-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Sq14MMhOtfp9ydMJp+QEYCARcE58nOkIUArhkIQxgSIKVXJofhFT1zHrubWdUEGQ oSJjbz0dhcNwR7t4QkOVVw== 0000039899-95-000018.txt : 19951024 0000039899-95-000018.hdr.sgml : 19951024 ACCESSION NUMBER: 0000039899-95-000018 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19951023 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19951023 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GANNETT CO INC /DE/ CENTRAL INDEX KEY: 0000039899 STANDARD INDUSTRIAL CLASSIFICATION: NEWSPAPERS: PUBLISHING OR PUBLISHING & PRINTING [2711] IRS NUMBER: 160442930 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-06961 FILM NUMBER: 95583357 BUSINESS ADDRESS: STREET 1: 1100 WILSON BLVD CITY: ARLINGTON STATE: VA ZIP: 22234 BUSINESS PHONE: 7032846000 MAIL ADDRESS: STREET 1: 1100 WILSON BLVD 28TH FLOOR CITY: ARLINGTON STATE: VA ZIP: 22234 8-K 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report: October 23, 1995 GANNETT CO., INC. (Exact name of registrant as specified in its charter) Delaware 1-6961 16-0442930 (State or other (Commission (IRS Employer jurisdiction File Number) Identification No.) of incorporation) 1100 Wilson Boulevard, Arlington, Virginia 22234 (Address of principal executive offices)(Zip Code) Registrant's telephone number, including area code (703) 284-6000 ITEM 5. OTHER EVENTS In conformity with the requirements of the Integrated Disclosure System, Gannett Co., Inc. ("Gannett") has elected to file by this Report on Form 8-K certain exhibits and certain information required under Rule 3-05 and Article 11 of Regulation S-X in connection with Gannett's Registration Statement No. 33-58686 on Form S-3. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (a) Financial Statements of Businesses Acquired. (1) Audited consolidated balance sheets of Multimedia, Inc. And Subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of operations, changes in stockholders' equity, and cash flows for each of the three years ended December 31, 1994, 1993, and 1992 (incorporated by reference to Multimedia's Annual Report on form 10-K for the year ended December 31, 1994 and filed as an exhibit hereto). (2) Unaudited consolidated balance sheet of Multimedia, Inc. And Subsidiaries as of June 30, 1995 and unaudited consolidated statements of operation and cash flows for the six months ended June 30, 1995 and June 30, 1994 (incorporated by reference to Multimedia's Quarterly Report on form 10Q for the quarterly period ended June 30, 1995 and filed as an exhibit hereto). (b) Pro Forma Financial Information. The following pro forma combining financial statements of Gannett and its pending acquisition is included in this report: (1) Unaudited pro forma consolidated condensed balance sheet as of June 25, 1995 and the unaudited pro forma consolidated condensed statements of operation for the year ended December 25, 1994 and the six months ended June 25, 1995 (filed as an exhibit hereto). (c) Exhibits. See Exhibit Index for list of exhibits. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. GANNETT CO., INC. Dated: October 23, 1995 By: /s/ Thomas L. Chapple ----------------------- Thomas L. Chapple, General Counsel and Secretary EXHIBIT INDEX Exhibit Number Title or Description - ----- -------------------- 23-1 Consent of KPMG Peat Marwick LLP 99-1 Audited consolidated balance sheets of Multimedia, Inc. And Subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of operations, changes in stockholders' equity, and cash flows for each of the the three years ended December 31, 1994, 1993, and 1992 (pages 24 - 38 of Multimedia's Annual Report on form 10-K for the year ended December 31, 1994) 99-2 Unaudited consolidated balance sheet of Multimedia, Inc. And Subsidiaries as of June 30, 1995 and unaudited consolidated statements of operations and cash flows for the six months ended June 30, 1995 and June 30, 1994 99-3 Unaudited pro forma consolidated condensed balance sheet as of June 25, 1995 and the unaudited pro forma consolidated condensed statements of operations for the year ended December 25, 1994 and June 25, 1995. EX-23.1 2 CONSENT OF KPMG PEAT MARWICK Exhibit 23-1 INDEPENDENT AUDITORS' CONSENT ----------------------------- The Board of Directors Multimedia, Inc. We consent to the inclusion of our report dated February 10, 1995, with respect to the consolidated balance sheets of Multimedia, Inc. and subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of earnings, stockholders' equity (deficit), and cash flows for each of the years in the three-year period ended December 31, 1994, which report appears in the Form 8-K of Gannett Co., Inc. dated October 23, 1995. /s/ KPMG Peat Marwick LLP - ------------------------- KPMG Peat Marwick LLP Greenville, South Carolina October 23, 1995 EX-99.1 3 MULTIMEDIA FORM 10-K Exhibit 99-1 MULTIMEDIA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992
(In thousands except per-share data) 1994 1993 1992 Operating revenues: Newspapers $150,140 135,920 132,485 Broadcasting 142,841 133,035 137,188 Cable 165,406 164,598 144,383 Entertainment 147,512 161,588 129,122 Security 24,584 16,750 10,262 Total operating revenues 630,483 611,891 553,440 Operating costs and expenses: Production 229,390 229,385 202,865 Selling, general and administrative 158,248 147,903 134,488 Depreciation and amortization 53,402 50,200 42,982 Total operating costs and expenses 441,040 427,488 380,335 Operating profit 189,443 184,403 173,105 Interest expense 59,142 61,996 71,820 Other income (expense), net 25,584 1,494 (447) Earnings before income taxes, minority interest and cumulative effect of changes in accounting principles 155,885 123,901 100,838 Income taxes 64,693 38,703 41,343 Minority interest in subsidiaries' losses (income), net (1,163) 320 1,009 Earnings before cumulative effect of change in accounting principles 90,029 85,518 60,504 Cumulative effect of changes in accounting principles 14,332 Net earnings $ 90,029 99,850 60,504 Earnings per share before cumulative effect of change in accounting principles $ 2.35 2.23 1.61 Cumulative effect of changes in accounting principles .37 Earnings per share $ 2.35 2.60 1.61 Weighted average shares 38,279 38,374 37,593
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. MULTIMEDIA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(In thousands) 1994 1993 1992 Common Stock: Balance at beginning of year $ 3,721 3,680 3,507 Stock options exercised 41 41 173 Balance at end of year 3,762 3,721 3,680 Additional paid-in capital: Balance at beginning of year 177,689 164,367 140,435 Stock options exercised 4,453 6,882 7,676 Tax benefit from exercise of employee stock options 2,691 2,084 12,875 Amortization of stock options 3,391 4,356 3,381 Balance at end of year 188,224 177,689 164,367 Retained earnings (deficit): Balance at beginning of year (358,930) (458,780) (519,284) Net earnings 90,029 99,850 60,504 Balance at end of year (268,901) (358,930) (458,780) Total stockholders' equity $ (76,915) (177,520) (290,733)
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. MULTIMEDIA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(In thousands) 1994 1993 1992 Cash flows from operating activities: Net earnings $ 90,029 99,850 60,504 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 53,402 50,200 42,982 Amortization of program rights 13,189 14,035 18,277 Amortization of debt issue costs 1,112 1,117 1,058 Cumulative effect of changes in accounting principles (14,332) Minority interest in subsidiaries' (losses) income, net 1,163 (320) (1,009) Amortization of stock options 3,391 4,356 3,381 Gain on disposal of assets, net (25,001) (739) 0 Increase (decrease) in deferred income taxes 9,559 (3,516) 788 (Increase) decrease in current assets: Trade accounts receivable (9,075) (6,276) (6,830) Inventories, deferred income tax benefits, deferred program costs and prepaid expenses and other (4,670) (7,972) 12 Increase (decrease) in current liabilities: Accounts payable, accrued payroll and accrued expenses 10,514 8,144 6,133 Accrued interest (328) (5,412) (1,887) Income taxes payable (2,539) 17,199 7,884 Unearned income 1,354 1,714 1,299 Net cash flows provided by operating activities 142,100 158,048 132,592 Cash flows from investing activities: Additions to property, plant and equipment (83,028) (47,378) (37,493) Proceeds from disposal of assets 48,475 4,678 0 Acquisitions of properties (11,045) (13,170) (78,710) Other (1,077) (4,485) 1,224 Net cash (used for) investing activities (46,675) (60,355) (114,979) Cash flows from financing activities: Addition (reduction) in revolving credit, net (28,000) (59,000) 20,500 Long-term debt retired (64,440) (21,998) (31,630) Program rights payments (12,777) (17,454) (16,463) Proceeds from exercise of employee stock options 4,363 6,923 7,849 Other 597 272 10 Net cash (used for) financing activities (100,257) (91,257) (19,734) Increase (decrease) in cash and cash equivalents (4,832) 6,436 (2,121) Cash and cash equivalents, beginning of year 11,034 4,598 6,719 Cash and cash equivalents, end of year $ 6,202 11,034 4,598
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. MULTIMEDIA, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1994 AND 1993
(In thousands except share data) 1994 1993 ASSETS Current assets: Cash and cash equivalents $ 6,202 11,034 Trade accounts receivable, less allowances for discounts and uncollectible accounts of $4,818 in 1994 and $3,713 in 1993 93,426 85,756 Inventories 4,643 4,408 Deferred income tax benefits 9,581 8,856 Program rights 7,570 8,476 Deferred program costs 10,923 9,670 Prepaid expenses and other 6,795 5,516 Total current assets 139,140 133,716 Property , plant and equipment, at cost: Land and land improvements 5,295 5,313 Buildings 42,701 39,155 Broadcasting equipment 52,294 53,898 Publishing equipment 60,857 58,599 Cable equipment 309,718 272,899 Other equipment and fixtures 83,698 68,559 Construction in progress 4,186 1,710 Total 558,749 500,133 Less accumulated depreciation 283,522 259,371 Net property, plant and equipment 275,227 240,762 Intangible assets, net 242,078 251,356 Other assets 27,533 29,340 $ 683,978 655,174 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Current installments of long-term debt $ 30,254 393 Accounts payable 24,512 20,557 Accrued interest 2,671 2,999 Accrued payroll 8,386 5,884 Accrued expenses 38,148 30,465 Income taxes payable 10,202 15,432 Program rights payable 7,793 8,540 Unearned income 20,556 19,416 Total current liabilities 142,522 103,686 Long-term debt, excluding current installments 542,303 664,604 Deferred income taxes 54,090 44,046 Other liabilities 3,294 2,837 Minority interest 18,684 17,521 Stockholders' equity (deficit): Common stock of $.10 par value per share. Authorized 100,000,000 shares and issued 37,620,000 shares in 1994 and 37,210,000 shares in 1993 3,762 3,721 Additional paid-in capital 188,224 177,689 Retained earnings (deficit) (268,901) (358,930) Total stockholders' equity (deficit) (76,915) (177,520) $ 683,978 655,174
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. MULTIMEDIA, INC. AND SUBSIDIARIES 1994 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The consolidated financial statements include the accounts of Multimedia, Inc. and subsidiaries. Significant inter- company items are eliminated in consolidation. REVENUE RECOGNITION Revenue is recognized when programming and advertising are aired or printed, or when services are rendered. CASH EQUIVALENTS Cash equivalents include investments with banks with original maturities of three months or less. Cash investments totaled $11,345,000 at December 31, 1994. Cash investments with banks totaled $11,135,000 at December 31, 1993. INVENTORIES Inventories are stated at the lower of cost (first-in, first-out) or market (net realizable value) and include newsprint and supplies. DEPRECIATION Depreciation for financial reporting purposes is calculated principally on a straight-line basis over the estimated useful lives of the respective assets. Depreciation expense for 1994, 1993 and 1992 was $39,025,000, $35,422,000 and $31,710,000, respectively. OTHER ASSETS DEFERRED LOAN COSTS Deferred loan costs include amounts incurred in connection with raising bank and Senior Note debt. The costs are amortized using the interest method over periods up to 10 years. DEFERRED COSTS Deferred costs include amounts deferred during the start- up and prematurity periods for cable systems under development and costs associated with the acquisition of security accounts. These costs are amortized on a straight- line basis over periods up to 15 years. PROGRAM RIGHTS Program rights represent agreements with programming syndicators for television program material. When the program or film becomes available for telecasting, the cost of the contract is recorded as an asset and the corresponding contractual obligation as a liability. The cost is amortized over the expected number of telecasts. The portion of the cost to be amortized within one year and after one year is reflected in the consolidated balance sheets as current and noncurrent assets, respectively. The payments under these contracts due within one year and after one year are similarly classified as current and noncurrent liabilities. INTANGIBLE ASSETS Intangible assets, which include cable television franchise rights, represent the excess of the cost of properties acquired over the amounts assigned to the net tangible assets at dates of acquisition. Intangible assets arising from acquisitions after October 31, 1970, are amortized on a straight-line basis over periods up to 40 years. Intangibles acquired prior to October 31, 1970, will be amortized only to the extent there is a permanent decline in value. The Company assesses the recoverability of these intangible assets by determining whether the amortization of the balance over its remaining life can be recovered through projected undiscounted future cash flows. INTEREST RATE SWAP AND CAP AGREEMENTS The interest rate swap agreements are being accounted for as a hedge of the obligation, and accordingly, the net swap settlement amount is recorded as an adjustment to interest expense in the period incurred. The net swap settlement amounts for 1994, 1993 and 1992 resulted in charges to interest expense of $1.1 million, $2.1 million and $7.8 million, respectively. The interest rate swap and cap agreements expire at various times from 1995 through 1997. The Company believes that the sellers of the swap and cap agreements will be able to meet their obligations under the agreements. The purpose of the Company's involvement in interest rate swaps and caps is to minimize the Company's exposure to interest rate fluctuations on its floating rate debt. The Company believes that it has no material concentration of credit or market risks with respect to these interest rate protection agreements. INCOME TAXES Effective January 1, 1993, the Company adopted SFAS No. 109, "Accounting for Income Taxes." Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using enacted tax MULTIMEDIA, INC. AND SUBSIDIARIES 28 1994 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS rates in effect for the year in which those temporary differ- ences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. In 1992, pursuant to APB Opinion 11, deferred income taxes were recognized for income and expense items that were reported in different years for financial reporting purposes and income tax purposes using the tax rate applic- able for the year of the calculation. EARNINGS PER SHARE Earnings per share are computed based on the weighted average number of shares of common stock and common stock equivalents outstanding during each year. Common stock equivalents are dilutive stock options determined by using the treasury stock method. MINORITY INTEREST Minority interest represents the minority shareholders' proportionate share of the equity and the income or loss of certain consolidated subsidiaries, primarily WKYC-TV, Inc. The Company owns 51% of WKYC-TV, Inc. ACCOUNTING CHANGES Effective January 1, 1993, the Company adopted SFAS No. 109, "Accounting for Income Taxes." SFAS No. 109 required a change from the deferred method, under APB Opinion 11, to the asset and liability method of accounting for income taxes. The cumulative effect of this change in accounting ($15.4 million) was determined as of January 1, 1993. The Company adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," as of January 1, 1993, which requires accrual, during an employee's active years of service, of the expected costs of providing postretirement benefits to employees and their beneficiaries and dependents. The Company's accumulated postretirement benefit obligation as of December 31, 1992, based upon calculations performed by the Company's actuarial consultant, was $1.1 million, net of tax. The net cumulative effect of the above changes ($14.3 million) is reported separately in the 1993 consoli- dated statement of earnings. The effect of these changes on earnings before cumulative effect of changes in accounting principles in 1993 was not material. Financial statements for years prior to 1993 have not been restated. Beginning January 1, 1994, the Company began reporting operating revenues for its television and radio stations net of agency commissions and national represen- tation fees. The prior years' consolidated statements of earnings have been restated to reflect this change. This change has no impact on net earnings or earnings per share. (2) RECAPITALIZATION MERGER On September 20, 1985, the Company's shareholders approved a Recapitalization Agreement and Plan of Merger (the "Recapitalization Merger"). The Recapitalization Merger was consummated on October 1, 1985, and was accounted for as a redemption not subject to purchase accounting. This resulted in a charge to retained earnings of approximately $887 million. (3) ACQUISITIONS In 1994, the Company purchased the accounts of existing security alarm monitoring companies for approximately $7,200,000 in cash. The purchase price has been assigned to property, plant and equipment ($3,500,000) and other assets ($3,700,000). Other acquisitions for 1994 included a small cable television system and the purchase of the remaining 20% interest in certain Illinois cable franchises. The purchase price of these other acquisitions is considered immaterial. In 1993, the Company purchased the accounts of existing security alarm monitoring companies for approx- imately $12,100,000 in cash. The purchase price has been assigned to property, plant and equipment ($6,100,000) and other assets ($6,000,000). Other acquisitions for 1993 included the purchase of the remaining 20% interest in an existing Illinois cable television franchise. The purchase price is considered immaterial. On December 3, 1992, the Company purchased Indiana cable television systems with approximately 28,000 subscribers for approximately $58,000,000 in cash. The purchase price has been assigned to property, plant and equipment ($18,700,000), intangibles ($37,100,000) and other assets ($2,200,000). The following unaudited pro forma summary presents the results as if the acquisition of Indiana cable television systems had occurred on January 1, 1992, after giving effect to certain adjustments including interest expense on the acquisition debt. The pro forma results do not necessarily represent results which would have occurred MULTIMEDIA, INC. AND SUBSIDIARIES 29 1994 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (3) ACQUISITIONS (CONTINUED) if the acquisition had occurred on the date indicated nor does it indicate results which may occur in the future.
(In thousands except per-share data) 1992 Total operating revenues $585,878 Net earnings 58,105 Earnings per share 1.55
In February 1992, the Company also purchased an Illinois cable television system with approximately 5,000 subscribers for approximately $9,500,000 in cash. The pur- chase price has been assigned to property, plant and equipment ($8,400,000) and intangibles ($1,100,000). In 1992, the Company also purchased the accounts of existing security alarm monitoring companies for approx- imately $8,500,000 in cash. The purchase price has been assigned to property, plant and equipment ($4,200,000) and other assets ($4,300,000). Other acquisitions for 1992 included purchases of the remaining 20% interest in two existing Illinois cable television franchises. The purchase price of these interests is considered immaterial. The operations of all acquired businesses for the three year period ended December 31, 1994, have been included in the consolidated statements of earnings since the dates of acquisition. Other than the Indiana cable tele- vision systems, the pro forma effects of the acquisitions on operating revenues, net earnings and net earnings per share for the year of acquisition and for the year immediately preceding the year of acquisition are not significant and are not presented. (4) OTHER ASSETS Other assets include:
(In thousands) 1994 1993 Deferred loan costs, net of accumulated amortization of $5,505 in 1994 and $4,372 in 1993 $ 5,646 6,780 Deferred costs, net of accumulated amortization of $12,232 in 1994 and $9,995 in1993 14,740 14,376 Program rights 56 318 Other 7,091 7,866 Total $27,533 29,340
(5) INTANGIBLE ASSETS Intangible assets include:
(In thousands) 1994 1993 Excess of cost over net tangible assets: 30-40 year life $205,597 209,149 10-20 year life 7,810 7,804 Franchise costs: 30-40 year life 43,986 41,266 10-20 year life 38,867 37,899 Less accumulated amortization (73,038) (63,803) Amounts not being amortized 18,856 19,041 Total $242,078 251,356
(6) LONG-TERM DEBT A summary of long-term debt follows:
(In thousands) 1994 1993 Bank credit facility: Term loan $102,000 166,000 Revolving credit 33,500 61,500 Senior notes 400,000 400,000 Note payable 36,750 36,750 Notes payable in quarterly or annual installments through June 1998 307 747 Total long-term debt 572,557 664,997 Less current installments 30,254 393 Long-term debt, excluding current installments $542,303 664,604
BANK CREDIT FACILITY The bank credit facility is comprised of a $355 million revolving credit line and a $102 million term loan. The commitment levels which remain in effect during the years ended are as follows:
(In thousands) Revolving Term Date Credit Loan Total December 31,1994 $355,000 102,000 457,000 December 31,1995 290,000 76,000 366,000 December 31,1996 225,000 50,000 275,000 December 31,1997 160,000 24,000 184,000 December 31,1998 90,000 90,000 December 31,1999 30,000 30,000 June 30, 2000
The bank credit facility has a floating interest rate based on the Company's debt to annualized operating cash flow ratio. At December 31, 1994, the interest rate (approx- imately 6.8%) for these bank notes was the LIBOR rate plus 5/8% or the prime rate. A commitment fee of 3/8% per annum on the unused portion of the revolving credit MULTIMEDIA, INC. AND SUBSIDIARIES 30 1994 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS commitment must be paid quarterly. The Company has the option under the bank Credit Agreement to seek bids from the various banks for alternative interest rates. The Company has interest rate swap agreements which effec- tively fix the LIBOR rate on $75 million of its floating rate debt at approximately 5.7%. These interest rate swap agree- ments expire at various times between June 1996 and November 1996. The Company also has an interest rate cap agreement which effectively caps LIBOR on $25 million of its floating rate debt at approximately 7.0%, which expires in December 1995. In addition, the Company has an inter- est rate cap which caps LIBOR at 7% on $25 million, which begins in 1996 and expires in 1997. SENIOR NOTES The Senior Notes are comprised of five series which have maturities from 1995 through 2005 with an original aver- age life of 10 years and bear interest at a composite rate of approximately 10.7%. The remaining average life is 5.5 years. Information regarding each series follows:
Principal Interest (In thousands) Due Dates Amount Rate 2 Series A June 29,1995 $ 30,000 10.23% Series B June 29,1996 30,000 10.36% Series C June 29,1997 30,000 10.50% Series D June 29,1998 70,000 10.61% Series E1 June 29,1999 240,000 10.92% through June 29, 2005 $400,000
1 One-seventh of the principal amount due each June 29 for the years 1999 to 2005. 2 Interest is payable semi-annually on June 29 and December 29. COVENANTS The bank Credit Agreement and/or Senior Notes contain covenants which limit (i) payment of dividends; (ii) purchase of capital stock of the Company; (iii) incur- rence of indebtedness; (iv) acquisitions outside of the Company's current lines of business; (v) liens; (vi) invest- ments; (vii) transactions with affiliates; (viii) sales of assets; and (ix) certain extraordinary transactions. In addition, one or both of the agreements require the Company to maintain specific ratios of debt to annualized operating cash flow, annualized operating cash flow to interest expense and annualized operating cash flow to fixed charges. Management believes it is in compliance with all covenants. NOTE PAYABLE In 1990, in addition to purchasing a 51% equity interest in WKYC from NBC, the Company purchased a 51% interest in a $75 million principal promissory note of WKYC which was held by NBC. As a result, 51% of the note is now due to the Company, and NBC retained a 49% interest in that note ($36.8 million), which bears interest at a rate of 10% payable semi-annually on January 15 and July 15. The principal amount is due in full on December 26, 1997. OTHER The other notes payable include a $20,000,000 commit- ment to the Company which expires on July 28, 1995. There were no outstanding borrowings at December 31, 1994, under this commitment. The interest rate on this commitment is the overnight Federal Funds rate plus 1.50% or competitive bid rates, as available. A commit- ment fee of 1/16% per annum on the unused portion of the commitment must be paid quarterly. The remaining notes payable have fixed interest rates ranging from 8% to 11.25%. The minimum aggregate annual repayments of long-term debt during the next five years, excluding the bank credit facility, are as follows (in thousands): 1995, $30,254; 1996, $30,062; 1997, $66,777; 1998, $70,012; 1999, $34,286. (7) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amount of cash and cash equivalents, trade accounts receivable, accounts payable and accrued expenses approximates fair value because of the short maturity of these instruments. The fair value of the interest rate swaps or caps is the estimated amount that the Company would receive or pay to eliminate the swap or cap agreements at the reporting date, taking into account current interest rates and the current credit-worthiness of the swap counterparties. The fair value of the Company's long-term debt is based on estimates of market prices for the same or similar issues and on the current rates offered to the Company for debt of the same remaining maturities. The fair value of program rights payable is the present value of the future obligations. MULTIMEDIA, INC. AND SUBSIDIARIES 31 1994 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (7) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED) Estimated fair values of the Company's financial instruments are as follows:
(In thousands) 1994 Carrying Fair Assets: Amount Value Interest rate cap agreements $ 524 654 Interest rate swap agreements - 2,564 Liabilities: Long-term debt: Bank credit facility 135,500 135,500 Senior notes 400,000 429,638 Note payable 36,750 37,856 Other notes payable 307 307 Program rights payable 7,793 7,514
(8) INCOME TAXES Total income tax expense for the years ended December 31, 1994 and 1993 was allocated as follows:
(In thousands) 1994 1993 Income from continuing operations $64,693 38,703 Cumulative effect of change in accounting principle- adoption of SFAS No. 106 - (755) Stockholders' equity- additional paid-in capital for compensation expense for tax purposes in excess of amounts recognized for financial reporting purposes (2,691) (2,084) Total income tax expense $62,002 35,864
Income tax expense (benefit) includes:
(In thousands) 1994 1993 1992 Federal: Current $46,260 28,905 33,821 Deferred 7,827 1,844 263 54,087 30,749 34,084 State: Current 9,114 7,783 7,369 Deferred 1,492 171 (110) 10,606 7,954 7,259 Total $64,693 38,703 41,343
The items comprising the difference in taxes on income computed at the U.S. statutory rates (35% in 1994 and 1993 and 34% in 1992) and the amounts provided follow:
(In thousands) 1994 1993 1992 Computed expected tax expense $54,560 43,365 34,285 Increase (reduction) in tax expense resulting from: State income taxes, net of Federal income tax benefit 6,894 5,170 4,791 Amortization 1,822 1,796 1,756 Reduction for settlement of IRS exam (12,372) Additional provision for (reduction in) income taxes 902 (365) 799 Other, net 515 1,109 (288) Actual tax expense $64,693 38,703 41,343
The significant components of deferred income tax expense attributable to income from continuing opera- tions for the years ended December 31, 1994 and 1993 are as follows:
(In thousands) 1994 1993 Deferred tax expense (exclusive of the effect of the following item) $9,319 1,195 Adjustment to deferred tax assets and liabilities for enacted changes in tax laws and rates 820 $9,319 2,015
For the year ended December 31, 1992, deferred income tax expense (benefit) of $153,000 resulted from timing differences in the recognition of income and expense for income tax and financial reporting purposes. The sources and tax effects of these timing differences are presented below:
(In thousands) 1992 Accelerated depreciation $ 304 Amortization (1,108) Accrued expenses and allowances (717) Other, net 1,674 $ 153
MULTIMEDIA, INC. AND SUBSIDIARIES 32 1994 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 1994 and 1993 are presented below:
(In thousands) 1994 1993 Deferred tax assets: Amortization of stock options $ 4,225 3,214 Accrued expenses and allowances 10,249 10,294 Total gross deferred tax assets 14,474 13,508 Less-valuation allowance Net deferred tax assets 14,474 13,508 Deferred tax liabilities: Accelerated depreciation 51,661 38,911 Amortization 6,856 9,018 Other, net 466 769 Total gross deferred tax liabilities 58,983 48,698 Net deferred tax liability $44,509 35,190
Management believes that a valuation allowance is not necessary based upon the level of historical tax- able income and the projections for future taxable income over the periods during which the deferred tax assets are deductible. The Internal Revenue Service (IRS) has examined the Company's federal consolidated income tax returns through 1989. In 1993 the Company reached an agreement with the IRS as to the 1982 through 1986 tax liabilities. The agreed to settlement principally involved purchase price alloca- tions related to cable acquisitions and characterization of professional fees incurred in 1985 and was less than the amounts previously accrued. This agreement resulted in a reduction in income taxes. The IRS has issued notices of deficiency with regard to the Company's tax returns for 1987 through 1989. The Company is contesting these deficiencies. The deficien- cies principally involve various acquisition issues related primarily to the cable division. The Company is continu- ing to vigorously contest the assessments, but the ultimate resolution of these matters cannot be ascertained at this time. The Company believes that it has adequately provided for agreed-upon and potential deficiencies, including interest. (9) COMMON STOCK, STOCK OPTIONS AND PREFERRED STOCK The Company has adopted five stock option plans (the Restricted Option Plan, Performance Option Plan, New Key Executive Plan, 1991 Stock Option Plan and Director's Option Plan) and signed stock option agreements with Phillip J. Donahue and Sally Jessy Raphael. Each option is for one share of common stock. All of the 1,513,494 authorized options, exercisable at $.33 per share, under the Restricted Option Plan were granted in 1985. Fair market value of the stock on the date of grant was $3.33 per share. Options for 679,810 shares were outstanding on December 31, 1991, all of which were exercised in 1992. There were no outstanding options under the Restricted Option Plan as of the end of 1994. All of the 1,032,498 authorized options, exercisable at $3.33 per share, under the Performance Option Plan were granted in 1985. Fair market value of the stock on the date of grant was $3.33 per share. The Performance Options became exercisable as defined operating cash flow goals of the Company were equaled or exceeded. Options for 264,555 shares were outstanding on December 31, 1991. Options for 64,555 shares were exercised in 1992, and options for 200,000 shares were exercised in 1994. No options remain outstanding under this plan. The forfeited shares from the Restricted Option Plan and the Performance Option Plan are now available for options which may be granted under the New Key Executive Plan. The New Key Executive Plan, 1991 Stock Option Plan, Director's Stock Option Plan and agreements with Phillip J. Donahue and Sally Jessy Raphael authorize the granting of 8,085,372 options. Generally, options granted under these plans are exercisable to the extent of 20% per year, beginning approximately one year following date of grant, provided the holder of the option is still an employee of or is rendering services to the Company at such time. Option prices, which are established by the Board of Directors or a committee thereof, have been determined based on the market values on dates of grant, except for 1,542,400 options granted in 1987 through 1992 at prices ranging from $3.33 to $23.00 per share. Information regarding options under the New Key Executive Plan, MULTIMEDIA, INC. AND SUBSIDIARIES 33 1994 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (9) COMMON STOCK, STOCK OPTIONS AND PREFERRED STOCK (CONTINUED) 1991 Stock Option Plan, Director's Stock Option Plan and Donahue and Sally Jessy Raphael agreements follows:
1994 1993 1992 Outstanding at January 1: Options 2,555,640 2,755,700 3,340,173 Price $ 3.33- $ 3.33- $ 3.33- $ 35.00 $ 29.00 $ 28.67 Granted: Options 827,500 385,000 448,000 Price $ 26.25- $ 32.13- $ 15.00- $ 34.25 $ 35.00 $ 29.00 Forfeited or canceled: Options 162,300 178,280 38,550 Price $ 15.00- $ 3.33- $ 15.21- $ 34.25 $ 35.00 $ 27.10 Exercised: Options 200,560 406,780 993,923 Price $ 9.92- $ 3.33- $ 3.33- $ 29.00 $ 27.10 $ 27.10 Outstanding at December 31: Options 3,020,280 2,555,640 2,755,700 Price $ 3.33- $ 3.33- $ 3.33- $ 35.00 $ 35.00 $ 29.00 Exercisable at December 31: Options 1,685,347 1,365,698 1,171,770 Price $ 3.33- $ 3.33- $ 3.33- $ 34.75 $ 35.00 $ 28.67
Compensation expense of $3,390,750, $4,356,000 and $3,381,000 is included in selling, general and admin- istrative expense in 1994, 1993 and 1992, respectively, related to the amortization of the deferred compensation on the options issued under the above plans. The Company has 600,000 shares of authorized but unissued 5% convertible cumulative preferred stock of $20 par value per share. (10) SHAREHOLDER RIGHTS PLAN In September 1989, the Company declared a dividend distribution of one common share purchase Right for each outstanding share of the Company's common stock. The Rights are designed to assure that all the Company's share- holders, other than an acquiring shareholder, receive equal treatment in the event of any proposed takeover of the Company. Each Right will entitle shareholders to buy one share of common stock at an exercise price of $133.33. The Rights will be exercisable only if a person or group acquires 15% or more of the Company's common stock or announces a tender offer, the consummation of which would result in ownership by a person or group of 15% or more of the common stock. If a person or group acquires 15% or more of the Company's outstanding common stock, each holder of a Right, other than Rights beneficially owned by the acquiring person, will have the right to purchase common shares of the Company having a market value of twice the exercise price of the Right. If the Company is acquired in a merger or other business combi- nation transaction, each holder of a Right will thereafter have the right to purchase common shares of the acquiring company which at the time of such transaction will have a market value of twice the exercise price of the Right. Prior to the acquisition by a person or group of bene- ficial ownership of 15% or more of the Company's common stock, the Rights are redeemable for one-third of one cent per Right at the option of the Board of Directors. If unexer- cised, the Rights expire September 6, 1999. (11) OTHER INCOME (EXPENSE) Other income (expense) includes:
(In thousands) 1994 1993 1992 Gain on disposal of assets , net $25,001 739 --- Interest income 779 904 82 Other, net (196) (149) (529) $25,584 1,494 (447)
In August 1994, the Company sold its wireless cable operations for $35.1 million resulting in a gain of $22.0 million before taxes. In addition, throughout 1994, the Company sold its radio properties in Milwaukee, Wisconsin; Shreveport, Louisiana; and Greenville, South Carolina. The proceeds from these transactions were $13.3 million resulting in gains of $8.1 million before taxes. The Company also discontinued its made-for-television movies business in 1994, resulting in losses of $3.4 million before taxes. In January 1993, the Company sold its mobile video production business for $4.5 million, which resulted in a gain of $2.3 million before taxes. Gain on disposal of assets, net, is net of approxi- mately $3.0 and $1.0 million in 1994 and 1993, respectively, in writeoffs of cable equipment related to rebuilds. Interest income includes $.5 and $.8 million, respectively, in 1994 and 1993, in refunds received from the IRS related to the settlement of its audits of the Company's 1982 through 1986 federal consolidated income tax returns. MULTIMEDIA, INC. AND SUBSIDIARIES 34 1994 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (12) EMPLOYEE BENEFIT PLANS PENSION PLANS The Company and its subsidiaries have noncontributory pension plans which cover substantially all employees who meet age and service requirements. The pension plans provide defined benefits that are based on years of credited service, average compensation (as defined) and the primary social security benefit. Contributions to the plans are based on the Entry Age Normal actuarial funding method and are limited to amounts that are currently deductible for tax reporting purposes. Assets held by the pension plans include equity securities, corporate and government bonds, and cash and short term assets. The weighted average discount rate and the rate of increase in future compensation levels used in determining the actuarial present value of the projected benefit obliga- tion were 8.0% and 6.5%, respectively, in 1994, and 7.25% and 6.5%, respectively, in 1993. The expected long-term rate of return on assets was 8% in 1994 and 1993. The following tables set forth the pension plans' funded status and amounts recognized in the Company's consolidated financial statements at December 31, 1994, and 1993:
(In thousands) 1994 1993 Actuarial present value of accumulated benefit obligation, including vested benefits of $35,218 in 1994 and $36,308 in 1993 $36,846 37,854 Projected benefit obligation $48,698 50,603 Plan assets at fair value 57,127 59,817 Excess of plan assets over the projected benefit obligation $ 8,429 9,214 Unrecognized net gain (2,341) (2,704) Unrecognized net asset being amortized over an average of 17 years (4,605) (5,180) Other (1,601) (1,298) Prepaid (accrued) pension costs included in other assets $ (118) 32
(In thousands) 1994 1993 1992 Net pension expense (income) included the following components: Service cost $ 2,183 2,206 1,942 Interest cost 3,528 3,312 3,029 Actual return on plan assets 583 (5,310) (3,547) Net deferral and amortization (6,099) 20 (1,654) Net pension expense (income) $ 195 228 (230)
THRIFT PLAN The Company and its subsidiaries have a salary deferral thrift plan for all eligible employees. The Company and its subsidiaries match contributions by employees up to 2% of their salaries. Company contributions charged to operations in 1994, 1993 and 1992 were $1,405,000, $1,359,000 and $1,216,000, respectively. Thrift plan costs are funded biweekly. OTHER POSTRETIREMENT BENEFITS The Company sponsors unfunded postretirement benefit plans that provide health care, life insurance and other postretirement benefits to certain retired employees. The health care plans generally include participant contribu- tions, co-insurance provisions, limitations on the Company's obligation and service-related eligibility requirements. The net postretirement benefit liability and periodic post- retirement benefit cost associated with these plans are not material. SUPPLEMENTAL RETIREMENT PROGRAM The Company has an unfunded Supplemental Retirement Program ("SERP"), not included in the above table, for certain executive officers. The actuarial present value of accumulated benefit obligation at December 31, 1994 and 1993 was $2,058,000, $1,355,000, respectively. The expense for 1994, 1993 and 1992 was $703,000, $606,000 and $519,000, respectively. MULTIMEDIA, INC. AND SUBSIDIARIES 35 1994 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (13) QUARTERLY OPERATING RESULTS (UNAUDITED) The Company's quarterly operating results for 1994 and 1993 are presented below.
(In thousands except per-share data) Quarter Ended March 31 June 30 September 30 December 31 1994 Operating revenues $146,419 159,231 152,650 172,183 Operating profit 40,918 49,851 47,713 50,961 Net earnings 17,334 19,443 30,469 22,783 Net earnings per share .45 .51 .80 .59 1993 Operating revenues $139,521 157,062 147,816 167,492 Operating profit 38,130 46,605 45,737 53,931 Earnings before cumulative effect of changes in accounting principles 15,198 18,267 30,241 21,812 Net earnings 29,530 18,267 30,241 21,812 Earnings per share be ore cumulative effect of changes in accounting principles .40 .48 .79 .56 Net earnings per share .77 .48 .79 .56
(14) INDUSTRY SEGMENTS Financial information by industry segment for each of the years in the three-year period ended December 31, 1994, is summarized below:
(In thousands) 1994 1993 1992 Operating revenues: Newspapers $150,140 135,920 132,485 Broadcasting 142,841 133,035 137,188 Cable 165,406 164,598 144,383 Entertainment 147,512 161,588 129,122 Security 24,584 16,750 10,262 $630,483 611,891 553,440 Operating profit: Newspapers 45,427 37,667 37,698 Broadcasting 51,756 38,816 38,191 Cable 52,555 56,645 50,692 Entertainment 52,074 63,285 55,841 Security 3,048 1,838 1,818 204,860 198,251 184,240 Less corporate expenses (15,417) (13,848) (11,135) $189,443 184,403 173,105 Depreciation and amortization: Newspapers 5,868 6,049 5,962 Broadcasting 8,600 9,031 9,888 Cable 31,569 28,817 22,387 Entertainment 1,158 2,024 1,960 Security 6,050 4,140 2,640 53,245 50,061 42,837 Corporate 157 139 145 $ 53,402 50,200 42,982
(In thousands) 1994 1993 1992 Additions to property, plant and equipment: Newspapers 6,542 4,611 6,785 Broadcasting 4,892 4,025 5,142 Cable 57,724 32,413 22,159 Entertainment 1,603 497 574 Security 11,881 5,704 2,739 82,642 47,250 37,399 Corporate 386 128 94 $ 83,028 47,378 37,493 Identifiable assets: Newspapers 91,902 89,473 90,872 Broadcasting 189,344 192,596 200,679 Cable 278,168 256,990 251,700 Entertainment 51,840 50,222 35,792 Security 60,543 47,336 31,894 671,797 636,617 610,937 Corporate 12,181 18,557 17,008 $683,978 655,174 627,945
MULTIMEDIA, INC. AND SUBSIDIARIES 36 1994 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company operates principally in five industries: newspapers, broadcasting, cable television, entertainment and security alarms. Newspaper operations involve the publication and distribution of both daily and non-daily newspapers from which revenues are derived primarily from circulation and the sale of advertising linage. Broadcasting operations involve the sale of time to adver- tisers and network revenue. Cablevision operations involve the provision of broadcast signals of television and radio stations owned by others to subscribers whose monthly payments are the primary source of revenues. Entertainment operations generate revenue from program- ming, talent and production operations. Security operations involve the monitoring, installation and servicing of secu- rity systems. Operating profit is total revenues less operating expenses. Interest expense, net other income (expense) and income taxes have been excluded in comput- ing operating profit. Identifiable assets by industry segment represent those assets used in the Company's oper- ations in that segment. (15) CASH FLOW INFORMATION Net cash provided by operating activities is further analyzed as follows:
(In thousands) 1994 1993 1992 Operating profit plus depreciation, amortization and amortization of stock options: Newspapers $ 51,295 43,716 43,660 Broadcasting 60,356 47,847 48,079 Cable 84,124 85,462 73,079 Entertainment 53,232 65,309 57,801 Security 9,098 5,978 4,458 Corporate (11,869) (9,354) (7,609) 246,236 238,958 219,468 Cash payments for interest (58,358) (61,636) (72,649) Cash payments for taxes, net of refunds (58,431) (32,016) (33,275) Amortization of program rights 13,189 14,035 18,277 Other (536) (1,293) 771 Net cash flows provided by operating activities $142,100 158,048 132,592
The Company entered into contracts for program rights totaling $12,052,000, $12,977,000 and $14,218,000 for 1994, 1993 and 1992, respectively, which are not reflected in the consolidated statements of cash flows or the above schedule. (16) COMMITMENTS At December 31, 1994, the Company had commitments for purchases of syndicated television programming of $27.2 million through 2000 and commitments for purchases of property, plant and equipment of $17.0 million ($13.9 million relates to construction of a new production facility at the Company's Montgomery, Alabama, newspaper oper- ation). Commitments relating to rebuilds and upgrades to cable franchises to be performed through 1996 were approx- imately $12.7 million at year-end. In addition, the Company periodically enters into contractual agreements with talent in the entertainment and broadcasting businesses. During the first quarter of 1995, the Company com- pleted the trade of certain of the Company's cable systems in Oklahoma and Illinois with 40,500 cable subscribers for Telecommunications, Inc.'s cable systems in Wichita, Kansas, with 50,400 subscribers. The Company paid $12.4 million in cash as part of this transaction. The transaction will be accounted for as a nonmonetary transaction. MULTIMEDIA, INC. AND SUBSIDIARIES 37 INDEPENDENT AUDITORS' REPORT THE BOARD OF DIRECTORS AND STOCKHOLDERS MULTIMEDIA, INC.: We have audited the accompanying consolidated balance sheets of Multimedia, Inc. and subsidiaries as of December 31, 1994 and 1993 and the related consolidated statements of earnings, stockholders' equity (deficit) and cash flows for each of the years in the three year period ended December 31, 1994. These consolidated financial statements are the responsibility of the Company's manage- ment. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with gener- ally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assess- ing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Multimedia, Inc. and subsidiaries at December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the years in the three year period ended December 31, 1994 in conformity with generally accepted accounting principles. As discussed in Note 1 to the consolidated financial statements, the Company changed its method of account- ing for income taxes in 1993 to adopt the provisions of the Financial Accounting Standards Board's SFAS No. 109, ACCOUNTING FOR INCOME TAXES. As discussed in Note 1, the Company also adopted in 1993 the provisions of the Financial Accounting Standards Board's SFAS No. 106, EMPLOYERS' ACCOUNTING FOR POSTRETIREMENT BENEFITS OTHER THAN PENSIONS. (KPMG Peat Marwick LLP signature appears here) KPMG Peat Marwick LLP Greenville, South Carolina February 10, 1995 EX-99.2 4 MULTIMEDIA JUNE FINANCIALS Exhibit 99-2 MULTIMEDIA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1995 AND 1994
Three Months Six Months (Unaudited) (In thousands except per-share data) 1995 1994 1995 1994 Operating revenues: Newspapers $ 41,304 37,447 78,355 71,101 Broadcasting 41,762 37,535 75,212 66,855 Cable 43,550 41,979 85,450 83,202 Entertainment 36,903 36,188 74,377 72,855 Security 6,808 6,082 13,380 11,637 Total operating revenues 170,327 159,231 326,774 305,650 Operating costs and expenses: Production 64,321 55,700 125,996 108,879 Selling, general and administrative 39,877 39,036 79,768 76,679 Depreciation 9,899 10,811 20,449 21,631 Amortization 3,660 3,833 7,237 7,692 Total operating costs and expenses 117,757 109,380 233,450 214,881 Operating profit 52,570 49,851 93,324 90,769 Interest expense 14,399 14,902 28,862 29,775 Other income (expense), net (62) (1,100) (105) 2,177 Earnings before income taxes and minority interest 38,109 33,849 64,357 63,171 Income taxes 15,816 14,047 26,709 26,216 Minority interest in subsidiaries' income, net 1,128 359 1,637 178 Net earnings $ 21,165 19,443 36,011 36,777 Per share of common stock: Net earnings $ .54 .51 .93 .96 Cash dividends - - - - Weighted average shares 38,886 38,191 38,708 38,280
MULTIMEDIA, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS JUNE 30, 1995 AND DECEMBER 31, 1994
June 30, December 31, (Unaudited) (In thousands) 1995 1994 ASSETS Current assets: Cash and cash equivalents $ 13,299 6,202 Net trade accounts receivable 94,789 93,426 Inventories 7,782 4,643 Deferred income tax benefits 9,941 9,581 Program rights 2,762 7,570 Deferred program costs 7,088 10,923 Prepaid expenses and other 7,388 6,795 Total current assets 143,049 139,140 Property , plant and equipment, at cost 607,764 558,749 Less accumulated depreciation 301,246 283,522 Net property , plant and equipment 306,518 275,227 Intangible assets, net 249,026 242,078 Other assets 30,533 27,533 $ 729,126 683,978 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Current installments of long-term debt $ 30,254 30,254 Accounts payable 19,173 24,512 Accrued interest 2,669 2,671 Accrued payroll 6,354 8,386 Accrued expenses 40,804 38,148 Income taxes payable 18,137 10,202 Program rights payable 3,108 7,793 Unearned income 21,365 20,556 Total current liabilities 141,864 142,522 Long-term debt 548,001 542,303 Deferred income taxes 53,574 54,090 Other liabilities 3,247 3,294 Minority interest 20,321 18,684 Stockholders' equity (deficit): Common stock 3,786 3,762 Additional paid-in capital 191,223 188,224 Retained earnings (deficit) (232,890) (268,901) Total stockholders' equity (deficit) (37,881) (76,915) $ 729,126 683,978
MULTIMEDIA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(Unaudited) (In thousands) 1995 1994 Net cash provided by operating activities $ 72,294 73,766 Additions to property, plant and equipment (47,990) (33,116) Acquisitions of properties (21,180) (8,824) Other 1,307 4,726 Net cash used for investing activities (67,863) (37,214) Addition (reduction) in revolving credit, net 46,754 (23,999) Long-term debt retired (41,056) (12,111) Other (3,032) (4,239) Net cash provided by (used for) financing activities 2,666 (40,349) Increase (decrease) in cash and cash equivalents 7,097 (3,797) Cash and cash equivalents, beginning of year 6,202 11,034 Cash and cash equivalents, end of period $ 13,299 7,237 NOTE: NET CASH PROVIDED BY OPERATING ACTIVITIES IS FURTHER ANALYZED AS FOLLOWS: Operating profit plus depreciation and amortization and amortization of stock options: Newspapers $ 26,792 23,532 Broadcasting 36,540 26,731 Cable 43,374 42,739 Entertainment 15,509 30,570 Security 4,696 4,354 Corporate (5,753) (6,055) 121,158 121,871 Interest expense less amortization of debt issue costs (28,318) (29,216) Change in current assets and liabilities 2,407 (2,260) Other (22,953) (16,629) Net cash provided by operating activities $ 72,294 73,766
THREE MONTHS HIGHLIGHTS
(Unaudited)(In thousands) 1995 1994 REVENUES: Newspapers $ 41,304 37,447 Broadcasting 41,762 37,535 Cable 43,550 41,979 Entertainment 36,903 36,188 Security 6,808 6,082 $ 170,327 159,231 OPERATING PROFITS: Newspapers $ 13,177 11,524 Broadcasting 18,971 13,689 Cable 14,363 12,631 Entertainment 8,150 15,497 Security 1,046 800 Corporate (3,137) (4,290) $ 52,570 49,851
EX-99.3 5 PRO FORMA FINANCIALS 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. -----END PRIVACY-ENHANCED MESSAGE-----