<PAGE> 1
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: September 3, 1996
Date of Earliest Event Reported: June 19, 1996
TELE-COMMUNICATIONS, INC.
-------------------------------------------------------
(Exact name of Registrant as specified in its charters)
State of Delaware
----------------------------------------------
(State or other jurisdiction of incorporation)
0-20421 84-1260157
- ----------------------------- ------------------------------------
(Commission File Number) (I.R.S. Employer Identification No.)
5619 DTC Parkway
Englewood, Colorado 80111
- ---------------------------------------- ------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 267-5500
<PAGE> 2
Item 5. Other Events
(a) Liberty Media Group and Mr. Barry Diller and certain of their
respective affiliates entered into an agreement in August 1995
(the "August Agreement") pursuant to which an option (the
"Option") owned by Liberty Media Group to purchase 2 million
shares of the Class B Common Stock of Silver King
Communications, Inc. ("Silver King") (which shares would
constitute voting control of Silver King) together with $3.5
million (representing the exercise price of the Option) would
be contributed to BDTV INC. ("BDTV"), an entity in which the
Liberty Media Group would own all of the non-voting equity
interests (which would constitute substantially all of the
equity of such entity) and Mr. Diller would own all of the
voting equity interests. BDTV would thereafter exercise the
Option and hold the shares of the Silver King Class B Common
Stock purchased thereunder. The Federal Communications
Commission ("FCC") approval required for the exercise of the
Option by BDTV was received in June 1996, and the Option was
exercised on August 13, 1996 and BDTV became the owner of the
2 million shares of Silver King Class B Common Stock purchased
thereunder (the "BDTV Transaction"). In connection with its
approval of the transfer of control of Silver King to Barry
Diller resulting from the exercise of the Option and the
acquisition of the 2 million shares of Silver King Class B
Common Stock by BDTV thereby, the FCC imposed a condition
requiring prior FCC approval for any increases in TCI's
percentage equity interest in Silver King (including its
indirect interest through its ownership of non-voting
securities of BDTV).
On August 25, 1996, Liberty HSN, Inc. (a wholly owned
subsidiary of the Liberty Media Group which holds the
17,566,702 shares of Home Shopping Network, Inc. ("HSN") Common
Stock and 20,000,000 shares of HSN Class B Common Stock
beneficially owned by the Liberty Media Group), HSN and Silver
King entered into an Exchange and Merger Agreement (the "HSN
Merger Agreement"). The HSN Merger Agreement provides for a
merger (the "Merger") of a subsidiary of Silver King into HSN,
in which each share of HSN Common Stock would be converted
into .45 share of Silver King Common Stock and each share of
HSN Class B Common Stock would be converted into .54 share of
Silver King Class B Common Stock. In order to avoid exceeding
the equity percentage limit set forth in the FCC approval,
however, Liberty Media Group agreed that it would retain an
approximate 19.9% equity interest in HSN (as the surviving
corporation in the Merger) following the Merger (which
equity interest would be composed of all 17,566,702 shares of
HSN Common Stock and 739,141 shares of HSN Class B Common
Stock which would be exchanged with the subsidiary of Silver
King being merged into HSN prior to the Merger) and that it
would accept a contingent right to receive 2,644,299 shares
of Silver King Class B Common Stock in lieu of the full
number of shares of Silver King Class B Common Stock it would
be entitled to receive in the Merger. As a result, in the
Merger, Liberty Media Group would receive 7,756,564 shares of
Silver King Class B Common Stock (which would be contributed
to an entity ("BDTV II") having a capital structure and
governance provisions similar to BDTV (together with the BDTV
Transaction, the "HSN Transactions")) and the contingent right
to receive 2,644,299 shares of Silver King Class B Common
Stock upon the Liberty Media Group being entitled to own such
shares under applicable FCC regulations on or before the fifth
anniversary of the Merger. In addition, the 739,141 shares of
HSN Class B Common Stock and 17,566,702 shares of HSN Common
Stock exchanged by the Liberty Media Group for the stock of
the surviving corporation in the Merger would become
exchangeable into 399,136 shares of Silver King Class B
Common Stock and 7,905,015 shares of Silver King Common Stock,
respectively, upon the Liberty Media Group becoming entitled
to own such additional interest in Silver King in accordance
with applicable FCC regulations.
<PAGE> 3
Item 5 Other Events (continued).
The HSN Merger is subject to the satisfaction of certain
conditions, including the receipt of all necessary regulatory
consents and approvals. If consummated, HSN would cease to be
a subsidiary of Liberty Media Group and therefore, the
financial results of HSN would not be consolidated with the
financial results of Liberty Media Group. Although Liberty
Media Group would cease to possess voting control over HSN, it
would continue to have an indirect equity interest in the
business of HSN through its indirect ownership of the equity
securities of Silver King. No assurance can be given that the
transactions will be consummated.
(b) On June 19, 1996, Tele-Communications, Inc. ("TCI") announced
the proposed distribution (the "Distribution") by TCI to the
holders of shares of the TCI Group Common Stock of all of the
issued and outstanding common stock of TCI Satellite
Entertainment, Inc. ("Satellite"). At the time of the
Distribution, Satellite will be a Delaware corporation and a
direct wholly owned subsidiary of TCI. The Distribution will
be effected as a tax-free dividend to, and will not involve
the payment of any consideration by, the holders of TCI Group
Common Stock. Prior to the Distribution, TCI will cause to be
transferred to Satellite, or one or more of Satellite's
subsidiaries, certain assets and businesses (and the related
liabilities) of the TCI Group constituting all of TCI's
interests in the business of distributing multichannel
programming services in the United States direct to the home
via medium power or high power broadcast satellite, including
the rental and sale of customer premises equipment relating
thereto.
<PAGE> 4
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements
None.
(b) Pro Forma Financial Information
Tele-Communications, Inc. and Subsidiaries:
Condensed Pro Forma Combined Balance Sheet,
June 30, 1996 (unaudited)
Condensed Pro Forma Combined Statement of Operations,
Six months ended June 30, 1996 (unaudited)
Condensed Pro Forma Combined Statement of Operations,
Year ended December 31, 1995 (unaudited)
Notes to Condensed Pro Forma Combined Financial Statements,
June 30, 1996 (unaudited)
"TCI Group"
Condensed Pro Forma Combined Balance Sheet,
June 30, 1996 (unaudited)
Condensed Pro Forma Combined Statement of Operations,
Six months ended June 30, 1996 (unaudited)
Condensed Pro Forma Combined Statement of Operations,
Year ended December 31, 1995 (unaudited)
Notes to Condensed Pro Forma Combined Financial Statements,
June 30, 1996 (unaudited)
"Liberty Media Group"
Condensed Pro Forma Combined Balance Sheet,
June 30, 1996 (unaudited)
Condensed Pro Forma Combined Statement of Operations,
Six months ended June 30, 1996 (unaudited)
Condensed Pro Forma Combined Statement of Operations,
Year ended December 31, 1995 (unaudited)
Notes to Condensed Pro Forma Combined Financial Statements,
June 30, 1996 (unaudited)
(c) Exhibits
Agreement and Plan of Exchange and Merger, dated as of August
25, 1996, by and among Tele- Communications, Inc., Silver
King Communications, Inc., House Acquisition Corp. and
Liberty HSN, Inc.
Termination Agreement, dated as of August 25, 1996, among
Silver King Communications, Inc., BDTV INC., Liberty Program
Investments, Inc. and Liberty HSN, Inc.
Voting Agreement, dated as of August 25, 1996, by and among
Certain Stockholders of Tele- Communications, Inc. and
Silver King Communications, Inc.
Letter Agreement, dated as of August 25, 1996, by and between
Liberty Media Corporation and Barry Diller.
Incorporated herein by reference to Amendment No. 4 to
Schedule 13D Statement of Tele-Communications, Inc.
in respect of Home Shopping Network, Inc.
<PAGE> 5
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 hereunto duly authorized.
Date: September 3, 1996
TELE-COMMUNICATIONS, INC.
(Registrant)
By:/s/ Stephen M. Brett
-------------------------------------
Stephen M. Brett
Executive Vice President
<PAGE> 6
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Pro Forma Combined Financial Statements
June 30, 1996
(unaudited)
The following unaudited condensed pro forma combined balance sheet of
TCI, dated as of June 30, 1996, assumes that the acquisition by TCI of all the
common stock of a subsidiary of Viacom, Inc. ("VII Cable") (the "VII Cable
Acquisition") (see note 1), the proposed Distribution (see note 2) and the HSN
Transactions (see note 3) had occurred as of such date.
The following unaudited condensed pro forma combined statement of
operations of TCI for the six months ended June 30, 1996 assumes that the VII
Cable Acquisition, the Distribution and the HSN Transactions had occurred as
of January 1, 1995.
The following unaudited condensed pro forma combined statement of
operations of TCI for the year ended December 31, 1995 assumes that the VII
Cable Acquisition, the Distribution, the HSN Transactions and the acquisition
of a 51% ownership interest in Cablevision S.A. and certain affiliated
companies (collectively "Cablevision") (the "Cablevision Acquisition") (see
note 4) had occurred as of January 1, 1995.
The unaudited pro forma results do not purport to be indicative of the
results of operations that would have been obtained if the VII Cable
Acquisition, the Distribution, the HSN Transactions and the Cablevision
Acquisition had occurred as of January 1, 1995. These condensed pro forma
combined financial statements of TCI should be read in conjunction with the
historical financial statements and the related notes thereto of TCI.
1
<PAGE> 7
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Pro Forma Combined Balance Sheet
(unaudited)
<TABLE>
<CAPTION>
June 30, 1996
----------------------------------------------------------------
TCI VII Cable Pro forma Satellite
Historical Historical (1) adjustments (1) Distribution (2)
---------- --- ---------- --------------- ----------------
Assets amounts in millions
- ------
<S> <C> <C> <C> <C>
Cash, receivables and other current assets $ 1,093 18 1,700 (5) (22)
(1,700)(6)
Note receivable from Satellite -- -- -- 250
Investment in affiliates and Turner
Broadcasting System, Inc., and
related receivables 3,680 -- -- (29)
Property and equipment, net of
accumulated depreciation 8,010 437 (3)(6) (1,048)
Franchise costs, intangibles and 14,533 620 (45)(6) --
other assets, net of amortization 1,425 (7)
------- ----- ------ ------
$27,316 1,075 1,377 (849)
======= ===== ====== ======
Liabilities and Stockholders' Equity
- ------------------------------------
Payables and accruals $ 1,943 90 (26)(6) (468)
Debt 13,334 57 (57)(6) --
1,700 (5)
Deferred income taxes 4,707 63 -- (16)
Other liabilities 192 11 (12)(6) --
------- ----- ------ ------
Total liabilities 20,176 221 1,605 (484)
------- ----- ------ ------
Minority interests 945 -- 626 (8) --
Redeemable preferred stock 659 -- -- --
Company-obligated mandatorily
redeemable preferred securities of
subsidiary trusts holding solely
subordinated debt securities of TCIC 1,016 -- -- --
Stockholders' equity:
Preferred Stock -- -- -- --
Viacom equity investment -- 854 (854)(9) --
TCI Group Series A common stock 685 -- -- --
TCI Group Series B common stock 85 -- -- --
Liberty Media Group Series A
common stock 146 -- -- --
Liberty Media Group Series B
common stock 21 -- -- --
Additional paid-in capital 4,314 -- -- (365)
Cumulative foreign currency
translation adjustment (7) -- -- --
Unrealized holding gains for
available-for-sale securities 346 -- -- --
Accumulated deficit (756) -- -- --
Treasury stock (314) -- -- --
------- ----- ------ ------
4,520 854 (854) (365)
------- ----- ------ ------
$27,316 1,075 1,377 (849)
======= ===== ====== ======
<CAPTION>
June 30, 1996
-----------------------------
HSN TCI
Transactions (3) Pro forma
---------------- ---------
Assets
- ------
<S> <C> <C>
Cash, receivables and other current assets (144) 945
Note receivable from Satellite -- 250
Investment in affiliates and Turner
Broadcasting System, Inc., and
related receivables 294 3,945
Property and equipment, net of
accumulated depreciation (133) 7,263
Franchise costs, intangibles and (353) 16,180
other assets, net of amortization
------ --------
(336) 28,583
====== ========
Liabilities and Stockholders' Equity
- ------------------------------------
Payables and accruals (160) 1,379
Debt (119) 14,915
Deferred income taxes 35 4,789
Other liabilities -- 191
------ --------
Total liabilities (244) 21,274
------ --------
Minority interests (91) 1,480
Redeemable preferred stock -- 659
Company-obligated mandatorily
redeemable preferred securities of
subsidiary trusts holding solely
subordinated debt securities of TCIC -- 1,016
Stockholders' equity:
Preferred Stock -- --
Viacom equity investment -- --
TCI Group Series A common stock -- 685
TCI Group Series B common stock -- 85
Liberty Media Group Series A
common stock -- 146
Liberty Media Group Series B
common stock -- 21
Additional paid-in capital -- 3,949
Cumulative foreign currency
translation adjustment -- (7)
Unrealized holding gains for
available-for-sale securities (1) 345
Accumulated deficit -- (756)
Treasury stock -- (314)
------ --------
(1) 4,154
------ --------
(336) 28,583
====== ========
</TABLE>
See accompanying notes to unaudited condensed pro forma combined financial
statements.
2
<PAGE> 8
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Pro Forma Combined Statement of Operations
(unaudited)
<TABLE>
<CAPTION>
Six months ended June 30, 1996
--------------------------------------------------------------------------------------
VII Cable Pro forma Satellite HSN
TCI Historical adjustments Distribution Transactions TCI
Historical (1) (1) (2) (3) Pro forma
---------- ----------- ----------- ------------- ------------ ---------
amounts in millions
<S> <C> <C> <C> <C> <C> <C>
Revenue $ 3,954 236 -- (194) (500) 3,496
Operating, cost of sales, selling,
general and administrative
expenses, compensation relating to
stock appreciation rights (2,849) (151) -- 187 471 (2,342)
Depreciation and amortization (756) (44) (18)(10) 54 19 (745)
------- --------- ------- ------------ ------------- ----------
Operating income 349 41 (18) 47 (10) 409
Interest expense (526) (24) (63)(14) -- 6 (607)
Interest and dividend income 24 -- -- 13 (1) 36
Share of losses of affiliates, net (211) -- -- 1 2 (208)
Other income (expense), net (65) 4 (16)(15) -- -- (77)
------- --------- ------- ------------ ------------- ----------
Earnings (loss) before income
taxes (429) 21 (97) 61 (3) (447)
Income tax benefit (expense) 127 (12) 25(16) (20) 4 124
------- --------- ------- ------------ ------------- ----------
(72)
Net earnings (loss) (302) 9 41 1 (323)
Dividend requirement on redeemable
preferred stocks (18) -- -- -- -- (18)
------- --------- ------- ------------ ------------- ----------
Net earnings (loss) attributable
to common stockholders $ (320) 9 (72) 41 1 (341)
======= ========= ======= ============ ============= ==========
Primary earnings (loss) attributable to
common stockholders per common
and common equivalent share:
TCI Group Series A and Series B
common stock $ (.51) (.54)(17)
======= ==========
Liberty Media Group Series A and
Series B common stock $ .11 .12 (17)
======= ==========
</TABLE>
See accompanying notes to unaudited condensed pro forma combined
financial statements.
3
<PAGE> 9
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Pro Forma Combined Statement of Operations
(unaudited)
<TABLE>
<CAPTION>
Year ended December 31, 1995
---------------------------------------------------------------------------
TCI VII Cable Cablevision Pro forma
Historical Historical (1) Historical (4) adjustments(1)(4)
---------- -------------- -------------- -----------------
amounts in millions
<S> <C> <C> <C> <C>
Revenue $ 6,851 442 52 (2)(6)
Operating, cost of sales, selling,
general and administrative expenses,
compensation relating to stock
appreciation rights and restructuring
charges (4,937) (279) (34) --
Depreciation and amortization (1,372) (82) (2) (45)(10)
-------- ---- ----- -----
Operating income (loss) 542 81 16 (47)
Interest expense (1,010) (48) -- (3)(11)
(4)(12)
(5)(13)
(84)(14)
Interest and dividend income 52 -- -- --
Share of earnings (losses) of
affiliates, net (193) -- -- --
Gains 337 -- -- --
Other income (expense), net (19) 34 -- (27)(6)
(31)(15)
-------- ---- ----- -----
Earnings (loss) before income
taxes (291) 67 16 (201)
Income tax benefit (expense) 120 (33) (5) 52 (16)(6)
-------- ---- ----- -----
Net earnings (loss) (171) 34 11 (149)
Dividend requirement on redeemable
preferred stocks (34) -- -- --
-------- ---- ----- -----
Net earnings (loss) attributable to
common stockholders $ (205) 34 11 (149)
======== ==== ===== =====
Loss attributable to common
stockholders per common share:
TCI Class A and Class B common
stock $ (.11)
=========
TCI Group Series A and Series B
common stock $ (.16)
=========
Liberty Media Group Series A
and Series B common stock $ (.16)
=========
<CAPTION>
Year ended December 31, 1995
-------------------------------------------------------
Satellite HSN TCI
Distribution (2) Transactions (3) Pro forma
---------------- ---------------- ---------
amounts in millions
<S> <C> <C> <C>
Revenue (209) (1,018) 6,116
Operating, cost of sales, selling,
general and administrative expenses,
compensation relating to stock
appreciation rights and restructuring
charges 214 1,060 (3,976)
Depreciation and amortization 56 43 (1,402)
----- ------- --------
Operating income (loss) 61 85 738
Interest expense -- 10 (1,144)
Interest and dividend income 25 (2) 75
Share of earnings (losses) of
affiliates, net 9 (24) (208)
Gains -- -- 337
Other income (expense), net -- (30) (73)
----- ------- --------
Earnings (loss) before income
taxes 95 39 (275)
Income tax benefit (expense) (32) (27) 75
----- ------- --------
Net earnings (loss) 63 12 (200)
Dividend requirement on redeemable
preferred stocks -- -- (34)
----- ------- --------
Net earnings (loss) attributable to
common stockholders 63 12 (234)
====== ======= ========
Loss attributable to common
stockholders per common share:
TCI Class A and Class B common
stock (.15)(18)
========
TCI Group Series A and Series B
common stock (.16)(18)
========
Liberty Media Group Series A
and Series B common stock (.14)(18)
========
</TABLE>
See accompanying notes to unaudited condensed pro forma combined financial
statements.
4
<PAGE> 10
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Condensed Pro Forma Combined Financial Statements
June 30, 1996
(unaudited)
(1) On July 31, 1996, pursuant to certain agreements entered into among
TCI Communications, Inc. ("TCIC"), TCI, Viacom International Inc. and
Viacom, Inc. ("Viacom"), TCIC acquired all of the common stock of VII
Cable which, at the time of such acquisition, owned Viacom's cable
systems and related assets.
The transaction was structured as a tax-free reorganization in which
VII Cable initially transferred all of its non-cable assets, as well
as all of its liabilities other than current liabilities, to a new
subsidiary of Viacom ("New Viacom Sub"). VII Cable also transferred
to New Viacom Sub the proceeds (the "Loan Proceeds") of a $1.7 billion
loan facility (the "Loan Facility") arranged by TCIC, TCI and VII
Cable. Following these transfers, VII Cable retained cable assets
with a value at closing of approximately $2.326 billion and the
obligation to repay the Loan Proceeds borrowed under the Loan
Facility. Neither Viacom nor New Viacom Sub has any obligation with
respect to repayment of the Loan Proceeds.
Prior to the consummation of the VII Cable Acquisition, Viacom offered
to the holders of shares of Viacom Class A Common Stock and Viacom
Class B Common Stock (collectively, "Viacom Common Stock") the
opportunity to exchange (the "Exchange Offer") a portion of their
shares of Viacom Common Stock for shares of Class A Common Stock, par
value $100 per share, of VII Cable ("VII Cable Class A Stock").
Immediately following the completion of the Exchange Offer, TCIC
acquired from VII Cable shares of VII Cable Class B Common Stock (the
"Share Issuance") in exchange for $350 million (which was used to
reduce VII Cable's obligations under the Loan Facility). At the time
of the Share Issuance, the VII Cable Class A Stock received by Viacom
stockholders pursuant to the Exchange Offer automatically converted
into 5% Class A Senior Cumulative Exchangeable Preferred Stock (the
"Exchangeable Preferred Stock") of VII Cable with a stated value of
$100 per share. The terms of the Exchangeable Preferred Stock,
including its dividend, redemption and exchange features, were
designed to cause the Exchangeable Preferred Stock, in the opinion of
two investment banks, to initially trade at the stated value.
The cost to acquire VII Cable was approximately $2.326 billion,
consisting of the Loan Proceeds and the $626 million aggregate par
value of the VII Cable Exchangeable Preferred Stock. The accompanying
unaudited pro forma condensed combined statements of operations do not
reflect potential cost savings attributable to (i) economics of scale
which may be realized in connection with purchases of programming and
equipment or (ii) consolidation of certain operating and
administrative functions including the elimination of duplicative
facilities and personnel.
(continued)
5
<PAGE> 11
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Condensed Pro Forma Combined Financial Statements
(2) On June 19, 1996, TCI announced the Distribution by TCI to the holders
of shares of the TCI Group common stock of all of the issued and
outstanding common stock of Satellite. At the time of the
Distribution, Satellite will be a Delaware corporation and a direct
wholly owned subsidiary of TCI. The Distribution will be effected as
a tax-free dividend to, and will not involve the payment of any
consideration by, the holders of TCI Group common stock. Prior to the
Distribution, TCI will cause to be transferred to Satellite, or one or
more of Satellite's subsidiaries, certain assets and businesses (and
the related liabilities) of the TCI Group constituting all of TCI's
interests in the business of distributing multichannel programming
services in the United States direct to the home via medium power or
high power broadcast satellite, including the rental and sale of
customer premises equipment relating thereto.
On or before the date of the Distribution, Satellite will issue to
TCIC a promissory note in the principal amount of $250 million,
representing a portion of Satellite's intercompany balance owed to
TCIC on that date. The remainder of such intercompany balance will be
assumed by TCI on or before the date of the Distribution in the form
of a capital contribution to Satellite. Such promissory note will bear
interest at the rate of 10% per annum and will mature on September 30,
2001. Such interest income to TCIC, amounting to $25 million per
annum, has been reflected in the accompanying condensed proforma
combined statements of operations.
(3) Liberty Media Group and Mr. Barry Diller and certain of their
respective affiliates entered into the August Agreement pursuant to
which the Option owned by Liberty Media Group to purchase 2 million
shares of the Class B common stock of Silver King (which shares would
constitute voting control of Silver King) together with $3.5 million
(representing the exercise price of the Option) would be contributed
to BDTV. BDTV would thereafter exercise the Option and hold the
shares of the Silver King Class B Common Stock purchased thereunder.
The FCC approval required for the exercise of the Option by BDTV was
received in June 1996, and the Option was exercised on August 13, 1996
and BDTV became the owner of the 2 million shares of Silver King Class
B Common Stock purchased thereunder. In connection with its approval
of the transfer of control of Silver King to Barry Diller resulting
from the exercise of the Option and the acquisition of the 2 million
shares of Silver King Class B Common Stock by BDTV thereby, the FCC
imposed a condition requiring prior FCC approval for any increases in
TCI's percentage equity interest in Silver King (including its indirect
interest through its ownership of non-voting securities of BDTV).
(continued)
6
<PAGE> 12
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Condensed Pro Forma Combined Financial Statements
On August 25, 1996, Liberty HSN, Inc. (a wholly owned subsidiary of the
Liberty Media Group which holds the 17,566,702 shares of HSN Common
Stock and 20,000,000 shares of HSN Class B Common Stock beneficially
owned by the Liberty Media Group), HSN and Silver King entered into the
HSN Merger Agreement. The HSN Merger Agreement provides for the Merger
of a subsidiary of Silver King into HSN, in which each share of HSN
Common Stock would be converted into .45 share of Silver King Common
Stock and each share of HSN Class B Common Stock would be converted
into .54 share of Silver King Class B Common Stock. In order to avoid
exceeding the equity percentage limit set forth in the FCC approval,
however, Liberty Media Group agreed that it would retain an approximate
19.9% equity interest in HSN (as the surviving corporation in the
Merger) following the Merger (which equity interest would be composed
of all 17,566,702 shares of HSN Common Stock and 739,141 shares of HSN
Class B Common Stock which would be exchanged with the subsidiary of
Silver King being merged into HSN prior to the Merger) and that it
would accept a contingent right to receive 2,644,299 shares of Silver
King Class B Common Stock in lieu of the full number of shares of
Silver King Class B Common Stock it would be entitled to receive in the
Merger. As a result, in the Merger, Liberty Media Group would receive
7,756,564 shares of Silver King Class B Common Stock (which would be
contributed to BDTV II) and the contingent right to receive 2,644,299
shares of Silver King Class B Common Stock upon the Liberty Media Group
being entitled to own such shares under applicable FCC regulations on
or before the fifth anniversary of the Merger. In addition, the
739,141 shares of HSN Class B Common Stock and 17,566,702 shares of HSN
Common Stock exchanged by the Liberty Media Group for the stock of the
surviving corporation in the Merger would become exchangeable into
399,136 shares of Silver King Class B Common Stock and 7,905,015 shares
of Silver King Common Stock, respectively, upon the Liberty Media Group
becoming entitled to own such additional interest in Silver King in
accordance with applicable FCC regulations.
The HSN Merger is subject to the satisfaction of certain conditions,
including the receipt of all necessary regulatory consents and
approvals. If consummated, HSN would cease to be a subsidiary of
Liberty Media Group and therefore, the financial results of HSN would
not be consolidated with the financial results of Liberty Media Group.
Although Liberty Media Group would cease to possess voting control
over HSN, it would continue to have an indirect equity interest in the
business of HSN through its indirect ownership of the equity
securities of Silver King. No assurance can be given that the
transactions will be consummated.
(4) On April 25, 1995, TCI consummated the Cablevision Acquisition for an
aggregate purchase price of $286 million. The purchase price was paid
with cash consideration of approximately $199 million (including a
previously paid deposit of $20 million) and the Company's issuance of
approximately $87 million in secured negotiable promissory notes
payable (the "Cablevision Notes"). The Company has an option during
the two year period ended April 25, 1997 to increase its ownership
interest in Cablevision to 80% at a cost per subscriber similar to the
initial purchase price. The exercise of such option has not been
reflected in the accompanying condensed pro forma combined financial
statements.
All amounts presented with respect to Cablevision are stated in U.S.
dollars. During the periods covered by the accompanying condensed pro
forma financial statements, an exchange rate of one U.S. dollar to one
Argentine peso was maintained by the Argentine government.
(continued)
7
<PAGE> 13
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Condensed Pro Forma Combined Financial Statements
(5) Reflects the borrowing of the Loan Proceeds ($1.7 billion) under the
Loan Facility. Scheduled maturities of the Loan through December 31,
2000 are assumed to be $300 million (1996), none (1997), $30 million
(1998), $110 million (1999) and $135 million (2000).
(6) Reflects the conveyance to New Viacom Sub of the Loan Proceeds,
existing bank debt of $57 million and certain other nonmaterial
assets, liabilities and related results of operations of VII Cable,
including for the year ended December 31, 1995, a pre-tax gain of $27
million from the sale of marketable securities and a provision for
income taxes of $11 million.
(7) The cost to acquire VII Cable will be allocated to the assets and
liabilities acquired according to their respective fair values, with
any excess being treated as franchise costs. The valuations and other
studies which will provide the basis for the allocation of the cost to
acquire VII Cable have not yet been performed and, consequently, the
purchase accounting adjustments made in connection with the
development of the unaudited condensed pro forma combined financial
statements are preliminary. The entire purchase price in excess of
the book value of VII Cable's assets and liabilities has been
attributed to franchise costs. The approximately $1.4 billion pro
forma excess of unallocated acquisition costs as of June 30, 1996 is
being amortized over 40 years at a rate of $36 million per year. To
the extent that the excess purchase price over book value is allocated
to property and equipment or other assets, including identifiable
intangibles with lives of less than 40 years, depreciation and
amortization will increase and, on an after-tax basis, net loss will
increase. Although the Company cannot estimate the potential increase
in depreciation nor amortization, it may be significant. The Company
estimates the average useful life of property and equipment to be
approximately 12.5 years. In addition, the Company does not believe
that there are substantial intangible assets which will require
amortization over periods less that 12.5 years. As a result, the
Company does not believe that any allocation of purchase price to
other assets should be expected to result in an amortization period
less than 12.5 years. VII Cable has estimated, that for every $100
million allocated to property and equipment or to other assets
including identifiable intangibles, and assuming an average life of
12.5 years, depreciation and amortization would increase by $5.5
million per year over such 12.5 year period.
(8) Reflects the aggregate par value of the VII Cable Exchangeable
Preferred Stock.
(9) Represents the elimination of VII Cable's historical equity.
(10) Represents depreciation and amortization of VII Cable's and
Cablevision's allocated excess purchase prices based upon weighted
average lives of 12-1/2 years for property and equipment for
Cablevision and 40 years for franchise costs for VII Cable and 20
years for franchise costs for Cablevision.
(11) Represents assumed interest expense on the $87 million principal
amount of the Cablevision Notes, calculated at an assumed interest
rate of 10.0% per annum.
(continued)
8
<PAGE> 14
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Condensed Pro Forma Combined Financial Statements
(12) Represents additional interest expense on assumed indebtedness of
Cablevision. Such additional interest expense was not reflected in
the historical financial statements of Cablevision as the related
borrowings were not utilized to support the assets acquired by the
Company. The pro forma adjustment assumes that Cablevision's April
25, 1995 borrowings ($77 million including capital lease obligations)
were outstanding since January 1, 1995 and that such borrowings bore
interest at 14.5% per annum.
(13) Represents assumed interest expense incurred by the Company on the
borrowings of $179 million to pay the remaining cash portion of the
Cablevision purchase price. Such interest expense was calculated at
the Company's weighted average interest rate of 8.l% for the year
ended December 31, 1995.
(14) Represents assumed additional interest expense (after taking into
consideration interest expense reflected in the historical VII Cable
operations) incurred by the Company on the borrowings of the Loan
Proceeds. Solely for the purposes of this presentation, the Company
has assumed an interest rate of 7.41% and 7.78% for the six months
ended June 30, 1996 and for the year ended December 31, 1995,
respectively, based upon historical interest rates adjusted for
anticipated terms of the Loan Facility.
(15) Reflects an assumed 5.0% cumulative annual dividend on the $626
million of VII Cable Exchangeable Preferred Stock included in minority
share of losses of consolidated subsidiaries.
(16) Reflects the estimated income tax effect of the pro forma adjustments.
The effective income tax rate on a pro forma basis is adversely
affected by the amortization of excess acquisition costs, which are
assumed not to be deductible for tax purposes.
(17) Reflects loss per common share based upon 663.2 million weighted
average shares and 165.8 million weighted average shares of TCI Group
and Liberty Media Group, respectively, at June 30, 1996. Such amounts
represent the weighted average shares disclosed in TCI's historical
financial statements.
(18) Reflects loss per common share based upon 648.2 million weighted
average shares, 656.4 million weighted average shares and 164.1
million weighted average shares of Tele-Communications, Inc. from
January 1, 1995 through August 10, 1995, TCI Group from August 11,
1995 through December 31, 1995 and Liberty Media Group from August 11,
1995 through December 31, 1995, respectively. Such amounts represent
TCI's weighted average shares, as disclosed in its historical
financial statements.
9
<PAGE> 15
"TCI Group"
Condensed Pro Forma Combined Financial Statements
June 30, 1996
(unaudited)
The following unaudited condensed pro forma combined balance sheet of
TCI Group, dated as of June 30, 1996, assumes that the VII Cable Acquisition
(see note 1) and the Distribution (see note 2) had occurred as of such date.
The following unaudited condensed pro forma combined statement of
operations of TCI Group for the six months ended June 30, 1996 assumes that the
VII Cable Acquisition and the Distribution had occurred as of January 1, 1995.
The following unaudited condensed pro forma combined statement of
operations of TCI Group for the year ended December 31, 1995 assumes that the
VII Cable Acquisition, the Distribution and the Cablevision Acquisition (see
note 3) had occurred as of January 1, 1995.
The unaudited pro forma results do not purport to be indicative of the
results of operations that would have been obtained if the VII Cable
Acquisition, the Distribution and the Cablevision Acquisition had occurred as
of January 1, 1995. These condensed pro forma combined financial statements of
TCI Group should be read in conjunction with the historical financial
statements and the related notes thereto of TCI Group.
10
<PAGE> 16
"TCI GROUP"
Condensed Pro Forma Combined Balance Sheet
(unaudited)
<TABLE>
<CAPTION>
June 30, 1996
-----------------------------------------------------------------------------------
TCI Group VII Cable Pro forma Satellite TCI
Historical Historical (1) adjustments(1) Distribution(2) Pro forma
---------- -------------- -------------- --------------- ---------
Assets amounts in millions
------
<S> <C> <C> <C> <C> <C>
Cash, receivables and other
current assets $ 573 18 1,700 (4) (22) 569
(1,700)(5)
Note receivable from Satellite -- -- -- 250 250
Investment in affiliates and
related receivables 2,422 -- -- (29) 2,393
Property and equipment, net of
accumulated depreciation 7,862 437 (3)(5) (1,048) 7,248
Franchise costs, intangibles and
other assets, net of amortization 14,100 620 (45)(5) -- 16,100
1,425 (6)
------- ----- ------ ------ ------
$24,957 1,075 1,377 (849) 26,560
======= ===== ====== ====== ======
Liabilities and Stockholders' Equity
------------------------------------
Payables and accruals $ 1,734 90 (26)(5) (468) 1,330
Debt 13,211 57 (57)(5) -- 14,911
1,700 (4)
Deferred income taxes 4,482 63 -- (16) 4,529
Other liabilities 186 11 (12)(5) -- 185
------- ----- ------ ------ ------
Total liabilities 19,613 221 1,605 (484) 20,955
------- ----- ------ ------ ------
Minority interests 807 -- 626 (7) -- 1,433
Redeemable preferred stock 659 -- -- -- 659
Company-obligated mandatorily
redeemable preferred securities of
subsidiary trusts holding solely
subordinated debt securities of
TCIC 1,016 -- -- -- 1,016
Stockholders' equity:
Viacom equity investment -- 854 (854)(8) -- --
Combined equity 2,825 -- -- (365) 2,460
Cumulative foreign currency
translation adjustment (7) -- -- -- (7)
Unrealized holding gains for
available-for-sale securities 49 -- -- -- 49
Due from Liberty Media Group (5) -- -- -- (5)
------- ----- ------ ----- ------
2,862 854 (854) (365) 2,497
------- ----- ------ ----- ------
$24,957 1,075 1,377 (849) 26,560
======= ===== ====== ===== ======
</TABLE>
See accompanying notes to unaudited condensed pro forma combined financial
statements.
11
<PAGE> 17
"TCI GROUP"
Condensed Pro Forma Combined Statement of Operations
(unaudited)
<TABLE>
<CAPTION>
Six months ended June 30, 1996
-------------------------------------------------------------------------------------
TCI Group VII Cable Pro forma Satellite TCI
Historical Historical (1) adjustments(1) Distribution(2) Pro forma
---------- -------------- -------------- --------------- ---------
amounts in millions
<S> <C> <C> <C> <C> <C>
Revenue $ 3,258 236 -- (194) 3,300
Operating, cost of sales, selling,
general and administrative
expenses and compensation
relating to stock appreciation
rights (2,225) (151) -- 187 (2,189)
Depreciation and amortization (724) (44) (18)(9) 54 (732)
------- --------- -------- ------- ---------
Operating income 309 41 (18) 47 379
Interest expense (513) (24) (63)(13) -- (600)
Interest and dividend income 20 -- -- 13 33
Share of losses of affiliates, net (221) -- -- 1 (220)
Other income (expense), net (60) 4 (16)(14) -- (72)
------- ---------- -------- ------- ---------
Earnings (loss) before income
taxes (465) 21 (97) 61 (480)
Income tax benefit (expense) 144 (12) 25(15) (20) 137
------- --------- -------- ------- ---------
Net earnings (loss) (321) 9 (72) 41 (343)
Dividend requirement on
redeemable preferred stocks (18) -- -- -- (18)
------- --------- -------- ------- ---------
Net earnings (loss) attributable
to common stockholders $ (339) 9 (72) 41 (361)
======= ========= ======== ======= =========
Loss attributable to common
stockholders per common share $ (.51) (.54)(16)
======= =========
</TABLE>
See accompanying notes to unaudited condensed pro forma combined
financial statements.
12
<PAGE> 18
"TCI GROUP"
Condensed Pro Forma Combined Statement of Operations
(unaudited)
<TABLE>
<CAPTION>
Year ended December 31, 1995
-----------------------------------------------------------------------
TCI Group VII Cable Cablevision Pro forma
Historical Historical (1) Historical (3) adjustments (1)(3)
---------- -------------- -------------- ------------------
amount in millions
<S> <C> <C> <C> <C>
Revenue $ 5,384 442 52 (2)(5)
Operating, selling, general and
administrative expenses and
compensation relating to stock
appreciation rights (3,457) (279) (34) --
Depreciation and amortization (1,274) (82) (2) (45)(9)
------- ----- --- ----
Operating income 653 81 16 (47)
Interest expense (993) (48) -- (3)(10)
(4)(11)
(5)(12)
(84)(13)
Interest and dividend income 43 -- -- --
Share of losses of affiliates, net (178) -- -- --
Gains 339 -- -- --
Other income (expense), net (45) 34 -- (27)(5)
(31)(14)
------- ----- --- ----
Earnings (loss) before income
taxes (181) 67 16 (201)
Income tax benefit (expense) 66 (33) (5) 52 (15)(5)
------- ----- --- ----
Earnings (loss) before losses of
Liberty Media Group (115) 34 11 (149)
Losses of Liberty Media Group (29) -- -- --
------- ----- --- ----
Net earnings (loss) (144) 34 11 (149)
Dividend requirement on redeemable
preferred stocks (34) -- -- --
------- ----- --- ----
Net earnings (loss) attributable
to common stockholders $ (178) 34 11 (149)
======= ===== === ====
Loss attributable to common
stockholders per common share $ (.16)
=======
<CAPTION>
Year ended December 31, 1995
-----------------------------------
Satellite TCI
Distribution (2) Pro forma
---------------- ---------
amounts in millions
<S> <C> <C>
Revenue (209) 5,667
Operating, selling, general and
administrative expenses and
compensation relating to stock
appreciation rights 214 (3,556)
Depreciation and amortization 56 (1,347)
---- ------
Operating income 61 764
Interest expense -- (1,137)
Interest and dividend income 25 68
Share of losses of affiliates, net 9 (169)
Gains -- 339
Other income (expense), net -- (69)
---- ------
Earnings (loss) before income
taxes 95 (204)
Income tax benefit (expense) (32) 48
---- ------
Earnings (loss) before losses of
Liberty Media Group 63 (156)
Losses of Liberty Media Group -- (29)
---- ------
Net earnings (loss) 63 (185)
Dividend requirement on redeemable
preferred stocks -- (34)
---- ------
Net earnings (loss) attributable
to common stockholders 63 (219)
==== ======
Loss attributable to common
stockholders per common share (.16)(17)
======
</TABLE>
See accompanying notes to unaudited condensed pro forma combined financial
statements.
13
<PAGE> 19
"TCI GROUP"
Notes to Condensed Pro Forma Combined Financial Statements
June 30, 1996
(unaudited)
(1) On July 31, 1996, pursuant to certain agreements entered into among
TCIC, TCI, Viacom International Inc. and Viacom, TCIC acquired all of
the common stock of VII Cable which, at the time of such acquisition,
owned Viacom's cable systems and related assets.
The transaction was structured as a tax-free reorganization in which
VII Cable initially transferred all of its non-cable assets, as well
as all of its liabilities other than current liabilities, to New
Viacom Sub. VII Cable also transferred to New Viacom Sub the Loan
Proceeds of the Loan Facility arranged by TCIC, TCI and VII Cable.
Following these transfers, VII Cable retained cable assets with a
value at closing of approximately $2.326 billion and the obligation to
repay the Loan Proceeds borrowed under the Loan Facility. Neither
Viacom nor New Viacom Sub has any obligation with respect to repayment
of the Loan Proceeds.
Prior to the consummation of the VII Cable Acquisition, Viacom offered
to the holders of shares of Viacom Common Stock the opportunity to
exchange a portion of their shares of Viacom Common Stock for shares
of VII Cable Class A Stock. Immediately following the completion of
the Exchange Offer, TCIC acquired from VII Cable shares of VII Cable
Class B Common Stock in exchange for $350 million (which was used to
reduce VII Cable's obligations under the Loan Facility). At the time
of the Share Issuance, the VII Cable Class A Stock received by Viacom
stockholders pursuant to the Exchange Offer automatically converted
into the Exchangeable Preferred Stock of VII Cable with a stated value
of $100 per share. The terms of the Exchangeable Preferred Stock,
including its dividend, redemption and exchange features, were
designed to cause the Exchangeable Preferred Stock, in the opinion of
two investment banks, to initially trade at the Stated Value.
The cost to acquire VII Cable was approximately $2.326 billion,
consisting of the Loan Proceeds and the $626 million aggregate par
value of the VII Cable Exchangeable Preferred Stock. The accompanying
unaudited pro forma condensed combined statements of operations do not
reflect potential cost savings attributable to (i) economics of scale
which may be realized in connection with purchases of programming and
equipment or (ii) consolidation of certain operating and
administrative functions including the elimination of duplicative
facilities and personnel.
(2) On June 19, 1996, TCI announced the Distribution by TCI to the holders
of shares of the TCI Group common stock of all of the issued and
outstanding common stock of Satellite. At the time of the
Distribution, Satellite will be a Delaware corporation and a direct
wholly owned subsidiary of TCI. The Distribution will be effected as
a tax-free dividend to, and will not involve the payment of any
consideration by, the holders of TCI Group common stock. Prior to the
Distribution, TCI will cause to be transferred to Satellite, or one or
more of Satellite's subsidiaries, certain assets and businesses (and
the related liabilities) of the TCI Group constituting all of TCI's
interests in the business of distributing multichannel programming
services in the United States direct to the home via medium power or
high power broadcast satellite, including the rental and sale of
customer premises equipment relating thereto.
(continued)
14
<PAGE> 20
"TCI GROUP"
Notes to Condensed Pro Forma Combined Financial Statements
On or before the date of the Distribution, Satellite will issue to
TCIC a promissory note in the principal amount of $250 million,
representing a portion of Satellite's intercompany balance owed to
TCIC on that date. The remainder of such intercompany balance will be
assumed by TCI on or before the date of the Distribution in the form
of a capital contribution to Satellite. Such promissory note will bear
interest at the rate of 10% per annum and will mature on September 30,
2001. Such interest income to TCIC, amounting to $25 million per
annum, has been reflected in the accompanying condensed proforma
combined statements of operations.
(3) On April 25, 1995, TCI Group consummated the Cablevision Acquisition
for an aggregate purchase price of $286 million. The purchase price
was paid with cash consideration of approximately $199 million
(including a previously paid deposit of $20 million) and TCI Group's
issuance of the Cablevision Notes. TCI Group has an option during the
two year period ended April 25, 1997 to increase its ownership
interest in Cablevision to 80% at a cost per subscriber similar to the
initial purchase price. The exercise of such option has not been
reflected in the accompanying condensed pro forma combined financial
statements.
All amounts presented with respect to Cablevision are stated in U.S.
dollars. During the periods covered by the accompanying condensed pro
forma financial statements, an exchange rate of one U.S. dollar to one
Argentine peso was maintained by the Argentine government.
(4) Reflects the borrowing of the Loan Proceeds ($1.7 billion) under the
Loan Facility. Scheduled maturities of the Loan through December 31,
2000 are assumed to be $300 million (1996), none (1997), $30 million
(1998), $110 million (1999) and $135 million (2000).
(5) Reflects the conveyance to New Viacom Sub of the Loan Proceeds,
existing bank debt of $57 million and certain other nonmaterial
assets, liabilities and related results of operations of VII Cable,
including for the year ended December 31, 1995, a pre-tax gain of $27
million from the sale of marketable securities and a provision for
income taxes of $11 million.
(continued)
15
<PAGE> 21
"TCI GROUP"
Notes to Condensed Pro Forma Combined Financial Statements
(6) The cost to acquire VII Cable will be allocated to the assets and
liabilities acquired according to their respective fair values, with
any excess being treated as franchise costs. The valuations and other
studies which will provide the basis for the allocation of the cost to
acquire VII Cable have not yet been performed and, consequently, the
purchase accounting adjustments made in connection with the
development of the unaudited condensed pro forma combined financial
statements are preliminary. The entire purchase price in excess of
the book value of VII Cable's assets and liabilities has been
attributed to franchise costs. The approximately $1.4 billion pro
forma excess of unallocated acquisition costs as of March 31, 1996 is
being amortized over 40 years at a rate of $36 million per year. To
the extent that the excess purchase price over book value is allocated
to property and equipment or other assets, including identifiable
intangibles with lives of less than 40 years, depreciation and
amortization will increase and, on an after-tax basis, net loss will
increase. Although TCI Group cannot estimate the potential increase
in depreciation nor amortization, it may be significant. TCI Group
estimates the average useful life of property and equipment to be
approximately 12.5 years. In addition, TCI Group does not believe
that there are substantial intangible assets which will require
amortization over periods less that 12.5 years. As a result, TCI
Group does not believe that any allocation of purchase price to other
assets should be expected to result in an amortization period less
than 12.5 years. VII Cable has estimated, that for every $100 million
allocated to property and equipment or to other assets including
identifiable intangibles, and assuming an average life of 12.5 years,
depreciation and amortization would increase by $5.5 million per year
over such 12.5 year period.
(7) Reflects the aggregate par value of the VII Cable Exchangeable
Preferred Stock.
(8) Represents the elimination of VII Cable's historical equity.
(9) Represents depreciation and amortization of VII Cable's and
Cablevision's allocated excess purchase prices based upon weighted
average lives of 12-1/2 years for property and equipment for
Cablevision and 40 years for franchise costs for VII Cable and 20
years for franchise costs for Cablevision.
(10) Represents assumed interest expense on the $87 million principal
amount of the Cablevision Notes, calculated at an assumed interest
rate of 10.0% per annum.
(11) Represents additional interest expense on assumed indebtedness of
Cablevision. Such additional interest expense was not reflected in
the historical financial statements of Cablevision as the related
borrowings were not utilized to support the assets acquired by TCI
Group. The pro forma adjustment assumes that Cablevision's April 25,
1995 borrowings ($77 million including capital lease obligations) were
outstanding since January 1, 1995 and that such borrowings bore
interest at 14.5% per annum.
(12) Represents assumed interest expense incurred by TCI Group on the
borrowings of $179 million to pay the remaining cash portion of the
Cablevision purchase price. Such interest expense was calculated at
TCI Group's weighted average interest rate of 8.1% for the year ended
December 31, 1995.
(continued)
16
<PAGE> 22
"TCI GROUP"
Notes to Condensed Pro Forma Combined Financial Statements
(13) Represents assumed additional interest expense (after taking into
consideration interest expense reflected in the historical VII Cable
operations) incurred by TCI Group on the borrowings of the Loan
Proceeds. Solely for the purposes of this presentation, TCI Group has
assumed an interest rate of 7.41% and 7.78% for the six months ended
June 30, 1996 and for the year ended December 31, 1995, respectively,
based upon historical interest rates adjusted for anticipated terms of
the Loan Facility.
(14) Reflects an assumed 5.0% cumulative annual dividend on the $626
million of VII Cable Exchangeable Preferred Stock included in minority
share of losses of consolidated subsidiaries.
(15) Reflects the estimated income tax effect of the pro forma adjustments.
The effective income tax rate on a pro forma basis is adversely
affected by the amortization of excess acquisition costs, which are
assumed not to be deductible for tax purposes.
(16) Reflects loss per common share based upon 663.2 million weighted
average shares. Such amount represents TCI Group's weighted average
shares, as disclosed in its June 30, 1996 historical financial
statements.
(17) Reflects loss per common share based upon 656.4 million weighted
average shares from August 11, 1995 through December 31, 1995. Such
amount represents TCI Group's weighted average shares, as disclosed in
its December 31, 1995 historical financial statements.
17
<PAGE> 23
"LIBERTY MEDIA GROUP"
Condensed Pro Forma Combined Financial Statements
June 30, 1996
(unaudited)
The following unaudited condensed pro forma combined balance sheet of
Liberty Media Group, dated as of June 30, 1996, assumes that the HSN
Transactions (see note 1) had occurred as of such date.
The following unaudited condensed pro forma combined statements of
operations of Liberty Media Group for the six months ended June 30, 1996 and
for the year ended December 31, 1995 assume that the HSN Transactions had
occurred as of January 1, 1995.
The unaudited pro forma results do not purport to be indicative of the
results of operations that would have been obtained if the HSN Transactions had
occurred as of January 1, 1995. These condensed pro forma combined financial
statements of Liberty Media Group should be read in conjunction with the
historical financial statements and the related notes thereto of Liberty Media
Group.
18
<PAGE> 24
"LIBERTY MEDIA GROUP"
Condensed Pro Forma Combined Balance Sheet
(unaudited)
<TABLE>
<CAPTION>
June 30, 1996
------------------------------------------------------------
Liberty Media Liberty Media
Group HSN Group
Historical Transactions (1) Pro forma
---------- ---------------- ---------
Assets amounts in thousands
<S> <C> <C> <C>
Cash, receivables and other
current assets $ 520,429 (144,107) 376,322
Investments in affiliates, Turner
Broadcasting System, Inc. and
other investments and related
receivables 1,302,764 293,518 1,580,304
(15,978)
Property and equipment, net of
accumulated depreciation 147,672 (132,782) 14,890
Intangibles, net of accumulated
amortization 352,766 (333,625) 19,141
Other assets, net of amortization 6,937 (3,233) 3,704
-------------- --------------- --------------
$ 2,330,568 (336,207) 1,994,361
============== =============== ==============
Liabilities and Combined Equity
Payables and accruals $ 224,490 (159,461) 65,029
Debt 122,359 (118,496) 3,863
Deferred tax liability 225,567 34,821 260,388
Other liabilities 6,932 -- 6,932
-------------- --------------- --------------
Total liabilities 579,348 (243,136) 336,212
-------------- --------------- --------------
Minority interests in equity of
consolidated subsidiaries 93,520 (91,396) 2,124
Combined equity:
Combined equity 1,354,954 -- 1,354,954
Due to TCI Group 5,429 (557) 4,872
Unrealized gains on available-for-
sale securities, net of taxes 297,317 (1,118) 296,199
-------------- --------------- --------------
1,657,700 (1,675) 1,656,025
-------------- --------------- --------------
$ 2,330,568 (336,207) 1,994,361
============== =============== ==============
</TABLE>
See accompanying notes to unaudited condensed pro forma combined financial
statements.
19
<PAGE> 25
"LIBERTY MEDIA GROUP"
Condensed Pro Forma Combined Statement of Operations
(unaudited)
<TABLE>
<CAPTION>
Six months ended June 30, 1996
---------------------------------------------------------
Liberty Media Liberty Media
Group HSN Group
Historical Transactions (1) Pro forma
---------- ---------------- ---------
amounts in thousands
<S> <C> <C> <C>
Revenue $ 742,349 (499,601) 242,748
Operating, cost of sales, selling,
general and administrative
expenses and compensation
relating to stock appreciation
rights (670,758) 470,530 (200,228)
Depreciation and amortization (31,927) 18,610 (13,317)
---------- -------- --------
Operating income 39,664 (10,461) 29,203
Interest expense (12,501) 6,336 (6,165)
Dividend and interest income 4,371 (938) 3,433
Share of earnings of affiliates, net 12,755 2,437 15,192
Minority interests in earnings of
consolidated subsidiaries (6,357) 4,217 (2,140)
Other, net (2,518) (4,369) (6,887)
---------- -------- --------
Earnings before income taxes 35,414 (2,778) 32,636
Income tax expense (16,584) 3,457 (13,127)
---------- -------- --------
Net earnings $ 18,830 679 19,509
========== ======== ========
Earnings per common share $ .11 .12 (2)
========== ========
</TABLE>
See accompanying notes to unaudited condensed pro forma combined financial
statements.
20
<PAGE> 26
"LIBERTY MEDIA GROUP"
Condensed Pro Forma Combined Statement of Operations
(unaudited)
<TABLE>
<CAPTION>
Year ended December 31, 1995
-------------------------------------------------------
Liberty Media Liberty Media
Group HSN Group
Historical Transactions (1) Pro forma
---------- ---------------- ---------
amounts in thousands
<S> <C> <C> <C>
Revenue $1,539,675 (1,018,625) 521,050
Operating, cost of sales, selling,
general and administrative
expenses, compensation
relating to stock
appreciation rights and
restructuring charges (1,552,770) 1,060,050 (492,720)
Depreciation and amortization (98,011) 43,249 (54,762)
------------ --------- --------
Operating loss (111,106) 84,674 (26,432)
Interest expense (19,315) 10,078 (9,237)
Dividend and interest income 11,552 (1,961) 9,591
Share of losses of affiliates, net (15,092) (23,535) (38,627)
Minority interests in losses of
consolidated subsidiaries 34,518 (36,573) (2,055)
Other, net (11,181) 6,810 (4,371)
------------ ------- --------
Loss before income taxes (110,624) 39,493 (71,131)
Income tax benefit 54,292 (27,414) 26,878
------------ ------- --------
Net loss $ (56,332) 12,079 (44,253)
============ ======= ==========
Loss per common share $ (.16) (.14)(3)
============ ==========
</TABLE>
See accompanying notes to unaudited condensed pro forma combined financial
statements.
21
<PAGE> 27
"LIBERTY MEDIA GROUP"
Notes to Condensed Pro Forma Combined Financial Statements
June 30, 1996
(unaudited)
(1) Liberty Media Group and Mr. Barry Diller and certain of their
respective affiliates entered into the August Agreement pursuant to
which the Option owned by Liberty Media Group to purchase 2 million
shares of the Class B common stock of Silver King (which shares would
constitute voting control of Silver King) together with $3.5 million
(representing the exercise price of the Option) would be contributed
to BDTV. BDTV would thereafter exercise the Option and hold the
shares of the Silver King Class B Common Stock purchased thereunder.
The FCC approval required for the exercise of the Option by BDTV was
received in June 1996, and the Option was exercised on August 13, 1996
and BDTV became the owner of the 2 million shares of Silver King Class
B Common Stock purchased thereunder. In connection with its approval
of the transfer of control of Silver King to Barry Diller resulting
from the exercise of the Option and the acquisition of the 2 million
shares of Silver King Class B Common Stock by BDTV thereby, the FCC
imposed a condition requiring prior FCC approval for any increases in
TCI's percentage equity interest in Silver King (including its indirect
interest through its ownership of non-voting securities of BDTV).
On August 25, 1996, Liberty HSN, Inc. (a wholly owned subsidiary of the
Liberty Media Group which holds the 17,566,702 shares of HSN Common
Stock and 20,000,000 shares of HSN Class B Common Stock beneficially
owned by the Liberty Media Group), HSN and Silver King entered into the
HSN Merger Agreement. The HSN Merger Agreement provides for the Merger
of a subsidiary of Silver King into HSN, in which each share of HSN
Common Stock would be converted into .45 share of Silver King Common
Stock and each share of HSN Class B Common Stock would be converted
into .54 share of Silver King Class B Common Stock. In order to avoid
exceeding the equity percentage limit set forth in the FCC approval,
however, Liberty Media Group agreed that it would retain an approximate
19.9% equity interest in HSN (as the surviving corporation in the
Merger) following the Merger (which equity interest would be composed
of all 17,566,702 shares of HSN Common Stock and 739,141 shares of HSN
Class B Common Stock which would be exchanged with the subsidiary of
Silver King being merged into HSN prior to the Merger) and that it
would accept a contingent right to receive 2,644,299 shares of Silver
King Class B Common Stock in lieu of the full number of shares of
Silver King Class B Common Stock it would be entitled to receive in the
Merger. As a result, in the Merger, Liberty Media Group would receive
7,756,564 shares of Silver King Class B Common Stock (which would be
contributed to BDTV II) and the contingent right to receive 2,644,299
shares of Silver King Class B Common Stock upon the Liberty Media Group
being entitled to own such shares under applicable FCC regulations on
or before the fifth anniversary of the Merger. In addition, the
739,141 shares of HSN Class B Common Stock and 17,566,702 shares of HSN
Common Stock exchanged by the Liberty Media Group for the stock of the
surviving corporation in the Merger would become exchangeable into
399,136 shares of Silver King Class B Common Stock and 7,905,015 shares
of Silver King Common Stock, respectively, upon the Liberty Media Group
becoming entitled to own such additional interest in Silver King in
accordance with applicable FCC regulations.
(continued)
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"LIBERTY MEDIA GROUP"
Notes to Condensed Pro Forma Combined Financial Statements
The HSN Merger is subject to the satisfaction of certain conditions,
including the receipt of all necessary regulatory consents and
approvals. If consummated, HSN would cease to be a subsidiary of
Liberty Media Group and therefore, the financial results of HSN would
not be consolidated with the financial results of Liberty Media Group.
Although Liberty Media Group would cease to possess voting control
over HSN, it would continue to have an indirect equity interest in the
business of HSN through its indirect ownership of the equity
securities of Silver King. No assurance can be given that the
transactions will be consummated.
(2) Reflects earnings per common share based upon 165.8 million weighted
average shares. Such amount represents Liberty Media Group's weighted
average shares, as disclosed in its June 30, 1996 historical financial
statements.
(3) Reflects loss per common share based upon 164.1 million weighted
average shares from August 11, 1995 through December 31, 1995. Such
amount represents Liberty Media Group's weighted average shares, as
disclosed in its December 31, 1995 historical financial statements.
23
