<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (Date of earliest event reported): NOVEMBER 15, 1996
U S WEST, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
A DELAWARE CORPORATION COMMISSION FILE IRS EMPLOYER
IDENTIFICATION
(State of incorporation) NUMBER 1-8611 NO. 84-0926774
</TABLE>
7800 EAST ORCHARD ROAD, ENGLEWOOD, COLORADO 80111
(Address of principal executive offices, including Zip Code)
TELEPHONE NUMBER (303) 793-6500
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
The undersigned Registrant hereby amends the following items, exhibits, or
other portions of its Form 8-K, Commission File Number 1-8611, dated November
15, 1996, as set forth in the pages hereto.
ITEM 7. EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION
- ----------- ---------------------------------------------------------------------------------------------------
<C> <S>
99G Unaudited Pro Forma Condensed Combined Financial Statements of U S WEST, Inc. and subsidiaries and
U S WEST Media Group as of September 30, 1996 and for the nine months ended September 30, 1996,
and for the year ended December 31, 1995.
</TABLE>
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned hereunto duly authorized.
U S WEST, INC.
By: /s/ STEPHEN E. BRILZ
-----------------------------------------
Stephen E. Brilz
CORPORATE COUNSEL AND
ASSISTANT SECRETARY
Dated: December 12, 1996
<PAGE>
EXHIBIT 99G
U S WEST, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined statements of operations of U S
WEST, Inc. ("U S WEST") and the U S WEST Media Group (the "Media Group") for the
year ended December 31, 1995 give effect to (i) the merger of U S WEST and
Continental Cablevision, Inc. ("Continental") (the "Merger"), (ii) U S WEST's
planned refinancing of Continental's revolving debt facilities following
consummation of the Merger through the issuance of U S WEST commercial paper
(the "U S WEST Refinancing"), (iii) the pending acquisition by Continental of
the remaining 62.1% interest in Meredith/New Heritage Strategic Partners, L.P.
(the "MN/H Buyout"), (iv) the acquisition by Continental of Cablevision of
Chicago, Columbia Cable of Michigan, Consolidated Cablevision of California, the
cable television business of Providence Journal Company and the remaining 66.2%
interest in N-COM Limited Partnership II, (v) the sale by Continental of its
8.30% senior notes due 2006 and the application of the net proceeds therefrom,
(vi) the redemption by Teleport Communications Group, Inc. ("TCG") of a portion
of the shares of common stock of TCG owned by Continental and the
reclassification of Continental's remaining interest in TCG (the "TCG
Transaction") and (vii) the consummation of Phase II of a joint venture between
U S WEST and AirTouch Communications, Inc. ("AirTouch"). Upon consummation of
Phase II of the joint venture, the domestic cellular properties of U S WEST and
AirTouch will be combined (the "U S WEST/AirTouch Joint Venture"), as though
each transaction had occurred as of January 1, 1995. The following unaudited pro
forma condensed combined statements of operations of U S WEST and the Media
Group for the nine months ended September 30, 1996 give effect to (i) the
Merger, (ii) the U S WEST Refinancing, (iii) the MN/H Buyout, (iv) the TCG
Transaction and (v) the consummation of the U S WEST/AirTouch Joint Venture, as
though each transaction had occurred as of January 1, 1996. The following
unaudited pro forma condensed combined balance sheets of U S WEST and the Media
Group at September 30, 1996 give effect to (i) the Merger, (ii) the U S WEST
Refinancing, (iii) the MN/H Buyout and (iv) the consummation of the U S
WEST/AirTouch Joint Venture, as though each transaction had occurred on
September 30, 1996.
The pro forma adjustments are based on available information and certain
assumptions that U S WEST's management believes are reasonable and are described
in the notes accompanying the unaudited pro forma condensed combined balance
sheets and the unaudited pro forma condensed combined statements of operations.
The unaudited pro forma financial information does not purport to represent what
U S WEST or the Media Group's financial position or results of operations would
actually have been had the transactions actually occurred at such dates or to
project U S WEST or the Media Group's financial position or results of
operations at or for any future date or period. In the opinion of U S WEST's
management, all adjustments necessary to present fairly such unaudited pro forma
financial information have been made.
The unaudited pro forma financial statements should be read in conjunction
with the historical financial statements of U S WEST, the Media Group, and
Continental, including the notes thereto, and with the pro forma financial
statements of Continental. Continental pro forma financial statements are
attached hereto as an Exhibit.
THE MERGER
U S WEST will account for the Merger by the purchase method of accounting.
Accordingly, U S WEST's cost to acquire Continental of approximately $11.5
billion (as of September 30, 1996) will be allocated to the assets acquired and
liabilities assumed according to their respective fair values. The $7.6 billion
pro forma excess of the purchase price over the net tangible assets acquired at
September 30, 1996, and goodwill related to a deferred income tax liability of
$3.1 billion, will be amortized over 25 years, except for intangible assets
allocated to Continental's equity method investments, which will be amortized
over 15 years. Amortization related to Continental's equity method investments
will be recorded as a component of equity income (loss) in unconsolidated
ventures. The intangible assets acquired consist principally of the cable
television franchises of Continental and goodwill.
The final allocation of the purchase price is dependent upon certain
valuations and other studies that have not progressed to a stage where there is
sufficient information to make such an allocation in the accompanying unaudited
pro forma condensed combined financial statements. Accordingly, the purchase
1
<PAGE>
price allocation adjustments made in connection with the development of the
unaudited pro forma condensed combined financial statements are preliminary and
have been made solely for the purpose of developing such unaudited pro forma
condensed combined financial statements.
The impact on U S WEST's financial position from the disposition of certain
Continental properties as required by federal rules governing cross-ownership by
telephone companies of cable companies and provision of "in-region" interLATA
services is not expected to be material to the pro forma financial statements
and, accordingly, has not been reflected in the unaudited pro forma condensed
combined financial statements. Certain reclassifications have been made to the
Continental historical consolidated financial statements and pro forma amounts
to reflect such financial statements on a basis consistent with the unaudited
pro forma condensed combined financial statements of U S WEST and the Media
Group after giving effect to the Merger.
U S WEST/AIRTOUCH JOINT VENTURE
In July 1994, U S WEST signed an agreement with AirTouch to combine their
domestic cellular properties into a joint venture in a multi-phased transaction.
During Phase I, which commenced on November 1, 1995, the partners are operating
their cellular properties separately. A wireless management company has been
formed and is providing centralized services to both companies on a contract
basis. In Phase II, the partners will combine their domestic properties into a
joint venture, subject to obtaining certain authorizations. The parties are
seeking to obtain regulatory and other approvals precedent to entering into
Phase II. The recent passage of the 1996 Telecommunications Act has removed
significant regulatory barriers to completion of Phase II.
U S WEST's domestic cellular assets and related liabilities will be
contributed to the U S WEST/ AirTouch Joint Venture at historical cost after
which the equity method of accounting will be applied. The equity method of
accounting requires recognition of U S WEST's share of the financial condition
and operating results of the U S WEST/AirTouch Joint Venture on one line on the
balance sheet and statement of operations. The assumed ownership interests for U
S WEST and AirTouch approximate 26 percent and 74 percent, respectively,
pursuant to the partnership agreement. The actual interests of U S WEST and
AirTouch in the capital, income (loss) and cash flows of the joint venture will
depend on a number of factors, the outcome of which cannot be reliably
estimated. These factors include, among other things, the timing of the actual
closing of Phase II and the ability of the parties to contribute certain of
their domestic cellular interests to the joint venture. Accordingly, U S WEST
cannot predict the actual interest it will have upon the closing of Phase II in
the capital, income (loss) or cash flow of the U S WEST/AirTouch Joint Venture.
U S WEST's interest in the joint venture will further adjust depending on the
timing of the contribution of its PCS investment. The timing of such
contribution is at U S WEST's discretion and will occur either at the closing of
Phase II or a date selected by U S WEST, no later than mid-1998. The closing of
Phase II is conditioned upon the satisfaction of certain conditions, including
the ability of AirTouch and U S WEST to contribute at least 60 percent of their
respective domestic cellular interests to the joint venture. U S WEST
anticipates that Phase II will close in early 1997.
Some of the cellular interests of AirTouch and U S WEST are subject to
consent provisions in connection with certain transactions. In addition, other
partnership interests may, under certain circumstances, be subject to rights of
first refusal provisions in favor of third parties. The foregoing provisions may
or may not preclude certain properties from being contributed to the U S
WEST/AirTouch Joint Venture. To the extent any such properties have not been
contributed to the U S WEST/AirTouch Joint Venture at the time of Phase II
closing, U S WEST and AirTouch are obligated throughout the life of the U S
WEST/ AirTouch Joint Venture to continue to use reasonable efforts to effect
such contribution. U S WEST and AirTouch have agreed that, in the event that
either is unable to contribute all of its domestic cellular interests to the U S
WEST/AirTouch Joint Venture, the parties will restructure, among other things,
the allocation of profits and losses and the distribution of cash and property
of the U S WEST/AirTouch Joint Venture or, to the extent such a restructuring is
not feasible, to otherwise compensate each party to achieve the same economic
result each party would have obtained if all of the parties' domestic cellular
properties had been contributed to the joint venture at the Phase II closing. As
a result, U S WEST cannot predict the actual interest it will have in the U S
WEST/AirTouch Joint Venture upon Phase II closing. The following pro forma
information reflects the assumption that all domestic cellular properties are
contributed to the U S WEST/
2
<PAGE>
AirTouch Joint Venture. U S WEST believes this assumption is reasonable because
of the continuing obligations of U S WEST and AirTouch to affect the
contribution of their respective domestic cellular assets to the U S
WEST/AirTouch Joint Venture. In addition, management believes the effect on U S
WEST's financial position and results of operations if certain domestic cellular
properties are not contributed to the U S WEST/AirTouch Joint Venture would not
be material.
3
<PAGE>
U S WEST, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
DOLLARS IN MILLIONS (EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
U S WEST U S WEST/
U S WEST PRO FORMA AIRTOUCH JOINT
U S WEST CONTINENTAL ADJUSTMENTS FOR THE VENTURE
HISTORICAL PRO FORMA FOR THE MERGER MERGER ADJUSTMENTS
----------- ------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Sales and other revenues............................ $ 11,746 $ 1,782(A) $ 13,528 $ (882)(N)
Employee-related expenses........................... 4,071 379(A) 4,450 (152)(N)
Other operating expenses............................ 2,323 662(A) 2,985 (445)(N)
Taxes other than income taxes....................... 416 15(A) 431 (17)(N)
Depreciation and amortization....................... 2,291 451(A) $ 376(B) 3,118 (121)(N)
----------- ------ ----- ----------- -----
Total operating expenses............................ 9,101 1,507 376 10,984 (735)
----------- ------ ----- ----------- -----
Income (loss) from operations....................... 2,645 275 (376) 2,544 (147)
Other income (expense):
Interest expense.................................. (527) (444)(A) (10)(C) (981) 1(N)
Equity (losses) income in unconsolidated
ventures......................................... (207) (53)(A) (39)(D) (299) 146(N)
11(O)
Gains on merger of joint venture interest and
sales of other assets............................ 293 24(A) 317
Guaranteed minority interest expense.............. (14) (14)
Other income (expense) net........................ (36) 7(A) (29) 17(N)
----------- ------ ----- ----------- -----
Income (loss) before income taxes and extraordinary
items.............................................. 2,154 (191) (425) 1,538 28
Provision (benefit) for income taxes................ 825 (59)(A) (124)(E) 642 11(P)
----------- ------ ----- ----------- -----
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS............ 1,329 (132) (301) 896 17
Dividend and preferences on preferred stock......... (3) (40)(A) (9)(F) (52)
----------- ------ ----- ----------- -----
Income (loss) before extraordinary items available
for common stock................................... $ 1,326 $ (172) $ (310) $ 844 $ 17
----------- ------ ----- ----------- -----
----------- ------ ----- ----------- -----
INCOME BEFORE EXTRAORDINARY ITEM PER SHARE OF
COMMUNICATIONS STOCK............................... $ 2.52 $ 2.52
----------- -----------
----------- -----------
AVERAGE SHARES OF COMMUNICATIONS STOCK OUTSTANDING
(MILLIONS)......................................... 470.72 470.72
----------- -----------
----------- -----------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM PER SHARE OF
MEDIA STOCK........................................ $ 0.30 $ (0.55)(G)
----------- -----------
----------- -----------
AVERAGE SHARES OF MEDIA STOCK OUTSTANDING
(MILLIONS)......................................... 470.55 621.15(G)
----------- -----------
----------- -----------
<CAPTION>
U S WEST
PRO FORMA
---------------
<S> <C>
Sales and other revenues............................ $ 12,646
Employee-related expenses........................... 4,298
Other operating expenses............................ 2,540
Taxes other than income taxes....................... 414
Depreciation and amortization....................... 2,997
-------
Total operating expenses............................ 10,249
-------
Income (loss) from operations....................... 2,397
Other income (expense):
Interest expense.................................. (980)
Equity (losses) income in unconsolidated
ventures.........................................
(142)
Gains on merger of joint venture interest and
sales of other assets............................ 317
Guaranteed minority interest expense.............. (14)
Other income (expense) net........................ (12)
-------
Income (loss) before income taxes and extraordinary
items.............................................. 1,566
Provision (benefit) for income taxes................ 653
-------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS............ 913
Dividend and preferences on preferred stock......... (52)
-------
Income (loss) before extraordinary items available
for common stock................................... $ 861
-------
-------
INCOME BEFORE EXTRAORDINARY ITEM PER SHARE OF
COMMUNICATIONS STOCK............................... $ 2.52
-------
-------
AVERAGE SHARES OF COMMUNICATIONS STOCK OUTSTANDING
(MILLIONS)......................................... 470.72
-------
-------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM PER SHARE OF
MEDIA STOCK........................................ $ (0.52)
-------
-------
AVERAGE SHARES OF MEDIA STOCK OUTSTANDING
(MILLIONS)......................................... 621.15
-------
-------
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
4
<PAGE>
U S WEST, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996
DOLLARS IN MILLIONS (EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
U S WEST U S WEST/
U S WEST PRO FORMA AIRTOUCH JOINT
U S WEST CONTINENTAL ADJUSTMENTS FOR THE VENTURE
HISTORICAL PRO FORMA FOR THE MERGER MERGER ADJUSTMENTS
----------- ------------- -------------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Sales and other revenues........................ $ 9,353 $ 1,454(A) $ 10,807 $ (823)(N)
Employee-related expenses....................... 3,246 302(A) 3,548 (130)(N)
Other operating expenses........................ 1,823 549(A) 2,372 (373)(N)
Taxes other than income taxes................... 319 16(A) 335 (13)(N)
Depreciation and amortization................... 1,796 360(A) $ 260(B) 2,416 (107)(N)
----------- ------ ----- ----------- -----
Total operating expenses........................ 7,184 1,227 260 8,671 (623)
----------- ------ ----- ----------- -----
Income (loss) from operations................... 2,169 227 (260) 2,136 (200)
Other income (expense):
Interest expense.............................. (411) (361)(A) (8)(C) (780) 2(N)
Equity (losses) income in unconsolidated
ventures..................................... (224) (107)(A) (29)(D) (360) 164(N)
8(O)
Gains on sales of rural telephone exchanges... 51 51
Guaranteed minority interest expense.......... (36) (36)
Other income (expense) -- net................. (47) 60(A) 13 21(N)
----------- ------ ----- ----------- -----
Income (loss) before income taxes and cumulative
effect of change in accounting principle....... 1,502 (181) (297) 1,024 (5)
Provision (benefit) for income taxes............ 588 (33)(A) (84)(E) 471 (2) (P)
----------- ------ ----- ----------- -----
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE........................ 914 (148) (213) 553 (3)
Dividend and preferences on preferred stock..... (3) (32)(A) (5)(F) (40)
----------- ------ ----- ----------- -----
Income (loss) before cumulative effect of change
in accounting principle available for common
stock.......................................... $ 911 $ (180) $ (218) $ 513 $ (3)
----------- ------ ----- ----------- -----
----------- ------ ----- ----------- -----
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE PER SHARE OF
COMMUNICATIONS STOCK........................... $ 1.90 $ 1.90
----------- -----------
----------- -----------
AVERAGE SHARES OF COMMUNICATIONS STOCK
OUTSTANDING (MILLIONS)......................... 476.7 476.7
----------- -----------
----------- -----------
INCOME (LOSS) PER SHARE OF MEDIA STOCK.......... $ 0.01 $ (0.63)(G)
----------- -----------
----------- -----------
AVERAGE SHARES OF MEDIA STOCK OUTSTANDING
(MILLIONS)..................................... 473.50 624.10(G)
----------- -----------
----------- -----------
<CAPTION>
U S WEST
PRO FORMA
---------------
<S> <C>
Sales and other revenues........................ $ 9,984
Employee-related expenses....................... 3,418
Other operating expenses........................ 1,999
Taxes other than income taxes................... 322
Depreciation and amortization................... 2,309
-------
Total operating expenses........................ 8,048
-------
Income (loss) from operations................... 1,936
Other income (expense):
Interest expense.............................. (778)
Equity (losses) income in unconsolidated
ventures.....................................
(188)
Gains on sales of rural telephone exchanges... 51
Guaranteed minority interest expense.......... (36)
Other income (expense) -- net................. 34
-------
Income (loss) before income taxes and cumulative
effect of change in accounting principle....... 1,019
Provision (benefit) for income taxes............ 469
-------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE........................ 550
Dividend and preferences on preferred stock..... (40)
-------
Income (loss) before cumulative effect of change
in accounting principle available for common
stock.......................................... $ 510
-------
-------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE PER SHARE OF
COMMUNICATIONS STOCK........................... $ 1.90
-------
-------
AVERAGE SHARES OF COMMUNICATIONS STOCK
OUTSTANDING (MILLIONS)......................... 476.7
-------
-------
INCOME (LOSS) PER SHARE OF MEDIA STOCK.......... $ (0.63)
-------
-------
AVERAGE SHARES OF MEDIA STOCK OUTSTANDING
(MILLIONS)..................................... 624.10
-------
-------
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
5
<PAGE>
U S WEST, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1996
DOLLARS IN MILLIONS
<TABLE>
<CAPTION>
U S WEST U S WEST/
U S WEST PRO FORMA AIRTOUCH JOINT
U S WEST CONTINENTAL ADJUSTMENTS FOR THE VENTURE
HISTORICAL PRO FORMA FOR THE MERGER MERGER ADJUSTMENTS
----------- ------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS
Total current assets.............................. $ 2,936 $ 156(A) $ 3,092 $ (180)(Q)
Property, plant and equipment -- net.............. 15,227 2,553(A) 17,780 (844)(Q)
Investment in Time Warner Entertainment........... 2,493 2,493
Investments in other unconsolidated ventures...... 1,371 532(A) $ 601(H) 2,504 1,037(Q)
Intangible assets -- net.......................... 1,791 1,953(A) 8,079(H) 11,823 (430)(Q)
Other assets...................................... 1,765 746(A) 2,511 (6)(Q)
----------- ------------- ------ ----------- ------
Total assets...................................... $ 25,583 $ 5,940 $ 8,680 $ 40,203 $ (423)
----------- ------------- ------ ----------- ------
----------- ------------- ------ ----------- ------
LIABILITIES AND EQUITY
Total current liabilities......................... $ 4,866 $ 441(A) $ 4,615(I) $ 9,922 $ (313)(Q)
Long-term debt.................................... 7,402 5,958(A) (3,069)(J) 10,291
Deferred taxes, credits and other................. 4,382 435(A) 2,730(K) 7,547 (110)(Q)
Redeemable preferred securities................... 651 651
Redeemable common stock........................... 278(A) (278)(L)
Total equity...................................... 8,282 (1,172)(A) 4,682(M) 11,792
----------- ------------- ------ ----------- ------
Total liabilities and equity...................... $ 25,583 $ 5,940 $ 8,680 $ 40,203 $ (423)
----------- ------------- ------ ----------- ------
----------- ------------- ------ ----------- ------
<CAPTION>
U S WEST
PRO FORMA
-----------
<S> <C>
ASSETS
Total current assets.............................. $ 2,912
Property, plant and equipment -- net.............. 16,936
Investment in Time Warner Entertainment........... 2,493
Investments in other unconsolidated ventures...... 3,541
Intangible assets -- net.......................... 11,393
Other assets...................................... 2,505
-----------
Total assets...................................... $ 39,780
-----------
-----------
LIABILITIES AND EQUITY
Total current liabilities......................... $ 9,609
Long-term debt.................................... 10,291
Deferred taxes, credits and other................. 7,437
Redeemable preferred securities................... 651
Redeemable common stock...........................
Total equity...................................... 11,792
-----------
Total liabilities and equity...................... $ 39,780
-----------
-----------
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
6
<PAGE>
U S WEST MEDIA GROUP
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
DOLLARS IN MILLIONS (EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MEDIA GROUP U S WEST/
MEDIA GROUP PRO FORMA AIRTOUCH JOINT
MEDIA GROUP CONTINENTAL ADJUSTMENTS FOR THE VENTURE
HISTORICAL PRO FORMA FOR THE MERGER MERGER ADJUSTMENTS
----------- ------------- -------------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Sales and other revenues
Directory and information services.............. $ 1,180 $ 1,180
Wireless communications......................... 941 941 $ (941)(N)
Cable and telecommunications.................... 215 $ 1,782(A) 1,997
Other........................................... 38 38 2(N)
----------- ------ ----------- -----
Total sales and other revenues.................... 2,374 1,782 4,156 (939)
Cost of sales and other revenues.................. 772 632(A) 1,404 (244)(N)
Selling, general and administrative expenses...... 886 424(A) 1,310 (427)(N)
Depreciation and amortization..................... 249 451(A) $ 376(B) 1,076 (121)(N)
----------- ------ ----- ----------- -----
Total operating expenses.......................... 1,907 1,507 376 3,790 (792)
----------- ------ ----- ----------- -----
Income (loss) from operations..................... 467 275 (376) 366 (147)
Other income (expense):
Interest expense................................ (100) (444)(A) (10)(C) (554) 1(N)
Equity (losses) income in unconsolidated
ventures....................................... (207) (53)(A) (39)(D) (299) 146(N)
11(O)
Gains on merger of joint venture interest and
sales of other assets.......................... 157 24(A) 181
Guaranteed minority interest expense............ (14) (14)
Other income -- net............................. 5 7(A) 12 17(N)
----------- ------ ----- ----------- -----
Income (loss) before income taxes and
extraordinary item............................... 308 (191) (425) (308) 28
Provision (benefit) for income taxes.............. 163 (59)(A) (124)(E) (20) 11(P)
----------- ------ ----- ----------- -----
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM........... 145 (132) (301) (288) 17
Dividend and preferences on preferred stock....... (3) (40)(A) (9)(F) (52)
----------- ------ ----- ----------- -----
Income (loss) before extraordinary item available
for Media Stock.................................. $ 142 $ (172) $ (310) $ (340) $ 17
----------- ------ ----- ----------- -----
----------- ------ ----- ----------- -----
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM PER SHARE
OF MEDIA STOCK................................... $ 0.30 $ (0.55)(G)
----------- -----------
----------- -----------
AVERAGE SHARES OF MEDIA STOCK OUTSTANDING
(MILLIONS)....................................... 470.55 621.15(G)
----------- -----------
----------- -----------
<CAPTION>
MEDIA GROUP
PRO FORMA
-----------
<S> <C>
Sales and other revenues
Directory and information services.............. $ 1,180
Wireless communications......................... --
Cable and telecommunications.................... 1,997
Other........................................... 40
-----------
Total sales and other revenues.................... 3,217
Cost of sales and other revenues.................. 1,160
Selling, general and administrative expenses...... 883
Depreciation and amortization..................... 955
-----------
Total operating expenses.......................... 2,998
-----------
Income (loss) from operations..................... 219
Other income (expense):
Interest expense................................ (553)
Equity (losses) income in unconsolidated
ventures.......................................
(142)
Gains on merger of joint venture interest and
sales of other assets.......................... 181
Guaranteed minority interest expense............ (14)
Other income -- net............................. 29
-----------
Income (loss) before income taxes and
extraordinary item............................... (280)
Provision (benefit) for income taxes.............. (9)
-----------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM........... (271)
Dividend and preferences on preferred stock....... (52)
-----------
Income (loss) before extraordinary item available
for Media Stock.................................. $ (323)
-----------
-----------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM PER SHARE
OF MEDIA STOCK................................... $ (0.52)
-----------
-----------
AVERAGE SHARES OF MEDIA STOCK OUTSTANDING
(MILLIONS)....................................... 621.15
-----------
-----------
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
7
<PAGE>
U S WEST MEDIA GROUP
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996
DOLLARS IN MILLIONS (EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MEDIA GROUP U S WEST/
MEDIA GROUP PRO FORMA AIRTOUCH JOINT
MEDIA GROUP CONTINENTAL ADJUSTMENTS FOR THE VENTURE
HISTORICAL PRO FORMA FOR THE MERGER MERGER ADJUSTMENTS
----------- -------------- -------------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Sales and other revenues
Directory and information services............ $ 908 $ 908
Wireless communications....................... 869 869 $ (869)(N)
Cable and telecommunications.................. 176 $ 1,454(A) 1,630
Other......................................... 12 12
----------- ------ ----------- -----
Total sales and other revenues.................. 1,965 1,454 3,419 (869)
Cost of sales and other revenues................ 626 512(A) 1,138 (215)(N)
Selling, general and administrative expenses.... 698 355(A) 1,053 (347)(N)
Depreciation and amortization................... 216 360(A) $ 260(B) 836 (107)(N)
----------- ------ ----- ----------- -----
Total operating expenses........................ 1,540 1,227 260 3,027 (669)
----------- ------ ----- ----------- -----
Income (loss) from operations................... 425 227 (260) 392 (200)
Other income (expense):
Interest expense.............................. (80) (361)(A) (8)(C) (449) 5(N)
Equity (losses) income in unconsolidated
ventures..................................... (224) (107)(A) (29)(D) (360) 164(N)
8(O)
Guaranteed minority interest expense.......... (36) (36)
Other income (expense) -- net................. (24) 60(A) 36 18(N)
----------- ------ ----- ----------- -----
Income (loss) before income taxes............... 61 (181) (297) (417) (5)
Provision (benefit) for income taxes............ 51 (33)(A) (84)(E) (66) (2)(P)
----------- ------ ----- ----------- -----
NET INCOME (LOSS)............................... 10 (148) (213) (351) (3)
Dividend and preferences on preferred stock..... (3) (32)(A) (5)(F) (40)
----------- ------ ----- ----------- -----
Income (loss) available for Media Stock......... $ 7 $ (180) $ (218) $ (391) $ (3)
----------- ------ ----- ----------- -----
----------- ------ ----- ----------- -----
INCOME (LOSS) PER SHARE OF MEDIA STOCK.......... $ 0.01 $ (0.63)(G)
----------- -----------
----------- -----------
AVERAGE SHARES OF MEDIA STOCK OUTSTANDING
(MILLIONS)..................................... 473.50 624.10(G)
----------- -----------
----------- -----------
<CAPTION>
MEDIA GROUP PRO
FORMA
---------------
<S> <C>
Sales and other revenues
Directory and information services............ $ 908
Wireless communications....................... --
Cable and telecommunications.................. 1,630
Other......................................... 12
-------
Total sales and other revenues.................. 2,550
Cost of sales and other revenues................ 923
Selling, general and administrative expenses.... 706
Depreciation and amortization................... 729
-------
Total operating expenses........................ 2,358
-------
Income (loss) from operations................... 192
Other income (expense):
Interest expense.............................. (444)
Equity (losses) income in unconsolidated
ventures.....................................
(188)
Guaranteed minority interest expense.......... (36)
Other income (expense) -- net................. 54
-------
Income (loss) before income taxes............... (422)
Provision (benefit) for income taxes............ (68)
-------
NET INCOME (LOSS)............................... (354)
Dividend and preferences on preferred stock..... (40)
-------
Income (loss) available for Media Stock......... $ (394)
-------
-------
INCOME (LOSS) PER SHARE OF MEDIA STOCK.......... $ (0.63)
-------
-------
AVERAGE SHARES OF MEDIA STOCK OUTSTANDING
(MILLIONS)..................................... 624.10
-------
-------
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
8
<PAGE>
U S WEST MEDIA GROUP
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1996
DOLLARS IN MILLIONS
<TABLE>
<CAPTION>
MEDIA GROUP U S WEST/
MEDIA MEDIA GROUP PRO FORMA AIRTOUCH JOINT
GROUP CONTINENTAL ADJUSTMENTS FOR THE VENTURE
HISTORICAL PRO FORMA FOR THE MERGER MERGER ADJUSTMENTS
----------- ------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS
Total current assets............................ $ 836 $ 156(A) $ 992 $ (186)(Q)
Property, plant and equipment -- net............ 1,428 2,553(A) 3,981 (844)(Q)
Investment in Time Warner Entertainment......... 2,493 2,493
Investments in other unconsolidated ventures.... 1,371 532(A) $ 601(H) 2,504 1,037(Q)
Intangible assets -- net........................ 1,791 1,953(A) 8,079(H) 11,823 (430)(Q)
Other assets.................................... 934 746(A) 1,680 (6)(Q)
----------- ------------- ------ ----------- ------
Total assets.................................... $ 8,853 $ 5,940 $ 8,680 $ 23,473 $ (429)
----------- ------------- ------ ----------- ------
----------- ------------- ------ ----------- ------
LIABILITIES AND EQUITY
Total current liabilities....................... $ 1,364 $ 441(A) $ 4,615(I) $ 6,420 $ (319)(Q)
Long-term debt.................................. 1,741 5,958(A) (3,069)(J) 4,630
Deferred taxes, credits and other............... 632 435(A) 2,730(K) 3,797 (110)(Q)
Redeemable preferred securities................. 651 651
Redeemable common stock......................... 278(A) (278)(L)
Total equity.................................... 4,465 (1,172)(A) 4,682(M) 7,975
----------- ------------- ------ ----------- ------
Total liabilities and equity.................... $ 8,853 $ 5,940 $ 8,680 $ 23,473 $ (429)
----------- ------------- ------ ----------- ------
----------- ------------- ------ ----------- ------
<CAPTION>
MEDIA GROUP
PRO FORMA
-------------
<S> <C>
ASSETS
Total current assets............................ $ 806
Property, plant and equipment -- net............ 3,137
Investment in Time Warner Entertainment......... 2,493
Investments in other unconsolidated ventures.... 3,541
Intangible assets -- net........................ 11,393
Other assets.................................... 1,674
-------------
Total assets.................................... $ 23,044
-------------
-------------
LIABILITIES AND EQUITY
Total current liabilities....................... $ 6,101
Long-term debt.................................. 4,630
Deferred taxes, credits and other............... 3,687
Redeemable preferred securities................. 651
Redeemable common stock.........................
Total equity.................................... 7,975
-------------
Total liabilities and equity.................... $ 23,044
-------------
-------------
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
9
<PAGE>
U S WEST, INC. AND U S WEST MEDIA GROUP
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
THE MERGER
(A) See Exhibit G -- "Continental Cablevision, Inc. -- Unaudited Pro Forma
Condensed Combined Financial Statements." Certain reclassifications have
been made to the Continental pro forma amounts to reflect such financial
statements on a basis consistent with the unaudited pro forma condensed
combined financial statements of U S WEST and the Media Group after giving
effect to the Merger.
(B) Reflects incremental amortization expense for the excess of the purchase
price over net tangible assets acquired (excluding intangible assets related
to Continental's equity method investments), in addition to adjustments to
reflect depreciation of tangible cable assets over 6 years. The excess of
the purchase price over the net tangible cable assets acquired is being
amortized over 25 years.
(C) Represents assumed interest expense of $65 million annually ($49 million for
nine months) on the issuance of $1.15 billion of U S WEST commercial paper
to fund the cash portion of the Merger consideration. Such interest expense
was calculated at U S WEST's approximate commercial paper borrowing rate of
5.65 percent at September 30, 1996. A 1/8 percentage point change in the
assumed financing rate would change annual interest expense by $1.44
million. Also reflects a reduction in interest expense of $55 million
annually ($41 million for nine months) related to the planned refinancing of
Continental's revolving debt facilities with the issuance of $3.441 billion
of U S WEST commercial paper. Such interest expense was calculated using an
assumed interest savings of 1.60 percent based on the difference between the
U S WEST commercial paper rate and the Continental rate on its revolving
debt facilities. A 1/8 percentage point change in the assumed rate on the
refinancing would change annual interest expense by $4.3 million.
(D) Reflects incremental amortization for the excess of the purchase price over
the net tangible cable assets acquired related to Continental's equity
method investments being amortized over 15 years.
(E) Reflects the estimated income tax effect of the pro forma adjustments.
(F) Dividends associated with the issuance of $1 billion in liquidation value of
4.5% Series D Preferred Stock less Continental's historical accretion of
preferred stock preferences.
(G) Media Stock pro forma loss per share assumes the issuance of approximately
150.6 million Media shares at a price of $17.20 per share on January 1,
1995. The share price is computed based on the average of the closing sales
prices for the Media stock for the five-day trading period surrounding the
October 7, 1996 announcement of the final terms of the merger. The trading
period began on October 3, 1996 and ended on October 9, 1996.
10
<PAGE>
(H) Represents the allocation of the purchase price to intangible assets
acquired. The purchase price and the excess of the purchase price over the
net tangible assets acquired at September 30, 1996, are as follows (in
millions):
<TABLE>
<S> <C>
Purchase Price:
Media Stock issued............................................ $ 2,590
Series D Preferred Stock issued at fair value................. 920
Cash paid through issuance of commercial paper................ 1,150
Acquisition costs............................................. 20
---------
Total consideration........................................... 4,680
Debt and other liabilities assumed at fair value.............. 6,805
---------
Purchase price, excluding deferred income tax gross up........ $ 11,485
---------
---------
Excess of Purchase Price over Net Tangible Assets Acquired:
Purchase price................................................ $ 11,485
Net tangible assets acquired (including acquisitions)......... 3,935
---------
Excess of purchase price over net tangible assets acquired.... 7,550
Deferred income tax gross up.................................. 3,135
---------
Total intangible assets acquired.............................. $ 10,685
---------
---------
Allocation of intangible assets:
Identifiable intangible assets, primarily cable television
franchises................................................. $ 6,552
Goodwill.................................................... 3,480
Investments in other unconsolidated ventures................ 653
</TABLE>
(I) Represents the issuance of $1.15 billion of U S WEST commercial paper to
finance the cash portion of the Merger consideration, the refinancing of
Continental's revolving debt facilities with the issuance of $3.441 billion
of U S WEST commercial paper, $20 million in estimated closing costs related
to the Merger and $4 million in recognition of pension and executive
retirement plan obligations at Continental.
(J) Represents the refinancing of Continental's revolving debt facilities with
the issuance of $3.441 billion of U S WEST commercial paper and an
adjustment of $372 million to reflect Continental's debt and interest rate
derivatives at fair value as of September 30, 1996.
(K) Represents an estimated deferred income tax liability of $3.135 billion
associated with the Continental purchase price allocation inclusive of
Continental's historical deferred income taxes of $405 million.
(L) Represents the elimination of Continental's redeemable common stock.
(M) Represents the issuance of approximately $2.59 billion in Media Stock and
$920 million of Series D Preferred Stock at fair value ($1.0 billion in
liquidation value) as consideration in the Merger, and elimination of
Continental stockholders' deficiency of $1.172 billion.
U S WEST/AIRTOUCH JOINT VENTURE
(N) To deconsolidate U S WEST's domestic cellular revenues and expenses and to
reflect, on the equity method of accounting, U S WEST's assumed 26 percent
interest in the combined pro forma earnings of the U S WEST/AirTouch Joint
Venture.
11
<PAGE>
(O) To record amortization to income of the implied negative goodwill arising
from the difference in the pro forma net book value of assets contributed to
the U S WEST/AirTouch Joint Venture and U S WEST's assumed share (26
percent) of the total U S WEST/AirTouch Joint Venture assets. The implied
negative goodwill is amortized over 40 years. The implied negative goodwill
is determined as follows (in millions):
<TABLE>
<CAPTION>
SEPTEMBER 30,
1996
-------------
<S> <C>
Net book value of assets contributed by
U S WEST............................................................... $ 1,037
Net book value of assets contributed by AirTouch........................ 4,708
------
Combined net book values contributed.................................... $ 5,745
------
------
U S WEST's share at 26 percent.......................................... 1,494
Net book value of contribution.......................................... 1,037
------
Implied negative goodwill............................................... $ 457
------
------
Annual amortization..................................................... $ 11
------
------
Nine month amortization................................................. $ 8
------
------
</TABLE>
(P) To record the income tax effects of the pro forma adjustments.
(Q) To deconsolidate and reflect on the equity method of accounting U S WEST's
domestic cellular assets and liabilities and reflect their contribution to
the U S WEST/AirTouch Joint Venture at historical cost.
12
<PAGE>
EXHIBIT G
CONTINENTAL CABLEVISION, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Combined Financial Statements
are based on the historical financial statements of Continental Cablevision,
Inc. ("Continental"). The Unaudited Pro Forma Condensed Combined Balance Sheet
gives effect to the acquisition of the remaining 62.1% interest in Meredith/New
Heritage Strategic Partners, L.P. (the "M/NH Buyout") as though the transaction
occurred as of September 30, 1996. The Unaudited Pro Forma Condensed Combined
Statement of Operations for the year ended December 31, 1995 gives effect to (i)
the acquisition of the cable television business and assets of Providence
Journal Company; (ii) the acquisitions of Cablevision of Chicago, Columbia Cable
of Michigan and Consolidated Cablevision of California; (iii) the acquisition of
the remaining 66.2% interest in N-COM Limited Partnership II ("N-COM"); and (iv)
the M/NH Buyout (collectively the "Acquisitions"); (v) the sale of 8.30% senior
notes due 2006 and the application of the proceeds therefrom and (vi) the
redemption of shares of Teleport Communications Group, Inc. ("TCG") common stock
and reclassification of the remaining shares of TCG common stock (the "TCG
Transaction") as though each transaction had occurred as of January 1, 1995. The
Unaudited Pro Forma Condensed Combined Statement of Operations for the nine
months ended September 30, 1996 gives effect to (i) the M/NH Buyout and (ii) the
TCG Transaction, as though each transaction occurred as of January 1, 1996.
1
<PAGE>
EXHIBIT G
CONTINENTAL CABLEVISION, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1996
DOLLARS IN THOUSANDS
<TABLE>
<CAPTION>
CONTINENTAL
ADJUSTMENTS
FOR THE
CONTINENTAL M/NH CONTINENTAL
HISTORICAL BUYOUT PRO FORMA
------------- ------------- -------------
<S> <C> <C> <C>
ASSETS
Cash................................................................. $ 27,943 $ 5,448(1) $ 33,391
Accounts receivable (net)............................................ 106,644 1,455(1) 108,099
Prepaid expenses and other........................................... 14,536 700(1) 15,236
Supplies............................................................. 122,825 -- 122,825
Marketable equity securities......................................... 586,726 -- 586,726
Investments.......................................................... 532,369 -- 532,369
Property, plant and equipment (net).................................. 2,358,776 70,967(1) 2,429,743
Other assets (net)................................................... 1,990,496 121,223(1) 2,111,719
------------- ------------- -------------
Total.............................................................. $ 5,740,315 $ 199,793 $ 5,940,108
------------- ------------- -------------
------------- ------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Accounts payable..................................................... $ 83,433 $ 2,021(1) $ 85,454
Accrued interest..................................................... 83,657 -- 83,657
Accrued and other liabilities........................................ 239,715 2,572(1) 242,287
Debt................................................................. 5,792,523 195,200(1) 5,987,723
Deferred income taxes................................................ 404,499 -- 404,499
Minority interest in subsidiaries.................................... 30,449 -- 30,449
Redeemable common stock.............................................. 277,659 -- 277,659
Stockholders' equity (deficiency).................................... (1,171,620) -- (1,171,620)
------------- ------------- -------------
Total.............................................................. $ 5,740,315 $ 199,793 $ 5,940,108
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
2
<PAGE>
EXHIBIT G
CONTINENTAL CABLEVISION INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
DOLLARS IN THOUSANDS
<TABLE>
<CAPTION>
CONTINENTAL
PRO FORMA
CONTINENTAL FOR THE
CONTINENTAL CONTINENTAL ADJUSTMENTS ACQUISITIONS CONTINENTAL
ADJUSTMENTS PRO FORMA FOR THE SALE AND FOR THE ADJUSTMENTS
CONTINENTAL FOR THE FOR THE OF 8.30% SALE OF FOR TCG CONTINENTAL
HISTORICAL ACQUISITIONS ACQUISITIONS NOTES 8.30% NOTES TRANSACTIONS PRO FORMA
----------- ------------- ----------- ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues...................... $1,442,392 $ 340,026(2) $1,782,418 $ -- $1,782,418 $ -- $1,782,418
Costs and expenses:
Operating................... 498,239 133,693(2) 631,932 -- 631,932 -- 631,932
Selling, general and
administrative............. 339,002 73,758(2) 412,760 -- 412,760 -- 412,760
Depreciation and
amortization............... 341,171 109,809(2) 450,980 -- 450,980 -- 450,980
Restricted stock purchase
program.................... 12,005 -- 12,005 -- 12,005 -- 12,005
----------- ------------- ----------- ------------- ----------- ------------- -----------
Total..................... 1,190,417 317,260 1,507,677 -- 1,507,677 -- 1,507,677
----------- ------------- ----------- ------------- ----------- ------------- -----------
Operating income.............. 251,975 22,766 274,741 -- 274,741 -- 274,741
Interest expense (net)........ 363,826 84,226(2) 448,052 5,046(4) 453,098 (9,077)(5) 444,021
Other (income) expenses
(net)........................ 48,124 (9,170)(2) 38,954 -- 38,954 (16,863)(6) 22,091
Minority interest............. (39) -- (39) -- (39) -- (39)
----------- ------------- ----------- ------------- ----------- ------------- -----------
Loss from operations.......... (159,936) (52,290) (212,226) (5,046) (217,272) 25,940 (191,332)
Income tax (benefit)
expense...................... (47,909) (18,946)(3) (66,855) (1,968)(3) (68,823) 10,117(3) (58,706)
----------- ------------- ----------- ------------- ----------- ------------- -----------
Net loss before extraordinary
item......................... $(112,027) $ (33,344) $(145,371) $ (3,078) $(148,449) $ 15,823 $(132,626)
----------- ------------- ----------- ------------- ----------- ------------- -----------
----------- ------------- ----------- ------------- ----------- ------------- -----------
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1996
DOLLARS IN THOUSANDS
<TABLE>
<CAPTION>
CONTINENTAL CONTINENTAL CONTINENTAL
ADJUSTMENTS PRO FORMA FOR ADJUSTMENTS
CONTINENTAL FOR THE THE FOR TCG CONTINENTAL
HISTORICAL M/NH BUYOUT M/NH BUYOUT TRANSACTIONS PRO FORMA
----------- ------------- -------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Revenues.......................................... $1,413,977 $ 40,093(2) $1,454,070 $ -- $1,454,070
Costs and expenses:
Operating....................................... 502,671 9,923(2) 512,594 -- 512,594
Selling, general and administrative............. 331,748 10,225(2) 341,973 -- 341,973
Depreciation and amortization................... 352,279 7,595(2) 359,874 -- 359,874
Restricted stock purchase program............... 12,647 -- 12,647 -- 12,647
----------- ------------- -------------- ------------- -----------
Total......................................... 1,199,345 27,743 1,227,088 -- 1,227,088
----------- ------------- -------------- ------------- -----------
Operating income.................................. 214,632 12,350 226,982 -- 226,982
Interest expense (net)............................ 353,583 12,412(2) 365,995 (4,569)(5) 361,426
Other (income) expenses (net)..................... 61,289 382(2) 61,671 (15,039)(6) 46,632
Minority interest................................. (263) -- (263) -- (263)
----------- ------------- -------------- ------------- -----------
Loss from operations.............................. (199,977) (444) (200,421) 19,608 (180,813)
Income tax (benefit) expense...................... (40,584) (173)(3) (40,757) 7,647(3) (33,110)
----------- ------------- -------------- ------------- -----------
Net loss before extraordinary item................ $(159,393) $ (271) $ (159,664) $ 11,961 $(147,703)
----------- ------------- -------------- ------------- -----------
----------- ------------- -------------- ------------- -----------
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
3
<PAGE>
EXHIBIT G
CONTINENTAL CABLEVISION INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(1) The M/NH Buyout will be accounted for under the purchase method of
accounting. The following adjustments have been recorded to reflect the M/NH
Buyout as of September 30, 1996: (i) Continental will borrow approximately
$219.2 million to finance the
M/NH Buyout; (ii) existing indebtedness of Continental to M/NH totalling
$24.0 million will be discharged and has been recorded as a reduction to
other assets; and (iii) the excess of the purchase price over the tangible
assets acquired (primarily acquired franchises) has been recorded to other
assets. The M/NH Buyout closed in October 1996.
(2) To record the results of operations for the Acquisitions. The results of
operations for certain cable television systems have been adjusted, where
necessary, to a December 31 fiscal year end. The results of operations have
been adjusted to record interest expense for the year ended December 31,
1995, as a result of approximately $623.7 million of additional debt
incurred or to be incurred to finance the Acquisitions and the M/NH Buyout
and the net $815.0 million increase in debt as a result of the Providence
Journal Merger. The results of operations have been adjusted to record
interest expense for the nine months ended September 30, 1996, as a result
of approximately $219.2 million of additional debt to be incurred to finance
the M/NH Buyout. Incremental interest expense was calculated using
Continental's weighted average borrowing rate of 7.6%. Continental's equity
in net loss of affiliates includes a loss of $2.6 million for the year ended
December 31, 1995 relating to its 33.8% interest in N-COM. This amount has
been eliminated to reflect the results of operations of N-COM as if it was
wholly owned by Continental during 1995. The results of operations have also
been adjusted to record depreciation and amortization expense based on the
fair value of the assets acquired. Depreciation expense for property, plant
and equipment acquired has been determined based on estimated lives of five
to ten years. Costs of acquired franchises and goodwill arising from the
Acquisitions are amortized over 40 years. Allocated corporate overhead from
parent companies to Providence Journal Cable and M/NH has been eliminated.
These costs relate to allocated corporate overhead, such as executive
salaries and other corporate departments including treasury, tax and human
resources, and include certain management fees. Continental will not be
incurring these costs in the future.
The following table sets forth the historical results of operations for the
Acquisitions for the periods in which they were not owned by Continental for
the year ended December 31, 1995.
YEAR ENDED DECEMBER 31, 1995
DOLLARS IN THOUSANDS
<TABLE>
<CAPTION>
COMPLETED ACQUISITIONS
---------------------------------------------------------------
CONSOLIDATED PROVIDENCE COLUMBIA
CABLEVISION CABLEVISION JOURNAL CABLE OF M/NH PRO FORMA
OF CHICAGO OF CALIFORNIA CABLE MICHIGAN N-COM BUYOUT ADJUSTMENTS TOTAL
----------- ------------- ----------- ----------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues....................... $ 20,828 $ 3,233 $ 221,998 $ 22,074 $ 21,786 $ 50,107 $ -- $ 340,026
Costs and expenses:
Operating.................... 8,371 1,535 91,358 8,947 8,742 14,740 -- 133,693
Selling, general and
administrative.............. 5,516 568 45,224 4,675 4,253 13,522 -- 73,758
Allocated corporate overhead
from parent companies....... -- -- 6,309 -- -- 1,578 (7,887) --
Depreciation and
amortization................ 2,882 2,356 64,947 6,000 11,586 16,394 5,644 109,809
----------- ------------- ----------- ----------- --------- --------- ----------- ---------
Total...................... 16,769 4,459 207,838 19,622 24,581 46,234 (2,243) 317,260
----------- ------------- ----------- ----------- --------- --------- ----------- ---------
Operating income (loss)........ 4,059 (1,226) 14,160 2,452 (2,795) 3,873 2,243 22,766
Interest expense (net)......... 6,491 1,219 30,770 -- 12,266 9,101 24,379 84,226
Other (income) expenses
(net)......................... 39 9 (2,415) 21 466 (4,643) (2,647) (9,170)
----------- ------------- ----------- ----------- --------- --------- ----------- ---------
Income (loss) from operations
before income taxes........... $ (2,471) $ (2,454) $ (14,195) $ 2,431 $ (15,527) $ (585) $ (19,489) $ (52,290)
----------- ------------- ----------- ----------- --------- --------- ----------- ---------
----------- ------------- ----------- ----------- --------- --------- ----------- ---------
</TABLE>
(3) To record the income tax effect of the pro forma adjustments at the
respective effective rates.
4
<PAGE>
EXHIBIT G
(4) To record the net increase in interest expense due to the sale of $600.0
million of 8.30% notes and the application of the net proceeds therefrom to
repay $587.1 million of borrowings under the 1994 credit facility and the
subsequent reborrowing under the 1994 credit facility to redeem the $100.0
million of floating rate debentures. The incremental interest rate used to
calculate the adjustment to interest expense was (i) approximately 7.6% for
the 1994 credit facility and (ii) approximately 8.9% for the floating rate
debentures.
(5) To record the decrease in interest expense as a result of the $121.0 million
repayment of borrowings outstanding under the 1994 credit facility with the
net proceeds from the redemption of the TCG common stock. Incremental
interest expense was calculated using Continental's weighted average
borrowing rate of 7.6%.
(6) To record the decrease in other expense for the reversal of equity losses
related to the TCG Transaction.
5
