Exhibit 99-4
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. 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. Certain nonrecurring amounts, which principally include legal
fees, investment banker fees and other professional fees, severance costs for
certain Multimedia executives and debt prepayment penalties are not included
in the unaudited pro forma combined financial statements. The Company does not
believe that the aggregate after tax cost of such nonrecurring items will be
in excess of 5% of the purchase price. These items are not of an operating
nature but rather are directly attributable to the acquisition and, as such,
will be considered an adjustment to the purchase price in accordance with
paragraph 76 of APB 16, "Business Combinations". The company does not believe
that there will be any significant additional non-recurring operating costs of
the combined entity which are not reflected in the unaudited pro forma combined
statements of earnings.
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 (318,921)(1)(7) 3,292,276
30,817 (2)(7)
(22,600)(3)(7)
128,521 (4)(7)
1,771,000 (5)(7)
14,936 (6)(7)
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) Write-off Multimedia's deferred costs which have no carryforward value to
the combined entity.
(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.
(7) Adjustment to record the excess of acquisition cost over the fair value of
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.
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 ended
September 30, 1995 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).
Immediately following the acquisition, Gannett prepaid the majority of
Multimedia's long-term debt and has plans to repay substantially all of the
remaining amounts. The Company also terminated Multimedia's interest rate
swap agreements and its bank credit facility.
(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 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.
(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).
See note B(5) for further information regarding Multimedia debt.
(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.
Note 3 - Other Matters
As of September 30, 1995, Multimedia had commitments for purchases of
syndicated television programming of approximately $29 million through the
year 2000 and commitments relating to rebuilds and upgrades to cable
franchise facilities, to be performed through 1996, totaling approximately
$9 million. Commitments for purchases of other property, plant and
equipment were less than $1 million.