<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (Date of earliest event reported): MARCH 28, 1997
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>
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 U S WEST Media Group ("Media Group") for the year
ended December 31, 1996, give effect to (i) the November 15, 1996 merger (the
"Merger") between a wholly owned subsidiary of U S WEST and Continental
Cablevision, Inc. ("Continental"), (ii) U S WEST's refinancing of Continental's
revolving debt facilities following the Merger through the issuance of U S WEST
notes and debentures (the "U S WEST Refinancing"), (iii) the October 1996
acquisition by Continental of the remaining 62.1% interest in Meredith/New
Heritage Strategic Partners, L.P. (the "MN/H Buyout"), (iv) 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 from an investment accounted for on the equity method
to a marketable security (the "TCG Transaction") and (v) 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, 1996. The following unaudited pro forma condensed combined balance
sheets of U S WEST and the Media Group at December 31, 1996, give effect to the
consummation of the U S WEST/AirTouch Joint Venture, as though it had occurred
on December 31, 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 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 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, Media Group, and
Continental, including the notes thereto.
THE MERGER
U S WEST accounted for the Merger by the purchase method of accounting.
Accordingly, U S WEST's cost to acquire Continental of approximately $11.7
billion was allocated to the assets acquired and liabilities assumed according
to their respective fair values. The $8.0 billion excess of the purchase price
over the net tangible assets acquired at December 31, 1996, and goodwill related
to a deferred income tax liability of $3.3 billion, is being amortized over 25
years, except for intangible assets allocated to Continental's equity method
investments, which is being amortized over 15 years. Amortization related to
Continental's equity method investments is being recorded as a component of
equity losses in unconsolidated ventures. The intangible assets acquired consist
principally of the cable television franchises of Continental and goodwill.
1
<PAGE>
The purchase price and the excess of the purchase price over the net
tangible assets acquired at November 15, 1996, 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................... 1,142
Acquisition costs................................................ 22
---------
Total consideration.............................................. 4,674
Debt and other liabilities assumed at fair value................. 7,048
---------
Purchase price, excluding deferred income tax gross up........... $ 11,722
---------
---------
Excess of Purchase Price over Net Tangible Assets Acquired:
Purchase price................................................... $ 11,722
Net tangible assets acquired (including acquisitions)............ 3,759
---------
Excess of purchase price over net tangible assets acquired....... 7,963
Deferred income tax gross up..................................... 3,324
---------
Total intangible assets acquired................................. $ 11,287
---------
---------
Allocation of intangible assets:
Identifiable intangible assets, primarily cable television
franchises..................................................... $ 7,203
Goodwill......................................................... 3,710
Investments in other unconsolidated ventures..................... 374
</TABLE>
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 reflect the effects of the final allocation in the
accompanying unaudited pro forma condensed combined statement of operations.
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.
U S WEST/AIRTOUCH JOINT VENTURE
In July 1994, U S WEST signed a definitive agreement with AirTouch to
combine their domestic cellular properties into a partnership 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 services to both companies on a
contract basis. In Phase II, the partners will combine their domestic properties
subject to obtaining certain authorizations and partnership approvals. The
passage of the Telecommunications Act of 1996 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
2
<PAGE>
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 investment in PrimeCo Personal Communications L.P. 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.
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.
In February 1997, the King County Superior Court in Washington state ruled
that Media Group violated the terms of its partnership agreement with its
minority partners in the Seattle market by entering into the joint venture
agreement with AirTouch. The Media Group has obtained a stay of the ruling
pending its appeal. Similar litigation has been filed in other jurisdictions
regarding other cellular partnerships by the same minority partner that brought
the Seattle litigation. The Company believes it will ultimately be successful in
all such litigation. Media Group expects that Phase II closing will occur in the
second half of 1997.
The following pro forma information reflects the assumption that all
domestic cellular properties are contributed to the U S WEST/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, 1996
DOLLARS IN MILLIONS (EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
U S WEST U S WEST/
CONTINENTAL PRO U S WEST PRO FORMA AIRTOUCH JOINT
U S WEST CONTINENTAL FORMA ADJUSTMENTS FOR THE VENTURE
HISTORICAL HISTORICAL ADJUSTMENTS FOR THE MERGER MERGER ADJUSTMENTS
----------- ------------- --------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Sales and other revenues.................. $ 12,911 $ 1,667(A) $ 40(B) $ 14,618 $ (1,119)(N)
Employee-related expenses................. 4,412 452(A) 7(B) $ (90)(E) 4,781 (173)(N)
Other operating expenses.................. 2,671 609(A) 13(B) 3,293 (538)(N)
Taxes other than income taxes............. 429 20(A) 449 (18)(N)
Depreciation and amortization............. 2,544 422(A) 334(F) 3,300 (147)(N)
----------- ------------- ----- ----- ----------- -------
Total operating expenses.................. 10,056 1,503 20 244 11,823 (876)
----------- ------------- ----- ----- ----------- -------
Income (loss) from operations............. 2,855 164 20 (244) 2,795 (243)
Other income (expense):
Interest expense........................ (612) (416)(A) (99)(G) (1,127) 1(N)
Equity (losses) income in unconsolidated
ventures.............................. (346) (154)(A) 15(C) (8)(H) (386) 195(N)
107(I) 8(O)
Gain on sale of rural telephone
exchanges............................. 59 59
Guaranteed minority interest expense.... (55) (55)
Other income (expense) net.............. (61) 36(A) 20(J) (74) 32(N)
(69)(K)
----------- ------------- ----- ----- ----------- -------
Income (loss) before income taxes and
cumulative effect of change in
accounting principle.................... 1,840 (370) 35 (293) 1,212 (7)
Provision (benefit) for income taxes...... (696) 80(A) (14)(D) 120(D) (510) 3(D)
----------- ------------- ----- ----- ----------- -------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE.......... 1,144 (290) 21 (173) 702 (4)
Dividend and preferences on preferred
stock................................... (9) (38)(A) (3)(L) (50)
----------- ------------- ----- ----- ----------- -------
Income (loss) before cumulative effect of
change in accounting principle available
for common stock........................ $ 1,135 $ (328) $ 21 $ (176) $ 652 $ (4)
----------- ------------- ----- ----- ----------- -------
----------- ------------- ----- ----- ----------- -------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE PER SHARE OF
COMMUNICATIONS STOCK.................... $ 2.55 $ 2.55
----------- -----------
----------- -----------
AVERAGE SHARES OF COMMUNICATIONS STOCK
OUTSTANDING (MILLIONS).................. 477.55 477.55
----------- -----------
----------- -----------
INCOME (LOSS) PER SHARE OF MEDIA STOCK.... $ (0.16) $ (0.90)(M)
----------- -----------
----------- -----------
AVERAGE SHARES OF MEDIA STOCK OUTSTANDING
(MILLIONS).............................. 491.92 623.20(M)
----------- -----------
----------- -----------
<CAPTION>
U S WEST
PRO FORMA
-------------
<S> <C>
Sales and other revenues.................. $ 13,499
Employee-related expenses................. 4,608
Other operating expenses.................. 2,755
Taxes other than income taxes............. 431
Depreciation and amortization............. 3,153
-------------
Total operating expenses.................. 10,947
-------------
Income (loss) from operations............. 2,552
Other income (expense):
Interest expense........................ (1,126)
Equity (losses) income in unconsolidated
ventures.............................. (183)
Gain on sale of rural telephone
exchanges............................. 59
Guaranteed minority interest expense.... (55)
Other income (expense) net.............. (42)
-------------
Income (loss) before income taxes and
cumulative effect of change in
accounting principle.................... 1,205
Provision (benefit) for income taxes...... (507)
-------------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE.......... 698
Dividend and preferences on preferred
stock................................... (50)
-------------
Income (loss) before cumulative effect of
change in accounting principle available
for common stock........................ $ 648
-------------
-------------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE PER SHARE OF
COMMUNICATIONS STOCK.................... $ 2.55
-------------
-------------
AVERAGE SHARES OF COMMUNICATIONS STOCK
OUTSTANDING (MILLIONS).................. 477.55
-------------
-------------
INCOME (LOSS) PER SHARE OF MEDIA STOCK.... $ (0.91)
-------------
-------------
AVERAGE SHARES OF MEDIA STOCK OUTSTANDING
(MILLIONS).............................. 623.20
-------------
-------------
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
4
<PAGE>
U S WEST, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1996
DOLLARS IN MILLIONS
<TABLE>
<CAPTION>
U S WEST/
AIRTOUCH JOINT
U S WEST VENTURE
HISTORICAL ADJUSTMENTS
----------- --------------
<S> <C> <C>
ASSETS
Total current assets....................................................................... $ 3,112 $ (202)(P)
Property, plant and equipment--net......................................................... 18,281 (918)(P)
Investment in Time Warner Entertainment.................................................... 2,477
Investments in other unconsolidated ventures............................................... 1,548 1,058(P)
Intangible assets--net..................................................................... 12,595 (427)(P)
Net investment in assets held for sale..................................................... 409
Other assets............................................................................... 2,433 (9)(P)
----------- ------
Total assets............................................................................... $ 40,855 $ (498)
----------- ------
----------- ------
LIABILITIES AND EQUITY
Total current liabilities.................................................................. $ 6,074 $ (372)(P)
Long-term debt............................................................................. 14,300
Deferred taxes, credits and other.......................................................... 7,801 (126)(P)
Redeemable preferred securities............................................................ 1,131
Total equity............................................................................... 11,549
----------- ------
Total liabilities and equity............................................................... $ 40,855 $ (498)
----------- ------
----------- ------
<CAPTION>
U S WEST
PRO FORMA
-----------
<S> <C>
ASSETS
Total current assets....................................................................... $ 2,910
Property, plant and equipment--net......................................................... 17,363
Investment in Time Warner Entertainment.................................................... 2,477
Investments in other unconsolidated ventures............................................... 2,606
Intangible assets--net..................................................................... 12,168
Net investment in assets held for sale..................................................... 409
Other assets............................................................................... 2,424
-----------
Total assets............................................................................... $ 40,357
-----------
-----------
LIABILITIES AND EQUITY
Total current liabilities.................................................................. $ 5,702
Long-term debt............................................................................. 14,300
Deferred taxes, credits and other.......................................................... 7,675
Redeemable preferred securities............................................................ 1,131
Total equity............................................................................... 11,549
-----------
Total liabilities and equity............................................................... $ 40,357
-----------
-----------
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
5
<PAGE>
U S WEST MEDIA GROUP
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
DOLLARS IN MILLIONS (EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MEDIA GROUP
CONTINENTAL PRO MEDIA GROUP PRO FORMA
MEDIA GROUP CONTINENTAL FORMA ADJUSTMENTS FOR THE
HISTORICAL HISTORICAL ADJUSTMENTS FOR THE MERGER MERGER
----------- ------------- --------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Sales and other revenues
Directory and information services....... $ 1,259 $ 1,259
Wireless communications.................. 1,183 1,183
Cable and telecommunications............. 494 $ 1,667(A) $ 40(B) 2,201
Other.................................... 19 19
----------- ------------- --- ------------
Total sales and other revenues............. 2,955 1,667 40 4,662
Cost of sales and other revenues........... 966 596(A) 10(B) 1,572
Selling, general and administrative
expenses................................. 1,052 485(A) 10(B) $ (90)(E) 1,457
Depreciation and amortization.............. 422 422(A) 334(F) 1,178
----------- ------------- --- ----- ------------
Total operating expenses................... 2,440 1,503 20 244 4,207
----------- ------------- --- ----- ------------
Income (loss) from operations.............. 515 164 20 (244) 455
Other income (expense):
Interest expense......................... (168) (416)(A) (99)(G) (683)
Equity (losses) income in unconsolidated
ventures............................... (346) (154)(A) 15(C) (8)(H) (386)
107(I)
Guaranteed minority interest expense..... (55) (55)
Other income (expense)--net.............. (19) 36(A) 20(J) (32)
(69)(K)
----------- ------------- --- ----- ------------
Income (loss) before income taxes.......... (73) (370) 35 (293) (701)
Provision (benefit) for income taxes....... 2 80(A) (14)(D) 120(D) 188
----------- ------------- --- ----- ------------
NET INCOME (LOSS).......................... (71) (290) 21 (173) (513)
Dividend and preferences on preferred
stock.................................... (9) (38)(A) (3)(L) (50)
----------- ------------- --- ----- ------------
Earnings (loss) available for Media
Stock.................................... $ (80) $ (328) $ 21 $ (176) $ (563)
----------- ------------- --- ----- ------------
----------- ------------- --- ----- ------------
LOSS PER SHARE OF MEDIA STOCK.............. $ (0.16) $ (0.90)(M)
----------- ------------
----------- ------------
AVERAGE SHARES OF MEDIA STOCK OUTSTANDING
(MILLIONS)............................... 491.92 623.20(M)
----------- ------------
----------- ------------
<CAPTION>
U S WEST/
AIRTOUCH JOINT
VENTURE MEDIA GROUP
ADJUSTMENTS PRO FORMA
-------------- -----------
<S> <C> <C>
Sales and other revenues
Directory and information services....... $ 1,259
Wireless communications.................. $ (1,183)(N) --
Cable and telecommunications............. 2,201
Other.................................... 19
------- -----------
Total sales and other revenues............. (1,183) 3,479
Cost of sales and other revenues........... (307)(N) 1,265
Selling, general and administrative
expenses................................. (486)(N) 971
Depreciation and amortization.............. (147)(N) 1,031
------- -----------
Total operating expenses................... (940) 3,267
------- -----------
Income (loss) from operations.............. (243) 212
Other income (expense):
Interest expense......................... 1(N) (682)
Equity (losses) income in unconsolidated
ventures............................... 195(N) (183)
8(O)
Guaranteed minority interest expense..... (55)
Other income (expense)--net.............. 32(N) --
------- -----------
Income (loss) before income taxes.......... (7) (708)
Provision (benefit) for income taxes....... 3(D) 191
------- -----------
NET INCOME (LOSS).......................... (4) (517)
Dividend and preferences on preferred
stock.................................... (50)
------- -----------
Earnings (loss) available for Media
Stock.................................... $ (4) $ (567)
------- -----------
------- -----------
LOSS PER SHARE OF MEDIA STOCK.............. $ (0.91)
-----------
-----------
AVERAGE SHARES OF MEDIA STOCK OUTSTANDING
(MILLIONS)............................... 623.20
-----------
-----------
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
6
<PAGE>
U S WEST MEDIA GROUP
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1996
DOLLARS IN MILLIONS
<TABLE>
<CAPTION>
U S WEST/
MEDIA AIRTOUCH JOINT
GROUP VENTURE MEDIA GROUP
HISTORICAL ADJUSTMENTS PRO FORMA
----------- -------------- ------------
<S> <C> <C> <C>
ASSETS
Total current assets................................................................. $ 1,139 $ (208)(P) $ 931
Property, plant and equipment--net................................................... 4,275 (918)(P) 3,357
Investment in Time Warner Entertainment.............................................. 2,477 2,477
Investments in other unconsolidated ventures......................................... 1,548 1,058(P) 2,606
Intangible assets--net............................................................... 12,595 (427)(P) 12,168
Other assets......................................................................... 2,027 (9)(P) 2,018
----------- ------ ------------
Total assets......................................................................... $ 24,061 $ (504) $ 23,557
----------- ------ ------------
----------- ------ ------------
LIABILITIES AND EQUITY
Total current liabilities............................................................ $ 2,716 $ (378)(P) $ 2,338
Long-term debt....................................................................... 8,636 8,636
Deferred taxes, credits and other.................................................... 3,946 (126)(P) 3,820
Redeemable preferred securities...................................................... 1,131 1,131
Total equity......................................................................... 7,632 7,632
----------- ------ ------------
Total liabilities and equity......................................................... $ 24,061 $ (504) $ 23,557
----------- ------ ------------
----------- ------ ------------
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
7
<PAGE>
U S WEST, INC. AND U S WEST MEDIA GROUP
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(A) Historical Continental results for the period January 1, 1996 through
November 14, 1996 (the "Pre-Merger" period). Certain reclassifications have
been made to Continental's results to reflect them on a consistent basis
with the unaudited pro forma condensed combined financial statements of U S
WEST and Media Group.
(B) Reflects the results of operations related to the M/NH Buyout.
(C) Reflects the reversal of equity losses related to the TCG transaction.
(D) Reflects the estimated income tax effect of the pro forma adjustments.
(E) Reflects the reversal of a charge to Continental's Pre-Merger earnings to
reflect changes in Continental's restricted stock purchase program as a
result of the Merger.
(F) 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.
(G) Represents incremental interest expense of $58 million 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
commercial paper borrowing rate of 5.76 percent at December 31, 1996. A 1/8
percentage point change in the assumed financing rate would change annual
interest expense by $1.44 million. Also reflects incremental interest
expense of $41 to reflect the assumption and refinancing of Continental bank
debt totaling $3,657 at the Merger date. Such interest expense was
calculated at the rate achieved on the U S WEST Refinancing.
(H) 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.
(I) Reflects the reversal of equity losses related to an international joint
venture included in Continental's Pre-Merger earnings consistent with U S
WEST purchase accounting.
(J) Reflects the reversal of Continental's Merger costs included in Pre-Merger
earnings.
(K) Reflects the reversal of a gain associated with the TCG Transaction included
in Continental's Pre-Merger earnings.
(L) Dividends associated with the issuance of $1 billion in liquidation value of
4.5 percent Series D Preferred Stock less Continental's historical accretion
of preferred stock preferences.
(M) Media Stock pro forma loss per share assumes the issuance of 150.6 million
Media shares of Merger consideration on January 1, 1996.
(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.
(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
8
<PAGE>
(26 percent) of the total U S WEST/AirTouch Joint Venture net assets. The
implied negative goodwill is amortized over 40 years. The implied negative
goodwill is determined as follows (in millions):
<TABLE>
<CAPTION>
DECEMBER 31,
1996
-------------
<S> <C>
Net book value of assets contributed by U S WEST............................... $ 1,058
Net book value of assets contributed by AirTouch............................... 4,181
------
Combined net book values contributed........................................... $ 5,239
------
------
U S WEST's share at 26 percent................................................. 1,362
Net book value of contribution................................................. 1,058
------
Implied negative goodwill...................................................... $ 304
------
------
Annual amortization............................................................ $ 8
------
------
</TABLE>
(P) 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.
9
<PAGE>
ITEM 7. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ----------- ---------------------------------------------------------------------------------------------------
<C> <S>
99 Unaudited Pro Forma Condensed Combined Financial Statements of U S WEST, Inc. and U S WEST Media
Group for the year ended December 31, 1996.
</TABLE>
SIGNATURE
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 hereunto duly authorized.
U S WEST, INC.
By: /s/ STEPHEN E. BRILZ
-----------------------------------------
Stephen E. Brilz
CORPORATE COUNSEL AND
ASSISTANT SECRETARY
Dated: March 28, 1997
