<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: April 20, 1995
Date of Earliest Event Reported: December 6, 1994
TELE-COMMUNICATIONS, INC.
AND
TCI COMMUNICATIONS, INC.
----------------------------------------------------------
(Exact name of Registrants as specified in their charters)
State of Delaware
----------------------------------------------
(State or other jurisdiction of incorporation)
0-20421 and 0-5550 84-1260157 and 84-0588868
- ------------------------- -------------------------------------
(Commission File Numbers) (I.R.S. Employer Identification Nos.)
5619 DTC Parkway
Englewood, Colorado 80111
- ---------------------------------------- ---------------------------
(Address of principal executive offices) (Zip Code)
Registrants' telephone number, including area code: (303) 267-5500
<PAGE> 2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrants have duly caused this report to be signed on their behalf by the
undersigned hereunto duly authorized.
Date: June 13, 1995
TELE-COMMUNICATIONS, INC.
(Registrant)
By:/s/ STEPHEN M. BRETT
--------------------------------
Stephen M. Brett
Executive Vice President and
Secretary
TCI COMMUNICATIONS, INC.
(Registrant)
By:/s/ STEPHEN M. BRETT
--------------------------------
Stephen M. Brett
Senior Vice President and
General Counsel
<PAGE> 3
Item 5. Other Events.
On December 6, 1994, the Company entered into a Stock Purchase
Agreement (the "Cablevision Purchase Agreement") with a shareholder group
headed by Eduardo Eurnekian (the "Shareholders") to acquire controlling
interests in Cablevision S.A., Televisora Belgrano S.A., Construred S.A. and
Univent's S.A., four affiliated companies owned by the Shareholders and engaged
in the cable television business in the Greater Buenos Aires area (collectively
"Cablevision"). Upon execution of the Cablevision Purchase Agreement, the
Company paid the Shareholders $20 million and the Shareholders placed 51% of
the outstanding stock of Cablevision S.A. into an escrow account. Upon
consummation of the transaction, the $20 million will be applied toward the
ultimate purchase price and the escrowed stock will be transferred to the
Company. If the transaction is not consummated for certain enumerated reasons,
the Shareholders are contractually obligated to return the $20 million to the
Company and the Cablevision S.A. stock will be released from escrow.
On March 28, 1995, the Cablevision Purchase Agreement was amended to
provide for the acquisition of a 51% ownership interest in Cablevision for an
estimated purchase price of approximately $315 million. The purchase price
will be paid with cash consideration of approximately $216 million (including
the initial $20 million) and the Company's issuance of approximately $99
million in secured, negotiable promissory notes payable to the Shareholders
(the "Notes"). The purchase price is subject to adjustment based on the actual
number of Cablevision equivalent basic subscribers and Cablevision liabilities
as of the month-end prior to closing. The Notes will be secured by the
Company's pledge of the stock representing its 51% interest in Cablevision.
The Notes will bear interest at variable rates and are scheduled to be repaid
in 20 monthly installments beginning in the fourth month following the month of
acquisition.
In addition, the Company has an option during the two-year period
following the acquisition date to increase its ownership interest to 80% at a
cost per subscriber similar to the initial purchase price adjusted for certain
fluctuations in applicable foreign currency exchange rates.
Consummation of the Cablevision acquisition is subject to regulatory
approvals and other conditions. Accordingly, there is no assurance that such
acquisition will be consummated.
<PAGE> 4
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements
Cablevision (A Combination of Certain Cable Television Assets of
Cablevision S.A., Televisora Belgrano S.A., Construred S.A. and
Univent's S.A., as defined):
Independent Auditors' Report
Combined Balance Sheets,
December 31, 1994 and 1993
Combined Statements of Operations and Deficit,
Years ended December 31, 1994, 1993 and 1992
Combined Statements of Cash Flows,
Years ended December 31, 1994, 1993 and 1992
Notes to Combined Financial Statements,
December 31, 1994 and 1993
(b) Pro Forma Financial Information
TCI Communications, Inc. and Subsidiaries:
Condensed Pro Forma Combined Balance Sheet,
December 31, 1994 (unaudited)
Condensed Pro Forma Combined Statement of Operations,
Year ended December 31, 1994 (unaudited)
Notes to Condensed Pro Forma Combined Financial Statements,
December 31, 1994 (unaudited)
Tele-Communications, Inc. and Subsidiaries:
Condensed Pro Forma Combined Balance Sheet,
December 31, 1994 (unaudited)
Condensed Pro Forma Combined Statement of Operation,
Year ended December 31, 1994 (unaudited)
Notes to Condensed Pro Forma Combined Financial Statements,
December 31, 1994 (unaudited)
(c) Exhibits
(2.1) Stock Purchase Agreement, dated as of December 6, 1994, by and
among Eduardo Eurnekian, stockholders of shares of the Common
Stock of Cablevision S.A., Televisora Belgrano S.A.,
Construred S.A., Univent's S.A., and TCI International
Holdings, Inc.
(2.2) Amendment to Stock Purchase Agreement executed on December 6,
1994.
(10) Stockholders Agreement, dated December 6, 1994, between
Eduardo Eurnekian and TCI International Holdings, Inc.
_________________________
<PAGE> 5
--------------------------------------
CABLEVISION (A COMBINATION OF CERTAIN
CABLE TELEVISION ASSETS OF CABLEVISION
S.A., TELEVISORA BELGRANO S.A.,
CONSTRURED S.A. AND UNIVENT'S S.A.
AS DEFINED IN NOTE 1)
COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
(WITH INDEPENDENT AUDITORS' REPORT THEREON)
<PAGE> 6
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
TCI INTERNATIONAL HOLDINGS, INC.:
We have audited the accompanying combined balance sheets of Cablevision (A
combination of certain cable television assets of Cablevision S.A., Televisora
Belgrano S.A., Construred S.A. and Univent's S.A., as defined in Note 1) as of
December 31, 1994 and 1993, and the related combined statements of operations
and deficit and cash flows for each of the years in the three-year period ended
December 31, 1994. These combined financial statements are the responsibility
of the Companies' management. Our responsibility is to express an opinion on
these combined financial statements based on our audits.
We conducted our audits in accordance with United States generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the combined financial statements present fairly, in all
material respects, the financial position of Cablevision as of December 31,
1994 and 1993, and the results of their operations and their cash flows for
each of the years in the three-year period ended December 31, 1994 in
conformity with United States generally accepted accounting principles.
KPMG Finsterbusch Pickenhavn Sibille
Jose Alberto Schuster
Partner
March 24, 1995
Buenos Aires, Argentina
<PAGE> 7
CABLEVISION (A COMBINATION OF CERTAIN CABLE
TELEVISION ASSETS OF CABLEVISION S.A., TELEVISORA
BELGRANO S.A., CONSTRURED S.A. AND UNIVENT'S S.A.
AS DEFINED IN NOTE 1)
COMBINED BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
IN THOUSANDS OF ARGENTINE PESOS ("A$")
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
ASSETS
------
Cash A$ 6,650 316
Accounts receivable (note 4) 3,217 2,175
Property and equipment (note 5):
Cable distribution systems 35,029 16,684
Support equipment and buildings 8,731 5,561
Other 427 379
------ ------
44,187 22,624
Less accumulated depreciation 14,321 8,075
------ ------
29,866 14,549
Other assets 310 57
------ ------
A$ 40,043 17,097
====== ======
LIABILITIES AND COMBINED DEFICIT
--------------------------------
Cash overdraft A$ 16 485
Accounts payable (note 6) 15,534 12,379
Other accrued liabilities (note 7) 16,255 12,786
Bank debt (note 8) 44,179 500
Capital lease obligations (note 5) 1,634 -
Deferred income taxes (note 10) 6,482 1,505
------ ------
Total liabilities 84,100 27,655
------ ------
Combined deficit (44,057) (10,558)
------ ------
Commitments and contingencies (note 11 ) A$ 40,043 17,097
====== ======
</TABLE>
See accompanying notes to combined financial statements.
<PAGE> 8
CABLEVISION (A COMBINATION OF CERTAIN CABLE
TELEVISION ASSETS OF CABLEVISION S.A., TELEVISORA
BELGRANO S.A., CONSTRURED S.A. AND UNIVENT'S S.A.
AS DEFINED IN NOTE 1)
COMBINED STATEMENTS OF OPERATIONS AND DEFICIT
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
IN THOUSANDS OF ARGENTINE PESOS
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ -----
<S> <C> <C> <C>
Revenue A$ 138,685 68,695 39,492
Operating costs and expenses:
Operating:
Charges from affiliate (note 9) 17,117 11,922 7,086
Other 41,758 21,434 13,509
Selling, general and administrative (note 9) 27,709 17,247 7,149
Provision for doubtful accounts 2,949 2,439 463
Depreciation and amortization 6,246 2,957 963
------ ------ -----
Operating income 42,906 12,696 10,322
Interest expense 197 - -
Other expense, net 317 106 9
------ ------ -----
Earnings before income taxes 42,392 12,590 10,313
Income taxes (note 10) 15,415 4,490 3,120
------ ------ -----
Net earnings 26,977 8,100 7,193
Combined equity (deficit):
Beginning of year (10,558) (11,471) 1,187
Distributions (60,476) (7,187) (19,851)
------ ------ -----
End of year A$ (44,057) (10,558) (11,471)
====== ====== =====
</TABLE>
See accompanying notes to combined financial statements.
<PAGE> 9
CABLEVISION (A COMBINATION OF CERTAIN CABLE
TELEVISION ASSETS OF CABLEVISION S.A., TELEVISORA
BELGRANO S.A., CONSTRURED S.A. AND UNIVENT'S S.A.
AS DEFINED IN NOTE 1)
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
IN THOUSANDS OF ARGENTINE PESOS
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings A$ 26,977 8,100 7,193
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 6,246 2,957 963
Deferred income tax expense 4,977 1,114 501
Provision for doubtful accounts 2,949 2,439 463
Decrease (increase) in accounts receivable,
and other assets (4,244) (4,057) 519
Increase in accounts payable and accrued
liabilities 6,624 7,632 14,567
------ ------ ------
Net cash provided by operating activities 43,529 18,185 24,206
------ ------ ------
Cash flows from investing activities:
Capital expended for property and equipment (19,464) (11,778) (4,960)
------ ------ ------
Net cash used in investing activities (19,464) (11,778) (4,960)
------ ------ ------
Cash flows from financing activities:
Increase (decrease) in cash overdraft (469) 485 -
Bank borrowings 43,679 - 500
Capital lease payments (465) - -
Distributions (60,476) (7,187) (19,851)
------ ------ ------
Net cash used in financing activities (17,731) (6,702) (19,351)
------ ------ ------
Net change in cash 6,334 (295) (105)
Cash at beginning of year 316 611 716
------ ------ ------
Cash at end of year A$ 6,650 316 611
====== ====== ======
</TABLE>
See accompanying notes to combined financial statements.
<PAGE> 10
CABLEVISION (A COMBINATION OF CERTAIN CABLE
TELEVISION ASSETS OF CABLEVISION S.A., TELEVISORA
BELGRANO S.A., CONSTRURED S.A. AND UNIVENT'S S.A.
AS DEFINED IN NOTE 1)
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
IN THOUSANDS OF ARGENTINE PESOS
(1) PURPOSE OF THE COMBINED FINANCIAL STATEMENTS
The accompanying combined financial statements were prepared to
comply with Rule 3-05 of Regulation S-X of the Securities
Exchange Commission in connection with the acquisition by TCI
International Holdings, Inc. ("TCI International") of 51% of the
shares of Cablevision, S.A., Televisora Belgrano, S.A.,
Construred, S.A. and Univent's, S.A. (referred to hereinafter
collectively as the "Company" or "Cablevision") from an
unaffiliated shareholder group ("the selling shareholders"). In
addition, TCI International has the option to increase its
investment to 80% for a period of two years at a cost per
subscriber comparable to the initial purchase. Cablevision is
engaged principally in the business of cable television
broadcasting in the City of Buenos Aires and Greater Buenos
Aires, Argentina.
The combined financial statements present the combined financial
position, results of operations and cash flows as of and for each
of the years in the three-year period ended December 31, 1994 of
the cable television broadcasting business of Cablevision as if
such business had existed as a stand-alone business throughout
the periods presented.
Under the terms of the purchase agreement, TCI International will
acquire 51% of Cablevision's cable television broadcasting
business and the legal entities within which such business
currently operates. Assets related to Cablevision's cable
programming and other businesses ("the Other Businesses") will
not be purchased. In connection with the acquisition of 51% of the
Company by TCI International, it is anticipated that the assets
related to the Other Businesses will be transferred to the
selling shareholders at book value.
Accordingly, the accompanying combined financial statements
exclude the assets and operating results of the Other Businesses.
All liabilities of the legal entities acquired (including
liabilities associated with the "Other Businesses") will be the
responsibility of Cablevision and are thus included in the
combined balance sheets. However only interest expense relating
to debt historically associated with the cable television
broadcast to be acquired by International has been included in
the accompanying statements of operations and deficit believes
that such an alteration is reasonable.
Revenue represents amounts earned during the periods from
providing cable television services to cable subscribers. Costs
of programming comprise two elements: purchased programming,
which is stated at the actual costs paid to third parties and
programming produced by the Other Businesses, which has been
allocated to the cable business based on the amount which
management estimates would have been incurred to purchase such
programming during each period presented. Management believes
that such allocations are reasonable.
Salaries, occupancy, and depreciation and amortization have been
specifically attributed to the cable television broadcasting
business based on the personnel involved, assets employed and the
ratio of square footage occupied, adjusted where appropriate to
reflect the costs that would have been incurred had the business
operated on a stand-alone basis throughout the periods presented.
Operating costs and selling, general and administrative expenses
not directly attributable to a specific line of business were
allocated on the basis of the relative amounts of sales for each
business. Management believes that such allocations are
reasonable.
<PAGE> 11
2
CABLEVISION (A COMBINATION OF CERTAIN CABLE
TELEVISION ASSETS OF CABLEVISION S.A., TELEVISORA
BELGRANO S.A., CONSTRURED S.A. AND UNIVENT'S S.A.
AS DEFINED IN NOTE 1)
NOTES TO COMBINED FINANCIAL STATEMENTS
IN THOUSANDS OF ARGENTINE PESOS
The provision for income taxes has been calculated on a separate
return basis for the business acquired. To the extent that the
operating losses of the Other Businesses were available to offset
the Company's taxable income, the Company's current income tax
liability was reflected as an increase to combined equity.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies adopted in the preparation of the
combined financial statements are set out below.
BASIS OF PRESENTATION
The combined financial statements are presented in Argentine
pesos, in accordance with United States generally accepted accounting
principles. All amounts for periods prior to January 1, 1993 are
expressed in constant pesos of December 31, 1992 purchasing power. The
combined financial statements through December 31, 1992 have been
price-level restated in accordance with Accounting Principles Board
Statement No. 3 in order to reflect the effects of the changes in the
purchasing power of the Argentine currency as measured by the Argentine
Wholesale Price Index. Argentina ceased to be classified as a highly
inflationary economy as of January 1, 1993. Consequently, there is no
adjustment for changes in general purchasing power for periods
subsequent to December 31, 1992.
COMBINATION PRINCIPLES
The combined financial statements include the assets,
liabilities and operating results and cash flows of the cable
television businesses of the companies mentioned in note 1. All
inter-entity transactions have been eliminated in the combined
financial statements.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost, adjusted for changes
in general price levels through December 31, 1992 as noted above.
Construction and initial subscriber installation costs, including
material, labor and applicable overhead, are capitalized.
Depreciation is computed on a straight-line basis using
estimated useful lives of 5 to 10 years for distribution systems and
support equipment.
Repairs and maintenance are charged to operations and renewals
and additions are capitalized. At the time of ordinary retirements,
sales or other dispositions of part of a cable television system, the
depreciated cost and cost of removal of such property are charged to
accumulated depreciation, and salvage value, if any, is credited
thereto. Gains or losses are recognized only on sales of properties in
their entirety.
LEASING AGREEMENTS
The Company's leasing activities consist principally of the leasing
of data processing equipment. Such leases are classified as direct
financing leases. The leases expire over the next four years.
<PAGE> 12
3
CABLEVISION (A COMBINATION OF CERTAIN CABLE
TELEVISION ASSETS OF CABLEVISION S.A., TELEVISORA
BELGRANO S.A., CONSTRURED S.A. AND UNIVENT'S S.A.
AS DEFINED IN NOTE 1)
NOTES TO COMBINED FINANCIAL STATEMENTS
IN THOUSANDS OF ARGENTINE PESOS
INCOME TAX
Income tax is computed according to the guidelines established by the
Statement of Financial Accounting Standards No. 109, Accounting for
Income Taxes.
Statement 109 requires the asset and liability method of accounting
for income taxes. Under the asset and liability method of Statement
109, deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial
statement carrying amount of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled.
FOREIGN CURRENCY TRANSACTIONS
Foreign currency transactions are recorded at the rates of exchange
prevailing on the date of their execution or liquidation. Foreign
currency assets and liabilities are translated into Argentine pesos at
current rates in effect at the balance sheet date.
Revenue recognition
Monthly cable service revenue is recognized in the period that
services are delivered. Cable installation revenue is recognized in
the period the related services are provided to the extent of direct
selling costs. Any remaining amount is deferred and recognized over
the estimated average period that subscribers are expected to remain
connected to the cable television system.
(3) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
No cash payments were made for income taxes during the periods
presented. Payments of interest associated with the cable broadcasting
business during the periods were immaterial.
In 1994 the Company acquired fixed assets amounting to A$2,099 through
capital lease agreements.
(4) ACCOUNTS RECEIVABLE
Accounts receivable are summarized as follows:
<TABLE>
<CAPTION>
1994 1993
----- ----
<S> <C> <C>
Subscribers A$ 3,189 3,503
Magazine advertising 1,057 307
----- -----
4,246 3,810
Less allowance for doubtful
accounts (1,029) (1,635)
----- -----
A$ 3,217 2,175
===== =====
</TABLE>
<PAGE> 13
4
CABLEVISION (A COMBINATION OF CERTAIN CABLE
TELEVISION ASSETS OF CABLEVISION S.A., TELEVISORA
BELGRANO S.A., CONSTRURED S.A. AND UNIVENT'S S.A.
AS DEFINED IN NOTE 1)
NOTES TO COMBINED FINANCIAL STATEMENTS
IN THOUSANDS OF ARGENTINE PESOS
5) CAPITAL LEASES
At December 31, 1994, property and equipment includes A$1,566 of data
processing equipment under capital leases, net of accumulated
depreciation of A$533.
The following is a schedule by year of future minimum lease payments
under capital leases together with the present value of the net
minimum lease payments as of December 31, 1994:
<TABLE>
<S> <C>
Year ending December 31:
1995 A$ 564
1996 564
1997 731
-----
Total minimum lease payments 1,859
Less: amount representing interest (225)
-----
Present value of net minimum lease payments A$ 1,634
=====
</TABLE>
(6) ACCOUNTS PAYABLE
Accounts payable are comprised as follows:
<TABLE>
<CAPTION>
1994 1993
------- ------
<S> <C> <C>
Local currency:
Programming A$ 459 -
Purchases of fixed assets 1,812 959
Advertising and promotion 878 45
Insurance 119 34
Related parties 478 1,175
Advances from customers 362 336
Other services suppliers 737 158
------- ------
4,845 2,707
------- ------
In U.S. dollars:
Programming 9,442 9,672
Purchases of fixed assets 1,247 -
------- ------
10.689 9,672
------- ------
A$ 15,534 12,379
------- ------
</TABLE>
Annual maturities of accounts payable are as follows:
<TABLE>
<S> <C>
Year ended December 31, 1995 A$ 14,995
Year ended December 31, 1996 539
</TABLE>
<PAGE> 14
5
CABLEVISION (A COMBINATION OF CERTAIN CABLE
TELEVISION ASSETS OF CABLEVISION S.A., TELEVISORA
BELGRANO S.A., CONSTRURED S.A. AND UNIVENT'S S.A.
AS DEFINED IN NOTE 1)
NOTES TO COMBINED FINANCIAL STATEMENTS
IN THOUSANDS OF ARGENTINE PESOS
(7) OTHER ACCRUED LIABILITIES
Other accrued liabilities are comprised as follows:
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Income tax A$ 5,359 3,953
Taxes on revenue 5,819 5,085
Social charges 4,558 3,168
Other 519 580
------- ------
A$ 16,255 12,786
======= ======
</TABLE>
Social charges represent the employer portion of mandatory
contributions to national health and welfare schemes as well as
corresponding amounts withheld on behalf of employees.
(8) BANK DEBT
Bank debt as of December 31, 1994, all denominated in U.S. dollars,
totaled A$44,179 at an average fixed interest rate of 14.42% as compared
with A$500 at an average fixed interest rate of 19.5% at December 31,
1993. Loans of approximately A$9,000 at December 31, 1994 were secured
by credit card collections of subscriber fees.
Of the debt outstanding at December 31, 1994, A$34,684 matures in 1995.
The remaining balance is payable in 1996.
(9) TRANSACTIONS WITH RELATED PARTIES
The Company's selling, general and administrative expenses include
advertising purchased from related parties amounting to A$1,304 and
A$1,178 in 1994 and 1993, respectively. During the year ended
December 31, 1994, the Company placed significant additional amounts of
advertising with related entities in print and open channel television.
No amounts were billed to the Company nor were material amounts of
services provided by the Company in exchange. The related costs are
not reflected in the accompanying statement of operations and deficit
for the year ended December 31, 1994 as they are not believed to be
indicative of the nature and amount of advertising that Cablevision
would have purchased had Cablevision been required to pay for such
advertising.
Cablevision has been allocated certain internally produced programming
costs from a related programming business calculated at amounts which
management estimates would have been incurred to purchase such
programming during each period presented. Such charges, which are not
necessarily indicative of the costs that Cablevision would have
incurred had it been operated as a stand-alone business, amounted to
A$16,915, A$11,722 and A$6,886 in 1994, 1993 and 1992, respectively.
<PAGE> 15
6
CABLEVISION (A COMBINATION OF CERTAIN CABLE
TELEVISION ASSETS OF CABLEVISION S.A., TELEVISORA
BELGRANO S.A., CONSTRURED S.A. AND UNIVENT'S S.A.
AS DEFINED IN NOTE 1)
NOTES TO COMBINED FINANCIAL STATEMENTS
IN THOUSANDS OF ARGENTINE PESOS
Cablevision leases certain business offices from a related party.
Management has allocated rent expense based upon the estimated market
rate for comparable rentals, assigned to the estimated area used by the
cable television operations. Such charges amounted to A$202, A$200 and
A$200 in 1994, 1993 and 1992, respectively.
The effects of all transactions involving the selling shareholders
and/or the Other Businesses have been included in combined deficit.
The distribution amounts set forth in the accompanying statements of
operations and combined deficit represent the aggregate impact of such
transactions during the respective periods presented.
(10) INCOME TAXES
Income tax expense attributable to earnings for the years ended
December 31, 1994, 1993 and 1992 consists of:
<TABLE>
<CAPTION>
Current Deferred Total
--------- -------- ------
<S> <C> <C> <C>
Year ended December 31,
1994 A$ 10,438 4,977 15,415
======= ====== =======
Year ended December 31,
1993 A$ 3,376 1,114 4,490
======= ====== =======
Year ended December 31,
1992 A$ 2,619 501 3,120
======= ====== =======
</TABLE>
To the extent that operating losses of the Other Businesses were
available to offset the Company's taxable income, the Company's curent
income tax liability was reflected as a reduction of combined deficit.
Such reductions amounted to A$7,483, A$535 and A$1,605 during the year
ended December 31, 1994, 1993 and 1992, respectively.
Income tax expense attributable to earnings differs from the amounts
computed by applying the statutory Argentine income tax rate of 30% as
follows:
<TABLE>
<CAPTION>
1994 1993 1992
------- ------ ------
<S> <C> <C> <C>
Expected income taxes A$ 12,718 3,777 3,094
Effects of:
Non-deductible expenses 117 6 26
Separate return limitations on
deductions of initial subscriber
installation cost 2,580 707 -
------- ------ ------
Actual tax expense A$ 15,415 4,490 3,120
======= ====== ======
</TABLE>
The components of the deferred tax liabilities at December 31, 1994
and 1993 are shown as follows:
<TABLE>
<CAPTION>
1994 1993
---- -----
<S> <C> <C>
Capitalization for book purposes of
construction and initial subscriber
installation costs written off as
incurred for tax purposes A$ 6,790 1,996
Differences in the timing of the
deduction of the allowance for
doubtful accounts (308) (491)
----- ------
Total A$ 6,482 1,505
===== ======
</TABLE>
<PAGE> 16
7
CABLEVISION (A COMBINATION OF CERTAIN CABLE
TELEVISION ASSETS OF CABLEVISION S.A., TELEVISORA
BELGRANO S.A., CONSTRURED S.A. AND UNIVENT'S S.A.
AS DEFINED IN NOTE 1)
NOTES TO COMBINED FINANCIAL STATEMENTS
IN THOUSANDS OF ARGENTINE PESOS
(11) COMMITMENTS AND CONTINGENCIES
a. Cablevision leases business offices, has entered into pole rental
agreements, and uses certain other equipment under lease
arrangements. Lease expense under such arrangements aggregated
approximately A$822, A$676 and A$386 for 1994, 1993 and 1992,
respectively, including A$400, A$200 and A$186 paid under pole
rental agreements which are terminable on short notice by either
party.
It is expected that in the normal course of business, leases that
expire will be renewed or replaced by other leases. Accordingly,
annual commitments are not expected to decrease in comparison to
the 1994 amounts.
b. The Company is involved in several lawsuits and claims arising in
the normal course of business. In the opinion of management and
legal counsel, the final outcome of these matters will have no
significant adverse effects on the combined financial statements of
the Company.
c. Under the terms of the purchase agreement between TCI International
and the shareholders of Cablevision, the sellers retain the
obligation to reimburse the buyer for any losses subsequent to the
purchase date arising from loss contingencies or unrecorded
liabilities attributable to circumstances existing prior to that
date.
<PAGE> 17
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly Tele-Communications, Inc.)
Condensed Pro Forma Combined Financial Statements
December 31, 1994
(unaudited)
The following unaudited condensed pro forma combined balance sheet of TCI
Communications, Inc. ("TCIC"), dated as of December 31, 1994, assumes that the
merger with TeleCable Corporation ("TeleCable") (the "TeleCable Merger") had
occurred as of such date. See note (1).
In addition, the following unaudited condensed pro forma combined
statement of operations of TCIC for the year ended December 31, 1994 assumes
that (i) the TeleCable Merger, (ii) the combination of TCIC and Liberty Media
Corporation ("Liberty"), whereby TCIC and Liberty each became a wholly-owned
subsidiary of TCI (the "TCI/Liberty Combination") (see note 3) and (iii) the
transfer of United Artists International, Inc. from TCIC to TCI International
Holdings, Inc. (the "International Transfer") (see note 2) had occurred as of
January 1, 1994.
The unaudited pro forma results do not purport to be indicative of the
results of operations that would have been obtained if the TeleCable Merger,
the TCI/Liberty Combination and the International Transfer had occurred as of
January 1, 1994. These condensed pro forma combined financial statements of
TCIC should be read in conjunction with the condensed pro forma financial
statements and the related notes thereto of TCI included elsewhere herein and
the respective historical financial statements and the related notes thereto of
TCIC and TCI. The accompanying condensed pro forma financial statements no
longer reflect the assumed investment in Intermedia Partners IV, L.P., as such
transaction under its current terms can no longer be deemed probable.
1
<PAGE> 18
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Pro Forma Combined Balance Sheet
(unaudited)
<TABLE>
<CAPTION>
December 31, 1994
----------------------------------------------------------
Pro forma
TCIC TeleCable Adjustments TCI
Historical Historical(1) (1) Pro forma
---------- ------------- ----------- ---------
amounts in millions
<S> <C> <C> <C> <C>
Assets
------
Cash and receivables $ 204 19 -- 223
Investment in affiliates
and Turner Broadcasting System,
Inc., and related receivables 347 18 -- 365
Property and equipment, net of
accumulated depreciation 5,579 258 320 (4) 6,157
Franchise costs and other assets,
net of amortization 9,750 21 1,023 (4) 11,571
777 (5)
---------- ------- ------- --------
$ 15,880 316 2,120 18,316
========== ======= ======= ========
Liabilities and Stockholder's Equity
------------------------------------
Payables and accruals $ 856 31 -- 887
Debt 10,712 274 -- 10,986
Deferred income taxes 3,299 46 777 (5) 4,122
Other liabilities 96 5 -- 101
---------- ------- ------- --------
Total liabilities 14,963 356 777 16,096
---------- ------- ------- --------
Minority interests 271 3 -- 274
Common stockholder's equity:
Class A common stock 1 -- -- 1
Class B common stock -- 7 (7)(6) --
Additional paid-in capital (deficit) 2,842 (262) 262 (6) 4,142
1,300 (7)
Unrealized holding gains for
available-for-sale securities 2 3 (3)(6) 2
Accumulated earnings (deficit) (256) 209 (209)(6) (256)
Investment in TCI (1,096) -- -- (1,096)
Due from TCI (847) -- -- (847)
---------- ------- ------- --------
646 (43) 1,343 1,946
---------- ------- ------- --------
$ 15,880 316 2,120 18,316
========== ======= ======= ========
</TABLE>
See accompanying notes to unaudited condensed pro forma combined financial
statements.
2
<PAGE> 19
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Pro Forma Combined Statement of Operations
(unaudited)
<TABLE>
<CAPTION>
Year ended December 31, 1994
----------------------------------------------------------------------
International Pro forma
TCIC TeleCable Transfer Adjustments TCI
Historical Historical(1) Historical(2) (1)(2)(3) Pro forma
---------- ------------- ------------- ----------- ---------
amounts in millions
<S> <C> <C> <C> <C> <C>
Revenue $ 4,318 302 (24) -- 4,596
Operating, selling, general and
administrative expenses and
compensation relating to stock
appreciation rights (2,512) (171) 43 -- (2,640)
Depreciation and amortization (988) (46) 3 (46)(8) (1,077)
---------- ------ ---- ----- -------
Operating income 818 85 22 (46) 879
Interest expense (777) (23) -- -- (800)
Interest and dividend income 35 1 (2) -- 34
Share of earnings of Liberty 125 -- -- (125)(9) --
Share of losses of other
affiliates, net (114) -- 67 -- (47)
Gain (loss) on dispositions 156 -- (169) -- (13)
Other expense, net (20) (4) (7) -- (31)
---------- ------ ---- ----- -------
Earnings before income taxes 223 59 (89) (171) 22
Income tax expense (131) (23) 37 70 (10) (47)
---------- ------ ---- ----- -------
Net earnings (loss) $ 92 36 (52) (101) (25)
========== ====== ==== ===== =======
</TABLE>
See accompanying notes to unaudited condensed pro forma combined financial
statements.
3
<PAGE> 20
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Condensed Pro Forma Combined Financial Statements
December 31, 1994
(unaudited)
(1) As of August 8, 1994, TCI, TCIC and TeleCable entered into a
definitive merger agreement (the "TeleCable Merger Agreement") whereby
TeleCable was merged into TCIC on January 26, 1995. The aggregate
$1.6 billion purchase price was satisfied by TCIC's assumption of
approximately $300 million of TeleCable's net liabilities and the
issuance to TeleCable's shareholders of shares of TCI Class A common
stock (approximately 42 million shares) and 1 million shares of a new
series of preferred stock to be designated "Convertible Preferred
Stock" ("Series D Preferred Stock") with an aggregate initial
liquidation value of $300 million. The Series D Preferred Stock,
which accrues dividends at a rate of 5.5% per annum, are convertible
into 10 million shares of TCI Class A common stock. The Series D
Preferred Stock is redeemable at the option of TCI after five years
and at the option of either TCI or the holder after ten years. The
amount of net liabilities assumed by TCIC and the number of shares of
TCI Class A common stock issued to TeleCable's shareholders are
subject to closing adjustments.
(2) During 1994, TCI was reorganized based upon four lines of business:
Domestic Cable and Communications; Programming; International Cable
and Programming; and Technology/Venture Capital. In connection with
this reorganization, in November of 1994, TCIC transferred its
ownership of United Artists International, Inc. to TCI International
Holdings, Inc. in exchange for 79,903 shares of a newly created class
of TCI preferred stock, Redeemable Convertible Preferred Stock, Series
E (the "Series E Preferred Stock"). Such transaction has been
reflected at historical cost. Series E Preferred Stock accrues
dividends at the rate of 5.0% per annum and is convertible into TCI
Class A common stock at the initial conversion rate of 1,000 shares of
TCI Class A common stock for one share of the Series E Preferred
Stock.
(3) The TCI/Liberty Combination, which were consummated on August 4, 1994,
were structured as a tax free exchange whereby the common stock of
TCIC and Liberty and the preferred stock of Liberty were exchanged for
like shares of TCI. The merger agreement provided that each share of
TCIC's and Liberty's common stock (including shares held by TCIC's or
Liberty's subsidiaries) would be converted into one share and 0.975 of
a share, respectively, of the corresponding class of TCI's common
stock. Shares of Liberty Class E Preferred Stock were converted into
shares of a preferred stock of TCI having designations, preferences,
rights and qualifications, limitations and restrictions substantially
identical to the shares of preferred stock being converted. Shares of
the remaining Liberty preferred stock held by subsidiaries of TCIC
were converted into shares of a class of TCI preferred stock having an
equivalent fair value to that which was given up. The TCI/Liberty
Combination has been accounted for as a purchase of Liberty by TCI
utilizing Liberty's historical predecessor cost.
(continued)
4
<PAGE> 21
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Condensed Pro Forma Combined Financial Statements
(4) Represents an allocation of the purchase price of TeleCable to its
tangible and intangible assets. The cost allocations were estimated
using information available at the date of preparation of these
condensed pro forma combined financial statements and will be adjusted
upon final appraisal of the assets acquired. Therefore, the actual
allocations may differ from those allocations reflected herein.
(5) Represents the estimated incremental deferred income tax liability
associated with the TeleCable purchase price allocations, as described
in note (4) above. The adjustment assumes a combined federal and
state income tax rate of 41%.
(6) Represents the elimination of TeleCable's historical stockholders'
deficit.
(7) Represents TCI's capital contribution to TCIC resulting from the
issuance by TCI to TeleCable shareholders of shares of TCI Class A
common stock (approximately 42 million shares) and 1 million shares of
Series D Preferred Stock with an aggregate liquidation value of $300
million. See note (1) above.
(8) Represents depreciation and amortization of TeleCable's allocated
excess purchase price, based upon weighted average lives of 12-1/2
years for property and equipment and 40 years for franchise costs.
See note (1) above.
(9) Reflects the elimination of TCIC's share of Liberty's historical
earnings. See note (3) above.
(10) Reflects the estimated income tax effect of the pro forma adjustments.
5
<PAGE> 22
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Pro Forma Combined Financial Statements
December 31, 1994
(unaudited)
The following unaudited condensed pro forma combined balance sheet of
TCI, dated as of December 31, 1994, assumes that (i) the TeleCable Merger, (ii)
the Cablevision acquisition and (iii) the transactions whereby QVC, Inc.
("QVC") became 43% owned by the Company and 57% owned by Comcast (the "QVC
Transactions") had occurred as of such date. See notes (2), (3) and (4).
The following unaudited condensed pro forma combined statement of
operations of TCI for the year ended December 31, 1994 assumes that the
TeleCable Merger, the Cablevision acquisition, the TCI/Liberty Combination (see
note 1) and the QVC Transactions had occurred as of January 1, 1994.
The unaudited pro forma results do not purport to be indicative of the
results of operations that would have been obtained if the TeleCable Merger,
the Cablevision acquisition, the TCI/Liberty Combination and the QVC
Transactions had occurred as of January 1, 1994. These condensed pro forma
combined financial statements of TCI should be read in conjunction with the
historical financial statements and the related notes thereto of TCI. The
accompanying condensed pro forma combined financial statements no longer
reflect the assumed investment in Intermedia Partners IV, L.P., as such
transaction under its current terms can no longer be deemed probable.
6
<PAGE> 23
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Pro Forma Combined Balance Sheet
(unaudited)
<TABLE>
<CAPTION>
December 31, 1994
-------------------------------------------------
QVC
TCI TeleCable Cablevision Pro forma Transactions TCI
Historical Historical(2) Historical(3) adjustments(2)(3) Pro forma(4) Pro forma
---------- -------------- -------------- ----------------- ------------ ---------
amounts in millions
<S> <C> <C> <C> <C> <C> <C>
Assets
------
Cash, receivables and other
current assets $ 496 19 10 -- -- 525
Investment in affiliates and Turner
Broadcasting System, Inc., and
related receivables 2,156 18 -- -- 7 (12) 1,965
(216)(13)
Property and equipment, net of
accumulated depreciation 5,876 258 30 334 (5) -- 6,498
Franchise costs, intangibles and
other assets, net of amortization 11,000 21 -- 1,348 (5) -- 13,342
973 (6)
-------- ---- ------ -------- ----- -------
$ 19,528 316 40 2,655 (209) 22,330
======== ==== ====== ======== ===== =======
Liabilities and Stockholders' Equity
------------------------------------
Payables and accruals $ 1,193 31 32 -- -- 1,256
Debt 11,162 274 46 99 (7) 7 (12) 11,695
196 (8) (89)(13)
Deferred income taxes 3,613 46 6 973 (6) -- 4,638
Other liabilities 160 5 -- -- -- 165
-------- ---- ------ -------- ----- -------
Total liabilities 16,128 356 84 1,268 (82) 17,754
-------- ---- ------ -------- ----- -------
Minority interests 429 3 -- -- -- 432
Series D Preferred Stock -- -- -- 300 (10) -- 300
Stockholders' equity:
Preferred Stock -- -- -- -- -- --
Combined deficit -- -- (44) 44 (11) -- --
Class A common stock 577 -- -- 42 (10) -- 619
Class B common stock 89 7 -- (7)(9) -- 89
Additional paid-in capital 2,959 (262) -- 958 (10) -- 3,917
262 (9)
Cumulative foreign currency
translation adjustment (4) -- -- -- -- (4)
Unrealized holding gains for
available-for sale securities 253 3 -- (3)(9) (127)(13) 126
Retained earnings (deficit) (293) 209 -- (209)(9) -- (293)
Treasury stock (610) -- -- -- -- (610)
-------- ---- ------ -------- ----- -------
2,971 (43) (44) 1,087 (127) 3,844
-------- ---- ------ -------- ----- -------
$ 19,528 316 40 2,655 (209) 22,330
======== ==== ====== ======== ===== =======
</TABLE>
See accompanying notes to unaudited condensed pro forma combined financial
statements.
7
<PAGE> 24
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Pro Forma Combined Statement of Operations
(unaudited)
<TABLE>
<CAPTION>
Year ended December 31, 1994
-------------------------------
TCI Liberty TeleCable Cablevision
Historical Historical(1) Historical(2) Historical(3)
---------- ------------- ------------- -------------
amounts in millions, except per share amounts
<S> <C> <C> <C> <C>
Revenue $ 4,936 790 302 139
Operating, cost of sales, selling,
general and administrative expenses
and compensation relating to stock
appreciation rights (3,130) (726) (171) (90)
Depreciation and amortization (1,018) (32) (46) (6)
-------- ----- ----- ----
Operating income (loss) 788 32 85 43
Interest expense (785) (22) (23) --
Interest and dividend income 36 15 1 --
Share of earnings of Liberty 125 -- -- --
Share of earnings (losses) of
affiliates, net (120) 23 -- --
Gain on dispositions 151 183 -- --
Loss on early extinguishment of debt (9) -- -- --
Other expense, net (15) (11) (4) (1)
-------- ----- ----- ----
Earnings (loss) before income taxes 171 220 59 42
Income tax expense (116) (95) (23) (15)
-------- ----- ----- ----
Net earnings (loss) 55 125 36 27
Dividend requirement on redeemable
preferred stocks (8) (14) -- --
-------- ----- ----- ----
Net loss attributable to
common shareholders $ 47 111 36 27
======== ===== ===== ====
Primary earnings per common and
common equivalent share $ .09
========
</TABLE>
<TABLE>
<CAPTION>
Year ended
December 31, 1994
--------------------
QVC
Pro forma Transactions TCI
adjustments(1)(2)(3) Pro forma (4) Pro forma
-------------------- ------------- ------------
amounts in millions, except per share amounts
<S> <C> <C> <C>
Revenue (36)(14) -- 6,131
Operating, cost of sales, selling,
general and administrative expenses
and compensation relating to stock
appreciation rights 36 (14) -- (4,081)
Depreciation and amortization (73)(15) -- (1,175)
----- ----- -------
Operating income (loss) (73) -- 875
Interest expense 12 (16) -- (847)
(7) (17)
(16)(18)
(6)(19)
Interest and dividend income (12)(16) -- 40
Share of earnings of Liberty (125)(20) -- --
Share of earnings (losses) of
affiliates, net -- 26 (24) (98)
(27)(25)
Gain on dispositions -- -- 334
Loss on early extinguishment of
debt -- -- (9)
Other expense, net -- -- (31)
----- ----- -------
Earnings (loss) before income
taxes (227) (1) 264
Income tax expense 87 (21) -- (162)
----- ----- -------
Net earnings (loss) (140) (1) 102
Dividend requirement on redeemable
preferred stocks (17)(22) -- (31)
8 (23)
----- ----- -------
Net loss attributable to
common shareholders (149) (1) 71
===== ===== =======
Primary earnings per common and
common equivalent share $ .11 (26)
=======
</TABLE>
See accompanying notes to unaudited condensed pro forma combined financial
statements.
8
<PAGE> 25
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Condensed Pro Forma Combined Financial Statements
December 31, 1994
(unaudited)
(1) The TCI/Liberty Combination, which were consummated on August 4, 1994,
were structured as a tax free exchange whereby the common stock of
TCIC and Liberty and the preferred stock of Liberty were exchanged for
like shares of TCI. The merger agreement provided that each share of
TCIC's and Liberty's common stock (including shares held by TCIC's or
Liberty's subsidiaries) would be converted into one share and 0.975 of
a share, respectively, of the corresponding class of TCI's common
stock. Shares of Liberty Class E Preferred Stock were converted into
shares of a preferred stock of TCI having designations, preferences,
rights and qualifications, limitations and restrictions substantially
identical to the shares of preferred stock being converted. Shares of
the remaining Liberty preferred stock held by subsidiaries of TCIC
were converted into shares of a class of TCI preferred stock having an
equivalent fair value to that which was given up. All preferred stock
of TCI held by TCIC or its subsidiaries has been eliminated in
consolidation. The TCI/Liberty Combination has been accounted for as
a purchase of Liberty by TCI utilizing Liberty's historical
predecessor cost.
(2) As of August 8, 1994, TCI, TCIC and TeleCable entered into the
TeleCable Merger Agreement whereby TeleCable was merged into TCIC on
January 26, 1995. The aggregate $1.6 billion purchase price was
satisfied by TCIC's assumption of approximately $300 million of
TeleCable's net liabilities and the issuance to TeleCable's
shareholders of shares of TCI Class A common stock (approximately 42
million shares) and 1 million shares of Series D Preferred Stock with
an aggregate initial liquidation value of $300 million. The Series D
Preferred Stock, which accrues dividends at a rate of 5.5% per annum,
are convertible into 10 million shares of TCI Class A common stock.
The Series D Preferred Stock is redeemable at the option of TCI after
five years and at the option of either TCI or the holder after ten
years. The amount of net liabilities assumed by TCIC and the number
of shares of TCI Class A common stock issued to TeleCable's
shareholders are subject to closing adjustments.
(3) On December 6, 1994, the Company entered into the Cablevision Purchase
Agreement with the Shareholders to acquire controlling interests in
Cablevision. Upon execution of the Cablevision Purchase Agreement,
the Company paid the Shareholders $20 million and the Shareholders
placed 51% of the outstanding stock of Cablevision S.A. into an escrow
account. Upon consummation of the transaction, the $20 million will
be applied toward the ultimate purchase price and the escrowed stock
will be transferred to the Company. If the transaction is not
consummated for certain enumerated reasons, the Shareholders are
contractually obligated to return the $20 million to the Company and
the Cablevision S.A. stock will be released from escrow. All amounts
presented with respect to Cablevision are stated in U.S. dollars.
During the period covered in the accompanying condensed pro forma
combined historical financial statements, an exchange rate of one U.S.
dollar to one Argentine peso was maintained by the Argentine
government.
(continued)
9
<PAGE> 26
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Condensed Pro Forma Combined Financial Statements
On March 28, 1995, the Cablevision Purchase Agreement was amended to
provide for the acquisition of a 51% ownership interest in Cablevision
for an estimated purchase price of approximately $315 million. The
purchase price will be paid with cash consideration of approximately
$216 million (including the initial $20 million) and the Company's
issuance of approximately $99 million in Notes. The purchase price is
subject to adjustment based on the actual number of Cablevision
equivalent basic subscribers and Cablevision liabilities as of the
month-end prior to closing. The Notes will be secured by the
Company's pledge of the stock representing its 51% interest in
Cablevision. The Notes will bear interest at variable rates and are
scheduled to be repaid in 20 monthly installments beginning in the
fourth month following the month of acquisition.
In addition, the Company has an option during the two-year period
following the acquisition date to increase its ownership interest to
80% at a cost per subscriber similar to the initial purchase price
adjusted, however, for certain fluctuations in applicable foreign
currency exchange rates.
Consummation of the Cablevision acquisition is subject to regulatory
approvals and other conditions. Accordingly, there is no assurance
that such acquisition will be consummated.
(4) Pursuant to an Agreement and Plan of Merger dated as of August 4,
1994, as amended (the "QVC Merger Agreement"), QVC Programming
Holdings, Inc. (the "Purchaser"), a corporation which is jointly owned
by Comcast and Liberty, commenced an offer (the "QVC Tender Offer") to
purchase all outstanding shares of common stock and preferred stock of
QVC, Inc. ("QVC"). The QVC Tender Offer expired at midnight, New York
City time, on February 9, 1995, at which time the Purchaser accepted
for payment all shares of QVC which had been tendered in the QVC
Tender Offer. Following consummation of the QVC Tender Offer, the
Purchaser was merged with and into QVC with QVC continuing as the
surviving corporation. The Company owns an approximate 43% interest
of the post-merger QVC. Upon consummation of the aforementioned QVC
transactions, the Company is deemed to exercise significant influence
over QVC and, as such, will account for its investment in QVC under
the equity method.
(5) Represents an allocation of the purchase prices of TeleCable and
Cablevision to their tangible and intangible assets. The cost
allocations were estimated using information available at the date of
preparation of these condensed pro forma combined financial statements
and will be adjusted upon final appraisal of the assets acquired.
Therefore, the actual allocations may differ from those allocations
reflected herein.
(6) Represents the estimated incremental deferred income tax liability
associated with the TeleCable and Cablevision purchase price
allocations, as described in note (5) above. The adjustment assumes a
combined federal and state income tax rate of 41%.
(7) Represents the assumed issuance of the Notes in the acquisition of
Cablevision (see note 3).
(8) Represents assumed borrowings by the Company to pay the remaining cash
consideration in the Cablevision acquisition.
(continued)
10
<PAGE> 27
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Condensed Pro Forma Combined Financial Statements
(9) Represents the elimination of TeleCable's historical stockholders'
deficit.
(10) Represents the issuance by TCI to TeleCable shareholders of shares of
TCI Class A common stock (approximately 42 million shares) and 1
million shares of Series D Preferred Stock with an aggregate
liquidation value of $300 million. See note (2) above.
(11) Represents the elimination of Cablevision's historical stockholders'
deficit.
(12) Represents the Company's cash contribution in the QVC Transactions.
(13) Represents the elimination of the unrealized gain attributable to QVC.
(14) Represents the elimination of intercompany revenue and operating
expenses between TCIC and Liberty arising from the sale of certain
cable television programming to their respective cable television
subscribers. See note (1) above.
(15) Represents depreciation and amortization of TeleCable's and
Cablevision's allocated excess purchase prices based upon weighted
average lives of 12-1/2 years for property and equipment and 40 years
for franchise costs for TeleCable and 20 years for franchise costs for
Cablevision.
(16) Represents the elimination of interest on intercompany indebtedness
between TCIC and Liberty. See note (1) above.
(17) Represents assumed interest expense incurred by the Company on the
Notes, calculated at an assumed rate of 7% per annum.
(18) Represents assumed interest expense incurred by the Company on the
assumed borrowings of $196 million to pay the remaining cash portion
of the Cablevision purchase price and the interest expense that would
have been incurred had the initial $20 million payment toward the
Cablevision purchase price been paid on January 1, 1994. Such
interest expense was calculated at the Company's weighted average
interest rate of 7.5% for the year ended December 31, 1994.
(19) Represents additional interest expense on assumed indebtedness of
Cablevision. Interest expense was not reflected in the historical
financial statements as such borrowings were not utilized to support
the assets to be acquired by the Company. Such interest was
calculated at the interest rate in effect at December 31, 1994 for
such indebtedness (14.4% per annum).
(20) Represents the elimination of TCIC's share of Liberty's historical
earnings.
(21) Reflects the estimated income tax effect of the pro forma adjustments.
(22) Represents the dividend requirements on TCI's Series D Preferred Stock
(issued in connection with the TeleCable Merger - see note 2).
(23) Represents the elimination of the preferred stock dividend
requirements on Liberty preferred stock held by TCIC converted into
preferred stock of TCI.
(continued)
11
<PAGE> 28
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly TCI/Liberty Holding Company)
Notes to Condensed Pro Forma Combined Financial Statements
(24) Reflects the incremental increase in TCI's share of QVC's historical
earnings resulting from the consummation of the QVC Transactions.
(25) Represents the adjustment to TCI's share of the pro forma loss of the
Purchaser after giving effect to the consummation of the QVC
Transactions. Such adjustment reflects the estimated incremental
interest, depreciation and amortization expense, net of income taxes,
incurred by the Purchaser following the consummation of the QVC
Transactions.
(26) Reflects primary and fully diluted earnings per common and common
equivalent share based upon 651,475,966 weighted average shares.
Such amount is calculated utilizing 540,837,355 weighted average
shares of TCI at December 31, 1994 (such amount representing TCI's
weighted average shares, as disclosed in its historical financial
statements), adjusted for the effect of shares issued in the
TCI/Liberty Combination as if such transaction had occurred on January
1 and adjusted for the issuance of 42 million shares of TCI Class A
common stock issued in connection with the TeleCable Merger. Shares
issuable upon conversion of the Series D Preferred Stock (see note 2)
have not been included in the computation of weighted average shares
outstanding for the year ended December 31, 1994 because their
inclusion would be anti-dilutive.
12
