<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _____ to _____
Commission file number 0-20421
UNITED ARTISTS ENTERTAINMENT
EMPLOYEE STOCK OWNERSHIP PLAN
-----------------------------
(Full title of the Plan)
TELE-COMMUNICATIONS, INC.
----------------------------------------------------
(Issuer of the securities held pursuant to the Plan)
9197 S. Peoria
Englewood, Colorado 80112
-------------------------------------------
(Address of its principal executive office)
<PAGE> 2
REQUIRED INFORMATION
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Financial Statements:
---------------------
Independent Auditors' Report 1
Statements of Net Assets Available for Participant
Benefits - December 31, 1998 and 1997 2
Statement of Changes in Net Assets Available for
Participant Benefits - Years ended December 31, 1998 and 1997 3
Statement of Changes in Net Assets Available for
Participant Benefits - Year ended December 31, 1996 4
Notes to Financial Statements -
December 31, 1998, 1997 and 1996 5
Schedule 1 - Line 27a - Schedule of Assets Held for
Investment Purposes - December 31, 1998 11
Schedule 2 - Line 27d - Schedule of Reportable Transactions -
Year ended December 31, 1998 12
Exhibit -
---------
23-Consent of KPMG LLP
</TABLE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the members
of the Plan Committee have duly caused this annual report to be signed on its
behalf by the undersigned hereunto duly authorized.
UNITED ARTISTS ENTERTAINMENT
EMPLOYEE STOCK OWNERSHIP PLAN
(Name of Plan)
Date: June 30, 1999 By /s/Ann M. Koets
---------------------------------
Ann M. Koets
Plan Administrator
and Member of Plan Committee
<PAGE> 3
Independent Auditors' Report
The TCI Plan Administrative Committee
United Artists Entertainment
Employee Stock Ownership Plan:
We have audited the accompanying statements of net assets available for
participant benefits of the United Artists Entertainment Employee Stock
Ownership Plan as of December 31, 1998 and 1997, and the related statements of
changes in net assets available for participant benefits for each of the years
in the three-year period ended December 31, 1998. These financial statements are
the responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for participant benefits of the
United Artists Entertainment Employee Stock Ownership Plan as of December 31,
1998 and 1997, and the changes in net assets available for participant benefits
for each of the years in the three-year period ended December 31, 1998 in
conformity with generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets held
for investment purposes and reportable transactions are presented for the
purpose of additional analysis and are not a required part of the basic
financial statements but are supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. These supplemental
schedules are the responsibility of the Plan's management. The supplemental
schedules have been subjected to the auditing procedures applied in the audits
of the basic financial statements and, in our opinion, are fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
KPMG LLP
Denver, Colorado
June 23, 1999
1
<PAGE> 4
UNITED ARTISTS ENTERTAINMENT
EMPLOYEE STOCK OWNERSHIP PLAN
Statements of Net Assets Available
for Participant Benefits
December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
---------- ---------
amounts in thousands
<S> <C> <C>
Assets
- ------
Cash and cash equivalents $ 496 48
Investments, at market value (note 2):
Tele-Communications, Inc. ("TCI"):
Series A TCI Group Common Stock (887,000 and 974,000 shares,
with a cost of $9,369,000 and $10,281,000 at December 31,
1998 and 1997, respectively) 49,083 27,206
Series A Liberty Media Group Common Stock (547,000 and 601,000
shares, with a cost of $3,708,000 and $4,075,000 at December
31, 1998 and 1997, respectively) 25,191 14,525
Series A TCI Ventures Group Common Stock (146,000 and 163,000
shares with a cost of $770,000 and $860,000 at December 31,
1998 and 1997, respectively) 3,436 2,305
------- -------
77,710 44,036
Investment in TCI Satellite Entertainment, Inc. ("TSAT") Series A
Common Stock (33,000 and 78,000 shares, with a cost of $330,000
and $782,000 at December 31, 1998 and 1997, respectively) 47 534
Other (note 3) 620 781
------- -------
Liabilities
Net assets available for participant benefits, including $322,000 of
benefits payable to participants at December 31, 1998 (note 5) $78,873 45,399
======= =======
</TABLE>
See accompanying notes to financial statements.
2
<PAGE> 5
UNITED ARTISTS ENTERTAINMENT
EMPLOYEE STOCK OWNERSHIP PLAN
Statements of Changes in Net Assets Available
for Participant Benefits
Years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
-------- --------
amounts in thousands
<S> <C> <C>
Net investment income:
Net unrealized appreciation of investments (note 4) $ 40,338 22,635
Realized gains on securities transactions 1,554 107
Interest income 60 43
-------- --------
Total net investment income 41,952 22,785
Distributions to participants (8,478) (3,092)
-------- --------
Increase in net assets available for participant
benefits 33,474 19,693
Net assets available for participant benefits:
Beginning of year 45,399 25,706
-------- --------
End of year $ 78,873 45,399
======== ========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 6
UNITED ARTISTS ENTERTAINMENT
EMPLOYEE STOCK OWNERSHIP PLAN
Statement of Changes in Net Assets Available
for Participant Benefits
<TABLE>
<CAPTION>
Year ended December 31, 1996
-------------------------------------------
Income
Stock Accumulation
Fund Fund Total
--------- ------------ ----------
amounts in thousands
<S> <C> <C> <C>
Net investment income (loss):
Net unrealized depreciation of investments
(note 4) $ (6,715) -- (6,715)
Realized gains on securities transactions 138 -- 138
Interest income -- 55 55
-------- -------- --------
Total net investment income (loss) (6,577) 55 (6,522)
-------- -------- --------
Distributions to participants (2,406) -- (2,406)
Intrafund transfers 1,028 (1,028) --
-------- -------- --------
Decrease in net assets available for participant
benefits (7,955) (973) (8,928)
Net assets available for participant benefits:
Beginning of year 33,661 973 34,634
-------- -------- --------
End of year $ 25,706 -- 25,706
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 7
UNITED ARTISTS ENTERTAINMENT
EMPLOYEE STOCK OWNERSHIP PLAN
Notes to Financial Statements
December 31, 1998, 1997 and 1996
(1) Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statements of the United Artists
Entertainment Employee Stock Ownership Plan (the "Plan") have been
prepared on an accrual basis and present the net assets available for
participant benefits and the changes in those net assets.
Trust Fund Managed by US Bank ("Trustee")
The Trustee manages a trust fund on behalf of the Plan and has been
granted discretionary authority concerning purchases and sales of
investments. The Trustee may invest up to 100% of the assets of the
Stock Fund (as defined in note 2) in TCI's common stock or make other
investments as defined by the Plan.
Cash and Cash Equivalents
The Plan considers investments with initial maturities of three months
or less to be cash equivalents, which are recorded at cost which
approximates fair value.
Investments
Investments are reflected in the accompanying financial statements at
current market value. Current market value represents the closing
prices for those securities having readily available market quotations
and fair value as determined by the Trustee with respect to other
securities. The values used for the Tele-Communications, Inc. Series A
TCI Group Common Stock, par value $1.00 per share ("TCI Group Series A
Stock"), the Tele Communications, Inc. Series A Liberty Media Group
Common Stock, par value $1.00 per share ("Liberty Media Group Series A
Stock"), the Tele Communications, Inc. Series A TCI Ventures Group
Common Stock, par value $1.00 per share ("TCI Ventures Group Series A
Stock") and the TCI Satellite Entertainment, Inc. Series A Common
Stock, par value $1.00 per share ("TSAT Series A Stock") were $55.34,
$46.05, $23.53 and $1.42 per share, respectively, at December 31, 1998.
The market values used for the TCI Group Series A Stock, the Liberty
Media Group Series A Stock, the TCI Ventures Group Series A Stock and
the TSAT Series A Stock were $27.93, $24.17, $14.14 and $6.85 per
share, respectively, at December 31, 1997. The foregoing prices are the
closing market prices of the common stock on those dates. Securities
transactions are accounted for on the trade date. Distributions are
priced at current market value as of the last day of the calendar month
in which the event requiring distribution occurs.
On March 9, 1999, AT&T Corp. ("AT&T") acquired TCI in a merger (the
"AT&T Merger"), in which certain series of TCI common stock were
converted into certain series of AT&T common stock and TCI became a
subsidiary of AT&T. See note 2.
(continued)
5
<PAGE> 8
UNITED ARTISTS ENTERTAINMENT
EMPLOYEE STOCK OWNERSHIP PLAN
Notes to Financial Statements
Any appreciation (depreciation) and realized gains associated with the
stock held by the Plan during 1998, 1997 and 1996 were calculated based
on the weighted average cost basis of the shares on the applicable
date. See note 2.
Income Taxes
The Internal Revenue Service has determined and informed the Plan by a
letter dated November 15, 1996, that the Plan and related trust are
designed in accordance with applicable sections of the Internal Revenue
Code ("IRC"). The Plan has been amended since receiving the
determination letter. However, the Plan administrator and the Plan's
tax counsel believe that the Plan is designed and is currently being
operated in compliance with the applicable requirements of the IRC.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of additions
and deductions during the reporting period. Actual results could differ
significantly from those estimates.
Plan Expenses
Administrative expenses of the Plan are paid by TCI. Accordingly, such
expenses are not reflected in the accompanying financial statements.
(2) Description of Plan
On December 2, 1991, United Artists Entertainment Company ("UAE") and
TCI Communications, Inc. (formerly Tele-Communications, Inc. or "Old
TCI") consummated a merger (the "TCI/UAE Merger") pursuant to which UAE
became a wholly-owned subsidiary of Old TCI. Under the TCI/UAE Merger
agreement, outstanding shares of UAE's Class A and Class B common
stock, including such shares of stock held by the Plan, were converted
into Old TCI Class A common stock on the basis of 1.02 Old TCI Class A
shares for each share of either class of UAE's common stock. Employees
of UAE became employees of Old TCI and, as such, are entitled to
participate in Old TCI's benefit plan, if eligible. The Plan became
"inactive" as of the date of the TCI/UAE Merger and all participants
automatically became fully vested in all employer contributions.
Participant contributions were always fully vested.
(continued)
6
<PAGE> 9
UNITED ARTISTS ENTERTAINMENT
EMPLOYEE STOCK OWNERSHIP PLAN
Notes to Financial Statements
Until the plan became inactive, the participants had the choice to
invest their contributions in either the common stock of TCI ("Stock
Fund") or an "Income Accumulation Fund". Lump-sum payments received by
participants from other qualified plans could also be deposited into
the Plan as "rollover contributions". At December 31, 1998,
approximately 1,600 participants had balances in the plan.
There were no contributions or forfeitures (due to a participant's
termination prior to full vesting) during 1998, 1997 and 1996 as the
Plan was inactive. Vested benefits become distributable if a
participant dies, suffers total disability, retires, or terminates
employment for any other reason. Benefits are generally payable in a
single lump sum equal to the participant's vested benefits or, upon
participant termination, in not more than five annual installments if
the participant's vested benefits exceed $3,500. Benefits are paid in
cash or shares of TCI common stock at the participant's or
beneficiary's (as applicable) election.
The "Plan Committee" is responsible for the management and operation of
the Plan. The Plan provides for "hardship withdrawals" by participants
under certain circumstances, subject to approval by the Plan Committee.
On March 9, 1999, as a result of the AT&T Merger, (i) each share of TCI
Group Series A Stock was converted into 0.7757 of a share of AT&T
common stock (1.16355 shares as adjusted for an April 1999
three-for-two AT&T stock split), (ii) each share of Liberty Media Group
Series A Stock was converted into one share of a newly created class of
AT&T common stock (two shares as adjusted for a June 1999 two-for-one
stock split) designated as the Class A Liberty Media Group Common
Stock, par value $1.00 per share (the "AT&T Liberty Class A Tracking
Stock"), and (iii) each share of TCI Ventures Group Series A Stock was
converted into 0.52 of a share of AT&T Liberty Class A Tracking Stock
(1.04 shares as adjusted for a June 1999 two-for-one stock split).
Prior to the AT&T Merger, TCI's assets and operations were included in
three separate groups, each of which was tracked separately by public
equity securities. These groups were formerly known as the "Liberty
Media Group" (referred to herein as the "Old Liberty Group"), the "TCI
Ventures Group" and the "TCI Group."
Old Liberty Group was intended to reflect the separate performance of
TCI's assets which produce and distribute programming services.
The TCI Ventures Group was intended to reflect the separate performance
of TCI's principal international assets and businesses and
substantially all of TCI's non-cable and non-programming assets.
The TCI Group was intended to reflect the separate performance of TCI
and its subsidiaries and assets not attributed to Old Liberty Group or
TCI Ventures Group. Such subsidiaries and assets are comprised
primarily of TCI's domestic cable and communications business.
(continued)
7
<PAGE> 10
UNITED ARTISTS ENTERTAINMENT
EMPLOYEE STOCK OWNERSHIP PLAN
Notes to Financial Statements
The TCI Group was tracked separately through the TCI Group Series A
Stock and the Tele-Communications, Inc. Series B TCI Group Common Stock
(collectively, "TCI Group Stock"). The Old Liberty Group was tracked
through the Liberty Media Group Series A Stock and the
Tele-Communications, Inc. Series B Liberty Media Group Common Stock.
The TCI Ventures Group was tracked separately through the TCI Ventures
Group Series A Stock and the Tele-Communications, Inc. Series B TCI
Ventures Group Common Stock.
On December 4, 1996, all of the capital stock of TSAT ("TSAT Common
Stock") was distributed to holders of record of TCI Group Stock as of
the close of business on November 12, 1996 (the "Record Date").
Stockholders of record of TCI Group Stock on the Record Date received
one share of TSAT Common Stock for each ten shares of TCI Group Stock
owned of record at the close of business on the Record Date (the "TSAT
Distribution"). Fractional shares were not issued. Fractions of
one-half or greater of a share were rounded up and fractions of less
than one-half of a share were rounded down to the nearest whole number
of shares of TSAT Common Stock. As a result of the TSAT Distribution,
119,129 shares of TSAT Series A Stock were distributed to the Plan
during 1996. All shares of TSAT Series A Stock were liquidated
subsequent to December 31, 1998.
Effective July 1, 1999, the Plan is expected to be amended. See note 6.
(3) Other Investment
The investment contract held is fully benefit responsive and as such is
valued at contract value. Contract value represents prior year's
balance plus earnings, less participant withdrawals. Interest is
recognized on the accrual method. The Plan's other investment (at
contract value) at December 31 is shown below:
<TABLE>
<CAPTION>
Description 1998 1997
----------- -------- -------
amounts in thousands
<S> <C> <C>
Prudential Insurance
Company of America
Retirement Annuity $ 620 781
======== =======
</TABLE>
The contract value of the above investment approximates its fair value
at December 31, 1998 and 1997. Such investment was liquidated
subsequent to December 31, 1998. See note 6.
(continued)
8
<PAGE> 11
UNITED ARTISTS ENTERTAINMENT
EMPLOYEE STOCK OWNERSHIP PLAN
Notes to Financial Statements
(4) Change in Unrealized Appreciation (Depreciation)
Unrealized appreciation (depreciation) of investments for the years
ended December 31, 1998, 1997 and 1996, is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ---------- ----------
amounts in thousands
<S> <C> <C> <C>
End of year $ 63,580 28,572 6,801
Change in unrealized appreciation due to
distributions 5,330 864 673
Less beginning of year (28,572) (6,801) (14,189)
----------- ---------- ----------
Net unrealized appreciation (depreciation) of
investments $ 40,338 22,635 (6,715)
=========== ========== ==========
</TABLE>
(5) Reconciliation to Form 5500
The following represents a reconciliation between the Statement of Net
Assets Available for Participant Benefits included in the accompanying
financial statements and the Form 5500 at December 31, 1998 (amounts in
thousands):
<TABLE>
<S> <C>
Net Assets Available for Participant Benefits - financial
statements - December 31, 1998 $ 78,873
Benefits payable to participants (322)
-------------
Net Assets Available for Participant Benefits - Form 5500 -
December 31, 1998 $ 78,551
=============
</TABLE>
(6) Subsequent Event - Plan Changes
Effective July 1, 1999, the Plan is expected to be amended, and all
employee balances will be merged into the amended TCI 401(k) Plan, to
be renamed the AT&T Long Term Savings Plan ("LTSP"). As amended,
employees who have completed three consecutive months of employment are
expected to be eligible to participate in the LTSP. As of the effective
date, the LTSP is expected to have eleven investment options including
three custom funds, which will only be available to LTSP participants:
a fixed income fund, an equity fund and an international securities
fund; three mutual funds: a money market mutual fund, a growth and
income mutual fund and a growth mutual fund; three investment
strategies which will be portfolios managed by independent investment
managers, selected and closely reviewed by AT&T: a conservative
investment strategy, a moderate investment strategy, and an aggressive
investment strategy; an AT&T stock fund, and an AT&T Liberty stock
fund. As amended, LTSP participants may change investment options and
contribution percentages on a daily basis. Distributions are expected
to be processed on a daily basis.
(continued)
9
<PAGE> 12
UNITED ARTISTS ENTERTAINMENT
EMPLOYEE STOCK OWNERSHIP PLAN
Notes to Financial Statements
The LTSP is expected to allow participants to borrow up to 50% of their
expected vested account balance or $50,000, whichever is lower. The
minimum loan amount is expected to be $1,000, and the interest rate
will be set as the prime rate, as of the last business day of the month
prior to the month of the loan request.
10
<PAGE> 13
Schedule 1
UNITED ARTISTS ENTERTAINMENT
EMPLOYEE STOCK OWNERSHIP PLAN
Line 27a - Schedule of Assets Held for Investment Purposes
December 31, 1998
(amounts in thousands)
<TABLE>
<CAPTION>
(b) (c) (d) (e)
Description of investment Current
Identity of issuer including par value Cost value
------------------ -------------------------- -------- -------
<S> <C> <C> <C>
* Tele-Communications, Series A TCI Group
Inc. Common Stock, par value
$1.00 per share $ 9,369 49,083
* Tele-Communications, Series A Liberty Media
Inc. Group Common Stock,
par value $1.00 per share $ 3,708 25,191
* Tele-Communications, Inc. Series A TCI Ventures Group Common
Stock, par value $1.00 per share $ 770 3,436
TCI Satellite Entertainment, Inc. Series A TSAT Common Stock, par
value $1.00 per share $ 330 47
Prudential Insurance Retirement annuity
Company of America contract $ 620 620
</TABLE>
*Denotes party in interest
See accompanying independent auditors' report.
11
<PAGE> 14
Schedule 2
UNITED ARTISTS ENTERTAINMENT
EMPLOYEE STOCK OWNERSHIP PLAN
Line 27d - Schedule of Reportable Transactions
Year ended December 31, 1998
(amounts in thousands)
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e) (f) (g)
Expense
Identity of party Description of Purchase incurred with Cost of
involved asset price Selling price Lease rental transaction asset
----------------- --------------- ---------- ------------- ------------- ------------- -------
<S> <C> <C> <C> <C> <C> <C>
First American Prime Prime Money
Obligation Fund Market fund $ 2,523 -- -- -- 2,523
First American Prime Prime Money
Obligation Fund Market fund $ -- 2,077 -- -- 2,077
<CAPTION>
(a) (h) (i)
Current value of
asset on
Identity of party transaction Net gain
involved date or (loss)
----------------- ---------------- ---------
<S> <C> <C>
First American Prime
Obligation Fund 2,523 --
First American Prime
Obligation Fund 2,077 --
</TABLE>
See accompanying independent auditors' report.
12
<PAGE> 15
EXHIBIT INDEX
Shown below is the exhibit which is filed as a part of this Report -
23 - Consent of KPMG LLP
13
<PAGE> 1
Exhibit 23
Consent of Independent Auditors
The Plan Committee
United Artists Entertainment
Employee Stock Ownership Plan:
We consent to incorporation by reference in the registration statement (No.
33-44543) on Form S-8 of the United Artists Entertainment Employee Stock
Ownership Plan of our report dated June 23, 1999, relating to the statements of
net assets available for participant benefits of the United Artists
Entertainment Employee Stock Ownership Plan as of December 31, 1998 and 1997,
and the related statements of changes in net assets available for participant
benefits for each of the years in the three-year period ended December 31, 1998,
and the related schedules, which report appears in the December 31, 1998 Annual
Report on Form 11-K of the United Artists Entertainment Employee Stock Ownership
Plan.
KPMG LLP
Denver, Colorado
June 29, 1999