<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
FORM 8-K/A
AMENDMENT NO. 2
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
January 26, 1999 (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.
------------
This Current Report on Form 8-K/A amends the Current Report on Form 8-K,
dated December 16, 1998 (the "December 16 8-K"), as amended by the Form 8-K/A
filed on January 25, 1999, of Hearst-Argyle Television, Inc., to replace the
Unaudited Pro Forma Combined Condensed Financial Statements of Hearst-Argyle
Television, Inc. (giving effect to the Pulitzer Merger) filed as Exhibit 99.2 to
the December 16 8-K, as amended by the Form 8-K/A filed on January 25, 1999,
with the revised Unaudited Pro Forma Combined Condensed Financial Statements of
Hearst-Argyle Television Inc. (giving effect to the Pulitzer Merger) filed as
Exhibit 99.2 hereto.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
------------------------------------------------------------------
(c) Exhibits.
99.2 Unaudited Pro Forma Combined Condensed
Financial Statements of Hearst-Argyle
Television, Inc. (giving effect to the
Pulitzer Merger).
<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: January 26, 1999
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit
- ---------- -------
99.2 Unaudited Pro Forma Combined Condensed Financial Statements of
Hearst-Argyle Television, Inc. (giving effect to the Pulitzer
Merger).
<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)
The following unaudited pro forma combined condensed financial statements
of the Company (the "Pro Forma Statements") give effect to the Pulitzer Merger,
pursuant to which the Company will issue to the stockholders of Pulitzer
Publishing Company ("Pulitzer") 37,096,774 shares of the Company's Series A
Common Stock (the "Hearst-Argyle Merger Stock") and will assume $700 million of
new debt (the "New Debt").
The Pulitzer Merger 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). Accordingly, the Pulitzer
Broadcasting assets and liabilities have been adjusted to their estimated fair
values based upon preliminary purchase price allocations which have been made
solely for the purposes of developing the unaudited pro forma combined condensed
financial statements. The results of operations of Pulitzer Broadcasting will be
included in the consolidated financial statements of the Company subsequent to
its date 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 as if the transaction 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, 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 historical
statements of operations of Pulitzer 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, 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"), 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"), and the transaction consummated on January 5, 1999,
effective January 1, 1999 for accounting purposes, in which the Company
acquired, through a merger transaction, all of the partnership interests in
Kelly Broadcasting Co. (the "Kelly Transaction") 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 gives effect to the
STC Swap and the Kelly Transaction as if such transactions had occurred at the
beginning of 1998.
The unaudited pro forma combined condensed balance sheet at September 30,
1998 gives effect to the Kelly Transaction and the Pulitzer Merger as if the
Kelly Transaction and the Pulitzer Merger, assuming the market price of Hearst-
Argyle Series A Common Stock on the date the closing of the Pulitzer Merger
occurs (the "Closing Date") is $31.00 per share, had occurred on September 30,
1998, and is based upon the historical consolidated balance sheets of the
Company, Kelly Broadcasting and Pulitzer Broadcasting.
The Pro Forma Statements should be read in conjunction with the Company's
historical consolidated and unaudited pro forma combined condensed financial
statements, and the Kelly Broadcasting and the Pulitzer 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 Hearst Transaction, the Gannett Swap,
the STC Swap and the Kelly Transaction 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 market price of
Hearst-Argyle Series A Common Stock on the Closing Date is $31.00 (in thousands,
except share data):
<TABLE>
<CAPTION>
PURCHASE PRICE SHARES ISSUED
-------------- -------------
<S> <C> <C>
Value of Hearst-Argyle Merger Stock............................. $1,150,000 37,096,774
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>
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 purchase price is dependent upon the
market price of the Hearst-Argyle Series A Common Stock on the Closing Date, 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 closing of the Pulitzer
Merger, the fair value of the consideration exchanged will be valued based upon
the market price times the 37,096,774 shares issued in the Pulitzer Merger.
The variance in the market price of the Hearst-Argyle Series A Common Stock
on the Closing Date impacts the total estimated purchase price and therefore
impacts amortization of intangible assets, income taxes, net income and pro
forma basic and diluted earnings per share. The following table sets forth the
impact on net income and pro forma basic and diluted earnings per share
(including the Merger) given a range of market prices of the Hearst-Argyle
Series A Common Stock on the Closing Date:
Market Price of Value of Impact on
Hearst-Argyle Hearst-Argyle Incremental Pro Forma
Series A Common Series A Annual Basic and Diluted
Stock on the Common Stock Impact on Earnings per
Closing Date Issued (a) Net Income Share (b)
- --------------- ------------ ------------- -----------------
(In thousands, except share prices)
$42.50 $1,576,613 $(15,038) $(0.17)
$40.25 $1,493,145 $(12,096) $(0.13)
$38.75 $1,437,500 $(10,134) $(0.11)
$35.25 $1,307,661 $ (5,558) $(0.06)
$32.75 $1,214,919 $ (2,288) $(0.03)
$31.00 $1,150,000 $ -- $ --
$30.25 $1,122,177 $ 981 $ 0.01
$30.00 $1,112,903 $ 1,308 $ 0.01
$27.75 $1,029,435 $ 4,250 $ 0.05
$26.25 $ 973,790 $ 6,211 $ 0.07
- -----------
(a) Does not include the New Debt assumed of $700 million and estimated
transaction costs of $20 million.
(b) Calculated as the Incremental Annual Impact on Net Income divided by the sum
of the Hearst-Argyle Merger Stock plus the historical Hearst-Argyle basic
and diluted number of shares outstanding as of September 30, 1998.
2
<PAGE>
Hearst-Argyle Television, Inc.
Unaudited Pro Forma Combined Condensed Balance Sheet
as of September 30, 1998
(In thousands)
<TABLE>
<CAPTION>
KELLY KELLY PRO FORMA PULITZER PULITZER PRO FORMA
HEARST-ARGYLE BROADCASTING TRANSACTION HEARST- BROADCASTING MERGER PULITZER
HISTORICAL HISTORICAL ADJUSTMENTS ARGYLE 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.......... 125 125 371 (e) 496
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) 1,351,518
1,149,629 (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.......... 496
Series B common
stock.......... 413
Common stock.... --
Additional paid-
in capital..... 1,351,518
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>
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET 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 has used: (i) amounts available under its Credit Facility
and (ii) the proceeds from the issuance of $450 million of 7.18% Senior
Notes to institutional investors (the "Private Placement Debt") giving a
maturity of 12 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
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 37,096,774 shares of Hearst-Argyle Merger Stock, assuming the
market price of Hearst-Argyle Series A Common Stock on the Closing Date is
$31.00 per share, to the stockholders of Pulitzer and the assumption of the
New Debt ($700 million) for the net assets of Pulitzer Broadcasting.
(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 as of September 30, 1998.
(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 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 FCC, as part of its consent to the Pulitzer Merger,
required Hearst-Argyle to file an application to divest one of the
aforementioned stations (or propose such other action that would result in
compliance with such FCC rules) within six months following consummation of
the Pulitzer Merger. 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.
4
<PAGE>
Hearst-Argyle Television, Inc.
Unaudited Pro Forma Combined Condensed Statement Of Operations
Year Ended December 31, 1997
(In thousands, except per share data)
<TABLE>
<CAPTION>
PRO FORMA PULITZER PULITZER PRO FORMA
HEARST- BROADCASTING MERGER PULITZER DIVESTITURE
ARGYLE(a) HISTORICAL ADJUSTMENTS MERGER WGAL(g)
--------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
Total revenues... $453,708 $227,016 $ 9,038 (i) $689,762 $(29,772)
Station operating
expenses........ 202,318 125,090 600 (b) 317,692 (9,876)
(10,316)(i)
Amortization of
program rights.. 46,816 12,490 (i) 59,306 (1,748)
Depreciation and
amortization.... 57,169 23,447 50,446 (c) 131,062 (1,367)
-------- -------- -------- -------- --------
Station operating
income.......... 147,405 78,479 (44,182) 181,702 (16,781)
Corporate general
and
administrative
expenses........ 12,000 (5,354)(d) 13,500
6,854 (i)
-------- -------- -------- -------- --------
Operating
income.......... 135,405 78,479 (45,682) 168,202 (16,781)
Interest expense,
net............. (75,138) (16,081) (32,919)(e) (124,138) 1,028
Other income,
net............. 10 (10)(i) --
-------- -------- -------- -------- --------
Income before
income taxes.... 60,267 62,408 (78,611) 44,064 (15,753)
Income taxes..... 25,312 24,387 (28,548)(f) 21,151 (7,562)
-------- -------- -------- -------- --------
Income from
continuing
operations...... 34,955 $ 38,021 $(50,063) 22,913 $ (8,191)
======== ======== ========
Less: preferred
stock
dividends....... (1,422) (1,422)
-------- --------
Income applicable
to common
stock........... $ 33,533 $ 21,491
======== ========
Basic:
Income per
common share... $ 0.62 $ 0.24
======== ========
Number of shares
used in per
share
calculation.... 53,828 90,925(h)
Diluted:
Income per
common share... $ 0.62 $ 0.24
======== ========
Number of shares
used in per
share
calculation.... 53,873 90,970(h)
<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............. (123,110)
Other income,
net............. --
-------------
Income before
income taxes.... 28,311
Income taxes..... 13,589
-------------
Income from
continuing
operations...... 14,722
Less: preferred
stock
dividends....... (1,422)
-------------
Income applicable
to common
stock........... $ 13,300
=============
Basic:
Income per
common share... $ 0.15
=============
Number of shares
used in per
share
calculation.... 90,925(h)
Diluted:
Income per
common share... $ 0.15
=============
Number of shares
used in per
share
calculation.... 90,970(h)
</TABLE>
See notes on the following pages.
5
<PAGE>
Hearst-Argyle Television, Inc.
Unaudited Pro Forma Combined Condensed Statement of Operations
Nine Months Ended September 30, 1997
(In thousands, except per share data)
<TABLE>
<CAPTION>
PRO FORMA PULITZER PULITZER PRO FORMA
HEARST- BROADCASTING MERGER PULITZER DIVESTITURE
ARGYLE(a) HISTORICAL ADJUSTMENTS MERGER WGAL(g)
--------- ------------ ------------ --------- -----------
<S> <C> <C> <C> <C> <C>
Total revenues... $324,088 $165,002 $ 6,633(i) $495,723 $(21,483)
Station operating
expenses........ 147,237 93,016 (7,989)(i) 232,714 (7,474)
450 (b)
Amortization of
program rights.. 33,934 9,445 (i) 43,379 (1,330)
Depreciation and
amortization.... 37,177 17,622 39,804 (c) 94,603 (1,029)
-------- -------- -------- -------- --------
Station operating
income.......... 105,740 54,364 (35,077) 125,027 (11,650)
Corporate general
and
administrative
expenses........ 9,619 (2,938)(d) 11,850
5,169 (i)
-------- -------- -------- -------- --------
Operating
income.......... 96,121 54,364 (37,308) 113,177 (11,650)
Interest expense,
net............. (56,354) (12,553) (24,197)(e) (93,104) 771
Other income,
net............. 8 (8)(i) --
-------- -------- -------- -------- --------
Income before
income taxes.... 39,767 41,819 (61,513) 20,073 (10,879)
Income taxes..... 16,702 16,344 (23,411)(f) 9,635 (5,222)
-------- -------- -------- -------- --------
Income from
continuing
operations...... 23,065 $ 25,475 $(38,102) 10,438 $ (5,657)
======== ======== ========
Less: preferred
stock
dividends....... (1,066) (1,066)
-------- --------
Income applicable
to common
stock........... $ 21,999 $ 9,372
======== ========
Basic:
Income per
common share... $ 0.41 $ 0.10
======== ========
Number of shares
used in per
share
calculation.... 53,678 90,775(h)
Diluted:
Income per
common share... $ 0.41 $ 0.10
======== ========
Number of shares
used in per
share
calculation.... 53,943 91,040(h)
<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............. (92,333)
Other income,
net............. --
-------------
Income before
income taxes.... 9,194
Income taxes..... 4,413
-------------
Income from
continuing
operations...... 4,781
Less: preferred
stock
dividends....... (1,066)
-------------
Income applicable
to common
stock........... $ 3,715
=============
Basic:
Income per
common share... $ 0.04
=============
Number of shares
used in per
share
calculation.... 90,775(h)
Diluted:
Income per
common share... $ 0.04
=============
Number of shares
used in per
share
calculation.... 91,040(h)
</TABLE>
See notes on the following pages.
6
<PAGE>
Hearst-Argyle Television, Inc.
Unaudited Pro Forma Combined Condensed Statement of Operations
Nine Months Ended September 30, 1998
(In thousands, except per share data)
<TABLE>
<CAPTION>
PRO FORMA PULITZER PULITZER PRO FORMA
HEARST- BROADCASTING MERGER PULITZER DIVESTITURE
ARGYLE(a) HISTORICAL ADJUSTMENTS MERGER WGAL(g)
--------- ------------ ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
Total revenues... $344,714 $173,681 $ 6,197 (i) $524,592 $(21,659)
Station operating
expenses........ 150,772 95,946 (8,135)(i) 239,033 (7,452)
450 (b)
Amortization of
program rights.. 37,980 9,164 (i) 47,144 (1,285)
Depreciation and
amortization.... 39,462 16,512 39,787 (c) 95,761 (1,008)
-------- -------- -------- -------- --------
Station operating
income.......... 116,500 61,223 (35,069) 142,654 (11,914)
Corporate general
and
administrative
expenses........ 9,619 (2,926)(d) 11,850
5,157 (i)
-------- -------- -------- -------- --------
Operating
income.......... 106,881 61,223 (37,300) 130,804 (11,914)
Interest expense,
net............. (56,354) (10,255) (26,495)(e) (93,104) 771
Other income,
net............. 11 (11)(i) --
-------- -------- -------- -------- --------
Income before
income taxes.... 50,527 50,979 (63,806) 37,700 (11,143)
Income taxes..... 21,221 19,918 (23,043)(f) 18,096 (5,349)
-------- -------- -------- -------- --------
Income from
continuing
operations...... 29,306 $ 31,061 $(40,763) 19,604 $ (5,794)
======== ======== ========
Less: preferred
stock
dividends....... (1,066) (1,066)
-------- --------
Income applicable
to common
stock........... $ 28,240 $ 18,538
======== ========
Basic:
Income per
common share... $ 0.53 $ 0.20
======== ========
Number of shares
used in per
share
calculation.... 53,678 90,775 (h)
Diluted:
Income per
common share... $ 0.52 $ 0.20
======== ========
Number of shares
used in per
share
calculation.... 53,943 91,040 (h)
<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............. (92,333)
Other income,
net............. --
--------------
Income before
income taxes.... 26,557
Income taxes..... 12,747
--------------
Income from
continuing
operations...... 13,810
Less: preferred
stock
dividends....... (1,066)
--------------
Income applicable
to common
stock........... $ 12,744
==============
Basic:
Income per
common share... $ 0.14
==============
Number of shares
used in per
share
calculation.... 90,775 (h)
Diluted:
Income per
common share... $ 0.14
==============
Number of shares
used in per
share
calculation.... 91,040 (h)
</TABLE>
See notes on the following pages.
7
<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,
the STC Swap and the Kelly Transaction had occurred as of January 1, 1997.
(b) Estimated pension costs associated with the newly-established defined
benefit pension plan to be created for the transferred Pulitzer Broadcasting
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.
(c) 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.
(d) Change in corporate general and administrative expenses due to the Pulitzer
Merger, as a result of certain contractual agreeements expected to be
entered into upon consummation of the Pulitzer Merger, 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, net of corporate general and administrative expenses recorded in the
historical financial statements of Pulitzer Broadcasting.
(e) 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. If
the interest rate were to increase or decrease 1/8%, the difference in
interest expense would equal $875,000.
(f) Estimated income tax effect of the above adjustments, giving effect to the
Pulitzer Merger.
(g) Upon consummation of the Pulitzer Merger, the Company will 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 FCC, as part of its consent to the Pulitzer Merger,
required Hearst-Argyle to file an application to divest one of the
aforementioned stations (or propose such other action that would result in
compliance with such FCC rules) within six months following consummation of
the Merger. 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.
(h) Includes the issuance of the Hearst-Argyle Merger Stock to the
stockholders of New Pulitzer.
(i) Reclassification of Pulitzer Broadcasting account balances to conform with
the Company presentation.
8
<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, the STC Swap, and the Kelly Transaction had been completed as of
the beginning of the periods presented. The Gannett Swap, the Hearst
Transaction, the STC Swap and the Kelly Transaction 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- GANNET HEARST STC SWAP KELLY KELLY
ARGYLE HISTORICAL SWAP TRANSACTION ADJUSTMENTS BROADCASTING TRANSACTION PRO-FORMA
HISTORICAL(a) ARGYLE(b) ADJUSTMENTS ADJUSTMENTS AND OTHER HISTORICAL ADJUSTMENTS HEARST-ARGYLE
------------- ---------- ------------ ----------- ----------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenues............ $333,661 $ 51,826 $975(h) $ 1,320 (c) $ 615 (i) $65,311 $453,708
Station operating
expenses................. 142,096 27,610 681(d)(h) (1,944)(o) 995 (i)(j) 39,499 $ (6,619)(q) 202,318
Amortization of program
rights................... 40,129 2,833 16(h) (1,461)(i) 5,299 (q) 46,816
Depreciation and
amortization............. 22,924 16,955 138(e)(f) (3,777)(f) 3,704 (e)(f) 4,483 12,742 (f) 57,169
-------- -------- ---- ------- ------- ------- --------- --------
Station operating income.. 128,512 4,428 140 7,041 (2,623) 21,329 (11,422) 147,405
Corporate general and
administrative expenses.. 9,527 2,700 (227)(l) 1,320 (q) 12,000
(1,320)(l)
Non-cash compensation
expense.................. 3,518 (3,518)(k) --
-------- -------- ---- ------- ------- ------- --------- --------
Operating income (loss)... 118,985 (1,790) 140 10,786 (2,623) 21,329 (11,422) 135,405
Interest expense, net..... (32,484) (12,749) 8,005 (m) (1,203) (36,707)(m) (75,138)
-------- -------- ---- ------- ------- ------- --------- --------
Income (loss) before
income taxes............. 86,501 (14,539) 140 18,791 (2,623) 20,126 (48,129) 60,267
Income taxes.............. 35,363 2,430 (g) (1,093)(g) (11,388)(g) 25,312
-------- -------- ---- ------- ------- ------- --------- --------
Income (loss) from
continuing operations.... $ 51,138 $(14,539) $140 $16,361 $(1,530) $20,126 $(36,741) $ 34,955
======== ======== ==== ======= ======= ======= ======== ========
</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, 1997
(In thousands)
<TABLE>
<CAPTION>
HEARST STC SWAP KELLY KELLY PRO FORMA
HEARST-ARGYLE ARGYLE GANNETT SWAP TRANSACTION ADJUSTMENTS BROADCASTING TRANSACTION HEARST-
HISTORICAL(p) HISTORICAL(b) ADJUSTMENTS ADJUSTMENTS AND OTHER HISTORICAL ADJUSTMENTS ARGYLE
------------- ------------- ------------ ----------- ----------- ----------- ---------- -------
<S> <C> <C> <C> <C> <C>
Total revenues.......... $221,296 $ 51,826 $975(h) $ 1,320 (c) $ 362 (i) $48,309 $324,088
Station operating
expenses............... 96,919 27,610 681(d)(h) (1,944)(o) 211 (i)(j) 27,660 $ (3,900)(q) 147,237
Amortization of program
rights................. 29,201 2,833 16(h) (1,209)(i) 3,093 (q) 33,934
Depreciation and
amortization........... 13,694 16,955 138(e)(f) (7,151)(f) 1,965 (e)(f) 1,938 9,638 (f) 37,177
-------- -------- ---- ------- ------- -------- -------- -------
Station operating
income................. 81,482 4,428 140 10,415 (605) 18,711 (8,831) 105,740
Corporate general and
administrative
expenses............... 6,546 2,700 373 (l) (807)(l) 9,619
807 (q)
Non-cash compensation
expense................ 3,518 (3,518)(k)
-------- -------- ---- ------- ------- -------- -------- --------
Operating income........ 74,936 (1,790) 140 13,560 (605) 18,711 (8,831) 96,121
Interest expense, net... (20,524) (12,749) 5,352 (m) (139) (28,294)(m) (56,354)
-------- -------- ---- ------- ------- ------- -------- --------
Income (loss) before
income taxes........... 54,412 (14,539) 140 18,912 (605) 18,572 (37,125) 39,767
Income taxes............ 22,362 2,675 (g) (251) (8,084)(g) 16,702
-------- -------- ---- ------- ------- ------- -------- -------
Income (loss) from
continuing operations.. $ 32,050 $(14,539) $140 $16,237 $ (354) $18,572 $(29,041) $23,065
======== ======== ==== ======= ======= ======= ======== =======
</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
(In thousands)
<TABLE>
<CAPTION>
STC SWAP KELLY KELLY PRO FORMA
HEARST-ARGYLE ADJUSTMENTS BROADCASTING TRANSACTION HEARST-
HISTORICAL(n) AND OTHER HISTORICAL ADJUSTMENTS ARGYLE
---------------- ----------- ----------- ---------- -------
<S> <C> <C> <C> <C> <C>
Total revenues............... $292,010 $ 51 (i) $52,653 $344,714
Station operating expenses... 127,595 903 (i)(j) 30,341 $ (8,067)(q) 150,772
Amortization of program
rights...................... 32,027 (643) (i) 6,596 (q) 37,980
Depreciation and amortiza-
tion........................ 26,678 1,179 (e)(f) 6,716 4,889 (f)(q) 39,462
-------- ------ -------- -------- -------
Station operating income..... 105,710 (1,388) 15,596 (3,418) 116,500
Corporate general and admin-
istrative expenses.......... 9,619 (1,091)(l) 9,619
1,091 (q)
-------- ------ -------- --------- --------
Operating income............. 96,091 (1,388) 15,596 (3,418) 106,881
Interest expense, net........ (29,978) 2,057 (m) (5,504) (22,929)(m) (56,354)
-------- ------ -------- -------- --------
Income before income taxes... 66,113 669 10,092 (26,347) 50,527
Income taxes................. 28,111 271 (g) (7,161)(g) 21,221
-------- ------ ------- -------- --------
Income from continuing opera-
tions....................... $ 38,002 $ 398 $10,092 $(19,186) $ 29,306
======== ====== ======= ======== ========
</TABLE>
See notes on the following pages.
11
<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 and the Kelly 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 2018 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
Private Placement Debt at an interest rate of 7.18%.............. 32,310 24,233 24,233
Chase Credit Facility at an interest rate of 7.0%................ 5,600 4,200 4,200
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...................................... $ 75,138 $ 56,354 $ 56,354
========= ======== ========
</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.
(q) Reclassification of Kelly Broadcasting account balances to conform with
the Company's presentation.
12
