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 September 24,
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 September 24, 1995 and of
Multimedia at September 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
nine periods 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
SEPTEMBER 24, 1995
(In thousands) Gannett Multimedia(*) Pro forma Pro forma
Adjustments Combined
ASSETS
Cash and marketable securities $ 35,537 $ 7,843 $ 43,380
Accounts receivable, net 468,278 90,041 558,319
Inventories 101,042 7,276 108,318
Prepaid expenses and other current assets 70,750 34,750 105,500
--------- ------- --------- ---------
Total current assets 675,607 139,910 815,517
Property, plant and equipment, net 1,413,786 313,967 $ 318,921 (1) 2,046,674
Excess of acquisition cost over
the value of assets acquired 1,442,304 246,219 1,603,753 (2) 3,292,276
Other assets 193,859 30,817 (30,817)(2) 193,859
--------- ------- --------- ---------
Total assets $3,725,556 $730,913 $ 1,891,857 $6,348,326
========= ======= ========= =========
Liabilities & Shareholders' Equity
Current maturities of long-term
debt $ 59,824 $ 30,237 $ 90,061
Accounts payable and current portion
of film contracts payable 223,062 31,227 254,289
Accrued expenses and other current
liabilities 244,483 82,010 326,493
Dividends payable 49,158 49,158
Income taxes 18,612 12,289 $ (22,600)(3) 8,301
--------- ------- --------- ---------
Total current liabilities 595,139 155,763 (22,600) 728,302
Deferred income taxes 151,522 57,391 128,521 (4) 337,434
Long-term debt, less current portion 541,536 508,301 1,771,000 (5) 2,820,837
Postretirement medical and life
insurance liabilities 308,714 2,312 311,026
Other long-term liabilities 108,776 22,082 130,858
Total shareholders' equity 2,019,869 (14,936) 14,936 (6) 2,019,869
--------- ------- --------- ---------
Total liabilities and shareholders' equity $3,725,556 $730,913 $ 1,891,857 $6,348,326
========= ======= ========= =========
* For comparability, Multimedia amounts, which are as of September 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
NINE MONTHS ENDED SEPTEMBER 24, 1995
(In thousands except Pro forma Pro forma
per share data) Gannett Multimedia(*) Adjustments Combined
Net Operating Revenues:
Newspapers $2,350,790 $118,737 $2,469,527
Broadcasting 322,650 112,552 435,202
Outdoor 186,562 186,562
Cable 129,758 129,758
Entertainment 107,739 107,739
Security 20,843 20,843
--------- ------- ------ ---------
Total 2,860,002 489,629 3,349,631
--------- ------- ------ ---------
Operating Expenses:
Cost of sales and operating expenses,
exclusive of depreciation 1,622,790 186,208 1,808,998
Selling, general and administrative
expenses, exclusive of depreciation 513,536 118,148 631,684
Depreciation 116,578 29,769 $(29,769)(1) 152,119
35,541 (2)
Amortization of intangible assets 34,118 10,815 (10,815)(3) 70,918
36,800 (4)
--------- ------- ------ ---------
Total 2,287,022 344,940 31,757 2,663,719
--------- ------- ------ ---------
Operating income 572,980 144,689 (31,757) 685,912
--------- ------- ------ ---------
Non-operating income (expense):
Interest expense (31,723) (42,790) (79,400)(5) (153,913)
Other income (expense) (627) (557) (1,184)
--------- ------- ------ ---------
Total (32,350) (43,347) (79,400) (155,097)
--------- ------- ------ ---------
Income before income taxes 540,630 101,342 (111,157) 530,815
Provision for income taxes 218,900 42,057 (34,100)(6) 226,857
Minority interest, net (2,394) (2,394)
--------- ------- ------ ---------
Net income $ 321,730 $ 56,891 $(77,057) $ 301,564
========= ======= ====== =========
Net income per share $2.30 $1.47 $2.15
Average number of outstanding shares 140,103 140,103
* For comparability, Multimedia amounts, which are for the nine months ended
September 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
YEAR ENDED DECEMBER 25, 1994
(In thousands except
Per share date) Pro forma Pro forma
Gannett Multimedia(*) Adjustments Combined
Net Operating Revenues:
Newspaper advertising $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) 94,654
49,100 (4)
--------- ------- ------ ---------
Total 3,011,745 441,040 39,838 3,492,623
--------- ------- ------ ---------
Operating income 812,778 189,443 (39,838) 962,383
--------- ------- ------ ---------
Non-operating income (expense):
Interest expense (45,624) (59,142) (74,400)(5) (179,166)
Other income (expense) 14,945 25,584 40,529
--------- ------- ------ ---------
Total (30,679) (33,558) (74,400) (138,637)
--------- ------- ------ ---------
Income before income taxes 782,099 155,885 (114,238) 823,746
Provision for income taxes 316,700 64,693 (31,800)(6) 349,593
Minority interest, net (1,163) (1,163)
--------- ------- ------ ---------
Net income $ 465,399 $ 90,029 $(82,438) $ 472,990
========= ======= ====== =========
Net income per share $3.23 $2.35 $3.28
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 $538 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 September 24,
1995 assuming that the transaction occurred as of September 24, 1995.
Such pro forma information is based on the historical balance
sheets of Gannett as of September 24, 1995 and of Multimedia as of
September 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 earliest period
presented. The unaudited pro forma condensed combined statements
of income reflect Multimedia's historical results of operations
for the 12 month period ended December 31, 1994 and for the
nine month period ended September 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) 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.
(2) 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.
(3) Tax benefit of exercise and settlement of stock options.
The effective tax rate for this adjustment assumes that
all of the compensation element of the options will be
deductible for federal and state income tax purposes.
(4) Deferred tax on step-up of fixed assets, using the Company's
combined federal and state tax rate of 40.5%.
(5) The issuance of $1.77 billion in commercial paper necessary
to finance the merger.
(6) The elimination of the shareholders' equity accounts of
Multimedia.
B. Pro forma adjustments to the September 24, 1995 unaudited
condensed combined statement of income 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.1.)
(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 ($1.77 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
nine-month period ended September 24, 1995.
Multimedia's weighted average interest rate for the nine months
September 30, 1994 was substantially higher than Gannett's.
Had the merger been completed at the beginning of the period
presented and had Gannett been able to replace Multimedia's debt
with a like amount of debt at the Company's lower rates, interest
savings of approximately $10 million would have been realized
(exclusive of prepayment penalties that would be incurred upon
retirement of Multimedia's debt which would be treated as part of
the acquisition price).
(6) Record income tax effect of pro forma adjustments. The
effective tax rate on pro forma combined income before taxes
of 42.7% 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 statement of income 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.1.)
(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 ($1.77 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.
Multimedia's weighted average interest rate for the year ended
December 31, 1994 was substantially higher than Gannett's.
Had the merger been completed at the beginning of the period
presented and had Gannett been able to replace Multimedia's debt
with a like amount of debt at the Company's lower rates, interest
savings of approximately $33 million would have been realized
(exclusive of prepayment penalties that would be incurred upon
retirement of Multimedia's debt which would be treated as part of
the acquisition price).
(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.