<PAGE>
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: December 17, 1996
Date of Earliest Event Reported: December 4, 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>
Item 5. Other Events.
- ------- -------------
On December 4, 1996, Tele-Communications, Inc.
("TCI") distributed (the "Distribution") 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 was a Delaware corporation and
a direct wholly-owned subsidiary of TCI. The
Distribution was effected as a tax-free dividend to,
and did not involve the payment of any consideration
by, the holders of TCI Group Common Stock. Prior to
the Distribution, TCI caused 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.
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,
September 30, 1996 (unaudited)
Condensed Pro Forma Combined Statement of Operations,
Nine months ended September 30, 1996 (unaudited)
Condensed Pro Forma Combined Statement of Operations,
Year ended December 31, 1995 (unaudited)
Notes to Condensed Pro Forma Combined Financial
Statements, September 30, 1996 (unaudited)
"TCI Group"
Condensed Pro Forma Combined Balance Sheet,
September 30, 1996 (unaudited)
Condensed Pro Forma Combined Statement of Operations,
Nine months ended September 30, 1996 (unaudited)
Condensed Pro Forma Combined Statement of Operations,
Year ended December 31, 1995 (unaudited)
Notes to Condensed Pro Forma Combined Financial
Statements, September 30, 1996 (unaudited)
(c) Exhibits
--------
None.
<PAGE>
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: December 17, 1996
TELE-COMMUNICATIONS, INC.
(Registrant)
By:/s/ Stephen M. Brett
--------------------------
Stephen M. Brett
Executive Vice President
<PAGE>
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Pro Forma Combined Financial Statements
September 30, 1996
(unaudited)
The following unaudited condensed pro forma combined balance
sheet of TCI, dated as of September 30, 1996, assumes that the
Distribution (see note 1) had occurred as of such date.
The following unaudited condensed pro forma combined
statement of operations of TCI for the nine months ended
September 30, 1996 assumes that the Distribution and the
acquisition by TCI of all the common stock of a subsidiary of
Viacom, Inc. ("VII Cable") (the "VII Cable Acquisition") (see
note 2), 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 Distribution, the VII Cable Acquisition,
and the acquisition of a 51% ownership interest in Cablevision
S.A. and certain affiliated companies (collectively
"Cablevision") (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 Distribution, the VII Cable Acquisition 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>
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Pro Forma Combined Balance Sheet
(unaudited)
<TABLE>
<CAPTION>
September 30, 1996
---------------------------------------
TCI Satellite TCI
Historical Distribution (1) Pro forma
---------- ---------------- ---------
amounts in millions
<S> <C> <C> <C>
Assets
Cash, receivables and other
current assets $ 1,264 (24) 1,240
Note receivable from Satellite -- 250 250
Investment in affiliates and
Turner Broadcasting System,
Inc., and related receivables 3,736 (30) 3,706
Property and equipment, net of
accumulated depreciation 8,767 (1,136) 7,631
Franchise costs, intangibles
and other assets, net of
amortization 16,808 -- 16,808
-------- ------- --------
$ 30,575 (940) 29,635
======== ======= ========
Liabilities and Stockholders'
Equity
Payables and accruals $ 1,942 (460) 1,482
Debt 15,118 -- 15,118
Deferred income taxes 5,731 (23) 5,708
Other liabilities 183 -- 183
-------- ------- --------
Total liabilities 22,974 (483) 22,491
-------- ------- --------
Minority interests 1,585 -- 1,585
Redeemable preferred stock 654 -- 654
Company-obligated mandatorily
redeemable preferred
securities of subsidiary
trusts holding solely
subordinated debt securities
of TCIC 1,000 -- 1,000
Stockholders' equity:
Preferred Stock -- -- --
TCI Group Series A common
stock 685 -- 685
TCI Group Series B common
stock 85 -- 85
Liberty Media Group Series A
common stock 146 -- 146
Liberty Media Group Series B
common stock 21 -- 21
Additional paid-in capital 4,308 (457) 3,851
Cumulative foreign currency
translation adjustment (12) -- (12)
Unrealized holding gains for
available-for-sale securities 335 -- 335
Accumulated deficit (892) -- (892)
Treasury stock (314) -- (314)
-------- ------- --------
4,362 (457) 3,905
-------- ------- --------
$ 30,575 (940) 29,635
======== ======= ========
</TABLE>
See accompanying notes to unaudited condensed pro forma combined
financial statements.
2
<PAGE>
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Pro Forma Combined Statement of Operations
(unaudited)
<TABLE>
<CAPTION>
Nine months ended September 30, 1996
TCI Satellite VII Cable Pro forma TCI
Historical Distribution (1) Historical (2) adjustments(2) Pro forma
---------- ---------------- -------------- -------------- ---------
amounts in millions
<S> <C> <C> <C> <C> <C>
Revenue $ 6,089 (300) 293 (1)(4) 6,081
Operating, cost of sales,
selling, general and
administrative expenses,
compensation relating to
stock appreciation rights (4,367) 294 (189) -- (4,262)
Depreciation and
amortization (1,150) 87 (52) (14)(5) (1,129)
------ ---- ---- ---- ------
Operating income 572 81 52 (15) 690
Interest expense (803) -- (31) (46)(9) (880)
Interest and dividend income 42 19 2 -- 63
Share of losses of
affiliates, net (308) 1 -- -- (307)
Other income (expense), net (101) -- 1 (18)(10) (118)
----- ---- ---- ---- ----
Earnings (loss) before
income taxes (598) 101 24 (79) (552)
Income tax benefit (expense) 160 (31) (13) 12(11) 128
----- ---- ---- ---- ----
Net earnings (loss) (438) 70 11 (67) (424)
Dividend requirement on
redeemable preferred
stocks (27) -- -- -- (27)
----- ---- ---- ---- ---
Net earnings (loss)
attributable to common
stockholders $(465) 70 11 (67) (451)
===== ==== ==== ==== ====
Primary earnings (loss)
attributable to common
stockholders per common
and common equivalent
share:
TCI Group Series A and
Series B common stock $(.75) (.73)(12)
===== ====
Liberty Media Group
Series A and Series B
common stock $ .22 .22
===== ===
</TABLE>
See accompanying notes to unaudited condensed pro forma combined financial
statements.
3
<PAGE>
<TABLE>
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Pro Forma Combined Statement of Operations
(unaudited)
<CAPTION>
Year ended December 31, 1995
----------------------------------------------------------------------------------------------
TCI Satellite VII Cable Cablevision Pro forma TCI
Historical Distribution (1) Historical (2) Historical (3) adjustments(2)(3) Pro forma
---------- --------------- ------------- ------------- ---------------- ---------
amounts in millions
<S> <C> <C> <C> <C> <C> <C>
Revenue $6,851 (209) 442 52 (2) (4) 7,134
Operating, cost of sales,
selling, general and
administrative expenses,
compensation relating to
stock appreciation rights (4,937) 214 (279) (34) -- (5,036)
and restructuring charges
Depreciation and
amortization (1,372) 56 (82) ( 2) (45) (5) (l,445)
------ ---- ---- ---- ---- ------
Operating income (loss) 542 61 81 16 (47) 653
Interest expense (1,010) -- (48) -- (3) (6) (1,154)
(4) (7)
(5) (8)
(84) (9)
Interest and dividend income 52 25 -- -- -- 77
Share of earnings (losses)
of affiliates, net (193) 9 -- -- -- (184)
Gains 337 -- -- -- -- 337
Other income (expense), net (19) -- 34 -- (27) (4) (43)
(31) (10)
----- ---- ---- ---- ---- ----
Earnings (loss) before
income taxes (291) 95 67 16 (201) (314)
Income tax benefit (expense) 120 (32) (33) (5) 52 (11)(4) 102
----- ---- ---- ---- ---- ----
Net earnings (loss) (171) 63 34 11 (149) (212)
Dividend requirement on
redeemable preferred stocks (34) -- -- -- -- (34)
----- ---- ---- ---- ---- ----
Net earnings (loss)
attributable to common
stockholders $(205) 63 34 11 (149) (246)
====== ==== ==== ==== ==== ====
Loss attributable to common
stockholders per common
share:
TCI Class A and Class B
common stock $(.11) (.15)(13)
TCI Group Series A and
Series B common stock $(.16) (.16)(13)
Liberty Media Group Series
A and Series B common $(.16) (.16)
stock
</TABLE>
See accompanying notes to unaudited condensed pro forma combined financial
statements.
4
<PAGE>
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Condensed Pro Forma Combined Financial Statements
September 30, 1996
(unaudited)
(1) On December 4, 1996, TCI completed 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 was a Delaware
corporation and a direct wholly-owned subsidiary of TCI.
The Distribution was effected as a tax-free dividend to, and
did not involve the payment of any consideration by, the
holders of TCI Group common stock. Prior to the
Distribution, TCI caused 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 the date of the Distribution, Satellite issued to TCI
Communications, Inc. ("TCIC"), a subsidiary of TCI, 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 was assumed by TCI on 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.
(2) On July 31, 1996, pursuant to certain agreements entered
into among 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.
(continued)
5
<PAGE>
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Condensed Pro Forma Combined Financial Statements
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 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.
(3) 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.
(4) Reflects the conveyance to New Viacom Sub of certain
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)
6
<PAGE>
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Condensed Pro Forma Combined Financial Statements
(5) 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. The valuations and other studies which will
provide the basis of the allocation of the cost to acquire
VII Cable have not yet been completed and, consequently, the
purchase accounting adjustments made in connection with the
development of the unaudited condensed pro forma combined
financial statements are preliminary.
(6) 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.
(7) 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.
(8) 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.
(9) 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 7.50% and 7.78% for the nine months ended
September 30, 1996 and for the year ended December 31, 1995,
respectively, based upon historical interest rates adjusted
for anticipated terms of the Loan Facility.
(10) Reflects a 5.0% cumulative annual dividend on the $626
million of VII Cable Exchangeable Preferred Stock included
in minority share of losses of consolidated subsidiaries.
(11) 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.
(12) Reflects loss per common share based upon 665.0 million
weighted average shares of TCI Group at September 30, 1996.
Such amount represents the weighted average shares disclosed
in TCI's historical financial statements.
(13) Reflects loss per common share based upon 648.2 million
weighted average shares and 656.4 million weighted average
shares of Tele-Communications, Inc. from January 1, 1995
through August 10, 1995 and TCI 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.
7
<PAGE>
"TCI Group"
Condensed Pro Forma Combined Financial Statements
September 30, 1996
(unaudited)
The following unaudited condensed pro forma combined balance
sheet of TCI Group, dated as of September 30, 1996, assumes that
the Distribution (see note 1) and the VII Cable Acquisition (see
note 2) had occurred as of such date.
The following unaudited condensed pro forma combined
statement of operations of TCI Group for the nine months ended
September 30, 1996 assumes that the Distribution and the VII
Cable Acquisition 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 Distribution, the VII Cable Acquisition
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 Distribution, the VII Cable Acquisition, 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.
8
<PAGE>
<TABLE>
"TCI GROUP"
Condensed Pro Forma Combined Balance Sheet
(unaudited)
<CAPTION>
September 30, 1996
------------------------------------------
TCI Group Satellite TCI Group
Historical Distribution (1) Pro forma
---------- ---------------- ---------
Assets amounts in millions
- ------
Cash, receivables and other
<S> <C> <C> <C>
current assets $ 695 (24) 671
Note receivable from Satellite -- 250 250
Investment in affiliates and
related receivables 2,481 (30) 2,451
Property and equipment, net of
accumulated depreciation 8,621 (1,136) 7,485
Franchise costs, intangibles and
other assets, net of
amortization 16,363 -- 16,363
------ ------ ------
$28,160 (940) 27,220
====== ====== ======
Liabilities and Stockholders'Equity
- -----------------------------------
Payables and accruals $1,720 (460) 1,260
Debt 15,014 -- 15,014
Deferred income taxes 5,488 (23) 5,465
Other liabilities 176 -- 176
------ ------ ------
Total liabilities 22,398 (483) 21,915
------ ------ ------
Minority interests 1,447 -- 1,447
Redeemable preferred stock 654 -- 654
Company-obligated mandatorily
redeemable preferred securities
of subsidiary trusts holding
solely subordinated debt
securities of TCIC 1,000 -- 1,000
Stockholders' equity:
Combined equity 2,666 (457) 2,209
Cumulative foreign currency
translation adjustment (12) -- (12)
Unrealized holding gains for
available-for-sale securities 26 -- 26
Due from Liberty Media Group (19) -- (19)
----- ---- -----
2,661 (457) 2,204
----- ---- -----
$28,160 (940) 27,220
======= ===== ========
</TABLE>
See accompanying notes to unaudited condensed pro forma combined
financial statements.
9
<PAGE>
<TABLE>
"TCI GROUP"
Condensed Pro Forma Combined Statement of Operations
(unaudited)
<CAPTION>
Nine months ended September 30, 1996
-------------------------------------------------------------------------
TCI Group Satellite VII Cable Pro forma TCI Group
Historical Distribution(1) Historical (2) adjustments(2) Pro forma
---------- --------------- -------------- -------------- ---------
amounts in millions
<S> <C> <C> <C> <C> <C>
Revenue $5,120 (300) 293 (1)(4) 5,112
Operating, selling,
general and administrative
expenses and compensation
relating to stock appreciation
rights (3,503) 294 (189) -- (3,398)
Depreciation and amortization (1,107) 87 (52) (14)(5) (1,086)
------- ---- ---- ---- ------
Operating income 510 81 52 (15) 628
Interest expense (788) -- (31) (46)(9) (865)
Interest and dividend income 30 19 2 -- 51
Share of losses of affiliates, net (319) 1 -- -- (318)
Other income (expense), net (96) -- 1 (18)(10) (113)
----- ---- ---- ---- ----
Earnings (loss) before income
taxes (663) 101 24 (79) (617)
Income tax benefit (expense) 189 (31) (13) 12 (11) 157
----- ---- ---- ---- ----
Net earnings (loss) (474) 70 11 (67) (460)
Dividend requirement on redeemable
preferred stocks (27) -- -- -- (27)
----- ---- ---- ---- ----
Net earnings (loss) attributable
to common stockholders $ (501) 70 11 (67) (487)
======= ==== ===== ==== ====
Loss attributable to common
stockholders per common share $ (.75) (.73)(12)
====== ====
</TABLE>
See accompanying notes to unaudited condensed pro forma combined financial
statements.
10
<PAGE>
<TABLE>
"TCI GROUP"
Condensed Pro Forma Combined Statement of Operations
(unaudited)
<CAPTION>
Year ended December 31, 1995
---------------------------------------------------------------------------------------------
TCI Group Satellite VII Cable Cablevision Pro forma TCI Group
Historical Distribution (1) Historical (2) Historical (3) adjustments(2)(3) Pro forma
amount in millions
<S> <C> <C> <C> <C> <C> <C>
Revenue $5,384 (209) 442 52 (2) (4) 5,667
Operating, selling, general and
administrative expenses and
compensation relating to stock
appreciation rights (3,457) 214 (279) (34) -- (3,556)
Depreciation and amortization (1,274) 56 (82) (2) (45) (5) (1,347)
------ ---- ----- ---- ---- -----
Operating income 653 61 81 16 (47) 764
Interest expense (993) -- (48) -- (3) (6) (1,137)
(4) (7)
(5) (8)
(84)(9)
Interest and dividend income 43 25 -- -- -- 68
Share of losses of affiliates, net (178) 9 -- -- -- (169)
Gains 339 -- -- -- -- 339
Other income (expense), ne t (45) -- 34 -- (27) (4) (69)
(31) (10)
----- ---- ---- ---- ---- ----
Earnings (loss) before income
taxes (181) 95 67 16 (201) (204)
Income tax benefit (expense) 66 (32) (33) (5) 52 (11)(4) 48
------ ---- ---- ---- ---- ----
Earnings (loss) before losses of
Liberty Media Group (115) 63 34 11 (149) (156)
Losses of Liberty Media Group (29) -- -- -- -- (29)
------ ---- ---- ---- ---- ----
Net earnings (loss) (144) 63 34 11 (149) (185)
Dividend requirement on redeemable
preferred stocks (34) -- -- -- -- (34)
------ ---- ---- ---- ---- ----
Net earnings (loss) attributable
to common stockholders $(178) 63 34 11 (149) (219)
====== ==== ==== ==== ==== ====
Loss attributable to common
stockholders per common share $ (.16) (.16)(13)
</TABLE>
See accompanying notes to unaudited condensed pro forma combined financial
statements.
11
<PAGE>
"TCI GROUP"
Notes to Condensed Pro Forma Combined Financial Statements
September 30, 1996
(unaudited)
(1) On December 4, 1996, TCI completed 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 was a Delaware
corporation and a direct wholly-owned subsidiary of TCI.
The Distribution was effected as a tax-free dividend to, and
did not involve the payment of any consideration by, the
holders of TCI Group common stock. Prior to the
Distribution, TCI caused 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 the date of the Distribution, Satellite issued 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 was assumed by TCI on 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.
(2) 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.
(continued)
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"TCI GROUP"
Notes to Condensed Pro Forma Combined Financial Statements
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.
(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 conveyance to New Viacom Sub of certain
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.
(5) 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. The valuations and other studies which will
provide the basis of the allocation of the cost to acquire
VII Cable have not yet been completed and, consequently, the
purchase accounting adjustments made in connection with the
development of the unaudited condensed pro forma combined
financial statements are preliminary.
(6) 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.
(7) 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.
(8) 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)
13
<PAGE>
"TCI GROUP"
Notes to Condensed Pro Forma Combined Financial Statements
(9) 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 7.50% and 7.78% for the nine months ended
September 30, 1996 and for the year ended December 31, 1995,
respectively, based upon historical interest rates adjusted
for anticipated terms of the Loan Facility.
(10) Reflects a 5.0% cumulative annual dividend on the $626
million of VII Cable Exchangeable Preferred Stock included
in minority share of losses of consolidated subsidiaries.
(11) 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.
(12) Reflects loss per common share based upon 665.0 million
weighted average shares. Such amount represents TCI Group's
weighted average shares, as disclosed in its September 30,
1996 historical financial statements.
(13) 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.
14
