<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
F O R M 10-Q
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number 0-5550
TCI COMMUNICATIONS, INC.
(formerly Tele-Communications, Inc.)
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
State of Delaware 84-0588868
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5619 DTC Parkway
Englewood, Colorado 80111
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 267-5500
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
The number of shares outstanding of the Registrant's common stock (net
of shares held in treasury), as of August 4, 1994, was:
Class A common stock - 406,130,942 shares; and
Class B common stock - 47,258,787 shares.
<PAGE> 2
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly Tele-Communications Inc.)
Consolidated Balance Sheets
(unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
--------- ------------
Assets amounts in millions
- ------
<S> <C> <C>
Cash $ 4 1
Trade and other receivables, net 215 232
Investment in Liberty Media Corporation
("Liberty") (note 4) 522 489
Investments in other affiliates, accounted for
under the equity method, and related
receivables (note 5) 793 645
Investment in Turner Broadcasting System, Inc. ("TBS")
(note 6) 690 491
Property and equipment, at cost:
Land 73 73
Distribution systems 7,162 6,629
Support equipment and buildings 887 818
-------- ------
8,122 7,520
Less accumulated depreciation 2,915 2,585
-------- ------
5,207 4,935
-------- ------
Franchise costs 10,649 10,620
Less accumulated amortization 1,552 1,423
-------- ------
9,097 9,197
-------- ------
Other assets, at cost, net of amortization 590 530
-------- ------
$ 17,118 16,520
======== ======
</TABLE>
(continued)
I-1
<PAGE> 3
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly Tele-Communications, Inc.)
Consolidated Balance Sheets, continued
(unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
-------- ------------
Liabilities and Stockholders' Equity amounts in millions
- ------------------------------------
<S> <C> <C>
Accounts payable $ 134 124
Accrued interest 169 157
Other accrued expenses 556 500
Debt (note 7) 10,111 9,900
Deferred income taxes 3,420 3,310
Other liabilities 99 114
-------- ------
Total liabilities 14,489 14,105
-------- ------
Minority interests in equity
of consolidated subsidiaries 318 285
Redeemable preferred stocks -- 18
Stockholders' equity (note 8):
Preferred stock, $1 par value.
Authorized 10,000,000 shares; issued and
outstanding 6,201 shares of redeemable
preferred stocks in 1993 -- --
Class A common stock, $1 par value.
Authorized 1,000,000,000 shares;
issued 483,114,980 shares in 1994
and 481,837,347 shares in 1993 483 482
Class B common stock, $1 par value.
Authorized 100,000,000 shares;
issued 47,258,787 shares in
1994 and 1993 47 47
Additional paid-in capital 2,310 2,293
Cumulative foreign currency
translation adjustment (14) (29)
Unrealized holding gains for
available-for-sale securities 128 --
Accumulated deficit (310) (348)
-------- ------
2,644 2,445
Treasury stock, at cost (79,335,038
shares of Class A common stock) (333) (333)
-------- ------
Total stockholders' equity 2,311 2,112
-------- ------
Commitments and contingencies (note 9)
$ 17,118 16,520
======== ======
</TABLE>
See accompanying notes to consolidated financial statements.
I-2
<PAGE> 4
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly Tele-Communications, Inc.)
Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
Three months Six months
ended ended
June 30, June 30,
-------------------- -----------------
1994 1993 1994 1993
------- ----- ----- -----
amounts in millions,
except per share amounts
<S> <C> <C> <C> <C>
Revenue (note 4) $ 1,081 1,042 2,141 2,060
Operating costs and expenses:
Operating (note 4) 329 299 644 591
Selling, general and administrative 300 268 595 530
Compensation relating to stock
appreciation rights -- 3 -- 3
Adjustment to compensation relating to
stock appreciation rights 1 -- (18) --
Depreciation 173 152 336 296
Amortization 73 74 145 147
------- ----- ----- -----
876 796 1,702 1,567
------- ----- ----- -----
Operating income 205 246 439 493
Other income (expense):
Interest expense (185) (182) (363) (363)
Interest and dividend income 10 7 20 12
Share of earnings (losses) of Liberty
(note 4) 10 (18) 24 (8)
Share of losses of other affiliates,
net (note 5) (21) (12) (30) (26)
Gain on disposition of assets 5 5 5 45
Loss on early extinguishment of debt -- (3) (2) (11)
Minority interests in earnings of
consolidated subsidiaries, net 2 -- -- (4)
Other, net 1 -- (3) (4)
------- ----- ----- -----
(178) (203) (349) (359)
------- ----- ----- -----
Earnings before income taxes 27 43 90 134
Income tax expense (21) (17) (52) (55)
------- ----- ----- -----
Net earnings 6 26 38 79
Dividend requirement on redeemable
preferred stocks -- -- -- (1)
------- ----- ----- -----
Net earnings attributable
to common shareholders $ 6 26 38 78
======= ===== ===== =====
Primary and fully diluted earnings
attributable to common shareholders
per common and common equivalent
share (note 2) $ .01 .06 .08 .17
======= ===== ===== =====
</TABLE>
See accompanying notes to consolidated financial statements.
I-3
<PAGE> 5
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly Tele-Communications, Inc.)
Consolidated Statement of Stockholders' Equity
Six months ended June 30, 1994
(unaudited)
<TABLE>
<CAPTION>
Unrealized
Cumulative holding
foreign gains for
Common stock Additional currency available- Total
------------ paid-in translation for-sale Accumulated Treasury stockholders'
Class A Class B capital adjustment securities deficit stock equity
------- ------- ---------- ----------- ---------- ------------ --------- -----------
amounts in millions
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
January 1, 1994 $ 482 47 2,293 (29) -- (348) (333) 2,112
Net earnings -- -- -- -- -- 38 -- 38
Conversion of
redeemable
preferred stock 1 -- 17 -- -- -- -- 18
Foreign currency
translation
adjustment -- -- -- 15 -- -- -- 15
Unrealized holding gains
for available-for-sale
securities -- -- -- -- 128 -- -- 128
----- -- ----- --- --- ---- ---- -----
Balance at
June 30, 1994 $ 483 47 2,310 (14) 128 (310) (333) 2,311
===== == ===== === === ==== ==== =====
</TABLE>
See accompanying notes to consolidated financial statements.
I-4
<PAGE> 6
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly Tele-Communications, Inc.)
Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30,
-------------------------
1994 1993
------- ------
amounts in millions
(see note 3)
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 38 79
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 481 443
Compensation relating to stock appreciation rights -- 3
Adjustment to compensation relating to stock
appreciation rights (18) --
Share of earnings of Liberty (24) 8
Share of losses of other affiliates 30 26
Deferred income tax expense 21 36
Minority interests in earnings -- 4
Amortization of debt discount -- 14
Loss on early extinguishment of debt 2 11
Gain on disposition of assets (5) (45)
Payment received on preferred stock
investment redemption -- 197
Noncash interest and dividend income (4) (4)
Changes in operating assets and liabilities,
net of the effect of acquisitions:
Change in receivables 28 (5)
Change in accrued interest 12 37
Change in other accruals and payables 52 70
------- ------
Net cash provided by operating activities 613 874
------- ------
Cash flows from investing activities:
Cash paid for acquisitions (6) (70)
Capital expended for property and equipment (599) (440)
Proceeds from disposition of assets 30 137
Additional investments in and
loans to affiliates and others (212) (171)
Repayment of loans by affiliates and others 32 42
Return of capital from affiliates -- 1
Other investing activities (51) (60)
------- ------
Net cash used in investing activities (806) (561)
------- ------
Cash flows from financing activities:
Borrowings of debt 1,564 3,404
Repayments of debt (1,365) (3,452)
Preferred stock dividends of subsidiaries (3) (3)
Preferred stock dividends -- (1)
Repurchase of preferred stock -- (92)
Repurchases of common stock -- (3)
------- ------
Net cash provided (used) by financing activities 196 (147)
------- ------
Net increase in cash 3 166
Cash at beginning of period 1 34
------- ------
Cash at end of period $ 4 200
======= ======
</TABLE>
See accompanying notes to consolidated financial statements.
I-5
<PAGE> 7
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly Tele-Communications, Inc.)
Notes to Consolidated Financial Statements
June 30, 1994
(unaudited)
(1) General
The accompanying consolidated financial statements include the
accounts of TCI Communications, Inc. (formerly Tele-Communications,
Inc. or "Old TCI") and those of all majority-owned subsidiaries
("TCI" or the "Company"). All significant intercompany accounts and
transactions have been eliminated in consolidation.
As of January 27, 1994, Old TCI and Liberty entered into a definitive
agreement to combine the two companies (the "Mergers"). The
transaction was consummated on August 4, 1994 and was structured as a
tax free exchange of Class A and Class B shares of both companies and
preferred stock of Liberty for like shares of a newly formed holding
company, TCI/Liberty Holding Company. In connection with the Mergers,
Old TCI changed its name to TCI Communications, Inc. and TCI/Liberty
Holding Company changed its name to Tele-Communications, Inc.
("Holding Company"). Old TCI shareholders received one share of
Holding Company for each of their shares. Liberty common shareholders
received 0.975 of a share of Holding Company for each of their common
shares.
The accompanying interim consolidated financial statements are
unaudited but, in the opinion of management, reflect all adjustments
(consisting of normal recurring accruals) necessary for a fair
presentation of the results for such periods. The results of
operations for any interim period are not necessarily indicative of
results for the full year. These consolidated financial statements
should be read in conjunction with the consolidated financial
statements and notes thereto contained in the Company's Annual Report
on Form 10-K, as amended, for the year ended December 31, 1993.
Certain amounts have been reclassified for comparability with the 1994
presentation.
(2) Earnings Per Common and Common Equivalent Share
Primary earnings per common and common equivalent share attributable
to common shareholders was computed by dividing net earnings
attributable to common shareholders by the weighted average number of
common and common equivalent shares outstanding (451.4 million and
468.3 million for the three months ended June 30, 1994 and 1993,
respectively; and 492.1 million and 468.5 million for the six months
ended June 30, 1994 and 1993, respectively). Shares issuable upon
conversion of the Convertible Notes (see note 7) have not been
included in the computation of weighted average shares outstanding for
the three months ended June 30, 1994 because their inclusion would be
anti-dilutive.
Fully diluted earnings per common and common equivalent share
attributable to common shareholders was computed by dividing earnings
attributable to common shareholders by the weighted average number of
common and common equivalent shares outstanding (451.4 million and
469.9 million for the three months ended June 30, 1994 and 1993,
respectively; and 492.1 million and 469.9 million for the six months
ended June 30, 1994 and 1993, respectively). Share issuable upon
conversion of the Convertible Notes (see note 7) have not been
included in the computation of weighted average shares outstanding for
the three months ended June 30, 1994 because their inclusion would be
anti-dilutive. Shares issuable upon conversion of the Liquid Yield
OptionTM Notes and upon conversion of the Convertible Preferred Stock
have not been included in the 1993 computations of weighted average
shares outstanding because their inclusion would be anti-dilutive.
(continued)
I-6
<PAGE> 8
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly Tele-Communications, Inc.)
Notes to Consolidated Financial Statements
(3) Supplemental Disclosures to Consolidated Statements of Cash Flows
Cash paid for interest was $351 million and $312 million for the six
months ended June 30, 1994 and 1993, respectively. Also, during these
periods, cash paid for income taxes was not material.
Significant noncash investing and financing activities are as follows:
<TABLE>
<CAPTION>
Six months ended
June 30,
-----------------------
1994 1993
------ -----
amounts in millions
<S> <C> <C>
Common stock issued upon conversion
of redeemable preferred stock $ 18 --
====== =====
Effect of foreign currency translation
adjustment on book value of foreign
equity investments $ 15 4
====== =====
Unrealized gains, net of deferred income
taxes, on available-for-sale securities $ 128 --
====== =====
Noncash exchange of equity investments
and consolidated subsidiaries for
consolidated subsidiary $ 38 --
====== =====
Cash paid for acquisitions:
Fair value of assets acquired $ 48 77
Liabilities assumed (7) (7)
Minority interests in equity of
acquired entities (35) --
------ -----
Cash paid for acquisitions $ 6 70
====== =====
Receipt of notes receivable upon
disposition of Liberty common
stock and preferred stock $ -- 182
====== =====
Noncash exchange of equity investment
for consolidated subsidiary and
equity investment $ -- 19
====== =====
Noncash capital contribution to
Community Cable Television ("CCT")
(note 4) $ -- 22
====== =====
Common stock issued upon conversion
of notes $ -- 1
====== =====
</TABLE>
(continued)
I-7
<PAGE> 9
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly Tele-Communications, Inc.)
Notes to Consolidated Financial Statements
(4) Investment in Liberty
TCI owned 3,477,778 shares of Liberty Class A common stock and 55,070
shares of Liberty Class E, 6% Cumulative Redeemable Exchangeable
Junior Preferred Stock ("Liberty Class E Preferred Stock"). Upon
consummation of the Mergers, TCI received 3,390,833 shares of Class A
common stock of Holding Company and 55,070 shares of a new preferred
stock of Holding Company having designations, preferences, rights and
qualifications, limitations and restrictions that are substantially
identical to those of the Liberty Class E Preferred Stock, except that
the holders of the new preferred stock will be entitled to one vote
per share in any general election of directors of Holding Company.
Upon consummation of the Mergers, the remaining classes of preferred
stock of Liberty held by the Company were converted into the right to
receive that number of shares of a new series of preferred stock of
Holding Company having a substantially equivalent fair market value.
Due to the significant economic interest held by TCI through its
ownership of Liberty preferred stock and Liberty common stock and
other related party considerations, TCI has accounted for its
investment in Liberty under the equity method. Accordingly, the
Company has not recognized any income relating to dividends, including
preferred stock dividends, and the Company has continued to record the
earnings or losses generated by the interests contributed to Liberty
(by recognizing 100% of Liberty's earnings or losses before deducting
preferred stock dividends).
TCI and Liberty entered into an Option-Put Agreement (the "Option-Put
Agreement"), which was amended on November 30, 1993. Under the
amended Option-Put Agreement, between June 30, 1994 and September 28,
1994, and between January 1, 1996 and January 31, 1996, TCI will have
the option to purchase all of Liberty's interest in CCT and a loan
receivable in the amount of $50 million (the "Mile Hi Note") for an
amount equal to $77 million plus interest accruing at the rate of
11.6% per annum on such amount from June 3, 1993. Between April 1,
1995 and June 29, 1995, and between January 1, 1997 and January 31,
1997, Liberty will have the right to require TCI to purchase Liberty's
interest in CCT and the Mile Hi Note for an amount equal to $77
million plus interest on such amount accruing at the rate of 11.6% per
annum from June 3, 1993.
(continued)
I-8
<PAGE> 10
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly Tele-Communications, Inc.)
Notes to Consolidated Financial Statements
The Company purchases sports and other programming from certain
subsidiaries of Liberty. Charges to TCI (which are based upon
customary rates charged to others) for such programming were $24
million and $22 million for the six months ended June 30, 1994 and
1993, respectively. Such amounts are included in operating expenses
in the accompanying consolidated statements of operations. Certain
subsidiaries of Liberty purchase from TCI, at TCI's cost plus an
administrative fee, certain pay television and other programming. In
addition, a consolidated subsidiary of Liberty pays a commission to
TCI for merchandise sales to customers who are subscribers of TCI's
cable systems. Aggregate commission and charges for such programming
were $11 million and $4 million for the six months ended June 30, 1994
and 1993, respectively. Such amounts are recorded in revenue in the
accompanying consolidated statements of operations.
In September of 1993, Encore QE Programming Corp. ("QEPC"), a
wholly-owned subsidiary of Encore Media Corporation ("EMC"), a 90%
owned subsidiary of Liberty, entered into a limited partnership
agreement with TCI Starz, Inc. ("TCIS"), a wholly- owned subsidiary of
TCI, for the purpose of developing, operating and distributing STARZ!,
a first-run movie premium programming service launched in the first
quarter of 1994. QEPC is the general partner and TCIS is the limited
partner. Losses are allocated 1% to QEPC and 99% to TCIS. Profits
are allocated 1% to QEPC and 99% to TCIS until certain defined
criteria are met. Subsequently, profits are allocated 20% to QEPC and
80% to TCIS. TCIS has the option, exercisable at any time and without
payment of additional consideration, to convert its limited partner
interest to an 80% general partner interest with QEPC's partnership
interest simultaneously converting to a 20% limited partnership
interest. In addition, during specific periods commencing April 1999
and April 2001, respectively, QEPC may require TCIS to purchase, or
TCIS may require QEPC to sell, the partnership interest of QEPC in the
partnership for a formula-based price. EMC is paid a management fee
equal to 20% of "managed costs" as defined, in order to manage the
service. EMC manages the service and has agreed to provide the
limited partnership with certain programming under a programming
agreement whereby the partnership will pay its pro rata share of the
total costs incurred by EMC for such programming. The Company
accounts for the partnership as a consolidated subsidiary. (See note
9).
Summarized unaudited financial information of Liberty for the six
months ended June 30, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
Consolidated Operations 1994 1993
----------------------- ------ ----
amounts in millions
<S> <C> <C>
Revenue $ 675 483
Operating expenses (612) (463)
Depreciation and amortization (27) (21)
----- ----
Operating income (loss) 36 (1)
Interest expense (19) (13)
Other, net 7 6
----- ----
Net earnings $ 24 (8)
===== ====
</TABLE>
(continued)
I-9
<PAGE> 11
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly Tele-Communications, Inc.)
Notes to Consolidated Financial Statements
(5) Investments in Other Affiliates
Summarized unaudited results of operations for affiliates, other than
Liberty, accounted for under the equity method, are as follows:
<TABLE>
<CAPTION>
Six months
ended
Combined Operations June 30,
------------------- ----------------------
1994 1993
----- ----
amounts in millions
<S> <C> <C>
Revenue $ 420 375
Operating expenses (336) (313)
Depreciation and amortization (43) (76)
-------- -----
Operating income (loss) 41 (14)
Interest expense (14) (37)
Other, net (18) (16)
-------- -----
Net loss $ 9 (67)
======== =====
</TABLE>
Certain of the Company's affiliates are general partnerships and any
subsidiary of the Company that is a general partner in a general
partnership is, as such, liable as a matter of partnership law for all
debts of that partnership in the event liabilities of that partnership
were to exceed its assets.
(6) Investment in Turner Broadcasting System, Inc.
The Company owns shares of a class of preferred stock of TBS which has
voting rights and are convertible into shares of TBS common stock.
The holders of those preferred shares, as a group, are entitled to
elect seven of fifteen members of the board of directors of TBS, and
the Company appoints three such representatives. However, voting
control over TBS continues to be held by its chairman of the board and
chief executive officer. The Company's total holdings of TBS common
and preferred stocks represent an approximate 12% voting interest for
those matters for which preferred and common stock vote as a single
class.
In May 1993, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," effective for fiscal years
beginning after December 15, 1993. Under the new rules, debt
securities that the Company has both the positive intent and ability
to hold to maturity are carried at amortized cost. Debt securities
that the Company does not have the positive intent and ability to hold
to maturity and all marketable equity securities are classified as
available-for-sale or trading and carried at fair value. Unrealized
holding gains and losses on securities classified as available-for
sale are carried as a separate component of shareholders' equity.
Unrealized holding gains and losses on securities classified as
trading are reported in earnings.
(continued)
I-10
<PAGE> 12
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly Tele-Communications, Inc.)
Notes to Consolidated Financial Statements
The Company applied the new rules beginning in the first quarter of
1994. Application of the new rules resulted in a net increase of $191
million in the first quarter of 1994, adjusted to $128 million at June
30, 1994, to stockholders' equity, representing the recognition of
unrealized appreciation, net of taxes, for the Company's investment in
equity securities determined to be available-for-sale. The majority
of such securities represents the Company's investment in TBS common
stock. The Company holds no material debt securities.
(7) Debt
Debt is summarized as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
-------- ------------
amounts in millions
<S> <C> <C>
Parent company debt:
Senior notes $ 5,045 5,052
Bank credit facilities 602 80
Commercial paper 115 44
Other debt 2 2
------- -----
5,764 5,178
Debt of subsidiaries:
Bank credit facilities 3,082 3,264
Notes payable 1,120 1,321
Convertible notes (a) 47 47
Other debt 98 90
------- -----
$10,111 9,900
======= =====
</TABLE>
(a) These convertible notes, which are stated net of unamortized
discount of $197 million, mature on December 18, 2021. The
notes require (so long as conversion of the notes has not
occurred) an annual interest payment through 2003 equal to
1.85% of the face amount of the notes. At June 30, 1994, the
notes were convertible, at the option of the holders, into an
aggregate of 41,060,990 shares of Class A common stock.
During July and August of 1994, certain of these notes were
converted into 2,350,000 shares of Class A common stock.
The Company's bank credit facilities and various other debt
instruments generally contain restrictive covenants which require,
among other things, the maintenance of certain earnings, specified
cash flow and financial ratios (primarily the ratios of cash flow to
total debt and cash flow to debt service, as defined), and include
certain limitations on indebtedness, investments, guarantees,
dispositions, stock repurchases and/or dividend payments.
As security for borrowings under one of its credit facilities, the
Company pledged a portion of the common stock (with a quoted market
value of approximately $414 million at June 30, 1994) it holds of TBS.
(continued)
I-11
<PAGE> 13
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly Tele-Communications, Inc.)
Notes to Consolidated Financial Statements
In order to provide interest rate protection on a portion of its
variable rate indebtedness, the Company has entered into various
interest rate exchange agreements. The Company is exposed to credit
losses for the periodic settlements of amounts due under these
interest rate exchange agreements in the event of nonperformance by
the other parties to the agreements. However, the Company does not
anticipate nonperformance by the counterparties.
The fair value of the Company's debt is estimated based on the quoted
market prices for the same or similar issues or on the current rates
offered to the Company for debt of the same remaining maturities. The
fair value of debt, which has a carrying value of $10,111 million, was
$10,102 million at June 30, 1994.
The fair value of the interest rate exchange agreements is the
estimated amount that the Company would pay or receive to terminate
the agreements at June 30, 1994, taking into consideration current
interest rates and the current creditworthiness of the counterparties.
The Company would be required to pay $143 million at June 30, 1994 to
terminate the agreements.
TCI and certain of its subsidiaries are required to maintain unused
availability under bank credit facilities to the extent of outstanding
commercial paper.
The Company remains the sole obligor with respect to all indebtedness
and other obligations of Old TCI outstanding at the time the Mergers
were consummated and Holding Company has not assumed any of such
indebtedness or other obligations.
(8) Stockholders' Equity
Common Stock
The Class A common stock has one vote per share and the Class B common
stock has ten votes per share. Each share of Class B common stock is
convertible, at the option of the holder, into one share of Class A
common stock.
Stock Options
The Company had an Incentive Stock Option Plan ("ISOP") which has
expired. Options granted under the ISOP (prior to its expiration)
have an option price equal to the fair market value on the date of
grant, are all currently exercisable and expire five years from the
date of grant. Options to purchase 194,008 shares of TCI Class A
common stock are outstanding at June 30, 1994, with a purchase price
of $17.25 per share. During the six months ended June 30, 1994,
options to acquire 19,500 shares were exercised and options for 3,500
shares were cancelled.
TCI assumed certain stock options previously granted by United Artists
Entertainment Company ("UAE") to certain of its employees. These
options, which are currently exercisable, represent the right, as of
June 30, 1994, to acquire 162,228 shares of TCI Class A common stock
at adjusted purchase prices ranging from $8.83 to $18.63 per share.
During the six months ended June 30, 1994, options to acquire 5,100
shares were exercised and no options were cancelled. No additional
options may be granted by UAE.
(continued)
I-12
<PAGE> 14
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly Tele-Communications, Inc.)
Notes to Consolidated Financial Statements
The Company has adopted the 1992 Stock Incentive Plan (the "Plan").
The Plan provides for awards to be made with respect to a maximum of
10 million shares of Class A common stock. Awards may be made as
grants of stock options, stock appreciation rights, restricted shares,
stock units or any combination thereof. On November 11, 1992, stock
options in tandem with stock appreciation rights to purchase 4,020,000
shares of Class A common stock were granted pursuant to the Plan to
certain officers and other key employees at a purchase price of $16.75
per share. Such options become exercisable and vest evenly over five
years, first became exercisable beginning November 11, 1993 and expire
on November 11, 2002. During the year ended December 31, 1993, stock
options covering 50,000 shares of Class A common stock were cancelled
upon termination of employment. On October 12, 1993, stock options in
tandem with stock appreciation rights to purchase 1,355,000 shares of
TCI Class A common stock were granted pursuant to the Plan to certain
officers and other key employees at a purchase price of $16.75 per
share. During the six months ended June 30, 1994, stock options
covering 7,500 shares of Class A common stock were cancelled upon
termination of employment. On November 12, 1993, an additional grant
of stock options in tandem with stock appreciation rights to purchase
600,000 shares of TCI Class A common stock were granted to two
officers at a purchase price of $16.75 per share. Such options become
exercisable and vest evenly over four years, first become exercisable
beginning October 12, 1994 and expire on October 12, 2003. Separately
from the Plan, an additional grant of stock options in tandem with
stock appreciation rights to purchase 2,000,000 shares of TCI Class A
common stock at a purchase price of $16.75 per share was made on
November 12, 1993 to an individual who thereafter became a director of
the Company. Twenty percent of such options vested and became
exercisable immediately and the remainder become exercisable evenly
over 4 years. The options expire October 12, 1998. Estimates of the
compensation relating to these grants have been recorded through June
30, 1994, but are subject to future adjustment based upon market value
and, ultimately, on the final determination of market value when the
rights are exercised.
Other
The excess of consideration received on debentures converted or
options exercised over the par value of the stock issued is credited
to additional paid-in capital.
At June 30, 1994, there were 49,334,726 shares of TCI Class A common
stock reserved for issuance under exercise privileges related to
options and convertible debt securities described in this note 8 and
in note 7. In addition, one share of Class A common stock is reserved
for each share of Class B common stock.
(continued)
I-13
<PAGE> 15
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly Tele-Communications, Inc.)
Notes to Consolidated Financial Statements
(9) Commitments and Contingencies
On October 5, 1992, Congress enacted the Cable Television Consumer
Protection and Competition Act of 1992 (the "1992 Cable Act"). In
1993, the Federal Communications Commission ("FCC") adopted certain
rate regulations required by the 1992 Cable Act and imposed a
moratorium on certain rate increases. As a result of such actions,
the Company's basic and tier service rates and its equipment and
installation charges (the "Regulated Services") are subject to the
jurisdiction of local franchising authorities and the FCC. Basic and
tier service rates are evaluated against competitive benchmark rates
as published by the FCC, and equipment and installation charges are
based on actual costs. Any rates for Regulated Services that exceeded
the benchmarks were reduced as required by the 1993 rate regulations.
The rate regulations do not apply to the relatively few systems which
are subject to "effective competition" or to services offered on an
individual service basis, such as premium movie and pay-per-view
services.
The Company believes that it has complied in all material respects
with the provisions of the 1992 Cable Act, including its rate setting
provisions. However, the Company's rates for regulated services are
subject to review by the FCC, if a complaint has been filed, or the
appropriate franchise authority, if such authority has been certified.
If, as a result of the review process, a system cannot substantiate
its rates, it could be required to retroactively reduce its rates to
the appropriate benchmark and refund the excess portion of rates
received. Any refunds of the excess portion of tier service rates
would be retroactive to the date of complaint. Any refunds of the
excess portion of all other Regulated service rates would be
retroactive to the later of September 1, 1993 or one year prior to the
certification date of the applicable franchise authority. The amount
of refunds, if any, which could be payable by the Company in the event
that systems' rates are successfully challenged by franchising
authorities is not currently estimable.
In connection with the acquisition from TCI of a 19.9% minority
interest in Heritage Communications, Inc. ("Heritage") by Comcast,
Comcast has the right, through December 31, 1994, to require TCI to
purchase or cause to be purchased from Comcast all shares of Heritage
directly or indirectly owned by Comcast for either cash or assets or,
at TCI's election, shares of TCI common stock. The purchase price of
the shares of Heritage directly or indirectly owned by Comcast will be
determined by external appraisal.
The Company is obligated to pay fees for the license to exhibit
certain qualifying films that are released theatrically by various
motion picture studios from January 1, 1993 through December 31, 2002
(the "Film License Obligations"). The aggregate minimum liability
under certain of the license agreements is approximately $105 million.
The aggregate amount of the Film License Obligations under other
license agreements is not currently estimable because such amount is
dependent upon the number of qualifying films produced by the motion
picture studios, the amount of United States theatrical film rentals
for such qualifying films, and certain other factors. Nevertheless,
the Company's aggregate payments under the Film License Obligations
could prove to be significant.
(continued)
I-14
<PAGE> 16
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly Tele-Communications, Inc.)
Notes to Consolidated Financial Statements
The Company has guaranteed notes payable and other obligations of
affiliated and other companies with outstanding balances of
approximately $236 million at June 30, 1994.
The Company has contingent liabilities related to legal proceedings
and other matters arising in the ordinary course of business. In the
opinion of management, it is expected that amounts, if any, which may
be required to satisfy such contingencies will not be material in
relation to the accompanying consolidated financial statements.
(10) Subsequent Event
As of August 8, 1994, Holding Company, TCI and TeleCable Corporation
("TeleCable") entered into a merger agreement, whereby TeleCable will
be merged into TCI. The aggregate purchase price of $1.6 billion
will be paid with shares of Holding Company Class A common stock
(currently estimated to be 41,666,667 shares), assumption of
liabilities amounting to approximately $300 million and shares of a
Holding Company convertible preferred stock with an aggregate initial
liquidation value of $300 million. Such preferred stock shall accrue
dividends at 5-1/2% per annum, shall be convertible at the option of
its holders into 10 million shares of Holding Company Class A common
stock and shall be redeemable by Holding Company after 5 years. The
merger requires the approval of the shareholders of TeleCable and
various franchise and government authorities.
On August 5, 1994, Liberty, Comcast Corporation ("Comcast") and QVC,
Inc. ("QVC") announced that they had entered into a definitive merger
agreement (the "Merger Agreement") pursuant to which Comcast and
Liberty would acquire QVC. In accordance with the Merger Agreement,
Comcast and Liberty expect to commence on or prior to Thursday, August
11, 1994, a tender offer for all shares of stock of QVC at a net cash
price of $46 per share of QVC common stock and a net cash price of
$460 per share of QVC preferred stock. Following expiration of the
tender offer, a corporation controlled by both Comcast and Liberty
will merge with QVC and any remaining shares of QVC will be converted
into cash at the same price as offered in the tender offer.
The total cost of the acquisition of the QVC stock not currently owned
by Comcast or Liberty will be approximately $1.42 billion. Comcast
and Liberty have agreed to fund approximately $267 million and $20
million, respectively, of the acquisition with the balance expected
to be provided through debt financing, which after the merger will be
an obligation of QVC. The transaction is conditioned upon Comcast and
Liberty obtaining the requisite financing on satisfactory terms to
purchase all of the outstanding shares of QVC, upon receipt of certain
governmental approvals and other customary conditions.
I-15
<PAGE> 17
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly Tele-Communications, Inc.)
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(1) Material changes in financial condition:
On August 4, 1994, TCI and Liberty consummated the Mergers. The
transaction was structured as a tax free exchange of Class A and Class
B shares of both companies and preferred stock of Liberty for like
shares of Holding Company. TCI shareholders received one share of
Holding Company for each of their shares. Liberty common shareholders
received 0.975 of a share of Holding Company for each of their common
shares. The Company remains the sole obligor with respect to all
indebtedness and other obligations of Old TCI outstanding at the time
the Mergers were consummated and Holding Company has not assumed any
such indebtedness or other obligations.
As of August 8, 1994, Holding Company, TCI and TeleCable Corporation
("TeleCable") entered into a merger agreement, whereby TeleCable will
be merged into TCI. The aggregate purchase price of $1.6 billion
will be paid with shares of Holding Company Class A common stock
(currently estimated to be 41,666,667 shares), assumption of
liabilities amounting to approximately $300 million and shares of a
Holding Company convertible preferred stock with an aggregate initial
liquidation value of $300 million. Such preferred stock shall accrue
dividends at 5-1/2% per annum, shall be convertible at the option of
its holders into 10 million shares of Holding Company Class A common
stock and shall be redeemable by Holding Company after 5 years. The
merger requires the approval of the shareholders of TeleCable and
various franchise and government authorities.
On August 5, 1994, Liberty, Comcast and QVC announced that they had
entered into the Merger Agreement pursuant to which Comcast and
Liberty would acquire QVC. In accordance with the Merger Agreement,
Comcast and Liberty expect to commence on or prior to Thursday, August
11, 1994, a tender offer for all shares of stock of QVC at a net cash
price of $46 per share of QVC common stock and a net cash price of
$460 per share of QVC preferred stock. Following expiration of the
tender offer, a corporation controlled by both Comcast and Liberty
will merge with QVC and any remaining shares of QVC will be converted
into cash at the same price as offered in the tender offer.
The total cost of the acquisition of the QVC stock not currently owned
by Comcast or Liberty will be approximately $1.42 billion. Comcast
and Liberty have agreed to fund approximately $267 million and $20
million, respectively, of the acquisition with the balance expected
to be provided through debt financing, which after the merger will be
an obligation of QVC. The transaction is conditioned upon Comcast and
Liberty obtaining the requisite financing on satisfactory terms to
purchase all of the outstanding shares of QVC, upon receipt of certain
governmental approvals and other customary conditions. Liberty
expects that the funds required to make Liberty's $20 million cash
contribution will come from a combination of working capital and
general corporate funds and existing credit facilities of Liberty
and/or TCI.
(continued)
I-16
<PAGE> 18
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly Tele-Communications, Inc.)
(1) Material changes in financial condition (continued):
The Company generally finances acquisitions and capital expenditures
through net cash provided by operating and financing activities.
Although amounts expended for acquisitions and capital expenditures
exceed net cash provided by operating activities, the borrowing
capacity resulting from such acquisitions, construction and internal
growth has been and is expected to continue to be adequate to fund the
shortfall. See the Company's consolidated statements of cash flows
included in the accompanying consolidated financial statements.
The Company has received full investment grade status by all
accredited rating agencies. Such ratings have added to the Company's
ability to sell publicly greater amounts of fixed-rate debt securities
with longer maturities. The increased maturities of the debt
securities sold by the Company and the use of the proceeds of such
sales to decrease bank borrowings are expected to improve the
Company's liquidity due to decreased principal payments required in
the next five years.
The Company had approximately $1.6 billion in unused lines of credit
at June 30, 1994, excluding amounts related to lines of credit which
provide availability to support commercial paper. Although the
Company was in compliance with the restrictive covenants contained in
its credit facilities at said date, additional borrowings under the
credit facilities are subject to the Company's continuing compliance
with the restrictive covenants (which relate primarily to the
maintenance of certain ratios of cash flow to total debt and cash flow
to debt service, as defined in the credit facilities) after giving
effect to such additional borrowings. See note 7 to the accompanying
consolidated financial statements for additional information regarding
the material terms of the Company's lines of credit.
As security for borrowings under one of its credit facilities, the
Company pledged a portion of the common stock it holds of TBS having a
quoted market value of approximately $414 million at June 30, 1994.
Borrowings under this credit facility (which amounted to $195 million
at June 30, 1994) are due in August of 1994. On or before such date,
the Company expects to repay these borrowings.
One measure of liquidity is commonly referred to as "interest
coverage". Interest coverage, which is measured by the ratio of
operating income before depreciation, amortization and other noncash
credits or charges ($902 million and $939 million for the six months
ended June 30, 1994 and 1993, respectively) to interest expense ($363
million for each of the six months ended June 30, 1994 and 1993,
respectively), is determined by reference to the consolidated
statements of operations. The Company's interest coverage ratio was
248% and 259% for the six months ended June 30, 1994 and 1993,
respectively. Management of the Company believes that the foregoing
interest coverage ratio is adequate in light of the consistent and
nonseasonal nature of its cable television operations and the relative
predictability of the Company's interest expense, more than half of
which results from fixed rate indebtedness.
The Company's various partnerships and other affiliates accounted for
under the equity method generally fund their acquisitions, required
debt repayments and capital expenditures through borrowings under and
refinancing of their own credit facilities (which are generally not
guaranteed by the Company) and through net cash provided by their own
operating activities.
(continued)
I-17
<PAGE> 19
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly Tele-Communications, Inc.)
(1) Material changes in financial condition (continued):
Certain subsidiaries' loan agreements contain restrictions regarding
transfers of funds to the parent company in the form of loans,
advances or cash dividends. The amount of net assets of such
subsidiaries exceeds the Company's consolidated net assets. However,
net cash provided by operating activities of other subsidiaries which
are not restricted from making transfers to the parent company have
been and are expected to continue to be sufficient to enable the
parent company to meet its cash obligations.
Approximately thirty-five percent of the franchises held by the
Company, involving approximately 3.8 million basic subscribers, expire
within five years. There can be no assurance that the franchises for
the Company's systems will be renewed as they expire although the
Company believes that its cable television systems generally have been
operated in a manner which satisfies the standards established by the
Cable Communications Policy Act of 1984 for franchise renewal.
However, in the event they are renewed, the Company cannot predict the
impact of any new or different conditions that might be imposed by the
franchising authorities in connection with such renewals.
The Company is obligated to pay fees for the license to exhibit
certain qualifying films that are released theatrically by various
motion picture studios from January 1, 1993 through December 31, 2002
(the "Film License Obligations"). The aggregate minimum liability
under certain of the license agreements is approximately $105 million.
The aggregate amount of the Film License Obligations under other
license agreements is not currently estimable because such amount is
dependent upon the number of qualifying films produced by the motion
picture studios, the amount of United States theatrical film rentals
for such qualifying films, and certain other factors. Nevertheless,
the Company's aggregate payments under the Film License Obligations
could prove to be significant.
The Company is upgrading and installing optical fiber in its cable
systems at a rate such that in three years TCI anticipates that it
will be serving the majority of its customers with state-of-the-art
fiber optic cable systems. The Company's capital budget for 1994 is
$1.0 billion to provide for the continued rebuilding of its cable
systems. However, the Company is continually reevaluating its capital
budget and such budget is subject to change based upon the effects to
the Company's liquidity arising from rate regulation.
Management believes that net cash provided by operating activities,
the Company's ability to obtain additional financing (including its
available lines of credit and its access to public debt markets as an
investment grade debt security issuer) and proceeds from disposition
of assets will provide adequate sources of short-term and long-term
liquidity in the future.
(continued)
I-18
<PAGE> 20
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly Tele-Communications, Inc.)
(2) Material changes in results of operations:
On October 5, 1992, Congress enacted the 1992 Cable Act. In 1993 and
1994, the FCC adopted certain rate regulations required by the 1992
Cable Act and imposed a moratorium on certain rate increases. As a
result of such actions, the Company's Regulated Services are subject
to the jurisdiction of local franchising authorities and the FCC.
Basic and tier service rates are evaluated against competitive
benchmark rates as published by the FCC, and equipment and
installation charges are based on actual costs. The Company's new
rates for Regulated Services (which were initially implemented in
September of 1993, and further adjusted in July of 1994) are subject
to review by the FCC, if a complaint has been filed, or the
appropriate local franchising authority, if such authority has been
certified. The rate increase moratorium, which was applicable to
those rates charged for Regulated Services that were not subject to
review by the FCC or local franchise authorities (as described above),
began on April 5, 1993 and continued in effect through May 15, 1994.
The rate regulations do not apply to the relatively few systems which
are subject to "effective competition" or to services offered on an
individual service basis, such as premium movie and pay-per-view
services.
Based on its analysis and interpretation of the FCC's 1993 and 1994
rate regulations, the Company estimates that the implementation of
such regulations will result in an aggregate annualized reduction of
revenue and operating income ranging from $280 million to $300
million. The estimated annualized reduction in revenue assumes that
the FCC will not require further reductions beyond the current
regulations and is prior to any possible mitigating factors (none of
which is assured) such as (i) the provision of alternate service
offerings (ii) the implementation of rate adjustments to non-
regulated services and (iii) the utilization of cost-of-service
methodologies, as described below.
Subject to certain limitations, the FCC's rate regulations generally
permit cable operators to adjust rates to account for inflation and
increases in certain external costs, including increases in
programming costs and compulsory copyright fees. However, the FCC is
currently proposing that inflation increases may be required to be
offset by a productivity factor.
The revised benchmark regulations also provide a mechanism for
adjusting rates when regulated tiers are affected by channel additions
or deletions. The FCC has indicated that cable operators adding or
deleting channels on a regulated tier will be required to adjust the
per-channel benchmark for that tier based on the number of channels
offered after the addition or deletion. The FCC also stated that the
additional programming costs resulting from channel additions will be
accorded the same external treatment as other program cost increases,
and that cable operators will be permitted to recover a mark-up on
their programming expenses of up to 7.5 percent. Such mark-up is
currently under review by the FCC.
On February 22, 1994, the FCC also adopted interim "cost-of-service"
rules governing attempts by cable operators to justify higher than
benchmark rates based on unusually high costs. Under this
methodology, cable operators may recover, through the rates they
charge for Regulated Service, their normal operating expenses plus an
interim rate of return of 11.25%, which rate may be subject to change
in the future.
(continued)
I-19
<PAGE> 21
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly Tele-Communications, Inc.)
(2) Material changes in results of operations (continued):
The Company believes that it has complied, in all material respects,
with the provisions of the 1992 Cable Act, including its rate setting
provisions. However, the Company's rates for Regulated Services are
subject to adjustment upon review, as described above. If, as a
result of the review process, a system cannot substantiate its rates,
it could be required to retroactively reduce its rates to the
appropriate benchmark and refund the excess portion of rates received.
Any refunds of the excess portion of tier service rates would be
retroactive to the date of complaint. Any refunds of the excess
portion of all other Regulated Service rates would be retroactive to
the later of September 1, 1993, or one year prior to the certification
date of the applicable franchise authority. The amount of refunds, if
any, which could be payable by the Company in the event that any
system's rates were to be successfully challenged, is not currently
estimable.
Based on the foregoing, the Company believes that the 1993 and 1994
rate regulations will have a material adverse effect on its results of
operations.
Revenue increased by approximately 4% for each of the three month and
the six month periods ended June 30, 1994 compared to the
corresponding periods of 1993. Such increase was the result of growth
in subscriber levels within the Company's cable television systems
(4%), the effect of certain acquisitions made subsequent to June 30,
1993 (1%) and certain new services (2%), net of a decrease in revenue
(3%) due to rate reductions required by rate regulation implemented
pursuant to the 1992 Cable Act. In 1994, the Company anticipates that
it will experience a decrease in the price charged for those services
that are subject to rate regulation under the 1992 Cable Act.
Operating costs and expenses have historically remained relatively
constant as a percentage of revenue. However, due to the
aforementioned program to upgrade and install optical fiber in its
cable systems, the Company's capital expenditures and depreciation
expense have increased. Additionally, the Company incurred $30
million of programming and marketing costs associated with the launch
in 1994 of a new premium programming service to its subscribers. The
Company recorded an adjustment of $18 million in 1994 to reduce its
liability for compensation relating to stock appreciation rights
resulting from a decline in the market price of the Company's Class A
common stock. The Company cannot determine whether and to what extent
increases in the cost of programming will effect its operating costs.
Additionally, the Company cannot predict how these increases in the
cost of programming will affect its revenue but intends to recover
additional costs to the extent allowed by the aforementioned FCC rate
regulations.
The Company is a partner in certain joint ventures that are currently
operating and constructing cable television and telephone systems in
the United Kingdom and other parts of Europe. These joint ventures,
which are accounted for under the equity method, have generated losses
of which the Company's share in 1994 and 1993 amounted to $18 million
and $20 million, respectively. In contrast to the Company's domestic
operations, the Company's results of operations in the United Kingdom
and other parts of Europe will continue to be subject to fluctuations
in the applicable foreign currency exchange rates. At June 30, 1994,
the Company's stockholders' equity includes a cumulative foreign
currency translation loss of $14 million.
(continued)
I-20
<PAGE> 22
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly Tele-Communications, Inc.)
(2) Material changes in results of operations (continued):
The Company's net earnings of $6 million for the three months ended
June 30, 1994 represented a decrease of $20 million as compared to the
Company's net earnings (before preferred stock dividends) of $26
million for the corresponding period of 1993. Such decrease is
principally the result of the effect of the aforementioned reduction
in rates charged for Regulated Services, the aforementioned increases
in operating costs in 1994, net of the increase in revenue and the
effect of improved share of earnings from Liberty.
The Company's net earnings of $38 million for the six months ended
June 30, 1994 represented a decrease of $41 million as compared to the
Company's net earnings (before preferred stock dividends) of $79
million for the corresponding period of 1993. Such decrease is
principally the result of the aforementioned reduction in rates
charged for Regulated Services, the increases in operating costs in
1994, the decrease in gain on disposition of assets, net of the
increase in revenue, the adjustment to compensation relating to stock
appreciation rights and the effect of improved share of earnings from
Liberty.
I-21
<PAGE> 23
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly Tele-Communications, Inc.)
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
There were no material legal proceedings instituted during the quarter
ended June 30, 1994 to which the Company or any of its consolidated
subsidiaries is a party or of which any of their property is the
subject, except as follows:
Miles Whittenburg, Jr., et al., vs. Tele-Communications,
Inc., et al. On April 9, 1994, plaintiffs, six current
employees of United Cable Television of Baltimore Limited
Partnership and four spouses, filed suit in the Circuit Court
for Baltimore City against Tele-Communications, Inc., TCI East,
Inc., UCTC of Baltimore, Inc., and United Cable Television of
Baltimore Limited Partnership. The suit alleges, inter alia,
nine various tort claims, including but not limited to, false
imprisonment, assault, battery, intentional infliction of
emotional distress, invasion of privacy, and loss of consortium
in connection with an incident that occurred October 26, 1993,
at the Baltimore system. Each of the nine counts in the
complaint seek compensatory damages of $1,000,000 per
plaintiff, and punitive damages of $5,000,000 per plaintiff.
The Company intends to contest the case. Based upon the facts
available, management believes that, although no assurance can
be given as to the outcome of this action, the ultimate
disposition should not have a material adverse effect upon the
financial condition of the Company.
U.S. Corporate Investigations, Inc., vs.
Tele-Communications, Inc., et al. On April 29, 1994,
plaintiff filed suit in the Circuit Court for Baltimore City
against Tele-Communications, Inc., TCI East, Inc., United
Cable Television of Baltimore Limited Partnership, UCTC of
Baltimore, Inc., three individuals and one non-related
corporation. The action alleges, inter alia, conversion of
business records, conspiracy, and malicious interference with
contract and business relations. Each of the seven counts
seek compensatory damages of $2,000,000 and punitive damages
of $20,000,000. The Company intends to contest the case.
Based upon the facts available, management believes that,
although no assurance can be given as to the outcome of this
action, the ultimate disposition should not have a material
adverse effect upon the financial condition of the Company.
(continued)
II-1
<PAGE> 24
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly Tele-Communications, Inc.)
PART II - OTHER INFORMATION
Item 1. Legal Proceedings, continued
Elmer Lewis v. Tele-Communications, Inc., et at. On
June 23, 1994, plaintiff filed suit in the Federal Court for
the District of Maryland against Tele-Communications, Inc.,
TCI East, Inc., UCTC of Baltimore, Inc. and United Cable
Television of Baltimore Limited Partnership. On August 2,
1994, the suit was consolidated for all purposes with Tyrone
Belgrave, et al. v. Tele-Communications, Inc. et al.
(previously reported in the Company's Annual Report on Form
10-K for the year ended December 31, 1993). The suit alleges,
inter alia, false imprisonment, assault, employment
defamation, intentional infliction of emotional distress,
invasion of privacy, wrongful discharge and discrimination on
the basis of race. The complaint also seeks divestiture of
the Baltimore City cable franchise from the Company. Each of
the ten counts in the complaint seek compensatory damages of
$1,000,000 and punitive damages of $5,000,000. The Company
intends to contest the case. Based upon the facts available,
management believes that, although no assurance can be given
as to the outcome of this action, the ultimate disposition
should not have a material adverse effect upon the financial
condition of the Company.
There were no material developments during the quarter ended June 30,
1994 in any of the existing legal proceedings which were previously
reported in the Company's Annual Report on Form 10-K for the year
ended December 31, 1993, except as follows:
Ranlee Communications, Inc. v. United Artists
Telecommunications, Inc. and United Artists Communications,
Inc. This matter was filed in the United States District
Court for the Eastern District of New York in September of
1989. Plaintiff alleges that defendant United Artists
Telecommunications, Inc., by and through its parent United
Artists Communications, Inc., the predecessor company of UAE
(now a wholly-owned subsidiary of TCI), entered into an
agreement with plaintiff wherein plaintiff was engaged as a
manager to order, install and supervise telephone switching
systems throughout the United States, and to order, install
and supervise pay telephones in the Greater New York
Metropolitan area, and that the defendants did wrongfully and
in bad faith terminate the contract. Plaintiff seeks damages
in excess of $100 million. Discovery has been completed. The
Court has ruled against the defendants on their motion for
summary judgment and defendants are proceeding with trial
preparation and settlement negotiation. Based upon the facts
available, management believes that, although no assurance can
be given as to the outcome of this action, the ultimate
disposition should not have a material adverse effect upon the
financial condition of the Company.
II-2
<PAGE> 25
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly Tele-Communications, Inc.)
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits - None.
(b) Reports on Form 8-K filed during the quarter ended June 30,
1994:
Date of Item
Report Reported Financial Statements Filed
------ -------- --------------------------
April 6, 1994 Item 5 Liberty Media Corporation -
Year ended December 31, 1993
May 27, 1994 Item 5 Liberty Media Corporation -
(as amended by Three months ended
Form 8-K/A, March 31, 1994
Amendment #1)
II-3
<PAGE> 26
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TCI COMMUNICATIONS, INC.
(formerly
TELE-COMMUNICATIONS, INC.)
Date: August 12, 1994 By: /s/ JOHN C. MALONE
John C. Malone
President, and Chief
Executive Officer
Date: August 12, 1994 By: /s/ DONNE F. FISHER
Donne F. Fisher
Executive Vice President
Date: August 12, 1994 By: /s/ GARY K. BRACKEN
Gary K. Bracken, Controller
and Senior Vice President
(Principal Financial Officer and
Chief Accounting Officer)
II-4
