EXHIBIT 99.3
TRONC, INC.
PRO FORMA COMBINED BALANCE SHEETS
As of June 25, 2017
(In thousands) (Unaudited)
|
| | | | | | | | | | | | | | | | | | |
| | | tronc, Inc. | | Daily News, L.P. | | Pro forma Adjustments | | Ref | | Proforma Combined |
| Assets | | | | | | | | | | |
| Current assets | | | | | | | | | | |
| Cash | | $ | 174,200 |
| | $ | 8,924 |
| | $ | — |
| | | | $ | 183,124 |
|
| Accounts receivable | | 159,230 |
| | 14,465 |
| | — |
| | | | 173,695 |
|
| Inventories | | 6,719 |
| | 3,021 |
| | (843 | ) | | (a) | | 8,897 |
|
| Prepaid expenses | | 17,683 |
| | 4,158 |
| | — |
| | | | 21,841 |
|
| Total current assets | | 357,832 |
| | 30,568 |
| | (843 | ) | | | | 387,557 |
|
| | | | | | | | | | | |
| Property, plant and equipment | | | | | | | | | | |
| Land | | — |
| | 2,056 |
| | 19,664 |
| | (b) | | 21,720 |
|
| Machinery, equipment and furniture | | 110,455 |
| | 9,896 |
| | 2,995 |
| | (b) | | 123,346 |
|
| Buildings and leasehold improvements | | 14,245 |
| | 1,794 |
| | 6,586 |
| | (b) | | 22,625 |
|
| | | 124,700 |
| | 13,746 |
| | 29,245 |
| | | | 167,691 |
|
| Accumulated depreciation | | (66,249 | ) | | (4,083 | ) | | 4,083 |
| | (b) | | (66,249 | ) |
| | | 58,451 |
| | 9,663 |
| | 33,328 |
| | | | 101,442 |
|
| Advance payments on property, plant and equipment | | 2,014 |
| | — |
| | — |
| | | | 2,014 |
|
| Property, plant and equipment, net | | 60,465 |
| | 9,663 |
| | 33,328 |
| | | | 103,456 |
|
| | | | | | | | | | | |
| Other assets | | | | | | | | | | |
| Goodwill | | 122,631 |
| | — |
| | — |
| | | | 122,631 |
|
| Intangible assets, net | | 127,003 |
| | 1,910 |
| | — |
| | | | 128,913 |
|
| Software, net | | 49,683 |
| | — |
| | — |
| | | | 49,683 |
|
| Deferred income taxes | | 53,656 |
| | — |
| | — |
| | | | 53,656 |
|
| Other long-term assets | | 24,421 |
| | 1,384 |
| | — |
| | | | 25,805 |
|
| Total other assets | | 377,394 |
| | 3,294 |
| | — |
| | | | 380,688 |
|
| | | | | | | | | | | |
| Total assets | | $ | 795,691 |
| | $ | 43,525 |
| | $ | 32,485 |
| | | | $ | 871,701 |
|
| | | | | | | | | | | |
The accompanying notes are an integral part of these pro forma combined financial statements.
1
TRONC, INC.
PRO FORMA COMBINED BALANCE SHEETS
As of June 25, 2017
(In thousands) (Unaudited)
|
| | | | | | | | | | | | | | | | | | |
| | | tronc, Inc. | | Daily News, L.P. | | Pro forma Adjustments | | Ref | | Proforma Combined |
| Liabilities and stockholders’ equity | | | | | | | | | | |
| Current liabilities | | | | | | | | | | |
| Current portion of long-term debt | | $ | 21,845 |
| | $ | 100 |
| | $ | — |
| | | | $ | 21,945 |
|
| Accounts payable | | 62,456 |
| | 11,137 |
| | — |
| | | | 73,593 |
|
| Employee compensation and benefits | | 46,474 |
| | 6,558 |
| | — |
| | | | 53,032 |
|
| Deferred revenue | | 78,806 |
| | 2,661 |
| | — |
| | | | 81,467 |
|
| Amounts due to related parties | | — |
| | 102,882 |
| | (102,882 | ) | | (c) | | — |
|
| Other current liabilities | | 18,581 |
| | 1,779 |
| | — |
| | | | 20,360 |
|
| Total current liabilities | | 228,162 |
| | 125,117 |
| | (102,882 | ) | | | | 250,397 |
|
| | | | | | | | | | | |
| Non-current liabilities | | | | | | | | | | |
| Long-term debt | | 340,109 |
| | 5,492 |
| | — |
| | | | 345,601 |
|
| Deferred revenue | | 3,988 |
| | — |
| | — |
| | | | 3,988 |
|
| Pension and postretirement benefits payable | | 96,377 |
| | 26,044 |
| | (436 | ) | | (d) | | 121,985 |
|
| Other obligations | | 62,205 |
| | 25,019 |
| | (2,344 | ) | | (e) | | 84,880 |
|
| Total non-current liabilities | | 502,679 |
| | 56,555 |
| | (2,780 | ) | | | | 556,454 |
|
| | | | | | | | | | | |
| Commitments and contingencies | | | | | | | | | | |
| | | | | | | | | | | |
| Stockholders' equity (deficit) | | 64,850 |
| | (138,147 | ) | | 138,147 |
| | | | 64,850 |
|
| | | | | | | | | | | |
| Total liabilities and stockholders’ equity | | $ | 795,691 |
| | $ | 43,525 |
| | $ | 32,485 |
| | | | $ | 871,701 |
|
The accompanying notes are an integral part of these pro forma combined financial statements.
2
TRONC, INC.
PRO FORMA COMBINED STATEMENTS OF INCOME (LOSS)
For the year ended December 25, 2016
(In thousands) (Unaudited)
|
| | | | | | | | | | | | | | | | | | |
| | | tronc, Inc. | | Daily News, L.P. | | Pro forma Adjustments | | Ref | | Proforma Combined |
| | | | | | | | | | | |
| Operating revenues | | $ | 1,606,378 |
| | $ | 144,777 |
| | $ | — |
| | | | $ | 1,751,155 |
|
| | | | | | | | | | | |
| Operating expenses: | | | | | | | | | | |
| Compensation | | 597,293 |
| | 100,774 |
| | — |
| | | | 698,067 |
|
| Newsprint and ink | | 103,906 |
| | 19,247 |
| | — |
| | | | 123,153 |
|
| Outside services | | 494,478 |
| | 18,587 |
| | — |
| | | | 513,065 |
|
| Other operating expenses | | 300,089 |
| | 29,783 |
| | — |
| | | | 329,872 |
|
| Depreciation and amortization | | 57,499 |
| | 1,096 |
| | 2,122 |
| | (f) | | 60,717 |
|
| Total operating expenses | | 1,553,265 |
| | 169,487 |
| | 2,122 |
| | | | 1,724,874 |
|
| | | | | | | | | | | |
| Income (loss) from operations | | 53,113 |
| | (24,710 | ) | | (2,122 | ) | | | | 26,281 |
|
| Interest expense, net | | (26,703 | ) | | (2,882 | ) | | 2,449 |
| | (g) | | (27,136 | ) |
| Loss on equity investments, net | | (690 | ) | | — |
| | — |
| | | | (690 | ) |
| Proceeds from the sale of tax credits | | — |
| | 3,915 |
| | — |
| | | | 3,915 |
|
| Reorganization items, net | | (259 | ) | | — |
| | — |
| | | | (259 | ) |
| Income (loss) before income taxes | | 25,461 |
| | (23,677 | ) | | 327 |
| | | | 2,111 |
|
| Income tax expense (benefit) | | 18,924 |
| | — |
| | (9,238 | ) | | (h) | | 9,686 |
|
| Net income (loss) | | $ | 6,537 |
| | $ | (23,677 | ) | | $ | 9,565 |
| | | | $ | (7,575 | ) |
| | | | | | | | | | | |
The accompanying notes are an integral part of these pro forma combined financial statements.
3
TRONC, INC.
PRO FORMA COMBINED STATEMENTS OF INCOME (LOSS)
For the six months ended June 25, 2017
(In thousands) (Unaudited)
|
| | | | | | | | | | | | | | | | | | |
| | | tronc, Inc. | | Daily News, L.P. | | Pro forma Adjustments | | Ref | | Proforma Combined |
| | | | | | | | | | | |
| Operating revenues | | $ | 735,907 |
| | $ | 63,562 |
| | $ | — |
| | | | $ | 799,469 |
|
| | | | | | | | | | | |
| Operating expenses: | | | | | | | | | | |
| Compensation | | 259,614 |
| | 43,791 |
| | — |
| | | | 303,405 |
|
| Newsprint and ink | | 46,372 |
| | 8,677 |
| | — |
| | | | 55,049 |
|
| Outside services | | 229,189 |
| | 8,785 |
| | — |
| | | | 237,974 |
|
| Other operating expenses | | 141,928 |
| | 14,332 |
| | — |
| | | | 156,260 |
|
| Depreciation and amortization | | 27,838 |
| | 495 |
| | 958 |
| | (f) | | 29,291 |
|
| Total operating expenses | | 704,941 |
| | 76,080 |
| | 958 |
| | | | 781,979 |
|
| | | | | | | | | | | |
| Income (loss) from operations | | 30,966 |
| | (12,518 | ) | | (958 | ) | | | | 17,490 |
|
| Interest expense, net | | (12,881 | ) | | (1,419 | ) | | 1,199 |
| | (g) | | (13,101 | ) |
| Loss on equity investments, net | | (1,272 | ) | | — |
| | — |
| | | | (1,272 | ) |
| Premium on stock buyback | | (6,031 | ) | | — |
| | — |
| | | | (6,031 | ) |
| Income (loss) before income taxes | | 10,782 |
| | (13,937 | ) | | 241 |
| | | | (2,914 | ) |
| Income tax expense (benefit) | | 6,930 |
| | — |
| | (5,506 | ) | | (h) | | 1,424 |
|
| Net income (loss) | | $ | 3,852 |
| | $ | (13,937 | ) | | $ | 5,747 |
| | | | $ | (4,338 | ) |
| | | | | | | | | | | |
The accompanying notes are an integral part of these pro forma combined financial statements.
4
TRONC, INC.
NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1: BASIS OF PRESENTATION
The unaudited pro forma combined financial statements are based on tronc, Inc.’s (“tronc”) and Daily News, L.P.’s (“NYDN”) historical consolidated financial statements as adjusted to give effect to the acquisition of NYDN. The unaudited pro forma combined statements of operations for the six months ended June 25, 2017 and the year ended December 25, 2016 give effect to the NYDN acquisition as if it had occurred on December 28, 2015. The unaudited pro forma combined balance sheet as of June 25, 2017 gives effect to the NYDN acquisition as if it had occurred on June 25, 2017.
In management’s opinion, the unaudited pro forma combined financial statements have been developed on a reasonable and rational basis and reflect certain adjustments that, in the opinion of management, are necessary to fairly present tronc’s unaudited pro forma combined results of operations and unaudited pro forma combined financial position as of and for the periods indicated. The pro forma adjustments give effect to events that are (i) directly attributable to the acquisition of NYDN, (ii) factually supportable and (iii) with respect to the statement of operations, expected to have a continuing impact. The pro forma adjustments are based on the best information available to management and assumptions that management believes are reasonable given the information currently available; however, such adjustments are subject to change.
The unaudited pro forma financial statements are for illustrative and informational purposes only and are not intended to represent what tronc’s results of operations or financial position would have been had the acquisition occurred on the dates indicated above. The unaudited pro forma combined financial statements should not be considered indicative of tronc’s future results of operations or financial position and should be read in conjunction with the audited and unaudited consolidated financial statements and notes thereto of tronc and NYDN.
NOTE 2: PRELIMINARY PURCHASE PRICE ALLOCATION
On September 3, 2017, tronc completed the acquisition of 100% of the partnership interests in NYDN, for a cash purchase price of $1, subject to a post-closing working capital adjustment. The unaudited pro forma combined financial information includes various assumptions, including those related to the preliminary purchase price allocation of the assets acquired and liabilities assumed of NYDN based on management’s best estimates of fair value. The final purchase price allocation may vary based on final appraisals, valuations and analyses of the fair value of the acquired assets and assumed liabilities. Accordingly, the pro forma adjustments are preliminary and have been made solely for illustrative purposes.
The following table shows the preliminary allocation of the purchase price for NYDN to the acquired identifiable assets and assumed liabilities (in thousands):
|
| | | | |
| Allocated Fair Value of Acquired Assets and Assumed Liabilities | | |
| Cash acquired as part of the purchase | | $ | 3,305 |
|
| Accounts receivable and other current assets | | 20,220 |
|
| Property, plant and equipment, including assets under capital leases | | 48,347 |
|
| Mastheads and intangible assets not subject to amortization | | 1,910 |
|
| Other long-term assets | | 1,222 |
|
| Accounts payable and other current liabilities | | (17,203 | ) |
| Pension and postemployment benefits liability | | (25,445 | ) |
| Workers compensation and auto insurance liability | | (18,838 | ) |
| Other long-term liabilities | | (13,518 | ) |
| Total identifiable net assets (liabilities) | | — |
|
TRONC, INC.
NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(Unaudited)
NOTE 3: PRO FORMA ADJUSTMENTS
The pro forma adjustments are based on preliminary estimates and assumptions that are subject to change. The following adjustments have been reflected in the unaudited pro forma combined financial information:
Adjustments to the pro forma condensed combined balance sheet
| |
| (a) | Reflects the preliminary fair value adjustment of $0.8 million to the acquired inventory. |
| |
| (b) | Reflects the preliminary fair value adjustment of $33.3 million to the acquired property and equipment. |
| |
| (c) | Reflects the amount of related party liabilities included in NYDN financial statements that were not assumed by tronc, Inc. as part of the acquisition. |
| |
| (d) | Reflects the preliminary fair value adjustment to the pension plan based on acquisition date fair value. |
| |
| (e) | Consists of preliminary fair value adjustments associated with leased properties and workers compensation liabilities based on acquisition date fair values. |
Adjustments to the pro forma condensed statements of operations
| |
| (f) | Reflects the estimated impact on depreciation expense of the fair value adjustment to the acquired property and equipment discussed in Note 3(b). |
| |
| (g) | Reflects the elimination of interest expense on the related party debt not assumed by tronc, Inc. as part of the acquisition. |
| |
| (h) | Reflects the income tax effect of pro forma adjustments. |
