<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: August 26, 1994
Date of Earliest Event Reported: August 8, 1994
TELE-COMMUNICATIONS, INC.
AND
TCI COMMUNICATIONS, INC.
(Exact name of Registrants as specified in their charters)
State of Delaware
(State or other jurisdiction of incorporation)
0-20421 and 0-5550 84-1260157 and 84-0588868
(Commission File Numbers) (I.R.S. Employer Identification Nos.)
5619 DTC Parkway
Englewood, Colorado 80111
(Address of principal executive offices) (Zip Code)
Registrants' telephone number, including area code: (303) 267-5500
<PAGE> 2
ITEM 5. OTHER EVENTS.
As of August 8, 1994, Tele-Communications, Inc. (formerly TCI/Liberty
Holding Company or "TCI"), TCI Communications, Inc. ("TCIC") (formerly
Tele-Communications, Inc. or "Old TCI") and TeleCable Corporation ("TeleCable")
entered into a definitive merger agreement, whereby TeleCable will be merged
into TCIC, a wholly-owned subsidiary of TCI (the "TeleCable Merger"). The
aggregate $1.6 billion purchase price will be satisfied by TCIC's assumption of
approximately $300 million of TeleCable's net liabilities and the issuance to
TeleCable's shareholders of shares of TCI Class A common stock (currently
estimated to be approximately 42 million shares) and 1 million shares of TCI
Convertible Preferred Stock, Series D with an aggregate initial liquidation
value of $300 million. Such preferred stock, which will accrue dividends at a
rate of 5.5% per annum, will be convertible into 10 million shares of TCI Class
A common stock and will be redeemable by TCI after five years. Although the
amount of net liabilities to be assumed by TCIC and the number of TCI Class A
common shares to be issued to TeleCable's shareholders are subject to closing
adjustments, management does not believe that any such adjustments will be
material. The merger agreement requires the approval of TeleCable's
shareholders and various franchise and government authorities.
At June 30, 1994, TeleCable operated approximately 13,500 miles of
cable distribution systems that served approximately 740,000 basic subscribers
in 15 states. Historical and pro forma financial information reflecting the
TeleCable Merger is included herein under Item 7 of this Report.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements
TeleCable Corporation,
Six months ended June 30, 1994:
Condensed Consolidated Statement of Income,
Six months ended June 30, 1994 and 1993 (unaudited)
Condensed Consolidated Balance Sheet,
June 30, 1994 and December 31, 1993 (unaudited)
Condensed Consolidated Statement of Stockholders' Deficit,
Six months ended June 30, 1994 (unaudited)
Consolidated Statement of Cash Flows,
Six months ended June 30, 1994 and 1993 (unaudited)
Notes to Condensed Consolidated Financial Statements,
Six months ended June 30, 1994 (unaudited)
Years ended December 31, 1993 and 1992:
Report of Independent Accountants
Consolidated Statement of Income and Retained Earnings,
Years ended December 31, 1993 and 1992
Consolidated Balance Sheet,
December 31, 1993 and 1992
Consolidated Statement of Cash Flows,
Years ended December 31, 1993 and 1992
Notes to Consolidated Financial Statements,
December 31, 1993
(continued)
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS (CONTINUED).
(b) Pro Forma Financial Information
TCI Communications, Inc. and Subsidiaries:
Condensed Pro Forma Combined Balance Sheet,
June 30, 1994 (unaudited)
Condensed Pro Forma Combined Statement of Operations,
Six months ended June 30, 1994 (unaudited)
Condensed Pro Forma Combined Statement of Operations,
Year ended December 31, 1993 (unaudited)
Notes to Condensed Pro Forma Combined Financial Statements,
June 30, 1994 (unaudited)
Liberty Media Corporation and Subsidiaries:
Condensed Pro Forma Balance Sheet,
June 30, 1994 (unaudited)
Condensed Pro Forma Statement of Operations,
Six months ended June 30, 1994 (unaudited)
Condensed Pro Forma Combined Statement of Operations,
Year ended December 31, 1993 (unaudited)
Notes to Condensed Pro Forma Financial Statements,
June 30, 1994 (unaudited)
Tele-Communications, Inc. and Subsidiaries:
Condensed Pro Forma Combined Balance Sheet,
June 30, 1994 (unaudited)
Condensed Pro Forma Combined Statement of Operations,
Six months ended June 30, 1994 (unaudited)
Condensed Pro Forma Combined Statement of Operations,
Year ended December 31, 1993 (unaudited)
Notes to Condensed Pro Forma Combined Financial Statements,
June 30, 1994 (unaudited)
(c) Exhibits
(2) Agreement and Plan of Merger, dated as of August 8, 1994,
among Tele-Communications, Inc., TCI Communications, Inc. and
TeleCable Corporation*
Incorporated herein by reference to Tele-Communications,
Inc.'s Current Report on Form 8-K dated August 18, 1994
(Commission File No. 0-20421)
(23) Consent of Price Waterhouse LLP
_________________________
* The Agreement and Plan of Merger contains indices identifying the
items, including exhibits and schedules, annexed thereto. A copy
of any omitted item will be furnished supplementally to the
Commission upon request.
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrants have duly caused this report to be signed on their behalf by
the undersigned hereunto duly authorized.
Date: August 26, 1994
TELE-COMMUNICATIONS, INC.
(Registrant)
By:/s/ Stephen M. Brett
------------------------------------
Stephen M. Brett
Executive Vice President
and Secretary
TCI COMMUNICATIONS, INC.
(Registrant)
By:/s/ Stephen M. Brett
------------------------------------
Stephen M. Brett
Senior Vice President and
General Counsel
<PAGE> 5
TeleCable Corporation and Subsidiaries
Condensed Consolidated Statement of Income
Six Months Ended June 30, 1994 and 1993
(Dollar Amounts In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Operating revenues $146,441 $142,320
Operating expenses (82,100) (79,359)
Depreciation and amortization (22,801) (22,832)
-------- --------
Operating income 41,540 40,129
Interest income 326 298
Gain on sale of investments 68 1,870
Interest expense (11,429) (12,096)
Other expense, net (222) (224)
Minority interest in earnings of
consolidated subsidiaries (174) (174)
-------- --------
Income before taxes 30,109 29,803
Income tax expense (11,595) (11,217)
-------- --------
Net income $ 18,514 $ 18,586
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements
<PAGE> 6
TeleCable Corporation and Subsidiaries
Condensed Consolidated Balance Sheet
(Dollar Amounts In Thousands)
(Unaudited)
Assets
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
---- ----
<S> <C> <C>
Cash and cash equivalents $ 3,991 $ 5,509
Trade and other receivables 12,148 10,766
Less allowance for doubtful receivables 1,162 1,127
-------- --------
10,986 9,639
-------- --------
Inventories, net 985 887
Prepaid expenses 2,108 1,720
Income taxes receivable 652 -
Investments and other assets 19,930 13,324
Property, plant and equipment - at cost
Distribution plant and
other equipment 550,710 512,610
Land, buildings, and improvement 20,420 19,944
Vehicles 11,274 10,909
-------- --------
582,404 543,463
Less - accumulated depreciation 333,267 311,639
-------- --------
249,137 231,824
-------- --------
Cable television franchises 20,818 20,673
less accumulated amortization 14,221 13,423
-------- --------
6,597 7,250
-------- --------
Purchased goodwill 19,235 19,235
less accumulated amortization 6,806 6,576
-------- --------
12,429 12,659
-------- --------
Other intangibles 5,682 5,493
less accumulated depreciation 4,967 4,822
-------- --------
715 671
-------- --------
Total assets $307,530 $283,483
======== ========
</TABLE>
(Continued)
<PAGE> 7
TeleCable Corporation and Subsidiaries
Condensed Consolidated Balance Sheet, continued
(Dollar Amounts In Thousands)
(Unaudited)
Liabilities and Stockholders' Deficit
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
---- ----
<S> <C> <C>
Accounts payable - trade $ 3,900 $ 4,352
Accrued liabilities
Payroll and related expenses 2,463 3,979
Interest 4,025 3,825
Franchise taxes 3,422 4,353
Program services 4,940 3,917
Other 7,304 7,261
-------- --------
22,154 23,335
-------- --------
Deferred income 682 -
Income taxes payable - 1,666
Dividends payable 2,172 2,172
Debt 285,107 278,372
Deferred income taxes 47,308 45,163
Other liabilities 5,248 5,406
-------- --------
Total liabilities 366,571 360,466
Minority interest in
consolidated subsidiaries 2,518 2,344
Stockholders' deficit
Common stock
Class A 291 291
Class B 6,950 6,950
Capital deficit (262,410) (262,410)
Notes receivable - executive
stock purchase plan (3,346) (3,479)
Net unrealized gain on securities
available for sale 3,465 -
Retained earnings 193,491 179,321
-------- --------
(61,559) (79,327)
-------- --------
Liabilities and stockholders' deficit $307,530 $283,483
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements
<PAGE> 8
TeleCable Corporation and Subsidiaries
Condensed Consolidated Statement of Stockholders' Deficit
Six Months Ended June 30, 1994
(Dollar Amounts In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Net
Notes unrealized
Common stock receivable gain on Total
------------ executive securities stock-
Class Class Capital stock Retained available holders'
A B deficit plans earnings for sale deficit
----- ----- ------- ----- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1993 $291 6,950 (262,410) (3,479) 179,321 - (79,327)
Net income 18,514 18,514
Dividends declared (4,344) (4,344)
Payments on executive 133 133
stock notes
Change in net
unrealized gain on securities
available for sale 3,465 3,465
---- ----- -------- ------ ------- ----- --------
Balance at
June 30, 1994 $291 6,950 (262,410) (3,346) 193,491 3,465 $(61,559)
==== ===== ======== ====== ======= ===== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements
<PAGE> 9
TeleCable Corporation and Subsidiaries
Condensed Consolidated Statement of Cash Flows
Six Months Ended June 30, 1994 and 1993
(Dollar Amounts In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 18,514 $ 18,586
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 21,628 21,371
Amortization 1,173 1,461
Deferred income tax benefit (60) (601)
Gain on sale of investments (68) (1,870)
Deferred income recognized (137) (243)
(Increase) decrease in assets:
Accounts receivable (1,347) (1,898)
Inventory (98) 1
Prepaids (388) (450)
Income taxes receivable (652) -
Increase (decrease) in liabilities:
Accounts payable (452) 1,518
Accrued liabilities (642) (1,371)
Deferred income 122 27
Income taxes payable (1,666) (1,188)
Other, net (65) 86
-------- --------
Net cash provided by operating activities $ 35,862 $ 35,429
-------- --------
Cash flows from investing activities:
Purchases of property, plant and equipment (38,942) (22,390)
Proceeds from investments 117 3,293
Purchase of investments and other assets (1,078) (894)
-------- --------
Net cash used by investing activities (39,903) (19,991)
-------- --------
Cash flows from financing activities:
Change in revolving debt, net (3,358) 9,051
Change in term debt 10,092 (22,898)
Dividends paid (4,344) (4,331)
Purchase of company stock - (412)
Payments received on stock notes receivable 133 141
-------- --------
Net cash used by financing activities 2,523 (18,449)
-------- --------
Net decrease in cash and cash equivalents (1,518) (3,011)
Cash and cash equivalents at beginning of period 5,509 7,160
-------- --------
Cash and cash equivalents at end of period $ 3,991 $ 4,149
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements
<PAGE> 10
TeleCable Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Six Months Ended June 30, 1994
(Unaudited)
Note 1 - Basis of presentation:
The accompanying unaudited financial statements of TeleCable
Corporation and subsidiaries (the Company or TeleCable) have been
prepared using accounting principles consistent with those disclosed
in the December 31, 1993 financial statements. Due to the interim
nature of the financial statements, they do not include all of the
disclosures and notes required by generally accepted accounting
principles. In the opinion of management, all adjustments (consisting
only of normal recurring accruals) considered necessary for a fair
presentation have been included. The results of operations for the
six month periods ended June 30, 1994 and 1993 are not necessarily
indicative of results that may be expected for the entire year or any
interim period. These financial statements should be read in
connection with the Company's December 31, 1993 financial statements.
On January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115 (FAS 115), "Accounting for Certain
Investments in Debt and Equity Securities". One of the provisions of
FAS 115 requires that equity securities be classified as available for
sale, or trading. Available for sale securities are carried at their
fair values with the amount of unrealized gains and losses, net of
income taxes, reported as a separate component of stockholders'
equity. The Company does not have any securities classified as
trading. Accordingly, the Company classified equity securities with a
fair value of $8.0 million at June 30, 1994 as available for sale.
Stockholders' deficit at June 30, 1994 includes $3.5 million relating
to unrealized gains on securities available for sale, net of income
taxes.
Note 2 - Debt:
In March 1994, the Company repaid $30 million of expiring term debt
with proceeds from a new unsecured $40 million note that is due 2004.
Interest is payable semi-annually at a fixed rate of 6.52%.
Note 3 - Subsequent event:
On August 8, 1994, the Company, Tele-Communications, Inc. (TCI), and
TCI Communications, Inc. (TCIC) entered into a definitive merger
agreement, whereby TeleCable will be merged into TCIC, a wholly-owned
subsidiary of TCI. The aggregate $1.6 billion purchase price will be
satisfied by TCIC's assumption of approximately $300 million of
TeleCable's net liabilities and the issuance to TeleCable's
shareholders of shares of TCI Class A Common Stock (currently
estimated to be approximately 42 million shares) and 1 million shares
of TCI Convertible Preferred Stock with an aggregate initial
liquidation value of $300 million. Such preferred stock, which will
accrue dividends at a rate of 5.5% per annum, will be convertible into
10 million shares of TCI Class A Common Stock and will be redeemable
by TCI after (5) five years. Although the amount of net liabilities
to be assumed by TCIC and the number of TCI Class A Common shares to
be issued to TeleCable's shareholders are subject to closing
adjustments, the Company does not believe that any such adjustments
will be material. The merger agreement requires the approval of the
Company's shareholders and various franchise and government
authorities.
<PAGE> 11
Report of Independent Accountants
February 4, 1994
The Stockholders and Directors
TeleCable Corporation and Subsidiaries
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income and retained earnings and of cash flows
present fairly, in all material respects, the financial position of TeleCable
Corporation and its subsidiaries at December 31, 1993 and 1992, and the results
of their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which 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, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Norfolk, Virginia
- 1 -
<PAGE> 12
TELECABLE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
Year ended December 31,
1993 1992
---- ----
(dollars in thousands
except per share data)
<S> <C> <C>
Operating revenues $ 286,676 $ 268,404
Operating costs and expenses:
Operating expenses 132,487 123,350
Selling, general and administrative expenses 30,357 28,661
Depreciation and amortization 45,171 42,635
---------- ----------
208,015 194,646
---------- ----------
Operating income 78,661 73,758
Interest income 595 585
Gain on sale of investments 2,698 1,476
Interest expense (23,511) (27,225)
Other expense, net (410) (1,235)
Minority interest in income of consolidated subsidiary (344) (347)
---------- ----------
Income before provision for income taxes 57,689 47,012
Provision for income taxes 23,405 17,674
---------- ----------
Net income 34,284 29,338
Retained earnings - beginning of year 153,695 133,000
Dividends of $3.00 per share in 1993 and 1992 (8,658) (8,643)
---------- ----------
Retained earnings - end of year $ 179,321 $ 153,695
========== ==========
Number of shares used to compute earnings per share 2,884,894 2,878,397
========== ==========
Earnings per share $ 11.88 $ 10.19
========== ==========
</TABLE>
See notes to consolidated financial statements.
- 2 -
<PAGE> 13
TELECABLE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
Assets
<TABLE>
<CAPTION>
December 31,
1993 1992
---- ----
(dollars in thousands)
<S> <C> <C>
Cash and cash equivalents $ 5,509 $ 7,160
Accounts receivable - trade and other (net of
allowance for doubtful accounts of $1,127
in 1993 and $1,959 in 1992) 9,639 8,403
Inventories, at first-in, first-out cost 887 794
Prepaid expenses and other 1,720 1,279
Investments and other assets 13,324 12,494
Property, plant and equipment - at cost:
Distribution plant and other equipment 512,610 498,693
Land, buildings and improvements 19,944 19,132
Vehicles 10,909 10,092
-------- --------
543,463 527,917
Less - accumulated depreciation 311,639 299,156
-------- --------
231,824 228,761
-------- --------
Intangible assets, net:
Goodwill, net of accumulated amortization of
$6,576 in 1993 and $6,118 in 1992 12,659 13,116
Cable television franchises and other, net of
accumulated amortization of $18,246 in 1993
and $15,933 in 1992 7,921 9,714
-------- --------
20,580 22,830
-------- --------
Total assets $283,483 $281,721
======== ========
</TABLE>
- 3 -
<PAGE> 14
Liabilities and stockholders' deficit
<TABLE>
<CAPTION>
December 31,
1993 1992
---- ----
(dollars in thousands)
<S> <C> <C>
Accounts payable - trade $ 4,352 $ 1,760
Accrued liabilities:
Payroll and related expenses 3,979 3,511
Interest 3,825 4,187
Franchise taxes 4,353 4,210
Program services costs 3,917 4,150
Other 7,261 7,849
Dividends payable 2,172 2,167
Income taxes payable 1,666 2,522
Debt 278,372 304,195
Deferred income taxes 45,163 45,382
Other liabilities 5,406 4,689
--------- ---------
Total liabilities 360,466 384,622
--------- ---------
Minority interests in equity of consolidated subsidiary 2,344 2,000
Stockholders' deficit:
Common stock:
Class A - voting - $2.50 par value; authorized 225,000
shares; issued and outstanding 116,555 shares 291 291
Class B - non-voting - $2.50 par value; authorized
5,000,000 shares; issued and outstanding
2,779,801 and 2,773,421 shares 6,950 6,934
Capital deficit (262,410) (262,703)
Notes receivable - executive stock purchases (3,479) (3,118)
Retained earnings 179,321 153,695
--------- ---------
Total stockholders' deficit (79,327) (104,901)
--------- ---------
Commitments and contingencies (Note 8)
Total liabilities and stockholders' deficit $ 283,483 $ 281,721
========= =========
</TABLE>
See notes to consolidated financial statements.
- 4 -
<PAGE> 15
TELECABLE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31,
1993 1992
---- ----
(dollars in thousands)
<S> <C> <C>
Cash flows from operating activities
Net income $ 34,284 $ 29,338
Adjustments to reconcile net income to cash provided
by operating activities
Depreciation 42,403 39,720
Amortization 2,768 2,915
Gain on sale of property, plant and equipment (59) (72)
Gain on sale of investments (2,698) (1,476)
Deferred income taxes (219) (808)
(Increase) decrease in certain assets
Accounts receivable (1,236) (2,132)
Inventories (93) (134)
Prepaid expenses (441) (157)
Increase (decrease) in certain liabilities
Accounts payable 2,560 (1,574)
Accrued liabilities 617 1,335
Income taxes payable (856) 191
Deferred income recognized (465) (235)
Other, net 356 240
-------- --------
Net cash provided by operating activities 76,921 67,151
-------- --------
Cash flows from investing activities
Proceeds from sale of investments 4,453 8,309
Proceeds from sale of property, plant and equipment 122 77
Purchases of investments and other assets (3,066) (1,346)
Purchases of property, plant and equipment (45,529) (40,818)
-------- --------
Net cash used by investing activities (44,020) (33,778)
-------- --------
Cash flows from financing activities
Change in revolving debt, net (2,683) 26,587
Repayment of term debt (23,140) (50,390)
Dividends paid (8,654) (8,635)
Purchase of company stock (411) (479)
Payments received on stock notes receivable 336 430
-------- --------
Net cash used by financing activities (34,552) (32,487)
-------- --------
Net increase (decrease) in cash and cash equivalents (1,651) 886
Cash and cash equivalents at beginning of year 7,160 6,274
-------- --------
Cash and cash equivalents at end of year $ 5,509 $ 7,160
======== ========
</TABLE>
See notes to consolidated financial statements.
- 5 -
<PAGE> 16
TELECABLE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts
of TeleCable Corporation and its subsidiaries (the "Company").
Intercompany balances and transactions have been eliminated in
consolidation. Certain prior year balances have been reclassified to
conform with the current year presentation with no effect on previously
reported net income.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments, including
repurchase agreements, with an original maturity of three months or less
to be cash equivalents.
PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION
Property, plant and equipment, including capitalized interest and assets
acquired under capital leases, are recorded at cost and depreciated over
their estimated useful lives using accelerated and straight-line methods
for tax and financial reporting purposes, respectively. The asset cost
and related accumulated depreciation are eliminated from the accounts
when assets are fully depreciated. The cost of cable television systems
constructed by the Company includes all costs and expenses, including, if
appropriate, capitalized interest incurred prior to receipt of the first
subscriber revenues from the system. From that time until completion of
construction, costs capitalized include all direct construction costs and
a portion of certain fixed operating expenses based on progress toward
achieving expected subscriber levels.
Maintenance, repairs and minor renewals are charged to operations. Major
renewals and betterments are capitalized.
Estimated lives used to compute depreciation are:
<TABLE>
<S> <C>
Distribution plant and other equipment 8 - 12 years
Building and improvements 8 - 25 years
Vehicles 5 years
</TABLE>
INTANGIBLE ASSETS
Costs associated with developing and acquiring cable television
franchises are capitalized and amortized on a straight-line basis over
the expected life of the franchise, generally 8 to 15 years.
- 6 -
<PAGE> 17
Goodwill consists of acquisition costs in excess of the fair value of net
tangible and identifiable intangible assets acquired (principally cable
television franchises and purchased minority interests). Goodwill is
being amortized over 40 years.
INCOME TAXES
On January 1, 1992, the Company adopted Statement of Financial Accounting
Standard No. 109 (FAS 109), "Accounting for Income Taxes," which uses an
asset and liability method to recognize the deferred income tax effects
of transactions which are reported in different periods for financial
reporting and income tax return purposes. Under this approach, deferred
income tax balance sheet amounts are measured using currently enacted tax
rates. The deferred income tax provision is the difference between such
beginning and ending balance sheet amounts. Prior to the adoption of FAS
109, the Company used Statement of Financial Accounting Standard No. 96,
"Accounting for Income Taxes." This change in accounting principles did
not have a material effect on the Company's financial position or its
results of operations.
EARNINGS PER SHARE
Earnings per share are calculated using the annual weighted average
number of common shares outstanding.
NOTE 2 - RETIREMENT PLANS
The Company sponsors an employee savings plan covering substantially all
employees. The Company contributes an amount which, when added to
forfeitures, equals fifty percent of employee contributions up to four
percent of compensation. The Company's contributions were $727,000 and
$675,000 for 1993 and 1992, respectively.
The Company also sponsors a defined benefit pension plan covering
substantially all employees. The plan provides retirement benefits to
eligible employees based primarily on years of service and career
compensation. The Company's annual funding policy is to contribute no
less than the minimum required by the Employee Retirement Income Security
Act of 1974 and no more than the maximum which can be deducted under
relevant IRS regulations. Contributions to the plan reflect benefits
attributed to employees' services to date, as well as services expected
to be rendered in the future. At December 31, 1993 plan assets were
invested primarily in marketable securities.
- 7 -
<PAGE> 18
For financial reporting purposes, pension expense was $632,000 and
$432,000 for 1993 and 1992, respectively, and was comprised of the
following:
<TABLE>
<CAPTION>
1993 1992
---- ----
(dollars in thousands)
<S> <C> <C>
Service cost of the current period $767 $677
Interest cost on the projected benefit obligation 562 457
Actual return on assets held in the plan (622) (592)
Net amortization of unrecognized transition
asset and net asset gain (75) (110)
---- ----
Pension expense $632 $432
==== ====
</TABLE>
The pension plan's funding status at December 31 was:
<TABLE>
<CAPTION>
1993 1992
---- ----
(dollars in thousands)
<S> <C> <C>
Accumulated benefit obligation, including vested
benefits of $5,963 and $3,983 $6,536 $4,406
Effect of anticipated future compensation and
other events 2,472 2,392
------ ------
Projected benefit obligation 9,008 6,798
Fair value of assets held in the plan 9,121 7,806
------ ------
Plan assets in excess of projected benefit
obligation 113 1,008
Net unrecognized gain from past experience
different than assumed (1,056) (1,260)
Unrecognized transitional asset (591) (636)
Unrecognized prior service cost (127) (141)
------ ------
Net pension liability included in other liabilities $1,661 $1,029
====== ======
</TABLE>
The weighted average discount rate used to measure the projected benefit
obligation was reduced from 8% at December 31, 1992 to 7% at December 31,
1993. In addition, the rate of increase in future compensation levels
was reduced from 6.5% at December 31, 1992 to 4.5% at December 31, 1993.
The weighted average expected long-term rate of return on assets was 8.0%
for both 1993 and 1992.
The Company also sponsors a supplemental benefit plan which provides
supplemental retirement benefits on a nonqualified basis to certain
executives whose benefits under the pension plan are restricted by
various limitations under the Internal Revenue Code. Supplemental
benefit expense was $182,000 and $152,000 for 1993 and 1992,
respectively.
- 8 -
<PAGE> 19
On January 1, 1993, the Company adopted Financial Accounting Standard No.
106 "Employers' Accounting for Postretirement Benefits Other Than
Pensions" which deals principally with employers' recognition of retiree
medical and life insurance benefit costs and obligations. The Company
recognized $122,000 of net periodic postretirement benefit cost in 1993
related to the accounting change. Adoption of this new standard had an
immaterial impact on the Company's financial position and results of
operations.
NOTE 3 - INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
1993 1992
---- ----
(dollars in thousands)
<S> <C> <C>
Current federal $21,107 $16,600
Current state 2,517 1,882
Deferred federal (1,586) (1,100)
Deferred state 144 292
Adjustment to deferred income tax
liability for change in tax rate 1,223 -
------- -------
$23,405 $17,674
======= =======
</TABLE>
Income taxes paid during the year were $24.4 million in 1993 and $18.2
million in 1992. Included in deferred income taxes and the provision for
income taxes as of and for the year ended December 31, 1993 is an
additional accrual of approximately $1.2 million to reflect the effect of
the 1993 increase in income tax rates on the temporary differences
existing at the date of enactment.
The provision for income taxes differs from the amount computed by
applying the statutory federal tax rate to income before income taxes as
follows:
<TABLE>
<CAPTION>
1993 1992
---- ----
(dollars in thousands)
<S> <C> <C>
Income tax computed at 35% in 1993 and
34% in 1992 $20,191 $15,984
State income taxes net of federal tax benefit 1,730 1,435
Effect of change in rates on temporary
differences 1,223 -
Other 261 255
------- -------
$23,405 $17,674
======= =======
</TABLE>
- 9 -
<PAGE> 20
Significant components of the Company's deferred income tax liability are
as follows:
<TABLE>
<CAPTION>
1993 1992
---- ----
(dollars in thousands)
<S> <C> <C>
Property and equipment, principally
due to depreciation $50,280 $50,665
Accrued vacation liability (669) (617)
Accrued pension liability (649) (402)
Other (3,799) (4,264)
------- -------
Net deferred tax liability $45,163 $45,382
======= =======
</TABLE>
The Internal Revenue Service has proposed tax adjustments for the years
1986 through 1989 in the approximate amount of $3,100,000. The IRS
challenged the investment tax credits (ITC) claimed on transitional
property under the Tax Reform Act of 1986, certain intangible allocations
of a 1988 acquisition, and the treatment of make-ready expenditures as
part of cable plant costs. The years 1990 and 1991 are also part of this
audit, but the IRS does not intend to propose adjustments until the
appeal for the prior years has been considered. Management believes that
its original filing position was correct and will file an appeals protest
of all issues in early 1994. Since 1985, the Company has recognized
$5,500,000 in net transitional ITC tax benefits and approximately
$1,000,000 in tax benefits for the amortization of the 1988 acquisition
intangibles being challenged.
NOTE 4 - ACCOUNTS RECEIVABLE
Accounts receivable consist primarily of amounts due from the Company's
subscribers for cable and related services and amounts due from
advertisers. During 1993, the Company ceased charging subscribers for
certain equipment which was not returned to the Company upon
disconnection of service. Since equipment charges were fully offset by a
provision for doubtful accounts, the change in policy resulted in a
significant decrease in the allowance for doubtful accounts. The
components of accounts receivable and the related allowance consist of:
<TABLE>
<CAPTION>
December 31,
1993 1992
---- ----
(dollars in thousands)
<S> <C> <C>
Accounts receivable
Cable $ 4,540 $ 4,805
Advertising 4,689 3,770
Equipment 112 1,169
Other 1,425 618
------- -------
10,766 10,362
------- -------
</TABLE>
- 10 -
<PAGE> 21
<TABLE>
<S> <C> <C>
Allowance for doubtful accounts
Cable 682 496
Advertising 333 294
Equipment 112 1,169
Other - -
------- -------
1,127 1,959
------- -------
Accounts receivable, net $ 9,639 $ 8,403
======= =======
</TABLE>
NOTE 5 - INVESTMENTS AND OTHER ASSETS
Investments and other assets, stated at the lower of cost or net
realizable value, consist of:
<TABLE>
<CAPTION>
December 31,
1993 1992
---- ----
(dollars in thousands)
<S> <C> <C>
Investment in PPVN, Inc. ("Viewer's Choice") $ 5,770 $ 5,466
Investment in U.K. franchises - 1,313
Other, primarily equity investments 7,554 5,715
------- -------
$13,324 $12,494
======= =======
</TABLE>
The Company's remaining rights to provide cable and telecoms services
within the United Kingdom were sold in April and July 1993 for $3.9
million resulting in a gain of $2.2 million.
In January 1992, the Company sold its investment in QVC Network, Inc.
resulting in a gain of $1.2 million.
Other investments include marketable equity investments which are
recorded at a cost of $2.3 million and have a market value of $12.3
million at December 31, 1993. The remainder of other investments
consists primarily of equity investments for which a ready market does
not exist; however, management believes that the existing carrying value
approximates the fair value of such investments.
NOTE 6 - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
1993 1992
---- ----
(dollars in thousands)
<S> <C> <C>
Term notes payable (A) $225,000 $250,000
Revolving credit and term loan agreements (B) 51,425 54,108
Other (C) 1,947 87
-------- --------
$278,372 $304,195
======== ========
</TABLE>
- 11 -
<PAGE> 22
(A) The Company issued privately-placed unsecured, medium-term notes in
1986, 1988 and 1991. The notes were issued at par in the aggregate
amount of $310 million with interest payable semi-annually at rates
ranging from 8.75% to 9.44%. Through December 31, 1993, the
Company has repaid $85 million. The Company intends to refinance
notes due in 1994 with either funds available under the revolving
credit agreements or a new term loan. The remaining note balances
mature as follows:
<TABLE>
<S> <C> <C> <C>
1994 $30 million 1997 $50 million
1995 $40 million 1998 $50 million
1996 $40 million 1999 $15 million
</TABLE>
The loan agreements contain restrictive provisions relating to
stock redemptions, dividend payments, total debt in relation to
cash flow, limitations on secured debt, and limitations regarding
certain sales, mergers and other transactions. Through December
31, 1993, the Company was in compliance with all such restrictive
provisions.
(B) The Company's unsecured revolving credit and term loan agreements
with four commercial banks provide $100 million of revolving credit
lines which mature in early 1997. The Company has the option to
convert revolving loans outstanding on the maturity dates into term
loans payable in six equal annual installments.
At the Company's option, loans bear interest tied to the bank prime
rate, the London Interbank Offered Rate (LIBOR), the bank
Certificate of Deposit (CD) rate, or a rate agreed upon from time
to time between the Company and each bank. The rates can be fixed
for periods ranging from one day to one year and are subject to
certain adjustments at varying levels of debt in relation to
operating cash flow. The banks charge commitment fees ranging from
1/8% to 3/8% on the unused portion of the revolving credit lines.
The agreements contain restrictive provisions similar to those
described in (A) above.
(C) Other notes payable include amounts due for capital lease
obligations and sundry other notes.
Based on the borrowing rates currently available to the corporation for
loans with similar terms and average maturities, the fair value of term
notes payable approximated $234 million and $263 million at December 31,
1993 and 1992, respectively. The carrying value of the Company's
revolving credit and term loan agreements at December 31, 1993 and 1992
approximated fair value.
The Company paid interest of $23.9 million in 1993 and $28.4 million in
1992.
- 12 -
<PAGE> 23
NOTE 7 - STOCKHOLDERS' DEFICIT
The Company has a capital deficit at December 31, 1993 and 1992 resulting
from a return of capital paid to stockholders in May, 1988.
Notes received in exchange for stock sold to employees are full recourse
notes and are shown in the accompanying balance sheet as a contra-equity
account. The notes bear interest ranging from 6.50% to 9.25%. The
interest rates on the notes receivable are established annually at rates
which approximate market.
Class B common stock and capital deficit accounts changed as follows:
<TABLE>
<CAPTION>
Class B
common Capital
stock deficit
------- -------
(dollars in thousands)
<S> <C> <C>
Balance at December 31, 1991 $ 6,927 $(262,819)
Purchase of 9,945 shares of Class B stock (24) (455)
Sale of 12,510 shares of Class B stock 31 571
--------- ---------
Balance at December 31, 1992 6,934 (262,703)
Purchase of 8,520 shares of Class B stock (21) (390)
Sale of 14,900 shares of Class B stock 37 683
--------- ---------
Balance at December 31, 1993 $ 6,950 $(262,410)
========= =========
</TABLE>
NOTE 8 - COMMITMENTS AND CONTINGENCIES
Effective September 1, 1993, the Company adjusted subscriber rates to
comply with FCC standards issued to regulate such rates as contemplated
by the Cable Television Consumer Protection and Competition Act of 1992.
The Company's adjusted subscriber rates are subject to local and/or
federal governmental review. Management does not expect that rate
reviews will have an adverse impact on established rates.
TeleCable and its subsidiaries lease utility poles and certain other
facilities used in their operations. Total rent expense was $2.8 million
and $2.7 million in 1993 and 1992, respectively.
On December 31, 1993, TeleCable and its subsidiaries were committed under
non-cancelable operating leases which expire at various dates through
2069 and require the following minimum rents:
<TABLE>
<S> <C> <C> <C>
1994 $ 894,000 1997 $ 661,000
1995 $ 836,000 1998 $ 640,000
1996 $ 722,000 Thereafter $1,255,000
</TABLE>
In the ordinary course of business the Company has committed to invest in
the renewal and expansion of its cable distribution plant and support its
other cable related investments.
- 13 -
<PAGE> 24
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly Tele-Communications, Inc.)
Condensed Pro Forma Combined Financial Statements
June 30, 1994
(unaudited)
The following unaudited condensed pro forma combined balance sheet of
TCIC, dated as of June 30, 1994, assumes that (i) the proposed TeleCable Merger
and (ii) the combination of TCIC and Liberty Media Corporation ("Liberty"),
whereby TCIC and Liberty each became a wholly-owned subsidiary of TCI (the
"TCI/Liberty Mergers"), had occurred as of such date. See notes 1 and 2.
In addition, the following unaudited condensed pro forma combined
statements of operations of TCIC for the six months ended June 30, 1994 and the
year ended December 31, 1993 assume that the proposed TeleCable Merger and the
TCI/Liberty Mergers (collectively the "Mergers") had occurred prior to
January 1, 1993.
The unaudited pro forma results do not purport to be indicative of the
results of operations that would have been obtained if the Mergers had occurred
prior to January 1, 1993. These condensed pro forma combined financial
statements of TCIC should be read in conjunction with the condensed pro forma
financial statements and the related notes thereto of TCI and Liberty included
elsewhere herein and the respective historical financial statements and the
related notes thereto of TCIC and Liberty. The pro forma financial statements
of TCI represent a combination of the separate pro forma statements of TCIC and
Liberty in giving effect to the Mergers.
<PAGE> 25
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly Tele-Communications, Inc.)
Condensed Pro Forma Combined Balance Sheet
(unaudited)
<TABLE>
<CAPTION>
June 30, 1994
-------------------------------------------------------------------
TCIC TeleCable Pro forma TCIC
Historical Historical Adjustments(1)(2) Pro forma
---------- ---------- ----------------- ---------
Assets amounts in millions
- ------
<S> <C> <C> <C> <C>
Cash and receivables $ 219 16 -- 235
Investment in Liberty and
related receivables 522 -- (217) (3) 305
Investment in other affiliates
and Turner Broadcasting System,
Inc., and related receivables 1,483 20 -- 1,503
Property and equipment, net of
accumulated depreciation 5,207 249 333 (4) 5,789
Franchise costs and other assets,
net of amortization 9,687 23 1,036 (4) 11,537
791 (5)
-------- ----- ----- ------
$ 17,118 308 1,943 19,369
======== ===== ===== ======
Liabilities and Stockholders' Equity
- ------------------------------------
Payables and accruals $ 859 29 -- 888
Debt 10,111 285 -- 10,396
Deferred income taxes 3,420 47 791 (5) 4,258
Other liabilities 99 5 -- 104
-------- ----- ----- ------
Total liabilities 14,489 366 791 15,646
-------- ----- ----- ------
Minority interests 318 3 -- 321
Redeemable preferred stocks -- -- -- --
Common stockholders' equity:
Class A common stock 483 -- -- 483
Class B common stock 47 7 (7) (6) 47
Additional paid-in capital (deficit) 2,310 (262) 262 (6) 3,618
1,308 (7)
Cumulative foreign currency
translation adjustment (14) -- -- (14)
Unrealized holding gains for
available-for-sale securities 128 4 (4) (6) 128
Note receivable from executive
stock purchase plan -- (3) 3 (6) --
Accumulated earnings (deficit) (310) 193 (193) (6) (310)
Treasury stock, at cost (333) -- 333 (8) --
Investment in TCI -- -- (217) (3) (550)
(333) (8)
-------- ----- ----- ------
2,311 (61) 1,152 3,402
-------- ----- ----- ------
$ 17,118 308 1,943 19,369
======== ===== ===== ======
</TABLE>
See accompanying notes to unaudited condensed pro forma combined financial
statements.
<PAGE> 26
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly Tele-Communications, Inc.)
Condensed Pro Forma Combined Statement of Operations
(unaudited)
<TABLE>
<CAPTION>
Six months ended June 30, 1994
-------------------------------------------------------------------------
TCIC TeleCable Pro forma TCIC
Historical Historical Adjustments(1)(2) Pro forma
---------- ---------- ----------------- ---------
amounts in millions,
except per share amounts
<S> <C> <C> <C> <C>
Revenue $ 2,141 146 -- 2,287
Operating, selling, general and
administrative expenses and
compensation relating to stock
appreciation rights (1,221) (82) -- (1,303)
Depreciation and amortization (481) (23) (23) (9) (527)
------- ---- --- ------
Operating income 439 41 (23) (9) 457
Interest expense (363) (11) -- (374)
Interest and dividend income 20 -- -- 20
Share of earnings of Liberty 24 -- (24) (10) --
Share of losses of other
affiliates, net (30) -- -- (30)
Loss on early extinguishment of debt (2) -- -- (2)
Other income, net 2 -- -- 2
------- ---- --- ------
Earnings before income taxes 90 30 (47) 73
Income tax expense (52) (12) 19 (11) (45)
------- ---- --- ------
Net earnings $ 38 18 (28) 28
======= ===== ==== =======
Primary and fully diluted earnings per
common and common
equivalent share $ .08
=======
</TABLE>
See accompanying notes to unaudited condensed pro forma combined financial
statements.
<PAGE> 27
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly Tele-Communications, Inc.)
Condensed Pro Forma Combined Statement of Operations
(unaudited)
<TABLE>
<CAPTION>
Year ended December 31, 1993
--------------------------------------------------------------
TCIC TeleCable Pro forma TCIC
Historical Historical Adjustments(1)(2) Pro forma
---------- ---------- ----------------- ---------
amounts in millions,
except per share amounts
<S> <C> <C> <C> <C>
Revenue $ 4,153 287 -- 4,440
Operating, selling, general and
administrative expenses and
compensation relating to stock
appreciation rights (2,326) (163) -- (2,489)
Depreciation and amortization (911) (45) (47)(9) (1,003)
-------- ---- ----- ------
Operating income 916 79 (47) 948
Interest expense (731) (24) -- (755)
Interest and dividend income 34 -- -- 34
Share of earnings of Liberty 4 -- (4)(10) --
Share of losses of other
affiliates, net (76) -- -- (76)
Gain on dispositions 42 2 -- 44
Loss on early extinguishment of debt (17) -- -- (17)
Other income, net (11) -- -- (11)
-------- ---- ----- ------
Earnings before income taxes 161 57 (51) 167
Income tax expense (168) (23) 21 (11) (170)
-------- ---- ----- ------
Net earnings (loss) (7) 34 (30) (3)
Dividend requirement on
redeemable preferred stocks (2) -- 2 (12) --
-------- ---- ----- ------
Net earnings (loss) applicable
to common shareholders $ (9) 34 (28) (3)
======== ==== ===== ======
Loss per common share $ (.02)
========
</TABLE>
See accompanying notes to unaudited condensed pro forma combined financial
statements.
<PAGE> 28
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly Tele-Communications, Inc.)
Notes to Condensed Pro Forma Combined Financial Statements
June 30, 1994
(unaudited)
(1) As of August 8, 1994, TCI, TCIC and TeleCable entered into a
definitive merger agreement whereby TeleCable will be merged into
TCIC. The aggregate $1.6 billion purchase price will be satisfied by
TCIC's assumption of approximately $300 million of TeleCable's net
liabilities and the issuance to TeleCable's shareholders of shares of
TCI Class A common stock (currently estimated to be approximately 42
million shares) and 1 million shares of TCI Convertible Preferred
Stock, Series D with an aggregate initial liquidation value of $300
million. Such preferred stock, which will accrue dividends at a rate
of 5.5% per annum, will be convertible into 10 million shares of TCI
Class A common stock and will be redeemable by TCI after five years.
Although the amount of net liabilities to be assumed by TCIC and the
number of TCI Class A common shares to be issued to TeleCable's
shareholders are subject to closing adjustments, management does not
believe that any such adjustments will be material. The merger
agreement requires the approval of TeleCable's shareholders and
various franchise and government authorities.
(2) The TCI/Liberty Mergers, which were consummated on August 4, 1994,
were structured as a tax free exchange whereby the common stock of Old
TCI and Liberty and the preferred stock of Liberty were exchanged for
like shares of TCI. The merger agreement provided that each share of
Old TCI's and Liberty's common stock (including shares held by Old
TCI's or Liberty's subsidiaries) would be converted into one share and
0.975 of a share, respectively, of the corresponding class of TCI's
common stock. Shares of Liberty Class E Preferred Stock were
converted into shares of a preferred stock of TCI having designations,
preferences, rights and qualifications, limitations and restrictions
substantially identical to the shares of preferred stock being
converted. Shares of the remaining Liberty preferred stock held by
subsidiaries of Old TCI were converted into shares of a class or
series of TCI preferred stock having an equivalent value.
(3) Represents the conversion of Old TCI's investment in Liberty common
stock into an investment in TCI common stock and the conversion of Old
TCI's investment in Liberty preferred stock into an investment in TCI
preferred stock having an equivalent value. Such amount is reflected
as a reduction of stockholders' equity due to its related party
nature. Such conversion of shares is reflected at the carryover basis
of Old TCI's investment in Liberty. See note (2) above.
(4) Represents an allocation of the $1.6 billion purchase price of
TeleCable to its tangible and intangible assets. The cost
allocations were estimated using information available at the date of
preparation of these condensed pro forma combined financial statements
and will be adjusted upon final appraisal of the assets acquired.
Therefore, the actual allocations may differ from those allocations
reflected herein.
(5) Represents the estimated incremental deferred income tax liability
associated with the TeleCable purchase price allocations, as described
in note (4) above. The adjustment assumes a combined federal and
state income tax rate of 41%.
(6) Represents the elimination of TeleCable's historical stockholders'
deficit, including the note receivable from the employee stock
purchase plan. Pursuant to the TeleCable Merger agreement, any
portion of such note receivable that remains unpaid at closing will
not be included in the calculation of net liabilities to be assumed
by TCIC at closing.
(continued)
<PAGE> 29
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly Tele-Communications, Inc.)
Notes to Condensed Pro Forma Combined Financial Statements
June 30, 1994
(unaudited)
(7) Represents TCI's capital contribution to TCIC resulting from the
issuance by TCI to TeleCable shareholders of shares of TCI Class A
common stock (currently estimated to be approximately 42 million
shares) and 1 million shares of TCI Convertible Preferred Stock,
Series D with an aggregate liquidation of $300 million. The number of
TCI Class A common shares to be issued, which will be calculated using
a per share value of $24, is dependent upon the amount of net
liabilities of TeleCable that is assumed by TCIC at closing and
certain other factors. See note (1) above.
(8) Reflects the reclassification to "Investment in TCI" of 79,335,038
shares of Old TCI Class A common stock held by subsidiaries of Old TCI
replaced with TCI common stock of the corresponding class. See note
(2) above.
(9) Represents depreciation and amortization of the allocated TeleCable
purchase price, based upon weighted average lives of 12-1/2 years for
property and equipment and 40 years for franchise costs. See note (4)
above.
(10) Reflects the elimination of Old TCI's share of Liberty's historical
earnings. See notes (2) and (3) above.
(11) Reflects the estimated income tax effect of the pro forma adjustments.
(12) Reflects the elimination of the preferred stock dividend requirement
on Old TCI preferred stock converted into common stock of Old TCI
during the year ended December 31, 1993.
<PAGE> 30
LIBERTY MEDIA CORPORATION
Condensed Pro Forma Financial Statements
June 30, 1994
(unaudited)
The following unaudited condensed pro forma balance sheet of Liberty,
as of June 30, 1994, assumes Liberty had changed its accounting for its
investment in QVC, Inc. ("QVC") to the cost method and that the sale by Liberty
of the 49.9% partnership interest in American Movie Classics Company ("AMC")
had occurred as of such date. Additionally, such balance sheet also assumes
that the TCI/Liberty Mergers, had occurred as of such date (see note 4).
In addition, the following unaudited condensed pro forma statements of
operations of Liberty for the six months ended June 30, 1994 and for the year
ended December 31, 1993 assume the following had occurred prior to January 1,
1993:
(a) the change in accounting for Liberty's investment in QVC to
the cost method,
(b) the sale by Liberty of its 49.9% partnership interest in AMC,
(c) the Recapitalization Agreement, as defined in note 10,
(d) the acquisition of 20 million shares of Class B common stock
of Home Shopping Network, Inc. ("HSN"),
(e) the Tender, as defined in note 11,
(f) the acquisition of all general and limited partnership
interests in Mile Hi Cablevision Associates, Ltd. ("Mile Hi")
as described in note 12,
(g) the conversion of all the outstanding shares (10,974 shares)
of Liberty's Class A Convertible Preferred Stock ("Class A
Preferred Stock") into 4,405,678 shares of Liberty Class A
common stock and 55,070 shares of Class E, 6% Cumulative
Redeemable Exchangeable Junior Preferred Stock ("Class E
Preferred Stock"), and
(h) the TCI/Liberty Mergers.
The unaudited pro forma results do not purport to be indicative of the
results of operations that would have been obtained if the foregoing events had
actually occurred prior to January 1, 1993. These condensed pro forma
financial statements of Liberty should be read in conjunction with the
condensed pro forma financial statements and related notes thereto of TCIC and
TCI included elsewhere herein and the respective historical financial
statements and the related notes thereto of Liberty and TCIC. The pro forma
financial statements of TCI represent a combination of the separate pro forma
statements of Liberty and TCIC.
<PAGE> 31
LIBERTY MEDIA CORPORATION
Condensed Pro Forma Balance Sheet
(unaudited)
<TABLE>
<CAPTION>
June 30, 1994
-----------------------------------------------------------
Liberty Pro forma Liberty
Historical Adjustments(1)(2)(4) Pro forma
---------- -------------------- ---------
Assets amounts in thousands
- ------
<S> <C> <C> <C>
Cash, receivables, inventories,
prepaids and other current
assets, net $ 279,303 180,429 (3) 459,732
Investment in and advances to
affiliates and others 872,709 2,779 (3) 771,477
(104,011)(4)
Property and equipment, net of
accumulated depreciation 248,680 -- 248,680
Franchise costs, intangibles
and other assets,
net of amortization 445,718 -- 445,718
---------- -------- ---------
$1,846,410 79,197 1,925,607
========== ======== =========
Liabilities and Stockholders' Equity
- ------------------------------------
Payables and accruals $ 322,531 50,000 (3) 372,531
Debt 415,556 -- 415,556
Deferred income taxes 154,958 21,594 (3) 176,552
Other liabilities 3,060 -- 3,060
---------- -------- ---------
Total liabilities 896,105 71,594 967,699
----------- -------- ---------
Minority interests 187,190 -- 187,190
Preferred stock subject to
mandatory redemption 161,947 (161,947)(5) --
Common stockholders' equity:
Class E Preferred Stock 17 (17)(5) --
Class A common stock 87,515 -- 87,515
Class B common stock 43,339 -- 43,339
Additional paid-in capital 231,106 161,964 (5) 393,070
Unrealized holding gains for
available-for-sale securities 241,471 -- 241,471
Retained earnings 12,761 111,614 (3) 124,375
Note receivable from
related party (15,041) -- (15,041)
---------- -------- ---------
601,168 273,561 874,729
---------- -------- ---------
Investment in TCI -- (104,011)(4) (104,011)
---------- -------- ---------
$1,846,410 79,197 1,925,607
========== ======== =========
</TABLE>
See accompanying notes to unaudited condensed pro forma financial statements.
<PAGE> 32
LIBERTY MEDIA CORPORATION
Condensed Pro Forma Statement of Operations
(unaudited)
<TABLE>
<CAPTION>
Six months ended June 30, 1994
------------------------------------------------
Pro forma
Liberty Adjustments Liberty
Historical (1)(2)(4) Pro forma
---------- ------------ ---------
amounts in thousands,
except per share amounts
<S> <C> <C> <C>
Revenue $ 675,485 -- 675,485
Operating, selling, general and
administrative expenses (612,221) -- (612,221)
Depreciation and amortization (26,930) -- (26,930)
---------- ------- ---------
Operating income 36,334 -- 36,334
Interest expense (18,936) -- (18,936)
Dividend and interest income 12,361 -- 12,361
Share of earnings of affiliates, net 21,945 (3,022) (6) 10,378
(8,545) (7)
Minority interests (5,521) -- (5,521)
Provision for impairment of
investment (2,233) -- (2,233)
Other, net (2,429) -- (2,429)
--------- ------- --------
Earnings before income taxes 41,521 (11,567) 29,954
Income tax expense (17,024) 4,279 (8) (12,745)
--------- ------- --------
Net earnings 24,497 (7,288) 17,209
Dividend requirement on redeemable
preferred stocks (11,736) 11,736 (9) --
--------- ------- --------
Net earnings attributable to
common shareholders $ 12,761 4,448 17,209
========= ======= ========
Primary and fully diluted earnings
per common and common equivalent
share $ .10
=========
</TABLE>
See accompanying notes to unaudited condensed pro forma financial statements.
<PAGE> 33
LIBERTY MEDIA CORPORATION
Condensed Pro Forma Combined Statement of Operations
(unaudited)
<TABLE>
<CAPTION>
Year ended December 31, 1993
--------------------------------------------------------------------------------------------------
Pro forma Liberty
Liberty Effect of Recap- HSN Mile Hi Adjustments Pro forma
Historical italization (10) Historical(11) Historical(12) (1)(2)(4)(11)(12) Combined
---------- ---------------- -------------- -------------- ----------------- ----------
amounts in thousands,
except per share amounts
<S> <C> <C> <C> <C> <C> <C>
Revenue $1,153,256 -- 103,640 7,568 -- 1,264,464
Operating, selling, general
and administrative expenses (1,104,890) -- (103,718) (4,989) -- (1,213,597)
Depreciation and amortization (49,269) -- (2,579) (1,479) (5,358)(13) (58,685)
---------- ----- -------- ------ ------- ----------
Operating income (loss) (903) -- (2,657) 1,100 (5,358) (7,818)
Interest expense (31,080) -- (2,146) (2,180) (7,702)(14) (40,928)
2,180 (15)
Dividend and interest income 23,549 -- 1,633 6 -- 25,188
Gain on sale of investment 31,972 -- -- -- -- 31,972
Loss on transactions with TCIC (30,296) -- -- -- -- (30,296)
Share of earnings of affiliates
net 34,044 -- -- -- (13,978)(6) 9,133
(11,313)(7)
380 (16)
Minority interests 289 -- -- -- 57 (17) 3,884
170 (18)
3,368 (19)
Litigation settlements (7,475) -- -- -- -- (7,475)
Other, net (1,592) -- (847) -- -- (2,439)
---------- ----- -------- ------ ------- ----------
Earnings (loss) before
income taxes and
extraordinary item 18,508 -- (4,017) (1,074) (32,196) (18,779)
Income tax expense (11,522) -- (1,741) -- 9,063 (8) (4,200)
---------- ----- -------- ------ ------- ----------
Earnings (loss) before
extraordinary item 6,986 -- (5,758) (1,074) (23,133) (22,979)
Extraordinary item-loss on
early extinguishment of debt,
net of taxes (2,191) -- (5,051) -- -- (7,242)
---------- ----- -------- ------ ------- ----------
Net earnings (loss) 4,795 -- (10,809) (1,074) (23,133) (30,221)
Dividend requirement on
redeemable preferred stocks (31,972) 9,179 -- -- 23,110 (9) --
(317)(20)
---------- ----- -------- ------ ------- ----------
Net earnings (loss)
attributable to
common shareholders $ (27,177) 9,179 (10,809) (1,074) (340) (30,221)
=========== ===== ======== ====== ======= ==========
Net loss attributable to
common shareholders before
extraordinary item $ (0.19)
Extraordinary item, net (0.02)
-----------
Loss per common share $ (0.21)
===========
</TABLE>
See accompanying notes to unaudited condensed pro forma financial statements.
<PAGE> 34
LIBERTY MEDIA CORPORATION
Notes to Condensed Pro Forma Financial Statements
June 30, 1994
(unaudited)
(1) On July 11, 1994, Rainbow Program Enterprises ("Rainbow") purchased a
49.9% general partnership interest in AMC from Liberty under the terms
of a buy/sell provision contained in the AMC partnership agreement.
In connection with the purchase, Rainbow acquired an option to
purchase the remaining 0.1% general partnership interest in AMC from
Liberty for $373,000. The proceeds of $180,249,000 included the
economic benefit of Liberty's consulting agreement with AMC assigned
by Liberty to Cablevision Systems Corporation, the parent company of
Rainbow.
(2) On November 11, 1993, Liberty entered into an agreement with the staff
of the Federal Trade Commission pursuant to which Liberty agreed to
divest all of its equity interests in QVC during an 18 month time
period if QVC was successful in its offer to buy Paramount
Communications, Inc. ("Paramount") and not to vote or otherwise
exercise or influence control over QVC until such time as QVC withdrew
its offer for Paramount. Simultaneously, Liberty agreed to withdraw
from a stockholders' agreement pursuant to which Liberty and certain
other stockholders exercised control over QVC (the "Stockholders'
Agreement"). On February 15, 1994, QVC terminated its offer for
Paramount. Upon termination of such offer, Liberty had the right to
be reinstated as a party to the Stockholders' Agreement so long as
such option was exercised within 90 days after such termination.
On November 16, 1993, Liberty sold 1,690,041 shares of common stock of
QVC to Comcast Corporation ("Comcast") for aggregate consideration of
approximately $31,461,000. The sale to Comcast reduced Liberty's
interest in QVC common stock (on a fully diluted basis) from 21.6% to
18.5%. Liberty continued to account for its investment in QVC under
the equity method, although it no longer exercised significant control
over such affiliate, due to the pending determination of whether the
Company would rejoin the control group under the Stockholders'
Agreement. As a result of the election on May 13, 1994 by Liberty to
forego the exercise of its option to be reinstated as a party to the
Stockholders' Agreement, Liberty began as of that date to account for
its investment in QVC under the cost method.
(3) Represents cash received from the sale of the 49.9% partnership
interest in AMC by Liberty, pursuant to the terms of the buy/sell
provision contained in the AMC partnership agreement (see note 1), and
the corresponding increase in investment in affiliates, payables and
accruals, and common stockholders' equity. Such increase in
investment in affiliates is due to a negative balance in Liberty's
carrying value due to distributions in excess of Liberty's basis in
such investment. The increase in payables and accruals represents the
estimated current income taxes payable on the sale. Increase in
deferred income taxes represents the reversal of the temporary
difference resulting from basis for income tax purposes in excess of
basis for financial statement purposes. The increase in common
stockholders' equity is due to the difference between Liberty's
carrying value of such investment and the purchase price of the same
reduced by the estimated income tax effect. Such gain ($183,208,000)
is not reflected in the pro forma combined statement of operations due
to its non-recurring nature.
(continued)
<PAGE> 35
LIBERTY MEDIA CORPORATION
Notes to Condensed Pro Forma Financial Statements
(unaudited)
(4) The TCI/Liberty Mergers, which were consummated on August 4, 1994,
were structured as a tax free exchange whereby the common stock of Old
TCI and Liberty and the preferred stock of Liberty were exchanged for
like shares of TCI. The merger agreement provided that each share of
Old TCI's and Liberty's common stock (including shares held by Old
TCI's or Liberty's subsidiaries) would be converted into one share and
0.975 of a share, respectively, of the corresponding class of TCI's
common stock. Shares of Liberty Class E Preferred Stock were
converted into shares of a preferred stock of TCI having designations,
preferences, rights and qualifications, limitations and restrictions
substantially identical to the shares of preferred stock being
converted. Shares of the remaining Liberty preferred stock held by
subsidiaries of Old TCI were converted into shares of a class or
series of TCI preferred stock having an equivalent value. Adjustment
represents the conversion of Liberty's investment in Old TCI common
stock into an investment in TCI common stock. Such amount is
reflected as a reduction of stockholders' equity due to its related
party nature. Such conversion of shares is reflected at the carryover
basis of Liberty's investment in Old TCI.
(5) Reflects the elimination of the historical preferred stock of Liberty
held by Old TCI or its subsidiaries. Such historical preferred stock
of Liberty was converted into TCI preferred stock having an equivalent
value. See note 4.
(6) Elimination of share of earnings of QVC through May 13, 1994.
(7) Elimination of share of earnings of AMC.
(8) Estimated income tax effect of the pro forma adjustments.
(9) Reflects the elimination of the preferred stock dividend requirement
on Liberty preferred stock converted into preferred stock of TCI. See
note 4.
(10) On June 3, 1993, Liberty completed the transaction contemplated by the
Recapitalization Agreement entered into on March 26, 1993 with certain
subsidiaries of Old TCI (such transaction is included in the Liberty
historical column of the pro forma balance sheet). Pursuant to the
Recapitalization Agreement, Liberty purchased 100% of the outstanding
shares of its Class C Redeemable, Exchangeable Preferred Stock (the
"Class C Preferred Stock") and 927,900 shares of its Class A common
stock. Liberty paid a purchase price of approximately $175 million
for the Class C Preferred Stock and approximately $19 million for the
Class A common stock. The aggregate purchase price of approximately
$194 million was satisfied by delivery of $12 million in cash and four
promissory notes totaling $182 million. In the accompanying unaudited
condensed pro forma statements of operations, the preferred stock
dividend requirement on such purchased preferred stock has been
eliminated.
(continued)
<PAGE> 36
LIBERTY MEDIA CORPORATION
Notes to Condensed Pro Forma Financial Statements
(unaudited)
(11) On February 11, 1993, Liberty acquired from RMS Limited Partnership
20,000,000 shares of Class B common stock (the "Class B Stock") of HSN
for an aggregate purchase price of $58 million in cash and 8,000,000
shares of the Class A common stock of Liberty. Additionally, on June
1, 1993, Liberty completed the purchase of approximately 16 million
shares of the common stock ("Common Stock") of HSN at a price of $7.00
per share (the "Tender"). In addition, Liberty had acquired Common
Stock of HSN previous to the acquisition of the Class B Stock (such
transactions are included in the Liberty historical column of the pro
forma balance sheet).
(12) On March 15, 1993, Mile Hi Cable Partners, L.P. ("New Mile Hi")
completed the acquisition (the "Acquisition") of all the general and
limited partnership interests in Mile Hi, the owner of the cable
television system serving Denver, Colorado (such acquisition is
included in the Liberty historical column of the pro forma balance
sheet). New Mile Hi is a limited partnership formed among Community
Cable Television ("CCT") (78% limited partnership interest), Daniels
Communications, Inc. ("DCI") (1% limited partnership interest) and P &
B Johnson Corp. (21% general partnership interest), a corporation
controlled by Robert L. Johnson, a member of the Board of Directors of
Liberty. CCT is a general partnership in which a wholly-owned
subsidiary of Liberty is a 50.001% partner and a wholly-owned
subsidiary of TCIC is a 49.999% partner. New Mile Hi is a
consolidated subsidiary of Liberty for financial reporting purposes.
Prior to the Acquisition, Liberty, through a wholly-owned subsidiary,
indirectly owned a 32.175% interest in Mile Hi through its ownership
of a limited partnership interest in Daniels & Associates Partners
Limited ("DAPL"), one of Mile Hi's general partners.
DAPL was liquidated on March 12, 1993, at which time a subsidiary of
Liberty (and partner in DAPL) received a liquidating distribution
consisting of a portion of DAPL's partnership interest in Mile Hi
representing the 32.175% interest in Mile Hi and a loan receivable of
approximately $50 million (the "Mile Hi Note").
Of the $110 million in cash required by New Mile Hi to complete the
transaction, $105 million was loaned to New Mile Hi by CCT and $5
million was provided by Mr. Johnson's corporation as a capital
contribution to New Mile Hi. Of the $5 million contributed by Mr.
Johnson's corporation, approximately $4 million was provided by CCT
through loans to Mr. Johnson and trusts for the benefit of his
children. CCT funded its loans to New Mile Hi and the Johnson
interests by drawing down $93 million under its revolving credit
facility and by borrowing $16 million from TCIC in the form of a
subordinated note.
(continued)
<PAGE> 37
LIBERTY MEDIA CORPORATION
Notes to Condensed Pro Forma Financial Statements
(unaudited)
(13) Depreciation and amortization of the purchase price of Mile Hi and HSN
allocated to its tangible and intangible assets are based upon
weighted average lives of 12-1/2 years for tangible assets, 30 years
for intangible assets and 40 years for franchise costs.
(14) Represents interest on borrowings to finance the cash portion of the
consideration for the acquisition of the partnership interests in Mile
Hi and the interest on the promissory notes delivered to Old TCI
pursuant to the Recapitalization Agreement (see note 10). Interest on
the borrowings for the Mile Hi acquisition is calculated at the
weighted average rate of 6% in effect for the year ended December 31,
1993.
(15) Reflects the reduction in interest expense arising from the assumed
repayment of Mile Hi debt at January 1, 1993 and the elimination of
the intercompany interest expense recorded by Mile Hi on its debt to
CCT.
(16) Elimination of share of losses of Mile Hi through March 15, 1993.
(17) Represents the interest income on the loan to a minority partner (see
note 12).
(18) Represents the minority partners' 22% interest in the pro forma losses
of Mile Hi adjusted for the effects of the Acquisition (see note 12).
(19) Represents the minority shareholders' 58.5% interest in the pro forma
losses of HSN (see note 11).
(20) Represents the preferred stock dividend requirement on the additional
shares of Class E Preferred Stock related to the conversion of all of
the outstanding shares (10,974 shares) of Liberty's Class A Preferred
Stock into 4,405,678 shares of Liberty Class A common stock and 55,070
shares of Class E Preferred Stock.
<PAGE> 38
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly TCI/Liberty Holding Company)
Condensed Pro Forma Combined Financial Statements
June 30, 1994
(unaudited)
The following unaudited condensed pro forma combined balance sheet of
TCI, dated as of June 30, 1994, assumes that (i) the proposed TeleCable Merger
and (ii) the TCI/Liberty Mergers, had occurred as of such date. See notes (1)
and (2).
In addition, the following unaudited condensed pro forma combined
statements of operations of TCI for the six months ended June 30, 1994 and the
year ended December 31, 1993 assume that the Mergers had occurred prior to
January 1, 1993.
The unaudited pro forma results do not purport to be indicative of the
results of operations that would have been obtained if the Mergers had occurred
prior to January 1, 1993. These condensed pro forma combined financial
statements of TCI should be read in conjunction with the condensed pro forma
financial statements and the related notes thereto of TCIC and Liberty included
elsewhere herein and the respective historical financial statements and the
related notes thereto of TCIC and Liberty. The pro forma financial statements
of TCI represent a combination of the separate pro forma statements of TCIC and
Liberty in giving effect to the Mergers.
<PAGE> 39
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly TCI/Liberty Holding Company)
Condensed Pro Forma Combined Balance Sheet
(unaudited)
<TABLE>
<CAPTION>
June 30, 1994
-------------------------------------------------------------
TCIC Liberty Pro forma TCI
Pro forma Pro forma adjustments(1)(2) Pro forma
---------- ---------- ----------------- ------------
Assets amounts in millions
- ------
<S> <C> <C> <C> <C>
Cash, receivables and other
current assets $ 235 460 -- 695
Investment in and advances to Liberty 305 -- (213) (3) --
(92) (4)
Investment in other affiliates and
Turner Broadcasting System, Inc.,
and related receivables 1,503 771 -- 2,274
Property and equipment, net of
accumulated depreciation 5,789 249 -- 6,038
Franchise costs, intangibles and
other assets, net of amortization 11,537 446 -- 11,983
------- ----- ---- ------
$19,369 1,926 (305) 20,990
======= ===== ==== ======
Liabilities and Stockholders' Equity
- ------------------------------------
Payables and accruals $ 888 345 -- 1,233
Due to TCIC -- 213 (213) (3) --
Debt 10,396 230 -- 10,626
Deferred income taxes 4,258 177 (5) (6) 4,430
Other liabilities 104 3 -- 107
------- ----- ---- ------
Total liabilities 15,646 968 (218) 16,396
------- ----- ---- ------
Minority interests 321 187 (92) (4) 416
Class A Preferred Stock -- -- -- (5) --
Stockholders' equity:
Preferred Stock -- -- 1 (7) 1
Class A common stock 483 88 42 (7) 611
(2) (8)
Class B common stock 47 43 (1) (8) 89
Additional paid-in capital 3,618 393 (43) (7) 3,867
(109) (5)
5 (6)
3 (8)
Cumulative foreign currency
translation adjustment (14) -- -- (14)
Unrealized holding gains for
available-for sale securities 128 242 -- 370
Retained earnings (deficit) (310) 124 -- (186)
Receivable from related party -- (15) -- (15)
Treasury stock -- -- (545) (5) (545)
Investment in TCI (550) (104) 654 (5) --
------- ----- ---- ------
3,402 771 5 4,178
------- ----- ---- ------
$19,369 1,926 (305) 20,990
======= ===== ==== ======
</TABLE>
See accompanying notes to unaudited condensed pro forma combined financial
statements.
<PAGE> 40
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly TCI/Liberty Holding Company)
Condensed Pro Forma Combined Statement of Operations
(unaudited)
<TABLE>
<CAPTION>
Six months ended June 30, 1994
----------------------------------------------------------------
TCIC Liberty Pro forma TCI
Pro forma Pro forma adjustments(1)(2) Pro forma
--------- --------- ----------------- ------------
amounts in millions, except per share amounts
<S> <C> <C> <C> <C>
Revenue $ 2,287 675 (35)(9) 2,927
Operating, selling, general and
administrative expenses and
compensation relating to
stock appreciation rights (1,303) (612) 35 (9) (1,880)
Depreciation and amortization (527) (27) -- (554)
-------- ----- ---- -------
Operating income 457 36 -- 493
Interest expense (374) (19) 21 (10) (372)
Interest and dividend income 20 12 (21)(10) 11
Share of earnings (losses) of
affiliates, net (30) 10 -- (20)
Loss on early extinguishment of debt (2) -- -- (2)
Other income (expense), net 2 (9) -- (7)
------- ----- ---- -------
Earnings before income taxes 73 30 -- 103
Income tax expense (45) (13) -- (58)
------- ----- ---- -------
Net earnings 28 17 -- 45
Dividend requirement on
redeemable preferred stocks -- -- (13)(11) (13)
------- ----- ---- -------
Net earnings attributable
to common shareholders $ 28 17 (13) 32
======= ===== ==== =======
Primary and fully diluted earnings
attributable to common shareholders per
common and common equivalent share $ .05 (13)
=======
</TABLE>
See accompanying notes to unaudited condensed pro forma combined financial
statements.
<PAGE> 41
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly TCI/Liberty Holding Company)
Condensed Pro Forma Combined Statement of Operations
(unaudited)
<TABLE>
<CAPTION>
Year ended December 31, 1993
-----------------------------------------------------------
TCIC Liberty Pro forma TCI
Pro forma Pro forma adjustments(1)(2) Pro forma
--------- --------- ----------------- ------------
amounts in millions, except per share amounts
<S> <C> <C> <C> <C>
Revenue $ 4,440 1,264 (55)(9) 5,649
Operating, selling, general and
administrative expenses and
compensation relating to
stock appreciation rights (2,489) (1,213) 55 (9) (3,647)
Depreciation and amortization (1,003) (59) -- (1,062)
------- ------ --- ------
Operating income (loss) 948 (8) -- 940
Interest expense (755) (41) 9 (10) (787)
Interest and dividend income 34 25 (9)(10) 50
Share of earnings (losses) of
affiliates, net (76) 9 -- (67)
Gain on disposition 44 32 -- 76
Loss on transactions with TCIC -- (30) -- (30)(12)
Loss on early extinguishment of debt (17) (7) -- (24)
Other expense, net (11) (6) -- (17)
------- ------ --- ------
Earnings (loss) before
income taxes 167 (26) -- 141
Income tax expense (170) (4) -- (174)
------- ------ --- ------
Net loss (3) (30) -- (33)
Dividend requirement on
redeemable preferred stocks -- -- (26)(11) (26)
------- ------ --- ------
Net loss attributable
to common shareholders $ (3) (30) (26) (59)
======= ====== === ======
Loss per common share $ (.10)(14)
======
</TABLE>
See accompanying notes to unaudited condensed pro forma combined financial
statements.
<PAGE> 42
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly TCI/Liberty Holding Company)
Notes to Condensed Pro Forma Combined Financial Statements
June 30, 1994
(unaudited)
(1) As of August 8, 1994, TCI, TCIC and TeleCable entered into a
definitive merger agreement whereby TeleCable will be merged into
TCIC. The aggregate $1.6 billion purchase price will be satisfied by
TCIC's assumption of approximately $300 million of TeleCable's net
liabilities and the issuance to TeleCable's shareholders of shares of
TCI Class A common stock (currently estimated to be approximately 42
million shares) and 1 million shares of TCI Convertible Preferred
Stock, Series D with an aggregate initial liquidation value of $300
million. Such preferred stock, which will accrue dividends at a rate
of 5.5% per annum, will be convertible into 10 million shares of TCI
Class A common stock and will be redeemable by TCI after five years.
Although the amount of net liabilities to be assumed by TCIC and the
number of TCI Class A common shares to be issued to TeleCable's
shareholders are subject to closing adjustments, management does not
believe that any such adjustments will be material. The merger
agreement requires the approval of TeleCable's shareholders and
various franchise and government authorities.
(2) The TCI/Liberty Mergers, which were consummated on August 4, 1994,
were structured as a tax free exchange whereby the common stock of Old
TCI and Liberty and the preferred stock of Liberty were exchanged for
like shares of TCI. The merger agreement provided that each share of
Old TCI's and Liberty's common stock (including shares held by Old
TCI's or Liberty's subsidiaries) would be converted into one share and
0.975 of a share, respectively, of the corresponding class of TCI's
common stock. Shares of Liberty Class E Preferred Stock were
converted into shares of a preferred stock of TCI having designations,
preferences, rights and qualifications, limitations and restrictions
substantially identical to the shares of preferred stock being
converted. Shares of the remaining Liberty preferred stock held by
subsidiaries of Old TCI were converted into shares of a class or
series of TCI preferred stock having an equivalent value.
(3) Represents the elimination of intercompany indebtedness between TCIC
and Liberty. See note (2) above.
(4) Represents the elimination of TCIC's minority interest in the equity
of a consolidated subsidiary of Liberty. See note (2) above.
(5) Represents the reclassification to treasury stock of shares of TCI
held by TCIC, Liberty or their respective subsidiaries previously
reflected as "Investment in TCI". All preferred stock of TCI held by
TCIC or its subsidiaries (also reflected in the TCIC pro forma
financial information as "Investment in TCI") has been eliminated in
consolidation with TCI. See note (2) above.
(6) Represents the elimination of temporary differences associated with
TCIC's and Liberty's investments in TCI preferred and common stock.
See note (2) above.
(7) Represents the issuance to TeleCable shareholders of TCI Convertible
Preferred Stock, Series D and Class A common stock in connection with
the TeleCable Merger.
(8) Reflects the net conversion of Old TCI and Liberty common stock held
other than by Old TCI, Liberty or their subsidiaries, at the exchange
ratios described in note 2, into like shares of TCI.
(continued)
<PAGE> 43
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly TCI/Liberty Holding Company)
Notes to Condensed Pro Forma Combined Financial Statements
(9) Represents the elimination of intercompany revenue and operating
expenses between TCIC and Liberty arising from the sale of certain
cable television programming to their respective cable television
subscribers. See note (2) above.
(10) Represents the elimination of interest on intercompany indebtedness
between TCIC and Liberty. See note (2) above.
(11) Represents the dividend requirements on TCI's (i) Convertible
Preferred Stock, Series D (to be issued in connection with the
TeleCable Merger - see note 1) and Class B, 6% Cumulative Redeemable
Exchangeable Junior Preferred Stock (issued in connection with the
TCI/Liberty Mergers - see note 2).
(12) Amount not eliminated for pro forma purposes as a reserve for an
impairment would have been required (based upon fair market value of
underlying asset) equal to the loss recognized by Liberty. See note
(2) above.
(13) Reflects primary and fully diluted earnings per common and common
equivalent share based upon 652,017,732 weighted average shares. Such
amount is calculated utilizing (i) 492,134,730 weighted average shares
of Old TCI at June 30, 1994 (such amount representing Old TCI's
weighted average shares, as disclosed in its historical financial
statements) reduced by 6,525,721 shares of Old TCI common stock
previously held by Liberty (ii) 127,799,557 weighted average shares of
Liberty at June 30, 1994 (such amount representing Liberty's weighted
average shares, as disclosed in its historical financial statements,
adjusted by 0.975 of a share) reduced by 3,390,834 shares of Liberty
common stock (as adjusted by 0.975 of a share) previously held by Old
TCI and (iii) 42,000,000 shares of TCI Class A common stock to be
issued in connection with the TeleCable Merger. Shares issuable upon
conversion of the Convertible Preferred Stock, Series D (see note 1)
have not been included in the computation of weighted average shares
outstanding for the six months ended June 30, 1994 because their
inclusion would be anti-dilutive.
(14) Reflects loss per common share based upon 592,232,340 weighted average
shares. Such amount is calculated utilizing (i) 432,566,150 weighted
average shares of Old TCI at December 31, 1993 (such amount
representing Old TCI's weighted average shares, as disclosed in its
historical financial statements) reduced by 6,525,721 shares of Old
TCI common stock previously held by Liberty (ii) 127,582,745 weighted
averages shares of Liberty at December 31, 1993 (such amount
representing Liberty's weighted average shares, as disclosed in its
historical financial statements, shares of Liberty common stock issued
in the HSN merger and Liberty common stock repurchased from Old TCI
in 1993, all of which have been adjusted by 0.975 of a share) reduced
by 3,390,834 shares of Liberty common stock (as adjusted by 0.975 of
a share) previously held by Old TCI and (iii) 42,000,000 shares of
TCI Class A common stock to be issued in connection with the TeleCable
Merger. Shares issuable upon conversion of the Convertible Preferred
Stock, Series D (see note 1) have not been included in the computation
of weighted average shares outstanding for the year ended December 31,
1993 because their inclusion would be anti-dilutive.
<PAGE> 44
EXHIBIT INDEX
Listed below are the exhibits which are filed as part of this report (according
to the number assigned to them in Item 601 of Regulation S-K):
(2) Agreement and Plan of Merger, dated as of August 8, 1994, among
Tele-Communications, Inc., TCI Communications, Inc. and TeleCable
Corporation*
Incorporated herein by reference to Tele-Communications, Inc.'s
Current Report on Form 8-K dated August 18, 1994 (Commission
File No. 0-20421)
(23) Consent of Price Waterhouse LLP
_________________________
* The Agreement and Plan of Merger contains indices identifying the items,
including exhibits and schedules, annexed thereto. A copy of any omitted
item will be furnished supplementally to the Commission upon request.
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement (No. 33-59058) on Form S-8 of TCI Communications, Inc. (formerly
Tele-Communications, Inc.) Employee Stock Purchase Plan; Registration Statement
(No. 2-87938) on Form S-8 of TCI Communications, Inc. 1982 Incentive Stock
Option Plan; Registration Statement (No. 33-44532) on Form S-8 of United
Artists Theatre Circuit, Inc. Employee Stock Purchase Plan; Registration
Statements (Nos. 2-96706, 2-99512, 33-12385, 33-51104, 33-58198 and 33-60982)
on Form S-3; the Post-Effective Amendment No. 1 to Form S-4 Registration
Statement (No. 33-43009) on Form S-8 of TCI Communications, Inc.; and
Registration Statement (No. 33-54263) on Form S-4 of Tele-Communications, Inc.
(formerly TCI/Liberty Holding Company) of our report dated February 4, 1994,
relating to the consolidated balance sheet of TeleCable Corporation and
subsidiaries as of December 31, 1993 and 1992, and the related consolidated
statements of operations and of cash flows for the years then ended, which
appears in the Current Report on Form 8-K of Tele-Communications, Inc. and TCI
Communications, Inc. dated August 26, 1994.
Price Waterhouse LLP
Norfolk, Virginia
August 22, 1994
