<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: January 23, 1995
Date of Earliest Event Reported: January 20, 1995
TELE-COMMUNICATIONS, INC.
AND
TCI COMMUNICATIONS, INC.
----------------------------------------------------------
(Exact name of Registrants as specified in their charters)
State of Delaware
----------------------------------------------
(State or other jurisdiction of incorporation)
0-20421 and 0-5550 84-1260157 and 84-0588868
- ----------------------------- -------------------------------------
(Commission File Numbers) (I.R.S. Employer Identification Nos.)
5619 DTC Parkway
Englewood, Colorado 80111
- ---------------------------------------- ------------------
(Address of principal executive offices) (Zip Code)
Registrants' telephone number, including area code: (303) 267-5500
<PAGE> 2
ITEM 5. OTHER EVENTS.
On January 20, 1995, Tele-Vue Systems, Inc. ("Tele-Vue"), Viacom International
Inc. ("Viacom"), InterMedia Partners IV, L.P. ("IP- IV") and RCS Pacific, L.P.
("RCS Pacific") entered into an Asset Purchase Agreement (the "Agreement")
pursuant to which RCS Pacific will acquire from Tele-Vue the assets of cable
television systems serving approximately 1 million subscribers as of December
31, 1994 for total consideration of approximately $1,983,000,000, subject to
adjustment in accordance with the terms of the Agreement. A subsidiary of
Tele-Communications, Inc. ("TCI") has agreed to loan $600 million in cash to
IP-IV. IP-IV will, in turn, loan such $600 million to RCS Pacific. RCS Pacific
could use the proceeds of the aforementioned loan as a portion of the total cash
consideration to be paid to Tele-Vue, or at the option of TCI, to purchase $600
million of TCI Class A common stock. Should TCI elect to sell such common stock,
RCS Pacific has the option to pay the consideration by delivery to Tele-Vue of
its short-term note of up to $600 million of the total consideration with the
balance to be paid in cash. Such note, if it is delivered, will be secured by
RCS Pacific's pledge of shares of stock of TCI having an aggregate market value
equal to the principal amount of such note, and payment of such note is expected
to be made with the proceeds of the sale of the TCI stock pledged as
collateral. TCI will guarantee that RCS Pacific will receive, upon sale of such
TCI common stock, an amount equal to the principal amount of, and accrued
interest on, the note delivered to Tele-Vue. The consummation of the
transactions contemplated by the Agreement is conditioned, among other things,
on receipt of approvals of various franchise and other governmental authorities
and receipts of "minority tax certificates" from the Federal Communications
Commission (the "FCC"). Separately, TCI and Viacom have reached agreement
regarding the settlement of litigation currently pending between them. Final
settlement of the litigation will be subject, among other things, to the
effectiveness of a new affiliation agreement convering TCI's long-term carriage
of Showtime and The Movie Channel. Effectiveness of this affiliation agreement,
in turn, is subject to certain conditions, including completion of the cable
transactions described above. These conditions are not expected to be met until
sometime in the summer of this year.
TCI, through its indirect wholly-owned subsidiary, TCID-IP IV, Inc.
("TCID-IP IV"), will hold a 25% limited partnership interest in IP-IV, and
IP-IV will in turn hold a 79% limited partnership interest in RCS Pacific. TCI
will account for its investment in IP-IV under the equity method of accounting.
It is anticipated that if the transactions contemplated by the Agreement are
consummated, TCI's consolidated net income will be significantly reduced
because of losses allocable to TCID-IP IV from its investment in IP-IV. As a
result of the depreciation and amortization arising from allocation of the
purchase price to the assets to be acquired by RCS Pacific and as a result of
the interest expense resulting from the third party debt incurred by RCS
Pacific to finance the acquisition, it is expected that RCS Pacific will incur
losses for some time after the acquisition.
ITEM 7. FINANCIAL STATEMENTS , PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements
Not required.
(b) Pro Forma Financial Information*
TCI Communications, Inc. and Subsidiaries:
Condensed Pro Forma Combined Balance Sheet, September 30, 1994
(unaudited)
Condensed Pro Forma Combined Statement of Operations,
Nine months ended September 30, 1994 (unaudited)
Condensed Pro Forma Combined Statement of Operations,
Year ended December 31, 1993 (unaudited)
Notes to Condensed Pro Forma Combined Financial Statements,
September 30, 1994 (unaudited)
Tele-Communications, Inc. and Subsidiaries:
Condensed Pro Forma Combined Balance Sheet,
September 30, 1994 (unaudited)
Condensed Pro Forma Combined Statement of Operations,
Nine months ended September 30, 1994 (unaudited)
Condensed Pro Forma Combined Statement of Operations,
Year ended December 31, 1993 (unaudited)
Notes to Condensed Pro Forma Combined Financial Statements,
September 30, 1994 (unaudited)
(c) Exhibits
None.
_________
* Pro forma financial information is provided in response to Rule 11.01(a)(8) of
Regulation S-X.
<PAGE> 3
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: January 23, 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> 4
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly Tele-Communications, Inc.)
Condensed Pro Forma Combined Financial Statements
September 30, 1994
(unaudited)
The following unaudited condensed pro forma combined balance sheet of
TCI Communications, Inc. ("TCIC") dated as of September 30, 1994, assumes that
(i) the proposed merger with TeleCable Corporation ("TeleCable") (the "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"), (iii) the transfer of United Artists International, Inc. from
TCIC to TCI International Holdings, Inc. (the "International Transfer") and
(iv) the investment in IP-IV had occurred as of such date. See notes (1), (2),
(3) and (4).
In addition, the following unaudited condensed pro forma combined
statements of operations of TCIC for the nine months ended September 30, 1994
and the year ended December 31, 1993 assume that the proposed Merger, the
TCI/Liberty Combination, the International Transfer and the investment in IP-IV
had occurred as of 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 proposed Merger, the
TCI/Liberty Combination, the International Transfer and the investment in IP-
IV had occurred as of January 1, 1993. These condensed pro forma combined
financial statements of TCIC should be read in conjunction with the condensed
pro forma financial statements and the related notes thereto of TCI included
elsewhere herein and the respective historical financial statements and the
related notes thereto of TCIC and TCI.
1
<PAGE> 5
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly Tele-Communications, Inc.)
Condensed Pro Forma Combined Balance Sheet
(unaudited)
<TABLE>
<CAPTION>
September 30, 1994
---------------------------------------------------------------------------------------
International Pro forma IP-IV
TCIC TeleCable Transfer Adjustments Pro forma TCI
Historical Historical(1) Historical (2) (1)(2)(3) (4) Pro forma
---------- ------------- -------------- ---------------- ------------- ---------
amounts in millions
<S> <C> <C> <C> <C> <C> <C>
Assets
------
Cash and receivables $ 227 16 (21) -- -- 222
Due from affiliated companies 64 -- -- -- -- 64
Investment in affiliates
and Turner Broadcasting System,
Inc., and related receivables 1,655 22 (404) -- 7 (10) 1,880
600 (11)
Property and equipment, net of
accumulated depreciation 5,471 258 (12) 333 (5) -- 6,050
Franchise costs and other assets,
net of amortization 9,791 21 (35) 1,020 (5) -- 11,580
783 (6)
-------- ----- -------- ------ ------ ------
$ 17,208 317 (472) 2,136 607 19,796
======== ===== ======== ====== ======= ======
Liabilities and Stockholder's Equity
------------------------------------
Payables and accruals $ 871 31 (14) -- -- 888
Debt 10,479 282 (9) -- 600 (11) 11,359
7 (10)
Deferred income taxes 3,426 48 14 783 (6) -- 4,271
Other liabilities 89 6 -- -- -- 95
-------- ----- -------- ------ ------ ------
Total liabilities 14,865 367 (9) 783 607 16,613
-------- ----- -------- ------ ------ ------
Minority interests 312 3 (28) -- -- 287
Common stockholder's equity:
Class A common stock 1 -- -- -- -- 1
Class B common stock -- 7 -- (7)(7) -- --
Additional paid-in capital 2,842 (262) (643) 262 (7) -- 4,142
1,300 (8)
643 (9)
Cumulative foreign currency
translation adjustment (5) -- 5 -- -- --
Unrealized holding gains for
available-for-sale securities 169 4 -- (4)(7) -- 169
Note receivable from executive
stock purchase plan -- (3) -- 3 (7) -- --
Accumulated earnings (deficit) (287) 201 203 (201)(7) -- (287)
(203)(9)
Investment in TCI (689) -- -- (440)(9) -- (1,129)
-------- ----- -------- ------ ------ ------
2,031 (53) (435) 1,353 -- 2,896
-------- ----- -------- ------ ------ ------
$ 17,208 317 (472) 2,136 607 19,796
======== ===== ======== ====== ====== ======
</TABLE>
See accompanying notes to unaudited condensed pro forma combined financial
statements.
2
<PAGE> 6
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly Tele-Communications, Inc.)
Condensed Pro Forma Combined Statement of Operations
(unaudited)
<TABLE>
<CAPTION>
Nine months ended September 30, 1994
--------------------------------------------------------------------------------
International Pro forma IP-IV
TCIC TeleCable Transfer Adjustments Pro forma TCI
Historical Historical(1) Historical(2) (1)(2)(3) (4) Pro forma
---------- ------------- -------------- ------------ --------- ---------
amounts in millions
<S> <C> <C> <C> <C> <C> <C>
Revenue $ 3,213 222 (17) -- -- 3,418
Operating, selling, general and
administrative expenses and
compensation relating to stock
appreciation rights (1,882) (127) 30 -- -- (1,979)
Depreciation and amortization (711) (34) 2 (35)(12) -- (778)
--------- ----- ----- --- ------- -------
Operating income 620 61 15 (35) -- 661
Interest expense (566) (17) -- -- (27)(13) (610)
Interest and dividend income 26 -- (1) -- 54 (16) 79
Share of earnings of Liberty 125 -- -- (125)(14) -- --
Share of losses of other
affiliates, net (59) -- 46 -- 2 (17) (101)
(90)(18)
Other expense, net (4) (1) (7) -- -- (12)
---------- ---- ---- ------ ------- --------
Earnings before income taxes 142 43 53 (160) (61) 17
Income tax expense (81) (17) (22) 65 (15) 25 (15) (30)
--------- ---- --- ----- -------- --------
Net earnings (loss) $ 61 26 31 (95) (36) (13) (19)
========= ===== ==== ====== ======== ========
</TABLE>
See accompanying notes to unaudited condensed pro forma combined financial
statements.
3
<PAGE> 7
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly Tele-Communications, Inc.)
Condensed Pro Forma Combined Statement of Operations
(unaudited)
<TABLE>
<CAPTION>
Year ended December 31, 1993
---------------------------------------------------------------------------------------
International Pro forma IP-IV
TCIC TeleCable Transfer Adjustments Pro forma TCI
Historical Historical(1) Historical(2) (1)(2)(3) (4) Pro forma
---------- ------------- ------------- ----------- --------- ----------
amounts in millions
<S> <C> <C> <C> <C> <C> <C>
Revenue $ 4,153 287 (2) -- -- 4,438
Operating, selling, general and
administrative expenses and
compensation relating to stock
appreciation rights (2,326) (163) 9 -- -- (2,480)
Depreciation and amortization (911) (45) 1 (48)(12) -- (1,003)
--------- ----- ----- --- ----- ------
Operating income 916 79 8 (48) -- 955
Interest expense (731) (24) -- -- (36)(13) (791)
Interest and dividend income 34 -- (2) -- 72 (16) 104
Share of earnings of Liberty 4 -- -- (4)(14) -- --
Share of losses of other
affiliates, net (76) -- 62 -- 6 (17) (84)
(76)(18)
Gain on dispositions 42 2 -- -- -- 44
Other expense, net (28) -- -- -- -- (28)
---------- ------- ------ ------ ----- ------
Earnings before income taxes 161 57 68 (52) (34) 200
Income tax expense (168) (23) (28) 22 (15) 14 (15) (183)
--------- ----- --- ------ ----- ------
Net earnings (loss) (7) 34 40 (30) (20) 17
Dividend requirement on
redeemable preferred stocks (2) -- -- 2 (20) -- --
----------- ------- ------ ------- ----- ------
Net earnings (loss) applicable
to common shareholders $ (9) 34 40 (28) (20) 17(19)
========== ====== ==== ======= ===== ======
</TABLE>
See accompanying notes to unaudited condensed pro forma combined financial
statements.
4
<PAGE> 8
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly Tele-Communications, Inc.)
Notes to Condensed Pro Forma Combined Financial Statements
September 30, 1994
(unaudited)
(1) As of August 8, 1994, TCI, TCIC and TeleCable entered into a
definitive merger agreement (the "Merger Agreement") whereby TeleCable
will be merged into TCIC. The aggregate $1.6 billion purchase price
will be satisfied by TCIC's assumption of approximately $300 million
of TeleCable's net liabilities and the issuance to TeleCable's
shareholders of shares of TCI Class A common stock (currently
estimated to be approximately 41.7 million shares) and 1 million
shares of a new series of preferred stock to be designated
"Convertible Preferred Stock, Series D" ("Series D Preferred Stock")
with an aggregate initial liquidation value of $300 million. The
Series D Preferred Stock, which will accrue dividends at a rate of
5.5% per annum, will be convertible into 10 million shares of TCI
Class A common stock. The Series D Preferred Stock will be redeemable
at the option of TCI after five years and at the option of either TCI
or the holder after ten years. Although the amount of net liabilities
to be assumed by TCIC and the number of shares of TCI Class A common
stock to be issued to TeleCable's shareholders are subject to closing
adjustments, management does not believe that any such adjustments
will be material. The merger agreement requires the approval of
TeleCable's shareholders and various franchise and other governmental
authorities.
(2) Subsequent to September 30, 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, on November 18, 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)
5
<PAGE> 9
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly Tele-Communications, Inc.)
Notes to Condensed Pro Forma Combined Financial Statements
September 30, 1994
(unaudited)
(4) On January 20, 1995, Tele-Vue, Viacom, IP-IV and RCS Pacific entered
into the Agreement pursuant to which RCS Pacific will acquire from
Tele-Vue the assets of cable television systems serving approximately
1 million subscribers as of December 31, 1994 for total consideration
of approximately $1,983,000,000, subject to adjustment in accordance
with the terms of the Agreement. A subsidiary of TCI has agreed to
loan $600 million in cash to IP-IV. IP-IV will, in turn, loan such
$600 million to RCS Pacific. RCS Pacific could use the proceeds of the
aforementioned loan as a portion of the total cash consideration to be
paid to Tele-Vue, or at the option of TCI, to purchase $600 million of
TCI Class A common stock. Should TCI elect to sell such common stock,
RCS Pacific has the option to pay the consideration by delivery to
Tele-Vue of its short-term note of up to $600 million of the total
consideration with the balance to be paid in cash. Such note, if it
is delivered, will be secured by RCS Pacific's pledge of shares of
stock of TCI having an aggregate market value equal to the principal
amount of such note, and payment of such note is expected to be made
with the proceeds of the sale of the TCI stock pledged as collateral.
TCI will guarantee that RCS Pacific will receive, upon sale of such
TCI common stock, an amount equal to the principal amount of, and
accrued interest on, the note delivered to Tele-Vue. The consummation
of the transactions contemplated by the Agreement is conditioned,
among other things, on receipt of approvals of various franchise and
other governmental authorities and receipt of "minority tax
certificates" from the FCC.
(5) 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.
(6) Represents the estimated incremental deferred income tax liability
associated with the TeleCable 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 elimination of TeleCable's historical stockholders'
deficit, including the note receivable from the employee stock
purchase plan. Pursuant to the Merger Agreement, any portion of such
note receivable that remains unpaid at closing will not be included in
the calculation of net liabilities to be assumed by TCIC at closing.
(8) Represents TCI's capital contribution to TCIC resulting from the
issuance by TCI to TeleCable shareholders of shares of TCI Class A
common stock (currently estimated to be approximately 41.7 million
shares) and 1 million shares of Series D Preferred Stock with an
aggregate liquidation value of $300 million. The number of shares of
TCI Class A common stock to be issued, which will be calculated using a
per share value of $24, is dependent upon the amount of net
liabilities of TeleCable that is assumed by TCIC at closing and
certain other factors. See note (1) above.
(9) Represents the elimination of the historical equity of the
International Transfer and the issuance of the Series E Preferred
Stock to TCIC recorded at historical cost.
6
<PAGE> 10
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly Tele-Communications, Inc.)
Notes to Condensed Pro Forma Combined Financial Statements
(10) Represents TCIC's capital contribution to IP-IV.
(11) Represents borrowing by TCIC, the proceeds of which will be loaned to
IP-IV who will then loan the proceeds to RCS Pacific.
(12) 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 (4) above.
(13) Reflects assumed interest expense on borrowings by TCIC to provide
$600 million loan and $7 million capital contribution to IP-IV. Such
interest expense is calculated at the assumed rate of 6% per annum.
(14) Reflects the elimination of TCIC's share of Liberty's historical
earnings. See note (3) above.
(15) Reflects the estimated income tax effect of the pro forma adjustments.
(16) Represents assumed interest income on note receivable described in
note 11. Such interest income is calculated at the assumed rate of 12%
per annum.
(17) Represents TCIC's share of historical earnings of IP-IV based upon
historical earnings of the cable television systems to be acquired by
RCS Pacific from Tele-Vue.
(18) Represents the adjustment to TCI's share of historical earnings of
IP-IV to reflect the acquisition of certain cable television systems
by RCS Pacific. Such adjustment reflects TCI's 25% interest in IP-IV
through such time as the capital contribution of the general partner
of IP-IV has been reduced to zero through allocated share of losses.
After such time, this adjustment reflects the recognition by TCI of
100% of the losses of IP-IV. Such losses result from assumed
additional depreciation and amortization of the allocated excess
purchase price and from assumed additional interest expense on the
assumed indebtedness incurred by RCS Pacific to fund the purchase
price.
(19) Should TCI elect to sell $600 million of TCI Class A common stock to
RCS Pacific and should RCS Pacific elect to pay a portion of the
consideration with a note payable in the principal amount of $600
million, net loss would be $16 million for the nine months ended
September 30, 1994 and net earnings attributable to common
shareholders would be $13 million for the year ended December 31,
1993, respectively.
(20) Reflects the elimination of the preferred stock dividend requirement
on TCIC preferred stock converted into common stock of TCIC during the
year ended December 31, 1993.
7
<PAGE> 11
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly TCI/Liberty Holding Company)
Condensed Pro Forma Combined Financial Statements
September 30, 1994
(unaudited)
The following unaudited condensed pro forma combined balance sheet of
TCI, dated as of September 30, 1994, assumes that (i) the proposed Merger, (ii)
the TCI/Liberty Combination and (iii) the investment in IP-IV had occurred as
of such date. See notes (1), (2) and (3).
The following unaudited condensed pro forma combined statements of
operations of TCI for the nine months ended September 30, 1994 and the year
ended December 31, 1993 assume that the proposed Merger, the TCI/Liberty
Combination and the investment in IP-IV had occurred as of 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 proposed Merger, the
TCI/Liberty Combination and the investment in IP-IV had occurred as of January
1, 1993. These condensed pro forma combined financial statements of TCI should
be read in conjunction with the condensed pro forma financial statements and
the related notes thereto of TCIC included elsewhere herein and the respective
historical financial statements and the related notes thereto of TCIC and TCI.
8
<PAGE> 12
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly TCI/Liberty Holding Company)
Condensed Pro Forma Combined Balance Sheet
(unaudited)
<TABLE>
<CAPTION>
September 30, 1994
----------------------------------------------------------------
IP-IV
TCI TeleCable Pro forma pro forma TCI
Historical Historical(2) adjustments(2) (3) Pro forma
---------- -------------- -------------- -------------- ---------
amounts in millions
<S> <C> <C> <C> <C> <C>
Assets
------
Cash, receivables and other
current assets $ 369 16 -- -- 385
Investment in affiliates and
Turner Broadcasting System, Inc.,
and related receivables 2,218 22 -- 7 (8) 2,847
600 (9)
Property and equipment, net of
accumulated depreciation 5,729 258 333 (4) -- 6,320
Franchise costs, intangibles and
other assets, net of amortization 10,801 21 1,020 (4) 12,625
783 (5) --
-------- ---- ------ ------ ------
$ 19,117 317 2,136 607 22,177
======== ==== ====== ====== ======
Liabilities and Stockholders' Equity
------------------------------------
Payables and accruals $ 1,182 31 -- -- 1,213
Debt 10,654 282 -- 7 (8) 11,543
600 (9)
Deferred income taxes 3,729 48 783 (5) -- 4,560
Other liabilities 131 6 -- -- 137
-------- ---- ------ ------ ------
Total liabilities 15,696 367 783 607 17,453
-------- ---- ------ ------ ------
Minority interests 446 3 -- -- 449
Series D Preferred Stock -- -- 300 (7) -- 300
Stockholders' equity:
Preferred Stock -- -- -- -- --
Class A common stock 571 -- 42 (7) -- 613
Class B common stock 89 7 (7)(6) -- 89
Additional paid-in capital 2,833 (262) 958 (7) -- 3,791
262 (6)
Cumulative foreign currency
translation adjustment (5) -- -- -- (5)
Unrealized holding gains for
available-for sale securities 433 4 (4)(6) -- 433
Retained earnings (deficit) (285) 201 (201)(6) -- (285)
Receivable from related party (15) (3) 3 (6) -- (15)
Treasury stock (646) -- -- -- (646)
-------- ---- ------ ------ ------
2,975 (53) 1,053 -- 3,975
-------- ---- ------ ------ ------
$ 19,117 317 2,136 607 22,177
======== ==== ====== ====== ======
</TABLE>
See accompanying notes to unaudited condensed pro forma combined financial
statements.
9
<PAGE> 13
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly TCI/Liberty Holding Company)
Condensed Pro Forma Combined Statement of Operations
(unaudited)
<TABLE>
<CAPTION>
Nine months ended September 30, 1994
-------------------------------------------------------------------
IV-IP
TCI Liberty TeleCable Pro forma Pro forma TCI
Historical Historical(1) Historical(2) adjustments(1)(2) (3) Pro forma
---------- ------------- ------------- ----------------- ------------- ---------
amounts in millions, except per share amounts
<S> <C> <C> <C> <C> <C> <C>
Revenue $ 3,427 790 222 (37)(10) -- 4,402
Operating, selling, general and
administrative expenses and
compensation relating to
stock appreciation rights (2,080) (627) (127) 37 (10) -- (2,896)
Depreciation and amortization (722) (32) (34) (35)(11) -- (823)
------- ----- ----- ----- ----- -------
Operating income 625 32 61 (35) -- 683
Interest expense (568) (22) (17) 12 (12) (27)(17) (622)
Interest and dividend income 26 15 -- (12)(12) 54 (18) 83
Share of earnings of Liberty 125 -- -- (125)(13) -- --
Share of earnings (losses) of
affiliates, net (56) 23 -- -- 2 (19) (121)
(90)(20)
Gain on dispositions -- 183 -- -- -- 183
Other expense, net (4) (11) (1) -- -- (16)
------- ----- ------ ----- ---- -----
Earnings before income taxes 148 220 43 (160) (61) 190
Income tax expense (85) (95) (17) 65 (14) 25 (14) (107)
------- ----- ------ ---- ---- ------
Net earnings 63 125 26 (95) (36) 83
Dividend requirement on
redeemable preferred stocks (3) (14) -- (12)(15) -- (21)
8 (16)
------- ----- ------ ----- ---- ------
Net earnings attributable
to common shareholders $ 60 111 26 (99) (36) 62 (24)
======= ===== ====== ==== ==== ========
Primary and fully diluted earnings
attributable to common
shareholder per common and
common equivalent share $ .12 $ .10 (25)
======= ========
See accompanying notes to unaudited condensed pro forma combined financial statements.
</TABLE>
10
<PAGE> 14
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly TCI/Liberty Holding Company)
Condensed Pro Forma Combined Statement of Operations
(unaudited)
<TABLE>
<CAPTION>
Year ended December 31, 1993
--------------------------------------------------------------------------------------------
IV-IP
TCI Liberty TeleCable Pro forma Pro forma TCI
Historical Historical (1) Historical (2) adjustments(1)(2) (3) Pro forma
---------- -------------- -------------- ----------------- ------------- ------------
amounts in millions, except per share amounts
<S> <C> <C> <C> <C> <C> <C>
Revenue $ 4,153 1,153 287 (55)(10) -- 5,538
Operating, selling, general and
administrative expenses and
compensation relation to stock
appreciation rights (2,326) (1,105) (163) 55 (10) -- (3,539)
Depreciation and amortization (911) (49) (45) (48)(11) -- (1,053)
-------- ------ ------ ---- ---- ------
Operating income (loss) 916 (1) 79 (48) -- 946
Interest expense (731) (31) (24) 17 (12) (36)(17) (805)
Interest and dividend income 34 23 -- (17)(12) 72 (18) 112
Share of earnings of Liberty 4 -- -- (4)(13) -- --
Share of earnings (losses) of
affiliates, net (76) 34 -- -- 6 (19) (112)
(76)(20)
Gain on dispositions 42 32 2 -- -- 76
Loss on transactions with TCIC -- (30) -- -- -- (30)(23)
Loss on early extinguishment of
debt (17) (2) -- -- -- (19)
Other expense, net (11) (9) -- -- -- (20)
-------- ------ ------ ---- ---- ------
Earnings (loss) before
income taxes 161 16 57 (52) (34) 148
Income tax expense (168) (12) (23) 22 (14) 14 (14) (167)
-------- ------ ------ ---- ---- ------
Net earnings (loss) (7) 4 34 (30) (20) (19)
Dividend requirement on redeemable
preferred stocks (2) (32) -- (17)(15) -- (26)
9 (16)
2 (21)
14 (22)
-------- ------ ------ ---- ---- ------
Net loss attributable to
common shareholders $ (9) (28) 34 (22) (20) (45)(24)
======== ====== ====== ==== ==== ======
Loss per common share $ (.02) $ (.08)(26)
======== ======
</TABLE>
See accompanying notes to unaudited condensed pro forma combined financial
statements.
11
<PAGE> 15
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly TCI/Liberty Holding Company)
Notes to Condensed Pro Forma Combined Financial Statements
September 30, 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 Merger
Agreement whereby TeleCable will be merged into TCIC. The aggregate
$1.6 billion purchase price will be satisfied by TCIC's assumption of
approximately $300 million of TeleCable's net liabilities and the
issuance to TeleCable's shareholders of shares of TCI Class A common
stock (currently estimated to be approximately 41.7 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 will accrue dividends at a rate of 5.5% per annum, will
be convertible into 10 million shares of TCI Class A common stock.
The Series D Preferred Stock will be redeemable at the option of TCI
after five years and at the option of either TCI or the holder after
ten years. Although the amount of net liabilities to be assumed by
TCIC and the number of shares of TCI Class A common stock to be issued
to TeleCable's shareholders are subject to closing adjustments,
management does not believe that any such adjustments will be
material. The merger agreement requires the approval of TeleCable's
shareholders and various franchise and other governmental authorities.
(3) On January 20, 1995, Tele-Vue, Viacom, IP-IV and RCS Pacific entered
into the Agreement pursuant to which RCS Pacific will acquire from
Tele-Vue the assets of cable television systems serving approximately
1 million subscribers as of December 31, 1994 for total consideration
of approximately $1,983,000,000, subject to adjustment in accordance
with the terms of the Agreement. A subsidiary of TCI has agreed to
loan $600 million in cash to IP-IV. IP-IV will, in turn, loan such
$600 million to RCS Pacific. RCS Pacific could use the proceeds of the
aforementioned loan as a portion of the total cash consideration to be
paid to Tele-Vue, or at the option of TCI, to purchase $600 million of
TCI Class A common stock. Should TCI elect to sell such common stock,
RCS Pacific has the option to pay the consideration by delivery to
Tele-Vue of its short-term note of up to $600 million of the total
consideration with the balance to be paid in cash. Such note, if it
is delivered, will be secured by RCS Pacific's pledge of shares of
stock of TCI having an aggregate market value equal to the principal
amount of such note, and payment of such note is expected to be made
with the proceeds of the sale of the TCI stock pledged as collateral.
TCI will guarantee that RCS Pacific will receive, upon sale of such
TCI common stock, an amount equal to the principal amount of, and
accrued interest on, the note delivered to Tele-Vue. The consummation
of the transactions contemplated by the Agreement is conditioned,
among other things, on receipt of approvals of various franchise and
other governmental authorities and receipts of "minority tax
certificates" from the FCC.
(continued)
12
<PAGE> 16
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly TCI/Liberty Holding Company)
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, including the note receivable from the employee stock
purchase plan. Pursuant to the Merger Agreement, any portion of such
note receivable that remains unpaid at closing will not be included in
the calculation of net liabilities to be assumed by TCIC at closing.
(7) Represents TCI's capital contribution to TCIC resulting from the
issuance by TCI to TeleCable shareholders of shares of TCI Class A
common stock (currently estimated to be approximately 41.7 million
shares) and 1 million shares of Series D Preferred Stock with an
aggregate liquidation value of $300 million. The number of shares of
TCI Class A common stock to be issued, which will be calculated using
a per share value of $24, is dependent upon the amount of net
liabilities of TeleCable that is assumed by TCIC at closing and
certain other factors. See note (2) above.
(8) Represents TCI's capital contribution to IP-IV.
(9) Represents borrowings by TCI, the proceeds of which will be loaned to
IP-IV who will in turn loan the proceeds to RCS Pacific.
(10) Represents the elimination of intercompany revenue and operating
expenses between TCIC and Liberty arising from the sale of certain
cable television programming to their respective cable television
subscribers. See note (2) above.
(11) 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).
(12) Represents the elimination of interest on intercompany indebtedness
between TCIC and Liberty. See note (1) above.
(13) Represents the elimination of TCIC's share of Liberty's historical
earnings.
(14) Reflects the estimated income tax effect of the pro forma adjustments.
(continued)
13
<PAGE> 17
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly TCI/Liberty Holding Company)
Notes to Condensed Pro Forma Combined Financial Statements
(15) Represents the dividend requirements on TCI's Series D Preferred Stock
(to be issued in connection with the proposed Merger - see note 2).
(16) Represents the elimination of the preferred stock dividend requirement
on certain preferred stock of Liberty repurchased from TCIC in June of
1993.
(17) Reflects assumed interest expense on borrowings by TCI to provide a
$600 million loan and $7 million capital contribution to IP-IV.
Such interest expense is calculated at the assumed rate of 6%
per annum.
(18) Represents assumed interest income on note receivable described in
note 9. Such interest income is calculated at the assumed rate of 12%
per annum.
(19) Represents TCI's share of historical earnings of IP-IV based upon
historical earnings of the cable television systems to be acquired by
RCS Pacific from Tele-Vue.
(20) Represents the adjustment to TCI's share of historical earnings of
IP-IV to reflect the acquisition of certain cable television systems
by RCS Pacific. Such adjustment reflects TCI's 25% interest in IP-IV
through such time as the capital contribution of the general partner
of IP-IV has been reduced to zero through allocated share of losses.
After such time, the adjustment reflects the recognition by TCI of
100% of the losses of IP-IV. Such losses result from assumed
additional depreciation and amortization of the allocated excess
purchase price and from assumed additional interest expense on the
assumed indebtedness incurred by RCS Pacific to fund the purchase
price.
(21) Reflects the elimination of the preferred stock dividend requirement
on TCIC preferred stock converted into common stock of TCIC during the
year ended December 31, 1993.
(22) Represents the elimination of the preferred stock dividend
requirements on Liberty preferred stock held by TCIC converted into
preferred stock of TCI.
(23) 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.
(24) Should TCI elect to sell $600 million of TCI Class A common stock to
RCS Pacific and should RCS Pacific elect to pay a portion of the
consideration with a note payable in the principal amount of $600
million, net earnings attributable to common shareholders would be $59
million (or $.09 per share) for the nine months ended September 30,
1994 and net loss attributable to common shareholders would be $49
million (or $.08 per share) for the year ended December 31, 1993,
respectively.
(25) Reflects primary and fully diluted earnings per common and common
equivalent share based upon 650,386,837 weighted average shares. Such
amount is calculated utilizing 517,168,689 weighted average shares of
TCI at September 30, 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 41,700,000 shares of TCI Class A common
stock to be issued in connection with the proposed 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 nine months ended September 30, 1994 because their
inclusion would be anti-dilutive.
(continued)
14
<PAGE> 18
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly TCI/Liberty Holding Company)
Notes to Condensed Pro Forma Combined Financial Statements
(26) Reflects loss per common share based upon 591,282,340 weighted average
shares. Such amount is calculated utilizing (i) 432,566,150 weighted
average shares of TCIC at December 31, 1993 (such amount representing
TCIC's weighted average shares, as disclosed in its historical
financial statements) reduced by 6,525,721 shares of TCIC common stock
previously held by Liberty (ii) 126,932,745 weighted averages shares
of Liberty at December 31, 1993 (such amount representing Liberty's
weighted average shares, as disclosed in its historical financial
statements and Liberty common stock repurchased from TCIC 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 TCIC and (iii) 41,700,000 shares of TCI Class A
common stock to be issued in connection with the proposed 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, 1993 because their
inclusion would be anti-dilutive.
15
