Exhibit 99-3
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial
statements give effect to the exchange of $45.25 in cash by
Gannett Co., Inc. (the Company) for each share of issued and
outstanding common stock of Multimedia, Inc. (Multimedia)
pursuant to the Merger Agreement. As a result of the merger,
Gannett will also assume or incur the long-term debt of
Multimedia. The purchase price is subject to adjustment if
Multimedia's long-term debt (including the current portion of
long-term debt) at December 31, 1995 exceeds a specified level.
This transaction will be accounted for as a purchase.
The unaudited pro forma combined balance sheet presents the
financial position of Gannett and Multimedia as of that June 25,
1995, assuming that the proposed merger with Multimedia occurred
as of that date. Such pro forma information is based on the
historical balance sheets of the Company at June 25, 1995 and of
Multimedia at June 30, 1995.
As required by rule 11-02 of regulation S-X, the unaudited
pro forma combined statements of income have been prepared
assuming that the proposed merger occurred as of the beginning
of the periods presented. The unaudited combined statements of
income reflect the historical results of operations for Gannett
and Multimedia for their respective 1994 fiscal years and first
six-months of 1995.
The unaudited pro forma combined financial statements give
effect to certain pro forma adjustments which are described in
the notes to these statements. Nonrecurring charges, including
legal fees, investment banker fees, and other professional fees
directly attributable to the merger with Multimedia are not
included in the unaudited pro forma combined financial
statements. In addition, there will be certain other
nonrecurring charges that will result from the merger which are
not included in the unaudited pro forma combined financial
statements. These consist primarily of severance costs and debt
prepayment penalties. The Company does not believe that the
aggregate amount of such nonrecurring charges will be material
in relation to the purchase price. As the nonrecurring charges
are incurred, most will be reflected as part of the purchase
price, others will be included in the expenses of the combined
operations.
The unaudited pro forma combined financial statements do
not reflect any synergies anticipated by the Company as a result
of the merger.
The unaudited pro forma data is presented for informational
purposes only and is not necessarily indicative of the results
of operations or financial position which would have been
achieved had the transaction been completed as of the beginning
of the earliest period presented, nor is it necessarily
indicative of Gannett's future results of operations or
financial position.
The unaudited pro forma combined financial statements
should be read in conjunction with the historical financial
statements of the Company and of Multimedia, including the
related notes thereto.
GANNETT CO., INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
JUNE 25, 1995
(In thousands) Gannett Multimedia(*) Pro forma Pro forma
Adjustments Combined
ASSETS
Cash and marketable securities $ 12,778 $ 13,299 $ 67,000 (1) $ 93,077
Accounts receivable, net 481,026 94,789 575,815
Inventories 79,989 7,782 87,771
Prepaid expenses and other
current assets 57,017 27,179 84,196
--------- ------- --------- ---------
Total current assets 630,810 143,049 67,000 840,859
Property, plant and equipment, net 1,412,358 306,518 318,341 (2) 2,037,217
Excess of acquisition cost over
the value of assets acquired 1,450,020 249,026 1,628,997 (3) 3,328,043
Other assets 189,745 30,533 (30,533)(3) 189,745
--------- ------- --------- ---------
Total assets $3,682,933 $729,126 $1,983,805 $6,395,864
========= ======= ========= =========
LIABILITIES & SHAREHOLDERS' EQUITY
Current maturities of long-term
debt $ 61,476 $ 30,254 $ 91,730
Accounts payable and current
portion of film contracts payable 199,772 22,282 222,054
Accrued expenses and other current
liabilities 234,269 71,192 305,461
Dividends payable 47,608 47,608
Income taxes 43,650 18,137 (18,000)(4) 43,787
--------- ------- --------- ---------
Total current liabilities 586,775 141,865 (18,000) 710,640
Deferred income taxes 155,840 53,574 128,924 (5) 338,338
Long-term debt, less current portion 553,725 548,000 1,835,000 (6) 2,936,725
Postretirement medical and life
insurance liability 308,324 2,230 310,554
Other long-term liabilities 108,561 21,338 129,899
Total shareholders' equity 1,969,708 (37,881) 37,881 (7) 1,969,708
--------- ------- --------- ---------
Total liabilities and
shareholders' equity $3,682,933 $729,126 $1,983,805 $6,395,864
========= ======= ========= =========
* For comparability, Multimedia amounts, which as of June 30, 1995, have been
reclassified to conform with Gannett's presentation.
See accompanying notes to Unaudited Pro Forma Combined Financial Statements.
GANNETT CO., INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
JUNE 25, 1995
(In thousands except Pro forma Pro forma
per share data) Gannett Multimedia(*) Adjustments Combined
Net Operating Revenues:
Newspapers $1,590,714 $78,355 $1,669,069
Broadcasting 217,863 75,212 293,075
Outdoor 119,164 119,164
Cable 85,450 85,450
Entertainment 74,377 74,377
Security 13,380 13,380
--------- ------- ------ ---------
Total 1,927,741 326,774 0 2,254,515
--------- ------- ------ ---------
Operating Expenses:
Cost of sales and operating
expenses, exclusive of
depreciation 1,076,594 125,996 1,202,590
Selling, general and
administrative expenses,
exclusive of depreciation 346,583 79,768 426,351
Depreciation 78,242 20,449 $(20,449)(1) 101,647
23,405 (2)
Amortization of intangible assets 22,756 7,237 (7,237)(3) 47,736
24,980 (4)
--------- ------- ------ ---------
Total 1,524,175 233,450 20,699 1,778,324
--------- ------- ------ ---------
Operating income 403,566 93,324 (20,699) 476,191
--------- ------- ------ ---------
Non-operating income (expense):
Interest expense (22,610) (28,862) (54,867)(5) (106,339)
Other income (expense) (1,727) (105) (1,832)
--------- ------- ------ ---------
Total (24,337) (28,967) (54,867) (108,171)
--------- ------- ------ ---------
Income before income taxes 379,229 64,357 (75,566) 368,020
Provision for income taxes 153,600 26,709 (23,100)(6) 157,209
Minority interest, net (1,637) (1,637)
--------- ------- ------ ---------
Net income $ 225,629 $ 36,011 $(52,466) $ 209,174
========= ======= ====== =========
Net income per share $1.61 $0.93 $1.49
Average number of outstanding shares 140,065 140,065
* For comparability, Multimedia amounts, which are for the first six months
of June 30, 1995 have been reclassified to conform with Gannett's
presentation.
See accompanying notes to Unaudited Pro Forma Combined Financial Statements.
GANNETT CO., INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
DECEMBER 25, 1994
(In thousands except
Per share date) Pro forma Pro forma
Gannett Multimedia(*) Adjustments Combined
Net Operating Revenues:
Newspaper $3,176,787 $150,140 $3,326,927
Broadcasting 406,608 142,841 549,449
Outdoor 241,128 241,128
Cable 165,406 165,406
Entertainment 147,512 147,512
Security 24,584 24,584
--------- ------- ------- ---------
Total 3,824,523 630,483 4,455,006
--------- ------- ------- ---------
Operating Expenses:
Cost of sales and operating
expenses, exclusive of
depreciation 2,106,810 229,390 2,336,200
Selling, general and
administrative expenses,
exclusive of depreciation 696,139 158,248 854,387
Depreciation 163,242 39,025 $(39,025)(1) 207,382
44,140 (2)
Amortization of intangible assets 45,554 14,377 (14,377)(3) 95,514
49,960 (4)
--------- ------- ------- ---------
Total 3,011,745 441,040 40,698 3,493,483
--------- ------- ------- ---------
Operating income 812,778 189,443 (40,698) 961,523
--------- ------- ------- ---------
Non-operating income (expense):
Interest expense (45,624) (59,142) (77,070)(5) (181,836)
Other income (expense) 14,945 25,584 40,529
--------- ------- ------- ---------
Total (30,679) (33,558) (77,070) (141,307)
--------- ------- ------- ---------
Income before income taxes 782,099 155,885 (117,768) 820,216
Provision for income taxes 316,700 64,693 (32,900)(6) 348,493
Minority interest, net (1,163) (1,163)
--------- ------- ------- ---------
Net income $ 465,399 $ 90,029 $(84,868) $ 470,560
========= ======= ======= =========
Net income per share $3.23 $2.35 $3.26
Average number of outstanding shares 144,276 144,276
* For comparability, Multimedia amounts, which are for the year-ended
December 31, 1994, have been reclassified to conform with Gannett's
presentation.
See accompanying notes to Unaudited Pro Forma Combined Financial Statements.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Note 1 - Basis of Presentation
The unaudited combined pro forma balance sheet has been prepared
to reflect the acquisition of Multimedia for an aggregate price
of approximately $1.8 billion plus the assumption of
approximately $578 million of Multimedia's long-term debt.
The unaudited pro forma combined balance sheet presents the
financial position of the Company and Multimedia as of June 25,
1995 assuming that the transaction occurred as of June 25, 1995.
Such pro forma information is based on the historical balance
sheets of Gannett as of June 25, 1995 and of Multimedia as of
June 30, 1995.
As required by rule 11-02 of regulation S-X, the unaudited pro
forma condensed combined statements of income assume that the
transaction occurred as of the beginning of the periods
presented. The unaudited pro forma condensed combined statements
of income reflect Multimedia's historical results of operations
for the most recent 12 month period ended December 31, 1994 and
for the six months ended June 30, 1995.
The Company believes that the assumptions used in preparing the
unaudited pro forma combined financial statements provide a
reasonable basis for presenting all of the significant effects
of the merger (other than any synergies anticipated by Gannett,
nonrecurring charges directly attributable to the merger and
nonrecurring charges that will result from combining
operations), and that the pro forma adjustments give effect to
those assumptions in the unaudited pro forma combined financial
statements.
Note 2 - Pro forma Adjustments
A. Pro forma adjustments to the unaudited condensed combined
balance sheet are made to reflect the following:
(1) Proceeds from exercise of all outstanding Multimedia stock
options.
(2) Adjustment to record the fixed assets of Multimedia at
estimated fair value at the acquisition date. The fair
value of fixed assets was estimated on a property-by-
property basis using certain information provided by
Multimedia, and in general consideration of the age,
condition and replacement value of the assets. Estimated
useful lives for depreciation purposes have been assigned
which give appropriate effect to the age, condition and
productiveness of the assets.
(3) Adjustment to record the excess of acquisition cost over the
fair value of net assets acquired (goodwill). The
acquisition cost was allocated to each business segment
based on the value of the segment, which was estimated by
The Company using internal and external valuation reports.
Goodwill for each business segment was calculated as the
excess of allocated purchase price over the estimated fair
value of the assets of the segment. For purposes of the
unaudited pro forma condensed combined statements of income,
goodwill is being amortized over various lives ranging from
ten to forty years.
(4) Tax benefit of options exercised. The effective tax rate
for this adjustment assumes that a portion of the
compensation element of the options exercised will be
deductible for federal and state income tax purposes.
(5) Deferred tax on step-up of fixed assets, using the Company's
combined federal and state tax rate of 40.5%.
(6) The issuance of $1.83 billion in commercial paper necessary
to finance the merger.
(7) The elimination of the shareholders' equity accounts of
Multimedia.
B. Pro forma adjustments to the June 25, 1995 unaudited
condensed combined income statement are made to reflect the
following:
(1) Elimination of Multimedia's historical depreciation expense.
(2) Depreciation expense based on estimated fair market value
and useful lives of Multimedia assets (see note A.2.)
(3) Elimination of Multimedia's historical amortization expense.
(4) Amortization expense on the estimated excess of acquisition
cost over fair value of assets, assuming lives ranging from
ten to forty years.
(5) Interest expense on amount assumed borrowed for
consideration paid ($1.83 billion). The rate used to
calculate interest expense, 5.98%, is based on the weighted
average rate paid by Gannett for commercial paper during the
six-month period ended June 25, 1995.
(6) Record income tax effect of pro forma adjustments. The
effective tax rate on pro forma combined income before taxes
of 42.4% differs from the Company's statutory tax rate of
35% due primarily to non-deductible goodwill and state
income taxes.
C. Pro forma adjustments to the December 25, 1994 unaudited
condensed combined income statement are made to reflect the
following:
(1) Elimination of Multimedia's historical depreciation expense.
(2) Depreciation expense based on estimated fair market value
and useful lives of Multimedia assets (see note A.2.)
(3) Elimination of Multimedia's historical amortization expense.
(4) Amortization expense on the estimated excess of acquisition
cost over fair value of assets, assuming lives ranging from
ten to forty years.
(5) Interest expense on amount assumed borrowed for
consideration paid ($1.83 billion). The rate used to
calculate interest expense, 4.2%, is based on the weighted
average rate paid by Gannett for commercial paper in 1994.
(6) Record income tax effect of pro forma adjustments. The
effective tax rate on pro forma combined income before taxes
of 42.5% differs from the Company's statutory tax rate of
35% due primarily to non-deductible goodwill and state
income taxes.