<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: May 8, 1998
Date of Earliest Event Reported: March 4, 1998
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 2. Acquisition or Disposition of Assets.
On April 30, 1998 (the "InterMedia Closing Date"), TCI IP-VI, LLC ("TCI
LLC"), a limited liability company wholly-owned by subsidiaries of
Tele-Communications, Inc. ("TCI"), transferred to InterMedia Capital Partners
VI, L.P. ("IP-VI"), a Delaware limited partnership, and certain of its
affiliates, cable television systems owned and operated by TCI Communications,
Inc. ("TCIC") subsidiaries serving, as of March 31, 1998, approximately 435,000
basic customers. The transfer (the "IP-VI Transfer") was completed pursuant to
the terms of a Contribution Agreement dated as of October 30, 1997, by and among
TCI TKR of Southern Kentucky, Inc., TCI TKR of Northern Kentucky, Inc., TCI TKR
of Jefferson County, Inc. TCI Cablevision of Kentucky, Inc., TCI Cablevision of
North Central Kentucky, Inc., TCI of North Central Kentucky, Inc., TCI of
Lexington, Inc. and TCI of Radcliff, Inc. (collectively the "TCI Parties") and
InterMedia Capital Management VI, L.P., as amended. The systems transferred were
located in and around the following Kentucky communities: Dawson Springs,
Providence, St. Charles, Caldwell County, Hopkins County, Webster County,
Shepherdsville, Danville, Lexington, Radcliff, Warren County, Bowling Green,
Oakland, Plum Springs, Smith's Grove, Woodburn, Louisville, Boone County,
Campbell County, Kenton County and Newport (the "Kentucky Systems"). IP-VI and
its affiliates also assumed rights and obligations under a programming rights
agreement with Satellite Services, Inc., an affiliate of TCIC. TCI LLC received
a 49.005% limited partnership interest in IP-VI, and IP-VI assumed approximately
$812 million in debt associated with the Kentucky Systems. The amount of the
consideration received by TCI LLC in the IP-VI Transfer was based on
arm's-length negotiations between the parties.
Leo J. Hindery, Jr., the President and Chief Executive Officer of TCIC,
and William R. Fitzgerald, an Executive Vice President of TCIC, are on the
advisory board of IP-VI. Mr. Hindery also owns a .495% limited partnership
interest in IP-VI. Additionally, the TCI Parties, TCI LLC and CVC Keep Well LLC,
an affiliate of TCIC, have agreed to take certain steps to support compliance by
subsidiaries of IP-VI with their payment obligations under senior credit
facilities, up to a total contingent commitment of approximately $490 million.
<PAGE> 3
Item 5. Other Events.
On March 4, 1998 (the "CSC Closing Date"), subsidiaries of TCI
(including certain subsidiaries of TCIC) transferred to CSC Parent Corporation,
a Delaware corporation (now known as Cablevision Systems Corporation) ("New
CSC"), cable television systems owned and operated by TCI serving approximately
830,000 basic customers, as of January 31, 1998. The systems transferred were
located in Union, Mercer, Monmouth, Somerset, Middlesex, Morris, Sussex, Bergen
and Passaic counties in New Jersey and in Rockland, Suffolk and Westchester
counties in New York (the "NJ/NY Systems"). In addition to its ownership
interest in the NJ/NY Systems, New CSC holds all of the common stock of the
former Cablevision Systems Corporation (now known as CSC Holdings, Inc.). The
NJ/NY Systems were transferred either directly by the transfer of the assets of
such cable systems or indirectly by the transfer of partnership interests or
capital stock in the entities owning such cable systems, in exchange for
24,471,086 shares (as adjusted for a stock dividend) of Class A common stock,
par value $0.01 per share, of New CSC ("New CSC Class A Common Stock")
representing an approximate 32.7% common equity ownership interest in New CSC
and assumption by New CSC of certain liabilities, including approximately $669
million in debt, relating to the cable television systems transferred by TCI to
New CSC. As a part of such transaction, TCIC subsidiaries contributed to New CSC
cable television systems serving approximately 410,000 basic customers in
exchange for 13,975,524 shares (as adjusted for a stock dividend) or 18.7% of
New CSC Class A Common Stock, and New CSC assumed approximately $78 million of
intercompany debt owed to TCIC. Such exchange was made pursuant to the terms of
the Contribution and Merger Agreement dated as of June 6, 1997, as amended and
restated by the Amended and Restated Contribution and Merger Agreement (the
"Contribution and Merger Agreement") dated as of June 6, 1997, by and among TCI
Communications, Inc., and certain affiliates of New CSC (the "CSC Transaction").
The amount of the consideration payable in the CSC Transaction was based on
arm's-length negotiations between the parties.
<PAGE> 4
On the CSC Closing Date, TCI and its subsidiaries (including certain
subsidiaries of TCIC) holding the New CSC Class A Common Stock issued in the CSC
Transaction (collectively, the "Investor"), New CSC and certain holders (the
"Class B Stockholders") of Class B common stock of New CSC ("New CSC Class B
Common Stock", and together with the New CSC Class A Common Stock, "New CSC
Common Stock") entered into a Stockholders Agreement (the "New CSC Stockholders
Agreement") providing, among other things, for: (i) limits on the Investor's
ability to acquire New CSC Class A Common Stock other than pursuant to the CSC
Transaction or in other limited circumstances, if, following such acquisition,
the Investor would own beneficially 10% or more of the New CSC Class A Common
Stock in excess of the shares of New CSC Class A Common Stock issued to the
Investor in the CSC Transaction; (ii) limitations on the Investor's ability to
transfer the shares of New CSC Class A Common Stock; (iii) consultation rights
among New CSC, TCI, and the Class B Stockholders regarding sales of New CSC as a
whole or significant assets of New CSC, certain sales of New CSC Class A Common
Stock owned by the Investor and certain sales of New CSC Class B Common Stock
owned by the Class B Stockholders; (iv) certain tag-along rights of the Investor
and drag-along rights of the Class B Stockholders upon certain sales of New CSC
Common Stock by the Class B Stockholders; (v) preemptive rights for the Investor
on new issuances of New CSC Common Stock so that the Investor may maintain
beneficial ownership of the percentage of the outstanding New CSC Common Stock
owned by the Investor immediately prior to such new issuance, with certain
limited exceptions; (vi) the Investor's right to designate two directors
("Investor Directors") for so long as certain ownership of New CSC Class A
Common Stock is maintained by the Investor; (vii) the right of the Investor
Directors to membership on a committee of the Board of Directors of New CSC to
approve certain transactions with Class B Stockholders and their family members
that will give such Investor Directors a veto over such transactions; (viii) the
Investor's agreement to vote in proportion with the public holders of New CSC
Class A Common Stock for the election of the directors of New CSC which the New
CSC Class A Common Stock is entitled to elect and any increase in authorized
shares; (ix) agreement by New CSC not to effect acquisition transactions that
would cause the debt to cash flow ratio of New CSC (calculated as described in
the New CSC Stockholders Agreement) to exceed a specified ratio (initially 8.0 :
1.0, and declining to 7.5 : 1.0 after December 31, 1999); and (x) certain
registration rights under the Securities Act of 1933, as amended, for shares of
New CSC Class A Common Stock owned by the Investor. John C. Malone and Leo J.
Hindery, Jr., executive officers and directors of TCI, have been designated as
the Investor Directors of New CSC.
<PAGE> 5
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements
The following Audited Consolidated Financial Statements of CSC
Holdings, Inc. (formerly Cablevision Systems Corporation) are
incorporated herein by reference to the CSC Holdings, Inc. Annual
Report on Form 10-K for the year ended December 31, 1997
(Commission File No. 1-9046):
Independent Auditors' Report
Consolidated Balance Sheets as of December 31, 1997 and 1996
Consolidated Statements of Operations for the years ended
December 31, 1997, 1996 and 1995
Consolidated Statements of Stockholders' Deficiency for the
years ended December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
(b) Pro Forma Financial Information
TCI Communications, Inc. and Subsidiaries:
Condensed Pro Forma Balance Sheet,
December 31, 1997 (unaudited)
Condensed Pro Forma Statement of Operations,
Year ended December 31, 1997 (unaudited)
Notes to Condensed Pro Forma Financial Statements,
December 31, 1997 (unaudited)
(c) Exhibits
Exhibit Number Description
2.1 Amended and Restated Contribution and Merger
Agreement, dated as of June 6, 1997, among TCI
Communications, Inc., Cablevision Systems
Corporation, CSC Parent Corporation and CSC
Merger Corporation.
Incorporated herein by reference to the Tele-
Communications, Inc. Current Report on Form
8-K dated March 6, 1998 (Commission File
No. 0-20421).
99.1 Stockholders Agreement dated as of March 4,
1998, by and among Cablevision Systems
Corporation, Tele-Communications, Inc. and the
Class B Entities (as defined therein)
Incorporated herein by reference to the Tele-
Communications, Inc. Current Report on Form
8-K dated March 6, 1998 (Commission File
No. 0-20421).
<PAGE> 6
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: May 8, 1998
TCI COMMUNICATIONS, INC.
(Registrant)
By:/s/ Stephen M. Brett
-------------------------------
Stephen M. Brett
Executive Vice President
<PAGE> 7
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Pro Forma Financial Statements
December 31, 1997
(unaudited)
The following unaudited condensed pro forma balance sheet of TCIC,
dated as of December 31, 1997, assumes that the IP-VI Transfer (see note 1) and
the CSC Transaction (see note 2) had occurred as of such date.
The following unaudited condensed pro forma statement of operations of
TCIC for the year ended December 31, 1997 assumes that the IP-VI Transfer and
the CSC Transaction had occurred as of January 1, 1997.
The unaudited pro forma results do not purport to be indicative of the
results of operations that would have been obtained if the IP-VI Transfer and
the CSC Transaction had occurred as of January 1, 1997. These condensed pro
forma financial statements of TCIC should be read in conjunction with the
historical financial statements and the related notes thereto of TCIC.
1
<PAGE> 8
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Pro Forma Balance Sheet
(unaudited)
<TABLE>
<CAPTION>
December 31, 1997
-----------------------------------------------------------------------------------------
CSC
Contribution of Contribution of IP-VI Transfer - Transaction -
TCIC Kentucky Systems NJ/NY Systems pro forma pro forma TCIC
historical to IP-VI(1)(3) to New CSC(2) adjustments adjustments pro forma
----------- --------------- ------------- --------------- ------------- --------
Assets amounts in millions
- ------
<S> <C> <C> <C> <C> <C> <C>
Cash, receivables and other current
assets $ 355 (14) (9) -- -- 332
Investment in affiliates, accounted for
under the equity method, and related
receivables 231 (92) -- 92(4) 663(5) 894
Property and equipment, net of
accumulated depreciation 6,524 (226) (151) -- -- 6,147
Franchise costs, intangibles and other
assets, net of amortization 14,748 (497) (450) -- -- 13,801
--------- ------------ ------------ ------------ ------------ ------------
$ 21,858 (829) (610) 92 663 21,174
========= ============ ============ ============ ============ ============
Liabilities and Stockholders' Deficit
Payables and accruals $ 1,272 (17) (9) -- -- 1,246
Debt 13,528 (812) (78) -- -- 12,638
Deferred income taxes 5,215 -- -- 73(4) 86(6) 5,374
Other liabilities 125 -- -- -- -- 125
--------- ------------ ------------ ------------ ------------ ------------
Total liabilities 20,140 (829) (87) 73 86 19,383
--------- ------------ ------------ ------------ ------------ ------------
Minority interests 787 -- -- -- -- 787
Redeemable preferred stock 232 -- -- -- -- 232
Company-obligated mandatorily redeem
able preferred securities of subsidiary
trusts holding solely subordinated debt
securities of TCIC 1,500 -- -- -- -- 1,500
Common stockholder's equity:
Class A common stock 1 -- -- -- -- 1
Class B common stock -- -- -- -- -- --
Additional paid-in capital 1,857 -- -- 19(4) -- 1,876
Combined equity -- -- (523) -- 523(6) --
Unrealized holding gains for available-
for-sale securities 4 -- -- -- -- 4
Accumulated deficit (957) -- -- -- 54(6) (903)
--------- ------------ ------------ ------------ ------------ ------------
905 -- (523) 19 577 978
Investment in TCI, at cost (1,143) -- -- -- -- (1,143)
Due from related parties (563) -- -- -- -- (563)
--------- ------------ ------------ ------------ ------------ ------------
(801) -- (523) 19 577 (728)
--------- ------------ ------------ ------------ ------------ ------------
$ 21,858 (829) (610) 92 663 21,174
========= ============ ============ ============ ============ ============
</TABLE>
See accompanying notes to unaudited condensed pro forma financial statements.
2
<PAGE> 9
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Pro Forma Combined Statement of Operations
(unaudited)
<TABLE>
<CAPTION>
Year ended December 31, 1997
----------------------------------------------------------------------------------------
Contribution CSC
of Kentucky Contribution of IP-VI Transfer - Transaction -
TCIC Systems to NJ/NY Systems pro forma pro forma TCIC
historical IP-VI(1) to New CSC(2) adjustments adjustments pro forma
---------- ---------- -------------- --------------- ------------ ----------
amounts in millions
<S> <C> <C> <C> <C> <C> <C>
Revenue $ 6,167 (185) (213) -- -- 5,769
Operating, selling, general and
administrative expenses, and stock
compensation (3,546) 102 116 -- -- (3,328)
Depreciation and amortization (1,393) 39 40 -- -- (1,314)
---------- ---------- ---------- ---------- ---------- ----------
Operating income 1,228 (44) (57) -- -- 1,127
Interest expense (1,064) 57 6 -- -- (1,001)
Interest income 26 -- -- -- -- 26
Share of losses of affiliates, net (54) 1 -- (3)(7) (50)(9) (106)
Other, net (235) 2 1 -- -- (232)
---------- ---------- ---------- ---------- ---------- ----------
Loss before income taxes (99) 16 (50) (3) (50) (186)
Income tax benefit 39 (7) 16 1(8) 20(8) 69
---------- ---------- ---------- ---------- ---------- ----------
Net loss (60) 9 (34) (2) (30) (117)
Dividend requirement on preferred stocks
(10) -- -- -- -- (10)
---------- ---------- ---------- ---------- ---------- ----------
Net loss attributable to common
stockholder $ (70) 9 (34) (2) (30) (127)
========== ========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to unaudited condensed pro forma financial statements.
3
<PAGE> 10
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Condensed Pro Forma Financial Statements
December 31, 1997
(unaudited)
(1) On April 30, 1998 (the "InterMedia Closing Date"), TCI IP-VI, LLC ("TCI
LLC"), a limited liability company wholly-owned by subsidiaries of
Tele-Communications, Inc. ("TCI"), transferred to InterMedia Capital
Partners VI, L.P. ("IP-VI"), a Delaware limited partnership, and
certain of its affiliates, cable television systems owned and operated
by TCI Communications, Inc. ("TCIC") subsidiaries serving, as of March
31, 1998, approximately 435,000 basic customers. The transfer (the
"IP-VI Transfer") was completed pursuant to the terms of a Contribution
Agreement dated as of October 30, 1997, by and among TCI TKR of
Southern Kentucky, Inc., TCI TKR of Northern Kentucky, Inc., TCI TKR of
Jefferson County, Inc. TCI Cablevision of Kentucky, Inc., TCI
Cablevision of North Central Kentucky, Inc., TCI of North Central
Kentucky, Inc., TCI of Lexington, Inc. and TCI of Radcliff, Inc.
(collectively the "TCI Parties") and InterMedia Capital Management VI,
L.P., as amended. The systems transferred were located in and around
the following Kentucky communities: Dawson Springs, Providence, St.
Charles, Caldwell County, Hopkins County, Webster County,
Shepherdsville, Danville, Lexington, Radcliff, Warren County, Bowling
Green, Oakland, Plum Springs, Smith's Grove, Woodburn, Louisville,
Boone County, Campbell County, Kenton County and Newport (the "Kentucky
Systems"). IP-VI and its affiliates also assumed rights and obligations
under a programming rights agreement with Satellite Services, Inc., an
affiliate of TCIC. TCI LLC received a 49.005% limited partnership
interest in IP-VI, and IP-VI assumed approximately $812 million in debt
associated with the Kentucky Systems. TCIC will account for its
ownership interest in IP-VI using the equity method of accounting.
Leo J. Hindery, Jr., the President and Chief Executive Officer of TCIC,
and William R. Fitzgerald, an Executive Vice President of TCIC, are on
the advisory board of IP-VI. Mr. Hindery also owns a .495% limited
partnership interest in IP-VI. Additionally, the TCI Parties, TCI LLC
and CVC Keep Well LLC, an affiliate of TCIC, have agreed to take
certain steps to support compliance by subsidiaries of IP-VI with their
payment obligations under senior credit facilities, up to a total
contingent commitment of approximately $490 million.
(continued)
4
<PAGE> 11
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Condensed Pro Forma Financial Statements
December 31, 1997
(unaudited)
(2) On March 4, 1998 (the "CSC Closing Date"), subsidiaries TCI (including
certain subsidiaries of TCIC) transferred to CSC Parent Corporation, a
Delaware corporation (now known as Cablevision Systems Corporation)
("New CSC"), cable television systems owned and operated by TCI serving
approximately 830,000 basic customers, as of January 31, 1998. The
systems transferred were located in Union, Mercer, Monmouth, Somerset,
Middlesex, Morris, Sussex, Bergen and Passaic counties in New Jersey
and in Rockland, Suffolk and Westchester counties in New York (the
"NJ/NY Systems"). In addition to its ownership interest in the NJ/NY
Systems, New CSC holds all of the common stock of the former
Cablevision Systems Corporation (now known as CSC Holdings, Inc.). The
NJ/NY Systems were transferred either directly by the transfer of the
assets of such cable systems or indirectly by the transfer of
partnership interests or capital stock in the entities owning such
cable systems, in exchange for 24,471,086 shares (as adjusted for a
stock dividend) of Class A common stock, par value $0.01 per share, of
New CSC ("New CSC Class A Common Stock") representing an approximate
32.7% common equity ownership interest in New CSC and assumption by New
CSC of certain liabilities, including approximately $669 million in
debt, relating to the cable television systems transferred by TCI to
New CSC. As a part of such transaction, TCIC subsidiaries contributed
to New CSC cable television systems serving approximately 410,000 basic
customers in exchange for 13,975,524 shares (as adjusted for a stock
dividend) or 18.7% of New CSC's Class A Common Stock, and New CSC
assumed approximately $78 million of intercompany debt owed to TCIC.
Such exchange was made pursuant to the terms of the Contribution and
Merger Agreement dated as of June 6, 1997, as amended and restated by
the Amended and Restated Contribution and Merger Agreement (the
"Contribution and Merger Agreement") dated as of June 6, 1997, by and
among TCI Communications, Inc., and certain affiliates of New CSC (the
"CSC Transaction"). In light of TCI's overall ownership interest in New
CSC of approximately 32.7%, TCIC will account for its approximate 18.7%
ownership interest in New CSC under the equity method of accounting.
5
<PAGE> 12
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Condensed Pro Forma Financial Statements
December 31, 1997
(unaudited)
(3) Represents the contribution of the Kentucky Systems to IP-VI. Such
contribution results in a $92 million negative investment in IP-VI
equal to the excess of the TCIC debt assumed by IP-VI over the
historical cost of the remaining net assets of the Kentucky Systems.
(4) Represents the gain recognized in connection with the IP-VI transfer.
Due to the Company's agreement to take certain steps to support
compliance by subsidiaries of IP-VI with their payment obligations
under certain senior credit facilities, such gain has been recorded as
a direct increase to additional paid-in capital (net of related
deferred income taxes of $73 million).
(5) Represents the receipt of 13,975,524 shares (as adjusted for a stock
dividend) of New CSC Class A Common Stock valued at approximately $663
million, based on the closing per share price of New CSC Class A Common
Stock of $47.44 on the CSC Closing Date.
(6) Represents the estimated gain from the contribution to New CSC of the
NJ/NY Systems. The estimated gain represents the excess of the fair
value of New CSC Class A Common Stock received (approximately $663
million) over the net assets of the NJ/NY Systems (approximately $523
million), net of the estimated deferred tax effect of the CSC
Transaction.
(7) Represents TCIC's proportionate share of IP-VI's pro forma losses for
the year ended December 31, 1997, including the amortization, over an
estimated 20 year life, of the difference between the recorded value of
TCIC's investment in IP-VI and TCIC's proportionate share of IP-VI's
pro forma net assets.
(8) Represents the estimated tax effect of the pro forma adjustments,
assuming an effective tax rate of 40%.
(9) Represents TCIC's proportionate share of New CSC's pro forma losses for
the year ended December 31, 1997, including the amortization, over an
estimated 20 year life, of the difference between the fair value of the
New CSC Class A Common Stock received and TCIC's proportionate share of
New CSC's pro forma net deficiency.
6