<PAGE>
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
December 16, 1998
-----------------
Date of Report (Date of earliest event reported)
HEARST-ARGYLE TELEVISION, INC.
------------------------------
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 000-27000 74-271753
-------- --------- ---------
(State of Organization) (Commission File Number) (IRS Employer Identification No.)
</TABLE>
888 Seventh Avenue
New York, New York 10106
------------------------
(Address of Registrant's Principal Executive Office) (Zip Code)
(212) 887-6800
--------------
(Registrant's telephone number, including area code)
<PAGE>
Item 5. Other Events.
------------
As reported by Hearst-Argyle Television, Inc. (the "Company") on a Current
Report on Form 8-K, dated May 26, 1998, the Company agreed to purchase the
television and radio business operations of Pulitzer Publishing Company
("Pulitzer") in exchange for shares of the Company's Series A Common Stock,
par value $.01 per share (the "Series A Common Stock"), worth $1.15 billion,
subject to a working capital adjustment. Pursuant to the Agreement and Plan of
Merger, dated as of May 25, 1998 (the "Pulitzer Merger Agreement"), by and
among the Company, Pulitzer and Pulitzer Inc., a wholly owned subsidiary of
Pulitzer ("New Pulitzer"), Pulitzer will contribute all of its publishing
assets and the net proceeds of $700 million of new debt into New Pulitzer and
distribute shares of capital stock of New Pulitzer to the current stockholders
of Pulitzer. As a result Pulitzer, with its remaining broadcast operations,
will then be merged with and into the Company in exchange for $1.15 billion of
the Company's Series A Common Stock and the assumption of $700 million of new
debt (the "Pulitzer Merger"). The Company expects the Pulitzer Merger to close
early in 1999, subject to shareholder and regulatory approvals and certain
other conditions. Currently, Pulitzer's television and radio business
operations are held in Pulitzer Broadcasting Company, a wholly owned
subsidiary of Pulitzer ("Pulitzer Broadcasting"), and certain subsidiaries of
Pulitzer Broadcasting. Attached hereto as Exhibit 99.1 are the consolidated
financial statements of Pulitzer Broadcasting and Subsidiaries as of September
30, 1998 and December 31, 1997 and for the three and nine months ended
September 30, 1998 and 1997.
In addition, as reported by the Company on a Current Report on Form 8-K, dated
September 17, 1998, as amended by a Current Report on Form 8-K/A, dated
December 7, 1998, the Company has entered into an agreement to acquire,
through a merger transaction, all of the partnership interests in Kelly
Broadcasting Co., a California limited partnership ("Kelly Broadcasting"), in
exchange for cash consideration in the amount of $520 million, subject to a
working capital adjustment (the "Kelly Transaction"). Kelly Broadcasting owns
and operates television broadcast station KCRA-TV, Sacramento, California, and
provides programming for television broadcast station KQCA-TV, Sacramento,
California, pursuant to a Time Brokerage Agreement with Channel 58, Inc., a
California corporation. Pursuant to the Kelly Broadcasting Co. Agreement and
Plan of Merger, dated as of August 21, 1998, by and among the Company, Kelly
Acquisition Corp., a Delaware corporation and wholly owned subsidiary of the
Company ("Merger Sub"), Kelly Broadcasting, J.S. Kelly L.L.C., a Delaware
limited liability company, G.G. Kelly L.L.C., a Delaware limited liability
company, and Robert E. Kelly, Kelly Broadcasting will be merged with and into
Merger Sub, with Merger Sub as the surviving entity. The Company expects the
Kelly Transaction to close in early 1999, subject to regulatory approvals and
other customary closing conditions.
Attached hereto as Exhibit 99.2 are the Company's Unaudited Pro Forma Combined
Condensed Financial Statements giving effect to the Pulitzer Merger
both including and excluding the Kelly Transaction.
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
------------------------------------------------------------------
(c) Exhibits.
99.1 Pulitzer Broadcasting Company and Subsidiaries
consolidated financial statements as of September 30,
1998 and December 31, 1997 and for the three and nine
months ended September 30, 1998 and 1997.
99.2 Unaudited Pro Forma Combined Condensed Financial
Statements of Hearst-Argyle Television, Inc. (giving
effect to the Pulitzer Merger both including and
excluding the Kelly Transaction).
<PAGE>
SIGNATURES
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 hereunto duly authorized.
HEARST-ARGYLE TELEVISION, INC.
By: /s/ Dean H. Blythe
----------------------------------
Dean H. Blythe
Senior Vice President-
Corporate Development, Secretary
and General Counsel
Date: December 16, 1998
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit
- ---------- -------
99.1 Pulitzer Broadcasting Company and Subsidiaries consolidated
financial statements as of September 30, 1998 and December 31, 1997
and for the three and nine months ended September 30, 1998 and
1997.
99.2 Unaudited Pro Forma Combined Condensed Financial Statements of
Hearst-Argyle Television, Inc. (giving effect to the Pulitzer
Merger both including and excluding the Kelly Transaction).
<PAGE>
EXHIBIT 99.1
PULITZER BROADCASTING COMPANY
AND SUBSIDIARIES
TABLE OF CONTENTS
CONSOLIDATED FINANCIAL STATEMENTS
Statements of Consolidated Income for each of the Nine-Month
and Three-Month Periods Ended September 30, 1998 and 1997 (Unaudited)
Statements of Consolidated Financial Position at September 30, 1998
(Unaudited) and December 31, 1997
Statements of Consolidated Cash Flows for each of the Nine-Month Periods
Ended September 30, 1998 and 1997 (Unaudited)
Notes to Consolidated Financial Statements
<PAGE>
PULITZER BROADCASTING COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
<TABLE>
<CAPTION>
THIRD QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
(Unaudited) (Unaudited)
---------------------- ----------------------
1998 1997 1998 1997
(In thousands)
<S> <C> <C> <C> <C>
OPERATING REVENUES - NET $ 53,908 $ 53,738 $173,681 $165,002
---------- ---------- ---------- ----------
OPERATING EXPENSES:
Operations 18,268 17,513 54,313 51,502
Selling, general and administrative 13,366 13,652 41,633 41,514
Depreciation and amortization 5,461 5,938 16,512 17,622
---------- ---------- ---------- ----------
Total operating expenses 37,095 37,103 112,458 110,638
---------- ---------- ---------- ----------
Operating income 16,813 16,635 61,223 54,364
Interest expense (3,330) (3,854) (10,255) (12,553)
Net other income (expense) 6 3 11 8
---------- ---------- ---------- ----------
INCOME BEFORE PROVISION FOR
INCOME TAXES 13,489 12,784 50,979 41,819
PROVISION FOR INCOME TAXES 5,273 4,998 19,918 16,344
---------- ---------- ---------- ----------
NET INCOME $ 8,216 $ 7,786 $ 31,061 $ 25,475
========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
PULITZER BROADCASTING COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED FINANCIAL POSITION
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
(Unaudited) (Unaudited)
------------- ------------
(In thousands, except share data)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Trade accounts receivable (less allowance for
doubtful accounts of $928 and $785) $ 41,770 $ 50,880
Program rights 10,283 7,866
Prepaid expenses and other 1,405 1,260
---------- ----------
Total current assets 53,458 60,006
---------- ----------
PROPERTIES:
Land 10,254 10,163
Buildings 45,040 44,769
Machinery and equipment 138,385 135,629
Construction in progress 5,761 3,282
---------- ----------
Total 199,440 193,843
Less accumulated depreciation 116,634 106,826
---------- ----------
Properties - net 82,806 87,017
---------- ----------
INTANGIBLE AND OTHER ASSETS:
Intangible assets - net of amortization 96,744 102,493
Other 9,100 7,172
---------- ----------
Total intangible and other assets 105,844 109,665
---------- ----------
TOTAL $242,108 $256,688
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Trade accounts payable $ 4,384 $ 3,966
Current portion of long-term debt 12,705 12,705
Salaries, wages and commissions 4,590 4,709
Interest payable 2,088 5,677
Program contracts payable 9,846 7,907
Other 1,263 1,551
---------- ----------
Total current liabilities 34,876 36,515
---------- ----------
LONG-TERM DEBT 160,000 172,705
---------- ----------
PENSION OBLIGATIONS 6,590 5,544
---------- ----------
POSTRETIREMENT BENEFIT OBLIGATIONS 2,711 2,556
---------- ----------
OTHER LONG-TERM LIABILITIES 3,888 3,299
---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY (DEFICIT):
Common stock, $100 par value; 1,000 shares authorized;
issued 100 shares 10 10
Additional paid-in capital 11,924 11,924
Retained earnings 112,670 81,609
Intercompany balance (90,561) (57,474)
---------- ----------
Total stockholder's equity (deficit) 34,043 36,069
---------- ----------
TOTAL $242,108 $256,688
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
PULITZER BROADCASTING COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
(Unaudited)
------------------------------
1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 31,061 $ 25,475
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 10,669 11,827
Amortization 5,843 5,795
Deferred income taxes (629) (640)
Gain on sale of assets
Changes in assets and liabilities which
provided (used) cash:
Trade accounts receivable 9,110 2,917
Other assets (194) (974)
Trade accounts payable and other liabilities (2,386) (2,997)
------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 53,474 41,403
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (6,684) (9,551)
Purchase of broadcast assets (2,936)
Investment in limited partnership (1,000) (1,500)
Sale of assets
------------- -------------
NET CASH USED IN INVESTING ACTIVITIES (7,684) (13,987)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt
Repayments of long-term debt (12,705) (50,705)
Net transactions with Pulitzer Publishing Company (33,085) 23,289
------------- -------------
NET CASH USED IN FINANCING ACTIVITES (45,790) (27,416)
------------- -------------
NET INCREASE IN CASH $ -- $ --
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
PULITZER BROADCASTING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ACCOUNTING POLICIES
Interim Adjustments - In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly Pulitzer Broadcasting
Company's financial position as of September 30, 1998, results of operations for
the three-month and nine-month periods ended September 30, 1998 and 1997 and
cash flows for the nine-month periods ended September 30, 1998 and 1997. These
financial statements should be read in conjunction with the audited consolidated
financial statements of Pulitzer Broadcasting Company ("Broadcasting") and
related notes thereto contained in Exhibit 99-1 to the Hearst-Argyle Television,
Inc. Current Report on Form 8-K/A dated December 16, 1998. Results of operations
for interim periods are not necessarily indicative of the results to be expected
for the full year.
Fiscal Year and Fiscal Quarters - Broadcasting's fiscal year and third fiscal
quarter end on the Sunday coincident with or prior to December 31 and September
30, respectively. For ease of presentation, Broadcasting has used December 31
as the year end and September 30 as the third quarter end.
Comprehensive Income - In June 1997, the Financial Accounting Standards Board
issued statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income. This statement established standards for the reporting
and display of Comprehensive Income and its components. This statement is
required to be implemented in financial statements issued for periods ending
after December 15, 1997. For the nine-month periods ended September 30, 1998
and 1997, Broadcasting did not incur items to be reported in "Comprehensive
Income" that were not already included in reported "net income". As a result,
comprehensive income and net income were the same for these periods.
2. TRANSACTIONS WITH PULITZER
Cash - The Statements of Consolidated Financial Position exclude all cash and
have reflected current payables for income taxes and other items, to the extent
paid by Pulitzer Publishing Company (the "Company" or "Pulitzer"), in the
intercompany balance.
Long-term Debt - Pulitzer's long-term debt balances and related interest expense
have been allocated to Broadcasting and are included in the consolidated
financial statements herein. This allocation to Broadcasting is consistent with
the terms of the Merger Agreement discussed in Note 3.
Intercompany Balance - Balance reflects the net transactions with Pulitzer,
which are not expected to be repaid.
Corporate Expenses - Broadcasting benefits from certain services provided by
Pulitzer including financial, legal, tax, employee benefit department, corporate
communications, and internal audit. These corporate costs have been allocated
to Broadcasting using a variety of factors, including revenues, property, and
payroll. Management believes that the methods of allocating costs to
Broadcasting are reasonable. Broadcasting's allocation of these costs were
$2,863,000 and $2,767,000 for the nine months ended September 30, 1998 and 1997,
respectively. These costs are included within the Statements of Consolidated
Income.
5
<PAGE>
3. SPIN-OFF AND MERGER
On May 25, 1998, Pulitzer, Pulitzer Inc., (a newly-organized, wholly-owned
subsidiary of the Company ("New Pulitzer")), and Hearst-Argyle Television, Inc.
("Hearst-Argyle") entered into an Agreement and Plan of Merger (the "Merger
Agreement") pursuant to which Hearst-Argyle will acquire the Company's
television and radio broadcasting operations (collectively, the "Broadcasting
Business"). The Broadcasting Business consists of nine network-affiliated
television stations and five radio stations owned and operated by Pulitzer
Broadcasting Company, a wholly-owned subsidiary of the Company, and its wholly-
owned subsidiaries. The Broadcasting Business will be acquired by Hearst-Argyle
through the merger ("Merger") of the Company into Hearst-Argyle.
Prior to the Spin-off (as defined below), the Company intends to borrow $700
million, which may be secured by the assets of the Broadcasting Business. Out
of the proceeds of this new debt, the Company will pay the existing Company debt
and any costs arising as a result of the Merger and related transactions. Prior
to the Merger, the balance of the proceeds of this new debt, together with the
Company's publishing assets and liabilities, will be contributed by the Company
to New Pulitzer pursuant to a Contribution and Assumption Agreement (the
"Contribution"). Pursuant to the Merger Agreement, Hearst-Argyle will assume
the new debt following the consummation of the Spin-off and Merger.
Immediately following the Contribution, the Company will distribute to each
holder of Company Common Stock one fully-paid and nonassessable share of New
Pulitzer Common Stock for each share of Company Common Stock held and to each
holder of Company Class B Common Stock one fully-paid and nonassessable share of
New Pulitzer Class B Common Stock for each share of Company Class B Common Stock
held (the "Distribution"). The Contribution and Distribution are collectively
referred to as the "Spin-off." The Spin-off and the Merger are collectively
referred to as the "Transactions."
The Company's obligation to consummate the Transactions is subject, among other
things, to the receipt of various regulatory approvals and approval by the
stockholders of both the Company and Hearst-Argyle. The Company has received a
favorable letter ruling from the Internal Revenue Service confirming that the
Spin-off will be tax-free to Pulitzer stockholders. Early termination of the
initial waiting period under the Hart-Scott-Rodino Antitrust Improvement Act of
1976 has also been granted. In addition, the Federal Communications Commission
(the "FCC") has published notice of its grant of the application for the
transfer of FCC licenses, including related waiver requests, from the Company to
Hearst-Argyle. The Company anticipates that the Transactions will be completed
in January 1999.
4. COMMITMENTS AND CONTINGENCIES
At September 30, 1998, Broadcasting and its subsidiaries had construction and
equipment commitments of approximately $2,024,000. Broadcasting's commitment
for broadcasting program contracts payable and license fees at September 30,
1998 was approximately $17,908,000.
Broadcasting and its subsidiaries are involved, from time to time, in various
claims and lawsuits incidental to the ordinary course of its business, including
such maters as libel, slander and defamation actions and complaints alleging
discrimination. While the results of litigation cannot be predicted, management
believes the ultimate outcome of such existing litigation will not have a
material adverse effect on the consolidated financial statements of Broadcasting
and its subsidiaries.
6
<PAGE>
EXHIBIT 99.2
------------
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS OF HEARST-ARGYLE
TELEVISION, INC. (THE "COMPANY") (GIVING EFFECT TO THE PULITZER MERGER (AS
DEFINED IN ITEM 5 OF THE COMPANY'S FORM 8-K, DATED SEPTEMBER 29, 1998 AND
AMENDED BY THE COMPANY'S FORM 8-K/A DATED DECEMBER 16, 1998) BOTH INCLUDING AND
EXCLUDING THE KELLY TRANSACTION (AS DEFINED IN ITEM 5 OF THE COMPANY'S FORM 8-K,
DATED SEPTEMBER 17, 1998 AS AMENDED BY THE COMPANY'S FORM 8-K/A DATED DECEMBER
7, 1998))
The following unaudited pro forma combined condensed financial statements
of the Company (the "Pro Forma Statements") give effect to the Pulitzer Merger
both including and excluding the Kelly Transaction, pursuant to which the
Company will issue to the stockholders of Pulitzer Publishing Company
("Pulitzer") shares of the Company's Series A Common Stock (the "Series A Common
Stock") with a value of $1.15 billion calculated on the basis of an equity
adjustment "collar" mechanism and will assume $700 million of new debt (the "New
Debt"). Upon consummation of the Kelly Transaction, the Company has agreed to
acquire, through a merger transaction, all of the partnership interests in Kelly
Broadcasting (as defined in Item 5 of the Company's Form 8-K dated September 17,
1998 as amended by The Company's Form 8-K/A dated December 7, 1998), in exchange
for cash consideration in the amount of $520 million, subject to a working
capital adjustment.
The Pulitzer Merger and the Kelly Transaction will be accounted for by the
Company using the purchase method with the Company as the acquiror of Pulitzer
Broadcasting (as defined in Item 5 of the Company's Form 8-K, dated September
29, 1998 as amended by The Company's Form 8-K/A dated December 16, 1998) and
Kelly Broadcasting. Accordingly, the Pulitzer Broadcasting and the Kelly
Broadcasting assets and liabilities have been adjusted to their estimated fair
values based upon preliminary purchase price allocations. The results of
operations of Pulitzer Broadcasting and Kelly Broadcasting will be included in
the consolidated financial statements of the Company subsequent to their dates
of acquisition.
The unaudited pro forma combined condensed statements of operations for the
nine-months ended September 30, 1997 and 1998 and for the year ended December
31, 1997 give effect to the Pulitzer Merger both including and excluding the
Kelly Transaction as if both transactions had been completed at the beginning of
each period presented. The unaudited pro forma combined condensed statements of
operations of the Company, including the estimated impact of the Pulitzer Merger
both including and excluding the estimated impact of the Kelly Transaction, have
been prepared based upon the unaudited pro forma combined condensed statements
of operations of the Company, excluding the estimated impact of the Pulitzer
Merger and the Kelly Transaction, the historical statements of operations of
Pulitzer Broadcasting and the historical statements of operations of Kelly
Broadcasting. The unaudited pro forma combined condensed statements of
operations of the Company for the year ended December 31, 1997 and for the nine-
months ended September 30, 1997, excluding the estimated impact of the Pulitzer
Merger and the Kelly Transaction, give effect to the transaction consummated on
January 31, 1997 in which Argyle Television, Inc. ("Argyle"), exchanged its WZZM
and WGRZ stations for Gannett Co., Inc.'s WLWT and KOCO stations located in
Cincinnati, OH and Oklahoma City, OK, respectively (the "Gannett Swap"), the
transaction consummated on August 29, 1997, in which The Hearst Corporation,
pursuant to a merger transaction, contributed its television broadcast group to
Argyle (the "Hearst Transaction"), and the transaction effective June 1, 1998,
whereby the Company exchanged its television stations WNAC-TV and WDTN-TV for
STC Broadcastings, Inc.'s television stations KSBW-TV and WPTZ-TV/WNNE-TV (the
"STC Swap") as if all such transactions had occurred at the beginning of 1997,
and for the nine-months ended September 30, 1998 excluding the estimated impact
of the Pulitzer Merger and the Kelly Transaction give effect to the STC Swap as
if such transaction had occurred at the beginning of 1998.
The unaudited pro forma combined condensed balance sheet at September 30,
1998 gives effect to the Pulitzer Merger including and excluding the Kelly
Transaction as if the Pulitzer Merger had occurred on September 30, 1998 at the
minimum Collar Price of $29.75 and at the maximum Collar Price of $38.50 and is
based upon the historical consolidated balance sheets of the Company, Pulitzer
Broadcasting and Kelly Broadcasting.
The Pro Forma Statements should be read in conjunction with the Company's
historical consolidated and unaudited pro forma combined condensed financial
statements, the Pulitzer Broadcasting and the Kelly Broadcasting historical
consolidated financial statements either included herein or filed previously by
the Company. The Pro Forma Statements are not necessarily indicative of the
actual results of operations or financial position of the Company that would
have occurred had the Pulitzer Merger, the Kelly Transaction, the Hearst
Transaction, the Gannett Swap and the STC Swap occurred on the dates indicated
nor are they necessarily indicative of future operating results or financial
position.
<PAGE>
For purposes of the Pro Forma Statements, the estimated purchase price of
Pulitzer Broadcasting was determined as follows assuming the maximum stock price
of $38.50 and the minimum stock price of $29.75 (in thousands, except share
data):
<TABLE>
<CAPTION>
SHARES ISSUED
PURCHASE PRICE MAXIMUM MINIMUM
-------------- ---------- ----------
<S> <C> <C> <C>
Value of Series A Common Stock issued to Pulitzer stockholders.. $1,150,000 29,870,130 38,655,462
New Debt assumed................................................ 700,000
Estimated transaction costs..................................... 20,000
----------
TOTAL ESTIMATED PURCHASE PRICE.................................. $1,870,000
==========
</TABLE>
For purposes of the Pro Forma Statements, the total estimated purchase
price of Pulitzer Broadcasting is allocated as follows (in thousands):
<TABLE>
<S> <C>
Fair value of the Pulitzer Broadcasting net assets............. $ 116,385
Intangible assets.............................................. 1,753,615
----------
TOTAL ESTIMATED PURCHASE PRICE................................. $1,870,000
==========
</TABLE>
For purposes of the Pro Forma Statements, the estimated purchase price of
Kelly Broadcasting was determined as follows (in thousands):
<TABLE>
<S> <C>
Cash........................................................... $520,000
Estimated transaction costs.................................... 12,000
--------
TOTAL ESTIMATED PURCHASE PRICE................................. $532,000
========
</TABLE>
For purposes of the Pro Forma Statements, the total estimated purchase
price of Kelly Broadcasting is allocated as follows (in thousands):
<TABLE>
<S> <C>
Fair value of the Kelly Broadcasting net assets............... $ 25,336
Intangible assets............................................. 506,664
--------
TOTAL ESTIMATED PURCHASE PRICE................................ $532,000
========
</TABLE>
The estimated purchase price and the resulting allocations are based on
management's preliminary estimations and have been made solely for purposes of
developing the Pro Forma Statements. Any subsequent adjustments and any
uncertainties affecting the pro forma presentation based upon such allocations
are not expected to be significant. As the Collar Price is dependent upon the
trading price and volume of the Hearst-Argyle Series A Common Stock during the
Measurement Period, the accounting values assigned to the consideration
exchanged at the close of the Pulitzer Merger, may fluctuate from the values
assigned in the unaudited pro forma combined condensed financial statements. At
the close of the Pulitzer Merger, the fair value of the consideration exchanged
will be valued based upon the closing price times the number of shares issued in
the Pulitzer Merger. If the closing price on the date of the closing of the
Pulitzer Merger differed from the Collar Price plus or minus $0.25, the effect
on net income would be approximately $341,000 (minimum stock price) and $263,000
(maximum stock price), and the effect on Earnings Per Share, both basic and
diluted, assuming no additional shares are given, would be approximately $.0037
(minimum stock price) and $.0031 (maximum stock price).
2
<PAGE>
Hearst-Argyle Television, Inc.
Unaudited Pro Forma Combined Condensed Balance Sheet
as of September 30, 1998
(Including the Pulitzer Merger and the Kelly Transaction)
(In thousands)
<TABLE>
<CAPTION>
PULITZER
KELLY KELLY PRO FORMA BROADCASTING PULITZER PRO FORMA
HEARST-ARGYLE BROADCASTING TRANSACTION KELLY BUSINESS MERGER PULITZER
HISTORICAL HISTORICAL ADJUSTMENTS TRANSACTION HISTORICAL ADJUSTMENTS MERGER
------------- ------------ ----------- ----------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents.... $ 51,254 $ 2,028 $ 53,282 $ 53,282
Accounts
receivable,
net............ 76,820 9,121 $ 1,460 (c) 87,401 $ 41,770 $ 7,625 (f) 136,796
Program rights.. 45,614 9,458 55,072 10,283 65,355
Deferred tax
asset.......... 4,172 4,172 4,172
Other........... 7,984 384 8,368 1,405 9,773
---------- -------- -------- ---------- -------- ---------- ----------
Total current
assets......... 185,844 20,991 1,460 208,295 53,458 7,625 269,378
Property, plant
and equipment,
net............. 125,351 14,704 140,055 82,806 222,861
Intangible
assets, net..... 712,115 76,819 (76,819)(a) 1,218,779 96,744 (96,744)(d) 3,650,737
506,664 (a) 1,753,615 (d)
678,343 (d)
Other:
Deferred
acquisition and
financing
costs, net..... 29,144 29,144 29,144
Program rights,
noncurrent..... 4,993 6,447 11,440 11,440
Other assets.... 27,057 1,664 (739)(a) 27,982 9,100 (6,000)(d) 36,082
5,000 (g)
---------- -------- -------- ---------- -------- ---------- ----------
Total assets.... $1,084,504 $120,625 $430,566 $1,635,695 $242,108 $2,341,839 $4,219,642
========== ======== ======== ========== ======== ========== ==========
LIABILITIES AND
STOCKHOLDERS'
EQUITY
Current
liabilities:
Accounts payable
and accrued
liabilities.... $ 40,058 $ 4,738 $ 2,000 (b) $ 45,978 $ 11,062 $ 22,912 (d)(g) $ 79,952
(818)(a)
Current portion
of long-term
debt........... 12,705 (12,705)(d) --
Program rights
payable........ 45,890 7,530 53,420 9,846 63,266
Other current
liabilities.... 185 185 1,263 1,448
---------- -------- -------- ---------- -------- ---------- ----------
Total current
liabilities.... 86,133 12,268 1,182 99,583 34,876 10,207 144,666
Deferred tax
liability....... 157,588 157,588 678,343 (d) 836,409
478 (h)
Program rights
payable,
noncurrent...... 5,028 7,633 12,661 12,661
Other
liabilities..... 814 108 922 3,888 (867)(d) 3,465
(478)(h)
Pension
obligations..... 6,590 (1,801)(d) 4,789
Post-retirement
benefit
obligations..... 2,711 2,711
Credit facility.. 80,000 (b) 80,000 700,000 (e) 780,000
Senior notes..... 500,000 500,000 500,000
Senior
subordinated
notes........... 2,596 2,596 2,596
Long-term debt... 86,948 363,052 (a)(b) 450,000 160,000 (160,000)(d) 450,000
---------- -------- -------- ---------- -------- ---------- ----------
Total
liabilities..... 752,159 106,957 444,234 1,303,350 208,065 1,225,882 2,737,297
---------- -------- -------- ---------- -------- ---------- ----------
Partners'
Capital......... 13,668 (13,668)(a)
Stockholders'
equity
Preferred stock
series A....... 1 1 1
Preferred stock
series B....... 1 1 1
Series A common
stock.......... 125 125 387 (e) 512
Series B common
stock.......... 413 413 413
Common stock.... 10 (10)(d) --
Additional paid-
in capital..... 201,889 201,889 11,924 (11,924)(d) 1,351,502
1,149,613 (e)
Intercompany
balance........ (90,561) 90,561 (d) --
Retained
earnings....... 151,138 151,138 112,670 (112,670)(d) 151,138
Treasury stock.. (21,222) (21,222) (21,222)
---------- -------- -------- ---------- -------- ---------- ----------
Total
stockholders'
equity.......... 332,345 -- -- 332,345 34,043 1,115,957 1,482,345
---------- -------- -------- ---------- -------- ---------- ----------
Total liability
and
stockholders'
equity.......... $1,084,504 $120,625 $430,566 $1,635,695 $242,108 $2,341,839 $4,219,642
========== ======== ======== ========== ======== ========== ==========
<CAPTION>
DIVESTITURE PRO FORMA
WGAL(i) DIVESTITURE
----------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents.... $ 53,282
Accounts
receivable,
net............ $ (4,468) 132,328
Program rights.. (1,701) 63,654
Deferred tax
asset.......... 4,172
Other........... (128) 9,645
----------- ------------
Total current
assets......... (6,297) 263,081
Property, plant
and equipment,
net............. (5,765) 217,096
Intangible
assets, net..... (10,378) 3,640,359
Other:
Deferred
acquisition and
financing
costs, net..... 29,144
Program rights,
noncurrent..... 11,440
Other assets.... 36,082
----------- ------------
Total assets.... $(22,440) $4,197,202
=========== ============
LIABILITIES AND
STOCKHOLDERS'
EQUITY
Current
liabilities:
Accounts payable
and accrued
liabilities.... $ (846) $ 79,106
Current portion
of long-term
debt........... --
Program rights
payable........ (2,532) 60,734
Other current
liabilities.... (312) 1,136
----------- ------------
Total current
liabilities.... (3,690) 140,976
Deferred tax
liability....... (2,467) 833,942
Program rights
payable,
noncurrent...... 12,661
Other
liabilities..... 3,465
Pension
obligations..... (663) 4,126
Post-retirement
benefit
obligations..... (929) 1,782
Credit facility.. (14,691) 765,309
Senior notes..... 500,000
Senior
subordinated
notes........... 2,596
Long-term debt... 450,000
----------- ------------
Total
liabilities..... (22,440) 2,714,857
----------- ------------
Partners'
Capital.........
Stockholders'
equity
Preferred stock
series A....... 1
Preferred stock
series B....... 1
Series A common
stock.......... 512
Series B common
stock.......... 413
Common stock.... --
Additional paid-
in capital..... 1,351,502
Intercompany
balance........ --
Retained
earnings....... 151,138
Treasury stock.. (21,222)
----------- ------------
Total
stockholders'
equity.......... -- 1,482,345
----------- ------------
Total liability
and
stockholders'
equity.......... $(22,440) $4,197,202
=========== ============
</TABLE>
See notes on the following pages.
3
<PAGE>
Hearst-Argyle Television, Inc.
Unaudited Pro Forma Combined Condensed Balance Sheet
as of September 30, 1998
(Including the Pulitzer Merger and excluding the Kelly Transaction)
(In thousands)
<TABLE>
<CAPTION>
PULITZER
BROADCASTING PULITZER PRO FORMA
HEARST-ARGYLE BUSINESS MERGER PULITZER DIVESTITURE PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS MERGER WGAL(i) DIVESTITURE
------------- ------------ ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents........... $ 51,254 $ 51,254 $ 51,254
Accounts receivable,
net................... 76,820 $ 41,770 $ 7,625 (f) 126,215 $ (4,468) 121,747
Program rights......... 45,614 10,283 55,897 (1,701) 54,196
Deferred tax asset..... 4,172 4,172 4,172
Other.................. 7,984 1,405 9,389 (128) 9,261
---------- -------- ---------- ---------- -------- ----------
Total current assets.... 185,844 53,458 7,625 246,927 (6,297) 240,630
Property, plant and
equipment, net......... 125,351 82,806 208,157 (5,765) 202,392
Intangible assets, net.. 712,115 96,744 (96,744)(d) 3,144,073 (10,378) 3,133,695
1,753,615 (d)
678,343 (d)
Other:
Deferred acquisition
and financing costs,
net................... 29,144 29,144 29,144
Program rights,
noncurrent............ 4,993 4,993 4,993
Other assets........... 27,057 9,100 (6,000)(d) 35,157 35,157
5,000 (g)
---------- -------- ---------- ---------- -------- ----------
Total assets............ $1,084,504 $242,108 $2,341,839 $3,668,451 $(22,440) $3,646,011
========== ======== ========== ========== ======== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and
accrued liabilities... $ 40,059 $ 11,062 $ 22,912 (d)(g) $ 74,033 $ (846) $ 73,187
Current portion of
long-term debt........ 12,705 (12,705)(d) -- --
Program rights
payable............... 45,890 9,846 55,736 (2,532) 53,204
Other current
liabilities........... 184 1,263 1,447 (312) 1,135
---------- -------- ---------- ---------- -------- ----------
Total current
liabilities............ 86,133 34,876 10,207 131,216 (3,690) 127,526
Deferred tax liability.. 157,588 678,343 (d) 836,409 (2,467) 833,942
478 (h)
Program rights payable,
noncurrent............. 5,028 5,028 5,028
Other liabilities....... 814 3,888 (867)(d) 3,357 3,357
(478)(h)
Pension obligations..... 6,590 (1,801)(d) 4,789 (663) 4,126
Post-retirement benefit
obligations............ 2,711 2,711 (929) 1,782
Credit facility......... 250,000 (e) 250,000 (14,691) 235,309
Senior notes............ 500,000 500,000 500,000
Senior subordinated
notes.................. 2,596 2,596 2,596
Long-term debt.......... 160,000 290,000 (d)(e) 450,000 450,000
---------- -------- ---------- ---------- -------- ----------
Total liabilities....... 752,159 208,065 1,225,882 2,186,106 (22,440) 2,163,666
---------- -------- ---------- ---------- -------- ----------
Stockholders' equity
Preferred stock series
A..................... 1 1 1
Preferred stock series
B..................... 1 1 1
Series A common stock.. 125 387 (e) 512 512
Series B common stock.. 413 413 413
Common stock........... 10 (10)(d)
Additional paid-in 201,889 11,924 (11,924)(d) 1,351,502 1,351,502
capital............... 1,149,613 (e)
Intercompany balance... (90,561) 90,561 (d)
Retained earnings
(deficit)............. 151,138 112,670 (112,670)(d) 151,138 151,138
Treasury stock......... (21,222) (21,222) (21,222)
---------- -------- ---------- ---------- -------- ----------
Total stockholders'
equity................. 332,345 34,043 1,115,957 1,482,345 -- 1,482,345
---------- -------- ---------- ---------- -------- ----------
Total liability and
stockholders' equity... $1,084,504 $242,108 $2,341,839 $3,668,451 $(22,440) $3,646,011
========== ======== ========== ========== ======== ==========
</TABLE>
See notes on the following pages.
4
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEETS ADJUSTMENTS:
(a) To reflect the Kelly Transaction and the adjustment of the Kelly
Broadcasting net assets to their estimated fair values of the net assets
acquired, elimination of existing long-term debt and partners' capital.
(b) To record the issuance of long-term debt to be incurred in connection with
the purchase price paid for Kelly Broadcasting and related transaction
costs. The Company intends to use: (i) amounts available under its Credit
Facility and (ii) the proceeds from the issuance of $450 million of 7.18%
Senior Notes giving a maturity of 1.2 years and average life of ten years to
finance the Kelly transaction.
(c) To record the amount Kelly Broadcasting will owe Hearst-Argyle to the extent
the estimated working capital is less than $11 million (approximately $1.5
million) which is based upon the working capital of Kelly Broadcasting as of
September 30, 1998.
(d) To reflect the Pulitzer Merger and the adjustment of Pulitzer Broadcasting
Business net assets to their estimated fair values of the net assets
acquired, elimination of existing long-term debt and stockholders' equity
and to record the tax effect of the differences between book and tax basis
of the net assets acquired.
(e) Issuance of 38,655,462 shares of the Company's Series A Common Stock to the
stockholders of New Pulitzer and the assumption of the New Debt ($700
million) for the net assets of Pulitzer Broadcasting Business. The
adjustment reflects the minimum stock price or the maximum number of shares
to be issued. If the maximum stock price is used, then the minimum number of
shares to be issued is 29,870,130.
(f) To record the amount New Pulitzer will owe Hearst-Argyle to the extent
the estimated working capital is less than $41 million (approximately $7.6
million) which is based upon the working capital of the Pulitzer
Broadcasting Business as of September 30, 1998. See "Working capital
adjustments".
(g) To record the Company's purchase of Pulitzer's investment in the Major
League Baseball team, the Arizona Diamondbacks.
(h) Reclassification of Pulitzer Broadcasting account balances to conform with
the Company presentation.
(i) Upon consummation of the Pulitzer Merger, the Company will, assuming the
Federal Communications Commission (the "FCC") grants the temporary waiver
requested by the Company, own two television stations in an area (WGAL in
Lancaster, PA and WBAL in Baltimore, MD) with overlapping service contours
in violation of the FCC's current local ownership rules. The FCC's current
rules prohibit the ownership of two stations in the same geographic area
whose service contours overlap. Accordingly, the Company will be required to
divest one of the aforementioned stations. If WGAL is sold for cash, the
proceeds of such sale will be used to reduce indebtedness under Hearst-
Argyle's Credit Agreement, dated August 29, 1997, with the Chase Manhattan
Bank and certain lenders party thereto (the "Chase Credit Facility") and
therefore the pro forma balance sheet reflects the effect of a reduction in
the Chase Credit Facility by an amount equal to $14.7 million, the net book
value of WGAL. The net book value has been used in the unaudited pro forma
combined condensed financial statements for the divestiture of WGAL because
no other valuation currently can be based on an independent third party
offer. The divestiture of WGAL at net book value would be equivalent to
selling WGAL at a price equal to less than two times WGAL's 1997 broadcast
cash flow. Given the valuations of broadcasting properties in recent
transactions, including the valuation of Pulitzer Broadcasting implied by
the shares of Series A Common Stock to be issued in the Pulitzer Merger (the
"Merger Stock"), the Company management believes that any divestiture of
WGAL would occur at a valuation significantly higher than its net book
value.
5
<PAGE>
Hearst-Argyle Television, Inc.
Unaudited Pro Forma Combined Condensed Statement Of Operations
Year Ended December 31, 1997
(Including the Pulitzer Merger and the Kelly Transaction)
(In thousands, except per share data)
<TABLE>
<CAPTION>
PULITZER
PRO FORMA KELLY KELLY PRO FORMA BROADCASTING PULITZER PRO FORMA
HEARST- BROADCASTING TRANSACTION KELLY BUSINESS MERGER PULITZER DIVESTITURE
ARGYLE(a) HISTORICAL ADJUSTMENTS TRANSACTION HISTORICAL ADJUSTMENTS MERGER WGAL(k)
--------- ------------ ----------- ----------- ------------ ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenues... $388,397 $65,311 $453,708 $227,016 $ 9,038 (m) $689,762 $(29,772)
Station operating
expenses........ 169,438 39,499 $ (6,619)(b) 202,318 125,090 600 (f) 317,692 (9,876)
(10,316)(m)
Amortization of
program rights.. 41,517 5,299 (b) 46,816 12,490 (m) 59,306 (1,748)
Depreciation and
amortization.... 39,944 4,483 12,742 (c) 57,169 23,447 50,446 (g) 131,062 (1,367)
-------- ------- -------- -------- -------- -------- -------- --------
Station operating
income.......... 137,498 21,329 (11,422) 147,405 78,479 (44,182) 181,702 (16,781)
Corporate general
and
administrative
expenses........ 12,000 1,320 (b) 12,000 (5,354)(h) 13,500
(1,320)(h) 6,854 (m)
-------- ------- -------- -------- -------- -------- -------- --------
Operating
income.......... 125,498 21,329 (11,422) 135,405 78,479 (45,682) 168,202 (16,781)
Interest expense,
net............. (37,228) (1,203) (35,897)(d) (74,328) (16,081) (32,919)(i) (123,328) 1,028
Other income,
net............. 10 (10)(m) --
-------- ------- -------- -------- -------- -------- -------- --------
Income before
income taxes.... 88,270 20,126 (47,319) 61,077 62,408 (78,611) 44,874 (15,753)
Income taxes..... 36,700 (11,048)(e) 25,652 24,387 (31,031)(j) 19,008 (6,250)
-------- ------- -------- -------- -------- -------- -------- --------
Income from
continuing
operations...... 51,570 $20,126 $(36,271) $ 35,425 $ 38,021 $(47,580) 25,866 $ (9,503)
======= ======== ======== ======== ======== ========
Less: preferred
stock
dividends....... (1,422) (1,422)
-------- --------
Income applicable
to common
stock........... $ 50,148 $ 24,444
======== ========
Basic (Minimum):
Income per
common share... $ 0.93 $ 0.26
======== ========
Number of shares
used in per
share
calculation.... 53,828 92,483(l)
Basic (Maximum):
Income per
common share... $ 0.93 $ 0.29
======== ========
Number of shares
used in per
share
calculation.... 53,828 83,698(l)
Diluted
(Minimum):
Income per
common share... $ 0.93 $ 0.26
======== ========
Number of shares
used in per
share
calculation.... 53,873 92,528(l)
Diluted
(Maximum):
Income per
common share... $ 0.93 $ 0.29
======== ========
Number of shares
used in per
share
calculation.... 53,873 83,743(l)
<CAPTION>
PRO FORMA
DIVESTITURE
-------------
<S> <C>
Total revenues... $659,990
Station operating
expenses........ 307,816
Amortization of
program rights.. 57,558
Depreciation and
amortization.... 129,695
-------------
Station operating
income.......... 164,921
Corporate general
and
administrative
expenses........ 13,500
-------------
Operating
income.......... 151,421
Interest expense,
net............. (122,300)
Other income,
net............. --
-------------
Income before
income taxes.... 29,121
Income taxes..... 12,758
-------------
Income from
continuing
operations...... 16,363
Less: preferred
stock
dividends....... (1,422)
-------------
Income applicable
to common
stock........... $ 14,941
=============
Basic (Minimum):
Income per
common share... $ 0.16
=============
Number of shares
used in per
share
calculation.... 92,483(l)
Basic (Maximum):
Income per
common share... $ 0.18
=============
Number of shares
used in per
share
calculation.... 83,698(l)
Diluted
(Minimum):
Income per
common share... $ 0.16
=============
Number of shares
used in per
share
calculation.... 92,528(l)
Diluted
(Maximum):
Income per
common share... $ 0.18
=============
Number of shares
used in per
share
calculation.... 83,743(l)
</TABLE>
See notes on the following pages.
6
<PAGE>
Hearst-Argyle Television, Inc.
Unaudited Pro Forma Combined Condensed Statement of Operations
Year Ended December 31, 1997
(Including the Pulitzer Merger and excluding the Kelly Transaction)
(In thousands, except per share data)
<TABLE>
<CAPTION>
PULITZER
PRO FORMA BROADCASTING PULITZER PRO FORMA
HEARST- BUSINESS MERGER PULITZER DIVESTITURE PRO FORMA
ARGYLE(a) HISTORICAL ADJUSTMENTS MERGER WGAL(k) DIVESTITURE
--------- ------------ ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Total revenues.......... $388,397 $227,016 $ 9,038 (m) $624,451 $(29,772) $594,679
Station operating
expenses............... 169,438 125,090 600 (f) 284,812 (9,876) 274,936
(10,316)(m)
Amortization of
program rights......... 41,517 12,490 (m) 54,007 (1,748) 52,259
Depreciation and
amortization........... 39,944 23,447 50,446 (g) 113,837 (1,367) 112,470
-------- -------- --------- -------- -------- --------
Station operating
income................. 137,498 78,479 (44,182) 171,795 (16,781) 155,014
Corporate general and
administrative
expenses............... 12,000 (5,354)(h) 13,500 13,500
6,854 (m)
-------- -------- --------- -------- -------- --------
Operating income........ 125,498 78,479 (45,682) 158,295 (16,781) 141,514
Interest expense, net... (37,228) (16,081) (32,919)(i) (86,228) 1,028 (85,200)
Other income, net....... 10 (10)(m) --
-------- -------- --------- -------- -------- --------
Income before income
taxes.................. 88,270 62,408 (78,611) 72,067 (15,753) 56,314
Income taxes............ 36,700 24,387 (31,706)(j) 29,381 (6,250) 23,131
-------- -------- --------- -------- -------- --------
Income from continuing
operations............. 51,570 $ 38,021 $ (46,905) 42,686 $ (9,503) 33,183
======== ========= ========
Less: preferred
stock dividends........ (1,422) (1,422) (1,422)
-------- -------- --------
Income applicable to
common stock........... $ 50,148 $ 41,264 $ 31,761
======== ======== ========
Basic (Minimum):
Income per
common share......... $ 0.93 $ 0.45 $ 0.34
======== ======== ========
Number of shares used
in per share
calculation.......... 53,828 92,483(l) 92,483(l)
Basic (Maximum):
Income per common
share................ $ 0.93 $ 0.49 $ 0.38
======== ======== ========
Number of shares used
in per share
calculation.......... 53,828 83,698(l) 83,698(l)
Diluted (Minimum):
Income per common
share................ $ 0.93 $ 0.45 $ 0.34
======== ======== ========
Number of shares used
in per share
calculation.......... 53,873 92,528(l) 92,528(l)
Diluted (Maximum):
Income per common
share................ $ 0.93 $ 0.49 $ 0.38
======== ======== ========
Number of shares used
in per share
calculation.......... 53,873 83,743(l) 83,743(l)
</TABLE>
See notes on the following pages.
7
<PAGE>
Hearst-Argyle Television, Inc.
Unaudited Pro Forma Combined Condensed Statement of Operations
Nine Months Ended September 30, 1997
(Including the Pulitzer Merger and the Kelly Transaction)
(In thousands, except per share data)
<TABLE>
<CAPTION>
PULITZER
PRO FORMA KELLY KELLY PRO FORMA BROADCASTING PULITZER PRO FORMA
HEARST- BROADCASTING TRANSACTION KELLY BUSINESS MERGER PULITZER DIVESTITURE
ARGYLE(a) HISTORICAL ADJUSTMENTS TRANSACTION HISTORICAL ADJUSTMENTS MERGER WGAL(k)
--------- ------------ ----------- ----------- ------------ ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenues... $275,779 $48,309 $324,088 $165,002 $ 6,633(m) $495,723 $(21,483)
Station operating
expenses........ 123,477 27,660 $ (3,900)(b) 147,237 93,016 (7,989)(m) 232,714 (7,474)
450 (f)
Amortization of
program rights.. 30,841 3,093 (b) 33,934 9,445 (m) 43,379 (1,330)
Depreciation and
amortization.... 25,601 1,938 9,638 (c) 37,177 17,622 39,804 (g) 94,603 (1,029)
-------- ------- -------- -------- -------- -------- -------- --------
Station operating
income.......... 95,860 18,711 (8,831) 105,740 54,364 (35,077) 125,027 (11,650)
Corporate general
and
administrative
expenses........ 9,619 (807)(h) 9,619 (2,938)(h) 11,850
807 (b) 5,169 (m)
-------- ------- -------- -------- -------- -------- -------- --------
Operating
income.......... 86,241 18,711 (8,831) 96,121 54,364 (37,308) 113,177 (11,650)
Interest expense,
net............. (27,921) (139) (27,685)(d) (55,745) (12,553) (24,197)(i) (92,495) 771
Other income,
net............. 8 (8)(m) --
-------- ------- -------- -------- -------- -------- -------- --------
Income before
income taxes.... 58,320 18,572 (36,516) 40,376 41,819 (61,513) 20,682 (10,879)
Income taxes..... 24,786 (7,447)(e) 17,339 16,344 (24,376)(j) 9,307 (4,896)
-------- ------- -------- -------- -------- -------- -------- --------
Income from
continuing
operations...... 33,534 $18,572 $(29,069) $ 23,037 $ 25,475 $(37,137) 11,375 $ (5,983)
======= ======== ======== ======== ======== ========
Less: preferred
stock
dividends....... (1,066) (1,066)
-------- --------
Income applicable
to common
stock........... $ 32,468 $ 10,309
======== ========
Basic (Minimum):
Income per
common share... $ 0.60 $ 0.11
======== ========
Number of shares
used in per
share
calculation.... 53,678 92,334(l)
Basic (Maximum):
Income per
common share... $ 0.60 $ 0.12
======== ========
Number of shares
used in per
share
calculation.... 53,678 83,549(l)
Diluted
(Minimum):
Income per
common share... $ 0.60 $ 0.11
======== ========
Number of shares
used in per
share
calculation.... 53,943 92,598(l)
Diluted
(Maximum):
Income per
common share... $ 0.60 $ 0.12
======== ========
Number of shares
used in per
share
calculation.... 53,943 83,813(l)
<CAPTION>
PRO FORMA
DIVESTITURE
-------------
<S> <C>
Total revenues... $474,240
Station operating
expenses........ 225,240
Amortization of
program rights.. 42,049
Depreciation and
amortization.... 93,574
-------------
Station operating
income.......... 113,377
Corporate general
and
administrative
expenses........ 11,850
-------------
Operating
income.......... 101,527
Interest expense,
net............. (91,724)
Other income,
net............. --
-------------
Income before
income taxes.... 9,803
Income taxes..... 4,411
-------------
Income from
continuing
operations...... 5,392
Less: preferred
stock
dividends....... (1,066)
-------------
Income applicable
to common
stock........... $ 4,326
=============
Basic (Minimum):
Income per
common share... $ 0.05
=============
Number of shares
used in per
share
calculation.... 92,334(l)
Basic (Maximum):
Income per
common share... $ 0.05
=============
Number of shares
used in per
share
calculation.... 83,549(l)
Diluted
(Minimum):
Income per
common share... $ 0.05
=============
Number of shares
used in per
share
calculation.... 92,598(l)
Diluted
(Maximum):
Income per
common share... $ 0.05
=============
Number of shares
used in per
share
calculation.... 83,813(l)
</TABLE>
See notes on the following pages.
8
<PAGE>
Hearst-Argyle Television, Inc.
Unaudited Pro Forma Combined Condensed Statement of Operations
Nine Months Ended September 30, 1997
(Including the Pulitzer Merger and excluding the Kelly Transaction)
(In thousands, except per share data)
<TABLE>
<CAPTION>
PULITZER
PRO FORMA BROADCASTING PULITZER PRO FORMA
HEARST- BUSINESS MERGER PULITZER DIVESTITURE PRO FORMA
ARGYLE(a) HISTORICAL ADJUSTMENTS MERGER WGAL(k) DIVESTITURE
--------- ------------ ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Total revenues.......... $275,779 $165,002 $ 6,633 (m) $447,414 $(21,483) $425,931
Station operating
expenses............... 123,477 93,016 (7,989)(m) 208,954 (7,474) 201,480
450 (f)
Amortization of program
rights................. 30,841 9,445 (m) 40,286 (1,330) 38,956
Depreciation and
amortization........... 25,601 17,622 39,804 (g) 83,027 (1,029) 81,998
-------- -------- -------- -------- -------- --------
Station operating
income................. 95,860 54,364 (35,077) 115,147 (11,650) 103,497
Corporate general and
administrative
expenses............... 9,619 (2,938)(h) 11,850 11,850
5,169 (m)
-------- -------- -------- -------- -------- --------
Operating income........ 86,241 54,364 (37,308) 103,297 (11,650) 91,647
Interest expense, net... (27,921) (12,553) (24,197)(i) (64,671) 771 (63,900)
Other income, net....... 8 (8)(m) -- --
-------- -------- -------- -------- -------- --------
Income before income
taxes.................. 58,320 41,819 (61,513) 38,626 (10,879) 27,747
Income taxes............ 24,786 16,344 (24,376)(j) 16,754 (4,268) 12,486
-------- -------- -------- -------- -------- --------
Income from continuing
operations............. 33,534 $ 25,475 $(37,137) 21,872 $ (6,611) 15,261
======== ======== ========
Less: preferred stock
dividends.............. (1,066) (1,066) (1,066)
-------- -------- --------
Income applicable to
common stock........... $ 32,468 $ 20,806 $ 14,195
======== ======== ========
Basic (Minimum):
Income per common
share................ $ 0.60 $ 0.23 $ 0.15
======== ======== ========
Number of shares used
in per share
calculation.......... 53,678 92,334(l) 92,334(l)
Basic (Maximum):
Income per common
share................ $ 0.60 $ 0.25 $ 0.17
======== ======== ========
Number of shares used
in per share
calculation.......... 53,678 83,549(l) 83,549(l)
Diluted (Minimum):
Income per common
share................ $ 0.60 $ 0.22 $ 0.15
======== ======== ========
Number of shares used
in per share
calculation.......... 53,943 92,598(l) 92,598(l)
Diluted (Maximum):
Income per common
share................ $ 0.60 $ 0.25 $ 0.17
======== ======== ========
Number of shares used
in per share
calculation.......... 53,943 83,813(l) 83,813(l)
</TABLE>
See notes on the following pages.
9
<PAGE>
Hearst-Argyle Television, Inc.
Unaudited Pro Forma Combined Condensed Statement of Operations
Nine Months Ended September 30, 1998
(Including the Pulitzer Merger and the Kelly Transaction)
(In thousands, except per share data)
<TABLE>
<CAPTION>
PULITZER
PRO FORMA KELLY KELLY PRO FORMA BROADCASTING PULITZER PRO FORMA
HEARST- BROADCASTING TRANSACTION KELLY BUSINESS MERGER PULITZER DIVESTITURE
ARGYLE(a) HISTORICAL ADJUSTMENTS TRANSACTION HISTORICAL ADJUSTMENTS MERGER WGAL(k)
--------- ------------ ----------- ----------- ------------ ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenues... $292,061 $52,653 $344,714 $173,681 $ 6,197 (m) $524,592 $(21,659)
Station operating
expenses........ 128,498 30,341 $(8,067)(b) 150,772 95,946 (8,135)(m) 239,033 (7,452)
450 (f)
Amortization of
program rights.. 31,384 6,596 (b) 37,980 9,164 (m) 47,144 (1,285)
Depreciation and
amortization.... 27,857 6,716 4,889 (b)(c) 39,462 16,512 39,787 (g) 95,761 (1,008)
-------- ------- -------- -------- -------- -------- -------- --------
Station operating
income.......... 104,322 15,596 (3,418) 116,500 61,223 (35,069) 142,654 (11,914)
Corporate general
and
administrative
expenses........ 9,619 (1,091)(h) 9,619 (2,926)(h) 11,850
1,091 (b) 5,157 (m)
-------- ------- -------- -------- -------- -------- -------- --------
Operating
income.......... 94,703 15,596 (3,418) 106,881 61,223 (37,300) 130,804 (11,914)
Interest expense,
net............. (27,921) (5,504) (22,320)(b)(d) (55,745) (10,255) (26,495)(i) (92,495) 771
Other income,
net............. 11 (11)(m) --
-------- ------- -------- -------- -------- -------- -------- --------
Income before
income taxes.... 66,782 10,092 (25,738) 51,136 50,979 (63,806) 38,309 (11,143)
Income taxes..... 28,382 (7,284)(e) 21,098 19,918 (23,777)(j) 17,239 (4,401)
-------- ------- -------- -------- -------- -------- -------- --------
Income from
continuing
operations...... 38,400 $10,092 $(18,454) $ 30,038 $ 31,061 $(40,029) 21,070 $ (6,742)
======= ======== ======== ======== ======== ========
Less: preferred
stock
dividends....... (1,066) (1,066)
-------- --------
Income applicable
to common
stock........... $ 37,334 $ 20,004
======== ========
Basic (Minimum):
Income per
common share... $ 0.70 $ 0.22
======== ========
Number of shares
used in per
share
calculation.... 53,678 92,334 (l)
Basic (Maximum):
Income per
common share... $ 0.70 $ 0.24
======== ========
Number of shares
used in per
share
calculation.... 53,678 83,549 (l)
Diluted
(Minimum):
Income per
common share... $ 0.69 $ 0.22
======== ========
Number of shares
used in per
share
calculation.... 53,943 92,598 (l)
Diluted
(Maximum):
Income per
common share... $ 0.69 $ 0.24
======== ========
Number of shares
used in per
share
calculation.... 53,943 83,813 (l)
<CAPTION>
PRO FORMA
DIVESTITURE
--------------
<S> <C>
Total revenues... $502,933
Station operating
expenses........ 231,581
Amortization of
program rights.. 45,859
Depreciation and
amortization.... 94,753
--------------
Station operating
income.......... 130,740
Corporate general
and
administrative
expenses........ 11,850
--------------
Operating
income.......... 118,890
Interest expense,
net............. (91,724)
Other income,
net............. --
--------------
Income before
income taxes.... 27,166
Income taxes..... 12,838
--------------
Income from
continuing
operations...... 14,328
Less: preferred
stock
dividends....... (1,066)
--------------
Income applicable
to common
stock........... $ 13,262
==============
Basic (Minimum):
Income per
common share... $ 0.14
==============
Number of shares
used in per
share
calculation.... 92,334 (l)
Basic (Maximum):
Income per
common share... $ 0.16
==============
Number of shares
used in per
share
calculation.... 83,549 (l)
Diluted
(Minimum):
Income per
common share... $ 0.14
==============
Number of shares
used in per
share
calculation.... 92,598 (j)
Diluted
(Maximum):
Income per
common share... $ 0.16
==============
Number of shares
used in per
share
calculation.... 83,813 (l)
</TABLE>
See notes on the following pages.
10
<PAGE>
Hearst-Argyle Television, Inc.
Unaudited Pro Forma Combined Condensed Statement of Operations
Nine Months Ended September 30, 1998
(Including the Pulitzer Merger and excluding the Kelly Transaction)
(In thousands, except per share data)
<TABLE>
<CAPTION>
PULITZER
PRO FORMA BROADCASTING PULITZER PRO FORMA
HEARST- BUSINESS MERGER PULITZER DIVESTITURE PRO FORMA
ARGYLE(a) HISTORICAL ADJUSTMENTS MERGER WGAL(k) DIVESTITURE
--------- ------------ ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Total revenues.......... $292,061 $173,681 $ 6,197 (m) $471,939 $(21,659) $450,280
Station operating
expenses............... 128,498 95,946 (8,135)(m) 216,759 (7,452) 209,307
450 (f)
Amortization of program
rights................. 31,384 9,164 (m) 40,548 (1,285) 39,263
Depreciation and
amortization........... 27,857 16,512 39,787 (g) 84,156 (1,008) 83,148
-------- -------- -------- -------- -------- --------
Station operating
income................. 104,322 61,223 (35,069) 130,476 (11,914) 118,562
Corporate general and
administrative
expenses............... 9,619 (2,926)(h) 11,850 11,850
5,157 (m)
-------- -------- -------- -------- -------- --------
Operating income........ 94,703 61,223 (37,300) 118,626 (11,914) 106,712
Interest expense, net... (27,921) (10,255) (26,495)(i) (64,671) 771 (63,900)
Other income, net....... 11 (11)(m) --
-------- -------- -------- -------- -------- --------
Income before income
taxes.................. 66,782 50,979 (63,806) 53,955 (11,143) 42,812
Income taxes............ 28,382 19,918 (23,777)(j) 24,523 (4,401) 20,122
-------- -------- -------- -------- -------- --------
Income from continuing
operations............. 38,400 $ 31,061 $(40,029) 29,432 $ (6,742) 22,690
======== ======== ========
Less: preferred stock
dividends.............. (1,066) (1,066) (1,066)
-------- -------- --------
Income applicable to
common stock........... $ 37,334 $ 28,366 $ 21,624
======== ======== ========
Basic (Minimum):
Income per common
share................ $ 0.70 $ 0.31 $ 0.23
======== ======== ========
Number of shares used
in per share
calculation.......... 53,678 92,334(l) 92,334(l)
Basic (Maximum):
Income per common
share................ $ 0.70 $ 0.34 $ 0.26
======== ======== ========
Number of shares used
in per share
calculation.......... 53,678 83,549(l) 83,549(l)
Diluted (Minimum):
Income per common
share................ $ 0.69 $ 0.31 $ 0.23
======== ======== ========
Number of shares used
in per share
calculation.......... 53,943 92,598(l) 92,598(l)
Diluted (Maximum):
Income per common
share................ $ 0.69 $ 0.34 $ 0.26
======== ======== ========
Number of shares used
in per share
calculation.......... 53,943 83,813(l) 83,813(l)
</TABLE>
See notes on the following pages.
11
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
ADJUSTMENTS:
(a) On a pro forma basis assuming the Gannett Swap, the Hearst Transaction and
the STC Swap had occurred as of January 1, 1997.
(b) Reclassification of Kelly Broadcasting account balances to conform with the
Company presentation.
(c) Amortization of intangible assets resulting from purchase accounting
adjustments, net of amortization recorded in the historical financial
statements of Kelly Broadcasting. The estimated useful lives for these
intangible assets were as follows: Goodwill-40 years; FCC licenses-40
years; network affiliation agreements-40 years and other intangible assets-2
to 5 years.
(d) Interest expense relating to debt issued ($530 million) for the Kelly
Transaction at an assumed interest rate of 7.15% which approximates the rate
the Company pays for debt, net of interest expense recorded in the
historical financial statements of Kelly Broadcasting. If the interest rate
were to increase or decrease 1/8%, the difference in interest expense would
equal $663,000.
(e) Estimated income tax effect of the above adjustments, giving effect to the
Kelly Transaction.
(f) Estimated pension costs associated with the newly-established defined
benefit pension plan to be created for the transferred Pulitzer Broadcasting
Business employees, including the assets to be transferred to the Company
per the terms of the Pulitzer Merger Agreement, net of pension costs
recorded in the historical consolidated financial statements.
(g) Amortization of intangible assets resulting from purchase accounting
adjustments, net of amortization recorded in the historical consolidated
financial statements of Pulitzer Broadcasting. The estimated useful lives
for these intangible assets were as follows: Goodwill - 40 years; FCC
licenses - 40 years; network affiliation agreements - 40 years and other
intangible assets 2 to 5 years.
(h) Change in corporate general and administrative expenses due to the Pulitzer
Merger and the Kelly Transaction,as a result of certain contractual
agreeements expected to be entered into upon consummation of the Pulitzer
Merger and the Kelly Transaction, including the Services Agreement with
Hearst (which included certain adminstative services such as accounting,
financial, legal, tax, insurance, data processing and employee benefits)
which will be amended upon consummation of the Pulitzer Merger and the Kelly
Transaction, net of corporate general and administrative expenses recorded
in the historical financial statements of Pulitzer Broadcasting and Kelly
Broadcasting.
(i) Interest expense relating to the New Debt ($700 million) assumed in the
Pulitzer Merger at an assumed interest rate of 7.1% which approximates the
rate the Company pays for debt, net of interest expense recorded in the
historical consolidated financial statements of Pulitzer Broadcasting
Business. If the interest rate were to increase or decrease 1/8%, the
difference in interest expense would equal $875,000.
(j) Estimated income tax effect of the above adjustments, giving effect to the
Pulitzer Merger.
(k) Upon consummation of the Pulitzer Merger, the Company will, assuming the FCC
grants the temporary waiver requested by the Company, own two television
stations in an area (WGAL in Lancaster, PA and WBAL in Baltimore, MD) with
overlapping service contours in violation of the FCC's current local
ownership rules. The FCC's current rules prohibit the ownership of two
stations in the same geographic area whose service contours overlap.
Accordingly, the Company will be required to divest one of the
aforementioned stations. If WGAL is sold for cash, the proceeds of such sale
will be used to reduce indebtedness under the Credit Facility and therefore
the Pro Forma Statements of operations reflects the effects of a reduction
in the Credit Facility by an amount equal to $14.7 million, the net book
value of WGAL. The net book value has been used in the unaudited pro forma
combined condensed financial statements for the divestiture of WGAL because
no other valuation currently can be based on an independent third party
offer. The divestiture of WGAL at net book value would be equivalent to
selling WGAL at a price equal to less than two times WGAL's 1997 broadcast
cash flow. Given the valuations of broadcasting properties in recent
transactions, including the valuation of the Pulitzer Broadcasting implied
by The Hearst-Argyle Merger Stock, the Company management believes that any
divestiture of WGAL would occur at a valuation significantly higher than its
net book value.
(l) Includes the issuance of the Company Series A Common Stock to the
stockholders of New Pulitzer.
(m) Reclassification of Pulitzer Broadcasting account balances to conform with
the Company presentation.
12
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS OF HEARST-ARGYLE
The Unaudited Pro Forma Combined Condensed Statements of Operations of
Hearst-Argyle for the year ended December 31, 1997 and the nine-months ended
September 30, 1997 and 1998 have been prepared as if the Gannett Swap, the
Hearst Transaction and the STC Swap had been completed as of the beginning of
the periods presented. The Gannett Swap, the Hearst Transaction and the STC
Swap are accounted for using the purchase method of accounting. Any subsequent
adjustments and any uncertainties affecting the pro forma presentation are not
expected to be significant. The pro forma statements of operations presented
herein are not necessarily indicative of Hearst-Argyle's results of operations
that might have occurred had such transactions been completed at the beginning
of the periods indicated and do not purport to represent Hearst-Argyle's
consolidated results of operations for any future period.
Hearst-Argyle Television, Inc.
Unaudited Pro Forma Combined Condensed Statement of Operations
Year Ended December 31, 1997
(In thousands)
<TABLE>
<CAPTION>
HEARST PRO FORMA STC SWAP
HEARST-ARGYLE HISTORICAL GANNETT SWAP TRANSACTION HEARST ADJUSTMENTS PRO FORMA
HISTORICAL(a) ARGYLE(b) ADJUSTMENTS ADJUSTMENTS TRANSACTION AND OTHER HEARST-ARGYLE
---------------- ---------- ------------ ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenues............ $333,661 $ 51,826 $975(h) $ 1,320 (c) $387,782 $ 615 (i) $388,397
Station operating
expenses................. 142,096 27,610 681(d)(h) (1,944)(o) 168,443 995 (i)(j) 169,438
Amortization of program
rights................... 40,129 2,833 16(h) 42,978 (1,461)(i) 41,517
Depreciation and
amortization............. 22,924 16,955 138(e)(f) (3,777)(f) 36,240 3,704 (e)(f) 39,944
-------- -------- ---- ------- -------- ------- --------
Station operating income.. 128,512 4,428 140 7,041 140,121 (2,623) 137,498
Corporate general and
administrative expenses.. 9,527 2,700 (227)(l) 12,000 12,000
Non-cash compensation
expense.................. 3,518 (3,518)(k) -- --
-------- -------- ---- ------- -------- ------- --------
Operating income (loss)... 118,985 (1,790) 140 10,786 128,121 (2,623) 125,498
Interest expense, net..... (32,484 ) (12,749) 8,005 (m) (37,228) (37,228)
-------- -------- ---- ------- -------- ------- --------
Income (loss) before
income taxes............. 86,501 (14,539) 140 18,791 90,893 (2,623) 88,270
Income taxes.............. 35,363 2,430 (g) 37,793 (1,093)(g) 36,700
-------- -------- ---- ------- -------- ------- --------
Income (loss) from
continuing operations.... $ 51,138 $(14,539) $140 $16,361 $ 53,100 $(1,530) $ 51,570
======== ======== ==== ======= ======== ======= ========
</TABLE>
See notes on the following pages.
13
<PAGE>
Hearst-Argyle Television, Inc.
Unaudited Pro Forma Combined Condensed Statement of Operations
Nine Months Ended September 30, 1997
(In thousands)
<TABLE>
<CAPTION>
HEARST STC SWAP PRO FORMA
HEARST-ARGYLE ARGYLE GANNETT SWAP TRANSACTION ADJUSTMENTS HEARST-
HISTORICAL(p) HISTORICAL(b) ADJUSTMENTS ADJUSTMENTS AND OTHER ARGYLE
------------- ------------- ------------ ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Total revenues.......... $221,296 $ 51,826 $975(h) $ 1,320 (c) $ 362 (i) $275,779
Station operating
expenses............... 96,919 27,610 681(d)(h) (1,944)(o) 211 (i)(j) 123,477
Amortization of program
rights................. 29,201 2,833 16(h) (1,209)(i) 30,841
Depreciation and
amortization........... 13,694 16,955 138(e)(f) (7,151)(f) 1,965 (e)(f) 25,601
-------- -------- ---- ------- ------- --------
Station operating
income................. 81,482 4,428 140 10,415 (605) 95,860
Corporate general and
administrative
expenses............... 6,546 2,700 373 (l) 9,619
Non-cash compensation
expense................ 3,518 (3,518)(k)
-------- -------- ---- ------- ------- --------
Operating income........ 74,936 (1,790) 140 13,560 (605) 86,241
Interest expense, net... (20,524) (12,749) 5,352 (m) (27,921)
-------- -------- ---- ------- ------- --------
Income (loss) before
income taxes........... 54,412 (14,539) 140 18,912 (605) 58,320
Income taxes............ 22,362 2,675 (g) (251) 24,786
-------- -------- ---- ------- ------- --------
Income (loss) from
continuing operations.. $ 32,050 $(14,539) $140 $16,237 $ (354) $ 33,534
======== ======== ==== ======= ======= ========
</TABLE>
See notes on the following pages.
14
<PAGE>
Hearst-Argyle Television, Inc.
Unaudited Pro Forma Combined Condensed Statement of Operations
Nine Months Ended September 30, 1998
(In thousands)
<TABLE>
<CAPTION>
STC SWAP
HEARST-ARGYLE ADJUSTMENTS PRO FORMA
HISTORICAL(n) AND OTHER HEARST-ARGYLE
---------------- ----------- -------------
<S> <C> <C> <C>
Total revenues............... $292,010 $ 51 (i) $292,061
Station operating expenses... 127,595 903 (i)(j) 128,498
Amortization of program
rights...................... 32,027 (643) (i) 31,384
Depreciation and amortiza-
tion........................ 26,678 1,179 (e)(f) 27,857
-------- ------ --------
Station operating income..... 105,710 (1,388) 104,322
Corporate general and admin-
istrative expenses.......... 9,619 9,619
-------- ------ --------
Operating income............. 96,091 (1,388) 94,703
Interest expense, net........ (29,978) 2,057 (m) (27,921)
-------- ------ --------
Income before income taxes... 66,113 669 66,782
Income taxes................. 28,111 271 (g) 28,382
-------- ------ --------
Income from continuing opera-
tions....................... $ 38,002 $ 398 $ 38,400
======== ====== ========
</TABLE>
See notes on the following pages.
15
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS OF THE
COMPANY:
(a) The Hearst Transaction was consummated on August 29, 1997. The historical
financial data includes Argyle for the four months ended December 31, 1997.
Includes result from (i) WCVB, WTAE, WBAL, WISN, KMBC, and WDTN for the
entire period presented; (ii) WAPT,KITV, KHBS/KHOG, WLWT, KOCO and Hearst-
Argyle's share of the Clear Channel Venture from September 1 through
December 31, 1997; and, (iii) the management fees derived by Hearst-Argyle
from WWWB, WPBF, KCWE and WBAL-radio (the "Managed Stations") from September
1 through December 31, 1997.
(b) Includes the results of operations of Argyle, which includes: (i) WAPT,
KITV, KHBS/KHOG and Argyle's share of broadcast cash flows from the Clear
Channel Venture for January 1 to August 31, 1997; (ii) WZZM and WGRZ for
January 1997 only; and (iii) WLWT and KOCO from February 1 through August
31, 1997.
(c) Management fees derived by the Company from the Managed Stations from the
beginning of each period presented.
(d) Elimination of certain expenses which would not have been incurred under the
Company's management.
(e) Change in depreciation expense due to purchase accounting adjustments to
equipment and buildings, net of depreciation recorded in the historical
financial statements. The estimated useful lives used for equipment range
from 5 to 25 years and the estimated useful life used for buildings range
from 25 to 39 years.
(f) Amortization of intangible assets resulting from purchase accounting
adjustments, net of amortization recorded in the historical financial
statements. The estimated useful lives used for these intangible assets
were as follows: FCC licenses, network affiliation agreements and goodwill -
40 years; other intangibles - 2 to 5 years.
(g) Estimated income tax effect of the pro forma adjustments.
(h) The inclusion of WLWT and KOCO and the exclusion of WZZM and WGRZ results of
operations from the beginning of the period presented.
(i) The inclusion of WPTZ/WNNE and KSBW and the exclusion of WDTN and WNAC
results of operations from the beginning of the periods presented.
(j) Additional expenses which would have been incurred under the Company's
management.
(k) Conforming the accounting policies related to stock based compensation.
(l) Change in corporate expenses associated with the Company's new
organizational structure as a result of contractual agreements for
administrative services, such as accounting, financial, legal, tax,
insurance, data processing and employee benefits and other applicable
contractual agreements that were entered into upon the close of the Hearst
Transaction.
(m) Interest expense on the pro forma debt as follows (in thousands):
<TABLE>
<CAPTION>
PRO FORMA
--------------------------------
<S> <C> <C> <C>
12/31/97 9/30/97 9/30/98
--------- -------- --------
Senior Notes due 2007 at an interest rate of 7.0%................ $ 8,752 $ 6,564 $ 6,564
Senior Notes due 2008 at an interest rate of 7.0%................ 14,000 10,500 10,500
Senior Notes due 2027 at an interest rate of 7.5%................ 13,124 9,843 9,843
Senior subordinated Notes due 2005 at an interest rate of 9.75%.. 252 189 189
Commitment fees for the unused Chase Credit Facility............. 1,252 939 939
Non-cash interest charges........................................ 2,248 1,686 1,686
Interest income.................................................. (2,400) (1,800) (1,800)
--------- -------- --------
Total Interest Expense, net...................................... $ 37,228 $ 27,921 $ 27,921
========= ======== ========
</TABLE>
(n) Includes the results of operations of the Company, which includes: (i) WLWT,
KOCO, WAPT, KITV and the Arkansas Stations; (ii) WCVB, WTAE, WISN, WBAL and
KMBC; (iii) the management fee derived by the Company from the Managed
Stations for the full-period presented; (iv) the Company's share of the
Clear Channel Venture and WDTN from January 1 through May 31, 1998; and,
(iv) KSBW and WPTZ/WNNE from June 1 through September 30, 1998.
(o) Reduction of pension expense resulting from the actuarial valuation of the
newly-established qualified defined benefit pension plan.
(p) The historical data includes Argyle for the month of September 1997 only.
Includes the results from (i) WCVB, WTAE, WBAL, WISN, KMBC and WDTN for the
entire period presented (ii) WAPT, KITV, KHBS/KHOG, WLWT, KOCO and Hearst-
Argyle's share of the Clear Channel Venture for the month September 1997
only; and (iii) the management fees derived by Hearst-Argyle from the
Managed Stations for the month of September only.
16
