<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 3, 1995
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
------------------------
AMENDMENT NO. 16
TO
SCHEDULE 14D-1*
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
QVC, INC.
(NAME OF SUBJECT COMPANY)
QVC PROGRAMMING HOLDINGS, INC.
COMCAST CORPORATION
TELE-COMMUNICATIONS, INC.
(BIDDERS)
COMMON STOCK, $.01 PAR VALUE PER SHARE
(TITLE OF CLASS OF SECURITIES)
747262 10 3
(CUSIP NUMBER OF CLASS OF SECURITIES)
<TABLE>
<S> <C>
STANLEY L. WANG STEPHEN M. BRETT
COMCAST CORPORATION TELE-COMMUNICATIONS, INC.
1500 MARKET STREET 5619 DTC PARKWAY
PHILADELPHIA, PA 19102 ENGLEWOOD, CO 80111
(215) 665-1700
</TABLE>
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE
NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDER)
------------------------
COPIES TO:
<TABLE>
<S> <C>
DENNIS S. HERSCH FREDERICK H. MCGRATH
DAVIS POLK & WARDWELL BAKER & BOTTS, L.L.P.
450 LEXINGTON AVENUE 885 THIRD AVENUE
NEW YORK, NY 10017 NEW YORK, NY 10022
(212) 450-4000 (212) 705-5000
</TABLE>
* This Statement also constitutes Amendment No. 17 to the Schedule 13D filed by
Tele-Communications, Inc. and Amendment No. 38 to the Schedule 13D filed by
Comcast Corporation in each case with respect to the securities of the Subject
Company.
================================================================================
PAGE 1 OF PAGES
<PAGE> 2
QVC Programming Holdings, Inc., Comcast Corporation and TeleCommunications,
Inc. hereby amend and supplement their Tender Offer Statement on Schedule 14D-1
filed with the Securities and Exchange Commission on August 11, 1994 (as
previously amended and supplemented, the "Schedule 14D-1") with respect to
Bidders' Offer to Purchase for cash all outstanding shares of Common Stock and
Preferred Stock of the Company.
Information contained in the Schedule 14D-1 as hereby amended and
supplemented with respect to Comcast, Liberty, TCI and the Purchaser and their
respective executive officers, directors and controlling persons is given solely
by such person, and no other person has responsibility for the accuracy or
completeness of information supplied by such other persons.
Capitalized terms used but not defined herein have the meaning assigned to
them in the Offer to Purchase and the Schedule 14D-1.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) and (b) The information set forth in the Offer to Purchase is hereby
amended and supplemented to include the information set forth in the Supplement
to Offer to Purchase dated February 3, 1995 (the "Supplement"), a copy of which
is attached hereto as Exhibit (a)(22) and is hereby incorporated by reference.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(g) The information set forth in the Offer to Purchase is hereby
amended and supplemented to include the information set forth in under Item 4 of
this Amendment.
ITEM 6. INTERESTS IN THE SECURITIES OF THE SUBJECT COMPANY.
(a) and (b) The information set forth in the Offer to Purchase is hereby
amended and supplemented to include the information set forth in under Item 4 of
this Amendment.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Offer to Purchase is hereby amended and
supplemented to include the information set forth under Item 4 of this
Amendment.
ITEM 10. ADDITIONAL INFORMATION.
(a)-(d) and (f) The information set forth in the Offer to Purchase is
hereby amended and supplemented to include the information set forth under Item
4 of this Amendment.
The information set forth under "The Tender Offer -- 6. Certain Information
Concerning the Company" in the Offer to Purchase is hereby amended and
supplemented to include the following information:
PAGE 2 OF PAGES
<PAGE> 3
A copy of the financial statements set forth in the Company's Quarterly
Report on Form 10-Q for its fiscal quarter ended October 31, 1994 is attached
hereto as Exhibit (a)(27) and is hereby incorporated by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C> <C>
(a)(22) -- Supplement to Offer to Purchase, dated February 3, 1995.
(a)(23) -- Letter of Transmittal (including Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W9).
(a)(24) -- Form of Notice of Guaranteed Delivery.
(a)(25) -- Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees.
(a)(26) -- Form of Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(a)(27) -- Interim Financial Information from the Company's Quarterly Report on Form 10-Q
for its fiscal quarter ended October 31, 1994.
(b)(2) -- Term Sheet for the Company Loan.
</TABLE>
PAGE 3 OF PAGES
<PAGE> 4
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: February 3, 1995
QVC Programming Holdings, INC.
By: /s/ JULIAN A. BRODSKY
------------------------------------
Name: Julian A. Brodsky
Title: Vice Chairman
COMCAST CORPORATION
By: /s/ JULIAN A. BRODSKY
------------------------------------
Name: Julian A. Brodsky
Title: Vice Chairman
TELE-COMMUNICATIONS, INC.
By: /s/ STEPHEN M. BRETT
------------------------------------
Name: Stephen M. Brett
Title: Executive Vice President
PAGE 4 OF PAGES
<PAGE> 5
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- -------- ----------- ------------
<S> <C> <C> <C>
(a)(22) -- Supplement to Offer to Purchase, dated February 3, 1995.
(a)(23) -- Letter of Transmittal (including Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9)
(a)(24) -- Form of Notice of Guaranteed Delivery.
(a)(25) -- Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(a)(26) -- Form of Letter to Clients for use by Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees.
(a)(27) -- Interim Financial Information from the Company's Quarterly Report
on Form 10-Q for its fiscal quarter ended October 31, 1994
(b)(2) -- Term Sheet for the Company Loan.
</TABLE>
PAGE 5 OF PAGES
<PAGE> 1
SUPPLEMENT TO OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK,
SERIES B PREFERRED STOCK AND
SERIES C PREFERRED STOCK
OF
QVC, INC.
AT
$46 NET PER SHARE OF COMMON STOCK AND
$460 NET PER SHARE OF PREFERRED STOCK
BY
QVC PROGRAMMING HOLDINGS, INC.
THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME,
ON THURSDAY, FEBRUARY 9, 1995, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON AMONG OTHER THINGS, (i) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE SHARES (THE "SHARES") OF
COMMON STOCK, PAR VALUE $.01 PER SHARE (THE "COMMON STOCK"), AND SERIES B
PREFERRED STOCK AND SERIES C PREFERRED STOCK, EACH PAR VALUE $.10 PER SHARE
(TOGETHER, THE "PREFERRED STOCK") OF QVC, INC. (THE "COMPANY") WHICH, TOGETHER
WITH THE 19,176,061 FULLY DILUTED SHARES AGREED TO BE CONTRIBUTED BY COMCAST
CORPORATION ("COMCAST") AND LIBERTY MEDIA CORPORATION ("LIBERTY") (OR ANY
WHOLLY-OWNED SUBSIDIARY THEREOF) TO QVC PROGRAMMING HOLDINGS, INC. (THE
"PURCHASER"), PURSUANT TO THE JOINT BIDDING AGREEMENT (AS DEFINED IN THE OFFER
TO PURCHASE DATED AUGUST 11, 1994 (THE "OFFER TO PURCHASE")), REPRESENT AT LEAST
A MAJORITY OF THE OUTSTANDING SHARES OF COMMON STOCK, CALCULATED ON A FULLY
DILUTED BASIS, (ii) THE PURCHASER HAVING OBTAINED SUFFICIENT FINANCING ON TERMS
SATISFACTORY TO IT TO PURCHASE ALL OF THE OUTSTANDING SHARES PURSUANT TO THE
OFFER, CONSUMMATE THE MERGER (AS DESCRIBED IN THE OFFER TO PURCHASE) AND PAY
RELATED FEES AND EXPENSES AND (iii) THE ABSENCE OF CERTAIN LEGAL ACTIONS OR
PROCEEDINGS. SEE "THE TENDER OFFER -- 10. CERTAIN CONDITIONS OF THE OFFER" IN
THE OFFER TO PURCHASE, AS AMENDED, AND "HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS
ACT OF 1976" HEREIN.
------------------------
THE BOARD OF DIRECTORS OF THE COMPANY (OTHER THAN DIRECTORS AFFILIATED WITH
COMCAST) HAS UNANIMOUSLY DETERMINED THAT THE OFFER AND THE MERGER DESCRIBED IN
THE OFFER TO PURCHASE ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY'S
STOCKHOLDERS (OTHER THAN COMCAST AND LIBERTY AND THEIR AFFILIATES) AND APPROVED
THE OFFER AND THE MERGER, AND RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT
THE OFFER AND APPROVE THE MERGER.
------------------------
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
------------------------
IMPORTANT
Any stockholder desiring to tender Shares should either (1) complete and
sign the Letter of Transmittal (or facsimile thereof) in accordance with the
instructions in the Letter of Transmittal and deliver it with the certificate(s)
representing tendered Shares and all other required documents to the Depositary
or tender such Shares pursuant to the procedures for book-entry transfer set
forth in "The Tender Offer -- 3. Procedures for Tendering Shares" in the Offer
to Purchase, as amended, or (2) request his or her broker, dealer, commercial
bank, trust company or other nominee to effect the transaction for him or her. A
stockholder having Shares registered in the name of a broker, dealer, commercial
bank, trust company or other nominee must contact such person if he or she
desires to tender such Shares.
Any stockholder who desires to tender Shares and whose certificates
representing such Shares are not immediately available or who cannot comply with
the procedures for book-entry transfer on a timely basis may tender such Shares
pursuant to the guaranteed delivery procedures set forth in "The Tender
Offer -- 3. Procedures for Tendering Shares" in the Offer to Purchase, as
amended.
Questions and requests for assistance or additional copies of this
Supplement to Offer to Purchase ("Supplement"), the Offer to Purchase and the
Letter of Transmittal may be directed to the Information Agent or the Dealer
Manager at their respective addresses and telephone numbers set forth on the
last page of this Supplement. Additional copies of this Supplement, the Letter
of Transmittal and the Notice of Guaranteed Delivery may also be obtained from
brokers, dealers, commercial banks or trust companies.
------------------------
The Dealer Manager for the Offer is:
LAZARD FRERES & CO.
February 3, 1995
<PAGE> 2
To the Holders of Common Stock,
Series B Preferred Stock and
Series C Preferred Stock of
QVC, Inc.:
INTRODUCTION
The following information amends and supplements the Offer to Purchase,
dated August 11, 1994 (the "Offer to Purchase"), of QVC Programming Holdings,
Inc., a Delaware corporation (the "Purchaser"). The Purchaser, which will be
wholly-owned by Comcast Corporation, a Pennsylvania corporation ("Comcast"), and
Liberty Media Corporation, a Delaware corporation ("Liberty" and, together with
Comcast, the "Parent Purchasers") and a wholly-owned subsidiary of
Tele-Communications, Inc., a Delaware corporation ("TCI"), hereby offers to
purchase all outstanding shares (the "Shares") of Common Stock, $.01 par value
per share (the "Common Stock"), and Series B Preferred Stock and Series C
Preferred Stock, each par value $.10 per share (together, the "Preferred Stock")
of QVC, Inc., a Delaware corporation (the "Company") at $46 per share of Common
Stock and $460 per share of Preferred Stock, net to the seller in cash, without
interest thereon, upon the terms and subject to the conditions set forth in the
Offer to Purchase, this Supplement and in the related Letters of Transmittal
(which, together with the amendments thereto, constitute the "Offer"). Tendering
stockholders will not be obligated to pay brokerage fees or commissions or,
except as set forth in Instruction 6 of the Letter of Transmittal, stock
transfer taxes on the purchase of Shares pursuant to the Offer. The Purchaser
will pay all charges and expenses of Lazard Freres & Co. (in such capacity, the
"Dealer Manager"), the Bank of New York (the "Depositary") and D.F. King & Co.,
Inc. (the "Information Agent") incurred in connection with the Offer.
As indicated below, Comcast and Liberty are proceeding with their efforts
to obtain the financing necessary to satisfy the Financing Condition (as defined
in the Offer to Purchase, as amended) and anticipate that such financing will be
obtained by February 9, 1995, assuming all other conditions to the Offer have
been satisfied. Upon obtaining such financing, and if the other conditions to
the Offer are then satisfied, Comcast and Liberty intend to cause the Purchaser
to accept Shares for payment and consummate the Offer.
Except as otherwise set forth in this Supplement, the terms and conditions
previously set forth in the Offer to Purchase remain applicable in all respects
to the Offer, and this Supplement should be read in conjunction with the Offer
to Purchase. Unless the context requires otherwise, terms not defined herein
have the meaning ascribed to them in the Offer to Purchase.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (i) THERE BEING VALIDLY
TENDERED (AS DEFINED IN THE OFFER TO PURCHASE) AND NOT WITHDRAWN PRIOR TO THE
EXPIRATION DATE (AS DEFINED IN THE OFFER TO PURCHASE) SHARES WHICH, TOGETHER
WITH THE 19,176,061 FULLY DILUTED SHARES AGREED TO BE CONTRIBUTED BY THE PARENT
PURCHASERS (OR ANY WHOLLY-OWNED SUBSIDIARY THEREOF) TO THE PURCHASER PURSUANT TO
THE JOINT BIDDING AGREEMENT DESCRIBED IN THE OFFER TO PURCHASE, REPRESENT AT
LEAST A MAJORITY OF THE OUTSTANDING SHARES OF COMMON STOCK, ON A FULLY DILUTED
BASIS (THE "MINIMUM TENDER CONDITION"), (ii) THE PURCHASER HAVING OBTAINED
SUFFICIENT FINANCING ON TERMS SATISFACTORY TO IT TO PURCHASE ALL OF THE
OUTSTANDING SHARES PURSUANT TO THE OFFER, CONSUMMATE THE MERGER AND PAY RELATED
FEES AND EXPENSES (THE "FINANCING CONDITION") AND (iii) THE ABSENCE OF CERTAIN
LEGAL ACTIONS OR PROCEEDINGS. SEE "THE TENDER OFFER -- 10. CERTAIN CONDITIONS OF
THE OFFER" IN THE OFFER TO PURCHASE, AS AMENDED, AND "HART-SCOTT-RODINO
ANTITRUST IMPROVEMENTS ACT OF 1976" HEREIN.
<PAGE> 3
THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD") (OTHER THAN DIRECTORS
AFFILIATED WITH COMCAST) HAS UNANIMOUSLY DETERMINED THAT THE OFFER AND THE
MERGER DESCRIBED IN THE OFFER TO PURCHASE ARE FAIR TO AND IN THE BEST INTERESTS
OF THE COMPANY'S STOCKHOLDERS (OTHER THAN THE PARENT PURCHASERS AND THEIR
AFFILIATES) AND APPROVED THE OFFER AND THE MERGER AND RECOMMENDS THAT THE
COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND APPROVE THE MERGER.
ALLEN & COMPANY INCORPORATED ("ALLEN & COMPANY" OR "ALLEN"), FINANCIAL
ADVISOR TO THE COMPANY, HAS DELIVERED AN OPINION TO THE BOARD TO THE EFFECT THAT
THE CONSIDERATION TO BE RECEIVED BY THE STOCKHOLDERS (OTHER THAN THE PARENT
PURCHASERS) OF THE COMPANY IN THE OFFER AND MERGER DESCRIBED IN THE OFFER TO
PURCHASE IS FAIR TO SUCH STOCKHOLDERS FROM A FINANCIAL POINT OF VIEW. SEE
"SPECIAL FACTORS -- OPINIONS AND REPORTS OF FINANCIAL ADVISORS" IN THE OFFER TO
PURCHASE, AS AMENDED.
According to the Company, as of January 31, 1995, there were outstanding
approximately 55,642,642 Fully Diluted Shares. Subsequent to the Parent
Contribution, the Purchaser will beneficially own 19,176,061 Fully Diluted
Shares. Accordingly, the Purchaser believes that the Minimum Tender Condition
will be satisfied if approximately 8,645,261 shares of Common Stock are validly
tendered pursuant to the Offer and not withdrawn prior to Expiration Date.
Stockholders are urged to read this Supplement, the Offer to Purchase and
the related Letters of Transmittal carefully before deciding whether to tender
their Shares. Shareholders are also urged to consult the Tender Offer Statement
on Schedule 14D-1 (as amended, the "Schedule 14D-1") relating to the Offer,
which is on public file with the Commission and available for review.
2
<PAGE> 4
FINANCING OF THE TRANSACTION
Bank Financing. In connection with the Offer, on January 13, 1995, Comcast
entered into a commitment letter (together with the term sheets thereto, the
"Commitment Letter") with certain lenders (each, a "Managing Agent" and
collectively, the "Managing Agents"), pursuant to which the Managing Agents have
agreed, subject to the terms and conditions set forth therein, to provide the
Purchaser with a multi-draw term loan credit facility in the aggregate principal
amount of $1,100,000,000 (later increased to $1,150,000,000), (the "Tender Offer
Facility" and loans extended thereunder, the "Tender Loans"), and to provide the
Surviving Corporation (as defined in the Offer to Purchase) with a credit
facility in the aggregate principal amount of $1,200,000,000 (the "Permanent
Facility"). The proceeds of the Tender Offer Facility (except, unless Comcast
guarantees the payment of interest and certain fees and other amounts under the
Tender Offer Facility, for a certain amount to be withheld, as shall be
determined by the Managing Agents to be sufficient to pay, among other things,
all interest and fees for three months from the date of the initial Tender
Loans) are available to be used to finance the purchase of the Shares pursuant
to the Offer. The proceeds of the Permanent Facility are available to be used to
repay the Tender Offer Facility, to pay other amounts, including merger
consideration and transaction costs, payable in connection with the Merger, to
issue letters of credit and for general corporate purposes.
The Tender Offer Facility and the Permanent Facility will be provided
pursuant to the terms of, and shall become effective only upon the execution and
delivery of, mutually satisfactory definitive loan documentation incorporating
terms and conditions set forth in the Commitment Letter. It is expected that the
definitive documentation for the Tender Offer Facility will contain a condition
to the Managing Agents' obligations to advance funds under the Tender Offer
Facility that the definitive documentation for the Permanent Facility is
substantially complete.
The credit agreement for the Tender Offer Facility (the "Tender Facility
Agreement") will be subject to certain customary conditions precedent,
including, without limitation, the following: (1) the shareholders, management
or other similar agreement or agreements (the "Joint Ownership and Management
Agreements") between Comcast, Liberty and certain of their respective affiliates
and the corporate and capital structure and related documents and agreements of
the Purchaser and the Company shall be in form and substance reasonably
satisfactory to the Managing Agents; (2) the Purchaser shall have purchased,
concurrently with the initial borrowing under the Tender Offer Facility and
pursuant to the Offer, at least that number of Shares which, when added to the
number of Shares held by Purchaser, represents the number of Fully Diluted
Shares of the Company which is necessary to effect the Merger without the
affirmative vote of any other shareholder of the Company; (3) satisfaction of
the conditions to the Offer; (4) receipt by the Purchaser of capital
contributions of at least 18,000,000 Shares and such amount of cash as is
necessary to consummate the Offer, and to do so in compliance with the
applicable margin regulations; (5)(a) receipt of all necessary governmental
approvals and expiration of all applicable waiting periods without any action
being taken by any competent authority which restrains, prevents or imposes
materially adverse conditions upon the consummation of the Offer or the Merger
and (b) absence of any judgment, order, injunction or other restraint
prohibiting or imposing materially adverse conditions upon the purchase of
Shares pursuant to the Offer or the consummation of the Merger and absence of
pending or threatened actions, suits or proceedings with respect to the
Purchaser or the Company or its subsidiaries that could reasonably be expected
to have a material adverse effect on the business, assets, liabilities,
condition (financial or otherwise) or results of operations of the Purchaser or
the Company or its subsidiaries or have a material adverse effect on the Offer,
the Merger, the rights or remedies of the lenders or on the ability of the
Purchaser to perform its obligations under the Tender Offer Facility; (6)
satisfaction of the Managing Agents with the terms of the Offer and the Merger
Agreement; (7) receipt by the lenders of evidence of solvency and related
matters satisfactory to the Managing Agents; (8) the lenders shall have a
perfected first priority security interest in the Shares owned by the Purchaser;
(9) evidence that the Purchaser's property is free and clear of all liens and
encumbrances, with certain exceptions (including those in favor of the lenders);
(10) absence of a material adverse change relating to the Company since January
31, 1994; (11) absence of stock options, warrants or similar rights to acquire
the capital stock of the Company, with certain exceptions; (12) compliance of
the Offer, the Merger and the Tender Loans with all applicable legal
requirements, including, without limitation, Regulations G, T,
3
<PAGE> 5
U and X of the Board of Governors of the Federal Reserve System; (13) absence of
violation of contractual restrictions as a result of the Offer and the Merger
which would have a material adverse effect on the business, assets, liabilities,
condition (financial or otherwise) or results of operations of the Company or
which would have a material adverse effect on the ability of the Purchaser to
perform its obligations under the Tender Facility Agreement; (14) provision by
Comcast, Liberty or their respective subsidiaries of any additional funding
necessary to complete the Offer and undertakings to complete the Merger in a
manner and on terms reasonably satisfactory to the Managing Agents; (15) receipt
by the lenders of satisfactory legal opinions; and (16) payment of costs, fees,
expenses and other compensation contemplated by the Commitment Letter to the
lenders or the Managing Agents to the extent due.
The credit agreement for the Permanent Facility (the "Permanent Facility
Agreement") will be subject to certain customary conditions precedent,
including, without limitation, the following: (1) satisfaction of all conditions
to the Merger Agreement; (2) receipt of all necessary governmental approvals in
connection with the Merger, the transactions contemplated by the Merger
Agreement and otherwise referred to in the Permanent Facility, expiration of all
applicable waiting periods without any action being taken by any competent
authority which restrains, prevents or imposes materially adverse conditions
upon, the consummation of the Merger and the absence of any judgment, order,
injunction or other restraint prohibiting or imposing materially adverse
conditions upon the consummation of the Merger; (3) the Joint Ownership and
Management Agreements and the corporate and capital structure of the Surviving
Corporation shall be reasonably satisfactory in form and substance to the
Managing Agents; (4) receipt by the lenders of a perfected first priority
security interest in the stock of the Surviving Corporation and its material
subsidiaries; (5) termination of any bank credit agreements of the Company and
its subsidiaries (other than the Permanent Facility) and repayment of all
amounts outstanding thereunder concurrently with the initial funding under the
Permanent Facility; (6) the Company's and its subsidiaries' property shall be
free and clear of all liens and encumbrances, with certain exceptions; (7)
absence of material adverse change in the business, assets, liabilities,
financial condition or results of operations of the Company and its consolidated
subsidiaries, taken as a whole, since the funding of the Tender Offer Facility;
(8) absence of stock options, warrants of similar rights to acquire the capital
stock of the Company, with certain exceptions; (9) compliance of the Merger with
all applicable legal requirements, including, without limitation, Regulations G,
T, U and X of the Board of Governors of the Federal Reserve System; (10) the
lender's reasonable satisfaction as to the absence of violation of contractual
restrictions as a result of the Merger which would have a material adverse
effect on the business, assets, liabilities, financial condition or results of
operations of the Surviving Corporation or which would have a material adverse
effect on the ability of the Surviving Corporation to perform its obligations
under the Permanent Facility Agreement; (11) the receipt by the Surviving
Corporation of any additional funding necessary to complete the Merger; (12)
receipt by the lenders of evidence of solvency and related matters; (13) receipt
by the lenders of satisfactory legal opinions; and (14) payment of all
reasonable costs, fees, expenses and other compensation payable to the lenders
or the Managing Agents to the extent due.
The Commitment Letter has previously been filed as Exhibit (b)(1) to the
Schedule 14D-1, and the foregoing summary description is qualified in its
entirety by reference to such exhibit.
QVC Bridge Loan. In connection with the financing of the Offer, the Board
of Directors of the Company has authorized the officers of the Company, subject
to the negotiation and execution of definitive documentation and the
satisfaction of such officers with the other relevant terms and conditions of
such loan, to make a loan (the "Company Loan") on behalf of the Company to the
Purchaser pursuant to which the Company would provide to the Purchaser a loan of
up to $60 million. In addition, the Company has agreed to increase the loan by
an amount up to $266 million, which is approximately equal to the difference
between the Purchaser's aggregate costs of financing the Offer and the
Purchaser's net acquisition costs to consummate the Offer and the Merger. The
increased amount of the loan will be funded from proceeds to be received by the
Company from the exercise of Options prior to the closing of the Offer. It is
anticipated that the loan will only be drawn down by the Purchaser to the extent
that the Offer and the Merger are not consummated on the same day. Based upon
the balance sheet of the Company for the fiscal quarter ended October 31, 1994,
after funding the loan described above the Company would have in excess of
$20,000,000 of remaining cash, assuming the exercise of all outstanding Options
and the tender of all outstanding Shares. The loan described
4
<PAGE> 6
above will have a term of two months and will bear interest at Prime Rate (to be
defined) plus 2.00% per annum, payable at maturity. The loan will be conditioned
upon the Offer expiring no later than 12:00 Midnight, New York City time, on
Thursday, February 9, 1995, the time at which the Offer is currently scheduled
to expire. The loan will be unsecured and subordinated to the Tender Offer
Facility. The loan will be drawn down in one or more installments and only after
all available bank financing and equity capital are depleted. See "Financing of
the Transaction" in the Offer to Purchase, as amended.
In addition, the Company will fund a "Rabbi" trust for outstanding Options
not exercised in connection with the Offer; however, the amount of such funding
will reduce the amount of the Company Loan in an equal amount. See "Special
Factors -- The Merger Agreement" in the Offer to Purchase, as amended.
A copy of the term sheet relating to the foregoing is filed as Exhibit
(b)(2) to the Schedule 14D-1, and the foregoing summary description is qualified
in its entirety by reference to such exhibit.
Subordinated Debt Financing. The Purchaser does not expect to raise funds
required to consummate the Transaction through the issuance of subordinated debt
securities. The Surviving Corporation may, subject to market conditions, issue
subordinated debt securities subsequent to consummation of the Transaction.
HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976
On January 19, 1995, Comcast and TCI notified the Federal Trade Commission
(the "FTC") of their intention to consummate the Offer at any time after 5:00
p.m. on Monday, February 6, 1995, provided that conditions to closing have been
satisfied. The Offer is currently scheduled to expire at that time. Although all
applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (the "HSR Act") relating to the Transaction have expired, the notice
was given to the FTC in accordance with the parties' agreement with the FTC to
provide at least ten days' notice to the FTC prior to consummating the Offer.
There can be no assurance as to what action, if any, the FTC may take in
response to such notice. The Offer continues to be conditioned upon, among other
things, the absence, prior to the acceptance for payment of Shares, of there
being:
(a) instituted or pending any action or proceeding by any government
or governmental authority or agency, domestic or foreign, or by any other
person, domestic or foreign, before any court or governmental authority or
agency, domestic or foreign, (i) challenging or seeking to make illegal, to
delay materially or otherwise directly or indirectly to restrain or
prohibit the making of the Offer, the acceptance for payment of or payment
for some of or all the Shares by the Purchaser or the consummation by the
Purchaser of the Merger, seeking to obtain material damages or imposing any
material adverse conditions in connection therewith or otherwise directly
or indirectly relating to the transactions contemplated by the Offer or the
Merger, (ii) seeking to restrain or prohibit the exercise of full rights of
ownership or operation by the Purchaser or its affiliates of all or any
portion of the business or assets of the Company and its subsidiaries,
taken as a whole, or of the Purchaser or any of its affiliates, or to
compel the Purchaser or any of its affiliates to dispose of or hold
separate all or any material portion of the business or assets of the
Company and its subsidiaries, taken as a whole, or of the Purchaser or any
of its affiliates, (iii) seeking to impose limitations on the ability of
the Purchaser or any of its affiliates effectively to exercise full rights
of ownership of the Shares, including, without limitation, the right to
vote any Shares acquired or owned by the Purchaser or any of its affiliates
on all matters properly presented to the Company's stockholders or (iv)
seeking to require divestiture by the Purchaser or any of its affiliates of
any Shares; or
(b) any action taken, or any statute, rule, regulation, injunction,
order or decree proposed, enacted, enforced, promulgated, issued or deemed
applicable to the Offer, the acceptance for payment of or payment for
Shares or the Merger, by any court, government or governmental authority or
agency, domestic, foreign or supranational, other than the application of
the waiting period provisions of the HSR Act to the Offer or the Merger,
that, in the reasonable judgment of the Purchaser, might directly or
5
<PAGE> 7
indirectly, result in any of the consequences referred to in clauses (i)
through (iv) of paragraph (a) above.
See "The Tender Offer -- Certain Conditions of the Offer" in the Offer to
Purchase, as amended.
THE MERGER AGREEMENT
The parties to the Merger Agreement (as defined the Offer to Purchase)
intend to amend the Merger Agreement by a First Amendment to the Agreement and
Plan of Merger (the "First Amendment") to change the structure of the Merger so
that the Purchaser, rather than a wholly-owned subsidiary of the Purchaser,
would be merged with and into the Company (the "Merger" and, together with the
Offer, the "Transaction"). After the Merger, the Company would continue as the
Surviving Corporation.
It is anticipated that the First Amendment will also provide that the
Company, rather than the Purchaser, will fund the "Rabbi" trust referred to
under "Financing of the Transaction -- QVC Bridge Loan" above, the Company will
be authorized to draw cash funds from the "Rabbi" trust for the purpose of
repurchasing any outstanding Options for a price equal to the difference between
$46 per share and the per share exercise price of such Options at any time after
consummation of the Offer, which the Company will be permitted to do, that the
Company may accelerate the vesting of any outstanding Option, and that the
Company will be permitted to make the Company Loan.
A copy of the First Amendment is filed as Exhibit (c)(35) to the Schedule
14D-1, and the foregoing summary description is qualified in its entirety by
reference to such exhibit.
PARAMOUNT OPTIONS
On August 15, 1994 the options (the "Paramount Options") to purchase an
aggregate of 14,294,600 shares of Common Stock, which the Company granted to
BellSouth, Cox and Advance pursuant to the Stock Option Agreement, expired
without the exercise thereof, in whole or in part, by any of BellSouth, Cox or
Advance. In connection with the expiration of the Paramount Options, except as
otherwise expressly provided therein, the Stock Option Agreement (including the
Acknowledgement and Agreement executed by Comcast and Liberty and the other
agreements ancillary thereto and referred to therein) by its terms, including,
without limitation, BellSouth's agreement to become a party to the Stockholders
Agreement in the event that it purchased shares of Common Stock pursuant to the
Stock Option Agreement, became void and of no effect as to the Company and each
of BellSouth, Cox and Advance. As a result of the expiration of the Paramount
Options, the number of outstanding Fully Diluted Shares set forth in the Offer
to Purchase (which number had excluded the shares of Common Stock underlying the
Paramount Options) did not change.
REGULATORY APPROVALS
On November 4, 1994, the FCC granted consent to the transfer of control of
the Company's three domestic fixed-satellite earth station licenses from the
stockholders of the Company to the Purchaser.
SPECIAL FACTORS
Subsequent to distribution of the Offer to Purchase, it was amended and
supplemented as follows:
The information set forth in clause (i) of the subsection entitled "Special
Factors -- Fairness of the Transaction -- The Company -- Reasons for
Recommendation" in the Offer to Purchase was amended and supplemented to include
the following information:
In connection with its evaluation of the Company's current financial
condition and results of operations and its future prospects, the Board
considered the historical operating results for the Company as well as the
Company's budgets for its future operations. Among the information the
Board reviewed was the fact that the Company has launched two new domestic
shopping services and that the Company is a partner in home shopping joint
ventures in Mexico and the United Kingdom. The Board was aware that Allen
described that there may be significant near-term growth opportunity for
the Company's base
6
<PAGE> 8
business in view of the increasing acceptance of the home shopping
industry, but that the Company's rate of growth for its base business has
been decreasing. In addition, the Board noted that the Company's base
business faces increasing competition from proposed new entrants in the
televised home shopping industry, which include selected retail department
stores and mail order companies, as well as from other participants in the
industry. The Board also considered the information presented to the Board
by Allen and described in clauses (ii) and (iii) below and under
"-- Opinions and Reports of Financial Advisors -- Opinion of Allen &
Company".
The information set forth in clause (ii) of the subsection entitled
"Special Factors -- Fairness of the Transaction -- The Company -- Reasons for
Recommendation" in the Offer to Purchase was amended and supplemented to include
the following information:
In arriving at its recommendation, the Board also considered the
fairness of the consideration to be paid to stockholders in the Offer and
Merger in relation to the Company's net book value. Based on Allen's
analysis, $46 per share of Common Stock reflects a multiple of book value
of 3.89, which falls within the range of multiples of book value in
selected merger transactions that Allen analyzed, which ranged from .53 to
4.34. The Board was aware that certain valuations of the Company by Allen
reflected values higher than the consideration to be paid in the Offer. See
"-- Opinions and Reports of Financial Advisors -- Opinion of Allen &
Company".
The information set forth in clause (v) of the subsection entitled "Special
Factors -- Fairness of the Transaction -- The Company -- Reasons for
Recommendation" in the Offer to Purchase was amended and supplemented to include
the following information:
The Company considered certain restructuring alternatives, such as a
tender offer by the Company for its Shares or the issuance of debt
securities to the Company's stockholders, which would allow the Company to
remain independent and the stockholders to retain an equity interest in the
Company; however, following discussion with Allen with respect to these
alternatives, the Board concluded that the consideration to be paid to
stockholders in the Offer and Merger was in the best interests of
stockholders.
The information set forth in the subsection entitled "Special
Factors -- Fairness of the Transaction -- Comcast and Liberty" in the Offer to
Purchase was amended and supplemented to include the following information:
Comcast and Liberty recognized the fact that the Transaction is not
structured so that approval of at least a majority of unaffiliated security
holders is required, but did not consider this fact to be material to a
determination of the fairness of the Transaction to unaffiliated security
holders.
Comcast and Liberty recognized the fact that a majority of directors
who are not employees of the Company has not retained an independent
representative to act solely on behalf of unaffiliated security holders for
the purposes of negotiating the terms of the Transaction and/or preparing a
report concerning the fairness of the Transaction, but Comcast and Liberty
did not consider this fact to be material to a determination of the
fairness of the transaction to unaffiliated security holders in light of
the fact that Ralph J. and Brian L. Roberts did not participate in the
deliberations or decisions relating to the Merger Agreement and the
engagement of Allen & Company by the Board, the fact that the Merger
Agreement and the Transaction were unanimously approved by the directors of
the Company other than Ralph J. and Brian L. Roberts, and the fact that the
Offer price and the other terms of the Merger Agreement were the result of
arms-length negotiations between Comcast and Liberty and their respective
advisors, on the one hand, and the Company and its advisors, on the other
hand.
Comcast and Liberty believe that the analyses contained in the Lazard
Report, which included, among other things, an analysis of the going
concern value of the Company, provide a sufficient basis for Comcast's and
Liberty's consideration of the value of the Company. See "-- Opinions and
Reports of Financial Advisors -- Opinions and Report of Lazard". Therefore,
Comcast and Liberty did not prepare any independent analysis of book value
or liquidation value, and did not believe it necessary to consider whether
the consideration offered to unaffiliated security holders constitutes fair
value in relation to net
7
<PAGE> 9
book value, liquidation value or the purchase price paid in previous
purchases disclosed in Item 1(f) of the Schedule 13E-3.
Comcast and Liberty recognized the fact that certain valuations
obtained by Lazard were higher than the Offer price, while other valuations
obtained by Lazard were lower than the Offer price. See "-- Opinions and
Reports of Financial Advisers -- Opinion and Report of Lazard". Comcast and
Liberty did not consider this fact to be material to a determination of the
fairness of the Transaction to unaffiliated security holders.
Comcast did not obtain a valuation of the consideration offered by CBS
other than that contained in the Lazard Report. The Lazard Report included
a valuation of the consideration offered to the Company's stockholders in
the CBS Proposal based upon projected EBITDA exit multiples of 7.0x, 7.5x,
8.0x, 8.5x and 9.0x for CBS and the Company and derived implied deal prices
of the CBS Proposal ranging from $31 to $41 per share of the Company's
Common Stock. Based upon the Lazard Report, Comcast determined that the
implied deal price for the Company's Common Stock in the CBS Proposal was
$41 per share.
Liberty did not prepare an independent analysis of the CBS Proposal
and did not retain any person to prepare such an analysis on its behalf.
Liberty did, however, review certain summaries of the CBS Proposal prepared
by Allen for the Company in connection with Liberty's review of the CBS
Proposal and its determination of whether to support the CBS Proposal. Such
summaries contained an estimate of the value of the consideration to be
offered by CBS as part of the CBS Proposal that implied a value of
approximately $35 to $47 per share of Common Stock, based on a range of
multiples of estimated pro forma 1994 EBITDA for CBS and the Company
between 8.0x and 10.0x. In addition, following the announcement of the
Comcast Proposal and the termination of the CBS Proposal, Liberty also
reviewed certain portions of the Lazard Report provided to Liberty by
Comcast relating to the value of the CBS Proposal. Other than its review of
the Allen summary and portions of the Lazard Report, Liberty did not
prepare any independent analysis of the value of the Common Stock in the
CBS Proposal and did not attempt to verify the information contained in the
summaries prepared by Allen or in the Lazard Report.
The information set forth in clause (v) of the subsection entitled "Special
Factors -- Opinions and Reports of Financial Advisors -- Opinion of Allen &
Company" in the Offer to Purchase was amended and supplemented to include the
following information:
Allen's analysis yielded a per share valuation ranging between $34.18
based on a 25% discount rate and a multiple of projected EBITDA of 7.0 and
$58.88 based on a 15% discount rate and a multiple of projected EBITDA of
9.0.
The information set forth in clause (vi) of the subsection entitled
"Special Factors -- Opinions and Reports of Financial Advisors -- Opinion of
Allen & Company" in the Offer to Purchase was amended and restated in its
entirety as follows:
(vi) Other Factors Considered. (a) Allen reviewed recent trends in
the market price and trading volume of the shares of Common Stock. (b)
Allen compared the recent trends in the market price of the Common Shares
with the Standard & Poor's 500 Index, an index comprised of the Cable
Programming Companies and an index comprised of the Specialty Retailing
Companies. (c) Allen compared market reaction as reflected in the price of
the shares of Common Stock relating to selected public announcements
relating to the Company. This comparison included, among other things, a
review of the market prices of the shares of Common Stock prior to and
following the announcement of the CBS Proposal and the announcement of the
Comcast Proposal and prior to the announcement of the July 21, 1994 revised
proposal of Comcast and Liberty (the "Comcast/Liberty Proposal"), and
reviewed certain other relevant factors influencing the price of the shares
of Common Stock. (d) Allen considered the foregoing analyses, together with
the other analyses Allen made, and analyzed the relevant dates for purposes
of determining a representative value for the shares of Common Stock. Allen
concluded that the closing market price of $32.38 on June 29, 1994, the
date prior to the announcement of the CBS Proposal, was a representative
price for the shares of Common Stock and the consideration to be paid in
the Offer and the
8
<PAGE> 10
Merger represented a 42.1% premium over the market price on that date. (e)
Allen compared the premium of the $46 price to be paid in the Offer and the
Merger to various recent market prices for the shares of Common Stock and
to premiums paid in selected cash merger transactions. The premium of the
$46 price over market prices for the shares of Common Stock on the
Comparison Dates and on certain dates prior to June 29, 1994 ranged from
42.1% on June 29, 1994 to 4.0% on August 2, 1994 (the date prior to Comcast
and Liberty advising the Company that they would consider a transaction
involving an increase in consideration to be paid pursuant to the
Comcast/Liberty Proposal to $46 per share (on a common equivalent basis)).
The premiums paid in selected all cash merger transactions ranged from
10.0% to 82.5%. The multiple of sales, EBITDA, net income and book value in
selected merger transactions ranged from 0.10 to 6.22 (compared to a 1.79
multiple of sales based on a $46 per share of Common Stock valuation), 1.1
to 30.0 (compared to an 11.4 multiple of EBITDA based on a $46 per share of
Common Stock valuation), 10.7 to 27.2 (compared to a 29.2 multiple of net
income based on a $46 per share of Common Stock valuation) and 0.53 to 4.34
(compared to a 3.89 multiple of book value based on a $46 per share of
Common Stock valuation), respectively.
Allen determined from the foregoing that (a) the premium of the Offer and
the Merger price over the recent market prices for the shares of Common Stock
fell within the range of premiums paid in selected all cash merger transactions
and (b) the multiples of sales, EBITDA, net income and book value offered to the
Company in the Offer and the Merger fell within or above the range of such
multiples in selected merger transactions in generally comparable industries.
CERTAIN INFORMATION CONCERNING THE COMPANY
The following selected financial data relating to the Company and its
subsidiaries has been taken or derived from the audited financial statements
contained in the Company 10-K (as defined in the Offer to Purchase) and the
unaudited financial statements contained in the Company's Quarterly Reports on
Form 10-Q for its fiscal quarters ended October 31, 1994 and 1993 (the "Nine
Month Company 10-Qs"). More comprehensive financial information is included in
the Company 10-K and the Nine Month Company 10-Qs and the other documents filed
by the Company with the Commission, and the financial data set forth below is
qualified in its entirety by reference to such reports and other documents
including the financial statements contained therein. Such reports and other
documents may be examined and copies may be obtained from the offices of the
Commission in the manner set forth below.
9
<PAGE> 11
QVC, INC.
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
<TABLE>
<CAPTION>
AT AND FOR THE AT AND FOR THE
NINE MONTHS ENDED FISCAL YEAR ENDED
OCTOBER 31, JANUARY 31,
------------------------ ------------------------------------
1994 1993 1994 1993 1992
---------- -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net revenue..................... $ 964,185 $849,615 $1,222,104 $1,070,587 $921,804
Income before extraordinary item
and cumulative effect of
change in accounting
principle.................... 38,256 52,465 55,311 56,588 21,733
Net income...................... 38,256 56,455 59,301 55,092 19,625
Income per common share:
Primary:
Income before extraordinary
item and cumulative effect
of change in accounting
principle.................. .78 1.04 1.10 1.32 .68
Net income.............. .78 1.12 1.18 1.29 .61
Fully diluted:
Income before extraordinary
item....................... .78 1.04 1.10 1.27 .67
Net income.............. .78 1.12 1.18 1.24 .61
Cash dividends per common
share........................ -- -- -- -- --
Balance Sheet Data:
Total assets.................... 1,009,357 828,879 878,160 699,695 714,539
Long-term debt, less current
maturities................... 6,599 7,185 7,044 7,586 152,461
Supplementary Data:
Ratio of earnings to fixed
charges...................... 8.86x 11.10x 23.45x 4.88x 1.99x
Book value per common share..... $ 13.17 $ 12.22 $ 12.32 $ 10.34 $ 8.96
</TABLE>
The information concerning the Company contained herein has been taken from
or is based upon reports and other documents on file with the Commission or
otherwise publicly available. Although the Purchaser does not have any knowledge
that would indicate that any statements contained herein based upon such reports
and documents are untrue, the Purchaser does not take any responsibility for the
accuracy or completeness of the information contained in such reports and other
documents or for any failure by the Company to disclose events that may have
occurred and may affect the significance or accuracy of any such information but
that are unknown to the Purchaser.
The Company is subject to the informational requirements of the Exchange
Act and in accordance therewith files periodic reports, proxy statements and
other information with the Commission relating to its business, financial
condition and other matters. The Company is required to disclose in such proxy
statements certain information, as of particular dates, concerning the Company's
directors and officers, their remuneration, stock options granted to them, the
principal holders of the Company's securities and any material interest of such
persons in transactions with the Company. Such reports, proxy statements and
other information may be inspected at the public reference facilities maintained
by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549 and should also be available for inspection and copying at the regional
offices of the Commission of New York (Jacob K. Jarvis Federal Building, 26
Federal Plaza, New York, New York 10278) and Chicago (Everett McKinley Dirksen
Building, 219 South Dearborn Street, Chicago, Illinois 60604). Copies of such
material can also be obtained from the Public Reference Section of the
Commission in Washington, D.C. 20549, at prescribed rated.
10
<PAGE> 12
CERTAIN INFORMATION CONCERNING THE PURCHASER AND PARENT PURCHASERS
The TCI/Liberty Merger (as defined in the Offer to Purchase) was
consummated on August 4, 1994. In connection with the TCI/Liberty Merger and the
subsequent restructuring of the assets of TCI, (a) the corporate name of Liberty
Media Corporation was changed to TCI Cable Investments, Inc. (hereinafter
referred to as "Old Liberty") and a new wholly-owned subsidiary of TCI was
incorporated under the name "Liberty Media Corporation" (hereinafter referred to
as "Liberty", which entity presently holds substantially all of the programming
assets owned by TCI), (b) Liberty QVC, Inc., which at the time of the execution
of the Joint Bidding Agreement was the wholly-owned subsidiary of Old Liberty
that held all of the Shares to be contributed by Old Liberty to the Purchaser in
the Parent Contribution, became a wholly-owned subsidiary of Liberty, and
Liberty QVC, Inc. continues to hold such Shares, and (c) certain former
subsidiaries of Old TCI that held Shares became wholly-owned subsidiaries of
Liberty or transferred their Shares to Liberty or its wholly-owned subsidiaries.
As a result of the events described in the foregoing paragraph, TCI and
Comcast entered into a letter agreement (the "TCI Letter Agreement") dated as of
October 13, 1994. The TCI Letter Agreement provides, among other things, that
Liberty (a) agrees to be bound by all of the provisions of the Joint Bidding
Agreement, (b) assumes and agrees, subject to the terms and conditions set forth
therein, to perform all liabilities and obligations of Old Liberty under the
Joint Bidding Agreement (including, but not limited to, the obligations
regarding the contribution to the Purchaser of Shares (the "Liberty Shares") and
cash in connection with the consummation of the Offer) and (c) agrees to make an
additional contribution to the Purchaser of the 17,922 shares of Series B
Preferred Stock and 113,040 shares of Common Stock acquired by Liberty as a
result of the transactions described in clause (c) of the preceding paragraph
(the "Liberty Additional Shares") upon the same terms and conditions as the
Liberty Shares are to be contributed to the Purchaser. The TCI Letter Agreement
further provides that the contribution of the Liberty Additional Shares will
reduce the amount of cash to be contributed by Liberty to the Purchaser pursuant
to the Joint Bidding Agreement in connection with the consummation of the Offer
by $13,443,960 (which is the amount obtained by multiplying the 292,260 Fully
Diluted Shares comprising the Liberty Additional Shares by the Offer price of
$46 per share of Common Stock), and as a result the Liberty Additional
Contribution (as defined in the Joint Bidding Agreement) will be $6,556,040. See
"Financing of the Transaction" in the Offer to Purchase, as amended.
11
<PAGE> 13
Facsimile copies of the Letter of Transmittal will be accepted. The Letter
of Transmittal and certificates for Shares and any other required documents
should be sent to the Depositary at one of the addresses set forth below:
The Depositary
THE BANK OF NEW YORK
(For Information Call (800) 507-9357)
<TABLE>
<S> <C> <C>
By Mail: By Facsimile: By Hand of Overnight Courier:
Tender & Exchange Dept. (212) 815-6213 Tender & Exchange Dept.
P.O. Box 11248 101 Barclay Street
Church Street Station Confirm by telephone Receive and Deliver Window
New York, NY 10286-1248 (800) 507-9357 New York, NY 10286
</TABLE>
Questions or requests for assistance or additional copies of the Offer to
Purchase, this Supplement and the Letter of Transmittal may be directed to the
Information Agent or the Dealer Manager at their respective addresses and
telephone numbers set forth below. Stockholders may also contact their broker,
dealer, commercial bank or trust company for assistance concerning the Offer.
The Information Agent is:
D.F. KING & CO., INC.
<TABLE>
<S> <C> <C>
135 South LaSalle Street 77 Water Street 9841 Airport Boulevard
Chicago, Illinois 60603 New York, New York 10005 Los Angeles, California 90045
(312) 236-5881 (collect) (212) 269-5550 (collect) (213) 215-3860 (collect)
</TABLE>
OR
CALL TOLL-FREE (800) 735-3591
The Dealer Manager for the Offer is:
LAZARD FRERES & CO.
One Rockefeller Plaza
New York, New York 10020
(212) 632-6000
(call collect)
February 3, 1995
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER SHARES
OF
COMMON STOCK,
SERIES B PREFERRED STOCK
AND
SERIES C PREFERRED STOCK
OF
QVC, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED AUGUST 11, 1994
OF
QVC PROGRAMMING HOLDINGS, INC.
THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON
THURSDAY, FEBRUARY 9, 1995, UNLESS THE OFFER IS EXTENDED.
To: The Bank of New York, DEPOSITARY
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand or Overnight Courier:
Tender & Exchange (212) 815-6213 Tender & Exchange
Department Department
P.O. Box 11248 Confirm by Telephone: 101 Barclay Street
Church Street Station (800) 507-9357 Receive and Deliver Window
New York, NY 10286-1248 New York, NY 10286
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSIONS OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A
NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This revised Letter of Transmittal or the previously circulated original
Letter of Transmittal is to be used by stockholders if certificates for Shares
(as defined below) are to be forwarded herewith or, unless an Agent's Message
(as defined in the Offer to Purchase) is utilized, if delivery of Common Shares
is to be made by book-entry transfer to the Depositary's account at The
Depository Trust Company, Midwest Securities Trust Company or Philadelphia
Depository Trust Company (hereinafter collectively referred to as the
"Book-Entry Transfer Facilities") pursuant to the procedures set forth under
"The Tender Offer -- 3. Procedure for Tendering Shares" in the Offer to Purchase
dated August 11, 1994, as amended. Stockholders who tender Common Shares by
book-entry transfer are referred to herein as "Book-Entry Stockholders."
Holders of Shares whose certificates for such Shares (the "Share
Certificates") are not immediately available or who cannot deliver their Share
Certificates and all other documents required hereby to the Depositary on or
prior to the Expiration Date (as defined in the Offer to Purchase) or who cannot
complete the procedures for book-entry transfer on a timely basis, must tender
their Shares pursuant to the guaranteed delivery procedure set forth under "The
Tender Offer -- 3. Procedure for Tendering Shares" in the Offer to Purchase. See
Instruction 2.
<PAGE> 2
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- --------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES)
OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK,
EXACTLY AS NAME(S) APPEAR(S)
ON SHARE CERTIFICATE(S))
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
SHARE CERTIFICATE(S) AND SHARE(S) TENDERED
(ATTACH ADDITIONAL LIST IF NECESSARY)
- ---------------------------------------------------------------------------------------------------------
CLASS AND SERIES TOTAL NUMBER
SHARE OF SHARES OF SHARES NUMBER OF
CERTIFICATE REPRESENTED BY REPRESENTED BY SHARES
NUMBER(S)* SHARE CERTIFICATE(S) SHARE CERTIFICATE(S)* TENDERED**
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
TOTAL SHARES OF COMMON STOCK........................
------------------------
TOTAL SHARES OF SERIES B PREFERRED STOCK............
------------------------
TOTAL SHARES OF SERIES C PREFERRED STOCK............
- ---------------------------------------------------------------------------------------------------------
* NEED NOT BE COMPLETED BY STOCKHOLDERS TENDERING BY BOOK-ENTRY TRANSFER.
** UNLESS OTHERWISE INDICATED, IT WILL BE ASSUMED THAT ALL SHARES REPRESENTED BY ANY CERTIFICATES
DELIVERED TO THE DEPOSITARY ARE BEING TENDERED. SEE INSTRUCTION 4.
- ---------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: SIGNATURES MUST BE PROVIDED ON THE INSIDE AND REVERSE BACK COVER
PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY
<TABLE>
<S> <C> <C>
/ / CHECK HERE IF TENDERED COMMON SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE
DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND COMPLETE THE FOLLOWING:
Name of Tendering Institution....................................................................
Account No.....................................................................................at
/ / The Depository Trust Company
/ / Midwest Securities Trust Company
/ / Philadelphia Depository Trust Company
Transaction Code No. ............................................................................
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY
PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING. PLEASE ENCLOSE A PHOTOCOPY OF SUCH
NOTICE OF GUARANTEED DELIVERY:
Name(s) of Registered Stockholder(s).............................................................
Window Ticket Number (if any): ..................................................................
Date of Execution of Notice of Guaranteed Delivery...............................................
Name of Institution which Guaranteed Delivery....................................................
</TABLE>
------------------------
<PAGE> 3
Ladies and Gentlemen:
The undersigned hereby tenders to QVC Programming Holdings, Inc., a
Delaware corporation (the "Purchaser") to be wholly owned by Comcast
Corporation, a Pennsylvania corporation ("Comcast") and Liberty Media
Corporation, a Delaware corporation ("Liberty" and, together with Comcast, the
"Parent Purchasers") and a wholly-owned subsidiary of Tele-Communications, Inc.,
the above-described shares (the "Shares") of Common Stock, $.01 par value per
share (the "Common Stock"), and Series B Preferred Stock and Series C Preferred
Stock, each $.10 par value per share (together, the "Preferred Stock"), of QVC,
Inc., a Delaware corporation (the "Company"), pursuant to the Purchaser's offer
to purchase all outstanding Shares at a price of $46 per share of Common Stock
and $460 per share of Preferred Stock, net to the seller in cash, without
interest thereon, upon the terms and subject to the conditions set forth in the
Offer to Purchase dated August 11, 1994 (the "Offer to Purchase"), the
Supplement to Offer to Purchase dated February 3, 1995 (the "Supplement"),
receipt of which is hereby acknowledged, and in this revised Letter of
Transmittal (which, together with the Offer to Purchase, the Supplement, the
amendments thereto, and the related Letter of Transmittal, constitute the
"Offer"). For purposes of this Letter of Transmittal, "Common Shares" means the
Shares of Common Stock and "Preferred Shares" means the Shares of Preferred
Stock. The Purchaser reserves the right to transfer or assign, in whole or from
time to time in part, to one or more of its subsidiaries or affiliates the right
to purchase any or all Shares tendered pursuant to the Offer.
Subject to, and effective upon, acceptance for payment of and payment for
the Shares tendered herewith in accordance with the terms and subject to the
conditions of the Offer, the undersigned hereby sells, assigns and transfers to,
or upon the order of, the Purchaser all right, title and interest in and to all
the Shares that are being tendered hereby (and any and all other Shares or other
securities issued or issuable in respect thereof on or after August 4, 1994) and
any and all dividends thereon or distributions with respect thereto and
irrevocably appoints the Depositary the true and lawful agent, attorney-in-fact
and proxy of the undersigned to the full extent of the undersigned rights with
respect to the Shares (and all such other Shares or securities), with full power
of substitution (such power of attorney and proxy being deemed to be an
irrevocable power coupled with an interest), to (a) deliver Share Certificates
for such Shares (and all such other Shares and securities), or, in the case of
Common Shares, transfer ownership of such Common Shares (and all such other
Common Shares or securities) on the account books maintained by any of the
Book-Entry Transfer Facilities, together, in any such case, with all
accompanying evidences of transfer and authenticity, to or upon the order of the
Purchaser upon receipt by the Depositary, or as the undersigned's agent, of the
purchase price, (b) present such Shares for transfer on the books of the Company
and (c) receive all benefits and otherwise exercise all rights of beneficial
ownership of such Shares, all in accordance with the terms of the Offer.
The undersigned hereby irrevocably appoints Brian L. Roberts, John R.
Alchin and Stanley L. Wang and each of them, the attorneys-in-fact and proxies
of the undersigned, each with full power of substitution, to exercise all voting
and other rights of the undersigned in such manner as each such attorney and
proxy or his substitute shall in his sole discretion deem proper, with respect
to all of the Shares tendered hereby which have been accepted for payment by the
Purchaser prior to the time of any vote or other action for which the
undersigned is entitled to vote at any meeting of stockholders (whether annual
or special and whether or not an adjourned meeting), by written consent or
otherwise. This power of attorney and proxy is coupled with an interest in the
Company and in the Shares and is irrevocable and is granted in consideration of,
and is effective upon, the acceptance for payment of such Shares by the
Purchaser in accordance with the terms of the Offer. Such acceptance for payment
shall revoke, without further action, any other power of attorney or proxy
granted by the undersigned at any time with respect to such Shares and no
subsequent powers of attorneys or proxies will be given (and if given will be
deemed not to be effective) with respect thereto by the undersigned. The
undersigned understands that the Purchaser reserves the right to require that,
in order for such Shares to be deemed validly tendered, immediately upon the
Purchaser's acceptance for payment of such Shares, the Purchaser is able to
exercise full voting rights with respect to such Shares and other securities,
including voting at any meeting of stockholders.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby and that when the same are accepted for payment by the
Purchaser, the Purchaser will acquire good and unencumbered title thereto, free
and clear of all liens, restrictions, charges and encumbrances and not subject
to any adverse claims. The undersigned will, upon request, execute and deliver
any additional documents deemed by the Depositary or the Purchaser to be
necessary or desirable to complete the sale, assignment and transfer of the
Shares tendered hereby. In addition, the undersigned will promptly remit and
transfer to the Depositary for the account of the Purchaser any and all other
distributions in respect of the Shares tendered hereby, accompanied by
appropriate documentation of transfer and, pending such remittance or
appropriate assurance thereof, the Purchaser shall be entitled to all rights and
privileges as owner of any such distributions, and may withhold the entire
purchase price or deduct from the purchase price of Shares tendered hereby, the
amount or value thereof, as determined by the Purchaser in its sole discretion.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned, and any obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned. Except as stated in the Offer, this tender is
irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described under "The Tender Offer -- 3. Procedure for Tendering
Shares" in the Offer to Purchase and in the instructions hereto will constitute
a binding agreement between the undersigned and the Purchaser upon the terms and
subject to the conditions of the Offer.
<PAGE> 4
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or return any Share
Certificates not tendered or accepted for payment in the name(s) of the
undersigned. Similarly, unless otherwise indicated under "Special Delivery
Instructions," please mail the check for the purchase price and/or return any
Share Certificates not tendered or accepted for payment (and accompanying
documents, as appropriate) to the undersigned at the address shown below the
undersigned's signature. In the event that both the "Special Delivery
Instructions" and the "Special Payment Instructions" are completed, please issue
the check for the purchase price and/or return any Share Certificates not
tendered or accepted for payment in the name(s) of, and deliver said check
and/or return certificates to, the person or persons so indicated. Stockholders
tendering Common Shares by book-entry transfer may request that any Common
Shares not accepted for payment be returned by crediting such account maintained
at such Book-Entry Transfer Facility as such stockholder may designate by making
an appropriate entry under "Special Payment Instructions." The undersigned
recognizes that the Purchaser has no obligation pursuant to the "Special Payment
Instructions" to transfer any Shares from the name of the registered holder
thereof if the Purchaser does not accept for payment any of such Shares.
<PAGE> 5
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the purchase price of Shares
purchased or Shares Certificates not tendered or not purchased are to be issued
in the name of someone other than the undersigned, or if Common Shares tendered
by book-entry transfer that are not purchased are to be returned by credit to an
account at one of the Book-Entry Transfer Facilities other than that designated
above.
Issue check and/or certificates to:
Name............................................................................
(Please Print)
Address.........................................................................
...............................................................................
(Zip Code)
................................................................................
(Taxpayer Identification No. or Social Security No.)
(See Substitute Form W-9 below)
/ / Credit unpurchased Common Shares tendered by book-entry transfer to the
account set forth below:
Name of Account Party...........................................................
Account No. ................................................................. at
/ / The Depository Trust Company
/ / Midwest Securities Trust Company
/ / Philadelphia Depository Trust Company
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the purchase price of Shares
purchased or Shares Certificates not tendered or not purchased are to be mailed
to someone other than the undersigned or to the undersigned at an address other
than that shown below the undersigned's signature(s).
Mail check and/or certificates to:
Name............................................................................
(Please Print)
Address.........................................................................
...............................................................................
(Zip Code)
................................................................................
(Taxpayer Identification No. or Social Security No.)
<PAGE> 6
<TABLE>
<C> <S> <C>
SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9 BELOW)
............................................................................
Signature(s) of Owner(s)
............................................................................
Dated................................................................., 1994
Name(s) ....................................................................
(Please Print)
............................................................................
Capacity (full title) ......................................................
Address ....................................................................
............................................................................
............................................................................
(Include Zip Code)
Area Code and Telephone No. ................................................
Tax Identification or Social Security No. ..................................
(See Substitute Form W-9 on Reverse Side)
(Must be signed by registered holder(s) exactly as name(s) appear(s) on stock certificate(s) or on
a security position listing or by person(s) authorized to become registered holder(s) by
certificates and documents transmitted herewith. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a
fiduciary or representative capacity, please set forth full title and see Instruction 5.)
Guarantee of Signature(s)
(If required -- See Instructions 1 and 5)
Name of Firm ...............................................................
Authorized Signature .......................................................
Name .......................................................................
Address ....................................................................
Area Code and Telephone Number .............................................
Dated................................................................., 1994
</TABLE>
<PAGE> 7
TO BE COMPLETED BY ALL TENDERING STOCKHOLDERS
(SEE INSTRUCTION 8)
PAYER'S NAME: THE BANK OF NEW YORK
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
SUBSTITUTE PART I -- PLEASE PROVIDE YOUR ----------------------------------
FORM W-9 TIN IN THE BOX AT THE RIGHT AND Social Security Number
CERTIFY BY SIGNING AND DATING or
DEPARTMENT OF THE BELOW.
TREASURY INTERNAL ----------------------------------
REVENUE SERVICE Employer Identification Number
PAYER'S REQUEST FOR
TAXPAYER IDENTIFICATION
NUMBER (TIN)
</TABLE>
- --------------------------------------------------------------------------------
PART II
- --------------------------------------------------------------------------------
CERTIFICATION -- Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct taxpayer identification number
(or I am waiting for a number to be issued to me);
(2) I am not subject to backup withholding because (a) I am exempt from backup
withholding, or (b) I have not been notified by the Internal Revenue
Service ("IRS") that I am subject to backup withholding as a result of a
failure to report all interest or dividends, or (c) the IRS has notified
me that I am no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you
have been notified by the IRS that you are currently subject to backup
withholding because of underreporting interest or dividends on your tax
return. However, if after being notified by the IRS that you were subject
to backup withholding you received another notification from the IRS that
you are no longer subject to backup withholding, do not cross out such
item (2).
- -------------------------------------------------------------------------------
SIGNATURE DATE , 1995 PART III
---------------------------- ---------- Awaiting TIN / /
- -------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF
SUBSTITUTE FORM W-9.
- -------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office
or (2) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number by
the time of payment, 31% of all reportable payments made to me will be
withheld, but that such amounts will be refunded to me if I then provide a
Taxpayer Identification Number within sixty (60) days.
Signature Date
--------------------------------- ---------------------------
- --------------------------------------------------------------------------------
<PAGE> 8
SECTION 1445 CERTIFICATION
A. FORM FOR INDIVIDUAL TRANSFERORS
Section 1445 of the Internal Revenue Code provides that a transferee
(buyer) of a U.S. real property interest must withhold tax if the transferor
(seller) is a foreign person. To inform the transferee (buyer) that withholding
of tax is not required upon my disposition of a U.S. real property interest, I,
, hereby certify the following:
1. I am not a nonresident alien for purposes of U.S. income taxation;
2. My U.S. taxpayer identifying number (Social Security number) is
______________________
3. My home address is: _________________________________________________
_________________________________________________
I understand that this certification may be disclosed to the Internal
Revenue Service by the transferee and that any false statement I have made here
could be punished by fine, imprisonment, or both.
Under penalties of perjury I declare that I have examined this
certification and to the best of my knowledge and belief it is true, correct,
and complete.
SIGNATURE _____________________________________ DATE ___________________, 1995
B. FORM FOR ENTITY TRANSFERORS
Section 1445 of the Internal Revenue Code provides that a transferee of a
U.S. real property interest must withhold tax if the transferor is a foreign
person. To inform the transferee that withholding of tax is not required upon
the disposition of a U.S. real property interest by it, the undersigned hereby
certifies on behalf of _______________ the following information with respect to
it:
1. It is not a foreign corporation, foreign partnership, foreign trust, or
foreign estate (as those terms are defined in the Internal Revenue Code
and Income Tax Regulations).
2. U.S. employer identification number: _________________________________
3. Office address: ______________________________________________________
It is understood that this certification may be disclosed to the Internal
Revenue Service by transferee and that any false statement contained herein
could be punished by fine, imprisonment or both.
Under penalties of perjury I declare that I have examined this
certification and to the best of my knowledge and belief it is true, correct and
complete, and I further declare that I have authority to sign this document on
behalf of the aforementioned entity.
SIGNATURE _____________________________________ DATE ____________________, 1995
TITLE _________________________________________
NOTE: SEE INSTRUCTION 9 FOR INFORMATION REGARDING THIS FORM.
<PAGE> 9
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Guarantee of Signatures. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a firm which is a
member of a registered national securities exchange or the National Association
of Securities Dealers, Inc., or by a commercial bank or trust company having an
office or correspondent in the United States (an "Eligible Institution").
Signatures on this Letter of Transmittal need not be guaranteed (a) if this
Letter of Transmittal is signed by the registered holder(s) of the Shares (which
term, in the case of Common Shares and for purposes of this document, shall
include any participant in one of the Book-Entry Transfer Facilities whose name
appears on a security position listing as the owner of Common Shares) tendered
herewith and such holder(s) have not completed the instruction entitled "Special
Payment Instructions" on this Letter of Transmittal or (b) if such Shares are
tendered for the account of an Eligible Institution. See Instruction 5.
2. Delivery of Letter of Transmittal and Shares. This Letter of Transmittal
is to be used either if Share Certificates are to be forwarded herewith or,
unless an Agent's Message (as defined in the Offer to Purchase, as amended), is
utilized, if delivery of Common Shares is to be made by book-entry transfer
pursuant to the procedures set forth under "The Tender Offer -- 3. Procedures
for Tendering Shares" in the Offer to Purchase, as amended. Share Certificates,
or a confirmation of a book-entry transfer into the Depositary's account at one
of the Book-Entry Transfer Facilities of all Common Shares delivered
electronically, as well as a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), or an Agent's Message, and any other
documents required by this Letter of Transmittal, must be received by the
Depositary at one of its addresses set forth on the front page of this Letter of
Transmittal by the Expiration Date. Stockholders whose Share Certificates are
not immediately available or who cannot deliver their Share Certificates and all
other required documents to the Depositary by the Expiration Date or, in the
case of stockholders who hold Common Shares, who cannot complete the procedures
for delivery by book-entry transfer on a timely basis, must tender their Shares
pursuant to the guaranteed delivery procedure set forth under "The Tender
Offer -- 3. Procedures for Tendering Shares" in the Offer to Purchase, as
amended. Pursuant to such procedure: (a) such tender must be made by or through
an Eligible Institution, (b) a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form provided by the Purchaser must be
received by the Depositary by the Expiration Date and (c) the Share Certificates
or a confirmation of a book-entry transfer into the Depositary's account at one
of the Book-Entry Transfer Facilities of all Common Shares delivered
electronically, as well as a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) (or, in the case of a book-entry delivery, an
Agent's Message) and any other documents required by this Letter of Transmittal,
must be received by the Depositary on the National Association of Securities
Dealers, Inc. Automatic Quotation System/National Market System within five
trading days after the date of execution of such Notice of Guaranteed Delivery,
all as provided under "The Tender Offer -- 3. Procedures for Tendering Shares"
in the Offer to Purchase, as amended. If Shares are forwarded separately to the
Depositary, each must be accompanied by a duly executed Letter of Transmittal
(or facsimile thereof).
THE PREFERRED SHARES ARE NOT ELIGIBLE FOR ADMISSION TO THE BOOK-ENTRY
TRANSFER FACILITIES AND DELIVERY OF PREFERRED SHARES MAY NOT BE EFFECTED BY
BOOK-ENTRY TRANSFER.
The method of delivery of Share Certificates, this Letter of Transmittal
and all other required documents including in the case of Common Shares, through
Book-Entry Transfer Facilities, is at the option and sole risk of the tendering
stockholder and the delivery will be deemed made only when actually received by
the Depositary. If delivery is by mail, registered mail with return receipt
requested, properly issued, is recommended. In all cases, sufficient time should
be allowed to ensure timely delivery.
No alternative, conditional or contingent tenders will be accepted, and no
fractional Shares will be purchased. By executing this Letter of Transmittal (or
facsimile thereof), the tendering stockholder waives any right to receive any
notice of the acceptance for payment of the Shares.
3. Inadequate Space. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares and any other required
information should be listed on a separate schedule attached hereto and
separately signed on each page thereof in the same manner as this Letter of
Transmittal is signed.
4. Partial Tenders (not applicable to stockholders who tender by book-entry
transfer). If fewer than all the Shares represented by any certificate delivered
to the Depositary are to be tendered, fill in the number of Shares which are to
be tendered in the box entitled "Number of Shares Tendered". In such case, a new
certificate for the remainder of the Shares represented by the old certificate
will be sent to the person(s) signing this Letter of Transmittal, unless
otherwise provided in the appropriate box on this Letter of Transmittal, as
promptly as practicable following the expiration or termination of the Offer.
All Shares represented by certificates delivered to the Depositary will be
deemed to have been tendered unless otherwise indicated.
5. Signatures on Letter of Transmittal; Stock Powers and Endorsements. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the certificates without alteration, enlargement or any change
whatsoever.
If any of the Shares tendered hereby are held of record by two or more
persons, all such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in different names on
different certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal as there are different registrations of
certificates.
<PAGE> 10
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of certificates or separate stock powers
are required unless payment of the purchase price is to be made, or Shares not
tendered or not purchased are to be returned, in the name of any person other
than the registered holder(s). Signatures on any such certificates or stock
powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, certificates must be
endorsed or accompanied by appropriate stock powers, in either case, signed
exactly as the name(s) of the registered holder(s) appear(s) on the certificates
for such Shares. Signature(s) on any such certificates or stock powers must be
guaranteed by an Eligible Institution.
If this Letter of Transmittal or any certificate or stock power is signed
by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and proper evidence satisfactory to
the Purchaser of the authority of such person so to act must be submitted.
6. Stock Transfer Taxes. Except as noted in this Instruction 6, the
Purchaser will pay any stock transfer taxes with respect to the sale and
transfer of any Shares to it or its order pursuant to the Offer. If, however,
payment of the purchase price is to be made to, or Shares not tendered or not
purchased are to be returned in the name of, any person other than the
registered holder(s), or if a transfer tax is imposed for any reason other than
the sale or transfer of Shares to the Purchaser pursuant to the Offer, then the
amount of any stock transfer taxes (whether imposed on the registered holder(s),
such other person or otherwise) will be deducted from the purchase price unless
satisfactory evidence of the payment of such taxes, or exemption therefrom, is
submitted herewith.
Except as provided in this Instruction 6, it will not be necessary for
Transfer Tax Stamps to be affixed to the certificates listed in this Letter of
Transmittal.
7. Special Payment and Delivery Instructions. If the check for the purchase
price of any Shares purchased is to be issued, or any Shares not tendered or not
purchased are to be returned, in the name of a person other than the person(s)
signing this Letter of Transmittal or if the check or any certificates for
Shares not tendered or not purchased are to be mailed to someone other than the
person(s) signing this Letter of Transmittal or to the person(s) signing this
Letter of Transmittal at an address other than that shown above, the appropriate
boxes on this Letter of Transmittal should be completed. Stockholders tendering
Common Shares by book-entry transfer may request that Common Shares not
purchased be credited to such account at any of the Book-Entry Transfer
Facilities as such stockholder may designate under "Special Payment
Instructions". If no such instructions are given, any such Common Shares not
purchased will be returned by crediting the account at the Book-Entry Transfer
Facilities designated above.
8. Substitute Form W-9. Under the federal income tax laws, the Depositary
will be required to withhold 31% of the amount of any payments made to certain
stockholders pursuant to the Offer. In order to avoid such backup withholding,
each tendering stockholder, and, if applicable, each other payee, must provide
the Depositary with such stockholder's or payee's correct taxpayer
identification number and certify that such stockholder or payee is not subject
to such backup withholding by completing the Substitute Form W-9 set forth
above. In general, if a stockholder or payee is an individual, the taxpayer
identification number is the Social Security number of such individual. If the
Depositary is not provided with the correct taxpayer identification number, the
stockholder or payee may be subject to a $50 penalty imposed by the Internal
Revenue Service. Certain stockholders or payees (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. In order to satisfy the Depositary that
a foreign individual qualifies as an exempt recipient, such stockholder or payee
must submit a statement, signed under penalties of perjury, attesting to that
individual's exempt status. Such statements can be obtained from the Depositary.
For further information concerning backup withholding and instructions for
completing the Substitute Form W-9 (including how to obtain a taxpayer
identification number if you do not have one and how to complete the Substitute
Form W-9 if Shares are held in more than one name), consult the enclosed
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9.
Failure to complete the Substitute Form W-9 will not, by itself, cause
Shares to be deemed invalidly tendered, but may require the Depositary to
withhold 31% of the amount of any payments made pursuant to the Offer. Backup
withholding is not an additional federal income tax. Rather, the federal income
tax liability of a person subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained provided that the required information is furnished to
the Internal Revenue Service.
NOTE: FAILURE TO COMPLETE AND RETURN THE SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
9. Withholding Under Section 1445. In addition to any applicable backup
withholding, under Section 1445 of the Internal Revenue Code of 1986, as amended
(the "Code"), the Depositary will withhold 10% of the amount of any payments
made to foreign stockholders unless the Depositary receives from the Company the
documentation necessary to avoid the withholding tax applicable to transfers of
interest in a "United States real property holding corporation" as defined in
Section 897 of the Code. There can be no assurance that the necessary
documentation will be obtained. Non-foreign stockholders who want to be assured
of avoiding withholding under Section 1445 regardless of whether the necessary
documentation is obtained from the Company must certify, under penalties of
perjury, their non-foreign status by completing the Section 1445 Certification
included in this Letter of Transmittal. Individuals should complete Form A and
entities should complete Form B of the Section 1445 Certification.
<PAGE> 11
Failure to complete the Section 1445 Certification will not, by itself,
cause Shares to be deemed invalidly tendered, but may require the Depositary to
withhold 10% of the amount of any payments made pursuant to the offer. Any
amounts withheld under Section 1445 will be allowed as a credit against such
stockholder's United States federal income tax liability and may entitle such
stockholder to a refund, provided that the Internal Revenue Service determines
that the Company is not a "United States real property holding corporation" and
the required information is furnished to it.
NOTE: FAILURE TO COMPLETE AND RETURN THE SECTION 1445 CERTIFICATION MAY
RESULT IN WITHHOLDING OF 10% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
10. Requests for Assistance or Additional Copies. Requests for assistance
or additional copies of the Offer to Purchase and this Letter of Transmittal may
be obtained from the Information Agent or Dealer Manager at their respective
addresses or telephone numbers set forth below.
11. Lost, Destroyed or Stolen Certificates. If any certificate(s)
representing Shares has been lost, destroyed or stolen, the stockholder should
promptly notify the Depositary. Instructions will then be given as to what steps
must be taken to obtain a replacement certificate(s). The Letter of Transmittal
and related documents cannot be processed until the procedures for replacing
such missing certificate(s) have been followed.
Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal, certificates of Shares
and any other required documents should be sent or delivered by each stockholder
of the Company or his broker, dealer, commercial bank, trust company or other
nominee to the Depositary at one of its addresses set forth below:
The Depositary for the Offer is:
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand or Overnight Courier:
Tender & Exchange (212) 815-6213 Tender & Exchange
Department Confirm by Telephone: Department
P.O. Box 11248 (800) 507-9357 101 Barclay Street
Church Street Station Receive and Deliver
New York, NY 10286-1248 Window
New York, New York 10286
</TABLE>
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
listed below. Additional copies of this Offer to Purchase, the Supplement, this
Letter of Transmittal and other tender offer materials may be obtained from the
Information Agent as set forth below, and will be furnished promptly at the
Company's expense. You may also contact your broker, dealer, commercial bank,
trust company or other nominee for assistance concerning this Offer.
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
(212) 269-5550 (Collect)
(800) 735-3591 (Toll-Free)
The Dealer Manager for the Offer is:
LAZARD FRERES & CO.
One Rockefeller Plaza
New York, New York 10020
(212) 632-6000 (call collect)
<PAGE> 12
GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9
HOW TO OBTAIN A TAXPAYER IDENTIFICATION NUMBER. -- If you do not have a
taxpayer identification number or don't know your number, apply for one
immediately. To apply, obtain FORM SS-5, Application for a Social Security Card
(for individuals), from your local office of the Social Security Administration,
or FORM SS-4, Application for Employer Identification Number (for businesses and
all other entities), from your local IRS office.
PAYEES AND PAYMENTS EXEMPT FROM BACKUP WITHHOLDING. -- Payees specifically
exempted from backup withholding on ALL payments include the following:
(1) A corporation.
(2) An organization exempt from tax under Section 501(a), or an IRA, or a
custodial account under section 403(b)(7).
(3) The United States or any of its agencies or instrumentalities.
(4) A state, the District of Columbia, a possession of the United States,
or any of their political subdivisions or instrumentalities.
(5) A foreign government or any of its political subdivisions, agencies or
instrumentalities.
(6) An international organization or any of its agencies or
instrumentalities.
(7) A foreign central bank of issue.
(8) A registered dealer in securities or commodities registered in the U.S.
or a possession of the U.S.
(9) A real estate investment trust.
(10) An entity registered at all times during the tax year under the
Investment Company Act of 1940.
(11) A common trust fund operated by a bank under section 584(a).
(12) A financial institution.
Payments of dividends and patronage dividends generally not subject to
backup withholding also include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in trade or business in the U.S. and
that have at least one nonresident partner.
- Payments of patronage dividends not paid in money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Payments of interest generally not subject to backup withholding include
the following:
- Payments of interest on obligations issued by individuals.
NOTE: You may be subject to backup withholding if this interest is $600 or
more and is paid in the course of the payer's trade or business and you have
not provided your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends
under section 852).
- Payments described in section 6049(b)(5) to nonresident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible
erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR
TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN AND
DATE THE FORM AND RETURN IT TO THE PAYER.
Payments that are not subject to information reporting are also not subject
to backup withholding. For details, see sections 6041, 6041A(a), 6042, 6044,
6045, 6049, 6050A, and 6050N, and their regulations.
PENALTIES
FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you fail to
furnish your correct taxpayer identification number to a requester, you are
subject to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis that results in no backup
withholding, you are subject to a $500 penalty.
CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
PRIVACY ACT NOTICE. -- Section 6109 requires most recipients of dividends,
interest, or other payments to furnish their correct taxpayer identification
number to persons who must file information returns with the IRS. The IRS uses
the numbers for identification purposes and to help verify the
<PAGE> 13
accuracy of your tax return. You must provide your taxpayer identification
number whether or not you are required to file a tax return. Payers must
generally withhold 31% of taxable interest, dividends, and certain other
payments to a payee who does not furnish a taxpayer identification number to a
payer. Certain penalties may also apply.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL
REVENUE SERVICE.
WHAT NAME AND NUMBER TO GIVE THE REQUESTER
<TABLE>
<C> <S> <C>
---------------------------------------------------------------
GIVE THE NAME AND
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF:
- ---------------------------------------------------------------
1. Individual The individual
2. Two or more individuals (joint The actual owner of
account) the account or, if
combined funds, the
first individual on
the account(1)
3. Custodian account of a minor (Uniform The minor(2)
Gift to Minors Act)
4. a. The usual revocable savings trust The
(grantor is also trustee) grantor-trustee(1)
b. So-called trust account that is not The actual owner(1)
a legal or valid trust under state law
5. Sole proprietorship The owner(3)
---------------------------------------------------------------
GIVE THE NAME AND
EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION NUMBER
OF:
- ---------------------------------------------------------------
6. Sole proprietorship The owner(3)
7. A valid trust, estate or pension trust Legal entity(4)
8. Corporate The corporation
9. Association, club, religious, The organization
charitable, educational, or other
tax-exempt organization
10. Partnership The partnership
11. A broker or registered nominee The broker or nominee
12. Account with the Department of The public entity
Agriculture in the name of a public
entity (such as a state or local
government, school district, or
prison) that receives agricultural
program payments
</TABLE>
- ------------------------------------------------------------------
------------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) You must show your individual name, but you may also enter your business or
"doing business as" name. You may use either your social security number or
employer identification number.
(4) List first and circle the name of the legal trust, estate, or pension trust.
(Do not furnish the taxpayer identification number of the personal
representative or trustee unless the legal entity itself is not designated
in the account title.)
NOTE: IF NO NAME IS CIRCLED WHEN THERE IS MORE THAN ONE NAME, THE NUMBER WILL BE
CONSIDERED TO BE THAT OF THE FIRST NAME LISTED.
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
AND PREFERRED STOCK
OF
QVC, INC.
This Notice of Guaranteed Delivery or one substantially equivalent hereto
must be used to accept the Offer (as defined below) if certificates representing
shares of Common Stock or Preferred Stock (each as defined below) of QVC, Inc.,
a Delaware corporation (the "Company"), and all other documents required by the
revised Letter of Transmittal are not immediately available or cannot be
delivered to the Depositary on or prior to the Expiration Date (as defined in
the Offer to Purchase, as amended), or in the case of Common Shares (as defined
in the Letter of Transmittal) the procedures for delivery of book-entry transfer
cannot be completed on a timely basis. This Notice of Guaranteed Delivery may be
delivered by hand or sent by facsimile transmission or mail to the Depositary.
See "The Tender Offer -- 3. Procedure for Tendering Shares" in the Offer to
Purchase, as amended.
To: THE BANK OF NEW YORK, Depositary
<TABLE>
<S> <C> <C>
By Mail: By Facsimile: By Hand or Overnight Courier:
Tender & Exchange Dept. (212) 815-6213 Tender & Exchange Dept.
P.O. Box 11248 101 Barclay Street
Church Street Station Confirm by telephone: Receive and Deliver Window
New York, NY 10286-1248 (800) 507-9357 New York, NY 10286
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO
A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE
SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
Ladies and Gentlemen:
The undersigned hereby tenders to QVC Programming Holdings, Inc., a
Delaware corporation to be wholly owned by Comcast Corporation, a Pennsylvania
corporation, and Liberty Media Corporation, a Delaware corporation and a
wholly-owned subsidiary of Tele-Communications, Inc., upon the terms and subject
to the conditions set forth in the Offer to Purchase dated August 11, 1994 (the
"Offer to Purchase"), the Supplement to the Offer to Purchase dated February 3,
1995 (the "Supplement") and the related Letters of Transmittal (together, with
amendments thereto, the "Offer"), receipt of which is hereby acknowledged, all
shares indicated below (the "Shares") of Common Stock, $.01 par value per share
(the "Common Stock"), Series B Preferred Stock, $.10 par value per share (the
"Series B Preferred Stock"), and Series C Preferred Stock, $.10 par value per
share (the "Series C Preferred Stock"), of the Company pursuant to the
guaranteed delivery procedures set forth under "The Tender Offer -- 3. Procedure
for Tendering Shares" in the Offer to Purchase, as amended.
<TABLE>
<S> <C>
Number of Shares of Common Stock: .... SIGN HERE
Number of Shares of Series B Preferred
Stock: .............................
Number of Shares of Series C Preferred
Stock: .............................
Certificate Nos. (if available):
...................................... ..........................................
...................................... (Signature(s))
If Common Share(s) will be tendered ..........................................
by book-entry transfer: (Name(s) of Record Holders) (Please Print)
Name of Tendering Institution: ..........................................
(Address)
...................................... ..........................................
(Zip Code)
...................................... ..........................................
(Area Code and Telephone No.)
Account No..........................at ..........................................
Date
</TABLE>
/ / The Depository Trust Company
/ / Midwest Securities Trust Company
/ / Philadelphia Depository Trust Company
<PAGE> 2
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm that is a member in good standing of a registered
national securities exchange or the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States, hereby guarantees to deliver to the Depositary, at one of its
addresses set forth above, the certificates representing all tendered Shares, in
proper form for transfer, together with a properly completed and duly executed
Letter of Transmittal (or facsimile thereof), with any required signature
guarantees, or an Agent's Message (as defined in the Offer to Purchase) in the
case of a book-entry delivery of Common Shares, and any other documents required
by the revised Letter of Transmittal within five trading days on the National
Association of Securities Dealers, Inc. Automated Quotation System/National
Market System after the date of execution of this Notice of Guaranteed Delivery.
.......................................................
(Name of Firm)
.......................................................
(Authorized Signature)
.......................................................
(Name)
.......................................................
(Title)
.......................................................
(Address)
.......................................................
(Zip Code)
.......................................................
(Area Code and Telephone No.)
Dated: .............., 1995
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE OF GUARANTEED
DELIVERY. CERTIFICATES FOR SHARES SHOULD BE SENT WITH YOUR LETTER OF
TRANSMITTAL.
<PAGE> 1
LAZARD FRERES & CO.
ONE ROCKEFELLER PLAZA
NEW YORK, NEW YORK 10020
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES
OF
COMMON STOCK,
SERIES B PREFERRED STOCK
AND
SERIES C PREFERRED STOCK
OF
QVC, INC.
AT
$46 NET PER SHARE OF COMMON STOCK
$460 NET PER SHARE OF PREFERRED STOCK
BY
QVC PROGRAMMING HOLDINGS, INC.
THE OFFER AND WITHDRAWAL RIGHTS
WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON
THURSDAY, FEBRUARY 9, 1995, UNLESS THE OFFER IS EXTENDED.
January , 1995
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by QVC Programming Holdings, Inc., a Delaware
corporation (the "Purchaser") to be wholly owned by Comcast Corporation, a
Pennsylvania corporation ("Comcast"), and Liberty Media Corporation, a Delaware
corporation ("Liberty" and, together with Comcast, the "Parent Purchasers") and
a wholly-owned subsidiary of Tele-Communications, Inc., a Delaware corporation,
to act as financial advisor and Dealer Manager in connection with its offer to
purchase all outstanding shares (the "Shares") of Common Stock, $.01 par value
per share (the "Common Stock"), and Series B Preferred Stock and Series C
Preferred Stock, each $.10 par value per share (together, the "Preferred
Stock"), of QVC, Inc., a Delaware corporation (the "Company"), at $46 per share
of Common Stock and $460 per share of Preferred Stock, net to the seller in
cash, without interest thereon, upon the terms and subject to the conditions set
forth in the Purchaser's Offer to Purchase dated August 11, 1994 (the "Offer to
Purchase"), the Supplement to the Offer to Purchase dated February 3, 1995 (the
"Supplement") and the related Letter of Transmittal (which, together with the
amendments thereto, constitute the "Offer").
<PAGE> 2
Please furnish copies of the enclosed materials to those of your clients
for whose accounts you hold Shares registered in your name or in the name of
your nominee.
The Offer is subject to several conditions contained in the Offer to
Purchase, including there being validly tendered and not withdrawn prior to the
Expiration Date (as defined in the Offer to Purchase, as amended) Shares which,
together with the Shares agreed to be contributed by the Parent Purchasers to
the Purchaser, represent at least a majority of the outstanding shares of Common
Stock on a fully diluted basis.
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, we are enclosing
the following documents:
1. Supplement to Offer to Purchase dated February 3, 1995;
2. Revised Letter of Transmittal to tender Shares for your use and for the
information of your clients, together with Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 providing information
relating to backup federal income tax withholding (facsimile copies of the
Letter of Transmittal may be used to tender Shares);
3. Notice of Guaranteed Delivery for Shares to be used to accept the Offer
if the certificates for Shares and all other required documents are not
immediately available or cannot be delivered to The Bank of New York (the
"Depositary") by the Expiration Date or if procedures for book-entry transfer
cannot be completed by the Expiration Date (as defined in the Offer to
Purchase);
4. A printed form of the letter which may be sent to your clients for whose
accounts you hold Shares registered in your name or in the name of your nominee,
with space provided for obtaining such clients' instructions with regard to the
Offer; and
5. A return envelope addressed to the Depositary.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, FEBRUARY 9, 1995,
UNLESS THE OFFER IS EXTENDED.
In order to accept the Offer, a duly executed and properly completed Letter
of Transmittal and any required signature guarantees, or an Agent's Message (as
defined in the Offer to Purchase) in connection with a book-entry delivery of
Common Shares (as defined in the Letter of Transmittal) and any other required
documents should be sent to the Depositary and either certificates representing
the tendered Shares should be delivered to the Depositary, or such Common Shares
should be tendered by book-entry transfer into the Depositary's account
maintained at one of the Book Entry Transfer Facilities (as described in the
Offer to Purchase), all in accordance with the instructions set forth in the
Letter of Transmittal and the Offer to Purchase.
If holders of Shares wish to tender, but it is impracticable for them to
forward their certificates or other required documents on or prior to the
Expiration Date or to comply with the book-entry transfer procedures on a timely
basis, a tender may be effected by following the guaranteed delivery procedures
specified in "The Tender Offer -- 3. Procedures for Tendering Shares" in the
Offer to Purchase, as amended.
The Purchaser will not pay any fees or commissions to any broker or dealer
or other person (other than the Dealer Manager, the Information Agent or the
Depositary as described in the Offer to Purchase, as amended) for soliciting
tenders of Shares pursuant to the Offer. The Purchaser will, however, upon
request, reimburse brokers, dealers, commercial banks and trust companies for
reasonable and necessary costs and expenses incurred by them in forwarding
materials to their customers. The Purchaser will pay all stock transfer taxes
applicable to its purchase of Shares pursuant to the Offer, subject to
Instruction 6 of the Letter of Transmittal.
2
<PAGE> 3
Any inquiries you may have with respect to the Offer should be addressed
to, and additional copies of the enclosed materials may be obtained from, the
Information Agent or the undersigned at the addresses and telephone numbers set
forth on the back cover of the Offer to Purchase, the Supplement and the Letter
of Transmittal.
Very truly yours,
LAZARD FRERES & CO.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON AS THE AGENT OF QVC PROGRAMMING HOLDINGS, INC. (OR ANY
AFFILIATE THEREOF), THE DEALER MANAGER, THE INFORMATION AGENT OR THE DEPOSITARY,
OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT
ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS
ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN.
3
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES
OF
COMMON STOCK,
SERIES B PREFERRED STOCK
AND
SERIES C PREFERRED STOCK
OF
QVC, INC.
AT
$46 NET PER SHARE OF COMMON STOCK
$460 NET PER SHARE OF PREFERRED STOCK
BY
QVC PROGRAMMING HOLDINGS, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON THURSDAY, FEBRUARY 9, 1995, UNLESS THE OFFER IS EXTENDED.
February 3, 1995
To Our Clients:
Enclosed for your consideration are the Supplement to Offer to Purchase
dated February 3, 1995 (the "Supplement"), which supplements the Offer to
Purchase dated August 11, 1994 (the "Offer to Purchase"), and the related
revised Letter of Transmittal (which, together with the Offer to Purchase, the
amendments thereto and the related Letters of Transmittal, constitute the
"Offer") relating to the offer by QVC Programming Holdings, Inc., a Delaware
corporation (the "Purchaser") to be wholly owned by Comcast Corporation, a
Pennsylvania corporation ("Comcast"), and Liberty Media Corporation, a Delaware
corporation ("Liberty" and, together with Comcast, the "Parent Purchasers") and
a wholly-owned subsidiary of Tele-Communications, Inc., a Delaware corporation,
to purchase for cash all outstanding shares (the "Shares") of Common Stock, $.01
par value per share (the "Common Stock"), and Series B Preferred Stock and
Series C Preferred Stock, each $.10 par value per share (together, the
"Preferred Stock"), of QVC, Inc., a Delaware corporation (the "Company"), at a
price of $46 per share of Common Stock and $460 per share of Preferred Stock,
net to the seller in cash, without interest thereon, upon the terms and
conditions set forth in the Offer. Holders of Shares whose certificates for such
Shares (the "Share Certificates") are not immediately available or who cannot
deliver their Share Certificates and all other required documents to the
Depositary (as defined below) on or prior to the Expiration Date (as defined in
the Offer to Purchase), or who cannot complete the procedures for book-entry
transfer on a timely basis, must tender their Shares according to the guaranteed
delivery procedures set forth in the Offer to Purchase, as amended. See "The
Tender Offer -- 3. Procedure for Tendering Shares" in the Offer to Purchase, as
amended.
WE ARE THE HOLDER OF RECORD OF SHARES HELD FOR YOUR ACCOUNT. A TENDER OF
SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR
INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION
ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT.
We request instructions as to whether you wish us to tender any or all of
the Shares held by us for your account, upon the terms and subject to the
conditions set forth in the Offer.
<PAGE> 2
Your attention is directed to the following:
1. The tender price is $46 per share of Common Stock and $460 per share of
Preferred Stock, net to you in cash, without interest thereon, upon the terms
and subject to the conditions set forth in the Offer.
2. The Offer is being made for all outstanding shares of Common Stock and
Preferred Stock.
3. The Offer and withdrawal rights expire at 12:00 Midnight, New York City
time, on Thursday, February 9, 1995, unless the Offer is extended.
4. The Offer is conditioned upon, among other things, (i) there being
validly tendered and not withdrawn prior to the Expiration Date Shares which,
together with the Shares agreed to be contributed by the Parent Purchasers (or
any wholly-owned subsidiary thereof) to the Purchaser pursuant to the Joint
Bidding Agreement (as defined in the Offer to Purchase, as amended) represent at
least a majority of the outstanding shares of Common Stock, calculated on a
fully diluted basis, (ii) the Purchaser having obtained sufficient financing on
terms satisfactory to it to purchase all of the outstanding Shares pursuant to
the Offer, consummate the Merger (as defined in the Offer to Purchase, as
amended) and pay related fees and expenses and (iii) the absence of certain
legal actions or proceedings.
5. Any brokerage fees, commissions or stock transfer taxes applicable to
the sale of Shares to the Purchaser pursuant to the Offer will be paid by the
Purchaser, except as otherwise provided in Instruction 6 of the Letter of
Transmittal.
6. Payment for Shares purchased pursuant to the Offer will in all cases be
made only after timely receipt by The Bank of New York (the "Depositary") of (a)
Share Certificates or timely confirmation of the book-entry transfer of Common
Shares (as defined in the Letter of Transmittal) into the account maintained by
the Depositary at The Depository Trust Company, the Midwest Securities Trust
Company or the Philadelphia Depository Trust Company (collectively, the
"Book-Entry Transfer Facilities"), pursuant to the procedures set forth in the
Offer to Purchase, (b) the Letter of Transmittal (or a facsimile thereof),
properly completed and duly executed, with any required signature guarantees or
an Agent's Message (as defined in the Offer to Purchase), in connection with a
book-entry delivery, and (c) any other documents required by the Letter of
Transmittal. See "The Tender Offer -- 3. Procedure for Tendering Shares" in the
Offer to Purchase, as amended. Accordingly, payment may not be made to all
tendering stockholders at the same time depending upon when certificates for or
confirmations of book-entry transfer of such Common Shares into the Depositary's
account at a Book-Entry Transfer Facility are actually received by the
Depositary.
7. The Board of Directors of the Company (other than directors affiliated
with Comcast) has unanimously determined that the Offer and the Merger described
in the Offer are fair to and in the best interests of the Company's stockholders
(other than Comcast and Liberty and their affiliates) and approved the Offer and
the Merger, and recommends that the Company's stockholders accept the Offer and
approve the Merger.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing, detaching and returning to us the instruction form
on the detachable part hereof. An envelope to return your instructions to us is
enclosed. If you authorize tender of your Shares, all such Shares will be
tendered unless otherwise specified on the detachable part hereof. Your
instructions should be forwarded to us in ample time to permit us to submit a
tender on your behalf by the expiration of the Offer.
The Purchaser is not aware of any state where the making of the Offer is
prohibited by administrative or judicial action pursuant to any valid state
statute. If the Purchaser becomes aware of any valid state statute prohibiting
the making of the Offer or the acceptance of Shares pursuant thereto, the
Purchaser will make a reasonable good faith effort to comply with such state
statute. If, after such reasonable good faith effort, the Purchaser cannot
comply with such state statute, the Offer will not be made to (nor will tenders
be accepted from or on behalf of) the holders of Shares in such state.
In any jurisdiction where the securities, blue sky or other laws require
the Offer to be made by a licensed broker or dealer, the Offer is being made on
behalf of the Company by Lazard Freres & Co., the Dealer Manager for the Offer,
or one or more registered brokers or dealers that are licensed under the laws of
such jurisdiction.
<PAGE> 3
INSTRUCTIONS WITH RESPECT TO THE
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES
OF
COMMON STOCK,
SERIES B PREFERRED STOCK
AND
SERIES C PREFERRED STOCK
OF
QVC, INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed
Supplement, dated February 3, 1995, to the Offer to Purchase dated August 11,
1994 as supplemented and amended by the amendments thereto and the related
revised Letter of Transmittal (such documents together with any amendment
thereto and the related Letters of Transmittal constitute the "Offer"), in
connection with the offer by QVC Programming Holdings, Inc., a Delaware
corporation (the "Purchaser"), to purchase all outstanding shares (the "Shares")
of Common Stock, $.01 par value per share (the "Common Stock"), and Series B
Preferred Stock and Series C Preferred Stock, each $.10 par value per share, of
QVC, Inc., a Delaware corporation.
This will instruct you to tender to the Purchaser the Shares indicated
below (or if no number is indicated below, all Shares) held by you for the
account of the undersigned, upon the terms and subject to the conditions set
forth in the Offer to Purchase and the related revised Letter of Transmittal.
<TABLE>
<S> <C>
SIGN HERE
Shares to be Tendered:
.........................................
.... shares of Common Stock Signature(s)
.... shares of Series B Preferred .........................................
Stock
.........................................
Please print name(s) and address(es) here
.... shares of Series C Preferred
Stock .........................................
Area Code & Telephone Numbers
Dated:........................, 1995 .........................................
Taxpayer Identification or
Social Security Number(s)
</TABLE>
<PAGE> 1
Exhibit (a)(27)
QVC, INC. AND SUBSIDIARIES
SELECTED FINANCIAL INFORMATION
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Interim Financial Information Extracted from Form 10-Q for the fiscal quarter Ended
October 31, 1995
Consolidated Unaudited Balance Sheets
at October 31, 1994 and January 31, 1994 . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Operations (unaudited) for the three months and nine months
Ended October 31, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows (unaudited) for the nine months
Ended October 31, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Shareholders' Equity (unaudited) for the nine months
Ended October 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements (unaudited) . . . . . . . . . . . . . . . . 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
<PAGE> 2
QVC. INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS October 31, January 31,
1994 1994
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 80,790 $ 15,873
Accounts receivable, less allowance for
doubtful accounts of $67,671 at
October 31, 1994 and $52,759 at
January 31, 1994 193,540 183,162
Inventories 198,012 148,208
Deferred taxes 56,748 59,749
Prepaid expenses 8,238 5,536
---------- --------
Total current assets 537,328 412,528
Property, plant and equipment, at cost,
less accumulated depreciation 89,739 80,579
Cable television distribution rights, net 99,729 99,579
Other assets, net 38,086 33,664
Excess of cost over acquired net assets 244,475 251,810
---------- --------
Total assets $1,009,857 $878,160
---------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt $ 3,158 $ 3,114
Accounts payable-trade 130,801 81,594
Accrued liabilities 264,286 225,989
---------- --------
Total current liabilities 398,245 310,697
Long-term debt, less current maturities 6,599 7,044
---------- --------
Total liabilities 404,844 317,711
---------- --------
Shareholders' equity:
Convertible Preferred Stock, par value $.10 50 56
Common Stock, par value $.01 409 399
Additional paid-in capital 451,659 446,027
Retained earnings 152,193 113,937
Foreign currency translation adjustments 202 -
---------- --------
Total shareholders' equity 604,513 560,419
---------- --------
Total liabilities and shareholders' equity $1,009,357 $878,160
---------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE> 3
QVC. INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three months ended Nine months ended
October 31, October 31,
------------------- -------------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenue $364,467 $313,945 $964,185 $849,615
Cost of goods sold 223,165 185,043 588,292 499,002
-------- -------- -------- --------
Gross profit 141,302 128,902 375,893 350,613
-------- -------- -------- --------
Operating expenses:
Variable costs 46,869 43,976 126,920 121,277
General and administrative 45,314 31,532 114,523 98,372
Depreciation 4,636 4,175 13,154 12,278
Amortization of intangible assets 8,349 6,453 20,894 19,609
-------- -------- --------- --------
105,168 86,136 275,491 251,536
-------- -------- --------- --------
Operating income 36,134 42,766 100,402 99,077
-------- -------- --------- --------
Other income (expense):
Losses from joint ventures (7,677) (2,118) (27,248) (2,118)
Interest income 4,434 2,430 12,333 7,698
Interest expense (345) (346) (1,046) (1,242)
-------- -------- -------- --------
(3,588) (34) (15,961) 4,338
-------- -------- -------- --------
Income before income taxes and cumulative
effect of a change in accounting
principle 32,546 42,732 84,441 103,415
Income tax provision (18,080) (21,215) (46,185) (50,950)
-------- -------- -------- --------
Income before cumulative effect of
a change in accounting principle 14,466 21,517 38,256 52,465
Cumulative effect of a change in
accounting for income taxes - - - 3,990
-------- -------- -------- --------
Net income $ 14,466 $ 21,517 $ 38,256 $ 56,455
-------- -------- -------- --------
Income per share:
Income before cumulative effect of a
change in accounting principle $ .29 $ .42 $ .78 $ 1.04
Cumulative effect of a change in
accounting for income taxes - - - .08
-------- -------- -------- --------
Net income $ .29 $ .42 $ .78 $ 1.12
-------- -------- -------- --------
Weighted average number of common and
common equivalent shares 48,945 50,680 48,901 50,582
-------- -------- -------- --------
</TABLE>
The accompany notes are an integral part of these consolidated financial
statements.
3
<PAGE> 4
QVC. INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Nine months ended
October 31,
---------------------
1994 1993
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 38,256 $ 56,455
Adjustments to reconcile net income to net
cash provided by operating activities:
(Increase) decrease in deferred taxes (3,005) 4,303
Cumulative effect of a change in accounting
for income taxes - (3,990)
Depreciation 13,154 12,278
Amortization of intangible assets 20,894 19,609
Losses from joint ventures 27,248 2,118
Losses on sales of equipment 450 -
Deferral of Q2 start-up costs (7,985) (144)
Effects of changes in working capital items* 27,621 (31,756)
-------- --------
Net cash provided by operating activities 116,633 58,873
-------- --------
Cash flows from investing activities:
Capital expenditures (26,627) (19,531)
Expenditures for cable television
distribution rights (11,569) -
Changes in other assets (423) (819)
Investment in and advances to joint ventures (22,196) (13,312)
Proceeds from sales of equipment 3,864 -
-------- --------
Net cash used in investing activities (56,951) (33,662)
Cash flows from financing activities:
Borrowings under revolving credit facilities - 20,000
Payments against revolving credit facilities - (20,000)
Principal payments under other debt (401) (374)
Payments under Senior term loan - (21,000)
Proceeds from exercise of stock options 2,536 983
Proceeds from exercise of warrants 3,100 6,185
-------- --------
Net cash provided by (used in) financing activities 5,235 (14,206)
-------- --------
Net increase in cash and cash equivalents 64,917 11,005
Cash and cash equivalents at beginning of period 15,873 4,279
-------- --------
Cash and cash equivalents at end of period $ 80,790 $ 15,284
-------- --------
* Analysis of effects of changes in working
capital items:
Increase in accounts receivable $(10,378) $(29,887)
Increase in inventories (49,804) (46,406)
Decrease (increase) in deferred taxes 3,001 (9,812)
Increase in prepaid expenses (2,702) (5,532)
Increase in accounts payable 49,207 29,514
Increase in accrued liabilities 38,297 30,367
-------- --------
$ 27,621 $(31,756)
-------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 5
QVC INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Additional Foreign
Convertible Common Paid-in Retained Currency
Preferred Stock Stock Capital Earnings Translation Total
--------------- ----- ---------- -------- ----------- -----
<S> <C> <C> <C> <C> <C>
Balance January 31, 1994 $56 $399 $446,027 $113,937 $ - $560,419
Net income for period - - - 38,256 - 38,256
Proceeds from exercise of
warrants - 3 3,097 - - 3,100
Proceeds from the exercise of
employee stock options - 1 2,535 - - 2,536
Conversion of shares (6) 6 - - - -
Foreign currency translation
adjustments - - - - 202 202
---- ---- -------- -------- ---- --------
Balance October 31, 1994 $50 $409 $451,659 $152,193 $202 $684,513
---- ---- -------- -------- ---- --------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE> 6
QVC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The interim consolidated financial statements are unaudited and
should be read in conjunction with the audited consolidated financial statements
and notes thereto for the years ended January 31, 1994 and 1993.
In the opinion of QVC, Inc. (the "Company"), all adjustments
necessary for a fair presentation of such consolidated financial statements have
been included. Such adjustments principally consist of normal recurring items.
Interim results are not necessarily indicative of results for a full year.
The consolidated financial statements include the accounts of the
Company and all subsidiaries. Investments in the Company's joint ventures (50%
or less owned) are accounted for under the equity method. All significant
intercompany accounts and transactions are eliminated in consolidation.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies followed by the Company are set forth in
Note 1 to the Company's consolidated financial statements in the QVC, Inc.
Annual Report on Form 10-K for the fiscal year ended January 31, 1994.
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
October 31, January 31,
1994 1994
----------- -----------
(in thousands)
<S> <C> <C>
Land $ 7,818 $ 3,977
Buildings and improvements 57,317 50,627
Furniture and other equipment 34,384 33,866
Broadcast equipment 10,163 8,942
Computer equipment and software 19,288 20,005
Construction in progress 295 1,684
-------- --------
129,265 119,101
Less - Accumulated depreciation (30,526) (38,522)
-------- --------
Net property, plant and equipment $ 89,739 $ 80,579
</TABLE>
In October 1994, the Company purchased a 600,000 square foot office
and warehouse facility in West Chester, Pennsylvania for a total cost of
approximately $9.6 million. It is anticipated that some of the operations
located in other facilities will be transferred to this building.
6
<PAGE> 7
QVC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 4 - OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
October 31, January 31,
1994 1994
----------- -----------
(in thousands)
<S> <C> <C>
Deferred taxes (Note 6) $20,271 $17,265
Investments in and advances to
joint ventures, net of
accumulated losses 6,345 11,194
Start-up costs 11,444 3,459
Satellite transponder rights 1,000 1,000
Other 1,496 1,234
------- -------
40,556 34,152
Less - accumulated amortization (2,470) (488)
------- -------
Net other assets $38,086 $33,664
------- -------
</TABLE>
During fiscal 1993, the Company established electronic retailing
program service in the United Kingdom ("QVC - The Shopping Channel") and Mexico
("CVC") through joint venture agreements with British Sky Broadcasting Limited
and Grupo Televisa, S.A. de C.V., respectively. The joint venture in the United
Kingdom began broadcasting on October 1, 1993, and the joint venture in Mexico
began broadcasting on November 15, 1993. The joint venture agreement in the
United Kingdom requires, among other things, that the Company provide all
funding to the joint venture until it is profitable. The Company will then
recover all prior funding before any profits are shared. Accordingly, the
Company has included 100% of the loss on operations of this venture in the
Consolidated Statements of Operations. The operating results of the joint
venture in Mexico are shared equally by the partners.
Summarized financial information for "QVC" - The Shopping Channel"
and "CVC" on a 100% basis follows (in thousands):
<TABLE>
<CAPTION>
October 31, 1994 January 31, 1994
------------------------ -------------------------
QVC - The QVC - The
Shopping Channel CVC Shopping Channel CVC
------------------------ -------------------------
<S> <C> <C> <C> <C>
Current assets $10,912 $14,512 $5,608 $9,687
Property, plant and equipment, net 2,599 2,282 1,645 1,665
Unamortized start-up costs 865 630 2,205 1,650
Current liabilities 9,053 17,085 4,181 9,507
</TABLE>
<TABLE>
<CAPTION>
Three months ended October 31, 1994 Nine months ended October 31, 1994
----------------------------------- ----------------------------------
QVC-The QVC-The
Shopping Channel CVC Shopping Channel CVC
---------------- --- ---------------- ---
<S> <C> <C> <C> <C>
Net Revenue $8,082 $9,467 $ 15,699 $21,116
Gross profit 3,222 3,198 5,406 5,979
Loss (5,720) (2,290) (20,015) (8,537)
</TABLE>
During the month of October 1993, "QVC - The Shopping Channel" experienced
net sales of $187,000, gross profit of $87,000 and a net loss of $2.1 million.
7
<PAGE> 8
QVC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
In Fiscal 1993, the Company also entered a joint venture with
Tribune Entertainment Company and Regal Communications to form QRT Enterprises
("QRT"). QRT produced and Syndicated "Can We Shop" with Joan Rivers, which
commenced Broadcasting January 17, 1994. On June 15, 1994, QRT announced plans
to cease the venture with the last show broadcasted on July 15, 1994. "Can We
Shop" was a one-hour, Monday through Friday television show through which
merchandise was sold.
The Company has made a $4.4 million investment in Friday Holdings,
L.P., a limited partnership ("Friday Holdings"). The limited partnership's
purpose was to establish or acquire businesses in the communications field and
to develop information products. This partnership is currently being
liquidated.
The Company's share of gains (losses) from joint ventures during
the three and nine months ended October 31, 1994 follows (in thousands):
<TABLE>
<CAPTION>
Three Months Nine Months
------------ -----------
<S> <C> <C>
QVC - The Shopping Channel $(5,720) $(20,015)
CVC (1,145) (4,268)
QRT 138 (1,115)
Friday Holdings (900) (1,800)
Other (50) (50)
------- --------
$(7,677) $(27,248)
------- --------
</TABLE>
The Company capitalized $11.4 million of costs relating to the
start-up of Q2, a new televised Shopping/programming service, which fully
launched on August 1, 1994 in the United States. The capitalized start-up costs
are being amortized over eighteen months. Total amortization for the quarter
ended October 31, 1994 was $1.9 million.
NOTE 5 - CAPITAL STOCK
The Company has 175,000,000 shares of Common Stock authorized.
There were 40,906,497 shares outstanding at October 31, 1994 and 39,895,447
shares outstanding at January 31, 1994. The increase in the number of shares of
Common Stock outstanding is the result of the exercise of warrants (310,000),
the exercise of employee stock options (105,000) and the conversion of
Convertible Preferred Stock (596,050).
The following table summarizes the number of Convertible Preferred
shares at October 31, 1994 and January 31, 1994 (in thousands):
<TABLE>
<CAPTION>
October 31, 1994 January 31, 1994
Shares ------------------------ --------------------------
Authorized Outstanding Par Value Outstanding Par Value
---------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Series A 10 - $ - - $ -
Series B 1,000 18 2 28 3
Series C 1,000 481 48 531 53
Series D 300 - - 1 -
--- ---
$50 $56
</TABLE>
NOTE 6 - INCOME TAXES
The Company adopted the principles of Statement of Financial
Accounting Standards No. 109 ("SFAS 109") to account for income taxes in the
first quarter of fiscal 1993. The cumulative effect of adopting SFAS 109 was to
increase net income by approximately $4.0 million in the first quarter of fiscal
1993. The provisions for income taxes for the three months and nine months ended
October 31, 1994 and 1993 are based on the estimated annual effective tax rate
after considering the federal and state statutory rates, amortization of
intangibles arising from the CUN acquisition, which is not deductible for tax
purposes, and the fact that the losses from joint ventures provide no state
income tax benefit.
In 1994, the Company received notice that the Internal Revenue
Service ("IRS") has completed its examinations of the Company's federal income
tax returns through fiscal 1991. As a result of the examination, the IRS has
proposed
8
<PAGE> 9
QVC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
adjustments that relate primarily to the amortization of cable television
distribution rights, that would result in a potential tax liability for those
years in excess of $56.0 million. The Company intends to vigorously contest
these proposed adjustments. While it is not possible at this time to predict
the outcome of these actions, it is the opinion of management, after reviewing
the matter with outside counsel, that this matter will be resolved without
having a material effect on the Company's financial position.
NOTE 7 - INCOME PER SHARE
The Company computes income per share using the modified treasury
stock method. The following table presents the computation of net income per
share for the three and nine months ended October 31, 1994 and 1993 (in
thousands, except per share amounts).
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 31, October 31,
----------------------- ----------------------
Income: 1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C>
Income before cumulative effect of
a change in accounting for
income taxes $14,466 $21,517 $38,256 $52,465
Cumulative effect of a change in
accounting for income taxes - - - 3,990
------- ------- ------- -------
$14,466 $21,517 $38,256 $56,455
------- ------- ------- -------
Net Income
Shares:
Weighted average number of common
Shares outstanding 40,713 38,855 40,320 37,235
Add - common equivalent shares
assuming conversion of Series B,
Series C and Series D Convertible
Preferred Stock 5,145 6,508 5,414 7,922
Add - Common shares assumed to be
outstanding from exercise of warrants
and options 9,665 10,093 9,746 10,282
Less - Assumed purchase of Common Stock
from proceeds of exercise of warrants
and options (6,578) (4,776) (6,579) (4,857)
-------- ------- ------ -------
48,945 50,680 48,901 50,582
-------- ------- ------- -------
Income per share:
Income before cumulative effect of
a change in accounting principle $ .29 $ .42 $ .78 $ 1.04
Cumulative effect of a change in
accounting for income taxes - - - .08
-------- ------- ------- -------
Net income $ .29 $ .42 $ .78 $ 1.12
-------- ------- ------- -------
</TABLE>
9
<PAGE> 10
QVC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 8 - SUPPLEMENTAL INFORMATION ON CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine months ended
October 31,
---------------------
1994 1993
---- ----
(in thousands)
<S> <C> <C>
Supplemental cash flow information:
Interest paid $855 $ 1,099
Income taxes paid 207 32,414
</TABLE>
During the nine months ended October 31, 1993, the only non-cash
investing and financing activity was the $302,000 foreign currency translation
adjustments related to investments in foreign joint ventures.
NOTE 9 - ACQUISITION BY COMCAST CORPORATION AND LIBERTY MEDIA CORPORATION
On August 4, 1994, the Company, Comcast Corporation ("Comcast")
Liberty Media Corporation ("Liberty") and a company wholly owned by Comcast and
Liberty ("Holdings") entered into a definitive merger agreement pursuant to
which Holdings will acquire QVC and thereafter QVC will merge with a subsidiary
of Holdings. On August 11, 1994, Holdings commenced a tender offer for all
shares of stock of QVC at a cash price of $46 per share of QVC Common Stock and
$460 per share of QVC Convertible Preferred Stock. The total cost of the
acquisition for the QVC Stock not owned by Comcast or Liberty will be in excess
of $1.4 billion. Comcast and Liberty have agreed to fund a total of
approximately $303 million of the acquisition with the balance to be provided
through debt financing which, after the merger, will be an obligation of QVC.
Following the acquisition, Comcast and Liberty will own approximately 57% and
49%, respectively, of Holdings, which will own 100% of QVC.
NOTE 10 - LITIGATION
As previously reported to the Securities and Exchange Commission,
the Company has been named as a defendant in certain actions filed in state and
federal courts in Delaware arising out of Liberty's prior acquisitions of
shares of Home Shopping Network, Inc. ("HSN") and the Company's July 1993
letter proposal to HSN to combine HSN and the Company in a stock-for-stock
transaction (the "HSN Actions"). The plaintiffs and defendants to the HSN
Actions have executed a Memorandum of Understanding (the "MOU") setting forth
an agreement in principle for the settlement of the HSN Actions for a total
consideration of $13 million (plus $200,000 to cover administrative expenses),
all of which is to be funded by Liberty. In May 1994, the Company became a
party to a revised MOU. Under the revised MOU, the Company is not required to
pay any portion of the proposed settlement fund or the administrative expenses
of the settlement.
On August 19, 1994, plaintiffs and defendants in the HSN Actions
entered into a stipulation in connection with the contemplated settlement of
such actions (the "Delaware Settlement"), which was then filed with the
Delaware courts. On November 18, 1994, the parties entered into a revised
Stipulation (the "Revised Stipulation"), which was then filed with the Delaware
courts. The Revised Stipulation continues to provide for the Delaware
Settlement, but also provides for the settlement of a separate related action
(the "Related Action") brought in Delaware Chancery Court against Liberty and
certain other defendants in the HSN Actions (but not the Company). The Revised
Stipulation provides that settlement of the Related Action and the Delaware
Settlement are not dependent on each other.
Pursuant to the Delaware Settlement, three subclasses of
plaintiffs would be certified for settlement purposes. Members of two of the
three subclasses will have the right to opt out of the Delaware Settlement
pursuant to procedures set forth in the Revised Stipulation. The Delaware
Settlement contemplates that Liberty will create a settlement fund of $13.2
million (plus interest from December 31, 1993) and that the net proceeds of the
settlement fund will be distributed to the eligible members of the two
subclasses who do not opt out of the settlement in accordance with a proposed
plan of distribution. QVC is not required to pay any portion of the settlement
fund.
Consummation of the proposed Delaware Settlement is subject to a
number of conditions, including (i) obtaining final approval from the Delaware
courts, (ii) the number of shares opting out of the settlement not exceeding a
confidential, predetermined ceiling, and (iii) the dismissal of the HSN Actions
by the Delaware courts with prejudice and the release of claims in the HSN
Actions. If approved by the Delaware courts, the Delaware Settlement would
result in the dismissal with prejudice of the HSN Actions and the release of
all claims in the HSN Actions. The Delaware courts have scheduled hearings on
the proposed Delaware Settlement to be held on January 24, 1995.
10
<PAGE> 11
QVC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
In October 1993, the Company brought an action in Delaware
Chancery Court against Viacom Inc. ("Viacom"), Paramount Communications Inc.
("Paramount") and certain Paramount directors for breach of fiduciary duty in
failing to give fair treatment to the Company's merger proposal while granting
undue advantages to Viacom's merger proposal. In November 1993, the court
granted the Company's motion for a preliminary injunction against certain
anti-takeover mechanisms being used to preclude the Paramount shareholders from
accepting the Company's cash tender offer for Paramount shares. This
injunction was affirmed by the Delaware Supreme Court in December 1993. Viacom
subsequently filed a motion to dismiss the Company's complaint. Paramount's
time to respond to the complaint has been extended to January 26, 1995.
In July 1994, after the announcement that Comcast and Liberty
would make a joint offer to purchase all of the outstanding shares of stock of
the Company, eight putative class action lawsuits (the "Consolidated Action")
were filed by certain shareholders of the Company in Delaware Chancery Court on
behalf of a purported class consisting of all public shareholders of the
Company. The defendants in the Consolidated Action include the Company and
directors of the Company. Plaintiffs alleged, among other things, that the
defendants breached their fiduciary duties when considering the Comcast offer
in that they failed to take all possible steps to seek out and encourage the
best offer for the Company. Plaintiffs sought, among other things, an
injunction ordering the defendants to auction the Company and an award of
unspecified compensatory damages to the members of the plaintiff class.
In early August 1994, Comcast and Liberty were joined as
defendants in the Consolidated Action. On August 5, 1994, the parties reached
an agreement in principle providing for the settlement and dismissal with
prejudice of the Consolidated Action. The agreement in principle provides,
among other things, that an affiliate of Comcast and Liberty will commence a
tender offer to purchase all of the outstanding shares of QVC Common Stock for
$46 per share in cash, to be followed by a merger in which the remaining
holders of QVC Common Stock will receive $46 per share in cash. The agreement
in principle also provides that all defendants deny that any of them have
committed or threatened to commit any violations of law or breaches of duty;
that plaintiffs' counsel will apply to the court for an award of fees (to be
paid by the Company in the event that the offer and merger are consummated) in
an amount to be agreed among plaintiffs and defendants; and that the terms of
the settlement are subject to court approval in all respects. In the event of
court approval, all claims against defendants (and certain others) that were or
could have been asserted in the settled Consolidated Action will be dismissed
with prejudice and released, and shareholders of the Company who may have had
such claims at any time from June 20, 1994 through the effective date of the
merger, will be barred from asserting them in the future. Prior to the time
that court approval for the settlement described above is sought, shareholders
of the Company who are members of the class on behalf of whom the action is
brought will receive written notice of the terms of the settlement and the
claims to be settled, released, dismissed and barred.
The Company has also been named as a defendant in various legal
proceedings arising in the ordinary course of business. Although the outcome
of these matters cannot be determined, in the opinion of management,
disposition of these proceedings will not have a material effect on the
Company's financial position.
11
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company is a retailer of a wide range of consumer products
which are marketed and sold by merchandise-focused televised-shopping programs.
The average number of homes receiving the QVC Service was (in millions, except
dollar amounts):
<TABLE>
<CAPTION>
Three months ended Nine months ended
October 31, October 31,
--------------------- ---------------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cable homes - 24 hours per day 46.0 43.6 45.2 43.1
Cable homes - part-time 3.1 3.0 3.0 2.9
Satellite dish homes (estimated) 3.0 3.0 3.0 3.0
---- ---- ---- ----
Total 52.1 49.6 51.2 49.0
---- ---- ---- ----
Full-time equivalent homes
("FTE") 48.5 46.1 47.7 45.6
QVC net sales per FTE home $7.48 $6.79 $20.14 $18.58
</TABLE>
FTE homes equal the total number of cable homes receiving the QVC
Service 24 hours per day plus one-third of the part-time cable homes and
one-half of the satellite dish homes. This calculation reflects the Company's
estimate of the relative value to the Company of part-time homes and satellite
dish homes compared to full-time homes. QVC net sales excludes non-merchandise
revenue and net sales associated with the Company's infomercial division,
QDirect.
Net revenues increased in the first nine months of fiscal 1994 due
to the increase in the number of homes receiving the QVC Service as well as an
increase in net sales to existing subscribers. It is unlikely that the number
of homes receiving the QVC Service will continue to grow at rates comparable to
prior periods, given that the QVC Service is already received by approximately
80% of all the cable television homes in the United States. As relative growth
in the number of homes declines, future growth in sales will depend
increasingly on continued additions of new customers from homes already
receiving the QVC Service and continued growth in repeat sales to existing
customers.
Operating profit margins have declined during the quarter largely
as a result of a decrease in the gross margin percentage primarily due to
reduced sales of higher margin jewelry products as well as increases in general
and administrative expense and amortization expense associated with the launch
of Q2 on August 1, 1994. Prior to August, the Company capitalized all Q2
start-up costs which totaled $11.4 million. These costs are being amortized
over eighteen months. Total amortization of Q2 start-up costs was $1.9 million
during the third quarter of 1994.
12
<PAGE> 13
RESULTS OF OPERATIONS
The following table sets forth the Company's Consolidated
Statements of Operations expressed as a percentage of net revenue:
<TABLE>
<CAPTION>
Three months Nine months
ended October 31, ended October 31,
--------------------- ---------------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenue 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 61.2 58.9 61.0 58.7%
----- ----- ----- -----
Gross Profit 38.8 41.1 39.0 41.3
----- ----- ----- ----
Operating expenses:
Variable costs 12.9 14.0 13.1 14.3
General and
administrative 12.4 10.0 11.9 11.6
Depreciation 1.3 1.3 1.4 1.4
Amortization of
intangible assets 2.3 2.1 2.2 2.3
----- ----- ----- -----
28.9 27.4 28.6 29.6
----- ----- ----- -----
Operating income 9.9 13.7 10.4 11.7
----- ----- ----- -----
Other income (expense):
Losses from joint
ventures (2.1) (0.7) (2.8) (0.2)
Interest income 1.2 0.8 1.3 0.9
Interest expense (0.1) (0.1) (0.1) (0.2)
---- ---- ---- -----
(1.0) - (1.6) 0.5
---- ---- ---- -----
Income before income
taxes and cumulative
effect of a change in
accounting principle 8.9 13.7 8.8 12.2
Income tax provision (4.9) (6.8) (4.8) (6.0)
----- ----- ----- -----
Income before cumulative
effect of a change in
accounting principle 4.0 6.9 4.0 6.2
Cumulative effect of a
change in accounting
for income taxes - - - 0.4
----- ----- ----- -----
Net income 4.0% 6.9% 4.0% 6.6%
----- ----- ----- -----
</TABLE>
NET REVENUE AND GROSS PROFIT
Net revenue for the three months ended October 31, 1994 was $364.5
million, an increase of 16.1% over the $313.9 million net revenue in the prior
year's quarter. During the nine months of 1994, net revenue was $964.2 million
compared to $849.6 million in the prior period which was an increase of 13.5%.
The sales increase during the third quarter was due to the 5.2% increase in the
average number of homes receiving the QVC Service and, to a greater extent, the
10.2% increase in net sales per FTE home. For the nine months ending October
31, 1994, the sales increase was due to the 4.6% increase in the average number
of homes receiving the QVC Service as well as the 8.4% increase in net sales
per FTE home.
Net revenue for the three month and nine month periods in 1994
includes $2.2 million and $7.8 million, respectively, of net sales from the
Company's second channel, consisting of The QVC Fashion Channel, onQ and Q2, to
9.8 million and 9.3 million FTE homes, respectively, as compared to net sales
from The QVC Fashion Channel of $5.7 million and $20.4 million, respectively,
for the same three month and nine month periods in 1993 to 7.8 million FTE
homes. The Company launched a new shopping service on the second channel in
August 1994, currently consisting primarily of Q2 and onQ, which is expected to
completely replace The QVC Fashion Channel by mid-December 1994. Q2 is designed
for the audience that has not yet purchased from traditional home-shopping
formats and is currently broadcast 24 hours a day Thursday through Sunday. onQ
is QVC's new fashion service for younger adults and is currently broadcast 24
hours a day two days a week. QVC is currently phasing out onQ programming on
the second channel and replacing it with Q2 programming, which the Company
anticipates will air seven days a week on the second channel by the end of
fiscal 1994. The Company believes that the decline in sales from
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<PAGE> 14
the second channel during the nine months ended October 31, 1994, is due to the
change in the format of the programming featured on the second channel for
which a market has not yet had time to develop. The Company anticipates that
Q2 will be on the air seven days a week by the end of fiscal 1994.
The Company has two credit programs, the QVC Easy-Pay Plan and the
QVC revolving credit card program. The Company offers customers the Easy-Pay
option only on selected items. The Easy-Pay Plan permits customers to pay for
such items in several monthly installments. When the Easy-Pay Plan is selected
by the customer, the item purchased is shipped after the first payment is
billed to the customer's credit card. The customer's credit card is
subsequently billed up to four additional monthly installments until the total
purchase price of the product has been received by the Company. QVC's
revolving credit card program permits customers to charge purchases on the
Company's own credit card. The accounts receivable from the revolving credit
card program are purchased (with recourse) and serviced by an unrelated third
party. Sales under these credit programs amounted to 41.9% and 41.0% of net
revenue for the three months ended October 31, 1994 and 1993, respectively.
For the nine months ended October 31, 1994 and 1993, sales under these programs
were 42.9% and 39.8% of net revenue, respectively. Sales under these credit
programs increased as a percentage of total sales in the current quarter and
nine months primarily because of more sales under the Easy-Pay Plan. The loss
provision for uncollectible accounts under these credit programs amounted to
$4.3 million in the current quarter compared with $5.7 million in the prior
year and $13.0 million in the first nine months of 1994 compared to $15.8
million in the prior year.
The sales mix by product category as a percentage of net sales was
as follows:
<TABLE>
<CAPTION>
Three months Nine months
ended October 31, ended October 31,
----------------------- ------------------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Jewelry 35.7% 42.7% 38.8% 42.7%
Apparel and accessories 22.6 19.2 20.2 18.6
Housewares 12.7 11.0 12.3 11.3
Electronics 9.4 6.8 8.6 7.3
Collectibles 7.9 8.6 7.3 8.8
Other 11.7 11.7 12.8 11.3
----- ----- ----- -----
100.0% 100.0% 100.0% 100.0%
----- ----- ----- -----
</TABLE>
Gross profit for the quarter ended October 31, 1994 was $141.3
million, or 38.8% of net revenue, compared to $128.9 million, or 41.1% of net
revenue in the prior year. For the nine months of 1994, gross profit was
$375.9 million or 39.0% of net revenue compared to $350.6 million or 41.3% of
net revenue in the prior year. The principal reason for the increase in gross
profit was the increased sales volume. The decrease in the gross profit
percentage in 1994 was principally due to reduced sales of higher-margin
jewelry products and stronger sales of the Company's promotional Today's
Special Value items which sell below normal gross profit margins. Increased
costs in 1994 of shipping and handling the product that were not reflected in
the charge to the customer also contributed to the decrease in the gross profit
percentage.
VARIABLE COSTS
Variable costs totaled $46.9 million and $44.0 million for the
third quarter of 1994 and 1993, respectively, and $126.9 million and $121.3
million for the nine months of 1994 and 1993, respectively. The major
components of this expense classification are detailed below, expressed in
amounts and as a percentage of net revenue (dollars in millions):
<TABLE>
<CAPTION>
Three months Nine months
ended October 31, ended October 31,
----------------------------- ------------------------------
1994 1993 1994 1993
------------ ------------ ------------- -------------
$ % $ % $ % $ %
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Order processing and
customer service 17.7 4.9 16.4 5.2 48.5 5.0 45.7 5.4
Commissions and license fees 19.2 5.3 17.1 5.5 50.3 5.2 45.7 5.4
Provision for doubtful accounts 4.8 1.3 6.0 1.9 14.3 1.5 17.7 2.1
Credit card processing fees 5.2 1.4 4.5 1.4 13.8 1.4 12.2 1.4
---- ---- ---- ---- ----- ---- ----- ----
46.9 12.9 44.0 14.0 126.9 13.1 121.3 14.3
---- ---- ---- ---- ----- ---- ----- ----
</TABLE>
Order processing and customer service expenses increased as a
result of the higher sales volume. These expenses decreased as a percentage of
net revenue in 1994 due to greater utilization of the Company's automated
ordering system which gives customers the option to place orders by using their
touchtone telephone instead of speaking to a telemarketing operator. In 1994,
commissions and license fees increased in amount as a result of the higher
sales volume and decreased as a percentage of net revenue as a result of a
reduction of sales to homes obtained under the license agreement with JCPTV.
The provision for doubtful accounts as a percentage of net revenue decreased in
1994 due to an improvement in collection experience of QVC's revolving credit
card program. Credit card processing fees as a percentage of net revenue have
remained stable.
14
<PAGE> 15
GENERAL AND ADMINISTRATIVE
During the third quarter of 1994, general and administrative
expenses totaled $45.3 million, or 12.4% of net revenue compared to $31.5
million, or 10.0% of net revenue, in the prior year. For the nine months of
1994, general and administrative expenses total $114.5 million or 11.9% of net
revenue, compared to $98.4 million or 11.6% of net revenue in the prior year.
The major components of general and administrative expenses are detailed below,
expressed in amounts and as a percentage of net revenue (dollars in millions).
<TABLE>
<CAPTION>
Three months Nine months
ended October 31, ended October 31,
----------------------------- -----------------------------
1994 1993 1994 1993
------------ ------------ ------------ -------------
$ % $ % $ % $ %
---- ---- ---- ---- ----- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Administration 14.5 4.0 11.4 3.6 38.8 4.0 38.2 4.5
Advertising and marketing 9.9 2.7 6.5 2.0 24.9 2.6 19.9 2.3
Data processing 5.2 1.4 4.3 1.4 14.5 1.5 13.3 1.6
Broadcasting 8.3 2.3 5.1 1.6 19.3 2.0 15.0 1.8
Merchandising and programming 6.0 1.6 2.8 0.9 12.7 1.3 7.9 0.9
Occupancy costs 1.4 0.4 1.4 0.5 4.3 0.5 4.1 0.5
---- ---- ---- ---- ----- ---- ---- ----
45.3 12.4 31.5 10.0 114.5 11.9 98.4 11.6
---- ---- ---- ---- ----- ---- ---- ----
</TABLE>
The increase in administration expenses during the third quarter
of 1994 is principally the result of administrative costs of Q2 operations
including $2.7 million of severance and relocation costs related to the
Company's decision to consolidate the second channel services of Q2 and onQ
into Q2. The remaining increase in administrative expenses for 1994 are due to
higher personnel costs. Included in the administration expenses for the nine
months ended October 31, 1993 was the $3.8 million settlement of the Shop
Television Network, Inc. litigation. Advertising and marketing expenses
increased in 1994 due to increased mailings of program guides, increases in
consumer advertising as well as increases in the costs of advertising the
Company's televised-shopping program on cable systems. Also contributing to
the increase are costs related to the Company's infomercial division, QDirect,
for the purchase of media time. Data processing costs increased in 1994 due to
higher manpower costs associated with information systems staffing.
Broadcasting costs increased in the third quarter and nine months of 1994 due
to the launch of Q2 on August 1, 1994 and, to a lesser extent, higher costs to
enhance QVC's on-air presentation. The increase in merchandising and
programming expenses during the third quarter of 1994 reflects the launch of
Q2, additional personnel needed to sustain QVC's sales growth and additional
personnel costs related to the Company's QDirect division.
DEPRECIATION AND AMORTIZATION
Depreciation expenses increased in 1994 due to the depreciation
recognized on the current year's plant and equipment additions. Amortization
expense increased in the 1994 third quarter due to the amortization of Q2
start-up costs of $1.9 million. These costs are being amortized over an
eighteen-month period. For the nine months of 1994, the increase in
amortization due to the Q2 start-up costs was partially offset due to the
reduction in amortization of debt placement fees as a result of the repayment
of the Senior term loan during the first quarter of 1993.
OPERATING INCOME
Operating income was $36.1 million during the third quarter of
1994 compared to $42.8 million in the prior year. For the nine months ended
October 31, 1994, operating income was $100.4 million compared to $99.1 million
in the prior year. The decrease in operating income in the third quarter is
due primarily to the decrease in the gross margin percentage primarily due to
reduced sales of higher-margin jewelry products as well as increases in
operating expenses associated with the Q2 service. For the nine months ended
October 31, 1994, the increased gross profit resulting from the increased sales
volume offset higher operating expenses.
LOSSES FROM JOINT VENTURE
During 1993, the Company entered into four joint ventures which
resulted in combined losses of $7.8 million during the third quarter of 1994
and $27.2 million during the nine months of 1994. The most significant joint
ventures are those formed with British Sky Broadcasting Limited ("BSkyB") and
Grupo Televisa, S.A. de C.V. BSkyB and the Company formed a joint venture to
bring electronic retailing to the United Kingdom. On October 1, 1993, BSkyB
and the Company launched "QVC - The Shopping Channel." A majority of all
consumers subscribing to BSkyB's service are now able to receive the new QVC
service. QVC - The Shopping Channel is distributed to approximately 2.7
million FTE homes. The agreement with BSkyB requires, among other things, that
the Company provide all funding to the venture until it is profitable. The
Company will then recover all prior funding before any profits are shared.
During the three months ended October 31, 1994, QVC - The Shopping Channel
operations resulted in a $5.7 million loss, which was
15
<PAGE> 16
recorded by the Company, including $472,000 amortization of capitalized
start-up costs. For the nine months of 1994, the channel's operations resulted
in a $20.0 million loss, including $1.4 million amortization of capitalized
start-up costs. During the month of October 1993, QVC - The Shopping Channel
incurred a loss of $2.1 million, representing the first month of operations.
On November 15, 1993, the Company and Grupo Televisa, S.A. de C.V.
began broadcasting "CVC" in Mexico. CVC is distributed through broadcast
television, cable television and satellite dishes to approximately 6.6 million
FTE homes. The Company's 50% share of CVC's losses resulted in a $1.1 million
and $4.3 million during the three months and nine months ended October 31,
1994, respectively. Included in the losses were amortization of capitalized
start-up costs of $153,000 and $465,000 for the three and nine month periods,
respectively.
The Company also entered a joint venture with Tribune
Entertainment Company and Regal Communications to produce and distribute "Can
We Shop" with Joan Rivers. "Can We Shop" first aired on January 17, 1994. On
June 15, 1994, QRT announced plans to cease the venture with the last show
broadcasted on July 15, 1994. "Can We Shop" was a one-hour, Monday through
Friday television show through which merchandise was sold. The Company's share
of the operating loss in 1994 amounted to $1.1 million.
The Company made a one-third investment in Friday Holdings, L.P.
for the purpose of establishing or acquiring businesses in the communications
field as well as developing information products. The Company recorded a
$900,000 loss and $1.8 million loss for the three and nine months ended October
31, 1994, respectively, in association with this partnership. This partnership
is currently being liquidated.
INTEREST EXPENSE
Interest expense has remained relatively constant.
INTEREST INCOME
The Company experienced higher interest income on its revolving
charge card due to higher average account balances as well as an increase in
the number of customer accounts. The Company also experienced higher interest
income on temporary cash investments.
INCOME TAX PROVISION
The Company adopted the principles of Statement of Financial
Accounting Standards No. 109 ("SFAS 109") to account for income taxes in the
first quarter of fiscal 1993. The provisions for income taxes for the three
and nine months ended October 31, 1994 and 1993 are based on the estimated
annual effective tax rate after considering the federal and state statutory
rates, amortization of intangibles arising from the CVN acquisition which is
not deductible for tax purposes, and the fact that the joint venture operations
provide no state income tax benefit.
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE
Effective February 3, 1993, the Company changed its method of
accounting for income taxes as required by SFAS 109, "Accounting for Income
Taxes". This statement superseded SFAS 96, which was adopted by the Company in
fiscal 1988. The cumulative effect of adopting SFAS 109 was to increase net
income by approximately $4.0 million in the first quarter of fiscal 1993.
NET INCOME
Net income for the third quarter of 1994 was $14.5 million
compared to net income of $21.5 million in the prior year. For the nine months
ended October 31, 1994, net income was $38.3 million compared to $56.5 million
in the prior year. The changes in net income resulted from the factors
discussed above.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal source of working capital is
internally-generated cash flow from operations. For the nine months ended
October 31, 1994, net cash provided by operating activities totaled $116.6
million. Net cash provided by operations was increased by the decrease in
working capital items of $27.6 million in 1994.
The Company's capital expenditures during the nine months of 1994
totaled $26.6 million, principally for the purchase of a new office and
warehouse facility in West Chester, Pennsylvania, broadcast equipment and
computer equipment and software.
The Company has an agreement with an unrelated third party which
provides for the sale and servicing of accounts receivable originating from the
Company's revolving credit card. The Company remains
16
<PAGE> 17
obligated to repurchase uncollectible accounts pursuant to the recourse
provisions of the agreement and is required to maintain a specified percentage
of all outstanding receivables transferred under the program as a deposit with
the third party to secure its obligations under the agreement.
The Company has a $60.0 million bank revolving credit facility to
finance operations as well as to fund letters of credit for merchandise
purchases. Interest on outstanding amounts under this agreement is payable at
the bank's prime rate or other interest rate options. A commitment fee of .15%
is currently payable on the unused portion of the revolving credit facility.
The commitment fee was reduced from .25% on March 30, 1994. The credit
agreement requires the Company to maintain certain ratios for total liabilities
to shareholders' equity and for coverage of fixed charges. No amounts have
been borrowed under this agreement in 1994. Outstanding letters of credit
totaled $6.3 million at October 31, 1994.
Working capital at October 31, 1994 was $139.1 million compared to
$101.8 million at January 31, 1994. The current ratio was 1.3 at October 31,
1994 compared to 1.3 at January 31, 1994. Long-term debt to total
capitalization was 1.1% at October 31, 1994.
During the first quarter of 1994, the Company entered into
affiliation agreements with various cable system operators for carriage of the
Company's new shopping service, Q2. The cable system operators will receive
compensation from the Company which is dependent upon the number of additional
subscribers and the launch date of Q2 on the cable system. During the nine
months ended October 31, 1994, the Company has paid $11.6 million in connection
with the new affiliation agreements.
On August 4, 1994, Comcast Corporation ("Comcast"), Liberty Media
Corporation ("Liberty"), a wholly owned subsidiary of Comcast and Liberty
("Holdings") and the Company entered into a Merger Agreement (the "Merger
Agreement"), providing for the acquisition of QVC, Inc. by Holdings. Pursuant
to the Merger Agreement, Holdings commenced a tender offer to purchase all the
outstanding shares of Common and Preferred Stock of QVC, Inc. for $46 and $460
per share, respectively (the "Offer"). Following the successful completion of
the offer and the satisfaction of the other conditions set forth in the Merger
Agreement, a wholly owned subsidiary of Holdings will merge with and into QVC,
Inc. with QVC, Inc. continuing as the surviving corporation (the "Merger").
The total cost of the acquisition of the QVC stock not currently
owned by Comcast or Liberty will be in excess of $1.4 billion. Comcast and
Liberty have agreed to fund approximately $303 million of the acquisition, with
the balance to be provided through debt financing which, after the Merger, will
be the obligation of QVC. Following the consummation of the Merger, which is
subject to financing, governmental approval and certain other conditions,
Comcast and Liberty will own approximately 57% and 43%, respectively, of
Holdings, which will own 100% of QVC, and Holdings will be managed by Comcast.
The Company will be highly leveraged, primarily as a result of the
debt incurred in connection with the Merger. The Company's ability to make
scheduled payments or to refinance its obligations with respect to its
indebtedness depends on its financial and operating performance, which, in
turn, is subject to prevailing economic conditions and to financial, business
and other factors beyond its control. There can be no assurance that the
Company's operating results will continue to be sufficient for payment of the
Company's indebtedness.
The Company believes that its present capital resources and future
operations will result in adequate financial resources to fund all future
interest and debt payments existing as of October 31, 1994, as well as capital
expenditures.
EFFECTS OF INFLATION
Inflation has not had a significant impact on the results of the
Company's operations.
17
<PAGE> 1
Exhibit (b)(2)
Summary of Terms
QVC Bridge Funding
------------------
Loan: QVC will make a bridge loan to QVC Programming Holdings
on arms'-length terms. The QVC loan will be drawn down
only after $1.1 billion of bank financing (all
available bank financing), not reduced by any fees or
holdback, and all capital contributions are used to
purchase shares tendered. The loan will be structured
so as not to be a margin loan.
Lender: QVC, Inc.
Borrower: QVC Programming Holdings, Inc.
Principal Amount: Up to $60 million*, drawn in one or more installments.
In addition, QVC will lend up to an amount equal to
$266 million, which represents the aggregate amount to
be received by the Company as the exercise price of
options exercised immediately prior to the closing of
the tender offer (assuming all options are exercised).
Term: 6 months.
Interest: Prime Rate (to be defined) plus 2.00% per annum,
payable at maturity.
Subordination: The QVC loan will be subordinated to the bank tender
offer facility.
Security: The QVC loan will not be secured.
Condition Precedent: The QVC loan is conditioned on the tender offer
expiring no later than 12:00 midnight on February 9,
1995.
- ----------------------
*This amount assumes the tender of all of the shares issued upon exercise
of 100% of outstanding options as well as all other outstanding shares (other
than shares owned by QVC Programming Holdings). To the extent that less than
100% of such shares are tendered, the maximum aggregate principal amount of the
bridge loan will be reduced.
