishing assets as described in note (e).
Amortization for the fiscal years ending June 30, 1999, June 30, 2000, June
30, 2001 and June 30, 2002 will be $332 million, $228 million, $198 million
and $183 million, respectively.
(n) Reflects the amortization, over a 40 year period, of the unallocated amount
of the excess of the purchase price over the fair value of PolyGram assets
acquired as described in note (e).
(o) Reflects the additional interest expense resulting from the increased
short-term borrowings of approximately $707 million at an average borrowing
rate of 6.28% and increased long-term borrowings of $4.5 billion at an
average borrowing rate of 7.02% for the payment of $8.35 billion of the
$10.35 billion purchase price to acquire 100% of PolyGram in the Offer. The
balance of the $8.35 billion payment will be funded from the net sale
proceeds from the sale of Tropicana.
(p) Reflects the income taxes provided for at the statutory income tax rate.
(q) Reflects the adjustment of interest attributable to minority shareholders
of Universal.
(r) Reflects the removal of Tropicana net income.
(s) Reflects the removal of the gain on the sale of Tropicana.
(t) Reflects the elimination of USA Networks and the television business
contributed to the LLC. The initial 50% interest was accounted for under
the equity method of accounting, while the acquisition of the remaining 50%
interest was accounted for under the purchase method of accounting.
(u) Reflects the 45.8% equity in the net income of the LLC net of the
amortization of goodwill on the investment in the LLC over 40 years. The
interest in the LLC is accounted for under the equity method of accounting.
(v) Reflects distribution agreements which principally include: (1) USAi's
distribution of Universal's library and other television product and
theatrical films in domestic television markets and (2) Universal's
distribution of USAi's television product in foreign markets.
(w) Reflects the additional interest expense resulting from the increased
short-term borrowings for the payment of $1.7 billion for the incremental
50% interest in USA Networks offset by the reduction of short-term
borrowings using cash proceeds of $1.3 billion from the USAi transaction,
at an average borrowing rate of 5.4%.
8
<PAGE> 11
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
(99.1) Unaudited Supplementary Pro Forma Financial Information.
(99.2) PolyGram's Unaudited Interim Financial Reports (incorporated by
reference to PolyGram's Reports on Form 6-K dated July 22, 1998
and October 21, 1998).
9
<PAGE> 1
EXHIBIT 99.1
THE SEAGRAM COMPANY LTD. UNAUDITED SUPPLEMENTARY
PRO FORMA FINANCIAL INFORMATION
The following unaudited supplementary pro forma financial information of
The Seagram Company Ltd. (the "Corporation" or "Seagram") is intended solely to
provide investors with additional data and should be read in conjunction with
(i) the unaudited pro forma consolidated balance sheet as of June 30, 1998 and
unaudited pro forma consolidated income statement for the fiscal year ended
June 30, 1998 included in the Corporation's Form 8-K dated August 25, 1998, as
amended, and (ii) the unaudited pro forma consolidated balance sheet as of
September 30, 1998 and unaudited pro forma consolidated income statement for
the three months ended September 30, 1998 included in this Form 8-K to which
this exhibit is attached.
The unaudited supplementary pro forma financial information which follows
includes revenues and earnings before interest, taxes, depreciation and
amortization of the Corporation and its consolidated subsidiaries ("EBITDA").
EBITDA is a non-GAAP financial metric utilized by management and is intended
solely to provide additional information to investors. The Corporation believes
EBITDA provides additional information for understanding its underlying business
results. The Corporation also believes EBITDA is an appropriate measure of the
Corporation's operating performance, given the goodwill associated with the
Corporation's acquisitions. However, EBITDA should be considered in addition to,
not as a substitute for, reported revenues, operating income, net income, cash
flows and other measures of financial performance in accordance with generally
accepted accounting principles.
The unaudited supplementary pro forma financial information for the fiscal
year ended June 30, 1998 illustrates the effect of the proposed acquisition of
PolyGram N.V. (the "Acquisition") and the other transactions referred to below
as if such transactions had been consummated on July 1, 1997. The unaudited
supplementary pro forma financial information for the three months ended
September 30, 1998 illustrates the effect of the Acquisition as if the
Acquisition had been consummated on July 1, 1997. For purposes of the following
unaudited supplementary pro forma financial information, the total purchase
price of the Acquisition of Dutch Guilders 20.7 billion is converted to U.S.
dollars at a rate of 2.0 Dutch Guilders to 1.0 U.S. dollar, the payment of which
is reflected as cash consideration of $8.35 billion and the issuance of
47,904,191 common shares of the Corporation valued at $2.0 billion (assuming
that all PolyGram shares are acquired in the Acquisition). The Acquisition
will be accounted for as a purchase.
The other transactions referred to in the immediately preceding paragraph
are:
- on October 21, 1997, the acquisition by Universal Studios, Inc.
("Universal") of an incremental 50% interest in the USA Networks
partnership (the "USA Networks transaction"), including the Sci-Fi
Channel, for $1.7 billion in cash. The USA Networks transaction was
accounted for under the purchase method of accounting. The cost of the
acquisition was allocated on the basis of the estimated fair market value
of the assets acquired and liabilities assumed. This valuation resulted
in $1.6 billion of unallocated excess of cost over fair value of assets
acquired which was being amortized over 40 years, and
- on February 12, 1998, the sale of a 50% interest in USA Networks to USA
Networks, Inc. ("USAi") and the contribution of the remaining 50%
interest in USA Networks and the majority of the television assets
("UTV") of Universal, including all of Universal's domestic television
production and distribution operations and 50% of the international
operations of USA Networks, to USANi LLC in a transaction (the "USA
transaction") in which Universal received cash, 13.5 million shares of
USAi (after giving effect to the 2 for 1 split of USAi stock on March 26,
1998), consisting of approximately 7.1 million shares of common stock and
6.4 million shares of Class B common stock which, as of the date of
acquisition, in the aggregate represented a 10.7% equity interest in
USAi, and a 45.8% interest in the USANi LLC which is exchangeable for
USAi common stock and Class B common stock. The USAi transaction resulted
in $82 million of unallocated excess cost over fair value of assets
acquired which is being amortized over 40 years. The investment in the
7.1 million shares of USAi common stock held by Universal at June 30,
1998 is accounted for at market value ($178 million at June 30,1998) and
has an underlying historical cost of $142 million. The investment in the
6.4 million shares of Class B common stock of USAi is carried at its
historical cost of $128 million. The investment in the USANi LLC is
included in investments in unconsolidated companies on the consolidated
balance sheet and is accounted for under the equity method.
No adjustment has been included in the pro forma amounts for any
anticipated cost savings or other synergies.
Pursuant to the agreement relating to the acquisition of PolyGram,
Polygram has retained a financial advisor for the purpose of selling PolyGram's
film division as promptly as practicable. On November 10, 1998, Seagram and
PolyGram entered into an agreement with a subsidiary of Metro-Goldwyn-Mayer
Inc. ("MGM") with respect to the previously announced agreement in principle to
sell certain library assets of PolyGram's film division to a subsidiary of MGM
following Seagram's acquisition of PolyGram. Discussions with other parties
regarding the sale of certain other library assets of PolyGram's film division
have taken place, and Seagram is continuing to examine strategic alternatives
regarding the film division's production and distribution operations. No
adjustment has been included in the pro forma amounts for any sale of PolyGram
film division assets.
The unaudited supplementary pro forma financial information of the
Corporation is presented for comparative purposes only and is not intended to be
indicative of actual consolidated results of operations or consolidated
financial position that would have been achieved had the Acquisition, the
USA Networks transaction and the USAi transaction been consummated as of the
dates indicated above nor does it purport to indicate results which may be
attained in the future.
<PAGE> 2
THE SEAGRAM COMPANY LTD. AND SUBSIDIARY COMPANIES
UNAUDITED SUPPLEMENTARY PRO FORMA FINANCIAL INFORMATION
For the Fiscal Year Ended June 30, 1998
(United States dollars in millions)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Adjustments Adjustments
------------------ ---------------------------------
UTV and Seagram/ PolyGram Seagram
Seagram USA USAi & USAi Financial PolyGram Consolidated
Historical Networks Other Pro Forma Statements(c), (d) Adjustments Pro Forma
---------- -------- ------ --------- ----------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues
Spirits and Wine.............. $4,525 $ -- $ -- $4,525 -- -- $ 4,525
Entertainment
Filmed Entertainment....... 2,793 (376)(a) 11(b) 2,428 -- -- 2,428
Music...................... 1,461 -- -- 1,461 5,559 -- 7,020
Recreation and Other....... 695 -- -- 695 -- -- 695
------ ----- ---- ------ ------ ----- -------
Total Entertainment........... 4,949 (376) 11 4,584 5,559 -- 10,143
Total Revenues................... $9,474 $(376) $ 11 $9,109 $5,559 $ -- $14,668
====== ===== ==== ====== ====== ===== ======
EBITDA
Spirits and Wine .............. $ 583 $ -- $ -- $ 583 -- -- $ 583
Entertainment
Filmed Entertainment ........ 316 (115)(a) 3(b) 204 -- -- 204
Music 84 -- -- 84 540 -- 624
Recreation and Other ........ 99 -- -- 99 -- -- 99
------ ----- ---- ------ ------ ----- -------
Total Entertainment............ 499 (115) 3 387 540 -- 927
Total EBITDA .................... 1,082 (115) 3 970 540 -- 1,510
Depreciation and Amortization ... 416 (24)(a) -- 392 182 516(e) 1,090
Corporate Expenses .............. 113 -- -- 113 -- -- 113
------ ----- ---- ------ ------ ----- -------
Operating Income ................ $ 553 $ (91) $ 3 $465 $358 $(516) $ 307
====== ===== ==== ====== ====== ===== ======
</TABLE>
<PAGE> 3
THE SEAGRAM COMPANY LTD. AND SUBSIDIARY COMPANIES
UNAUDITED SUPPLEMENTARY PRO FORMA FINANCIAL INFORMATION
For the Quarter Ended September 30, 1998
(United States dollars in millions)
<TABLE>
<CAPTION>
Pro Forma
Adjustments
------------------------------
PolyGram Seagram
Seagram Financial PolyGram Consolidated
Historical Statements(c),(d) Adjustments Pro Forma
---------- ----------------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues
Spirits and Wine $ 1,021 -- -- $ 1,021
Entertainment
Filmed Entertainment 618 -- -- 618
Music 420 1,343 -- 1,763
Recreation and Other 188 -- -- 188
---------- ---------- ----------- ------------
Total Entertainment 1,226 1,343 -- 2,569
Total Revenues $ 2,247 $ 1,343 $ -- $ 3,590
========== ========== =========== ============
EBITDA
Spirits and Wine $ 144 -- -- $ 144
Entertainment
Filmed Entertainment 93 -- -- 93
Music 21 114 -- 135
Recreation and Other 34 -- -- 34
---------- ---------- ----------- ------------
Total Entertainment 148 114 -- 262
Total EBITDA 292 114 -- 406
Depreciation and Amortization 101 45 124(e) 270
Corporate Expenses 12 -- -- 12
---------- ---------- ----------- ------------
Operating Income $ 179 $ 69 $ (124) $ 124
========== ========== =========== ============
</TABLE>
<PAGE> 4
NOTES TO SEAGRAM UNAUDITED SUPPLEMENTARY
PRO FORMA FINANCIAL INFORMATION
(a) Reflects the elimination of USA Networks and the television business
contributed to the LLC. The initial 50% interest was accounted for under
the equity method of accounting, while the acquisition of the remaining 50%
interest was accounted for under the purchase method of accounting.
(b) Reflects distribution agreements which principally include: (1) USAi's
distribution of Universal's library and other television product and
theatrical films in domestic television markets and (2) Universal's
distribution of USAi's television product in foreign markets.
(c) The PolyGram financial statements for the twelve months ended June 30, 1998
and three months ended September 30, 1998 have been converted to U.S. GAAP
and certain reclassifications have been made to conform to Seagram's
account classifications. The income statements has been converted to US
Dollars at an average rate of 2.01812 Dutch Guilders to one US Dollar for
the twelve months ended June 30, 1998 and at an average rate of
1.9868 Dutch Guilders to one US Dollar for the three months ended September
30, 1998.
(d) Includes PolyGram's film division operating results for the twelve months
ended June 30, 1998 and the three months ended September 30, 1998,
respectively.
(e) Reflects the amortization, on an accelerated basis over periods from 14 to
20 years, of the $2.8 billion revaluation to fair value of artist
contracts, catalogs and music publishing assets as described in note (e).
Amortization for the fiscal years ending June 30, 1999, June 30, 2000, June
30, 2001 and June 30, 2002 will be $332 million, $228 million, $198 million
and $183 million, respectively. The amortization, over a 40 year period, of
the unallocated amount of the excess of the purchase price over the fair
value of PolyGram assets.
