<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: September 3, 1996
Date of Earliest Event Reported: June 19, 1996
TCI COMMUNICATIONS, INC.
-----------------------------------------------------------
(Exact name of Registrant as specified in its charters)
State of Delaware
(State or other jurisdiction of incorporation)
0-5550 84-0588868
- ------------------------- ------------------------------------
(Commission File Number) (I.R.S. Employer Identification No.)
5619 DTC Parkway
Englewood, Colorado 80111
- ---------------------------------------- -----------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 267-5500
<PAGE> 2
Item 5. Other Events.
On June 19, 1996, Tele-Communications, Inc. ("TCI") announced the
proposed distribution (the "Distribution") by TCI to the holders of
shares of the TCI Group Common Stock of all of the issued and
outstanding common stock of TCI Satellite Entertainment, Inc.
("Satellite"). At the time of the Distribution, Satellite will be a
Delaware corporation and a direct wholly owned subsidiary of TCI. The
Distribution will be effected as a tax-free dividend to, and will not
involve the payment of any consideration by, the holders of TCI Group
Common Stock. Prior to the Distribution, TCI will cause to be
transferred to Satellite, or one or more of Satellite's subsidiaries,
certain assets and businesses (and the related liabilities) of the TCI
Group constituting all of TCI's interests in the business of
distributing multichannel programming services in the United States
direct to the home via medium power or high power broadcast satellite,
including the rental and sale of customer premises equipment relating
thereto.
<PAGE> 3
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements
None.
(b) Pro Forma Financial Information
Condensed Pro Forma Combined Balance Sheet,
June 30, 1996 (unaudited)
Condensed Pro Forma Combined Statement of Operations,
Six months ended June 30, 1996 (unaudited)
Condensed Pro Forma Combined Statement of Operations,
Year ended December 31, 1995 (unaudited)
Notes to Condensed Pro Forma Combined Financial Statements,
June 30, 1996 (unaudited)
(c) Exhibits
None.
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: September 3, 1996
TCI COMMUNICATIONS, INC.
(Registrant)
By:/s/ Stephen M. Brett
------------------------------------
Stephen M. Brett
Senior Vice President
<PAGE> 5
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Pro Forma Combined Financial Statements
June 30, 1996
(unaudited)
The following unaudited condensed pro forma combined balance sheet of
TCIC, dated as of June 30, 1996, assumes that the acquisition by TCI of all the
common stock of a subsidiary of Viacom, Inc. ("VII Cable") (the "VII Cable
Acquisition") (see note 1) and the Distribution (see note 2) had occurred as of
such date.
Additionally, the following unaudited condensed pro forma combined
statements of operations of TCIC for the six months ended June 30, 1996 and the
year ended December 31, 1995 assume that the VII Cable Acquisition and the
Distribution had occurred as of January 1, 1995.
The unaudited pro forma results do not purport to be indicative of the
results of operations that would have been obtained if the VII Cable
Acquisition and the Distribution had occurred as of January 1, 1995. These
condensed pro forma combined financial statements of TCIC should be read in
conjunction with the historical financial statements and the related notes
thereto of TCIC.
<PAGE> 6
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Pro Forma Combined Balance Sheet
(unaudited)
<TABLE>
<CAPTION>
June 30, 1996
---------------------------------------------------------------------------------
Pro forma
TCIC VII Cable Adjustments Satellite TCIC
Historical Historical (1) (1) Distribution (2) Pro forma
---------- -------------- ----------------- ---------------- ---------
amounts in millions
<S> <C> <C> <C> <C> <C>
Assets
- ------
Cash and receivables $ 262 18 1,700 (3) (22) 258
(1,700)(4)
Note receivable from Satellite -- -- -- 250 250
Investment in affiliates
and related receivables 1,402 -- -- (29) 1,373
Property and equipment, net of
accumulated depreciation 7,627 437 (3)(4) (1,048) 7,013
Franchise costs and other assets, 12,745 620 (45)(4) -- 14,745
net of amortization 1,425 (5)
-------- ----- ----- ----- ------
$ 22,036 1,075 1,377 (849) 23,639
======== ===== ===== ===== ======
Liabilities and Stockholder's Equity
- ------------------------------------
Payables and accruals $ 1,429 90 (26)(4) (468) 1,025
Debt 12,604 57 (57)(4) -- 14,304
1,700 (3)
Deferred income taxes 4,432 63 -- (16) 4,479
Other liabilities 69 11 (12)(4) -- 68
-------- ----- ----- ----- ------
Total liabilities 18,534 221 1,605 (484) 19,876
-------- ----- ----- ----- ------
Minority interests 199 -- 626 (6) -- 825
Redeemable preferred stock 232 -- -- -- 232
Company-obligated mandatorily
redeemable preferred securities
of subsidiary trusts holding
solely subordinated debt
securities of the Company 1,016 -- -- -- 1,016
Common stockholder's equity:
Viacom equity investment -- 854 (854)(7) -- --
Class A common stock 1 -- -- -- 1
Class B common stock -- -- -- -- --
Additional paid-in capital 3,682 -- -- (365) 3,317
Unrealized holding gains for
available-for-sale securities 4 -- -- -- 4
Accumulated deficit (558) -- -- -- (558)
Investment in TCI (1,143) -- -- -- (1,143)
Due to TCI 69 -- -- -- 69
-------- ----- ----- ----- ------
2,055 854 (854) (365) 1,690
-------- ----- ----- ----- ------
$ 22,036 1,075 1,377 (849) 23,639
======== ===== ===== ===== ======
</TABLE>
See accompanying notes to unaudited condensed pro forma combined financial
statements.
<PAGE> 7
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Pro Forma Combined Statement of Operations
(unaudited)
<TABLE>
<CAPTION>
Six months ended June 30, 1996
--------------------------------------------------------------------------------------
TCIC VII Cable Pro forma Satellite TCIC
Historical Historical (1) Adjustments (1) Distribution (2) Pro forma
---------- -------------- --------------- ---------------- ---------
amounts in millions
<S> <C> <C> <C> <C> <C>
Revenue $ 2,906 236 -- (194) 2,948
Operating, selling, general and
administrative expenses and
compensation relating to stoc
appreciation rights (1,851) (151) -- 187 (1,815)
Depreciation and amortization (680) (44) (18)(8) 54 (688)
-------- ---- ---- ----- ------
Operating income 375 41 (18) 47 445
Interest expense (493) (24) (63)(9) --
(580)
Interest and dividend income 19 -- -- 13 32
Share of losses of
affiliates, net (103) -- -- 1
(102)
Other income (expense), net (72) 4 (16)(10) -- (84)
-------- ---- ---- ----- ------
Earnings (loss) before
income taxes (274) 21 (97) 61 (289)
Income tax benefit (expense) 86 (12) 25 (11) (20) 79
-------- ---- ---- ----- ------
Net earnings (loss) (188) 9 (72) 41 (210)
Preferred stock dividend
requirements (4) -- -- -- (4)
-------- ---- ---- ----- ------
Net earnings (loss)
attributable to common
stockholder $ (192) 9 (72) 41 (214)
======== ==== ==== ===== ======
</TABLE>
See accompanying notes to unaudited condensed pro forma combined financial
statements.
<PAGE> 8
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Pro Forma Combined Statement of Operations
(unaudited)
<TABLE>
<CAPTION>
Year ended December 31, 1995
--------------------------------------------------------------------------------------
TCIC VII Cable Pro forma Satellite TCIC
Historical Historical (1) Adjustments (1) Distribution (2) Pro forma
---------- -------------- --------------- ---------------- ---------
amounts in millions
<S> <C> <C> <C> <C> <C>
Revenue $ 5,118 442 (2)(4) (209) 5,349
Operating, selling, general and
administrative expenses and
compensation relating to stock
appreciation rights (3,092) (279) -- 214 (3,157)
Depreciation and amortization (1,223) (82) (36)(8) 56 (1,285)
-------- ---- ---- --- ------
Operating income 803 81 (38) 61 907
Interest expense (962) (48) (84)(9) -- (1,094)
Interest and dividend income 34 -- -- 25 59
Share of losses of other
affiliates, net (43) -- -- 9 (34)
Other income (expense), net (1) 34 (27)(4) -- (25)
(31)(10)
-------- ---- ---- --- ------
Earnings (loss) before
income taxes (169) 67 (180) 95 (187)
Income tax benefit (expense) 49 (33) 45 (11) (32) 29
-------- ---- ---- --- ------
Net earnings (loss) $ (120) 34 (135) 63 (158)
======== ==== ===== === ======
</TABLE>
See accompanying notes to unaudited condensed pro forma combined financial
statements.
<PAGE> 9
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Condensed Pro Forma Combined Financial Statements
June 30, 1996
(unaudited)
(1) On July 31, 1996, pursuant to certain agreements entered into among
TCI Communications, Inc. ("TCIC"), TCI, Viacom International Inc. and
Viacom, Inc. ("Viacom"), TCIC acquired all of the common stock of VII
Cable which, at the time of such acquisition, owned Viacom's cable
systems and related assets.
The transaction was structured as a tax-free reorganization in which
VII Cable transferred all of its non-cable assets, as well as all of
its liabilities other than current liabilities, to a new subsidiary of
Viacom ("New Viacom Sub"). VII Cable also transferred to New Viacom
Sub the proceeds (the "Loan Proceeds") of a $1.7 billion loan facility
(the "Loan Facility") arranged by TCIC, TCI and VII Cable. Following
these transfers, VII Cable retained cable assets with a value at
closing of approximately $2.326 billion and the obligation to repay
the Loan Proceeds borrowed under the Loan Facility. Neither Viacom
nor New Viacom Sub has any obligation with respect to repayment of the
Loan Proceeds.
Prior to the consummation of the VII Cable Acquisition, Viacom offered
to the holders of shares of Viacom Class A Common Stock and Viacom
Class B Common Stock (collectively, "Viacom Common Stock") the
opportunity to exchange a portion of their shares of Viacom Common
Stock for shares of Class A Common Stock, par value $100 per share, of
VII Cable ("VII Cable Class A Stock"). Immediately following the
completion of the Exchange Offer, TCIC acquired from VII Cable shares
of VII Cable Class B Common Stock (the "Share Issuance") in exchange
for $350 million (which was used to reduce VII Cable's obligations
under the Loan Facility). At the time of the Share Issuance, the VII
Cable Class A Stock received by Viacom stockholders pursuant to the
Exchange Offer automatically converted into 5% Class A Senior
Cumulative Exchangeable Preferred Stock (the "Exchangeable Preferred
Stock") of VII Cable with a stated value of $100 per share. The terms
of the Exchangeable Preferred Stock, including its dividend,
redemption and exchange features, were designed to cause the
Exchangeable Preferred Stock, in the opinion of two investment banks,
to initially trade at the stated value.
The cost to acquire VII Cable was approximately $2.326 billion,
consisting of the Loan Proceeds and the $626 million aggregate par
value of the VII Cable Exchangeable Preferred Stock. The accompanying
unaudited pro forma condensed combined statements of operations do not
reflect potential cost savings attributable to (i) economics of scale
which may be realized in connection with purchases of programming and
equipment or (ii) consolidation of certain operating and
administrative functions including the elimination of duplicative
facilities and personnel.
(2) On June 19, 1996, TCI announced the Distribution by TCI to the holders
of shares of the TCI Group common stock of all of the issued and
outstanding common stock of Satellite. At the time of the
Distribution, Satellite will be a Delaware corporation and a direct
wholly owned subsidiary of TCI. The Distribution will be effected as
a tax-free dividend to, and will not involve the payment of any
consideration by, the holders of TCI Group common stock. Prior to the
Distribution, TCI will cause to be transferred to Satellite, or one or
more of Satellite's subsidiaries, certain assets and businesses (and
the related liabilities) of the TCI Group constituting all of TCI's
interests in the business of distributing multichannel programming
services in the United States direct to the home via medium power or
high power broadcast satellite, including the rental and sale of
customer premises equipment relating thereto.
(continued)
<PAGE> 10
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Condensed Pro Forma Combined Financial Statements
On or before the date of the Distribution, Satellite will issue to TCIC
a promissory note in the principal amount of $250 million, representing
a portion of Satellite's intercompany balance owed to TCIC on that
date. The remainder of such intercompany balance will be assumed by TCI
on or before the date of the Distribution in the form of a capital
contribution to Satellite. Such promissory note will bear interest at
the rate of 10% per annum and will mature on September 30, 2001. Such
interest income to TCIC, amounting to $25 million per annum, has been
reflected in the accompanying condensed pro forma combined statements
of operations.
(3) Reflects the borrowing of the Loan Proceeds ($1.7 billion) under the
Loan Facility. Scheduled maturities of the Loan through December 31,
2000 are assumed to be $300 million (1996), none (1997), $30 million
(1998), $110 million (1999) and $135 million (2000).
(4) Reflects the conveyance to New Viacom Sub of the Loan Proceeds,
existing bank debt of $57 million and certain other nonmaterial
assets, liabilities and related results of operations of VII Cable,
including for the year ended December 31, 1995, a pre-tax gain of $27
million from the sale of marketable securities and a provision for
income taxes of $11 million.
(5) The cost to acquire VII Cable will be allocated to the assets and
liabilities acquired according to their respective fair values, with
any excess being treated as franchise costs. The valuations and other
studies which will provide the basis for the allocation of the cost to
acquire VII Cable have not yet been performed and, consequently, the
purchase accounting adjustments made in connection with the
development of the unaudited condensed pro forma combined financial
statements are preliminary. The entire purchase price in excess of
the book value of VII Cable's assets and liabilities has been
attributed to franchise costs. The approximately $1.4 billion pro
forma excess of unallocated acquisition costs as of June 30, 1996 is
being amortized over 40 years at a rate of $36 million per year. To
the extent that the excess purchase price over book value is allocated
to property and equipment or other assets, including identifiable
intangibles with lives of less than 40 years, depreciation and
amortization will increase and, on an after-tax basis, net loss will
increase. Although the Company cannot estimate the potential increase
in depreciation nor amortization, it may be significant. The Company
estimates the average useful life of property and equipment to be
approximately 12.5 years. In addition, the Company does not believe
that there are substantial intangible assets which will require
amortization over periods less that 12.5 years. As a result, the
Company does not believe that any allocation of purchase price to
other assets should be expected to result in an amortization period
less than 12.5 years. VII Cable has estimated, that for every $100
million allocated to property and equipment or to other assets
including identifiable intangibles, and assuming an average life of
12.5 years, depreciation and amortization would increase by $5.5
million per year over such 12.5 year period.
(6) Reflects the aggregate par value of the VII Cable Exchangeable
Preferred Stock.
(7) Represents the elimination of VII Cable's historical equity.
(8) Represents amortization of VII Cable's allocated excess purchase
price, based upon a weighted average life of 40 years for franchise
costs.
(continued)
<PAGE> 11
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Condensed Pro Forma Combined Financial Statements
(9) Represents assumed additional interest expense (after taking into
consideration interest expense reflected in the historical VII Cable
operations) incurred by the Company on the borrowings of the Loan
Proceeds. Solely for the purposes of this presentation, the Company
has assumed an interest rate of 7.41% and 7.78% for the six months
ended June 30, 1996 and for the year ended December 31, 1995,
respectively, based upon historical interest rates adjusted for terms
of the Loan Facility.
(10) Reflects an assumed 5.0% cumulative annual dividend on the $626
million of VII Cable Exchangeable Preferred Stock included in minority
share of losses of consolidated subsidiaries.
(11) Reflects the estimated income tax effect of the pro forma adjustments.
The effective income tax rate on a pro forma basis is adversely
affected by the amortization of excess acquisition costs, which are
assumed not to be deductible for tax purposes.
