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):
August 9, 1996
UNITED VIDEO SATELLITE GROUP, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 0-22662 73-1290412
(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
7140 South Lewis Avenue, Tulsa, Oklahoma 74136-5422
(Address of Principal Executive Office) (Zip code)
(918) 488-4000
(Registrant's telephone number, including area code)
1
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired
The following financial statements of Netlink USA, Retail Division
are attached:
Appendix I Netlink USA, Retail Division, Financial Statements
as of December 31, 1995 and for the year then
ended.
Appendix II Netlink USA, Retail Division, Unaudited Financial
Statements as of March 31, 1996 and for the three
months ended March 31, 1996 and 1995.
(b) Pro Forma Financial Information
The pro forma financial information is attached as Appendix III.
(c) Exhibits
2. Agreement between United Video Satellite Group, Inc. and
Liberty Media Corporation dated August 9, 1996 (previously
filed under Form 8-K on August 9, 1996).
23. Consent of Independent Auditors.
2
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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 thereunto duly authorized.
UNITED VIDEO SATELLITE GROUP, INC.
DATE: October 23, 1996 By:
-----------------------------
Peter C. Boylan, III
Executive Vice President and
Chief Financial Officer
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Independent Auditors' Report
The Board of Directors
Netlink USA:
We have audited the accompanying balance sheet of Netlink USA, Retail
Division (an operating division of Netlink USA, an indirect wholly-
owned partnership of Liberty Media Corporation) as of December 31,
1995, and the related statements of operations and accumulated deficit
and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Netlink
USA, Retail Division as of December 31, 1995, and the results of its
operations and its cash flows for the year then ended, in conformity
with generally accepted accounting principles.
KPMG Peat Marwick LLP
August 9, 1996
4
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NETLINK USA, RETAIL DIVISION
(An Operating Division of Netlink USA,
An Indirect Wholly-Owned Partnership of Liberty Media Corporation)
Balance Sheet
December 31, 1995
(in thousands)
- -----------------------------------------------------------------------
Assets
Current assets:
Cash $ 694
Accounts receivable:
Trade 8,504
Other 1,786
-------
10,290
Less allowance for doubtful accounts 2,326
-------
7,964
Prepaid expenses and other current assets 345
-------
Total current assets 9,003
Property and equipment 6,960
Less accumulated depreciation 4,948
-------
2,012
Excess cost over acquired net assets, net of
accumulated amortization of $430 3,087
-------
$14,102
=======
Liabilities and Accumulated Deficit
Current liabilities:
Cash overdraft $ 3,565
Accounts payable 1,003
Accrued liabilities (note 3) 9,649
Deferred revenue 40,414
-------
Total current liabilities 54,631
Commitments and contingencies (note 4)
Accumulated deficit (40,529)
-------
$14,102
=======
See accompanying notes to financial statement.
5
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NETLINK USA, RETAIL DIVISION
(An Operating Division of Netlink USA,
An Indirect Wholly-Owned Partnership of Liberty Media Corporation)
Statement of Operations and Accumulated Deficit
Year Ended December 31, 1995
(in thousands)
- -----------------------------------------------------------------------
Revenue $139,071
Operating expenses:
Operating, including amounts from affiliates
(note 3) 116,509
Selling, general and administrative, including
amounts from affiliates (note 3) 21,371
Bad debt expense 2,106
Depreciation and amortization 1,243
--------
141,229
--------
Operating loss (2,158)
Other expenses (41)
--------
Net loss (2,199)
Accumulated deficit, beginning of year (35,536)
Net advances to parent (2,794)
--------
Accumulated deficit, end of year $(40,529)
========
See accompanying notes to financial statements
6
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NETLINK USA, RETAIL DIVISION
(An Operating Division of Netlink USA,
An Indirect Wholly-Owned Partnership of Liberty Media Corporation)
Statement of Cash Flows
Year Ended December 31, 1995
(in thousands)
- -----------------------------------------------------------------------
Cash flows from operating activities:
Net loss $(2,199)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 1,243
Bad debt expense 2,106
Changes in operating assets and liabilities:
Change in accounts receivable (2,045)
Change in prepaid expenses and other current
assets 56
Change in accounts payable and accrued
liabilities 474
Change in deferred revenue 2,482
-------
Net cash provided by operating activities 2,117
Cash flows used in investing activities -
Capital expended for property and equipment (233)
-------
Net cash used in investing activities (233)
Cash flows used in financing activities:
Net change in advances to parent (2,794)
Change in cash overdraft 363
-------
Net cash used in financing activities (2,431)
-------
Net decrease in cash (547)
Cash at beginning of period 1,241
-------
Cash at end of period $ 694
=======
See accompanying notes to financial statements
7
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NETLINK USA, RETAIL DIVISION
(An Operating Division of Netlink USA,
An Indirect Wholly-Owned Partnership of Liberty Media Corporation)
Notes to Financial Statements
December 31, 1995
- -----------------------------------------------------------------------
(1) Organization
Netlink USA (the "Company" or "Netlink"), is an indirect, wholly-
owned partnership of Liberty Media Corporation ("Liberty"), which
is a wholly-owned subsidiary of Tele-Communications, Inc. ("TCI").
The Company is engaged in the businesses of selling C-band
distributed video programming and miscellaneous ancillary services
to retail customers (the Retail C-Band Business) and wholesale
customers (the Wholesale C-Band Business) in the United States.
Effective April 1, 1996, Liberty and United Video Satellite Group,
Inc. ("UVSG"), agreed to form a limited liability company for the
purpose of combining and operating UVSG's Superstar Satellite
Entertainment retail business and the Retail C-Band Business (the
"Venture"). Effective April 1, 1996, Liberty and UVSG contributed
certain assets and liabilities of their respective Retail C-Band
Businesses to the Venture.
The accompanying financial statements represent the historical
results of the Retail C-Band Business which was contributed to the
Venture.
(2) Summary of Significant Accounting Policies
Property and Equipment
Property and equipment is stated at cost. Depreciation is
computed on a straight-line basis using estimated useful lives of
the assets which range from 5 to 10 years.
Excess Cost Over Acquired Net Assets
Excess cost over acquired net assets consists of the difference
between the acquisition cost and amounts allocated to the tangible
assets acquired. Such amounts are being amortized on a straight-
line basis over 30 years. The Company assesses the recoverability
of excess cost over acquired net assets and long-term assets based
on future undiscounted operating cash flows.
Income Taxes
No provision has been made for income taxes in the accompanying
financial statements as the earnings or losses of the Retail C-
Band Business are reported in the respective income tax returns of
the partners of Netlink USA individually.
Deferred Revenue
The Company receives programming revenue from subscribers in
monthly, quarterly, semi-annual and annual installments. The
Company recognizes revenue on a straight-line basis over the term
of the service agreement. Deferred revenue at December 31, 1995
represents amounts billed to customers for services to be provided
subsequent to December 31, 1995.
8
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NETLINK USA, RETAIL DIVISION
(An Operating Division of Netlink USA,
An Indirect Wholly-Owned Partnership of Liberty Media Corporation)
Notes to Financial Statements, Continued
- -----------------------------------------------------------------------
Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
(3) Related Party Transactions
Certain programming services are purchased by the Company from
affiliates of Liberty and TCI. Charges aggregated approximately
$18,088,000 for the year ended December 31, 1995 for programming
services. Accrued liabilities at December 31, 1995 includes
approximately $1,726,000 related to these services from related
parties. Netlink also purchases certain programming from Netlink
USA, Wholesale C-Band Business at rates approximating those
charged to third parties. For the year ended December 31, 1995,
such charges aggregated approximately $8,017,000.
Certain TCI corporate general and administrative costs are charged
to Netlink at rates set at the beginning of the year based on
projected levels of utilization for that year. The utilization-
based charges are set at levels that management believes to be
reasonable and that approximate the costs Netlink would incur for
comparable services on a stand alone basis. During the year ended
December 31, 1995, Netlink was allocated $316,000 in corporate
general and administrative costs by TCI.
TCI manages certain treasury activities for Netlink on a
centralized basis. Cash receipts are remitted to TCI and cash
disbursements are funded by TCI on a daily basis. The net amount
of such cash activities are included as a component of the
accumulated deficit balance.
(4) Commitments and Contingencies
Netlink leases office space and equipment under lease
arrangements. Rental expense under such arrangements amounted to
approximately $319,000 for the year ended December 31, 1995. This
lease, which is classified as an operating lease, expires on
December 31, 1996.
The Company is being audited by various state sales tax
authorities. Subsequent to 1995, the Company was assessed
approximately $330,000 in delinquent sales taxes, interest and
penalties in three states, which has been provided for in the
accompanying financial statements. Obligations that may arise
based on future state sales tax audits have not been provided for
in the accompanying financial statements. The amount of future
assessments is estimated by management to range from $-0- to
$500,000.
In March 1996, the Company reached an agreement with one of its
satellite dealers to advance commissions aggregating $2,400,000
through March 1997.
9
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Appendix II
NETLINK USA, RETAIL DIVISION
(An Operating Division of Netlink USA,
An Indirect Wholly-Owned Partnership of Liberty Media Corporation)
Condensed Balance Sheet (unaudited)
March 31, 1996
(in thousands)
- -----------------------------------------------------------------------
Assets
Current assets:
Cash $ 2,168
Trade and other receivables, net 14,273
Prepaid expenses and other current assets 467
-------
Total current assets 16,908
Property and equipment 6,960
Less accumulated depreciation 5,230
-------
1,730
Excess cost over acquired net assets, net of
accumulated amortization of $459 3,058
-------
$21,696
=======
Liabilities and Accumulated Deficit
Current liabilities:
Cash overdraft $ 1,445
Accounts payable 1,304
Accrued liabilities (note 2) 11,792
Deferred revenue 50,940
-------
Total current liabilities 65,481
Commitments and contingencies (note 3)
Accumulated deficit (43,785)
-------
$21,696
=======
See accompanying notes to financial statements.
10
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NETLINK USA, RETAIL DIVISION
(An Operating Division of Netlink USA,
An Indirect Wholly-Owned Partnership of Liberty Media Corporation)
Condensed Statements of Operations and Accumulated Deficit (unaudited)
(in thousands)
- -----------------------------------------------------------------------
Three Months Ended March 31,
1996 1995
------ ------
Revenue $ 39,062 $ 29,528
Operating expenses:
Operating, including amounts from
affiliates (note 2) 31,138 26,672
Selling, general and administrative,
including amounts from affiliates
(note 2) 6,685 4,869
Bad debt expense 590 444
Depreciation and amortization 311 265
------- -------
38,724 32,250
------- -------
Operating earnings (loss) 338 (2,722)
Other expenses (11) (28)
------- -------
Net earnings (loss) 327 (2,750)
Accumulated deficit, beginning of period (40,529) (35,536)
Net advances to parent (3,583) (5,561)
------- -------
Accumulated deficit, end of period $(43,785) $(43,847)
======== ========
See accompanying notes to financial statements.
11
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NETLINK USA, RETAIL DIVISION
(An Operating Division of Netlink USA,
An Indirect Wholly-Owned Partnership of Liberty Media Corporation)
Condensed Statements of Cash Flows (unaudited)
(in thousands)
- -----------------------------------------------------------------------
Three Months Ended March 31,
1996 1995
------ ------
Cash flows from operating activities:
Net earnings (loss) $ 327 $(2,750)
Adjustments to reconcile net earnings
(loss) to net cash provided by
operating activities:
Depreciation and amortization 311 265
Bad debt expense 590 444
Changes in operating assets and
liabilities:
Change in accounts receivable (6,899) 2,032
Change in prepaid expenses and
other current assets (122) 96
Change in accounts payable and
accrued liabilities 2,444 1,975
Change in deferred revenue 10,526 454
------- -------
Net cash provided by operating activities 7,177 2,516
Cash flows used in investing activities -
Capital expended for property and
equipment -- (58)
------- -------
Net cash used in investing activities -- (58)
Cash flows used in financing activities:
Net change in advances to parent (3,583) (5,561)
Change in cash overdraft (2,120) 2,195
------- -------
Net cash used in financing activities (5,703) (3,366)
------- -------
Net increase (decrease) in cash 1,474 (908)
Cash at beginning of period 694 1,241
------- -------
Cash at end of period $ 2,168 $ 333
======= =======
See accompanying notes to financial statements.
12
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NETLINK USA, RETAIL DIVISION
(An Operating Division of Netlink USA,
An Indirect Wholly-Owned Partnership of Liberty Media Corporation)
Notes to Condensed Financial Statements (Unaudited)
March 31, 1996
- -----------------------------------------------------------------------
(1) Organization
Netlink USA (the "Company" or "Netlink"), is an indirect, wholly-
owned partnership of Liberty Media Corporation ("Liberty"), which
is a wholly-owned subsidiary of Tele-Communicaations, Inc.
("TCI"). The Company is engaged in the businesses of selling C-
band distributed video programming and miscellaneous ancillary
services to retail customers (the Retail C-Band Business) and
wholesale customers (the Wholesale C-Band Business) in the United
States.
Effective April 1, 1996, Liberty and United Video Satellite
Group, Inc. ("UVSG"), agreed to form a limited liability company
for the purpose of combining and operating UVSG's Superstar
Satellite Entertainment retail business and the Retail C-Band
Business (the "Venture"). Effective April 1, Liberty and UVSG
contributed certain assets and liabilities of their respective
Retail C-Band Businesses to the Venture.
The accompanying condensed financial statements represent the
historical results of the Retail C-Band Business which was
contributed to the Venture.
The accompanying interim financial statements are unaudited but,
in the opinion of management, reflect all adjustments (consisting
of normal recurring accruals) necessary for a fair presentation
of the results for such periods. The results of operations for
any interim period are not necessarily indicative of results for
the full year. These financial statements should be read in
conjunction with the audited financial statements of Netlink USA,
Retail Division for the year ended December 31, 1995.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities at the date of the financial statements
and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those
estimates.
(2) Related Party Transactions
Certain programming services are purchased by the Company from
affiliates of Liberty and TCI. Charges aggregated approximately
$5,237,000 and $2,831,000 for programming services for the three
months ended March 31, 1996 and 1995, respectively. Accrued
liabilities at March 31, 1996 and December 31, 1995 includes
approximately $1,911,000 and $1,726,000, respectively, related to
these services from related parties. Netlink also purchases
certain programming from Netlink USA, Wholesale C-Band Business
at rates approximating those charged to third parties. For the
three months ended March 31, 1996 and 1995, such charges
aggregated approximately $1,604,000 and $1,925,000.
Certain TCI corporate general and administrative costs are
charged to Netlink at rates set at the beginning of the year
based on projected levels of utilization for that year. The
utilization-based charges are set at levels that management
believes to be reasonable and that approximate the costs Netlink
would incur for comparable services on a stand alone basis.
During the three months ended March 31, 1996 and 1995, Netlink
was allocated $57,000 and $31,000 in corporate general and
administrative costs by TCI.
TCI manages certain treasury activities for Netlink on a
centralized basis. Cash receipts are remitted to TCI and cash
disbursements are funded by TCI on a daily basis. The net amount
of such cash activities are included as a component of the
accumulated deficit balance.
(3) Commitments and Contingencies
Netlink leases office space and equipment under lease
arrangements. Rental expense under such arrangements amounted to
approximately $113,000 and $100,000 for the three months ended
March 31, 1996 and 1995, respectively.
The Company is being audited by various state sales tax
authorities. Subsequent to 1995, the Company was assessed
approximately $183,000 in delinquent sales taxes, interest and
penalties in three states, which has been provided for in the
accompanying financial statements. Obligations that may arise
based on future state sales tax audits have not been provided for
in the accompanying financial statements. The amount of future
assessments is estimated by management to range from $-0- to
$500,000.
In March 1996, the Company reached an agreement with one of its
satellite dealers to advance commissions aggregating $2,400,000
through March 1997.
13
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Appendix III
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Combined Financial Statements of
United Video Satellite Group, Inc. ("UVSG") have been derived from, and
should be read in conjunction with, the respective historical financial
statements and notes thereto of UVSG and Netlink USA, Retail Division
("Netlink"). The Unaudited Pro Forma Combined Balance Sheet assumes
that the combination of the retail C-band home satellite dish
businesses' assets, obligations and operations of UVSG's Superstar
division and Netlink (the "Merger") occurred as of March 31, 1996. The
Unaudited Pro Forma Combined Statements of Operations assume that the
Merger occurred as of January 1, 1995. The pro forma financial
statments are unaudited and are not necessarily indicative of the
financial position or results of operations of UVSG that would have
occurred had the Merger occurred as of the dates indicated or the
future results of operations of UVSG.
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UNITED VIDEO SATELLITE GROUP, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(In thousands, except per share data)
At March 31, 1996
-------------------------------------
Historical Pro Forma
-----------------
Adjust- Pro
UVSG Netlink ments Forma
---- ------- ------- -----
ASSETS
Current assets:
Cash and cash equivalents $49,468 $ 2,168 $(2,168)(1) $ 49,468
Marketable securities, at
market 29,369 -- 29,369
Accounts receivables, net
of allowance for doubt-
ful accounts 29,662 14,273 43,935
Accrued interest receivable 633 -- 633
Prepaid expenses and other 6,561 467 7,028
Deferred tax asset 1,224 -- 1,224
------- ------- ------- -------
Total current assets 116,917 16,908 (2,168) 131,657
Property, plant and
equipment, at cost, net 52,819 1,730 (1,730)(1) 52,819
Goodwill, net of accumulated
amortization 32,075 3,058 (3,058)(1) 32,075
Deferred tax asset 596 -- 596
Other Assets 2,278 -- 2,278
-------- ------- ------ --------
$204,685 $21,696 $(6,956) $219,425
======== ======= ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Cash overdraft $ -- $ 1,445 $(1,445) $ --
Accounts payable 4,347 1,304 5,651
Accrued liabilities 28,470 11,792 40,262
Current portion of capital
lease obligations and
other long-term debt 3,107 -- 3,107
------- ------- ------- -------
35,924 14,541 (1,445) 49,020
Customer prepayments 59,906 50,940 110,846
------- ------- ------- -------
Total current liabilities 95,830 65,481 (1,445) 159,866
Deferred compensation 4,775 -- 4,775
Capital lease obligations
and other long-term debt 23,199 -- 23,199
Minority interest 3,133 -- (49,296)(1) (46,163)
Stockholders' equity:
Preferred stock -- -- --
Common stock 360 -- 360
Additional paid in-capital 30,641 -- 30,641
Notes receivable from
stockholders (481) -- (481)
Retained earnings
(accumulated deficit) 47,305 (43,785) 43,785 (1) 47,305
Treasury stock (77) -- (77)
-------- ------- ------- -------
Total stockholders' equity 77,748 (43,785) 43,785 77,748
-------- ------- ------- -------
$204,685 $21,696 $(6,956) $219,425
======== ======= ======= ========
- --------------
(1) The pro forma adjustments necessary to present the combined
financial position are as follows:
Net liabilities of Netlink $(43,785)
Less certain assets not contributed
to the venture by Netlink:
Cash (2,168)
Property, plant and equipment (1,730)
Goodwill (3,058)
Add:
Cash overdraft not contributed
to the venture by Netlink 1,445
---------
Minority interest in the venture $ (49,296)
=========
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UNITED VIDEO SATELLITE GROUP, INC.
UNAUDITED PRO FORMA
COMBINED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Three Months Ended March 31, 1996
-------------------------------------
Historical Pro Forma
-----------------
Adjust- Pro
UVSG Netlink ments Forma
---- ------- ------- -----
Revenues $73,442 $39,062 $112,504
Operating expenses:
Programming and delivery 31,573 31,728 63,301
Selling, general and
administrative 26,986 6,685 (974)(1) 32,697
Depreciation and
amortization 3,580 311 3,891
------- -------- ------- --------
62,139 38,724 (974) 99,889
------- ------- ------- --------
Operating income 11,303 338 974 12,615
Other income(expenses), net 344 (11) -- 333
------- ------- ------- --------
Income before income taxes 11,647 327 974 12,948
Provision for income taxes (4,342) -- 160 (2) (4,182)
Minority interest (68) -- (1,735)(3) (1,803)
-------- ------ ------- -------
Net income $ 7,237 $ 327 $ (601) $ 6,963
======== ====== ======= =======
Common and common equivalent
shares outstanding 36,968
=======
Earnings per share $ .19
=======
Year Ended December 31, 1995
-------------------------------------
Historical Pro Forma
-----------------
Adjust- Pro
UVSG Netlink ments Forma
---- ------- ------- -----
Revenues $262,919 $139,071 $ $401,990
Operating expenses:
Programming and delivery 120,594 118,615 239,209
Selling, general and
administrative 92,140 21,371 113,511
Depreciation and
amortization 11,769 1,243 13,012
-------- -------- --------
224,503 141,229 365,732
-------- -------- --------
Operating income (loss) 38,416 (2,158) 36,258
Other income (expenses), net (484) (41) (525)
-------- -------- --------
Income (loss) before income
taxes 37,932 (2,199) 35,733
Provision for income taxes (14,483) -- 2,591 (2) (11,892)
Minority interest (277) -- (4,813)(3) (5,090)
------- -------- ------ --------
Net income (loss) $ 23,172 $ (2,199) $(2,222) $ 18,751
======== ======== ======= ========
Common and common equivalent
shares outstanding 36,591
========
Earnings per share $ .51
========
The pro forma adjustments necessary to prevent the combined results of
operations are as follows:
(1) To eliminate non-recurring severance accruals.
(2) To reflect a provision for income taxes on the pro forma
adjustments.
(3) To reflect the minority interest to be held by Liberty Media
Corporation.
16
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Exhibit 23
Consent Of Independent Auditors
The Board of Directors
Netlink USA:
We consent to the incorporation by reference in the Registration
Statements (No. 33-72272 and No. 333-2866) on Form S-8 of United Video
Satellite Group, Inc. of our report dated August 9, 1996, with respect
to the balance sheet of Netlink USA, Retail Division (an operating
division of Netlink USA, an indirect wholly-owned partnership of
Liberty Media Corporation) as of December 31, 1995, and the related
statements of operations and accumulated deficit and cash flows for the
year then ended, which report appears in the Form 8-K of United Video
Satellite Group, Inc. dated October 23, 1996.
KPMG Peat Marwick LLP
Denver, Colorado
October 23, 1996
1
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