<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 11-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _____ to _____
Commission file number 0-21317
TCI SATELLITE ENTERTAINMENT, INC.
EMPLOYEE STOCK PURCHASE PLAN
----------------------------
(Full title of the Plan)
TCI SATELLITE ENTERTAINMENT, INC.
----------------------------------------------------
(Issuer of the securities held pursuant to the Plan)
8085 S. Chester Street, Suite 300
Englewood, Colorado 80112
-------------------------------------------
(Address of its principal executive office)
<PAGE>
REQUIRED INFORMATION
- --------------------
Financial Statements: Page No.
-------------------- --------
<TABLE>
<CAPTION>
<S> <C>
Independent Auditors' Report 1
Statement of Net Assets Available
for Participant Benefits,
December 31, 1997 2
Statement of Changes in Net Assets
Available for Participant Benefits,
Year ended December 31, 1997 3
Notes to Financial Statements,
December 31, 1997 4
Schedule 1 - Item 27a - Schedule of Assets
Held for Investment Purposes 8
Schedule 2 - Item 27d - Schedule of Reportable
Transactions 9
</TABLE>
Exhibit -
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23-Consent of KPMG Peat Marwick LLP
SIGNATURE
- ---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
members of the Plan Committee have duly caused this annual report to be signed
by the undersigned thereunto duly authorized.
TCI SATELLITE ENTERTAINMENT, INC.
EMPLOYEE STOCK PURCHASE PLAN
(Name of Plan)
By /s/ Collyn DeNio
---------------------------
Collyn DeNio
Plan Administrator
and Member of Plan Committee
June 26, 1998
<PAGE>
Independent Auditors' Report
----------------------------
The Plan Committee
TCI Satellite Entertainment, Inc.
Employee Stock Purchase Plan:
We have audited the accompanying statement of net assets available for
participant benefits of the TCI Satellite Entertainment, Inc. Employee Stock
Purchase Plan as of December 31, 1997, and the related statement of changes in
net assets available for participant benefits for the year ended December 31,
1997. These financial statements are the responsibility of the Plan's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally 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
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for participant benefits of the
TCI Satellite Entertainment, Inc. Employee Stock Purchase Plan as of December
31, 1997, and the changes in net assets available for participant benefits for
the year ended December 31, 1997 in conformity with generally accepted
accounting principles.
Our audit was performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets
held for investment purposes and reportable transactions are presented for the
purpose of additional analysis and are not a required part of the basic
financial statements but are supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. The supplemental schedules
have been subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, are fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
KPMG Peat Marwick LLP
Denver, Colorado
June 12, 1998
1
<PAGE>
TCI SATELLITE ENTERTAINMENT, INC.
EMPLOYEE STOCK PURCHASE PLAN
Statement of Net Assets Available
for Participant Benefits
December 31, 1997
<TABLE>
<CAPTION>
Assets
- ------
<S> <C>
Cash and cash equivalents $ 808
Investment in TCI Satellite Entertainment, Inc. ("TSAT")
Series A common stock (307,541 shares, with a cost of
$2,267,699 at December 31, 1997) (note 2) 2,114,344
----------
Net assets available for participant benefits, including
$32,049 of benefits payable to participants at December 31,
1997 $2,115,152
==========
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
TCI SATELLITE ENTERTAINMENT, INC.
EMPLOYEE STOCK PURCHASE PLAN
Statement of Changes in Net Assets Available
for Participant Benefits
Year ended December 31, 1997
<TABLE>
<CAPTION>
Contributions:
<S> <C>
Employer $1,158,291
Employee 1,158,291
----------
2,316,582
----------
Net investment income (loss):
Net unrealized depreciation of securities (156,962)
Realized loss on securities transactions (6,117)
Interest income 933
----------
(162,146)
----------
Total contributions and net investment loss 2,154,436
Distributions to participants (39,284)
----------
Increase in net assets available for
participant benefits 2,115,152
Net assets available for participant
benefits:
Beginning of year --
----------
End of year $2,115,152
==========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
TCI SATELLITE ENTERTAINMENT, INC.
EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements
December 31, 1997
(1) Summary of Significant Accounting Policies
------------------------------------------
Basis of Presentation
---------------------
The accompanying financial statements have been prepared on an accrual
basis and present the net assets available for participant benefits and the
changes in those net assets.
Trust Fund Managed by US Bank ("Trustee")
-----------------------------------------
Under the terms of a trust agreement between the Trustee and the TCI
Satellite Entertainment, Inc. Employee Stock Purchase Plan (the "Plan"),
the Trustee manages a trust fund on behalf of the Plan. The Trustee has
been granted discretionary authority concerning purchases and sales of
investments for the trust fund. The Trustee may invest up to 100% of the
assets of the Plan in employer securities without regard to any fiduciary
requirement to diversify Plan assets. Additionally, the Plan is allowed to
invest in non-employer securities.
Cash and Cash Equivalents
-------------------------
The Plan considers investments with initial maturities of three months or
less to be cash equivalents.
Investments
-----------
Investments are reflected in the accompanying financial statements at
current market value. Current market value represents the closing prices
for those securities having readily available market quotations and fair
value as determined by the Trustee with respect to other securities. The
value used for the Series A TCI Satellite Entertainment common stock was
$6.875 per share, at December 31, 1997. The foregoing price is the closing
market price of the common stock on that date. Securities transactions are
accounted for on the trade date. Distributions are priced at current
market value and are accounted for when shares are transferred by the
Trustee to participants. The cost basis of such shares distributed is
determined using the "first-in, first-out" method.
Income Taxes
------------
The Internal Revenue Service has determined and informed the Plan by a
letter dated April 29, 1998 that the Plan and related trust are designed in
accordance with applicable sections of the Internal Revenue Code
(continued)
4
<PAGE>
TCI SATELLITE ENTERTAINMENT, INC.
EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements
Plan Expenses
-------------
Administrative expenses of the Plan are paid by TSAT. Accordingly, such
expenses are not reflected in the accompanying financial statements.
Estimates
---------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of changes in
assets and liabilities during the reporting period. Actual results could
differ from those estimates.
(2) Description of the Plan
-----------------------
On December 4, 1996 (the "Distribution Date"), Tele-Communications, Inc.
("TCI") distributed (the "Distribution") all the capital stock of TSAT to
the holders of Tele-Communications, Inc. Series A TCI Group Common Stock
(the "Series A TCI Group Stock") and Tele-Communications, Inc. Series B TCI
Group Common Stock (the "Series B TCI Group Stock" and, together with the
Series A TCI Group Stock, the "TCI Group Stock"). The Distribution did not
involve the payment of any consideration by the holders of TCI Group Stock
(such holders, the "TCI Group Stockholders"), and was intended to qualify
as a tax-free spinoff. TCI Group Stockholders received one share of Series
A Common Stock for each ten shares of Series A TCI Group Stock owned and
one share of Series B Common Stock for each ten shares of Series B TCI
Group Stock owned.
In connection with the Distribution, TSAT formed the Plan effective January
1, 1997. The Plan is a defined contribution plan sponsored by TSAT. The
Plan enables participating employees to acquire a proprietary interest in
TSAT and to receive benefits upon retirement. In addition, the Plan
includes a salary deferral feature with respect to employee contributions.
At December 31, 1997, there were approximately 470 participants in the Plan
and approximately 820 employees who had one or more years of service and
met all other eligibility requirements were eligible to participate.
Former TCI employees who became TSAT employees in connection with the
Distribution and who had one or more years of service and met all other
eligibility requirements were allowed to participate in the Plan effective
January 1, 1997. Under the terms of the Plan, employees are eligible for
participation after one year of service (if at least 18 years old and work
a minimum of 1,000 hours per year) and the normal retirement age is 65
years. Participants may contribute up to 10% of their compensation, as
defined, to the Plan. TSAT (by annual resolution of the Board) may
contribute up to 100% of the participant contributions. Forfeitures (due
to participants' withdrawal prior to full vesting) may be applied to reduce
TSAT's otherwise determined contributions or offset the expenses of
maintaining the Plan. Such forfeitures amounted to $29,354, for the year
ended December 31, 1997. Participant contributions are always fully
vested. Generally, participants acquire a vested right in TSAT
contributions as follows:
Vesting
Years of service percentage
---------------- ----------
Less than 1 0%
1-2 20%
2-3 30%
3-4 45%
4-5 60%
5-6 80%
6 or more 100%
(continued)
5
<PAGE>
TCI SATELLITE ENTERTAINMENT, INC.
EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements
Although TSAT has not expressed an intent to terminate the Plan, it may do
so at any time. The Plan provides for full and immediate vesting of all
participant rights upon termination of the Plan.
(3) Change in Unrealized Depreciation
---------------------------------
Unrealized depreciation of investments held for the year ended December 31,
1997, is calculated as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
End of year $(153,355)
Change in unrealized
depreciation of distributions
(3,607)
Less beginning of year --
---------
Net unrealized depreciation of
investments $(156,962)
=========
</TABLE>
(4) Reconciliation to Form 5500
---------------------------
The following represents a reconciliation between the Statement of Net
Assets Available for Participant Benefits included in the accompanying
financial statements and the Form 5500 at December 31, 1997:
<TABLE>
<CAPTION>
<S> <C> <C>
Net Assets Available for Participant
Benefits - financial statements $2,115,152
Benefits payable to participants (32,049)
----------
Net Assets Available for Participant
Benefits - Form 5500 $2,083,103
==========
</TABLE>
The following represents a reconciliation between distributions to
participants in the Statement of Changes in Net Assets Available for
Participant Benefits included in the accompanying financial statements and
the Form 5500 for the year ended December 31, 1997:
<TABLE>
<CAPTION>
<S> <C> <C>
Distributions to participants -
financial statements $39,284
Current year benefits payable
to participants 32,049
-------
Distributions to participants -
Form 5500 $71,333
=======
</TABLE>
6
<PAGE>
TCI SATELLITE ENTERTAINMENT, INC.
EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements
(5) Subsequent Event
----------------
Effective April 1, 1998 and pursuant to (i) a Merger and Contribution
Agreement among TSAT, PRIMESTAR, Inc. ("PRIMESTAR") and the partners (the
"Non-TSAT Parties") of PRIMESTAR Partners L.P. (the "Partnership") and (ii)
an Asset Transfer Agreement between TSAT and PRIMESTAR, a business
combination (the "Restructuring") was consummated whereby (a) TSAT
contributed and transferred substantially all of its assets (including its
ownership in the Partnership) and liabilities to PRIMESTAR and (b) the
business of the Partnership and the business of distributing the
PRIMESTAR(R) programming service of each of the Non-TSAT Parties was
consolidated into PRIMESTAR.
As a result of the Restructuring and effective June 30, 1998, the Plan will
be merged with and into the Partnership's amended and restated retirement
plan, which will be renamed the PRIMESTAR, Inc. 401(k) Savings Plan (the
"PRIMESTAR PLAN"). In connection with such merger, all of the Plan's
assets and liabilities will be transferred to the PRIMESTAR Plan, and all
of the Plan's participants will become participants of the PRIMESTAR Plan.
7
<PAGE>
Schedule 1
----------
TCI SATELLITE ENTERTAINMENT, INC.
EMPLOYEE STOCK PURCHASE PLAN
Item 27a - Schedule of Assets Held for Investment Purposes
December 31, 1997
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
(a)* (b) (c) (d) (e)
Identity of Description of investment Current
issuer including par value Cost value
- ------ ------------- --------------------------- ------ ---------
TCI Satellite
Entertainment, Inc. Series A TSAT common stock,
par value $1.00 per share $2,267,699 2,114,344
</TABLE>
* None of the issuers represent parties in interest to the Plan.
See accompanying independent auditors' report.
8
<PAGE>
Schedule 2
----------
TCI SATELLITE ENTERTAINMENT, INC.
EMPLOYEE STOCK PURCHASE PLAN
Item 27d - Schedule of Reportable Transactions
Year ended December 31, 1997
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Current
value of
Expense asset on
Identity of party Description of Purchase incurred with Cost of transaction Net gain
involved asset price Selling price Lease rental transaction asset date or (loss)
- ----------------- -------------- -------- ------------- ------------- -------------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aim Short-Term Prime Money
Investment Co. Market fund $ 582,813 -- -- -- 582,813 582,813 --
Aim Short-Term Prime Money
Investment Co. Market Fund $ -- 582,813 -- -- 582,813 582,813 --
First American Prime Obligation
Class C $1,735,418 -- -- -- 1,735,418 1,735,418 --
First American Prime Obligation
Class C $ -- 1,735,418 -- -- 1,735,418 1,735,418 --
TCI Satellite Series A TSAT
Entertainment, Inc. common stock $2,316,479 -- -- -- 2,316,479 2,316,479 --
TCI Satellite Series A TSAT
Entertainment, Inc. common stock $ -- 3,013 -- -- 3,023 3,013 (10)
</TABLE>
See accompanying independent auditors' report.
9
<PAGE>
EXHIBIT INDEX
-------------
Shown below is the exhibit which is filed as a part of this Report -
23-Consent of KPMG Peat Marwick LLP
<PAGE>
Exhibit 23
----------
Consent of Independent Auditors
-------------------------------
The Plan Committee
TCI Satellite Entertainment, Inc.
Employee Stock Purchase Plan:
We consent to incorporation by reference in the registration statement (No. 333-
18165) on Form S-8 of TCI Satellite Entertainment, Inc. Employee Stock Purchase
Plan of our report dated June 12, 1998, relating to the statement of net assets
available for participant benefits of TCI Satellite Entertainment, Inc. Employee
Stock Purchase Plan as of December 31, 1997, and the related statement of
changes in net assets available for participant benefits for the year ended
December 31, 1997 and related schedules, which report appears in the December
31, 1997 Annual Report on Form 11-K of TCI Satellite Entertainment, Inc.
Employee Stock Purchase Plan.
KPMG Peat Marwick LLP
Denver, Colorado
June 26, 1998
