-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MsRvEIr6Z+tgncGJMRbw4FSPPGF5sdSHkXExAJIK7FioGAMU7YFNYUVJ+k9P/O80 KFJlL2QRvvOILlEyKpJJ/w== 0000912057-96-029105.txt : 19961213 0000912057-96-029105.hdr.sgml : 19961213 ACCESSION NUMBER: 0000912057-96-029105 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961115 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19961212 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: US WEST INC CENTRAL INDEX KEY: 0000732718 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 840926774 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-08611 FILM NUMBER: 96679944 BUSINESS ADDRESS: STREET 1: 7800 E ORCHARD RD STREET 2: SUITE 480 CITY: ENGLEWOOD STATE: CO ZIP: 80111 BUSINESS PHONE: 3037936629 MAIL ADDRESS: STREET 1: 7800 EAST ORCHARD ROAD STREET 2: SUITE 480 CITY: ENGLEWOOD STATE: CO ZIP: 80111 8-K/A 1 FORM 8-K/A - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES 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 (Date of earliest event reported): NOVEMBER 15, 1996 U S WEST, INC. (Exact name of registrant as specified in its charter) A DELAWARE CORPORATION COMMISSION FILE IRS EMPLOYER IDENTIFICATION (State of incorporation) NUMBER 1-8611 NO. 84-0926774
7800 EAST ORCHARD ROAD, ENGLEWOOD, COLORADO 80111 (Address of principal executive offices, including Zip Code) TELEPHONE NUMBER (303) 793-6500 (Registrant's telephone number, including area code) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The undersigned Registrant hereby amends the following items, exhibits, or other portions of its Form 8-K, Commission File Number 1-8611, dated November 15, 1996, as set forth in the pages hereto. ITEM 7. EXHIBITS
EXHIBITS DESCRIPTION - ----------- --------------------------------------------------------------------------------------------------- 99G Unaudited Pro Forma Condensed Combined Financial Statements of U S WEST, Inc. and subsidiaries and U S WEST Media Group as of September 30, 1996 and for the nine months ended September 30, 1996, and for the year ended December 31, 1995.
SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this amendment to be signed on its behalf by the undersigned hereunto duly authorized. U S WEST, INC. By: /s/ STEPHEN E. BRILZ ----------------------------------------- Stephen E. Brilz CORPORATE COUNSEL AND ASSISTANT SECRETARY Dated: December 12, 1996 EX-99.G 2 EXHIBIT 99G EXHIBIT 99G U S WEST, INC. UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS The following unaudited pro forma combined statements of operations of U S WEST, Inc. ("U S WEST") and the U S WEST Media Group (the "Media Group") for the year ended December 31, 1995 give effect to (i) the merger of U S WEST and Continental Cablevision, Inc. ("Continental") (the "Merger"), (ii) U S WEST's planned refinancing of Continental's revolving debt facilities following consummation of the Merger through the issuance of U S WEST commercial paper (the "U S WEST Refinancing"), (iii) the pending acquisition by Continental of the remaining 62.1% interest in Meredith/New Heritage Strategic Partners, L.P. (the "MN/H Buyout"), (iv) the acquisition by Continental of Cablevision of Chicago, Columbia Cable of Michigan, Consolidated Cablevision of California, the cable television business of Providence Journal Company and the remaining 66.2% interest in N-COM Limited Partnership II, (v) the sale by Continental of its 8.30% senior notes due 2006 and the application of the net proceeds therefrom, (vi) the redemption by Teleport Communications Group, Inc. ("TCG") of a portion of the shares of common stock of TCG owned by Continental and the reclassification of Continental's remaining interest in TCG (the "TCG Transaction") and (vii) the consummation of Phase II of a joint venture between U S WEST and AirTouch Communications, Inc. ("AirTouch"). Upon consummation of Phase II of the joint venture, the domestic cellular properties of U S WEST and AirTouch will be combined (the "U S WEST/AirTouch Joint Venture"), as though each transaction had occurred as of January 1, 1995. The following unaudited pro forma condensed combined statements of operations of U S WEST and the Media Group for the nine months ended September 30, 1996 give effect to (i) the Merger, (ii) the U S WEST Refinancing, (iii) the MN/H Buyout, (iv) the TCG Transaction and (v) the consummation of the U S WEST/AirTouch Joint Venture, as though each transaction had occurred as of January 1, 1996. The following unaudited pro forma condensed combined balance sheets of U S WEST and the Media Group at September 30, 1996 give effect to (i) the Merger, (ii) the U S WEST Refinancing, (iii) the MN/H Buyout and (iv) the consummation of the U S WEST/AirTouch Joint Venture, as though each transaction had occurred on September 30, 1996. The pro forma adjustments are based on available information and certain assumptions that U S WEST's management believes are reasonable and are described in the notes accompanying the unaudited pro forma condensed combined balance sheets and the unaudited pro forma condensed combined statements of operations. The unaudited pro forma financial information does not purport to represent what U S WEST or the Media Group's financial position or results of operations would actually have been had the transactions actually occurred at such dates or to project U S WEST or the Media Group's financial position or results of operations at or for any future date or period. In the opinion of U S WEST's management, all adjustments necessary to present fairly such unaudited pro forma financial information have been made. The unaudited pro forma financial statements should be read in conjunction with the historical financial statements of U S WEST, the Media Group, and Continental, including the notes thereto, and with the pro forma financial statements of Continental. Continental pro forma financial statements are attached hereto as an Exhibit. THE MERGER U S WEST will account for the Merger by the purchase method of accounting. Accordingly, U S WEST's cost to acquire Continental of approximately $11.5 billion (as of September 30, 1996) will be allocated to the assets acquired and liabilities assumed according to their respective fair values. The $7.6 billion pro forma excess of the purchase price over the net tangible assets acquired at September 30, 1996, and goodwill related to a deferred income tax liability of $3.1 billion, will be amortized over 25 years, except for intangible assets allocated to Continental's equity method investments, which will be amortized over 15 years. Amortization related to Continental's equity method investments will be recorded as a component of equity income (loss) in unconsolidated ventures. The intangible assets acquired consist principally of the cable television franchises of Continental and goodwill. The final allocation of the purchase price is dependent upon certain valuations and other studies that have not progressed to a stage where there is sufficient information to make such an allocation in the accompanying unaudited pro forma condensed combined financial statements. Accordingly, the purchase 1 price allocation adjustments made in connection with the development of the unaudited pro forma condensed combined financial statements are preliminary and have been made solely for the purpose of developing such unaudited pro forma condensed combined financial statements. The impact on U S WEST's financial position from the disposition of certain Continental properties as required by federal rules governing cross-ownership by telephone companies of cable companies and provision of "in-region" interLATA services is not expected to be material to the pro forma financial statements and, accordingly, has not been reflected in the unaudited pro forma condensed combined financial statements. Certain reclassifications have been made to the Continental historical consolidated financial statements and pro forma amounts to reflect such financial statements on a basis consistent with the unaudited pro forma condensed combined financial statements of U S WEST and the Media Group after giving effect to the Merger. U S WEST/AIRTOUCH JOINT VENTURE In July 1994, U S WEST signed an agreement with AirTouch to combine their domestic cellular properties into a joint venture in a multi-phased transaction. During Phase I, which commenced on November 1, 1995, the partners are operating their cellular properties separately. A wireless management company has been formed and is providing centralized services to both companies on a contract basis. In Phase II, the partners will combine their domestic properties into a joint venture, subject to obtaining certain authorizations. The parties are seeking to obtain regulatory and other approvals precedent to entering into Phase II. The recent passage of the 1996 Telecommunications Act has removed significant regulatory barriers to completion of Phase II. U S WEST's domestic cellular assets and related liabilities will be contributed to the U S WEST/ AirTouch Joint Venture at historical cost after which the equity method of accounting will be applied. The equity method of accounting requires recognition of U S WEST's share of the financial condition and operating results of the U S WEST/AirTouch Joint Venture on one line on the balance sheet and statement of operations. The assumed ownership interests for U S WEST and AirTouch approximate 26 percent and 74 percent, respectively, pursuant to the partnership agreement. The actual interests of U S WEST and AirTouch in the capital, income (loss) and cash flows of the joint venture will depend on a number of factors, the outcome of which cannot be reliably estimated. These factors include, among other things, the timing of the actual closing of Phase II and the ability of the parties to contribute certain of their domestic cellular interests to the joint venture. Accordingly, U S WEST cannot predict the actual interest it will have upon the closing of Phase II in the capital, income (loss) or cash flow of the U S WEST/AirTouch Joint Venture. U S WEST's interest in the joint venture will further adjust depending on the timing of the contribution of its PCS investment. The timing of such contribution is at U S WEST's discretion and will occur either at the closing of Phase II or a date selected by U S WEST, no later than mid-1998. The closing of Phase II is conditioned upon the satisfaction of certain conditions, including the ability of AirTouch and U S WEST to contribute at least 60 percent of their respective domestic cellular interests to the joint venture. U S WEST anticipates that Phase II will close in early 1997. Some of the cellular interests of AirTouch and U S WEST are subject to consent provisions in connection with certain transactions. In addition, other partnership interests may, under certain circumstances, be subject to rights of first refusal provisions in favor of third parties. The foregoing provisions may or may not preclude certain properties from being contributed to the U S WEST/AirTouch Joint Venture. To the extent any such properties have not been contributed to the U S WEST/AirTouch Joint Venture at the time of Phase II closing, U S WEST and AirTouch are obligated throughout the life of the U S WEST/ AirTouch Joint Venture to continue to use reasonable efforts to effect such contribution. U S WEST and AirTouch have agreed that, in the event that either is unable to contribute all of its domestic cellular interests to the U S WEST/AirTouch Joint Venture, the parties will restructure, among other things, the allocation of profits and losses and the distribution of cash and property of the U S WEST/AirTouch Joint Venture or, to the extent such a restructuring is not feasible, to otherwise compensate each party to achieve the same economic result each party would have obtained if all of the parties' domestic cellular properties had been contributed to the joint venture at the Phase II closing. As a result, U S WEST cannot predict the actual interest it will have in the U S WEST/AirTouch Joint Venture upon Phase II closing. The following pro forma information reflects the assumption that all domestic cellular properties are contributed to the U S WEST/ 2 AirTouch Joint Venture. U S WEST believes this assumption is reasonable because of the continuing obligations of U S WEST and AirTouch to affect the contribution of their respective domestic cellular assets to the U S WEST/AirTouch Joint Venture. In addition, management believes the effect on U S WEST's financial position and results of operations if certain domestic cellular properties are not contributed to the U S WEST/AirTouch Joint Venture would not be material. 3 U S WEST, INC. UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1995 DOLLARS IN MILLIONS (EXCEPT PER SHARE AMOUNTS)
U S WEST U S WEST/ U S WEST PRO FORMA AIRTOUCH JOINT U S WEST CONTINENTAL ADJUSTMENTS FOR THE VENTURE HISTORICAL PRO FORMA FOR THE MERGER MERGER ADJUSTMENTS ----------- ------------- -------------- ----------- -------------- Sales and other revenues............................ $ 11,746 $ 1,782(A) $ 13,528 $ (882)(N) Employee-related expenses........................... 4,071 379(A) 4,450 (152)(N) Other operating expenses............................ 2,323 662(A) 2,985 (445)(N) Taxes other than income taxes....................... 416 15(A) 431 (17)(N) Depreciation and amortization....................... 2,291 451(A) $ 376(B) 3,118 (121)(N) ----------- ------ ----- ----------- ----- Total operating expenses............................ 9,101 1,507 376 10,984 (735) ----------- ------ ----- ----------- ----- Income (loss) from operations....................... 2,645 275 (376) 2,544 (147) Other income (expense): Interest expense.................................. (527) (444)(A) (10)(C) (981) 1(N) Equity (losses) income in unconsolidated ventures......................................... (207) (53)(A) (39)(D) (299) 146(N) 11(O) Gains on merger of joint venture interest and sales of other assets............................ 293 24(A) 317 Guaranteed minority interest expense.............. (14) (14) Other income (expense) net........................ (36) 7(A) (29) 17(N) ----------- ------ ----- ----------- ----- Income (loss) before income taxes and extraordinary items.............................................. 2,154 (191) (425) 1,538 28 Provision (benefit) for income taxes................ 825 (59)(A) (124)(E) 642 11(P) ----------- ------ ----- ----------- ----- INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS............ 1,329 (132) (301) 896 17 Dividend and preferences on preferred stock......... (3) (40)(A) (9)(F) (52) ----------- ------ ----- ----------- ----- Income (loss) before extraordinary items available for common stock................................... $ 1,326 $ (172) $ (310) $ 844 $ 17 ----------- ------ ----- ----------- ----- ----------- ------ ----- ----------- ----- INCOME BEFORE EXTRAORDINARY ITEM PER SHARE OF COMMUNICATIONS STOCK............................... $ 2.52 $ 2.52 ----------- ----------- ----------- ----------- AVERAGE SHARES OF COMMUNICATIONS STOCK OUTSTANDING (MILLIONS)......................................... 470.72 470.72 ----------- ----------- ----------- ----------- INCOME (LOSS) BEFORE EXTRAORDINARY ITEM PER SHARE OF MEDIA STOCK........................................ $ 0.30 $ (0.55)(G) ----------- ----------- ----------- ----------- AVERAGE SHARES OF MEDIA STOCK OUTSTANDING (MILLIONS)......................................... 470.55 621.15(G) ----------- ----------- ----------- ----------- U S WEST PRO FORMA --------------- Sales and other revenues............................ $ 12,646 Employee-related expenses........................... 4,298 Other operating expenses............................ 2,540 Taxes other than income taxes....................... 414 Depreciation and amortization....................... 2,997 ------- Total operating expenses............................ 10,249 ------- Income (loss) from operations....................... 2,397 Other income (expense): Interest expense.................................. (980) Equity (losses) income in unconsolidated ventures......................................... (142) Gains on merger of joint venture interest and sales of other assets............................ 317 Guaranteed minority interest expense.............. (14) Other income (expense) net........................ (12) ------- Income (loss) before income taxes and extraordinary items.............................................. 1,566 Provision (benefit) for income taxes................ 653 ------- INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS............ 913 Dividend and preferences on preferred stock......... (52) ------- Income (loss) before extraordinary items available for common stock................................... $ 861 ------- ------- INCOME BEFORE EXTRAORDINARY ITEM PER SHARE OF COMMUNICATIONS STOCK............................... $ 2.52 ------- ------- AVERAGE SHARES OF COMMUNICATIONS STOCK OUTSTANDING (MILLIONS)......................................... 470.72 ------- ------- INCOME (LOSS) BEFORE EXTRAORDINARY ITEM PER SHARE OF MEDIA STOCK........................................ $ (0.52) ------- ------- AVERAGE SHARES OF MEDIA STOCK OUTSTANDING (MILLIONS)......................................... 621.15 ------- -------
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements. 4 U S WEST, INC. UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30, 1996 DOLLARS IN MILLIONS (EXCEPT PER SHARE AMOUNTS)
U S WEST U S WEST/ U S WEST PRO FORMA AIRTOUCH JOINT U S WEST CONTINENTAL ADJUSTMENTS FOR THE VENTURE HISTORICAL PRO FORMA FOR THE MERGER MERGER ADJUSTMENTS ----------- ------------- -------------- ----------- --------------- Sales and other revenues........................ $ 9,353 $ 1,454(A) $ 10,807 $ (823)(N) Employee-related expenses....................... 3,246 302(A) 3,548 (130)(N) Other operating expenses........................ 1,823 549(A) 2,372 (373)(N) Taxes other than income taxes................... 319 16(A) 335 (13)(N) Depreciation and amortization................... 1,796 360(A) $ 260(B) 2,416 (107)(N) ----------- ------ ----- ----------- ----- Total operating expenses........................ 7,184 1,227 260 8,671 (623) ----------- ------ ----- ----------- ----- Income (loss) from operations................... 2,169 227 (260) 2,136 (200) Other income (expense): Interest expense.............................. (411) (361)(A) (8)(C) (780) 2(N) Equity (losses) income in unconsolidated ventures..................................... (224) (107)(A) (29)(D) (360) 164(N) 8(O) Gains on sales of rural telephone exchanges... 51 51 Guaranteed minority interest expense.......... (36) (36) Other income (expense) -- net................. (47) 60(A) 13 21(N) ----------- ------ ----- ----------- ----- Income (loss) before income taxes and cumulative effect of change in accounting principle....... 1,502 (181) (297) 1,024 (5) Provision (benefit) for income taxes............ 588 (33)(A) (84)(E) 471 (2) (P) ----------- ------ ----- ----------- ----- INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE........................ 914 (148) (213) 553 (3) Dividend and preferences on preferred stock..... (3) (32)(A) (5)(F) (40) ----------- ------ ----- ----------- ----- Income (loss) before cumulative effect of change in accounting principle available for common stock.......................................... $ 911 $ (180) $ (218) $ 513 $ (3) ----------- ------ ----- ----------- ----- ----------- ------ ----- ----------- ----- INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE PER SHARE OF COMMUNICATIONS STOCK........................... $ 1.90 $ 1.90 ----------- ----------- ----------- ----------- AVERAGE SHARES OF COMMUNICATIONS STOCK OUTSTANDING (MILLIONS)......................... 476.7 476.7 ----------- ----------- ----------- ----------- INCOME (LOSS) PER SHARE OF MEDIA STOCK.......... $ 0.01 $ (0.63)(G) ----------- ----------- ----------- ----------- AVERAGE SHARES OF MEDIA STOCK OUTSTANDING (MILLIONS)..................................... 473.50 624.10(G) ----------- ----------- ----------- ----------- U S WEST PRO FORMA --------------- Sales and other revenues........................ $ 9,984 Employee-related expenses....................... 3,418 Other operating expenses........................ 1,999 Taxes other than income taxes................... 322 Depreciation and amortization................... 2,309 ------- Total operating expenses........................ 8,048 ------- Income (loss) from operations................... 1,936 Other income (expense): Interest expense.............................. (778) Equity (losses) income in unconsolidated ventures..................................... (188) Gains on sales of rural telephone exchanges... 51 Guaranteed minority interest expense.......... (36) Other income (expense) -- net................. 34 ------- Income (loss) before income taxes and cumulative effect of change in accounting principle....... 1,019 Provision (benefit) for income taxes............ 469 ------- INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE........................ 550 Dividend and preferences on preferred stock..... (40) ------- Income (loss) before cumulative effect of change in accounting principle available for common stock.......................................... $ 510 ------- ------- INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE PER SHARE OF COMMUNICATIONS STOCK........................... $ 1.90 ------- ------- AVERAGE SHARES OF COMMUNICATIONS STOCK OUTSTANDING (MILLIONS)......................... 476.7 ------- ------- INCOME (LOSS) PER SHARE OF MEDIA STOCK.......... $ (0.63) ------- ------- AVERAGE SHARES OF MEDIA STOCK OUTSTANDING (MILLIONS)..................................... 624.10 ------- -------
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements. 5 U S WEST, INC. UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET AS OF SEPTEMBER 30, 1996 DOLLARS IN MILLIONS
U S WEST U S WEST/ U S WEST PRO FORMA AIRTOUCH JOINT U S WEST CONTINENTAL ADJUSTMENTS FOR THE VENTURE HISTORICAL PRO FORMA FOR THE MERGER MERGER ADJUSTMENTS ----------- ------------- -------------- ----------- -------------- ASSETS Total current assets.............................. $ 2,936 $ 156(A) $ 3,092 $ (180)(Q) Property, plant and equipment -- net.............. 15,227 2,553(A) 17,780 (844)(Q) Investment in Time Warner Entertainment........... 2,493 2,493 Investments in other unconsolidated ventures...... 1,371 532(A) $ 601(H) 2,504 1,037(Q) Intangible assets -- net.......................... 1,791 1,953(A) 8,079(H) 11,823 (430)(Q) Other assets...................................... 1,765 746(A) 2,511 (6)(Q) ----------- ------------- ------ ----------- ------ Total assets...................................... $ 25,583 $ 5,940 $ 8,680 $ 40,203 $ (423) ----------- ------------- ------ ----------- ------ ----------- ------------- ------ ----------- ------ LIABILITIES AND EQUITY Total current liabilities......................... $ 4,866 $ 441(A) $ 4,615(I) $ 9,922 $ (313)(Q) Long-term debt.................................... 7,402 5,958(A) (3,069)(J) 10,291 Deferred taxes, credits and other................. 4,382 435(A) 2,730(K) 7,547 (110)(Q) Redeemable preferred securities................... 651 651 Redeemable common stock........................... 278(A) (278)(L) Total equity...................................... 8,282 (1,172)(A) 4,682(M) 11,792 ----------- ------------- ------ ----------- ------ Total liabilities and equity...................... $ 25,583 $ 5,940 $ 8,680 $ 40,203 $ (423) ----------- ------------- ------ ----------- ------ ----------- ------------- ------ ----------- ------ U S WEST PRO FORMA ----------- ASSETS Total current assets.............................. $ 2,912 Property, plant and equipment -- net.............. 16,936 Investment in Time Warner Entertainment........... 2,493 Investments in other unconsolidated ventures...... 3,541 Intangible assets -- net.......................... 11,393 Other assets...................................... 2,505 ----------- Total assets...................................... $ 39,780 ----------- ----------- LIABILITIES AND EQUITY Total current liabilities......................... $ 9,609 Long-term debt.................................... 10,291 Deferred taxes, credits and other................. 7,437 Redeemable preferred securities................... 651 Redeemable common stock........................... Total equity...................................... 11,792 ----------- Total liabilities and equity...................... $ 39,780 ----------- -----------
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements. 6 U S WEST MEDIA GROUP UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1995 DOLLARS IN MILLIONS (EXCEPT PER SHARE AMOUNTS)
MEDIA GROUP U S WEST/ MEDIA GROUP PRO FORMA AIRTOUCH JOINT MEDIA GROUP CONTINENTAL ADJUSTMENTS FOR THE VENTURE HISTORICAL PRO FORMA FOR THE MERGER MERGER ADJUSTMENTS ----------- ------------- -------------- ----------- --------------- Sales and other revenues Directory and information services.............. $ 1,180 $ 1,180 Wireless communications......................... 941 941 $ (941)(N) Cable and telecommunications.................... 215 $ 1,782(A) 1,997 Other........................................... 38 38 2(N) ----------- ------ ----------- ----- Total sales and other revenues.................... 2,374 1,782 4,156 (939) Cost of sales and other revenues.................. 772 632(A) 1,404 (244)(N) Selling, general and administrative expenses...... 886 424(A) 1,310 (427)(N) Depreciation and amortization..................... 249 451(A) $ 376(B) 1,076 (121)(N) ----------- ------ ----- ----------- ----- Total operating expenses.......................... 1,907 1,507 376 3,790 (792) ----------- ------ ----- ----------- ----- Income (loss) from operations..................... 467 275 (376) 366 (147) Other income (expense): Interest expense................................ (100) (444)(A) (10)(C) (554) 1(N) Equity (losses) income in unconsolidated ventures....................................... (207) (53)(A) (39)(D) (299) 146(N) 11(O) Gains on merger of joint venture interest and sales of other assets.......................... 157 24(A) 181 Guaranteed minority interest expense............ (14) (14) Other income -- net............................. 5 7(A) 12 17(N) ----------- ------ ----- ----------- ----- Income (loss) before income taxes and extraordinary item............................... 308 (191) (425) (308) 28 Provision (benefit) for income taxes.............. 163 (59)(A) (124)(E) (20) 11(P) ----------- ------ ----- ----------- ----- INCOME (LOSS) BEFORE EXTRAORDINARY ITEM........... 145 (132) (301) (288) 17 Dividend and preferences on preferred stock....... (3) (40)(A) (9)(F) (52) ----------- ------ ----- ----------- ----- Income (loss) before extraordinary item available for Media Stock.................................. $ 142 $ (172) $ (310) $ (340) $ 17 ----------- ------ ----- ----------- ----- ----------- ------ ----- ----------- ----- INCOME (LOSS) BEFORE EXTRAORDINARY ITEM PER SHARE OF MEDIA STOCK................................... $ 0.30 $ (0.55)(G) ----------- ----------- ----------- ----------- AVERAGE SHARES OF MEDIA STOCK OUTSTANDING (MILLIONS)....................................... 470.55 621.15(G) ----------- ----------- ----------- ----------- MEDIA GROUP PRO FORMA ----------- Sales and other revenues Directory and information services.............. $ 1,180 Wireless communications......................... -- Cable and telecommunications.................... 1,997 Other........................................... 40 ----------- Total sales and other revenues.................... 3,217 Cost of sales and other revenues.................. 1,160 Selling, general and administrative expenses...... 883 Depreciation and amortization..................... 955 ----------- Total operating expenses.......................... 2,998 ----------- Income (loss) from operations..................... 219 Other income (expense): Interest expense................................ (553) Equity (losses) income in unconsolidated ventures....................................... (142) Gains on merger of joint venture interest and sales of other assets.......................... 181 Guaranteed minority interest expense............ (14) Other income -- net............................. 29 ----------- Income (loss) before income taxes and extraordinary item............................... (280) Provision (benefit) for income taxes.............. (9) ----------- INCOME (LOSS) BEFORE EXTRAORDINARY ITEM........... (271) Dividend and preferences on preferred stock....... (52) ----------- Income (loss) before extraordinary item available for Media Stock.................................. $ (323) ----------- ----------- INCOME (LOSS) BEFORE EXTRAORDINARY ITEM PER SHARE OF MEDIA STOCK................................... $ (0.52) ----------- ----------- AVERAGE SHARES OF MEDIA STOCK OUTSTANDING (MILLIONS)....................................... 621.15 ----------- -----------
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements. 7 U S WEST MEDIA GROUP UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30, 1996 DOLLARS IN MILLIONS (EXCEPT PER SHARE AMOUNTS)
MEDIA GROUP U S WEST/ MEDIA GROUP PRO FORMA AIRTOUCH JOINT MEDIA GROUP CONTINENTAL ADJUSTMENTS FOR THE VENTURE HISTORICAL PRO FORMA FOR THE MERGER MERGER ADJUSTMENTS ----------- -------------- -------------- ----------- --------------- Sales and other revenues Directory and information services............ $ 908 $ 908 Wireless communications....................... 869 869 $ (869)(N) Cable and telecommunications.................. 176 $ 1,454(A) 1,630 Other......................................... 12 12 ----------- ------ ----------- ----- Total sales and other revenues.................. 1,965 1,454 3,419 (869) Cost of sales and other revenues................ 626 512(A) 1,138 (215)(N) Selling, general and administrative expenses.... 698 355(A) 1,053 (347)(N) Depreciation and amortization................... 216 360(A) $ 260(B) 836 (107)(N) ----------- ------ ----- ----------- ----- Total operating expenses........................ 1,540 1,227 260 3,027 (669) ----------- ------ ----- ----------- ----- Income (loss) from operations................... 425 227 (260) 392 (200) Other income (expense): Interest expense.............................. (80) (361)(A) (8)(C) (449) 5(N) Equity (losses) income in unconsolidated ventures..................................... (224) (107)(A) (29)(D) (360) 164(N) 8(O) Guaranteed minority interest expense.......... (36) (36) Other income (expense) -- net................. (24) 60(A) 36 18(N) ----------- ------ ----- ----------- ----- Income (loss) before income taxes............... 61 (181) (297) (417) (5) Provision (benefit) for income taxes............ 51 (33)(A) (84)(E) (66) (2)(P) ----------- ------ ----- ----------- ----- NET INCOME (LOSS)............................... 10 (148) (213) (351) (3) Dividend and preferences on preferred stock..... (3) (32)(A) (5)(F) (40) ----------- ------ ----- ----------- ----- Income (loss) available for Media Stock......... $ 7 $ (180) $ (218) $ (391) $ (3) ----------- ------ ----- ----------- ----- ----------- ------ ----- ----------- ----- INCOME (LOSS) PER SHARE OF MEDIA STOCK.......... $ 0.01 $ (0.63)(G) ----------- ----------- ----------- ----------- AVERAGE SHARES OF MEDIA STOCK OUTSTANDING (MILLIONS)..................................... 473.50 624.10(G) ----------- ----------- ----------- ----------- MEDIA GROUP PRO FORMA --------------- Sales and other revenues Directory and information services............ $ 908 Wireless communications....................... -- Cable and telecommunications.................. 1,630 Other......................................... 12 ------- Total sales and other revenues.................. 2,550 Cost of sales and other revenues................ 923 Selling, general and administrative expenses.... 706 Depreciation and amortization................... 729 ------- Total operating expenses........................ 2,358 ------- Income (loss) from operations................... 192 Other income (expense): Interest expense.............................. (444) Equity (losses) income in unconsolidated ventures..................................... (188) Guaranteed minority interest expense.......... (36) Other income (expense) -- net................. 54 ------- Income (loss) before income taxes............... (422) Provision (benefit) for income taxes............ (68) ------- NET INCOME (LOSS)............................... (354) Dividend and preferences on preferred stock..... (40) ------- Income (loss) available for Media Stock......... $ (394) ------- ------- INCOME (LOSS) PER SHARE OF MEDIA STOCK.......... $ (0.63) ------- ------- AVERAGE SHARES OF MEDIA STOCK OUTSTANDING (MILLIONS)..................................... 624.10 ------- -------
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements. 8 U S WEST MEDIA GROUP UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET AS OF SEPTEMBER 30, 1996 DOLLARS IN MILLIONS
MEDIA GROUP U S WEST/ MEDIA MEDIA GROUP PRO FORMA AIRTOUCH JOINT GROUP CONTINENTAL ADJUSTMENTS FOR THE VENTURE HISTORICAL PRO FORMA FOR THE MERGER MERGER ADJUSTMENTS ----------- ------------- -------------- ----------- -------------- ASSETS Total current assets............................ $ 836 $ 156(A) $ 992 $ (186)(Q) Property, plant and equipment -- net............ 1,428 2,553(A) 3,981 (844)(Q) Investment in Time Warner Entertainment......... 2,493 2,493 Investments in other unconsolidated ventures.... 1,371 532(A) $ 601(H) 2,504 1,037(Q) Intangible assets -- net........................ 1,791 1,953(A) 8,079(H) 11,823 (430)(Q) Other assets.................................... 934 746(A) 1,680 (6)(Q) ----------- ------------- ------ ----------- ------ Total assets.................................... $ 8,853 $ 5,940 $ 8,680 $ 23,473 $ (429) ----------- ------------- ------ ----------- ------ ----------- ------------- ------ ----------- ------ LIABILITIES AND EQUITY Total current liabilities....................... $ 1,364 $ 441(A) $ 4,615(I) $ 6,420 $ (319)(Q) Long-term debt.................................. 1,741 5,958(A) (3,069)(J) 4,630 Deferred taxes, credits and other............... 632 435(A) 2,730(K) 3,797 (110)(Q) Redeemable preferred securities................. 651 651 Redeemable common stock......................... 278(A) (278)(L) Total equity.................................... 4,465 (1,172)(A) 4,682(M) 7,975 ----------- ------------- ------ ----------- ------ Total liabilities and equity.................... $ 8,853 $ 5,940 $ 8,680 $ 23,473 $ (429) ----------- ------------- ------ ----------- ------ ----------- ------------- ------ ----------- ------ MEDIA GROUP PRO FORMA ------------- ASSETS Total current assets............................ $ 806 Property, plant and equipment -- net............ 3,137 Investment in Time Warner Entertainment......... 2,493 Investments in other unconsolidated ventures.... 3,541 Intangible assets -- net........................ 11,393 Other assets.................................... 1,674 ------------- Total assets.................................... $ 23,044 ------------- ------------- LIABILITIES AND EQUITY Total current liabilities....................... $ 6,101 Long-term debt.................................. 4,630 Deferred taxes, credits and other............... 3,687 Redeemable preferred securities................. 651 Redeemable common stock......................... Total equity.................................... 7,975 ------------- Total liabilities and equity.................... $ 23,044 ------------- -------------
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements. 9 U S WEST, INC. AND U S WEST MEDIA GROUP NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS THE MERGER (A) See Exhibit G -- "Continental Cablevision, Inc. -- Unaudited Pro Forma Condensed Combined Financial Statements." Certain reclassifications have been made to the Continental pro forma amounts to reflect such financial statements on a basis consistent with the unaudited pro forma condensed combined financial statements of U S WEST and the Media Group after giving effect to the Merger. (B) Reflects incremental amortization expense for the excess of the purchase price over net tangible assets acquired (excluding intangible assets related to Continental's equity method investments), in addition to adjustments to reflect depreciation of tangible cable assets over 6 years. The excess of the purchase price over the net tangible cable assets acquired is being amortized over 25 years. (C) Represents assumed interest expense of $65 million annually ($49 million for nine months) on the issuance of $1.15 billion of U S WEST commercial paper to fund the cash portion of the Merger consideration. Such interest expense was calculated at U S WEST's approximate commercial paper borrowing rate of 5.65 percent at September 30, 1996. A 1/8 percentage point change in the assumed financing rate would change annual interest expense by $1.44 million. Also reflects a reduction in interest expense of $55 million annually ($41 million for nine months) related to the planned refinancing of Continental's revolving debt facilities with the issuance of $3.441 billion of U S WEST commercial paper. Such interest expense was calculated using an assumed interest savings of 1.60 percent based on the difference between the U S WEST commercial paper rate and the Continental rate on its revolving debt facilities. A 1/8 percentage point change in the assumed rate on the refinancing would change annual interest expense by $4.3 million. (D) Reflects incremental amortization for the excess of the purchase price over the net tangible cable assets acquired related to Continental's equity method investments being amortized over 15 years. (E) Reflects the estimated income tax effect of the pro forma adjustments. (F) Dividends associated with the issuance of $1 billion in liquidation value of 4.5% Series D Preferred Stock less Continental's historical accretion of preferred stock preferences. (G) Media Stock pro forma loss per share assumes the issuance of approximately 150.6 million Media shares at a price of $17.20 per share on January 1, 1995. The share price is computed based on the average of the closing sales prices for the Media stock for the five-day trading period surrounding the October 7, 1996 announcement of the final terms of the merger. The trading period began on October 3, 1996 and ended on October 9, 1996. 10 (H) Represents the allocation of the purchase price to intangible assets acquired. The purchase price and the excess of the purchase price over the net tangible assets acquired at September 30, 1996, are as follows (in millions): Purchase Price: Media Stock issued............................................ $ 2,590 Series D Preferred Stock issued at fair value................. 920 Cash paid through issuance of commercial paper................ 1,150 Acquisition costs............................................. 20 --------- Total consideration........................................... 4,680 Debt and other liabilities assumed at fair value.............. 6,805 --------- Purchase price, excluding deferred income tax gross up........ $ 11,485 --------- --------- Excess of Purchase Price over Net Tangible Assets Acquired: Purchase price................................................ $ 11,485 Net tangible assets acquired (including acquisitions)......... 3,935 --------- Excess of purchase price over net tangible assets acquired.... 7,550 Deferred income tax gross up.................................. 3,135 --------- Total intangible assets acquired.............................. $ 10,685 --------- --------- Allocation of intangible assets: Identifiable intangible assets, primarily cable television franchises................................................. $ 6,552 Goodwill.................................................... 3,480 Investments in other unconsolidated ventures................ 653
(I) Represents the issuance of $1.15 billion of U S WEST commercial paper to finance the cash portion of the Merger consideration, the refinancing of Continental's revolving debt facilities with the issuance of $3.441 billion of U S WEST commercial paper, $20 million in estimated closing costs related to the Merger and $4 million in recognition of pension and executive retirement plan obligations at Continental. (J) Represents the refinancing of Continental's revolving debt facilities with the issuance of $3.441 billion of U S WEST commercial paper and an adjustment of $372 million to reflect Continental's debt and interest rate derivatives at fair value as of September 30, 1996. (K) Represents an estimated deferred income tax liability of $3.135 billion associated with the Continental purchase price allocation inclusive of Continental's historical deferred income taxes of $405 million. (L) Represents the elimination of Continental's redeemable common stock. (M) Represents the issuance of approximately $2.59 billion in Media Stock and $920 million of Series D Preferred Stock at fair value ($1.0 billion in liquidation value) as consideration in the Merger, and elimination of Continental stockholders' deficiency of $1.172 billion. U S WEST/AIRTOUCH JOINT VENTURE (N) To deconsolidate U S WEST's domestic cellular revenues and expenses and to reflect, on the equity method of accounting, U S WEST's assumed 26 percent interest in the combined pro forma earnings of the U S WEST/AirTouch Joint Venture. 11 (O) To record amortization to income of the implied negative goodwill arising from the difference in the pro forma net book value of assets contributed to the U S WEST/AirTouch Joint Venture and U S WEST's assumed share (26 percent) of the total U S WEST/AirTouch Joint Venture assets. The implied negative goodwill is amortized over 40 years. The implied negative goodwill is determined as follows (in millions):
SEPTEMBER 30, 1996 ------------- Net book value of assets contributed by U S WEST............................................................... $ 1,037 Net book value of assets contributed by AirTouch........................ 4,708 ------ Combined net book values contributed.................................... $ 5,745 ------ ------ U S WEST's share at 26 percent.......................................... 1,494 Net book value of contribution.......................................... 1,037 ------ Implied negative goodwill............................................... $ 457 ------ ------ Annual amortization..................................................... $ 11 ------ ------ Nine month amortization................................................. $ 8 ------ ------
(P) To record the income tax effects of the pro forma adjustments. (Q) To deconsolidate and reflect on the equity method of accounting U S WEST's domestic cellular assets and liabilities and reflect their contribution to the U S WEST/AirTouch Joint Venture at historical cost. 12 EXHIBIT G CONTINENTAL CABLEVISION, INC. UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS The following Unaudited Pro Forma Condensed Combined Financial Statements are based on the historical financial statements of Continental Cablevision, Inc. ("Continental"). The Unaudited Pro Forma Condensed Combined Balance Sheet gives effect to the acquisition of the remaining 62.1% interest in Meredith/New Heritage Strategic Partners, L.P. (the "M/NH Buyout") as though the transaction occurred as of September 30, 1996. The Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 1995 gives effect to (i) the acquisition of the cable television business and assets of Providence Journal Company; (ii) the acquisitions of Cablevision of Chicago, Columbia Cable of Michigan and Consolidated Cablevision of California; (iii) the acquisition of the remaining 66.2% interest in N-COM Limited Partnership II ("N-COM"); and (iv) the M/NH Buyout (collectively the "Acquisitions"); (v) the sale of 8.30% senior notes due 2006 and the application of the proceeds therefrom and (vi) the redemption of shares of Teleport Communications Group, Inc. ("TCG") common stock and reclassification of the remaining shares of TCG common stock (the "TCG Transaction") as though each transaction had occurred as of January 1, 1995. The Unaudited Pro Forma Condensed Combined Statement of Operations for the nine months ended September 30, 1996 gives effect to (i) the M/NH Buyout and (ii) the TCG Transaction, as though each transaction occurred as of January 1, 1996. 1 EXHIBIT G CONTINENTAL CABLEVISION, INC. UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET AS OF SEPTEMBER 30, 1996 DOLLARS IN THOUSANDS
CONTINENTAL ADJUSTMENTS FOR THE CONTINENTAL M/NH CONTINENTAL HISTORICAL BUYOUT PRO FORMA ------------- ------------- ------------- ASSETS Cash................................................................. $ 27,943 $ 5,448(1) $ 33,391 Accounts receivable (net)............................................ 106,644 1,455(1) 108,099 Prepaid expenses and other........................................... 14,536 700(1) 15,236 Supplies............................................................. 122,825 -- 122,825 Marketable equity securities......................................... 586,726 -- 586,726 Investments.......................................................... 532,369 -- 532,369 Property, plant and equipment (net).................................. 2,358,776 70,967(1) 2,429,743 Other assets (net)................................................... 1,990,496 121,223(1) 2,111,719 ------------- ------------- ------------- Total.............................................................. $ 5,740,315 $ 199,793 $ 5,940,108 ------------- ------------- ------------- ------------- ------------- ------------- LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) Accounts payable..................................................... $ 83,433 $ 2,021(1) $ 85,454 Accrued interest..................................................... 83,657 -- 83,657 Accrued and other liabilities........................................ 239,715 2,572(1) 242,287 Debt................................................................. 5,792,523 195,200(1) 5,987,723 Deferred income taxes................................................ 404,499 -- 404,499 Minority interest in subsidiaries.................................... 30,449 -- 30,449 Redeemable common stock.............................................. 277,659 -- 277,659 Stockholders' equity (deficiency).................................... (1,171,620) -- (1,171,620) ------------- ------------- ------------- Total.............................................................. $ 5,740,315 $ 199,793 $ 5,940,108 ------------- ------------- ------------- ------------- ------------- -------------
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements. 2 EXHIBIT G CONTINENTAL CABLEVISION INC. UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS YEAR ENDED DECEMBER 31, 1995 DOLLARS IN THOUSANDS
CONTINENTAL PRO FORMA CONTINENTAL FOR THE CONTINENTAL CONTINENTAL ADJUSTMENTS ACQUISITIONS CONTINENTAL ADJUSTMENTS PRO FORMA FOR THE SALE AND FOR THE ADJUSTMENTS CONTINENTAL FOR THE FOR THE OF 8.30% SALE OF FOR TCG CONTINENTAL HISTORICAL ACQUISITIONS ACQUISITIONS NOTES 8.30% NOTES TRANSACTIONS PRO FORMA ----------- ------------- ----------- ------------- ----------- ------------- ----------- Revenues...................... $1,442,392 $ 340,026(2) $1,782,418 $ -- $1,782,418 $ -- $1,782,418 Costs and expenses: Operating................... 498,239 133,693(2) 631,932 -- 631,932 -- 631,932 Selling, general and administrative............. 339,002 73,758(2) 412,760 -- 412,760 -- 412,760 Depreciation and amortization............... 341,171 109,809(2) 450,980 -- 450,980 -- 450,980 Restricted stock purchase program.................... 12,005 -- 12,005 -- 12,005 -- 12,005 ----------- ------------- ----------- ------------- ----------- ------------- ----------- Total..................... 1,190,417 317,260 1,507,677 -- 1,507,677 -- 1,507,677 ----------- ------------- ----------- ------------- ----------- ------------- ----------- Operating income.............. 251,975 22,766 274,741 -- 274,741 -- 274,741 Interest expense (net)........ 363,826 84,226(2) 448,052 5,046(4) 453,098 (9,077)(5) 444,021 Other (income) expenses (net)........................ 48,124 (9,170)(2) 38,954 -- 38,954 (16,863)(6) 22,091 Minority interest............. (39) -- (39) -- (39) -- (39) ----------- ------------- ----------- ------------- ----------- ------------- ----------- Loss from operations.......... (159,936) (52,290) (212,226) (5,046) (217,272) 25,940 (191,332) Income tax (benefit) expense...................... (47,909) (18,946)(3) (66,855) (1,968)(3) (68,823) 10,117(3) (58,706) ----------- ------------- ----------- ------------- ----------- ------------- ----------- Net loss before extraordinary item......................... $(112,027) $ (33,344) $(145,371) $ (3,078) $(148,449) $ 15,823 $(132,626) ----------- ------------- ----------- ------------- ----------- ------------- ----------- ----------- ------------- ----------- ------------- ----------- ------------- -----------
NINE MONTHS ENDED SEPTEMBER 30, 1996 DOLLARS IN THOUSANDS
CONTINENTAL CONTINENTAL CONTINENTAL ADJUSTMENTS PRO FORMA FOR ADJUSTMENTS CONTINENTAL FOR THE THE FOR TCG CONTINENTAL HISTORICAL M/NH BUYOUT M/NH BUYOUT TRANSACTIONS PRO FORMA ----------- ------------- -------------- ------------- ----------- Revenues.......................................... $1,413,977 $ 40,093(2) $1,454,070 $ -- $1,454,070 Costs and expenses: Operating....................................... 502,671 9,923(2) 512,594 -- 512,594 Selling, general and administrative............. 331,748 10,225(2) 341,973 -- 341,973 Depreciation and amortization................... 352,279 7,595(2) 359,874 -- 359,874 Restricted stock purchase program............... 12,647 -- 12,647 -- 12,647 ----------- ------------- -------------- ------------- ----------- Total......................................... 1,199,345 27,743 1,227,088 -- 1,227,088 ----------- ------------- -------------- ------------- ----------- Operating income.................................. 214,632 12,350 226,982 -- 226,982 Interest expense (net)............................ 353,583 12,412(2) 365,995 (4,569)(5) 361,426 Other (income) expenses (net)..................... 61,289 382(2) 61,671 (15,039)(6) 46,632 Minority interest................................. (263) -- (263) -- (263) ----------- ------------- -------------- ------------- ----------- Loss from operations.............................. (199,977) (444) (200,421) 19,608 (180,813) Income tax (benefit) expense...................... (40,584) (173)(3) (40,757) 7,647(3) (33,110) ----------- ------------- -------------- ------------- ----------- Net loss before extraordinary item................ $(159,393) $ (271) $ (159,664) $ 11,961 $(147,703) ----------- ------------- -------------- ------------- ----------- ----------- ------------- -------------- ------------- -----------
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements. 3 EXHIBIT G CONTINENTAL CABLEVISION INC. NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (1) The M/NH Buyout will be accounted for under the purchase method of accounting. The following adjustments have been recorded to reflect the M/NH Buyout as of September 30, 1996: (i) Continental will borrow approximately $219.2 million to finance the M/NH Buyout; (ii) existing indebtedness of Continental to M/NH totalling $24.0 million will be discharged and has been recorded as a reduction to other assets; and (iii) the excess of the purchase price over the tangible assets acquired (primarily acquired franchises) has been recorded to other assets. The M/NH Buyout closed in October 1996. (2) To record the results of operations for the Acquisitions. The results of operations for certain cable television systems have been adjusted, where necessary, to a December 31 fiscal year end. The results of operations have been adjusted to record interest expense for the year ended December 31, 1995, as a result of approximately $623.7 million of additional debt incurred or to be incurred to finance the Acquisitions and the M/NH Buyout and the net $815.0 million increase in debt as a result of the Providence Journal Merger. The results of operations have been adjusted to record interest expense for the nine months ended September 30, 1996, as a result of approximately $219.2 million of additional debt to be incurred to finance the M/NH Buyout. Incremental interest expense was calculated using Continental's weighted average borrowing rate of 7.6%. Continental's equity in net loss of affiliates includes a loss of $2.6 million for the year ended December 31, 1995 relating to its 33.8% interest in N-COM. This amount has been eliminated to reflect the results of operations of N-COM as if it was wholly owned by Continental during 1995. The results of operations have also been adjusted to record depreciation and amortization expense based on the fair value of the assets acquired. Depreciation expense for property, plant and equipment acquired has been determined based on estimated lives of five to ten years. Costs of acquired franchises and goodwill arising from the Acquisitions are amortized over 40 years. Allocated corporate overhead from parent companies to Providence Journal Cable and M/NH has been eliminated. These costs relate to allocated corporate overhead, such as executive salaries and other corporate departments including treasury, tax and human resources, and include certain management fees. Continental will not be incurring these costs in the future. The following table sets forth the historical results of operations for the Acquisitions for the periods in which they were not owned by Continental for the year ended December 31, 1995. YEAR ENDED DECEMBER 31, 1995 DOLLARS IN THOUSANDS
COMPLETED ACQUISITIONS --------------------------------------------------------------- CONSOLIDATED PROVIDENCE COLUMBIA CABLEVISION CABLEVISION JOURNAL CABLE OF M/NH PRO FORMA OF CHICAGO OF CALIFORNIA CABLE MICHIGAN N-COM BUYOUT ADJUSTMENTS TOTAL ----------- ------------- ----------- ----------- --------- --------- ----------- --------- Revenues....................... $ 20,828 $ 3,233 $ 221,998 $ 22,074 $ 21,786 $ 50,107 $ -- $ 340,026 Costs and expenses: Operating.................... 8,371 1,535 91,358 8,947 8,742 14,740 -- 133,693 Selling, general and administrative.............. 5,516 568 45,224 4,675 4,253 13,522 -- 73,758 Allocated corporate overhead from parent companies....... -- -- 6,309 -- -- 1,578 (7,887) -- Depreciation and amortization................ 2,882 2,356 64,947 6,000 11,586 16,394 5,644 109,809 ----------- ------------- ----------- ----------- --------- --------- ----------- --------- Total...................... 16,769 4,459 207,838 19,622 24,581 46,234 (2,243) 317,260 ----------- ------------- ----------- ----------- --------- --------- ----------- --------- Operating income (loss)........ 4,059 (1,226) 14,160 2,452 (2,795) 3,873 2,243 22,766 Interest expense (net)......... 6,491 1,219 30,770 -- 12,266 9,101 24,379 84,226 Other (income) expenses (net)......................... 39 9 (2,415) 21 466 (4,643) (2,647) (9,170) ----------- ------------- ----------- ----------- --------- --------- ----------- --------- Income (loss) from operations before income taxes........... $ (2,471) $ (2,454) $ (14,195) $ 2,431 $ (15,527) $ (585) $ (19,489) $ (52,290) ----------- ------------- ----------- ----------- --------- --------- ----------- --------- ----------- ------------- ----------- ----------- --------- --------- ----------- ---------
(3) To record the income tax effect of the pro forma adjustments at the respective effective rates. 4 EXHIBIT G (4) To record the net increase in interest expense due to the sale of $600.0 million of 8.30% notes and the application of the net proceeds therefrom to repay $587.1 million of borrowings under the 1994 credit facility and the subsequent reborrowing under the 1994 credit facility to redeem the $100.0 million of floating rate debentures. The incremental interest rate used to calculate the adjustment to interest expense was (i) approximately 7.6% for the 1994 credit facility and (ii) approximately 8.9% for the floating rate debentures. (5) To record the decrease in interest expense as a result of the $121.0 million repayment of borrowings outstanding under the 1994 credit facility with the net proceeds from the redemption of the TCG common stock. Incremental interest expense was calculated using Continental's weighted average borrowing rate of 7.6%. (6) To record the decrease in other expense for the reversal of equity losses related to the TCG Transaction. 5 -----END PRIVACY-ENHANCED MESSAGE-----