<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-20577
CONTINENTAL CABLEVISION, INC.
(Exact name as registrant as specified in its charter)
DELAWARE
(State of Incorporation)
NO. 04-2370836
(I.R.S. Employer Identification No.)
THE PILOT HOUSE, LEWIS WHARF, BOSTON, MASSACHUSETTS 02110
(Address of principal executive office) (Zip Code)
(617) 742-9500
(Telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES _X_ NO ___
Number of Common Shares outstanding at the latest practicable date, November
1, 1996:
<TABLE>
<CAPTION>
CLASS PAR VALUE SHARES OUTSTANDING
<S> <C> <C>
Class A Common Stock................................. $.01 39,141,114
Class B Common Stock................................. $.01 109,371,996
</TABLE>
<PAGE>
CONTINENTAL CABLEVISION, INC.
FORM 10-Q
SEPTEMBER 30, 1996
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. Financial Information
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets--December 31, 1995 and September
30, 1996............................................................. 3
Condensed Statements of Consolidated Operations--Three and Nine Months
Ended September 30, 1995 and 1996.................................... 4
Condensed Statements of Consolidated Cash Flows--Nine Months Ended
September 30, 1995 and 1996.......................................... 5
Condensed Statement of Consolidated Stockholders' Equity
(Deficiency)--Nine Months Ended September 30, 1996................... 6
Notes to Condensed Consolidated Financial Statements.................. 7
Item 2. Management's Discussion and Analysis of Operations and Financial
Condition............................................................. 15
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K................................ 20
Signatures................................................................ 21
Exhibit Listing........................................................... 22
</TABLE>
2
<PAGE>
CONTINENTAL CABLEVISION, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
(IN THOUSANDS)
ASSETS
Cash................................................................................ $ 18,551 $ 27,943
Accounts Receivable-net............................................................. 110,132 106,644
Prepaid Expenses and Other.......................................................... 9,967 14,536
Supplies............................................................................ 88,687 122,825
Marketable Equity Securities........................................................ 151,378 586,726
Investments......................................................................... 538,352 532,369
Property, Plant and Equipment--net.................................................. 2,107,473 2,358,776
Intangible Assets--net.............................................................. 1,902,796 1,832,090
Other Assets--net................................................................... 153,257 158,406
------------ -------------
Total................................................................... $ 5,080,593 $ 5,740,315
------------ -------------
------------ -------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Accounts Payable.................................................................... $ 96,833 $ 83,433
Accrued Interest.................................................................... 86,977 83,657
Accrued and Other Liabilities....................................................... 238,343 239,715
Debt................................................................................ 5,285,159 5,792,523
Deferred Income Taxes............................................................... 307,041 404,499
Commitments and Contingencies
Minority Interest in Subsidiaries................................................... 26,056 30,449
Redeemable Common Stock, $.01 par value; 16,684,150 shares outstanding.............. 256,135 277,659
Stockholders' Equity (Deficiency):
Preferred Stock, $.01 par value; 198,857,142 shares authorized; none
outstanding................................................................... -- --
Series A Convertible Preferred Stock, $.01 par value; 1,142,858 shares
authorized and outstanding; liquidation preference $527,578,000 and
$559,662,000.................................................................. 11 11
Class A Common Stock, $.01 par value; 425,000,000 shares authorized; 38,780,694
and 38,820,774 shares outstanding............................................. 388 388
Class B Common Stock, $.01 par value; 200,000,000 shares authorized; 92,572,000
and 93,060,671 shares outstanding............................................. 926 931
Additional Paid-In Capital...................................................... 1,181,193 1,190,295
Unearned Compensation........................................................... (45,851) (45,283)
Foreign Currency Translation Adjustment......................................... -- 4,160
Net Unrealized Holding Gain on Marketable Equity Securities..................... 67,823 257,712
Deficit......................................................................... (2,420,441) (2,579,834)
------------ -------------
Stockholders' Equity (Deficiency)........................................... (1,215,951) (1,171,620)
------------ -------------
Total................................................................... $ 5,080,593 $ 5,740,315
------------ -------------
------------ -------------
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
CONTINENTAL CABLEVISION, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1995 1996 1995 1996
-------- -------- -------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues.............................. $342,445 $471,047 $992,493 $1,413,977
Costs and Expenses:
Operating......................... 117,296 167,844 342,142 502,671
Selling, General and
Administrative.................. 78,551 110,215 228,883 331,748
Depreciation and Amortization..... 82,156 120,583 230,568 352,279
Restricted Stock Purchase
Program......................... 3,042 3,993 8,947 12,647
-------- -------- -------- ----------
Total......................... 281,045 402,635 810,540 1,199,345
-------- -------- -------- ----------
Operating Income...................... 61,400 68,412 181,953 214,632
-------- -------- -------- ----------
Other (Income) Expense:
Interest.......................... 86,248 120,005 252,562 353,583
Equity in Net Loss of
Affiliates...................... 12,702 59,420 38,519 122,223
Gain on Sale of Marketable Equity
Securities...................... -- -- (23,032) --
Gain on Sale of Investments....... -- (68,889) (1,035) (68,889)
Minority Interest in Net Loss of
Subsidiaries.................... (60) (337) (100) (263)
Dividend Income................... (247) (70) (566) (464)
Other............................. 401 2,665 1,026 8,419
-------- -------- -------- ----------
Total......................... 99,044 112,794 267,374 414,609
-------- -------- -------- ----------
Loss Before Income Taxes.............. (37,644) (44,382) (85,421) (199,977)
Income Tax Provision (Benefit)........ (12,579) 4,825 (27,289) (40,584)
-------- -------- -------- ----------
Net Loss.............................. (25,065) (49,207) (58,132) (159,393)
-------- -------- -------- ----------
Preferred Stock Preferences........... (10,208) (11,043) (29,555) (32,084)
-------- -------- -------- ----------
Loss Applicable to Common
Stockholders......................... $(35,273) $(60,250) $(87,687) $ (191,477)
-------- -------- -------- ----------
-------- -------- -------- ----------
Loss Per Common Share................. $ (0.30) $ (0.41) $ (0.75) $ (1.29)
-------- -------- -------- ----------
-------- -------- -------- ----------
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
CONTINENTAL CABLEVISION, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1995 1996
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Operating Activities:
Net Loss.............................................. $ (58,132) $(159,393)
Adjustments to Reconcile Net Loss to Net Cash.........
Provided from Operating Activities, net of
acquisitions:
Depreciation and Amortization..................... 230,568 352,279
Restricted Stock Purchase Program................. 8,947 12,647
Amortization of Deferred Financing Costs.......... 6,673 7,657
Equity in Net Loss of Affiliates.................. 38,519 122,223
Gain on Sale of Marketable Equity Securities...... (23,032) --
Gain on Sale of Investments....................... (1,035) (68,889)
Minority Interest in Net Loss of Subsidiaries..... (100) (263)
Deferred Income Taxes............................. (28,330) (42,518)
Accrued Interest.................................. (37,605) (3,320)
Accounts Payable, Accrued and Other Liabilities... (41,545) (12,028)
Other Working Capital Changes..................... (25,432) (28,554)
--------- ---------
Net Cash Provided from Operating Activities............... 69,496 179,841
--------- ---------
Financing Activities:
Proceeds from Borrowings.............................. 768,900 1,233,327
Repayment of Borrowings............................... (134,749) (725,963)
Increase in Minority Interests........................ 2,746 4,656
Issuance of Common Stock.............................. -- 5
--------- ---------
Net Cash Provided from Financing Activities............... 636,897 512,025
--------- ---------
Investing Activities:
Acquisitions, Net of Liabilities Assumed and Cash
Acquired............................................ (184,882) (10,978)
Property, Plant and Equipment......................... (346,046) (513,938)
Investments........................................... (188,092) (249,764)
Other Assets.......................................... (16,973) (27,619)
Sale (Purchase) of Marketable Equity Securities,
net................................................. 27,357 (1,200)
Proceeds from Sale of Investments, net................ 1,181 121,025
--------- ---------
Net Cash Used for Investing Activities.................... (707,455) (682,474)
--------- ---------
Net Increase (Decrease) in Cash........................... (1,062) 9,392
Balance at Beginning of Period............................ 11,564 18,551
--------- ---------
Balance at End of Period.................................. $ 10,502 $ 27,943
--------- ---------
--------- ---------
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
5
<PAGE>
CONTINENTAL CABLEVISION, INC. AND SUBSIDIARIES
CONDENSED STATEMENT OF CONSOLIDATED STOCKHOLDERS' EQUITY (DEFICIENCY)
<TABLE>
<CAPTION>
NET
UNREALIZED
HOLDING
SERIES A COMMON STOCK FOREIGN GAIN ON
CONVERTIBLE ADDITIONAL CURRENCY MARKETABLE
PREFERRED CLASS CLASS PAID-IN UNEARNED TRANSLATION EQUITY
STOCK A B CAPITAL COMPENSATION ADJUSTMENT SECURITIES DEFICIT
----------- ----- ----- ---------- ------------ ---------- ---------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1996...... $11 $388 $926 $1,181,193 $(45,851) $ -- $ 67,823 $(2,420,441)
Net Loss...................... -- -- -- -- -- -- -- (159,393)
Accretion of Redeemable Common
Stock........................ -- -- -- (21,524 ) -- -- -- --
Restricted Stock Purchase
Program:
Stock Issued................ -- -- 5 13,266 (13,266) -- -- --
Stock Vested................ -- -- -- -- 12,647 -- -- --
Stock Forfeited............. -- -- -- (1,187 ) 1,187 -- -- --
Stock Exchanged for Loans... -- -- -- (188 ) -- -- -- --
Foreign Currency Translation
Adjustment................... -- -- -- -- -- 4,160 -- --
Issuance of Stock by Investee
(See Note 5)................. -- -- -- 18,735 -- -- -- --
Change in Unrealized Gain, net
of income taxes of
$127,996..................... -- -- -- -- -- -- 189,889 --
--- ----- ----- ---------- ------------ ---------- ---------- -----------
Balance, September 30, 1996... $11 $388 $931 $1,190,295 $(45,283) $4,160 $ 257,712 $(2,579,834)
--- ----- ----- ---------- ------------ ---------- ---------- -----------
--- ----- ----- ---------- ------------ ---------- ---------- -----------
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
6
<PAGE>
CONTINENTAL CABLEVISION, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements are unaudited,
but, in the opinion of management, include all adjustments of a normal recurring
nature necessary for a fair presentation of the results for such periods. The
results of operations and cash flows for any interim periods are not necessarily
indicative of results to be expected for a full year. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted in this Form 10-Q pursuant to the rules and regulations of the
Securities and Exchange Commission. These condensed consolidated financial
statements should be read in conjunction with the audited consolidated financial
statements and notes thereto contained in the Company's Annual Report on Form
10-K filed with the Securities and Exchange Commission.
INTANGIBLE AND OTHER ASSETS
Intangible assets consist primarily of franchise costs and goodwill recorded
in various acquisitions. Other assets represent deferred financing costs and
loans to employees (see Note 9). Intangible assets are amortized over 10 to 40
years. Accumulated amortization aggregated $902,906,000 at September 30, 1996.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses derivative financial instruments (primarily Interest Rate
Exchange Agreements (Swaps) and Interest Rate Cap Agreements (Caps)) as a means
of managing interest-rate risk associated with current debt or anticipated debt
transactions that have a high probability of being executed. These instruments
are matched with either fixed-rate or variable-rate debt and periodic cash
payments are accrued on a settlement basis as an adjustment to interest expense.
Derivative financial instruments are generally not held for trading purposes.
Any premiums associated with the instruments are amortized over their term and
realized gains or losses as a result of the termination of the instruments are
deferred and amortized over the shorter of the remaining term of the instrument
or the underlying debt (see Note 6).
LOSS PER COMMON SHARE
Loss per common share is calculated by dividing the loss available to common
stockholders by the weighted average number of common shares outstanding of
117,342,000 and 148,566,000 for the three months ended September 30, 1995 and
1996, respectively, and 117,531,000 and 148,485,000 for the nine months ended
September 30, 1995 and 1996, respectively. Shares of the Series A Convertible
Preferred Stock were not assumed to be converted into shares of common stock
since the result would be anti-dilutive.
FOREIGN CURRENCY TRANSLATION
The financial statements of the Company's non-U.S. investments are
translated into U.S. dollars in accordance with Statement of Financial
Accounting Standards No. 52, "Foreign Currency Translation." Net assets of
non-U.S. investments whose functional currencies are other than the U.S. dollar
are translated at current rates of exchange. Income and expense items are
translated at the average exchange rate for the period. The resulting
translation adjustments are recorded directly into a separate component of
stockholders' equity (deficiency). Deferred taxes are not recognized on the
Company's proportionate
7
<PAGE>
CONTINENTAL CABLEVISION, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
share of losses from international affiliates as they are not expected to result
in a benefit on the Company's U.S. tax return.
2. SUPPLEMENTAL DISCLOSURE OF CASH FLOWS
The following represents non-cash investing and financing activities and
cash paid for interest and income taxes (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1995 1996
---------- ----------
<S> <C> <C>
Accretion of Redeemable Common Stock.................................... $ 15,653 $ 21,524
---------- ----------
---------- ----------
Accretion of Series A Convertible Preferred Stock....................... $ 29,555 $ 32,084
---------- ----------
---------- ----------
Cash Paid During the Period for Interest................................ $ 296,886 $ 358,454
---------- ----------
---------- ----------
Cash Paid During the Period for Income Taxes............................ $ 988 $ 956
---------- ----------
---------- ----------
</TABLE>
3. ACQUISITIONS AND DISPOSITIONS
The Company purchased cable television systems in the Chicago, Illinois area
for approximately $168,500,000 in August 1995 and cable television systems in
California for approximately $17,000,000 in September 1995. In October 1995, the
Company purchased cable television systems in Michigan for approximately
$155,000,000. Also, in October 1995, the Company, Providence Journal, King
Holding Corporation, King Broadcasting Company and The Providence Journal
Company consummated a merger (the Providence Journal Merger) in which Providence
Journal (which at the time of the Providence Journal Merger included only the
Providence Journal cable businesses and assets) was merged with and into the
Company. In connection with the Providence Journal Merger, the Company purchased
the cable television businesses and assets of King Broadcasting Company (the
King Cable Assets and collectively with Providence Journal, Providence Journal
Cable). The total consideration involved in the Providence Journal Merger
consisted of $405,000,000 in cash, the repayment of approximately $410,000,000
of existing indebtedness and the issuance of 30,142,394 shares of the Company's
Class A common stock at an ascribed value of $584,762,000. In December 1995, the
Company purchased for $88,000,000 in cash the non-owned interests in and
discharged certain liabilities of N-Com Limited Partnership II (N-Com), which
owns and operates cable television systems in Michigan.
The Company has signed a definitive Agreement and Plan of Merger (the Merger
Agreement) providing for the merger of the Company with and into U S WEST, Inc.
or a wholly owned subsidiary thereof. The Merger Agreement provides for the
stockholders of the Company to receive a combination of cash and securities of U
S WEST, Inc. valued at approximately $4.6 billion in exchange for all of the
outstanding stock of the Company. Additionally, U S WEST, Inc. or a wholly owned
subsidiary thereof will assume the Company's outstanding indebtedness and other
liabilities. The merger is contingent upon the receipt of approvals from the
Company's stockholders. Certain major stockholders have agreed to vote in favor
of the merger and other related matters. The merger is expected to close in the
fourth quarter of 1996. As a result of the merger with U S WEST, the Company
will be required to dispose of certain assets. No assurances can be given that
the merger will occur, or occur in the foregoing manner.
In May 1996, the Company acquired a cable television system in California
for a purchase price of $10,978,000.
8
<PAGE>
CONTINENTAL CABLEVISION, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In October 1996, the Company acquired the non-owned interests in and assumed
certain liabilities of Meredith/New Heritage Strategic Partners, L.P. (M/NH) for
approximately $219,200,000. M/NH operates cable systems in the Minneapolis/St.
Paul area. This acquisition will be accounted for using the purchase method of
accounting.
Also in October, the Company exchanged its cable systems in and around St.
Louis County, Missouri for TCI Cable Partners of St. Louis L.P.'s systems
serving certain Massachusetts communities. The systems of each party serve
approximately 100,000 basic subscribers. The Company has also entered into an
agreement with Cox Communications, Inc. (Cox) to exchange systems serving
certain Virginia and Rhode Island communities for Cox's systems serving certain
Massachusetts communities. The systems of each party serve approximately 48,000
basic subscribers. The Company expects to consummate this transaction in the
fourth quarter of 1996 or the first quarter of 1997. The Company does not expect
to record a gain or loss on these exchanges.
4. MARKETABLE EQUITY SECURITIES
Marketable equity securities have an aggregate cost basis of $155,299,000 as
of September 30, 1996 and include approximately 17,861,000 shares of Teleport
Communications Group, Inc. (See Note 5).
5. INVESTMENTS
The Company's investments consist of the following (in thousands):
<TABLE>
<CAPTION>
CARRYING VALUE
---------------------------
APPROXIMATE DECEMBER 31 SEPTEMBER 30
OWNERSHIP 1995 1996
------------ ------------ -------------
<S> <C> <C> <C>
Equity Method Investments:
Optus Vision Pty Ltd (Optus Vision)................................. 47% $ 150,232 $ 306,354
Fintelco, S.A....................................................... 50% 164,144 147,635
Teleport Communications Group, Inc. (TCG), TCG
Partners and Regional TCG Partnerships 10%-30% 145,661 --
PrimeStar Partners L.P. (PrimeStar)................................. 10% 16,311 20,098
Singapore Cablevision Private Limited (SCV)......................... 25% 15,023 12,237
Other............................................................... 20%-50% 11,318 10,211
------------ -------------
502,689 496,535
Cost Method Investments............................................... 35,663 35,834
------------ -------------
Total............................................................. $ 538,352 $ 532,369
------------ -------------
------------ -------------
</TABLE>
In July 1996, TCG consummated an initial public offering (IPO) of shares of
its common stock. In conjunction with the IPO, TCG implemented a plan of
reorganization under which the Company exchanged its $53,800,000 loan and
contributed its interests in TCG partnerships to TCG for additional shares of
TCG common stock. As a result of the IPO, the Company recorded an increase in
investments, additional paid in capital and deferred income taxes of
$30,714,000, $18,735,000 and $11,979,000, respectively. Subsequent to the IPO,
TCG also redeemed approximately 7,976,000 shares of TCG common stock from the
Company for net cash proceeds of approximately $121,025,000 from which the
Company realized a pre-tax gain of approximately $68,889,000. As a result of the
redemption, the IPO and the reorganization, the Company's ownership in TCG is
now less than 20%, and, accordingly, the Company accounts for its remaining
shares of TCG as marketable equity securities.
9
<PAGE>
CONTINENTAL CABLEVISION, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A wholly owned subsidiary of the Company has issued a standby letter of
credit of $70,625,000 on behalf of PrimeStar, a limited partnership that
provides direct broadcast satellite (DBS) services. The standby letter of credit
guarantees a portion of the financing PrimeStar is incurring to construct a
successor satellite system and is collateralized by certain marketable equity
securities with a carrying value of $164,769,000 as of September 30, 1996. As a
result of the commitments and other qualitative factors, the Company accounts
for its investment in PrimeStar using the equity method.
The major components of all equity method investees' combined financial
position and results of operations are as follows (the Company's proportionate
share is reflected in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
1996
-------------
<S> <C>
Total Assets.............................................................................. $ 939,000
Total Liabilities......................................................................... 532,000
Equity.................................................................................... 407,000
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
1996
-------------
<S> <C>
Revenues.................................................................................. $ 178,000
Depreciation and Amortization............................................................. 32,000
Operating Loss............................................................................ (72,000)
Net Loss.................................................................................. (100,000)
</TABLE>
6. DEBT
Total debt outstanding is as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
1994 Credit Facility....................................................... $1,586,200 $ 2,180,820
1995 Credit Facility....................................................... 1,039,000 1,050,045
1996 Credit Facility....................................................... -- 15,000
Insurance Company Notes.................................................... 125,750 98,500
Senior Notes and Debentures................................................ 2,000,000 2,000,000
Subordinated Debt.......................................................... 500,000 400,000
Other...................................................................... 34,209 48,158
------------ -------------
Total.................................................................. $5,285,159 $ 5,792,523
------------ -------------
------------ -------------
</TABLE>
Credit availability under the Company's $2,200,000,000 unsecured reducing
revolving credit agreement (the 1994 Credit Facility) will decrease annually
commencing December 1997 with a final maturity in October 2003. Borrowings under
the 1994 Credit Facility bear interest at a rate between the agent bank's prime
rate and prime plus 1%, depending on certain financial tests. At the Company's
option, most borrowings bear interest at spreads over LIBOR. The Company's
obligations under the 1994 Credit Facility are guaranteed by the Company's
Restricted Subsidiaries (collectively with the Company, the Restricted Group),
which represent the majority of the Company's owned and operated cable systems,
excluding those acquired in the Providence Journal Cable and Michigan
acquisitions during 1995 (collectively, the New Borrowing Group) (see Note 3).
Prepayments are required from the proceeds of certain sales of the Restricted
Group's assets.
10
<PAGE>
CONTINENTAL CABLEVISION, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
During 1995, certain of the Company's subsidiaries entered into a
$1,200,000,000 unsecured reducing revolving credit facility (the 1995 Credit
Facility). Initial borrowings under the 1995 Credit Facility were used to
finance the acquisitions of Providence Journal Cable and certain Michigan cable
systems. Credit availability under the 1995 Credit Facility will decrease
annually commencing in December 1998 with a final maturity in September 2004.
Borrowings under the 1995 Credit Facility bear interest at a rate between the
agent bank's prime rate and prime plus 1/2%, depending on certain financial
tests. At the New Borrowing Group's option, most borrowings bear interest at
spreads over LIBOR. The New Borrowing Group's obligations under the 1995 Credit
Facility are guaranteed by substantially all of the New Borrowing Group
subsidiaries. Prepayments are required from the proceeds of certain sales of the
New Borrowing Group's assets.
In July 1996, the Company arranged an unsecured revolving credit facility
which will mature on July 1, 1997 (the 1996 Credit Facility). Maximum
availability under the 1996 Credit Facility is $1,000,000,000. Borrowings under
the 1996 Credit Facility may be used to fund general corporate purposes,
including capital expenditures, investments and acquisitions. The terms and
conditions of the 1996 Credit Facility are similar to those of the 1994 Credit
Facility. Indebtedness under the 1996 Credit Facility ranks pari passu in right
of payment with the Company's 1994 Credit Facility.
The Company's Insurance Company Notes are unsecured, bear interest at
10.12%, require increasing semi-annual repayments through July 1, 1999 and rank
pari passu in right of payment with the 1994 Credit Facility.
The Company's unsecured Senior Notes and Debentures rank pari passu in right
of payment with the Insurance Company Notes, the 1994 Credit Facility, and the
1996 Credit Facility (collectively, the Company's Senior Debt) and are
non-redeemable prior to maturity, except for the 9 1/2% Senior Debentures which
are redeemable at the Company's option at par plus declining premiums beginning
in 2005. No sinking fund is required for any of the Senior Notes or Debentures.
The Senior Notes and Debentures consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
8 1/2% Senior Notes, Due September 15, 2001................................ $ 200,000 $ 200,000
8 5/8% Senior Notes, Due August 15, 2003................................... 100,000 100,000
8 7/8% Senior Debentures, Due September 15, 2005........................... 275,000 275,000
8.30% Senior Notes, Due May 15, 2006....................................... 600,000 600,000
9% Senior Debentures, Due September 1, 2008................................ 300,000 300,000
9 1/2% Senior Debentures, Due August 1, 2013............................... 525,000 525,000
------------ -------------
Total.................................................................. $2,000,000 $ 2,000,000
------------ -------------
------------ -------------
</TABLE>
The Company's Senior Debt limits the Restricted Group with respect to, among
other things, payment of dividends and the repurchase of capital stock in an
aggregate amount in excess of $921,019,000, the creation of liens and additional
indebtedness, property dispositions, investments and leases and requires certain
minimum ratios of cash flow to debt and cash flow to related fixed charges. In
addition, the 1995 Credit Facility imposes similar limitations on the New
Borrowing Group.
11
<PAGE>
CONTINENTAL CABLEVISION, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company's Subordinated Debt is redeemable at the Company's option at par
plus declining premiums at various dates and is subordinated to the Company's
Senior Debt. Subordinated Debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
10 5/8% Senior Subordinated Notes, Due June 15, 2002....................... $ 100,000 $ 100,000
Senior Subordinated Floating Rate Debentures, Due November 1, 2004......... 100,000 --
11% Senior Subordinated Debentures, Due June 1, 2007....................... 300,000 300,000
------------ -------------
Total.................................................................. $ 500,000 $ 400,000
------------ -------------
------------ -------------
</TABLE>
Derivative financial instruments used to manage interest-rate risk include
Swaps and Caps. The following table summarizes the terms of the Company's Swaps
and Caps as of September 30, 1996:
<TABLE>
<CAPTION>
AVERAGE
MATURITIES INTEREST RATE
NOTIONAL AMOUNT ----------- ---------------
----------------
(IN THOUSANDS)
<S> <C> <C> <C>
Fixed to Variable Swaps.................................... $ 1,425,000 1998-2003 5.8%
Variable to Fixed Swaps.................................... 1,000,000 1997-2000 8.6%
Caps....................................................... 800,000 1996-1998 7.8%
</TABLE>
The Company's credit risk if the counterparties failed to perform under
these agreements would be limited to the periodic settlement of amounts
receivable under these agreements.
7. REDEEMABLE COMMON STOCK
Pursuant to a Stock Liquidation Agreement with certain stockholders (the
Selling Stockholders), the Company committed to repurchase shares of its common
stock (Redeemable Common Stock) in December 1998 or January 1999 at a defined
purchase price (Purchase Price). The Purchase Price is the greater of the
estimated amount of net proceeds per share from an underwritten public offering
of the Company's common stock or the net proceeds per share from the
liquidation, sale or merger of the Company less a 22.5% discount.
The initial estimated repurchase cost for the Redeemable Common Stock has
been adjusted by periodic accretions through the repurchase dates, based on the
interest method, of the difference between the initial estimate and the
subsequent estimates of the Purchase Price.
In the event the Company is unable to meet its commitments under the Stock
Liquidation Agreement, the Selling Stockholders may cause the sale of all or
substantially all of the assets of the Company.
8. STOCKHOLDERS' EQUITY (DEFICIENCY)
At September 30, 1996, there were 39,141,224 and 109,424,371 shares of Class
A and Class B common stock outstanding, respectively. Stockholders' Equity
(Deficiency) reflects only 38,820,774 and 93,060,671 shares of Class A and Class
B common stock outstanding, respectively, due to the classification of
16,684,150 shares as Redeemable Common Stock. Class A common stock has one vote
per share and Class B common stock has ten votes per share.
Each share of Series A Convertible Preferred stock (Convertible Preferred)
is entitled to 250 votes per share, shares equally with each common share in all
dividends and distributions and is convertible into 25
12
<PAGE>
CONTINENTAL CABLEVISION, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
shares of common stock, at any time, at the option of the holder. The
Convertible Preferred stockholders have the right to sell their shares in a
public offering by causing the Company to register such shares under the
Securities Act of 1933. Certain other stockholders of the Company have similar
registration rights.
The Convertible Preferred has a liquidation preference equal to the greater
of its Accreted Value or the amount which would be distributed to common
stockholders, assuming conversion of the Convertible Preferred. The Accreted
Value assumes a yield of 8% per annum, compounded semi-annually in arrears on
the purchase price. During the period, the carrying value of the Convertible
Preferred has been increased by $32,084,000 to reflect the Accreted Value of
$559,662,000 as of September 30, 1996.
After June 1997, if the value of the common stock is greater than 137.5% of
the then Accreted Value, the Company will have the right to convert each
outstanding share of Convertible Preferred into one share of common stock.
In June 2002, each outstanding share of Convertible Preferred may be
converted at the option of the holder or the Company into a number of common
shares which will have a value equal to the Accreted Value. The Company may, at
its sole option, purchase for cash at the Accreted Value all or part of the
Convertible Preferred instead of accepting or requiring conversion.
9. RESTRICTED STOCK PURCHASE PROGRAM
The Company maintains a Restricted Stock Purchase Program under which
certain employees of the Company, selected by the Board of Directors, are
permitted to buy shares of the Company's common stock at the par value of one
cent per share. The shares remain wholly or partly subject to forfeiture for up
to seven years, during which time the shares become "vested". Upon termination
of employment with the Company, an employee must resell to the Company, for the
price paid by the employee, the employee's shares which are not then vested. For
financial statement presentation, the difference between the purchase price and
the fair market value at the date of issuance (as determined by the Board of
Directors) is recorded as additional paid-in capital and unearned compensation
and charged to operations through 2001 as the shares vest. Shares of common
stock issued under the program for the period ended September 30, 1996 were
591,775. At September 30, 1996, 2,540,000 shares were not yet vested. In
connection with the Restricted Stock Purchase Program, a wholly owned subsidiary
of the Company has loaned approximately $33,848,000 at September 30, 1996 to the
participating employees to fund their individual tax liabilities. These loans
are due in 2002, bear interest at a range from 5% to 8% and are included in
Other Assets in the accompanying financial statements.
10. LEGISLATION AND REGULATION
Pursuant to the Cable Television Consumer Protection and Competition Act of
1992 (the 1992 Cable Act), the FCC in April 1993 promulgated rate regulations
that establish maximum allowable rates for cable television services, except for
services offered on a per-channel or per-program basis. The FCC's regulations
require rates for equipment and installations to be cost-based and require
reasonable rates for regulated cable television services to be established based
on, at the election of the cable television operator, either application of the
FCC's benchmark formula or a cost-of-service showing pursuant to standards
adopted by the FCC. In addition, the FCC regulations limit future rate increases
for regulated services.
On August 3, 1995, a social contract between the Company and the FCC (the
Social Contract) was adopted. The Social Contract is a six-year agreement
covering all of the Company's existing franchises (except franchises acquired in
1995), including those that were unregulated at the time and settled the
13
<PAGE>
CONTINENTAL CABLEVISION, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Company's pending cost-of-service rate cases and benchmark cable programming
service tier (CPS) rate cases. As part of the resolution of these cases, the
Company agreed to, among other things, (i) invest at least $1.35 billion in
domestic system rebuilds and upgrades through 2000 to expand channel capacity
and improve system reliability and picture quality, (ii) reduce its benchmark
broadcast service tier (BBT) service rates and (iii) make in-kind refunds to
affected subscribers totaling approximately $9.5 million in retail value. In
1995, the Company adjusted the rate reserve recorded in 1994 to reflect the
impact of the Social Contract. The resolution of pending rate cases was without
any finding by the FCC of any wrongdoing by the Company.
On August 21, 1996, an amendment (the Social Contract Amendment) to the
Social Contract was adopted by the FCC. The Social Contract Amendment
incorporates all franchises acquired during 1995 into the Social Contract and
settles most CPS-rate cases of the acquired franchises. The Social Contract
Amendment provides for cash refunds of $1.6 million (for which reserves were
recorded as of December 31, 1995) and increases the Company's investment
commitment in domestic system rebuilds and upgrades from $1.35 billion to $1.7
billion.
The Social Contract also provides for its termination in the future if the
laws and regulations applicable to services offered in any of the Company's
franchises change in a manner that would have a material favorable financial
impact on the Company. In that instance, the Company may petition the FCC to
terminate the Social Contract.
In February 1996, the 1996 Telecommunications Act was enacted into law. The
1996 Telecommunications Act modifies various provisions of the Communications
Act of 1934, the 1984 Cable Act and the 1992 Cable Act, with the intent of
establishing a pro-competitive, deregulatory policy framework for the
telecommunications industry. Among other provisions, the 1996 Telecommunications
Act sets March 31, 1999 as the date for removal of CPS-tier rate regulations,
allows telephone companies to build and operate cable systems in their local
markets and sets forth the conditions for voice and data competition in the
local telephone market. The Company at this time cannot predict the full effect
that the 1996 Telecommunications Act or the FCC's implementing regulations may
have on its future operations.
14
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with, and is
qualified in its entirety by reference to, the Company's Condensed Consolidated
Financial Statements for the nine months ended September 30, 1995 and 1996.
The Company is a leading provider of broadband communications services. The
Company's operations consist primarily of U.S. cable television systems with
complementary operations and investments in three other areas: (i) international
broadband communications ventures; (ii) the telecommunications and technology
industries, including companies offering competitive-access telephony and DBS
service; and (iii) programming services.
During 1995, the Company completed a series of acquisitions of cable systems
in the United States, the most significant of which was the acquisition of the
cable television businesses and assets of the Providence Journal. See Note 3 of
the Company's Condensed Consolidated Financial Statements.
The Company has entered into a definitive merger agreement with U S WEST,
Inc. (U S WEST), providing for the merger of the Company with and into U S WEST
or a wholly owned subsidiary thereof (the Merger). As a result of the Merger,
the Company's operations will become part of U S WEST Media Group, a leading
global media and telecommunications company.
The Merger is expected to close in the fourth quarter of 1996. The
consummation of the Merger is subject to votes by the Company's stockholders.
Certain major stockholders have agreed to vote in favor of the Merger and other
related matters. As a result of the merger with U S WEST, the Company will be
required to dispose of certain assets. No assurances can be given that the
Merger will occur, or occur in the foregoing manner. See Note 3 of the Company's
Condensed Consolidated Financial Statements.
THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1995. Revenues increased 37.6% (or $128.6 million) to $471.0
million. The acquisition of cable television systems during 1995 serving a total
of approximately 1,009,000 basic subscribers as of the acquisition dates
accounted for $104.8 million of such revenue increase. Excluding the effects of
the foregoing acquisitions, revenues increased 6.9% (or $23.8 million) to $366.2
as a result of an approximate 2.0% increase in ending basic cable subscribers,
an increase in cable revenue per average basic subscriber and increases in DBS-
service revenues. Excluding the foregoing acquisitions and DBS-service revenues,
monthly cable revenue per average basic subscriber increased 4.9% from $36.07 to
$37.82. The $1.75 increase in monthly cable revenue per average basic subscriber
primarily reflects the addition of new channels and increases in rates. The
increase in cable revenues (excluding the foregoing acquisitions and DBS
services) also includes a $3.1 million increase in advertising and home shopping
revenues to $22.3 million, offset by a $2.7 million decrease in pay-per-view
revenues to $8.4 million. Revenues from DBS services increased by $8.1 million
to $17.9 million as a result of an increase of 55,000 DBS-service customers to
approximately 117,000 as of September 30, 1996.
Operating, selling, general and administrative expenses increased 42.0% to
$278.1 million due primarily to the foregoing acquisitions, the provision of DBS
service and increases in programming costs and wages. Depreciation and
amortization expenses increased 46.8% to $120.6 million due to the foregoing
acquisitions and increased levels of capital expenditures. Non-cash stock
compensation (Restricted Stock Purchase Program expense) increased 31.3% to $4.0
million due to the vesting of a greater number of shares issued under the
Company's Restricted Stock Purchase Program as compared to 1995. Operating
income increased 11.4% to $68.4 million. Interest expense increased 39.1% to
$120.0 million as a result of a 45.9% increase in average debt outstanding due
to the foregoing acquisitions and increased levels of capital expenditures and
investments, offset by a decrease in the average effective
15
<PAGE>
interest rate from 8.8% to 8.4%. Other (income) expenses include equity in net
loss of affiliates, which increased from $12.7 million to $59.4 million
primarily due to the Company's share of increased losses from its investment in
Australia. The Company realized a gain of $68.9 million on the disposition of
part of its investment in TCG and accounts for its remaining shares of TCG as
marketable equity securities. The Company's effective tax rate for the three
months ended September 30, 1996 decreased due to the effect of increased losses
from its international investments.
As a result of such factors, the net loss for the three months ended
September 30, 1996 compared to the same period in 1995 increased $24.1 million
to $49.2 million.
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1995. Revenues increased 42.5% (or $421.5 million) to $1.4 billion. The
acquisition of cable television systems during 1995 serving a total of
approximately 1,009,000 basic subscribers as of the acquisition dates accounted
for $315.7 million of such revenue increase. Excluding the effects of the
foregoing acquisitions, revenues increased 10.7% (or $105.8 million) to $1.1
billion as a result of an approximate 2.0% increase in ending basic cable
subscribers, an increase in cable revenue per average basic subscriber and
increases in DBS-service revenues. Excluding the foregoing acquisitions and
DBS-service revenues, monthly cable revenue per average basic subscriber
increased 6.5% from $35.83 to $38.16. The $2.33 increase in monthly cable
revenue per average basic subscriber primarily reflects the addition of new
channels and increases in rates. The increase in cable revenues (excluding the
foregoing acquisitions and DBS services) also includes a $17.5 million increase
in advertising and home shopping revenues to $75.4 million and a $1.0 million
decrease in pay-per-view revenues to $23.5 million. Revenues from DBS services
increased by $24.5 million to $48.5 million principally as a result of an
increase of 55,000 DBS-service customers to approximately 117,000 as of
September 30, 1996.
Operating, selling, general and administrative expenses increased 46.1% to
$834.4 million due primarily to the foregoing acquisitions, the provision of DBS
service and increases in programming costs and wages. Depreciation and
amortization expenses increased 52.8% to $352.3 million due to the foregoing
acquisitions and increased levels of capital expenditures. Non-cash stock
compensation (Restricted Stock Purchase Program expense) increased 41.4% to
$12.6 million due to the vesting of a greater number of shares issued under the
Company's Restricted Stock Purchase Program as compared to 1995. Operating
income increased 18.0% to $214.6 million. Interest expense increased 40.0% to
$353.6 million as a result of a 48.6% increase in average debt outstanding due
to the foregoing acquisitions and increased levels of capital expenditures and
investments, offset by a decrease in the average effective interest rate from
9.1% to 8.5%. Other (income) expenses include equity in net loss of affiliates,
which increased from $38.5 million to $122.2 million primarily due to the
Company's share of increased losses from its international investment in
Australia. The Company realized a gain of $68.9 million on the disposition of
part of its investment in TCG and accounts for its remaining shares of TCG as
marketable equity securities.
As a result of such factors, the net loss for the nine months ended
September 30, 1996 compared to the same period in 1995 increased by $101.3
million to $159.4 million.
EBITDA. Based on its experience in the cable television industry, the
Company believes that EBITDA and related measures of cash flow serve as
important financial analysis tools for measuring and comparing cable television
companies in several areas, such as liquidity, operating performance and
leverage. EBITDA should not be considered as an alternative to operating or net
income (measured in accordance with GAAP) as an indicator of the Company's
performance or as an alternative to cash flows from operating activities
(measured in accordance with GAAP) as a measure of the Company's liquidity. For
the nine months ended September 30, 1996, EBITDA increased 37.5% to $579.6
million, as compared to the same period in 1995. Excluding the effects on both
periods of the acquisitions of cable television systems, EBITDA increased 7.4%
to $449.8 million. DBS service accounted for approximately $2.1 million and $7.1
million of EBITDA for the nine months ended September 30, 1995 and 1996,
respectively. The
16
<PAGE>
remaining increase in EBITDA for the nine months ended September 30, 1996
(excluding the effects of the acquisitions) was the result of increases in
revenues.
LIQUIDITY AND CAPITAL RESOURCES
The following table sets forth for the period indicated certain items from
the Company's Condensed Statement of Consolidated Cash Flows (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
1996
---------------
<S> <C>
Net Cash Provided From Operating Activities................... $ 179,841
---------------
---------------
Financing Activities:
Net borrowings.................................................... $ 507,364
Other............................................................. 4,661
---------------
Net Cash Provided From Financing Activities................... $ 512,025
---------------
---------------
Investing Activities:
Property, plant and equipment..................................... $ (513,938)
Investments....................................................... (249,764)
Other assets...................................................... (27,619)
Acquisitions, Net of Liabilities Assumed and Cash Acquired........ (10,978)
Sale (Purchase) of Investments and
Marketable Equity Securities, net............................... 119,825
---------------
Net Cash Used For Investing Activities........................ $ (682,474)
---------------
---------------
</TABLE>
CREDIT ARRANGEMENTS OF THE COMPANY. On September 30, 1996, the Company had
cash on hand of $27.9 million and the following credit arrangements: (i)
approximately $2.2 billion outstanding under a $2.2 billion reducing revolving
credit facility (the 1994 Credit Facility), (ii) approximately $1.1 billion
outstanding under a $1.2 billion reducing revolving credit facility (the 1995
Credit Facility); (iii) approximately $15.0 million outstanding under a $1.0
billion short-term revolving credit facility (the 1996 Credit Facility); (iv)
$98.5 million of 10.12% Senior Notes Due 1999 to the Prudential Life Insurance
Company; (v) $200.0 million of 8 1/2% Senior Notes Due 2001; (vi) $100.0 million
of 8 5/8% Senior Notes Due 2003; (vii) $275.0 million of 8 7/8% Senior
Debentures Due 2005; (viii) $600.0 million of the 8.30% Senior Notes Due 2006;
(ix) $300.0 million of 9% Senior Debentures Due 2008; (x) $525.0 million of
9 1/2% Senior Debentures Due 2013; (xi) $100.0 million of 10 5/8% Senior
Subordinated Notes Due 2002; and (xii) $300.0 million of 11% Senior Subordinated
Debentures Due 2007. Other miscellaneous debt was approximately $48.2 million as
of September 30, 1996. As of November 1, 1996, there was credit availability of
approximately $4.5 million, $144.9 million and $705.0 million under the 1994
Credit Facility, the 1995 Credit Facility and the 1996 Credit Facility,
respectively. In February 1996, the Company borrowed funds under the 1994 Credit
Facility to redeem in full the $100.0 million of Senior Subordinated Floating
Rate Debentures plus accrued interest thereon.
As of September 30, 1996, a subsidiary of the Company had issued a standby
letter of credit of approximately $70.6 million on behalf of PrimeStar, which
guaranteed a portion of the financing being incurred by PrimeStar to construct a
successor-satellite system. The letter of credit is secured by certain
marketable equity securities with a fair market value of approximately $164.8
million as of September 30, 1996.
CAPITAL EXPENDITURES AND U.S. ACQUISITIONS. The Company's expenditures for
property, plant and equipment for the nine months ended September 30, 1996
totaled approximately $513.9 million (of which approximately $50.9 million was
related to the provision of DBS service and approximately $84.9 million was
related to the development of new businesses). The Company anticipates that it
will spend during
17
<PAGE>
1996: (i) approximately $529.0 million on capital expenditures for its cable
systems (excluding the cable systems to be acquired in 1996 (see below)), (ii)
approximately $85.0 million on capital expenditures for the provision of DBS
service and (iii) approximately $120.0 million on capital expenditures for new
businesses such as telephony and high-speed data services. However, the Company
is continually re-evaluating its capital budget based on economic, technological
and other factors. In accordance with the Social Contract, as amended, the
Company has agreed to invest a minimum of $1.7 billion in system rebuilds and
upgrades in the United States through 2000 to expand channel capacity and
improve system reliability and picture quality (see Note 10 of the Company's
Condensed Consolidated Financial Statements).
In May 1996, the Company purchased a cable television system in California
for approximately $11.0 million.
In October 1996, the Company acquired the remaining ownership interests in
and assumed certain liabilities of Meredith/New Heritage Strategic Partners,
L.P. for total consideration of approximately $219.2 million. See Note 3 of the
Company's Condensed Consolidated Financial Statements.
INVESTMENTS. For purposes of the Condensed Statements of Consolidated Cash
Flows, the Company's investments include, among other things, interests in
telecommunications and technology and international broadband communications
ventures as indicated below.
INTERNATIONAL INVESTMENTS. As of September 30, 1996, the Company had
advanced US$150.5 million to Fintelco. In addition, the Company has recorded
commitments to contribute an additional US$17.1 million to Fintelco in order to
finance its portion of certain acquisitions of Argentine cable television
systems. Fintelco entered into a US$140.0 million credit facility in 1995 and
arranged an additional US$50.0 million credit facility in October 1996. Proceeds
from such facilities were used to refinance existing indebtedness and for
general corporate purposes, including capital expenditures. Fintelco is in the
process of arranging an additional US$40.0 million of credit facilities. Such
facilities may reduce the amount of future advances from Fintelco's
shareholders, including the Company. No assurances can be given at this time
that such additional facilities will be successfully arranged.
As of September 30, 1996, the Company had invested approximately US$397.7
million in Optus Vision. Optus Vision anticipates at this time that its
remaining funding needs will be provided by a combination of equity from the
joint venture partners and third-party debt. Optus Vision has arranged A$280.0
million of short-term credit facilities and is in the process of arranging
additional short-term credit facilities. Proceeds from such facilities will be
used to refinance existing short-term indebtedness and for general corporate
purposes, including capital expenditures. No assurances can be given at this
time that such short-term facilities will be successfully arranged.
As of September 30, 1996, the Company had invested US$17.6 million in SCV
and committed to contribute up to approximately US$27.0 million (based on
exchange rates as of September 30, 1996) in additional capital. In addition, the
Company has committed to lend up to approximately US$45.0 million (based on
exchange rates as of September 30, 1996) to SCV if third-party debt financing is
unavailable. SCV has arranged an aggregate of S$176.0 million in senior credit
facilities. Such facilities may reduce the amount of future advances from SCV's
shareholders, including the Company.
INVESTMENTS IN TELECOMMUNICATIONS AND TECHNOLOGY. The Company has made
numerous investments which are related to its ownership interests in TCG and
PrimeStar.
In July 1996, TCG consummated an initial public offering (IPO) of shares of
its common stock. In conjunction with the IPO, TCG implemented a plan of
reorganization, under which CCI exchanged its $53.8 million loan and contributed
its interests in TCG partnerships to TCG for additional shares of TCG common
stock. Subsequent to the IPO, TCG redeemed approximately 8.0 million shares of
TCG common stock from the Company for net cash proceeds of approximately $121.0
million. The Company used such
18
<PAGE>
proceeds to repay amounts outstanding under the 1994 Credit Facility. The
Company currently owns approximately 17.9 million shares of TCG common stock,
which represents an approximate 11.2% ownership interest and had a market value
of $504.6 million as of November 1, 1996.
Simultaneous with the IPO, TCG issued $925.0 million of public debt
securities. As a result of the IPO and such public debt issuance, the Company
does not anticipate making any additional advances to TCG in the future.
In order to obtain certain regulatory approvals in connection with the
Merger, the Company has agreed to divest of its entire interest in TCG over a
period of approximately two years.
The Company also owns an approximate 10.4% partnership interest in
PrimeStar. The Company had made cash investments totaling $31.4 million as of
September 30, 1996 to fund PrimeStar's ongoing operations and may in the future
make additional investments in PrimeStar.
OTHER FINANCING AND INVESTMENT ACTIVITIES. During the nine months ended
September 30, 1996, the Company invested approximately $27.6 million in other
assets which included, among other things, an increase in loans to certain
employees to cover tax obligations in connection with the Company's Restricted
Stock Purchase Program (see Note 9 of the Company's Condensed Consolidated
Financial Statements).
1998-1999 SHARE REPURCHASE PROGRAM. The Company is a party to a liquidity
agreement (the Stock Liquidation Agreement) with certain stockholders, including
H. Irving Grousbeck (a co-founder of the Company), and the partners of certain
general investment limited partnerships managed by Burr, Egan, Deleage & Co.
(collectively, the Subject Stockholders), pursuant to which the Company has
obligations to purchase, and the Subject Stockholders and other stockholders who
have elected to have their shares of Common Stock covered thereby (Redeemable
Common Stock) have obligations to sell, such Redeemable Common Stock in 1998 or
1999. The Company's obligation under the Stock Liquidation Agreement is to
repurchase approximately 16.7 million shares of Redeemable Common Stock on
December 15, 1998 (or January 15, 1999), at each such stockholder's election.
See Note 7 of the Company's Condensed Consolidated Financial Statements.
CAPITAL RESOURCES. Historically, cash generated from the Company's
operating activities in conjunction with borrowings and, to a lesser extent,
proceeds from private equity issuances have been sufficient to fund the
Company's capital expenditures, investments and acquisitions, debt service
requirements and stock repurchase obligations. Prior to the consummation of the
Merger with U S WEST, the Company anticipates funding its capital expenditures,
acquisitions, investments and debt service requirements with cash provided from
operating activities and borrowings under existing credit facilities. If the
Merger is not consummated, the Company anticipates funding its capital needs
with cash provided from operating activities, borrowings under existing and new
credit facilities and future equity issuances. However, there can be no
assurances in this regard. Furthermore, there can be no assurances that the
terms available for any future debt or equity financing would be favorable to
the Company.
RECENT LEGISLATION. See Note 10 of the Company's Condensed Consolidated
Financial Statements.
19
<PAGE>
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
The exhibits listed in the Exhibit Index are filed as part of this Quarterly
Report on Form 10-Q and are incorporated herein by reference.
(B) REPORTS ON FORM 8-K
No reports on Form 8-K were filed.
20
<PAGE>
CONTINENTAL CABLEVISION, INC.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED DULY AUTHORIZED.
CONTINENTAL CABLEVISION, INC. (REGISTRANT)
DATE: November 13, 1996 By: /s/ WILLIAM T. SCHLEYER
-----------------------------------------
William T. Schleyer
PRESIDENT AND CHIEF OPERATING OFFICER
DATE: November 13, 1996 By: /s/ P. ERIC KRAUSS
-----------------------------------------
P. Eric Krauss,
VICE PRESIDENT, TREASURER AND CORPORATE
CONTROLLER
21
<PAGE>
EXHIBIT LISTING
Listed below are the exhibits which are filed as part of this report
(according to the number assigned to them in Item 601 of Regulation S-K).
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -------------
<S> <C>
2.1 Amendment, dated as of October 7, 1996, to Agreement and Plan of Merger dated as of February 27, 1996,
and as amended and restated as of June 27, 1996, between U S WEST, Inc. and the Company.......... Filed
herewith as Exhibit 2.1.
2.2 Amendment No. 2 to Stockholders' Agreement dated as of October 7, 1996, among the stockholders of
Continental Cablevision, Inc. named therein and U S WEST, Inc........... Filed herewith as Exhibit 2.2.
11.1 Schedule of computation of earnings per share.......................... Filed herewith as Exhibit 11.1.
27.0 Financial Data Schedules............................................... Filed herewith as Exhibit 27.0.
</TABLE>
22
<PAGE>
EXHIBIT 2.1
AMENDMENT TO AGREEMENT AND PLAN OF MERGER
AMENDMENT, dated as of October 7, 1996 (this "Amendment"), to the
Agreement and Plan of Merger, dated as of February 27, 1996, as amended and
restated as of June 27, 1996 (the "Merger Agreement"), among U S WEST, Inc., a
Delaware corporation ("Acquiror"), Continental Merger Corporation, a Delaware
corporation ("Company Sub"), and Continental Cablevision, Inc., a Delaware
corporation (the "Company").
W I T N E S S E T H :
WHEREAS, Acquiror, Company Sub and the Company desire to amend the
Merger Agreement in certain respects, as more fully set forth herein; and
WHEREAS, Section 9.5 of the Merger Agreement permits amendments to the
Merger Agreement by the written agreement of Acquiror, Company Sub and the
Company.
NOW, THEREFORE, in consideration of the mutual covenants and agreement
set forth herein, the parties hereto agree as follows:
ARTICLE I.
AMENDMENTS TO THE MERGER AGREEMENT
1.1. DEFINITIONS. (a) The definition of "Class A Preferred Consideration
Amount" set forth in Section 1.1 of the Merger Agreement is hereby amended by
inserting the clause "but excluding any and all unvested and outstanding shares
of Restricted Company Common Stock" at the end thereof.
(b) The definition of "Class A Preferred Percentage" set forth in
Section 1.1 of the Merger Agreement is hereby amended by deleting the words
"Class A" from clause (y) thereof.
(c) The definition of "Calculation Price" set forth in Section 1.1 of
the Merger Agreement is hereby amended and restated as follows:
"CALCULATION PRICE" shall mean $21.00.
(d) The definition of "Transaction Value" set forth in Section 1.1 of
the Merger Agreement is hereby amended by inserting the clause "but excluding
any and all unvested and outstanding shares of Restricted Company Common Stock"
at the end thereof.
(e) Section 1.1 of the Merger Agreement is hereby amended by deleting
the definitions of "Cap Price," "Determination Price," "Floor Price," "Intra-Day
Closing Prices," "Random Trading Days" and "Trading Day" in their entirety.
(f) The following additional definitions are hereby added to Section 1.1
of the Merger Agreement:
"CLASS B COMMON STOCK ELECTION CONVERSION NUMBER" shall mean the quotient
of (x) the product of (A) the Class B Common Percentage multiplied by (B)
the Share Price divided by (y) the Calculation Price (rounded to the nearest
hundredth, or if there shall not be a nearest hundredth, to the next lowest
hundredth).
"CONVERSION NUMBER" shall mean the quotient of (x) the product of (A) the
Common Percentage multiplied by (B) the Share Price divided by (y) the
Calculation Price (rounded to the nearest hundredth, or if there shall not
be a nearest hundredth, to the next lowest hundredth).
(g) Section 1.2 of the Merger Agreement is hereby amended by deleting
the references therein to the terms "Acquiror Termination Notice," "Cap Top-Up
Intent Notice," "Class B Common Stock Election Conversion Number," "Company
Termination Notice," "Conversion Number," "Designated Assets,"
<PAGE>
"Designated Asset Fair Market Value," "Floor Top-up Intent Notice," "Put Closing
Date," "Put Exercise Notice," "Put Right" and "Put Shares."
1.2. THE MERGER. The first sentence of Section 2.1 of the Merger
Agreement is hereby amended and restated in its entirety as follows:
Upon the terms and subject to the conditions set forth in this Agreement,
and in accordance with the DGCL, the Company shall be merged with and
into Acquiror at the Effective Time (as defined in Section 2.3);
PROVIDED, HOWEVER, that if either (a) Acquiror, the Company and The
Providence Journal Company shall have received a ruling from the IRS
satisfactory to each of them (the "Ruling") by the later of (i) the fifth
Business Day after the date on which the last of the conditions set forth
in Article VIII is fulfilled or waived, other than conditions requiring
deliveries at the Closing and the condition set forth in Section 8.1(f)
and (ii) November 15, 1996 or (b) Acquiror, the Company and The
Providence Journal Company are otherwise satisfied that the receipt of
the Ruling is not necessary, upon the terms and subject to the conditions
set forth in this Agreement and in accordance with the DGCL, the Company
shall be merged with and into Company Sub at the Effective Time.
1.3. CONVERSION OF COMPANY COMMON STOCK. (a) Section 3.1(c)(i) of the
Merger Agreement is hereby amended by deleting the words "(as determined in
accordance with Section 3.1(d))" from clause (x) thereof.
(b) Section 3.1(c)(ii)(y) of the Merger Agreement is hereby amended by
deleting the words "(as determined in accordance with Section 3.1(d))" from
clause (1) thereof.
(c) Section 3.1(c)(ii)(z) of the Merger Agreement is hereby amended by
deleting the words "(as determined in accordance with Section 3.1(d))" from
clause (2) thereof.
(d) Section 3.1(d)(i) of the Merger Agreement is hereby amended by
deleting the reference to "(i)" therefrom.
(e) Section 3.1(d)(ii) of the Merger Agreement is hereby deleted in its
entirety.
1.4. COMPANY COMMON STOCK ELECTIONS; EXCHANGE FUND. (a) Section 3.2(c)
of the Merger Agreement is hereby amended by (i) inserting the clause "without
submitting a revised properly completed Election Form" following the words
"Election Form" in the last sentence thereof and (ii) amending and restating the
penultimate sentence thereof as follows:
The Election Form shall include information as to the Share Price, the
Cash Consideration Amount, the number of shares of Media Stock and Series
D Preferred Stock to be received (subject to proration pursuant to
Section 3.3) by a holder of Class B Common Stock making a Stock Election
and the number of shares of Media Stock and Series D Preferred Stock and
the amount of cash to be received by a holder of Class B Common Stock
making a Standard Election and shall state the pricing terms of the
Series D Preferred Stock.
(b) Section 3.2(e) of the Merger Agreement is hereby amended by deleting
the words "this Section 3.3" from the last sentence thereof and inserting in
lieu thereof the words "this Section 3.2".
1.5. SHARE PRICE ADJUSTMENT. Section 3.7 of the Merger Agreement is
hereby amended by (i) deleting the words "the condition set forth in Section
8.2(h) or" from the first proviso thereof, (ii) deleting the word "conditions"
from the second proviso thereof and inserting in lieu thereof the word
"condition" and (iii) deleting the word "either" from the second provisio
thereof.
1.6. CONDUCT OF BUSINESS OF THE COMPANY. Section 6.1 of the Merger
Agreement is hereby amended by deleting the words ", or take any other action a
principal purpose of which is to affect the calculation of the Determination
Price" from subsection (xxiii) thereof.
2
<PAGE>
1.7. CONDUCT OF BUSINESS OF ACQUIROR AND COMPANY SUB. Section 6.2 of the
Merger Agreement is hereby amended by (i) deleting the text of subsection (vi)
thereof and inserting in lieu thereof the words "purchase or sell (or announce
any intention or proposal to purchase or sell) shares of Media Stock for cash at
a price less than the Calculation Price (other than pursuant to employee benefit
plans in the ordinary course of business or pursuant to the U S WEST Shareowner
Investment Plan); PROVIDED, HOWEVER, that if the Closing shall not have occurred
on or prior to December 31, 1996, then Acquiror and its Subsidiaries shall have
the right to purchase (or announce any intention or proposal to purchase) shares
of Media Stock for cash at a price less than the Calculation Price after such
date" and (ii) deleting the words "and the purchase of the Put Shares pursuant
to Section 9.4" from subsection (viii) thereof.
1.8. ANTITRUST NOTIFICATION. (a) Section 7.6(c) of the Merger Agreement
is hereby amended by deleting the words "except as provided in Section 7.6(d),"
and inserting in lieu thereof the words "except with the mutual agreement of
Acquiror and the Company,".
(b) Section 7.6(d) of the Merger Agreement is hereby deleted in its
entirety.
1.9. CERTAIN ACTIONS. (a) Section 7.7(a) of the Merger Agreement is
hereby amended by deleting the reference to "(a)" therefrom.
(b) Sections 7.7(b) and 7.7(c) of the Merger Agreement are hereby
deleted in their entirety.
1.10. CONDITIONS PRECEDENT. (a) Section 8.1(b) is hereby amended by
inserting the word "and" immediately before clause (iii) and deleting clause
(iv) in its entirety.
(b) Section 8.2(h) of the Merger Agreement is hereby deleted in its
entirety and replaced with the words "[Intentionally Omitted.]".
(c) Section 8.3(c) of the Merger Agreement is hereby amended and
restated as follows:
(c) TAX OPINION. The Company shall have received an opinion of Sullivan
& Worcester LLP, dated the Closing Date, to the effect that (i) the Merger
should be treated for Federal income tax purposes as a reorganization within
the meaning of Section 368(a) of the Code; (ii) each of the Acquiror, the
Company and, in the case of the Subsidiary Merger, Company Sub should be a
party to the reorganization within the meaning of Section 368(b) of the
Code; and (iii) no gain or loss will be recognized by a stockholder of the
Company as a result of the Merger except (x) with respect to cash received
by such stockholder in lieu of fractional shares or pursuant to the exercise
of appraisal rights and (y) if a stockholder of the Company receives cash,
gain, if any, realized by such stockholder will be recognized, but only to
the extent of the cash received. In rendering such opinion, Sullivan &
Worcester LLP, may receive and rely upon representations contained in
certificates of Acquiror, the Company, certain stockholders of the Company
and, in the case of the Subsidiary Merger, Company Sub.
1.11. TERMINATION. (a) Section 9.1 of the Merger Agreement is hereby
amended by (i) deleting the words "8.2(h)," from subsection (d) thereof, (ii)
deleting subsections (h) and (i) thereof, (iii) inserting the word "or" at the
end of subsection (f) thereof and (iv) deleting the semi-colon from the end of
subsection (g) thereof and inserting a period in lieu thereof.
(b) The text of Section 9.4 of the Merger Agreement is hereby deleted in
its entirety and replaced with the words "[Intentionally Omitted.]".
1.12. EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
Section 10.2 of the Merger Agreement is hereby amended by deleting the word
"9.4" therefrom.
1.13. EXHIBITS. (a) Exhibits A and D of the Merger Agreement are hereby
amended and restated in their entirety in the forms attached hereto.
(b) Exhibits E and F of the Merger Agreement are hereby deleted in their
entirety.
3
<PAGE>
ARTICLE II
MISCELLANEOUS
2.1. DEFINITIONS. Capitalized terms used in this Amendment and not
defined herein shall have the meanings ascribed thereto in the Merger Agreement.
2.2. EFFECT OF AMENDMENT; RESTATEMENT. Except as amended by this
Amendment, the Merger Agreement shall be unamended and remain in full force and
effect. The Merger Agreement, as amended by this Amendment, is hereinafter
referred to as the "Agreement", and the parties hereto hereby agree that the
Agreement may be restated to reflect the amendments provided for in this
Amendment.
2.3. APPLICABLE LAW. This Amendment shall be governed by, and construed
in accordance with, the laws of the State of Delaware without reference to
choice of law principles, including all matters of construction, validity and
performance.
2.4. COUNTERPARTS. This Amendment may be executed in one or more
counterparts and each counterpart shall be deemed to be an original, but all of
which shall constitute one and the same original.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the day and year first above written.
U S WEST, INC.
By: /s/ CHARLES M. LILLIS
-----------------------------------------
Name: Charles M. Lillis
Title: EXECUTIVE VICE PRESIDENT;
PRESIDENT AND CHIEF
EXECUTIVE OFFICER OF THE
U S WEST MEDIA GROUP
CONTINENTAL MERGER CORPORATION
By: /s/ CHARLES M. LILLIS
-----------------------------------------
Name: Charles M. Lillis
Title: PRESIDENT
CONTINENTAL CABLEVISION, INC.
By: /s/ AMOS B. HOSTETTER, JR.
-----------------------------------------
Name: Amos B. Hostetter, Jr.
Title: CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
5
<PAGE>
EXHIBIT 2.2
AMENDMENT NO. 1 TO
STOCKHOLDERS' AGREEMENT
AMENDMENT NO. 1 TO STOCKHOLDERS' AGREEMENT, dated as of October 7, 1996,
among the undersigned stockholders of Continental Cablevision, Inc.
(collectively, the "Stockholders") and U S WEST, Inc., a Delaware corporation
("Acquiror").
W I T N E S S E T H :
WHEREAS, the Stockholders and Acquiror are parties to that certain
Stockholders' Agreement dated as of February 27, 1996 (the "Stockholders'
Agreement"); and
WHEREAS, the Stockholders and Acquiror desire to amend, on the terms set
forth herein, the Stockholders' Agreement.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. AMENDMENT TO STOCKHOLDERS' AGREEMENT. (a) Section 3.1 of the
Stockholders' Agreement is hereby amended by deleting the third and fourth
sentences thereof. The Stockholders' Agreement is further amended by inserting a
new Section 3.8 to read as follows:
3.8. RESTRICTIONS ON CONVERSION OF CLASS B COMMON STOCK. (a) Except as
provided in Section 3.7 hereof, each of the Stockholders agrees that such
Stockholder shall not, and Corporate Advisors agrees, with respect to the CP
Shares, to cause the CP Entities not to, exchange or convert any shares of
Class B Common Stock or Company Preferred Stock for or into shares of Class
A Common Stock; PROVIDED, HOWEVER, that, subject to and in accordance with
subsection (b) below and the Company's Restated Certificate of
Incorporation, as amended from time to time, each Stockholder may, and
Corporate Advisors, with respect to the CP Shares following the conversion
required by Section 4.2, may cause any CP Entity to, convert any of such
holder's shares of Class B Common Stock into shares of Class A Common Stock
immediately prior to the Effective Time in accordance with the Company's
Restated Certificate of Incorporation so long as, after giving effect to all
such conversions, a sufficient number of shares of Class B Common Stock will
be outstanding as of the Effective Time to enable the remaining holders of
Class B Common Stock to receive, in the aggregate, the Cash Consideration
Amount.
(b) Any Stockholder which desires to convert any of such Stockholder's
shares of Class B Common Stock, and Corporate Partners, if Corporate
Partners desires to cause any CP Entity to convert any of its CP Shares
(after converting such CP Shares into shares of Class B Common Stock in
accordance with Section 4.2) into Class A Common Stock, shall submit to the
Company, no later than immediately prior to the Effective Time (the
"Conversion Deadline"), a written notice of conversion (a "Notice of
Conversion") which specifies the number of shares of Class B Common Stock
which such holder desires to convert immediately prior to the Effective
Time, together with the certificates representing each share of Class B
Common Stock which such holder desires to convert. In the event that the
Company receives, on or before the Conversion Deadline, Notices of
Conversion with respect to an aggregate number of shares of Class B Common
Stock (the "Requested Number") which exceeds the aggregate number of shares
of Class B Common Stock which may be converted pursuant to subsection (a)
above (the "Permitted Number"), each holder which has submitted a Notice of
Conversion on or before the Conversion Deadline shall be deemed to have
converted, immediately prior to the Effective Time, a number of shares of
Class B Common Stock ("Converted Shares") equal to (x) the number of shares
of Class B Common Stock which such holder requested to convert, as set forth
in such holder's Notice of Conversion, multiplied by (y) a fraction, the
numerator of which is the Permitted Number and the denominator of which is
the Requested Number. As promptly as practicable following the Effective
Time, the Company will deliver to each holder which has properly
<PAGE>
converted shares of Class B Common Stock in accordance with this Section
3.8: (i) certificates representing a number of shares of Class A Common
Stock equal to the number of such holder's Converted Shares and (ii)
certificates representing a number of shares of Class B Common Stock equal
to the difference between the number of shares of Class B Common Stock which
such holder requested to convert, as set forth in such holder's Notice of
Conversion, and the number of such holder's Converted Shares.
(b) The third recital of the Stockholders' Agreement is hereby amended
and restated in its entirety as follows:
WHEREAS, Acquiror, Continental Merger Corporation, a Delaware corporation
("Company Sub"), and the Company have entered into an Agreement and Plan
of Merger, dated as of February 27, 1996, as amended and restated as of June
27, 1996 and as amended as of October 7, 1996 (the "Merger Agreement"),
pursuant to which the Company will be merged with and into either Acquiror
or Company Sub;
(c) Section 4.2 of the Stockholders' Agreement is hereby amended by
deleting the words "Company Common Stock" and inserting in lieu thereof the
words "Class B Common Stock."
2. NO OTHER AMENDMENTS. Except as specifically provided herein, the
terms and provisions of the Stockholders' Agreement shall be and remain
unaltered and in full force and effect.
3. MISCELLANEOUS. This Amendment shall be governed by, and construed in
accordance with, the laws of the State of Delaware, without regard to conflicts
of law principles. This Amendment may be executed in several counterparts and by
each party on a separate counterpart, each of which when so executed and
delivered shall be an original, but all of which together shall constitute one
and the same original.
2
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment
to be duly executed and delivered as of the day and year first above written.
U S WEST, INC.
By: /s/ CHARLES M. LILLIS
----------------------------------------
Name: Charles M. Lillis
Title: EXECUTIVE VICE PRESIDENT
THE AMOS B. HOSTETTER, JR.
1989 TRUST
By: /s/ AMOS B. HOSTETTER, JR.
----------------------------------------
Amos B. Hostetter, Jr., TRUSTEE
By: /s/ TIMOTHY P. NEHER
----------------------------------------
Timothy P. Neher, TRUSTEE
SCHOONER CAPITAL CORPORATION
By: /s/ VINCENT J. RYAN
----------------------------------------
Name: Vincent J. Ryan
Title: CHAIRMAN
BOSTON VENTURES LIMITED
PARTNERSHIP IV
BY: BOSTON VENTURES COMPANY
LIMITED PARTNERSHIP IV
By: /s/ ROY F. COPPEDGE III
----------------------------------------
Name: Roy F. Coppedge III
Title: GENERAL PARTNER
By: /s/ AMOS B. HOSTETTER, JR.
----------------------------------------
Amos B. Hostetter, Jr.
By: /s/ TIMOTHY P. NEHER
----------------------------------------
Timothy P. Neher
BOSTON VENTURES LIMITED
PARTNERSHIP III
BY: BOSTON VENTURES COMPANY
LIMITED PARTNERSHIP III
By: /s/ ROY F. COPPEDGE III
----------------------------------------
Name: Roy F. Coppedge III
Title: GENERAL PARTNER
BOSTON VENTURES LIMITED
PARTNERSHIP IIIA
BY: BOSTON VENTURES COMPANY
LIMITED PARTNERSHIP III
By: /s/ ROY F. COPPEDGE III
----------------------------------------
Name: Roy F. Coppedge III
Title: GENERAL PARTNER
BOSTON VENTURES LIMITED
PARTNERSHIP IVA
BY: BOSTON VENTURES COMPANY
LIMITED PARTNERSHIP IV
By: /s/ ROY F. COPPEDGE III
----------------------------------------
Name: Roy F. Coppedge III
Title: GENERAL PARTNER
3
<PAGE>
<TABLE>
<S> <C>
CORPORATE PARTNERS, L.P.
BY: CORPORATE PARTNERS, L.P.
BY: LFCP CORP.
By: /s/ JONATHAN H. KAGAN
----------------------------------------
Name: Jonathan H. Kagan
Title: MANAGING DIRECTOR
VENCAP HOLDINGS (1992) PTE LTD.
BY: CORPORATE ADVISORS, L.P.
BY: LFCP CORP.
By: /s/ JONATHAN H. KAGAN
----------------------------------------
Name: Jonathan H. Kagan
Title: MANAGING DIRECTOR
CORPORATE OFFSHORE PARTNERS, L.P.
BY: CORPORATE ADVISORS, L.P.
BY: LFCP CORP.
By: /s/ JONATHAN H. KAGAN
----------------------------------------
Name: Jonathan H. Kagan
Title: MANAGING DIRECTOR
AGREED AS TO SECTION 3.8 OF THE
STOCKHOLDERS' AGREEMENT, AS
AMENDED HEREBY
CONTINENTAL CABLEVISION, INC.
By: /s/ WILLIAM T. SCHLEYER
----------------------------------------
Name: William T. Schleyer
Title: PRESIDENT
MELLON BANK, N.A., AS TRUSTEE
FOR FIRST PLAZA GROUP TRUST
BY: CORPORATE ADVISORS, L.P.
BY: LFCP CORP.
By: /s/ JONATHAN H. KAGAN
----------------------------------------
Name: Jonathan H. Kagan
Title: MANAGING DIRECTOR
THE STATE BOARD OF
ADMINISTRATION OF FLORIDA
BY: CORPORATE ADVISORS, L.P.
BY: LFCP CORP.
By: /s/ JONATHAN H. KAGAN
----------------------------------------
Name: Jonathan H. Kagan
Title: MANAGING DIRECTOR
CONTCABLE CO-INVESTORS, L.P.
BY: CORPORATE ADVISORS, L.P.
BY: LFCP CORP.
By: /s/ JONATHAN H. KAGAN
----------------------------------------
Name: Jonathan H. Kagan
Title: MANAGING DIRECTOR
</TABLE>
4
<PAGE>
EXHIBIT 11.1
CONTINENTAL CABLEVISION, INC. AND SUBSIDIARIES
SCHEDULE OF COMPUTATION OF LOSS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -------------------
1995 1996 1995 1996
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Net Loss............................... $(25,065) $(49,207) $(58,132) $(159,393)
Preferred Stock Preferences............ (10,208) (11,043) (29,555) (32,084)
-------- -------- -------- ---------
Loss Applicable for Common
Stockholders.......................... $(35,273) $(60,250) $(87,687) $(191,477)
-------- -------- -------- ---------
-------- -------- -------- ---------
Loss Per Common Share.................. $ (0.30) $ (0.41) $ (0.75) $ (1.29)
-------- -------- -------- ---------
-------- -------- -------- ---------
Weighted Average Number of Shares
Outstanding........................... 117,342 148,566 117,531 148,485
-------- -------- -------- ---------
-------- -------- -------- ---------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 27,943
<SECURITIES> 586,726
<RECEIVABLES> 123,932
<ALLOWANCES> (17,288)
<INVENTORY> 122,825
<CURRENT-ASSETS> 0
<PP&E> 3,811,791
<DEPRECIATION> (1,453,015)
<TOTAL-ASSETS> 5,740,315
<CURRENT-LIABILITIES> 0
<BONDS> 5,792,523
277,659
11
<COMMON> 388
<OTHER-SE> (1,172,031)
<TOTAL-LIABILITY-AND-EQUITY> 5,740,315
<SALES> 1,413,977
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 1,199,345
<OTHER-EXPENSES> 414,609
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 353,583
<INCOME-PRETAX> (199,977)
<INCOME-TAX> (40,584)
<INCOME-CONTINUING> (159,393)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (159,393)
<EPS-PRIMARY> (1.29)
<EPS-DILUTED> 0
</TABLE>
