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. Gannett UK
effectively owns 100% of Newsquest shares. The acquisition has been recorded
under the purchase method of accounting and Newsquest's results of operations
are 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
June 27, 1999, 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 June 27, 1999 and of Newsquest at July 4, 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
acquisition occurred as of the beginning of the fiscal period presented. The
unaudited condensed combined statement of income, therefore, reflects the
historical results of operations for Gannett and Newsquest for the first half
of their respective 1999 fiscal periods.
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
June 27, 1999
(in thousands of dollars)
Pro forma Pro forma
Gannett Newsquest adjustments combined
-------- ---------- ---------- ----------
ASSETS
Current assets
Cash and marketable
securities $ 81,835 $ 5,343 $ $ 87,178
Accounts receivable, net 664,813 70,011 734,824
Inventories 82,206 2,610 84,816
Prepaid expenses and
other current assets 56,879 9,029 65,908
---------- ---------- ---------- ----------
Total current assets 885,733 86,993 972,726
Property, plant and
equipment, net 2,047,913 106,326 2,154,239
Excess of acquisition
cost over the
value of assets
acquired, net 3,797,738 521,552 1,094,983 (1) 5,414,273
Other assets 272,604 647 273,251
---------- ---------- ---------- ----------
Total assets $7,003,988 $ 715,518 $1,094,983 $8,814,489
========== ========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and
current portion of
film contracts payable 239,193 20,111 259,304
Accrued expenses
and other current
liabilities 378,522 31,871 70,680 (2) 481,073
Dividends payable 56,000 56,000
Income taxes 32,871 66,598 99,469
---------- ---------- ---------- ----------
Total current liabilities 706,586 118,580 70,680 895,846
Deferred income taxes 467,273 8,270 (1,420) (3) 474,123
Long-term debt,
less current portion 957,152 173,714 1,430,186 (4) 2,561,052
Postretirement medical
and life insurance
liabilities 307,092 307,092
Other long-term
liabilities 222,444 10,491 232,935
Total shareholders'
equity 4,343,441 404,463 (404,463) (5) 4,343,441
---------- ---------- ---------- ----------
Total liabilities and
shareholders' equity $7,003,988 $ 715,518 $1,094,983 $8,814,489
========== ========== ========== ==========
(A) This pro forma balance sheet includes Gannett's historical balances as of
June 27, 1999, and Newsquest's historical balances as of July 4, 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
Twenty-six weeks ended June 27, 1999
(in thousands of dollars, except per share data)
Pro forma Pro forma
Gannett Newsquest adjustments combined
---------- ---------- ---------- ----------
Revenues
Newspaper advertising $1,508,825 $ 225,252 $ $1,734,077
Newspaper circulation 502,169 30,556 532,725
Television 355,674 355,674
Cable and security 125,853 125,853
All other 98,889 6,734 105,623
---------- ---------- ---------- ----------
Total revenues 2,591,410 262,542 2,853,952
Operating expenses
Cost of sales and
operating expenses,
exclusive of depreciation 1,307,576 127,475 1,435,051
Selling, general and
administrative expenses,
exclusive of depreciation 395,232 47,148 442,380
Depreciation 101,601 9,971 111,572
Amortization of
intangible assets 55,867 20,630 (1) 76,497
---------- ---------- ---------- ----------
Total operating expenses 1,860,276 184,594 20,630 2,065,500
---------- ---------- ---------- ----------
Operating income 731,134 77,948 (20,630) 788,452
Non-operating income (expense)
Interest (expense), net of
interest income (30,444) (7,906) 7,906 (2) (71,117)
(40,673) (3)
Other 57,673 (634) 57,039
---------- ---------- ---------- ----------
Total 27,229 (8,540) (32,767) (14,078)
Income before income taxes 758,363 69,408 (53,397) 774,374
Provision for income taxes 302,500 21,169 (14,694) (4) 308,975
---------- ---------- ---------- ----------
Net income $ 455,863 $ 48,239 $ (38,703) $ 465,399
========== ========== ========== ==========
Net income per share-basic $1.63 $1.67
======= ========
Net income per share-diluted $1.62 $1.65
======= ========
Average outstanding shares:
Basic 279,466 279,466
Diluted 281,949 281,949
(A) This pro forma income statement includes Gannett's results for the 26-week
period ended June 27, 1999, and Newsquest results for the 26-week
period ended July 4, 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.
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
$1.5 billion plus the assumption of approximately $250 million of liabilities
and transaction-related costs, including $181 million of Newsquest's long-term
debt.
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
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 June 27, 1999 unaudited condensed
combined income statement are made to reflect the following:
(1) Amortization expense on the estimated excess of acquisition cost over fair
value of assets, assuming a life of forty years.
(2) The elimination of Newsquest's interest expense. (See (3) below.)
(3) Gannett's pro forma interest expense on the amount assumed borrowed for
consideration paid and acquisition-related expenses ($1.51 billion) and
Newsquest debt ($0.18 billion). The rate used to calculate interest
expense, 4.88%, is based on the weighted average rate paid by Gannett for
commercial paper in the first half of 1999.
(4) To adjust consolidated tax provisions for U.S. and U.K. tax effects of
acquisition.