Exhibit 99-2
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
On June 24, 1999, Gannett U.K. Limited ("Gannett UK"), a newly formed
wholly-owned subsidiary of Gannett Co., Inc. ("Gannett"), made a cash offer to
acquire the entire issued and to be issued share capital of Newsquest plc
("Newsquest"). Pursuant to the Offer, Newsquest shareholders were offered
460 pence (US $7.26) in cash or Loan Notes for each of 200.4 million fully
diluted shares, for a total price of approximately 922 million pounds sterling
(US $1.5 billion). Additionally, Gannett agreed to assume or retire
Newsquest's existing debt. On July 26, 1999, pursuant to the Offer Document,
Gannett UK declared the Offer unconditional in all respects. As of
October 4, 1999, Gannett UK effectively owns 100% of Newsquest
shares. The acquisition will be recorded under the purchase method of
accounting and Newsquest's results of operations will be included in the
company's financial statements beginning in the third quarter.
The accompanying unaudited pro forma condensed combined balance sheet
presents the financial position of Gannett Co., Inc. and Newsquest as of
December 27, 1998, assuming that the acquisition of Newsquest occurred as of
that date. Such pro forma information is based on the historical balance
sheets of Gannett at December 27, 1998 and of Newsquest at January 3, 1999.
As required by Rule 11-02 of Regulation S-X, the unaudited pro forma
condensed combined statement of income has been prepared assuming that the
proposed merger occurred as of the beginning of the period presented. The
unaudited condensed combined statement of income reflects the historical
results of operations for Gannett and Newsquest for their respective 1998
fiscal years.
The unaudited pro forma condensed combined financial statements give
effect to certain pro forma adjustments which are described in the notes to
these statements. The unaudited pro forma condensed combined financial
statements do not reflect any operating synergies anticipated by Gannett as
a result of the acquisition.
The unaudited pro forma condensed combined results are presented for
informational purposes only and are 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 period presented, nor is
it necessarily indicative of Gannett's future results of operations or
financial position.
The unaudited pro forma condensed combined financial statements should be
read in conjunction with the historical financial statements of Gannett and
Newsquest, including the related notes thereto.
EXHIBIT 99-2
Gannett Co., Inc.
Unaudited Pro Forma Condensed Combined Balance Sheet
December 27, 1998
(in thousands of dollars)
Pro forma Pro forma
Gannett Newsquest adjustments combined
-------- ---------- ---------- ----------
ASSETS
Current assets
Cash and marketable
securities $ 66,187 $ 98 $ $ 66,285
Accounts receivable, net 717,159 67,594 784,753
Inventories 87,176 3,074 90,250
Prepaid expenses and
other current assets 35,863 2,618 38,481
---------- ---------- ---------- ----------
Total current assets 906,385 73,384 979,769
Property, plant and
equipment, net 2,063,783 111,597 2,175,380
Excess of acquisition
cost over the
value of assets
acquired, net 3,794,601 546,566 1,196,852 (1) 5,538,019
Other assets 214,711 501 215,212
---------- ---------- ---------- ----------
Total assets $6,979,480 $ 732,048 $1,196,852 $8,908,380
========== ========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current maturities of
long-term debt $ 7,812 $ 3,150 $ $ 10,962
Accounts payable and
current portion of
film contracts payable 312,283 37,856 350,139
Accrued expenses
and other current
liabilities 345,687 28,050 70,969 (2) 444,706
Dividends payable 55,790 12,994 68,784
Income taxes 6,395 50,429 56,824
---------- ---------- ---------- ----------
Total current liabilities 727,967 132,479 70,969 931,415
Deferred income taxes 442,359 8,690 (1,492) (3) 449,557
Long-term debt,
less current portion 1,306,859 215,500 1,502,754 (4) 3,025,113
Postretirement medical
and life insurance
liabilities 308,145 308,145
Other long-term
liabilities 214,326 214,326
Total shareholders'
equity 3,979,824 375,379 (375,379) (5) 3,979,824
---------- ---------- ---------- ----------
Total liabilities and
shareholders' equity $6,979,480 $ 732,048 $1,196,852 $8,908,380
========== ========== ========== ==========
(A) This pro forma balance sheet includes Gannett's historical balances at
December 27, 1998, and Newsquest's historical balances at January 3, 1999.
(B) For comparability, Newsquest results have been reclassified to conform
with Gannett's presentation.
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements.
Gannett Co., Inc.
Unaudited Pro Forma Condensed Combined Statement of Income
Year-to-date ended December 27, 1998
(in thousands of dollars, except per share data)
Pro forma Pro forma
Gannett Newsquest adjustments combined
---------- ---------- ---------- ----------
Revenues
Newspapers advertising $2,942,995 $ 433,886 $ $3,376,881
Newspaper circulation 1,010,238 62,310 1,072,548
Television 721,298 721,298
Cable and security 240,600 240,600
All other 206,160 10,592 216,752
---------- ---------- ---------- ----------
Total revenues 5,121,291 506,788 5,628,079
Operating expenses
Cost of sales and
operating expenses,
exclusive of
depreciation 2,593,982 229,123 2,823,105
Selling, general and
administrative expenses,
exclusive of
depreciation 773,601 123,804 2,320 (1) 899,725
Depreciation 201,683 19,042 220,725
Amortization of
intangible assets 108,523 42,052 (2) 150,575
---------- ---------- ---------- ----------
Total operating expenses 3,677,789 371,969 44,372 4,094,130
---------- ---------- ---------- ----------
Operating income 1,443,502 134,819 (44,372) 1,533,949
Non-operating income (expense)
Interest (expense), net of
interest income (60,094) (33,774) 33,774 (3) (161,167)
(101,073) (4)
Other 286,005 286,005
---------- ---------- ---------- ----------
Total 225,911 (33,774) (67,299) 124,838
Income before income taxes 1,669,413 101,045 (111,671) 1,658,787
Provision for income taxes 669,500 31,830 (36,330) (5) 665,000
---------- ---------- ---------- ----------
Net income $ 999,913 $ 69,215 $ (75,341) $ 993,787
========== ========== ========== ==========
Net income per share-basic $3.53 $3.51
======= ========
Net income per share-diluted $3.50 $3.48
======= ========
Average outstanding shares:
Basic 283,097 283,097
Diluted 285,711 285,711
(A) This pro forma income statement includes Gannett's results for the 52-week
period ended December 27, 1998, and Newsquest results for the 53-week
period ended January 3, 1999.
(B) For comparability, Newsquest results have been reclassified to conform with
Gannett's presentation.
(C) Newsquest results are as reported in U.K. GAAP. U.S. GAAP adjustments are
included with the pro forma adjustments.
See accompanying notes to Unaudited Pro Forma Condensed Combined Financial
Statements.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS
Note 1 - Basis of Presentation
The unaudited pro forma condensed combined balance sheet has been prepared to
reflect the acquisition of Newsquest for an aggregate price of approximately
$1.45 billion plus the assumption of approximately $250 million of liabilities
and transaction-related costs, including $181 million of Newsquest's long-term
debt.
The unaudited pro forma condensed combined balance sheet presents the financial
position of Gannett and Newsquest as of December 27, 1998, assuming that
the transaction occurred as of December 27, 1998. Such pro forma information
is based on the historical balance sheets of Gannett as of December 27, 1998,
and of Newsquest as of January 3, 1999.
As required by Rule 11-02 of Regulation S-X, the unaudited pro forma condensed
combined statement of income assumes that the transaction occurred as of the
beginning of the period presented. The unaudited pro forma condensed combined
statement of income reflects Gannett's historical results of operations for
the 52 weeks ended December 27, 1998, and Newsquest's historical results of
operations for the 53 weeks ended January 3, 1999.
The company believes that the assumptions used in preparing the unaudited pro
forma condensed combined financial statements provide a reasonable basis for
presenting all of the significant effects of the merger (other than any
operating synergies anticipated by Gannett) and that the pro forma adjustments
give effect to those assumptions in the unaudited pro forma condensed combined
financial statements.
Note 2 - Pro Forma Adjustments
A. Pro forma adjustments to the unaudited condensed combined balance sheet
at December 27, 1998 are made to reflect the following:
(1) Adjustment to record the excess of acquisition cost over the fair value
of net assets acquired (goodwill). For purposes of the unaudited pro
forma condensed combined statement of income, goodwill is being amortized
over forty years.
(2) Accrual for estimated acquisition-related expenses incurred by Gannett
and Newsquest.
(3) Deferred tax adjustments in respect of acquisition expenses (see #2), net
of an adjustment in respect of tax deferred on real property sales.
(4) The issuance of commercial paper by Gannett to finance the purchase
price.
(5) The elimination of the shareholders' equity accounts of Newsquest.
B. Pro forma adjustments to the December 27, 1998 unaudited condensed
combined income statement are made to reflect the following:
(1) Newsquest excess pension amount, which is required to be reflected under
United States GAAP.
(2) Amortization expense on the estimated excess of acquisition cost over fair
value of assets, assuming a life of forty years.
(3) The elimination of Newsquest's interest expense. (See (4) below.)
(4) Gannett's pro forma interest expense on amount assumed borrowed for
consideration paid ($1.58 billion, translated from British pounds at the
beginning of 1998) and Newsquest average 1998 debt ($0.26 billion). The
rate used to calculate interest expense, 5.5%, is based on the weighted
average rate paid by Gannett for commercial paper in 1998.
(5) To adjust consolidated tax provisions for U.S. and U.K. tax effects of
acquisition.