<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
(Amendment #1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: May 27, 1994
Date of Earliest Event Reported: January 27, 1994
TELE-COMMUNICATIONS, INC.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
State of Delaware
----------------------------------------------
(State or other jurisdiction of incorporation)
<TABLE>
<S> <C>
0-5550 84-0588868
------------------------ ------------------------------------
(Commission File Number) (I.R.S. Employer Identification No.)
5619 DTC Parkway
Englewood, Colorado 80111
- - ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (303) 267-5500
<PAGE> 2
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: June 7, 1994
TELE-COMMUNICATIONS, INC.
(Registrant)
By: /s/ GARY K. BRACKEN
------------------------------
Gary K. Bracken, Controller
and Senior Vice President
(Principal Financial Officer
and Chief Accounting Officer)
<PAGE> 3
ITEM 5. OTHER EVENTS.
On January 27, 1994, Tele-Communications, Inc. ("TCI") and Liberty
Media Corporation ("Liberty") entered into a definitive agreement (the
"TCI/Liberty Agreement"), to combine the two companies. The transaction will
be 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 ("TCI/Liberty"). TCI shareholders
will receive one share of TCI/Liberty for each of their shares. Liberty common
shareholders will receive 0.975 of a share of TCI/Liberty for each of their
common shares. The transaction is subject to the approval of both sets of
shareholders as well as various regulatory approvals and other customary
conditions. Subject to timely receipt of such approvals, it is anticipated the
closing of such transaction will take place during 1994. Copies of the
TCI/Liberty Agreement and Amendment No. 1 thereto are incorporated herein as
Exhibits 2.1 and 2.2, respectively. The foregoing description of such
transaction is qualified in its entirety by reference to such Exhibits.
Historical unaudited financial information of Liberty for the three months ended
March 31, 1994 and the pro forma financial information related to the
TCI/Liberty Agreement are included under Item 7 of this Report.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements
Liberty Media Corporation,
Three months ended March 31, 1994:
Consolidated Balance Sheets,
March 31, 1994 and December 31, 1993 (unaudited)
Consolidated Statements of Operations,
Three months ended March 31, 1994 and 1993 (unaudited)
Consolidated Statement of Stockholders' Equity,
Three months ended March 31, 1994 (unaudited)
Consolidated Statements of Cash Flows,
Three months ended March 31, 1994 and 1993 (unaudited)
Notes to Consolidated Financial Statements
March 31, 1994 (unaudited)
(b) Pro Forma Financial Information
Tele-Communications, Inc. and Subsidiaries:
Condensed Pro Forma Balance Sheet,
March 31, 1994 (unaudited)
Condensed Pro Forma Statement of Operations,
Three months ended March 31, 1994 (unaudited)
Condensed Pro Forma Statement of Operations,
Year ended December 31, 1993 (unaudited)
Notes to Condensed Pro Forma Financial Statements,
March 31, 1994 (unaudited)
(continued)
<PAGE> 4
Liberty Media Corporation and Subsidiaries:
Condensed Pro Forma Balance Sheet,
March 31, 1994 (unaudited)
Condensed Pro Forma Combined Statement of Operations,
Three months ended March 31, 1994 (unaudited)
Condensed Pro Forma Combined Statement of Operations,
Year ended December 31, 1993 (unaudited)
Notes to Condensed Pro Forma Combined Financial Statements,
March 31, 1994 (unaudited)
TCI/Liberty and Subsidiaries:
Condensed Pro Forma Balance Sheet,
March 31, 1994 (unaudited)
Condensed Pro Forma Combined Statement of Operations,
Three months ended March 31, 1994 (unaudited)
Condensed Pro Forma Statement of Operations,
Year ended December 31, 1993 (unaudited)
Notes to Condensed Pro Forma Financial Statements,
March 31, 1994 (unaudited)
(c) Exhibits
(2.1) Agreement and Plan of Merger, dated as of January 27, 1994, by
and among Tele-Communications, Inc., Liberty Media
Corporation, TCI/Liberty Holding Company, TCI Mergeco, Inc.
and Liberty Mergeco, Inc.*
Incorporated herein by reference to the Company's Current
Report on Form 8-K dated February 15, 1994.
(2.2) Amendment No 1., dated as of March 30, 1994, to Agreement and
Plan of Merger, dated as of January 27, 1994, by and among
Tele-Communications, Inc., Liberty Media Corporation,
TCI/Liberty Holding Company, TCI Mergeco, Inc. and Liberty
Mergeco, Inc.
Incorporated herein by reference to the Company's Current
Report on Form 8-K dated April 6, 1994.
* The Agreement and Plan of Merger contains indexes
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> 5
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets March 31, December 31,
1994 1993
------------ ------------
amounts in thousands
<S> <C> <C>
Cash and cash equivalents $ 98,377 91,305
Trade and other receivables 64,679 57,458
Less allowance for doubtful receivables 3,012 3,032
------------ ---------
61,667 54,426
------------ ---------
Inventories, net 104,661 112,005
Prepaid expenses 31,311 25,210
Investments in affiliates, accounted for under the equity
method, and related receivables (note 4) 161,565 151,540
Other investments, at cost, and related receivables (note 5) 286,750 220,218
Investment in Tele-Communications, Inc. ("TCI")
common stock (note 6) 104,011 104,011
Property and equipment, at cost:
Land 21,662 21,662
Cable distribution systems 88,203 87,437
Support equipment and buildings 122,372 124,727
Computer and broadcast equipment 62,019 61,820
------------ ---------
294,256 295,646
Less accumulated depreciation 43,015 39,968
------------ ---------
251,241 255,678
------------ ---------
Franchise costs 142,796 142,789
Less accumulated amortization 6,329 5,351
------------ ---------
136,467 137,438
------------ ---------
Excess cost over acquired net assets 255,842 255,842
Less accumulated amortization 11,607 9,818
------------ ---------
244,235 246,024
------------ ---------
Other intangibles 97,105 96,873
Less accumulated amortization 68,447 65,895
------------ ---------
28,658 30,978
------------ ---------
Other assets, at cost, net of amortization 7,667 7,715
------------ ---------
$ 1,516,610 1,436,548
============ =========
</TABLE>
(continued)
I-1
<PAGE> 6
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, CONTINUED
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity March 31, December 31,
1994 1993
------------ ------------
amounts in thousands
<S> <C> <C>
Accounts payable $ 87,557 99,680
Accrued liabilities 80,706 82,716
Accrued litigation settlements 27,450 29,000
Film licenses payable 19,058 13,850
Due to TCI, including accrued interest payable (notes 7 and 10) 24,086 17,874
Accrued compensation relating to stock
appreciation rights (note 9) 26,694 36,996
Income taxes payable 31,056 24,624
Debt (notes 7 and 11) 260,283 260,180
Debt to TCI (notes 7 and 11) 185,918 185,918
Deferred income taxes 33,248 1,653
Other liabilities 2,693 1,585
------------ ---------
Total liabilities 778,749 754,076
------------ ---------
Minority interests in equity of consolidated
subsidiaries (note 8) 182,408 174,738
Preferred stock subject to mandatory redemption
requirements (including accreted dividends) (note 11)
Class B Redeemable Exchangeable Preferred Stock,
$.01 par value. 135,394 132,652
Class D Redeemable Voting Preferred Stock,
$.01 par value. 23,133 22,585
------------ ---------
158,527 155,237
------------ ---------
Stockholders' equity (notes 5, 9 and 12):
Class E, 6% Cumulative Redeemable Exchangeable Junior
Preferred Stock, $.01 par value. 17 17
Class A common stock, $1 par value. 87,515 87,515
Class B common stock, $1 par value. 43,339 43,339
Additional paid-in capital 228,593 236,126
Retained earnings 7,839 --
Unrealized holding gains for available-for-sale securities 44,392 --
Note receivable from related party (14,769) (14,500)
------------ ---------
396,926 352,497
------------ ---------
Commitments and contingencies (notes 4, 7 and 12)
$ 1,516,610 1,436,548
============ =========
</TABLE>
See accompanying notes to consolidated financial statements.
I-2
<PAGE> 7
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months
ended
March 31,
----------------------
1994 1993
-------- -------
amounts in thousands
<S> <C> <C>
Revenue:
Net sales from home shopping services $274,215 135,781
From TCI (note 10) 11,720 11,234
From cable and programming services 49,145 32,057
-------- -------
335,080 179,072
-------- -------
Cost of sales, operating costs and expenses:
Cost of sales 175,270 85,369
Operating 51,403 34,811
Selling, general and administrative 75,381 39,480
Charges by TCI (note 10) 3,399 1,365
Compensation relating to stock appreciation
rights (note 9) -- 8,078
Adjustment to compensation relating to stock
appreciation rights (note 9) (10,302) --
Depreciation 7,262 4,050
Amortization 5,513 3,830
-------- -------
307,926 176,983
-------- -------
Operating income 27,154 2,089
Other income (expense):
Interest expense to TCI (5,270) (669)
Other interest expense (3,820) (4,175)
Interest income from TCI 926 439
Dividend and interest income, primarily from affiliates 5,287 4,973
Gain on sale of investment -- 10,613
Provision for impairment of investment (2,233) --
Share of earnings of affiliates, net 9,137 7,153
Minority interests in earnings of consolidated subsidiaries (4,033) (35)
Other, net 61 (2,412)
-------- -------
Earnings before income taxes and
extraordinary item 27,209 17,976
Income tax expense (13,567) (5,730)
-------- -------
Earnings before extraordinary item 13,642 12,246
Extraordinary item-loss on early extinguishment of
debt, net of taxes -- (1,792)
-------- -------
Net earnings 13,642 10,454
Dividend requirement on preferred stocks (5,803) (10,895)
-------- -------
Net earnings (loss) attributable to common
shareholders $ 7,839 (441)
======== =======
Earnings (loss) per share:
Net earnings attributable to common shareholders
before extraordinary item $ 0.06 0.01
Extraordinary item, net -- (0.01)
-------- -------
Net earnings (loss) attributable to common
shareholders $ 0.06 0.00
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
I-3
<PAGE> 8
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Preferred
Stock Common stock Additional
--------- ----------------- paid-in Retained
Class E Class A Class B capital earnings
--------- ------- ------- ---------- --------
amounts in thousands
<S> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1994 $ 17 87,515 43,339 236,126 -
Dividends, including accretion, on all classes of
preferred stock - - - - (5,803)
Dividends on preferred stock subject to
mandatory redemption requirement - - - 2,513 -
Cash dividend on preferred stock - - - (10,046) -
Unrealized holding gains for available-for-sale
securities - - - - -
Accrued interest on note receivable from
related party (note 9) - - - - -
Net earnings - - - - 13,642
--------- ------ ------ ------- ------
BALANCE AT MARCH 31, 1994 $ 17 87,515 43,339 228,593 7,839
========= ====== ====== ======= ======
</TABLE>
<TABLE>
<CAPTION>
Unrealized Note
holding receivable Total
gains for from stock-
available-for sale related holders'
securities party equity
------------------ ---------- --------
amounts in thousands
<S> <C> <C> <C>
BALANCE AT JANUARY 1, 1994 - (14,500) 352,497
Dividends, including accretion, on all classes of
preferred stock - - (5,803)
Dividends on preferred stock subject to
mandatory redemption requirement - - 2,513
Cash dividend on preferred stock - - (10,046)
Unrealized holding gains for available-for-sale
securities 44,392 - 44,392
Accrued interest on note receivable from
related party (note 9) - (269) (269)
Net earnings - - 13,642
------ ------- -------
BALANCE AT MARCH 31, 1994 44,392 (14,769) 396,926
====== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
I-4
<PAGE> 9
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months
ended
March 31,
------------------------
1994 1993
---- ----
amounts in thousands
(see note 3)
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 13,642 10,454
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 12,775 7,880
Compensation relating to stock
appreciation rights -- 8,078
Adjustment to compensation relating to
stock appreciation rights (10,302) --
Share of earnings of affiliates, net (9,137) (7,153)
Deferred income tax expense 5,524 3,311
Minority interests in earnings 4,033 35
Noncash interest income (1,249) --
Provision for impairment of investment 2,233 --
Payment of litigation settlements (1,550) --
Payment of premium received upon
redemption of preferred stock investment -- 8,248
Loss on early extinguishment of debt,
net of tax -- 1,792
Gain on sale of investment -- (10,613)
Other noncash charges 1,070 335
Changes in operating assets and
liabilities, net of effect of
acquisitions:
Change in receivables (7,241) (1,358)
Change in inventories 7,344 7,625
Change in due to/from TCI 6,212 4,096
Change in prepaid expenses (6,101) (3,434)
Change in payables and
accruals (2,325) (5,088)
--------- ---------
Net cash provided by
operating activities 14,928 24,208
--------- ---------
</TABLE>
(continued)
I-5
<PAGE> 10
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months
ended
March 31,
------------------------
1994 1993
--------- --------
amounts in thousands
(see note 3)
<S> <C> <C>
Cash flows from investing activities:
Cash paid for acquisitions $ -- (150,255)
Capital expended for property and
equipment (4,995) (7,808)
Additional investments in and loans
to affiliates and others (7,044) (5,403)
Return of capital from affiliates 2,040 1,000
Collections on loans to affiliates and others 5,814 1,797
Cash received on redemption of preferred
stock investment -- 104,336
Proceeds from disposition of assets -- 12,600
Other investing activities, net 2,893 2,796
--------- --------
Net cash used by
investing activities (1,292) (40,937)
--------- --------
Cash flows from financing activities:
Borrowings of debt -- 236,362
Repayments of debt (65) (135,393)
Dividends on preferred stock (10,046) (9,743)
Contributions by minority shareholders
of subsidiary 3,947 4,041
Distribution to minority partner of subsidiary (400) --
--------- --------
Net cash (used) provided by
financing activities (6,564) 95,267
--------- --------
Net increase in cash and
cash equivalents 7,072 78,538
Cash and cash equivalents
at beginning of period 91,305 96,253
--------- --------
Cash and cash equivalents
at end of period $ 98,377 174,791
========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
I-6
<PAGE> 11
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1994
(UNAUDITED)
________________________________________________________________________________
(1) GENERAL
The accompanying consolidated financial statements include the
accounts of Liberty Media Corporation, those of all majority-owned
subsidiaries and entities for which there is a controlling voting
interest ("Liberty" or the "Company"). All significant intercompany
accounts and transactions have been eliminated in consolidation.
On January 27, 1994, Liberty and TCI entered into a definitive merger
agreement (the "Merger Agreement"). Under the Merger Agreement, the
transaction will be structured as a tax-free exchange of shares of
Class A and Class B common stock of both companies and preferred stock
of Liberty for like shares of a newly formed holding company,
TCI/Liberty Holding Company ("TCI/Liberty"). TCI stockholders will
receive one share of TCI/Liberty common stock for each of their
shares. Liberty common stockholders will receive 0.975 of a share of
TCI/Liberty common stock for each of their shares. Holders of Liberty
Class E, 6% Cumulative Redeemable Exchangeable Junior Preferred Stock
(the "Class E Preferred Stock") will receive one share of a
substantially identical class of voting preferred stock of TCI/Liberty
for each of their shares. The transaction is subject to the approval
of both sets of shareholders as well as various regulatory approvals
and other customary conditions. Subject to timely receipt of such
approvals, which cannot be assured, it is anticipated the closing of
such transaction will take place during 1994.
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 for the year ended December 31, 1993, as amended.
Certain amounts have been reclassified for comparability with the 1994
presentation.
(continued)
I-7
<PAGE> 12
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
In these notes to the consolidated financial statements, any reference
to TCI in connection with the issuance of the Company's preferred
stock includes subsidiaries of TCI.
(2) PRIMARY AND FULLY DILUTED EARNINGS (LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE
Primary and fully diluted earnings attributable to common shareholders
per common and common equivalent share for the three months ended
March 31, 1994 was computed by dividing net earnings attributable to
common shareholders by the weighted average number of common shares
outstanding (131,275,408).
Loss per common share attributable to common shareholders for the
three months ended March 31, 1993 was computed by dividing net loss
attributable to common shareholders by the weighted average number of
common shares outstanding (129,115,331). Common stock equivalents
were not included in the computation of weighted average shares
outstanding because their inclusion would be anti-dilutive.
(3) SUPPLEMENTAL DISCLOSURES TO CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash paid for interest was $2,592,000 and $5,538,000 for the three
months ended March 31, 1994 and 1993, respectively. Cash paid for
income taxes during the months ended March 31, 1994 and 1993 was
$1,611,000 and $3,453,000, respectively.
(continued)
I-8
<PAGE> 13
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
Significant noncash investing and financing activities are as follows:
<TABLE>
<CAPTION>
Three months
ended March 31,
----------------------------
1994 1993
---- -----
amounts in thousands
<S> <C> <C>
Cash paid for acquisitions:
Fair value of assets acquired $ - 597,543
Net liabilities assumed - (183,704)
Common stock issued for acquisition - (123,000)
Noncash contribution for acquisition - (32,673)
Minority interests in equity of
acquired entities - (107,911)
-------- -------
$ - 150,255
======== =======
Liberty Class A common stock
issued upon conversion of
preferred stock $ - 12,767
======== =======
Accreted and unpaid preferred
stock dividends $ 4,178 10,895
======== =======
Note issued in exchange for
Liberty Class A common stock $ - 18,539
======== =======
</TABLE>
(continued)
I-9
<PAGE> 14
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
(4) INVESTMENTS IN AFFILIATES
Liberty has several investments in affiliates accounted for under the
equity method. Summarized unaudited results of operations for such
affiliates are as follows:
<TABLE>
<CAPTION>
Three months
ended March 31,
-------------------
1994 1993
---- ----
amounts in thousands
<S> <C> <C>
Revenue $ 523,013 477,338
Operating expenses (397,783) (367,805)
Depreciation
and amortization (48,520) (48,201)
---------- ---------
Operating income 76,710 61,332
Interest expense (28,463) (25,007)
Other, net (19,768) (17,399)
----------- ---------
Net earnings $ 28,479 18,926
=========== =========
</TABLE>
(continued)
I-10
<PAGE> 15
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
The following table reflects the carrying value of the Company's
investments accounted for under the equity method, including related
receivables:
<TABLE>
<CAPTION>
March 31, December 31,
1994 1993
---------- -----------
amounts in thousands
<S> <C> <C>
QVC, Inc. ("QVC") $ 62,173 60,397
Kansas City Cable Partners ("KCCP") (31,798) (33,618)
US Cable of Lake County ("Lake County") 25,991 25,650
Columbia Associates, L.P. ("Columbia") 6,755 7,720
Lenfest Communications, Inc. ("Lenfest") 14,816 16,508
The Cable Partnerships of Country Cable
and Knight-Ridder Cablevision, Inc.
(SCI Cable Partners and TKR Cable Company)
(collectively referred to as "TKR") 37,439 34,270
Sunshine Network Joint Venture ("Sunshine") 8,835 9,131
American Movie Classics Company ("AMC") (6,819) (11,026)
Sioux Falls Cable Television ("Sioux Falls") (11,323) (11,675)
SportsChannel Chicago Associates ("Sports") 32,250 32,561
Home Team Sports Limited Partnership ("HTS") 4,676 4,610
Other investments 18,570 17,012
--------- --------
$ 161,565 151,540
========= ========
</TABLE>
The common stock of QVC is publicly traded. At March 31, 1994, based on
the trading price of QVC common stock, the Company's investment in QVC
had a market value of $373,057,000 (which exceeded its cost by
$310,884,000) (excluding the effect of the Diller option described
below).
(continued)
I-11
<PAGE> 16
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
The following table reflects the Company's share of earnings (losses) of
each of the aforementioned affiliates:
<TABLE>
<CAPTION>
Three months
ended March 31,
---------------------------
1994 1993
---- ----
amounts in thousands
<S> <C> <C>
QVC $ 1,776 2,306
KCCP 1,820 2,444
Lake County 341 105
Columbia (965) (1,902)
Lenfest (1,692) (2,734)
TKR 3,169 3,164
Sunshine (296) (185)
AMC 4,329 3,043
Sioux Falls 352 492
Sports 1,729 1,560
HTS 66 (38)
Other (1,492) (1,102)
--------- ---------
$ 9,137 7,153
========= =========
</TABLE>
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.
(continued)
I-12
<PAGE> 17
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
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 during the three months ended March 31, 1994, 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 by
Liberty to forego the exercise of its option to be reinstated as a party
to the Stockholders' Agreement, Liberty will now account for its
investment in QVC under the cost method.
Certain of the shares of stock of QVC owned by Liberty are subject to
repurchase by QVC in the event that commitments to carry its programming
are not met. Approximately 46% of the shares which the Company holds or
would hold upon exercise or conversion of convertible securities, are
"unvested" and are subject to such repurchase rights by QVC. QVC's
repurchase rights with respect to QVC securities held by the Company are
exercisable over a period of time, ending in the year 2004, if certain
carriage commitments made by Satellite Services, Inc., ("SSI"), an
indirect wholly owned subsidiary of TCI, are not met. Under the terms
of a certain agreement pursuant to which the Company acquired from TCI a
substantial number of the QVC securities it now beneficially owns, TCI
has agreed to reimburse the Company in the event QVC exercises its right
to repurchase certain of the "unvested" shares. Such reimbursement will
be based on the value assigned such shares when the Company acquired
them from TCI, which is substantially below the current market price of
such shares. Pursuant to an agreement with Comcast and Mr. Barry Diller
("Diller"), Diller has the right, exercisable during a 30-day period
beginning in June 1994, to purchase approximately 1.63 million shares of
QVC common stock from Liberty. The purchase price under the Diller
purchase right is $34.082 per share.
On September 16, 1993, Liberty announced that one of its subsidiaries
received notice from Rainbow Program Enterprises ("Rainbow") that
Rainbow had elected to purchase Liberty's 50% partnership interest in
AMC under the terms of a buy/sell provision contained in the AMC
partnership agreement. Upon completion of the sale, Liberty would
receive net pre-tax cash proceeds of approximately $170 million from the
sale and an additional $5 million from a buy-out of Liberty's consulting
agreement with AMC. The $170 million cash proceeds consist of $195
million sales price reduced by Liberty's
(continued)
I-13
<PAGE> 18
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
proportionate share of AMC's debt. On March 9, 1994 Liberty and Rainbow
agreed to a postponement of the closing of the sale until May 31, 1994.
Liberty and Rainbow are continuing their discussions regarding other
possible transactions which, if consummated, may result in the parties
amending or terminating the sale by Liberty of its AMC partnership
interest.
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 (other than non-recourse debts) of that partnership in the event
liabilities of that partnership were to exceed its assets.
(5) OTHER INVESTMENTS
Other investments, accounted for under the cost method, and related
receivables, are summarized as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1994 1993
-------- ------------
<S> <C> <C>
Limited partnership interest
and related receivables $ 3,647 3,647
Marketable equity securities 94,042 25,811
Convertible debt, accrued interest
and preferred stock investment 45,883 46,457
Note receivable including
accrued interest (a) 131,169 132,303
Other investments and related receivables 12,009 12,000
----------- --------
$ 286,750 220,218
=========== ========
</TABLE>
(a) In December 1992, Home Shopping Network, Inc. ("HSN"), a cost
investment of the Company at that time and a consolidated
subsidiary of the Company at December 31, 1993, distributed the
capital stock of Silver King Communications, Inc. ("SKC"),
formerly a wholly owned subsidiary of HSN, to their stockholders
of record, including Liberty. This transaction was treated as a
stock dividend by
(continued)
I-14
<PAGE> 19
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
_______________________________________________________________________________
HSN. At the time of said dividend, intercompany indebtedness in
an amount of approximately $135 million owed by SKC to HSN was
converted into a secured long-term senior loan to SKC (a cost
investment of the Company). Such loan is evidenced by a promissory
note, the terms of which are governed by a loan agreement and the
liability evidenced thereby is secured by substantially all of
SKC's assets, and bears interest on the unpaid principal amount at
9.5% per annum. The note is payable in equal monthly installments
of principal and interest over fifteen years.
Management of the Company estimates that the market value, calculated
utilizing a multiple of cash flow approach or publicly quoted market
prices, of all of the Company's other investments aggregated $383
million and $406 million at March 31, 1994 and December 31, 1993,
respectively. No independent external appraisals were conducted for
those assets which were valued utilizing a multiple of cash flow
approach.
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," ("Statement No. 115")
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 stockholders'
equity. Unrealized holding gains and losses on securities classified as
trading are reported in earnings.
The Company applied the new rules beginning in the first quarter of
1994. Application of the new rules resulted in a net increase of
$44,392,000 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. However, the
unrealized holding gain does not include any unrealized gain associated
with the Company's investment in TCI common stock as such common stock
is deemed to be restricted stock. Restricted stock, under Statement No.
115, is not considered to have a readily determinable fair value. See
note 6. The Company holds no debt securities.
(continued)
I-15
<PAGE> 20
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
(6) INVESTMENT IN TCI COMMON STOCK
The Company holds 2,988,009 shares of TCI class A common stock and
3,537,712 shares of TCI class B common stock. At March 31, 1994 and
December 31, 1993, the market value of the Company's investment in TCI
amounted to $149,559,000 and $209,785,000, respectively, based on its
publicly quoted market price.
Certain of the TCI common stock is held in escrow for delivery upon
exchange of the Liberty Class B Redeemable Exchangeable Preferred Stock
(the "Class B Preferred Stock"). Pending such exchange and provided
that the Company is not in default of its obligations to redeem,
exchange or purchase shares of the Class B Preferred Stock, the Company
has the right to vote the TCI common stock held in escrow on all matters
submitted for a vote to the holders of TCI common stock.
(7) DEBT
Debt is summarized as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1994 1993
--------- -------------
amounts in thousands
<S> <C> <C>
Parent company debt:
Note payable to TCI (a) $ 76,952 76,952
Note payable to TCI (b) 104,644 104,644
---------- -----------
Debt of subsidiaries: 181,596 181,596
Note payable to TCI (c) 4,322 4,322
---------- -----------
Debt due TCI 185,918 185,918
---------- -----------
Note payable to bank (d) 5,815 5,815
Note payable to bank (e) 23,425 23,425
Note payable to bank (f) 79,500 79,500
Liability to seller (g) 19,637 19,637
Unsecured note payable (h) 545 545
Convertible note payable (i) 13,300 13,131
Notes payable to bank (j) 110,000 110,000
Other debt, with varying
rates and maturities 8,061 8,127
---------- -----------
260,283 260,180
---------- -----------
$ 446,201 446,098
========== ===========
</TABLE>
(continued)
I-16
<PAGE> 21
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
(a) Payable by Liberty.
These notes payable bear interest at 11.6% per annum, are due on
February 1, 1997 and are secured by the Company's partnership
interest in Community Cable Television ("CCT") and a related
note receivable.
(b) Payable by Liberty.
These notes payable bear interest at 6% per annum and are
payable the earlier of June 30, 1994 or ten days following
termination of the proposed business combination of TCI and
Liberty (see note 1). From and after maturity, the unpaid
amount of these notes will bear interest at 10% per annum,
payable on demand.
(c) Payable by LMC Chicago Sports, Inc.
This note, which bears interest at the prime rate, is payable on
December 31, 1996 and is secured by the Company's general
partnership interest in Sports.
(d) Payable by Command Cable of Eastern Illinois Limited Partnership
("Command").
This loan is payable in quarterly installments as defined in the
related loan agreement, with a final payment on September 30,
1994. The quarterly installments consist of a fixed amount per
quarter plus additional principal payments based on a percentage
of the previous quarter's cash flow. The loan agreement
contains provisions for the maintenance of certain financial
ratios and other matters. At December 31, 1993, Command was in
default of certain provisions of the loan agreement. On April
29, 1994, Command and the bank reached an agreement whereby the
bank waived the default subject to certain modifications to the
loan agreement. All of Command's cable television assets are
pledged as collateral under this loan agreement.
(e) Payable by US Cable of Paterson ("Paterson").
This term loan has quarterly principal payments in increasing
amounts through December 31, 1996. In addition to the scheduled
quarterly payments, an annual payment may be required based upon
the prior year's excess cash flow, as defined. The outstanding
balance of the loan accrues interest at varying rates which
approximate the prime rate (6-1/4% at March 31, 1994). The
terms of the
(continued)
I-17
<PAGE> 22
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
agreement include, in addition to other requirements,
compliance with certain financial ratios and limitations on
capital expenditures and leases. The loan is secured and
collateralized by the assets of Paterson, the franchise rights,
and the assignment of its various leases and contracts.
(f) Payable by CCT.
This revolving line of credit provides for borrowings of up to
$145,000,000 through March 31, 1995. Such facility provides for
mandatory commitment reduction payments through December 31,
1999. The revolving credit facility permits CCT to borrow from
the banks to fund acquisitions of cable television systems and
for other general purposes, subject to compliance with the
restrictive covenants (including ratios of debt to cash flow and
cash flow to interest expense) contained in the loan agreement
governing the facility.
(g) Payable by Affiliated Regional Communications, Ltd. ("ARC").
The liability represents the final payment obligation due on
April 30, 1994, under an "Earnout Rights" agreement. The
agreement required annual payments during a five-year period
contingent upon the operations from ARC's "DBS Business," as
defined in the agreement. On April 29, 1994, a subsidiary of
ARC entered into a $30 million credit facility with a bank. A
portion of that facility was utilized to repay the "Earnout
Rights" obligation.
(h) Payable by LMC Regional Sports, Inc.
This note, which bears interest at the prime rate, is payable in
equal quarterly installments through June 30, 1994.
(i) Payable by ARC.
These notes are due December 30, 2000 and bear interest at 10%
per annum. The notes are convertible, at the option of the
holders, into an 11.65% limited partnership interest in ARC.
(continued)
I-18
<PAGE> 23
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
(j) Payable by HSN.
These notes payable consist of a $60 million unsecured senior
term loan, $25 million of which matures on each of June 15, 1994
and 1995 and $10 million of which matures on December 15, 1995;
and a $50 million unsecured senior term loan, $25 million of
which matures on each of January 31, 1997 and 1998; and a $40
million three-year senior unsecured revolving credit facility.
The revolving credit facility provides for yearly extension
options at the request of HSN and is subject to the approval of
participating banks. At March 31, 1994, $40 million of the
senior revolving credit facility remains available.
Restrictions contained in the senior term loans and revolving
credit agreement include, but are not limited to, limitations on
the encumbrance and disposition of assets and the maintenance of
various financial covenants and ratios.
(8) PROMISSORY NOTES
CCT has a note payable to TCI of approximately $59 million, including
accrued interest, due January 1, 2000. The note bears interest at 8% per
annum. The note, net of payments made, is reflected as an addition to
minority interest in the accompanying consolidated financial statements
due to its related party nature. Additionally, CCT has approximately
$37 million, including accrued interest, in notes receivable from TCI
due January 1, 2000. The notes receivable earn interest at 11.6% per
annum. These notes receivable are reflected as a reduction of minority
interest in the accompanying consolidated financial statements as they
represent subscription notes receivable.
(9) STOCKHOLDERS' EQUITY
GENERAL
Liberty is authorized to issue 300,000,000 Class A shares and
100,000,000 Class B shares. Liberty had 87,515,378 Class A shares and
43,338,720 Class B shares outstanding at March 31, 1994, and December
31, 1993.
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.
(continued)
I-19
<PAGE> 24
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
STOCK OPTION
The Company has an employment agreement with an officer (who is also a
director). Pursuant to this agreement, such officer was granted an
option to acquire 100,000 shares of Liberty Class B common stock at a
purchase price of $256 per share (reflects actual shares issued). The
employment agreement was amended and the option was exercised with cash
and a $25,500,000 note. This note bears interest at 7.54% per annum.
During October 1991, such officer tendered to the Company in partial
payment of such note 800,000 shares of TCI Class B common stock,
resulting in a net reduction of $12,195,000 in the amount payable under
the note.
The 100,000 shares issued by Liberty upon exercise of this option,
together with all subsequent dividends and distributions thereon,
including shares issued in the Stock Splits (collectively totaling
16,000,000 shares of Liberty Class B common stock and 200,000 shares of
Class E Preferred Stock at December 31, 1993, the "Option Units"), are
subject to repurchase by the Company under certain circumstances. The
Company's repurchase right will terminate as to 20% of the Option Units
per year, commencing March 28, 1992, and will terminate as to all of the
Option Units in the event of death, disability or under certain other
circumstances.
On October 24, 1992, said officer of the Company entered into a letter
agreement with respect to the timing and method of payment under the
promissory note and the release of the 200,000 shares of Class E
Preferred Stock from the collateral securing the promissory note. The
remaining principal balance on the note is approximately $14,500,000.
The next scheduled payment will be on October 24, 1994 in the principal
amount of approximately $4,300,000 plus interest accrued from December
31, 1993 to the payment date.
STOCK PLAN
The Company has a Stock Incentive Plan (the "Stock Plan") in order to
provide a special incentive to officers and other persons. Under the
Stock Plan, stock options, stock appreciation rights, restricted stock
and other awards valued by reference to, or that are otherwise based on,
the value of Class A common stock may be granted in respect to a maximum
of 40,000,000 shares of Class A common stock. Shares to be delivered
under the Stock Plan will be available from authorized but unissued
shares of Class A common stock or from shares of Class A common stock
reacquired by the Company. Shares of
(continued)
I-20
<PAGE> 25
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
Class A common stock that are subject to options or other awards that
terminate or expire unexercised will return to the pool of such shares
available for grant under the Stock Plan.
In June 1993, the Company granted an aggregate of 56,000 non-qualified
stock options with stock appreciation rights to certain officers and key
employees under the Stock Plan. Each option is exercisable for one
share of Class A common stock at an exercise price of $19.08. The
options vest in five equal annual installments commencing June 3, 1994
and expire in June 2003. Estimates of compensation relating to these
stock options with stock appreciation rights have been recorded through
March 31, 1994, but are subject to future adjustments based upon market
value and, ultimately, on the final determination of market value when
the rights are exercised.
STOCK APPRECIATION RIGHTS
The Company has granted to certain of its officers stock appreciation
rights with respect to 2,240,000 shares of Liberty Class A common stock.
These rights have an adjusted strike price of $0.80 per share, become
exercisable and vest evenly over seven years. Stock appreciation rights
expire on March 28, 2001. Estimates of compensation relating to these
stock appreciation rights have been recorded through March 31, 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. Stock appreciation rights with respect to 780,000 shares
have been exercised.
In 1993, the President of HSN received stock appreciation rights with
respect to 984,876 shares of HSN's common stock at an exercise price of
$8.25 per share. These rights vest over a four year period and are
exercisable until February 23, 2003. The stock appreciation rights will
vest upon termination of employment other than for cause and will be
exercisable for up to one year following the termination of employment.
In the event of a change in ownership control of HSN, all unvested stock
appreciation rights will vest immediately prior to the change in control
and shall remain exercisable for a one year period. Stock appreciation
rights not exercised will expire to the extent not exercised. These
rights may be exercised for cash or, so long as HSN is a public company,
for shares of HSN's common stock equal to the excess of the fair market
value of each share of common stock over $8.25 at the exercise date.
The stock appreciation rights also will vest in the event of death or
disability.
(continued)
I-21
<PAGE> 26
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
Estimated compensation relating to these stock appreciation rights has
been recorded through March 31, 1994, but is subject to future
adjustment based upon market value, and ultimately, on the final
determination of market value when the rights are exercised.
(10) TRANSACTIONS WITH TCI
Certain subsidiaries of Liberty produce and/or distribute sports and
other programming to cable television operators (including TCI) and
others. Charges to TCI are based upon customary rates charged to
others.
Certain subsidiaries of Liberty purchase, at TCI's cost plus an
administrative fee, certain pay television and other programming through
a subsidiary of TCI. In addition, HSN pays a commission to TCI for
merchandise sales to customers who are subscribers of TCI's cable
systems. Aggregate commissions and charges to TCI were approximately
$3,361,000 and $1,305,000 for the three months ended March 31, 1994 and
1993, respectively.
(11) FAIR VALUE OF FINANCIAL INSTRUMENTS
CASH AND CASH EQUIVALENTS, TRADE AND OTHER RECEIVABLES, DUE TO/FROM TCI,
PREPAID EXPENSES, ACCOUNTS PAYABLE, ACCRUED LIABILITIES, SALES RETURNS
AND INCOME TAXES PAYABLE
The carrying amount approximates fair value because of the short
maturity of these instruments.
DEBT AND DEBT DUE TCI
The carrying amount approximates fair value.
PREFERRED STOCKS, SUBJECT TO MANDATORY REDEMPTION REQUIREMENTS
The fair values of the Company's preferred stocks subject to mandatory
redemption requirements were based on management's estimates. These
estimates were made by reference to the market values of other similar
publicly traded instruments. Neither independent external appraisals
nor dealer quotes were obtained. The estimated fair value of the
Company's preferred stocks subject to mandatory redemption at March 31,
1994 was $162,757,000.
(continued)
I-22
<PAGE> 27
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
LIMITATIONS
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial
instrument. These estimates are subjective in nature, involve
uncertainties and matters of significant judgment and therefore cannot
be determined with precision. Changes in assumptions could significantly
affect the estimates.
(12) COMMITMENTS AND CONTINGENCIES
In February of 1991, the Company entered into an agreement with certain
of its stockholders which provides the Company the right upon the
occurrence of a "call triggering event" to require such persons to sell
the shares of Liberty common stock owned by them, and would provide such
persons the right upon the occurrence of a "put triggering event" to
sell their shares of Liberty common stock, in a registered public
offering or to one or more third parties selected by the Company. A
"call triggering event" consists of the issuance or adoption of a decree
by a governmental authority and the determination by an independent
committee of the Board of Directors that divestiture by any or all of
such persons of his or its Liberty common stock is necessary in order to
comply with the decree or is in the best interest of the Company in
light of material restrictions that would be imposed on the Company's
business absent such divestiture. A "put triggering event" consists of
the issuance or adoption of a decree by a governmental authority
requiring any or all of such persons to divest his or its shares of
Liberty common stock or TCI common stock or rendering such person's
continued ownership thereof illegal or subject to fine or penalty or
imposing material restrictions on such person's full rights of ownership
of such shares, provided that one of the essential facts giving rise to
such decree or that renders such decree applicable to such person is the
dual ownership by such person of voting securities of both the Company
and TCI. In each case, the Company would guarantee the sale price for
certain of the shares to be sold. The Company believes that it would
not be required to make any material payments in such event as the
Company anticipates that the aggregate proceeds derived from any sale of
such stock to the public or other third parties would approximate the
guaranteed sales price, before giving effect to any required tax
adjustment.
The guaranteed sale price for shares of Liberty common stock that
constitute "Covered Shares" (as defined) would be determined on the
basis of the proportionate share that such shares represent of the fair
market value of the Company on a going concern or liquidation value
basis (whichever method yields a higher valuation), subject to an upward
(continued)
I-23
<PAGE> 28
LIBERTY MEDIA CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
________________________________________________________________________________
adjustment for taxes. If income taxes are payable by such persons with
respect to such sales, the amount of the adjustment would be
approximately $7.59 per share (assuming an effective tax rate of 37%
based on Federal and state income tax rates in effect on March 31, 1994
and a sale price of $20.50 per share based on the last reported sale
price for the Class A common stock on that date). In the aggregate,
41,162,880 shares of Liberty common stock are currently covered by the
agreement. The Company believes that the likelihood of the occurrence
of a put triggering event is remote.
Liberty leases business offices, has entered into pole rental agreements
and transponder lease agreements, and uses certain equipment under lease
arrangements. In addition, as of March 31, 1994, the Company had
long-term sports program rights contracts which require payments through
1998 aggregating approximately $38,818,000.
The Company is obligated to pay fees for the license to exhibit certain
qualifying films that are released theatrically by various motion
picture studios through December 31, 2006 (the "Film License
Obligations"). As of March 31, 1994, these agreements require minimum
payments aggregating approximately $178 million. The aggregate amount
of the Film License Obligations 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.
I-24
<PAGE> 29
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Pro Forma Financial Statements
March 31, 1994
(unaudited)
The following unaudited condensed pro forma balance sheet of TCI,
dated as of March 31, 1994, assumes that the proposed mergers (the "Mergers"),
whereby TCI and Liberty will each become a wholly-owned subsidiary of
TCI/Liberty, had occurred as of such date (see note 1).
In addition, the unaudited condensed pro forma statements of
operations of TCI for the three months ended March 31, 1994 and the year ended
December 31, 1993 assume that the proposed 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 financial statements of TCI
should be read in conjunction with the condensed unaudited pro forma financial
statements of Liberty and TCI/Liberty and the related notes thereto included
elsewhere herein and the respective historical financial statements and the
related notes thereto of TCI and Liberty. The pro forma financial statements
of TCI/Liberty represent a combination of the separate pro forma statements of
TCI and Liberty in giving effect to the proposed Mergers.
<PAGE> 30
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Pro Forma Balance Sheet
(unaudited)
<TABLE>
<CAPTION>
March 31, 1994
---------------------------------------
TCI Pro forma
Historical Adjustments(1) Pro forma
---------- -------------- ---------
Assets amounts in millions
- - ------
<S> <C> <C> <C>
Cash and receivables $ 285 -- 285
Investment in Liberty and
related receivables 507 (207)(2) 300
Investment in other affiliates
and Turner Broadcasting System,
Inc., and related receivables 1,479 -- 1,479
Property and equipment, net of
accumulated depreciation 5,026 -- 5,026
Franchise costs and other assets,
net of amortization 9,761 -- 9,761
-------- ------ ------
$ 17,058 (207) 16,851
======== ====== ======
Liabilities and Stockholders' Equity
- - ------------------------------------
Payables and accruals $ 843 -- 843
Debt 10,008 -- 10,008
Deferred income taxes 3,456 -- 3,456
Other liabilities 97 -- 97
-------- ------ ------
Total liabilities 14,404 -- 14,404
-------- ------ ------
Minority interests 300 -- 300
Redeemable preferred stocks -- -- --
Common stockholders' equity:
Class A common stock 483 -- 483
Class B common stock 47 -- 47
Additional paid-in capital 2,310 -- 2,310
Cumulative foreign currency
translation adjustment (28) -- (28)
Unrealized holding gains for
available-for-sale securities 191 -- 191
Accumulated deficit (316) -- (316)
Treasury stock, at cost (333) 333 (3) --
Investment in TCI/Liberty -- (207)(2) (540)
(333)(3)
-------- ------ ------
2,354 (207) 2,147
-------- ------ ------
$ 17,058 (207) 16,851
======== ====== ======
</TABLE>
See accompanying notes to unaudited condensed pro forma financial statements.
<PAGE> 31
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Pro Forma Statement of Operations
(unaudited)
<TABLE>
<CAPTION>
Three months ended March 31, 1994
---------------------------------------
TCI Pro forma
Historical Adjustments(1) Pro forma
---------- -------------- ---------
amounts in millions,
except per share amounts
<S> <C> <C> <C>
Revenue $ 1,060 -- 1,060
Operating, selling, general and
administrative expenses and
compensation relating to stock
appreciation rights (591) -- (591)
Depreciation and amortization (235) -- (235)
-------- ------ ------
Operating income 234 -- 234
Interest expense (178) -- (178)
Interest and dividend income 10 -- 10
Share of earnings of Liberty 14 (14)(4) --
Share of losses of other
affiliates, net (9) -- (9)
Loss on early extinguishment of debt (2) -- (2)
Other income, net (6) -- (6)
-------- ------ ------
Earnings before income taxes 63 (14) 49
Income tax expense (31) 6 (5) (25)
-------- ------ ------
Net earnings $ 32 (8) 24
======== ====== ======
Primary and fully diluted earnings
per common and common equivalent
share $ .07
========
</TABLE>
See accompanying notes to unaudited condensed pro forma financial statements.
<PAGE> 32
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Pro Forma Statement of Operations
(unaudited)
<TABLE>
<CAPTION>
Year ended December 31, 1993
---------------------------------------
TCI Pro forma
Historical Adjustments(1) Pro forma
---------- -------------- ---------
amounts in millions,
except per share amounts
<S> <C> <C> <C>
Revenue $ 4,153 -- 4,153
Operating, selling, general and
administrative expenses and
compensation relating to stock
appreciation rights (2,326) -- (2,326)
Depreciation and amortization (911) -- (911)
-------- ------ ------
Operating income 916 -- 916
Interest expense (731) -- (731)
Interest and dividend income 34 -- 34
Share of earnings of Liberty 4 (4)(4) --
Share of losses of other
affiliates, net (76) -- (76)
Gain on dispositions 42 -- 42
Loss on early extinguishment of debt (17) -- (17)
Other income, net (11) -- (11)
-------- ------ ------
Earnings before income taxes 161 (4) 157
Income tax expense (168) 2 (5) (166)
-------- ------ ------
Net loss (7) (2) (9)
Dividend requirement on
redeemable preferred stocks (2) 2 (6) --
-------- ------ ------
Net loss applicable to
common shareholders $ (9) -- (9)
======== ====== ======
Loss per common share $ (.02)
========
</TABLE>
See accompanying notes to unaudited condensed pro forma financial statements.
<PAGE> 33
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Condensed Pro Forma Financial Statements
March 31, 1994
(unaudited)
(1) Pursuant to the TCI/Liberty Agreement, the Mergers will be structured
as a tax free exchange whereby the common stock of TCI and Liberty and
the preferred stock of Liberty would be exchanged for like shares of
TCI/Liberty. The TCI/Liberty Agreement provides that each share of
TCI's and Liberty's common stock (including shares held by 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/Liberty's
common stock. Any shares of Liberty preferred stock held by
subsidiaries of TCI or its subsidiaries shall be converted into shares
of a class or series of TCI/Liberty preferred stock having an
equivalent value. Shares of preferred stock of Liberty not owned by
TCI or its subsidiaries would be converted into shares of a preferred
stock of TCI/Liberty having designations, preferences, rights and
qualifications, limitations and restrictions similar to the shares of
preferred stock being converted.
(2) Represents the conversion of TCI's investment in Liberty common stock
into an investment in TCI/Liberty common stock and the conversion of
TCI's investment in Liberty preferred stock into an investment in
TCI/Liberty 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 TCI's investment in Liberty.
(3) Reflects the reclassification to "Investment in TCI/Liberty" of
79,335,038 shares of TCI Class A common stock held by subsidiaries of
TCI assumed to be replaced with TCI/Liberty common stock of the
corresponding class.
(4) Reflects the elimination of TCI's share of Liberty's historical
earnings. See note (2) above.
(5) Reflects the income tax effect of the pro forma adjustments.
(6) Reflects the elimination of the preferred stock dividend requirement
on TCI preferred stock converted into common stock of TCI during the
three months ended March 31, 1994.
<PAGE> 34
LIBERTY MEDIA CORPORATION
Condensed Pro Forma Combined Financial Statements
March 31, 1994
(unaudited)
The following unaudited condensed pro forma balance sheet of Liberty,
as of March 31, 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 50% partnership interest in American Movie Classics Company ("AMC") had
occurred as of such date. Additionally, such balance sheet also assumes that
the Mergers, whereby TCI and Liberty will each become wholly-owned subsidiaries
of TCI/Liberty, had occurred as of such date.
In addition, unaudited condensed pro forma combined statements of
operations of Liberty for the three months ended March 31, 1994 and for the
year ended December 31, 1993 are included which 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 50% partnership interest in AMC,
(c) the Recapitalization Agreement, as defined in note 11,
(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 12,
(f) the acquisition of all general and limited partnership
interests in Mile Hi Cablevision Associates, Ltd. ("Mile Hi")
as described in note 13,
(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 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 combined
financial statements of Liberty should be read in conjunction with the
condensed unaudited pro forma financial statements and related notes thereto of
TCI and TCI/Liberty included elsewhere herein and the respective historical
financial statements and the related notes thereto of Liberty and TCI. The pro
forma financial statements of TCI/Liberty represent a combination of the
separate pro forma statements of TCI and Liberty in giving effect to the
proposed Mergers.
<PAGE> 35
LIBERTY MEDIA CORPORATION
Condensed Pro Forma Balance Sheet
(unaudited)
<TABLE>
<CAPTION>
March 31, 1994
------------------------------------------
Liberty Pro forma
Historical Adjustments(1)(2)(4) Pro forma
---------- -------------------- ---------
Assets amounts in thousands
- - ------
<S> <C> <C> <C>
Cash, receivables, inventories,
prepaids and other current
assets, net $ 296,016 175,000 (3) 471,016
Investment in and advances to
affiliates and others 552,326 6,819 (3) 766,018
(104,011)(4)
310,884 (5)
Property and equipment, net of
accumulated depreciation 251,241 -- 251,241
Franchise costs, intangibles
and other assets,
net of amortization 417,027 -- 417,027
---------- -------- ---------
$1,516,610 388,692 1,905,302
========== ======== =========
Liabilities and Stockholders' Equity
- - ------------------------------------
Payables and accruals $ 296,607 50,000 (3) 346,607
Debt 446,201 -- 446,201
Deferred income taxes 33,248 115,027 (5) 168,969
20,694 (3)
Other liabilities 2,693 -- 2,693
---------- -------- ---------
Total liabilities 778,749 185,721 964,470
---------- -------- ---------
Minority interests 182,408 -- 182,408
Preferred stock subject to
mandatory redemption 158,527 (158,527)(6) --
Common stockholders' equity:
Class E Preferred Stock 17 (17)(6) --
Class A common stock 87,515 -- 87,515
Class B common stock 43,339 -- 43,339
Additional paid-in capital 228,593 158,544 (6) 387,137
Unrealized holding gains for
available-for-sale
securities 44,392 195,857 (5) 240,249
Retained earnings 7,839 111,125 (3) 118,964
Note receivable from
related party (14,769) -- (14,769)
---------- -------- ---------
396,926 465,509 862,435
---------- -------- ---------
Investment in TCI/Liberty -- (104,011)(4) (104,011)
---------- -------- ---------
$1,516,610 388,692 1,905,302
========== ======== =========
</TABLE>
See accompanying notes to unaudited condensed pro forma combined financial
statements.
<PAGE> 36
LIBERTY MEDIA CORPORATION
Condensed Pro Forma Combined Statement of Operations
(unaudited)
<TABLE>
<CAPTION>
Three months ended March 31, 1994
-----------------------------------
Pro forma
Liberty Adjustments Pro forma
Historical (1)(2)(4) Combined
---------- ----------- ---------
<S> <C> <C> <C>
Revenue $ 335,080 -- 335,080
Operating, selling, general and
administrative expenses (295,151) -- (295,151)
Depreciation and amortization (12,775) -- (12,775)
--------- ------ --------
Operating income 27,154 -- 27,154
Interest expense (9,090) -- (9,090)
Dividend and interest income 6,213 -- 6,213
Share of earnings of affiliates, net 9,137 (1,776)(7) 3,032
(4,329)(8)
Minority interests (4,033) -- (4,033)
Provision for impairment of
investment (2,233) -- (2,233)
Other, net 61 -- 61
--------- ------ -------
Earnings before income taxes 27,209 (6,105) 21,104
Income tax expense (13,567) 2,258 (9) (11,309)
--------- ------ -------
Net earnings 13,642 (3,847) 9,795
Dividend requirement on redeemable
preferred stocks (5,803) 5,803 (10) --
--------- ------ -------
Net earnings attributable to
common shareholders $ 7,839 1,956 9,795
========= ====== =======
Primary and fully diluted earnings
per common and common equivalent
share $ 0.06
=========
</TABLE>
See accompanying notes to unaudited condensed pro forma combined financial
statements.
<PAGE> 37
LIBERTY MEDIA CORPORATION
Condensed Pro Forma Combined Statement of Operations
(unaudited)
<TABLE>
<CAPTION>
Year ended December 31, 1993
------------------------------------------------------------------------------------------
Pro forma
Liberty Effect of Recap- HSN Mile Hi Adjustments Pro forma
Historical italization (11) Historical(12) Historical(13) (1)(2)(4)(12)(13) 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)(14) (58,685)
---------- ----- -------- ------ ------- ---------
Operating income (loss) (903) -- (2,657) 1,100 (5,358) (7,818)
Interest expense (31,080) -- (2,146) (2,180) (7,702)(15) (40,928)
2,180 (16)
Dividend and interest income 23,549 -- 1,633 6 -- 25,188
Gain on sale of investment 31,972 -- -- -- -- 31,972
Loss on transactions with TCI (30,296) -- -- -- -- (30,296)
Share of earnings of affiliates,
net 34,044 -- -- -- (13,978)(7) 9,133
(11,313)(8)
380 (17)
Minority interests 289 -- -- -- 57 (18) 3,884
170 (19)
3,368 (20)
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 (9) (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 (10) --
(317)(21)
---------- ----- -------- ------ ------- ---------
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 combined financial
statements.
<PAGE> 38
LIBERTY MEDIA CORPORATION
Notes to Condensed Pro Forma Combined Financial Statements
March 31, 1994
(unaudited)
(1) On September 16, 1993, Liberty announced that one of its subsidiaries
received notice from Rainbow Program Enterprises that Rainbow Program
Enterprises had elected to purchase Liberty's 50% partnership interest
in AMC under the terms of a buy/sell provision contained in the AMC
partnership agreement. A subsidiary of Liberty had initiated the
buy/sell procedure on August 1, 1993. Liberty expects to receive net
pre-tax cash proceeds of approximately $170 million from the sale and
an additional $5 million from a buy-out of Liberty's consulting
agreement with AMC.
(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 will now account for its investment
in QVC under the cost method.
(3) Represents assumed cash received from the sale of the 50% 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 assumed gain
($181,819,000) is not reflected in the pro forma combined statement of
operations due to its non-recurring nature.
(continued)
<PAGE> 39
LIBERTY MEDIA CORPORATION
Notes to Condensed Pro Forma Combined Financial Statements
(unaudited)
(4) Pursuant to the TCI/Liberty Agreement, the Mergers will be structured
as a tax free exchange whereby the common stock of TCI and Liberty and
the preferred stock of Liberty would be exchanged for like shares of
TCI/Liberty. The TCI/Liberty Agreement provides that each share of
TCI's and Liberty's common stock (including shares held by TCI's and
Liberty's subsidiaries) would be converted into one share and 0.975 of
a share, respectively, of the corresponding class of TCI/Liberty's
common stock. Any shares of Liberty preferred stock held by TCI or
its subsidiaries shall be converted into shares of a class or series
of TCI/Liberty preferred stock having an equivalent value. Shares of
preferred stock of Liberty not owned by TCI, Liberty or their
respective subsidiaries would be converted into shares of a preferred
stock of TCI/Liberty having designations, preferences, rights and
qualifications, limitations and restrictions similar to the shares of
preferred stock being converted. Adjustment represents the conversion
of Liberty's investment in TCI common stock into an investment in
TCI/Liberty 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 TCI.
(5) Represents the recognition of unrealized appreciation, net of taxes,
for Liberty's investment in QVC (an investment in equity securities
determined to be available-for-sale). See note 2.
(6) Reflects the elimination of the historical preferred stock of Liberty
held by TCI or its subsidiaries. Such historical preferred stock of
Liberty will be converted into TCI/Liberty preferred stock having an
equivalent value. See note 4.
(7) Elimination of share of earnings of QVC.
(8) Elimination of share of earnings of AMC.
(9) Estimated income tax effect of the pro forma adjustments.
(10) Reflects the elimination of the preferred stock dividend requirement
on Liberty preferred stock assumed to be converted into preferred
stock of TCI/Liberty. See note 4.
(11) On June 3, 1993, Liberty completed the transaction contemplated by the
Recapitalization Agreement entered into on March 26, 1993 with certain
subsidiaries of 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> 40
LIBERTY MEDIA CORPORATION
Notes to Condensed Pro Forma Combined Financial Statements
(unaudited)
(12) 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).
(13) 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 TCI 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 TCI in the form of a
subordinated note.
(continued)
<PAGE> 41
LIBERTY MEDIA CORPORATION
Notes to Condensed Pro Forma Combined Financial Statements
(unaudited)
(14) 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.
(15) 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 TCI pursuant
to the Recapitalization Agreement (see note 11). 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.
(16) 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.
(17) Elimination of share of losses of Mile Hi through March 15, 1993.
(18) Represents the interest income on the loan to a minority partner (see
note 13).
(19) Represents the minority partners' 22% interest in the pro forma losses
of Mile Hi adjusted for the effects of the acquisition (see note 13).
(20) Represents the minority shareholders' 58.5% interest in the pro forma
losses of HSN (see note 12).
(21) 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> 42
TCI/LIBERTY AND SUBSIDIARIES
Condensed Pro Forma Combined Financial Statements
March 31, 1994
(unaudited)
The following unaudited condensed pro forma balance sheet of
TCI/Liberty, dated as of March 31, 1994, assumes that the proposed Mergers,
whereby TCI and Liberty will each become wholly-owned subsidiaries of
TCI/Liberty, had occurred as of such date.
In addition, the unaudited condensed pro forma statements of
operations of TCI/Liberty for the three months ended March 31, 1994 and the
year ended December 31, 1993 assume that the proposed 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 TCI/Liberty Merger
had occurred prior to January 1, 1993. These condensed pro forma financial
statements of TCI/Liberty should be read in conjunction with the condensed
unaudited pro forma financial statements of TCI and Liberty and the related
notes thereto included elsewhere herein and the respective historical financial
statements and the related notes thereto of TCI and Liberty. The pro forma
financial statements of TCI/Liberty represent a combination of the separate pro
forma statements of TCI and Liberty in giving effect to the proposed Mergers.
<PAGE> 43
TCI/LIBERTY AND SUBSIDIARIES
Condensed Pro Forma Combined Balance Sheet
(unaudited)
<TABLE>
<CAPTION>
March 31, 1994
------------------------------------------------------
TCI Liberty Pro forma TCI/Liberty
Pro forma Pro forma adjustments(1) Pro forma
---------- ---------- -------------- -----------
Assets amounts in millions
- - ------
<S> <C> <C> <C> <C>
Cash, receivables and other current assets $ 285 471 -- 756
Investment in and advances to Liberty 300 -- (209)(2) --
(91)(3)
Investment in other affiliates and
Turner Broadcasting System, Inc.,
and related receivables 1,479 766 -- 2,245
Property and equipment, net of
accumulated depreciation 5,026 251 -- 5,277
Franchise costs, intangibles and
other assets, net of amortization 9,761 417 -- 10,178
------- ------ ------ ------
$16,851 1,905 (300) 18,456
======= ====== ====== ======
Liabilities and Stockholders' Equity
- - ------------------------------------
Payables and accruals $ 843 324 -- 1,167
Due to TCI -- 209 (209)(2) --
Debt 10,008 260 -- 10,268
Deferred income taxes 3,456 169 (5)(5) 3,620
Other liabilities 97 3 -- 100
------- ------ ------ ------
Total liabilities 14,404 965 (214) 15,155
------- ------ ------ ------
Minority interests 300 182 (91)(3) 391
Class A Preferred Stock -- -- -- (4) --
Stockholders' equity:
Class B 6% Cumulative Redeemable Exchangeable
Junior Preferred Stock -- -- -- --
Class A common stock 483 88 (2)(6) 569
Class B common stock 47 43 (1)(6) 89
Additional paid-in capital 2,310 387 (110)(4) 2,595
5 (5)
3 (6)
Cumulative foreign currency
translation adjustment (28) -- -- (28)
Unrealized holding gains for
available-for sale securities 191 240 -- 431
Retained earnings (deficit) (316) 119 -- (197)
Receivable from related party -- (15) -- (15)
Treasury stock -- -- (534)(4) (534)
Investment in TCI/Liberty (540) (104) 644 (4) --
------- ------ ------ ------
2,147 758 5 2,910
------- ------ ------ ------
$16,851 1,905 (300) 18,456
======= ====== ====== ======
</TABLE>
See accompanying notes to unaudited condensed pro forma combined financial
statements.
<PAGE> 44
TCI/LIBERTY AND SUBSIDIARIES
Condensed Pro Forma Combined Statement of Operations
(unaudited)
<TABLE>
<CAPTION>
Three months ended March 31, 1994
-----------------------------------------------------
TCI Liberty Pro forma TCI/Liberty
Pro forma Pro forma adjustments(1) Pro forma
--------- --------- -------------- -----------
amounts in millions
<S> <C> <C> <C> <C>
Revenue $ 1,060 335 (15)(7) 1,380
Operating, selling, general and
administrative expenses and
compensation relating to
stock appreciation rights (591) (295) 15 (7) (871)
Depreciation and amortization (235) (13) -- (248)
------- ------ ------ ------
Operating income 234 27 -- 261
Interest expense (178) (9) 6 (8) (181)
Interest and dividend income 10 6 (6)(8) 10
Share of earnings (losses) of
affiliates, net (9) 3 -- (6)
Loss on early extinguishment of debt (2) -- -- (2)
Other expense, net (6) (6) -- (12)
------- ------ ------ ------
Earnings before income taxes 49 21 -- 70
Income tax expense (25) (11) -- (36)
------- ------ ------ ------
Net earnings 24 10 -- 34
Dividend requirement on
redeemable preferred stocks -- -- (3)(9) (3)
------- ------ ------ ------
Net earnings attributable
to common shareholders $ 24 10 (3) 31
======= ====== ====== ======
Primary and fully diluted earnings
attributable to common shareholders per
common and common equivalent share $ .05 (11)
======
</TABLE>
See accompanying notes to unaudited condensed pro forma financial statements.
<PAGE> 45
TCI/LIBERTY AND SUBSIDIARIES
Condensed Pro Forma Combined Statement of Operations
(unaudited)
<TABLE>
<CAPTION>
Year ended December 31, 1993
-----------------------------------------------------
TCI Liberty Pro forma TCI/Liberty
Pro forma Pro forma adjustments(1) Pro forma
--------- --------- -------------- -----------
amounts in millions
<S> <C> <C> <C> <C>
Revenue $ 4,153 1,264 (55)(7) 5,362
Operating, selling, general and
administrative expenses and
compensation relating to
stock appreciation rights (2,326) (1,213) 55 (7) (3,484)
Depreciation and amortization (911) (59) -- (970)
------- ------ ------ ------
Operating income (loss) 916 (8) -- 908
Interest expense (731) (41) 9 (8) (763)
Interest and dividend income 34 25 (9)(8) 50
Share of earnings (losses) of
affiliates, net (76) 9 -- (67)
Gain on disposition 42 32 -- 74
Loss on transactions with TCI -- (30) -- (30)(10)
Loss on early extinguishment of debt (17) (7) -- (24)
Other expense, net (11) (6) -- (17)
------- ------ ------ ------
Earnings (loss) before
income taxes 157 (26) -- 131
Income tax expense (166) (4) -- (170)
------- ------ ------ ------
Net loss (9) (30) -- (39)
Dividend requirement on
redeemable preferred stocks -- -- (10)(9) (10)
------- ------ ------ ------
Net loss attributable
to common shareholders $ (9) (30) (10) (49)
======= ====== ====== ======
Loss per common share $ (.09)(12)
======
</TABLE>
See accompanying notes to unaudited condensed pro forma financial statements.
<PAGE> 46
TCI/LIBERTY AND SUBSIDIARIES
Notes to Condensed Pro Forma Combined Financial Statements
March 31, 1994
(unaudited)
(1) Pursuant to the TCI/Liberty Agreement, the Mergers will be structured
as a tax free exchange whereby the common stock of TCI and Liberty and
the preferred stock of Liberty would be exchanged for like shares of
TCI/Liberty. The TCI/Liberty Agreement provides that each share of
TCI's and Liberty's common stock (including shares held by TCI's and
Liberty's subsidiaries) would be converted into one share and 0.975 of
a share, respectively, of the corresponding class of TCI/Liberty's
common stock. Any shares of Liberty preferred stock held by
subsidiaries of TCI or its subsidiaries shall be converted into shares
of a class or series of TCI/Liberty preferred stock having an
equivalent value. Shares of preferred stock of Liberty not owned by
TCI or its subsidiaries would be converted into shares of a preferred
stock of TCI/Liberty having designations, preferences, rights and
qualifications, limitations and restrictions similar to the shares of
preferred stock being converted.
(2) Represents the elimination of intercompany indebtedness between TCI
and Liberty.
(3) Represents the elimination of TCI's minority interest in the equity of
a consolidated subsidiary of Liberty.
(4) Represents the reclassification to treasury stock of shares of
TCI/Liberty held by TCI, Liberty or their respective subsidiaries
previously reflected as "Investment in TCI/Liberty". All preferred
stock of TCI/Liberty held by TCI or its subsidiaries (also reflected
in the TCI pro forma financial information as "Investment in
TCI/Liberty") has been eliminated in consolidation with TCI/Liberty.
(5) Represents the elimination of temporary differences associated with
TCI's and Liberty's investments in TCI/Liberty preferred and common
stock.
(6) Reflects the net conversion of TCI and Liberty common stock held other
than by TCI, Liberty or their subsidiaries, at the exchange ratios
described in note 1, into like shares of TCI/Liberty.
(7) Represents the elimination of intercompany revenue and operating
expenses between TCI and Liberty arising from the sale of certain
cable television programming to their respective cable television
subscribers.
(8) Represents the elimination of interest on intercompany indebtedness
between TCI and Liberty.
(9) Represents the preferred stock dividend requirement on preferred stock
of TCI/Liberty other than preferred stock issued to TCI or its
respective subsidiaries.
(10) 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.
(continued)
<PAGE> 47
TCI/LIBERTY AND SUBSIDIARIES
Notes to Condensed Pro Forma Combined Financial Statements
(11) Reflects primary earnings per common and common equivalent share based
upon 610,025,737 weighted average shares. Such amount is calculated
utilizing 491,948,769 weighted average shares of TCI at March 31, 1994
(such amount representing TCI's weighted average shares, as disclosed
in their historical financial statements) reduced by 6,525,721 shares
of TCI common stock previously held by Liberty and 127,993,523
weighted averages shares of Liberty at March 31, 1994 (such amount
representing Liberty's weighted average shares, as disclosed in their
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 TCI.
(12) Reflects primary earnings per common and common equivalent share based
upon 550,232,340 weighted average shares. Such amount is calculated
utilizing 432,566,150 weighted average shares of TCI at December 31,
1993 (such amount representing TCI's weighted average shares, as
disclosed in their historical financial statements) reduced by
6,525,721 shares of TCI common stock previously held by Liberty and
127,582,745 weighted averages shares of Liberty at December 31, 1993
(such amount representing Liberty's weighted average shares, as
disclosed in their historical financial statements, shares of Liberty
common stock issued in the HSN merger and Liberty common stock
repurchased from 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 TCI.
