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Home My WebLink About920850.tiff RESOLUTION RE: TRANSFER AND ASSIGNMENT OF CABLE T.V. FRANCHISE TO TCI CABLEVISION OF COLORADO, INC. WHEREAS, the Board of County Commissioners of Weld County, Colorado, pursuant to Colorado statute and the Weld County Home Rule Charter, is vested with the authority of administering the affairs of Weld County, Colorado, and WHEREAS, the Board of County Commissioners has enacted Weld County Ordinance No. 94, as amended, pertaining to the award of cable television franchises within unincorporated portions of the County of Weld, and WHEREAS, Southwest Cablevision, Ltd. (hereinafter "Southwest") is the duly authorized holder of a franchise (as amended to date, the "Franchise") authorizing the operation and maintenance of a cable television system and authorizing Southwest to serve certain unincorporated portions of the County of Weld, State of Colorado, with cable television services, and WHEREAS, Southwest desires to transfer and assign its Franchise to TCI Cablevision of Colorado, Inc. , and WHEREAS, Southwest has provided the Board of County Commissioners with all documents necessary for said transfer and assignment, and WHEREAS, transfers and assignments of cable television franchises are authorized pursuant to said Ordinance No. 94, as amended, if so accepted by the Board of County Commissioners. NOW, THEREFORE, BE IT RESOLVED by the Board of County Commissioners of Weld County, Colorado, as follows: Section 1. That the Board of County Commissioners hereby accepts and consents to the transfer and assignment of the cable television Franchise in the unincorporated area of Weld County, Colorado, from Southwest to TCI. Section 2. That the acceptance and consent herein granted does not constitute a waiver of any of the obligations of the Franchise or Weld County Ordinance No. 94, as amended. Section 3. That the Board of County Commissioners hereby affirms that the Franchise, (i) is validly held in the name of TCI in full force and effect, and (ii) is for the current term, without considering any possible extension, ending on September 15, 1997. Section 4. That it is hereby declared to be the legislative intent of the Resolution herein that no portion or provision of this Resolution shall become inoperative or fail by reason of the invalidity or unenforceability of any other portion or provision, and to this end all provisions of this Resolution are declared to be severable. 920850 Ong GC( c • i ts , r lays)( J K. \S- �vg1 CHANGE OF OWNERSHIP - CABLE TV FRANCHISE PAGE 2 Section 5. That this Resolution shall become effective immediately upon, and continue and remain in effect from and after its passage, approval, and adoption. The above and foregoing Resolution was, on motion duly made and seconded, adopted by the //followin vote on the 9th day of September, A.D. , 1992. �l Q/, I�� BOARD OF COUNTY COMMISSIONERS ATTEST �//,�G�2 /( WELD COUNTY, COLORADO Weld County Clerk to the Board r e Kenn y, Chairman BY: t/ c A / / /I 4 Gs`% -G' /f1 � O� Deputy Clerkt'o the 'hoard`, onstance L. Harbe , Pro-Tem APPROVED AS FORM: C. W. Kirb County Attorney Gor . a W. H. Web ter 920850 HEARING CERTIFICATION DOCKET NO. 92-50 RE: CHANGE OF OWNERSHIP OF CABLE TELEVISION FRANCHISE - SOUTHWEST CABLEVISION, LTD. A public hearing was conducted on September 9, 1992, at 9:00 A.M. , with the following present: Commissioner George Kennedy, Chairman Commissioner Constance L. Harbert, Pro-Tem Commissioner C. W. Kirby Commissioner Gordon E. Lacy Commissioner W. H. Webster Also present: Acting Clerk to the Board, Carol Harding Assistant County Attorney, Bruce Barker The following business was transacted: I hereby certify that pursuant to a notice dated August 25, 1992, and duly published August 27, 1992, in the Windsor Beacon, a public hearing was conducted to consider a change of ownership of the cable television franchise for Southwest Cablevision, Ltd. , a Colorado Limited Partnership, to TCI Cablevision of Colorado, Inc. , a Colorado Corporation. Bruce Barker, Assistant County Attorney, made this a matter of record. Mr. Barker stated the Board does not have any real authority to approve said ownership change. However, according to Ordinance 94, as amended, the Board should receive and accept the change of ownership of the franchise. Kathy Stewart, General Manager of United Artists Cable of Greeley, was present to answer any questions of the Board. There was no public testimony offered concerning this matter. Commissioner Lacy moved to accept the change of ownership of the cable television franchise for Southwest Cablevision, Ltd. to TCI Cablevision of Colorado, Inc. The motion was seconded by Commissioner Webster, and it carried unanimously. The Commissioners requested legal staff to consider future cable TV needs as far as requirements, etc. and meet with them to determine what the future policy should be. This Certification was approved on the 14th day of September, 1992. dyllG.t�% / H� APPROVED: ATTEST: 7 �V 6g/it- """ ` BOARD OF COUNTY COMMISSIONERS WELD COUNTY, COLORADO Weld County Clerk to the Board By: 1/f i r, r ' 7 r�i - G� ge Kett!fedy, Chairman Deputy Clerk to the Board Constance L. Harbert, Pro-Tem TAPE #92-26 rttilvt-," C. W. i b DOCKET #92-50 Gor ORD94 J / W. H. Webs er 920850 G c i9 1-, NOTICE CHANGE OF OWNERSHIP Cable Television Franchise Pursuant to Weld County Ordinance 94 as Amended, a public hearing will be held in the Chambers of the Board of County Commissioners of Weld County, Colorado, the Weld County Centennial Center, 915 10th Street, First Floor, Greeley, Colorado, at the time indicated below for consideration of a Change of Ownership of the Cable Television Franchise for Southwest Cablevision, Ltd. , a Colorado Limited Partnership, to TCI Cablevision of Colorado, Inc. , a Colorado Corporation. Should any interested party desire the presence of a court reporter to make a record of the proceedings, in addition to the taped record which will be kept during the hearing, the Clerk to the Board's Office can be contacted for a list of certified court reporters in the area. If a court reporter is obtained, the Clerk to the Board' s Office shall be advised in writing of such action at least five days prior to the hearing. Cost of engaging a court reporter shall be borne solely by the requesting party. Application materials for said Change of Ownership may be examined at the Office of the Clerk to the Board of County Commissioners, located in the Weld County Centennial Center, 915 10th Street, Third Floor, Greeley, Colorado. DOCKET NO: 92-50 DATE: September 9, 1992 TIME: 9:00 a.m. NAME: Southwest Cablevision, Ltd. 3737 W 10th St. Greeley, CO 80634 REQUEST: Change of Ownership of Cable Television Franchise BOARD OF COUNTY COMMISSIONERS WELD COUNTY, COLORADO BY: DONALD D. WARDEN WELD COUNTY CLERK TO THE BOARD BY: Lc\�..__ , Betty Henson Deputy Clerk to the Board DATED: August 25, 1992 PUBLISHED: August 27, 1992 in the Windsor Beacon 920850 maga WELD C0MTY CHANCE OF OVMERWfP, en,' -'.^ tc^S AFFIDAVIT OF PUBLICATION Cable TamS O FraUdm Vunuurl b Wad Cantu Tr? ccP —? °„i 9: 35 STATE OF COLORADO Ordinate 04 at afAego homing vm be hold ss In be Chambers of the COUNTY OF WELD CLERK �ndisleb n County Count Colorado,thes Weld TO THE P.O-'' . I, KEITH HANSEN, of said County of Weld, being duly county Centeardil sworn,say that I am publisher of otanffbewlkoln Greeley,Colorado.m bo time Indicated below for WINDSOR BEACON consideration el a Ormonthip of tar Coble Television Rambla for 8aomeetoraadoo L LI a weekly newspaper having a general circulation in said a Colorado Lid.Limited County and State, published in the town of WINDSOR, Penny**. to ICI in said County and State; and that the notice, of which Cabletdelen el 00101•00, Imo., • Colorado the annexed is a true copy, has been published in said eY weekly for successive weeks, that the notice ghats my Intremad gory was published in the regular and entire issue of every chin the Means of a number of the paper during the period and time of court reporter to mote a reeked a Me protoodiaga.hi publication, and in the newspaper proper and not in a man is build reeled supplement, and that the first publication of said notice Mita MMNI Ih• was in said paper bearing the date of the haring,the Clerk at the n � Board's Office can be contacted for ■ Ilst of o2' day of N/C.1I/S'f , A.D., 19 9 Z and rwnyled court reporters In the last publication bearing the date of the the area.I■cam MPS Ili tined.t s Owl(to the Board's Moe shall be day of A.D., 1.9_ and advised In wilinllive a prbr that the said WINDSOR BEACON has been published amen a leam6re days pin to the hearing. Cost of continuously and uninterruptedly for the period of 5 e ngaging a coon reporter d ada home why by the consecutive weeks,in said County and State,prior to the main Put date of first publication of said notice, and the same is a Application materials for newspaper within'the meaning of an Act to regulate mid Chugs a Ouiaeb4 printing of legal notices and advertisements, approved may s examined at of the Clerk to the the Office BMay 18, 1931,and all prior is so as in force. Board of Countythe Weld Count,Clitillmal / Comnleslonere,loaded in , Cater.916 10th Street, Third Floor. Greeley, R Colorado T:na Subscri �d and sworn to before me this ,liar day DATE:SapMn6a 0.1067 of `1at/94'sf� 1199 t. , TIME:9:03n 7V`CWOf-1. _� OPLIZ\O'W/ NAME: Boahwset NOTARY PUBLIC Cabbvbien.U6,4737 W. 1Qh St,GreeleyCO 606% [" REQUEST: Change of My commission expires J` /1- 9 V Ownersldp. of CWle TWnelen Fmdibe BOARD OF COUNTY ' COMMISIONERS.WELD COUNTY,COLORADO BY:DONALD 0.WARDEN. WELD COUNTY CLERK TOME WARD BY: Bey Immorr,Oepoty . Oak*the Deed • DATED:August 76.1W Rated In the Modem Maven en August 27, 1068 920850 4 ,(,`'o MEMORAnDUM wupe To . Date--September-9, 1992 COLORADO From Bruce T. Barker, Assistant County Attome} Subject: Transfer of Ownership of Cable TV Ennehice On September 9, 1992, the Board will consider a request by TCI Cablevision of Colorado, Inc., to transfer to it the cable TV franchise currently held by Southwest Cablevision, Ltd. The area of the franchise is parts of Weld County immediately outside of the City of Greeley. Attached is a copy of the letter of application for the transfer sent by TCI and Southwest. Also attached are copies of other documents which I requested from TCI. Please note that Southwest Cablevision, Ltd., has only one general partner. The sole general partner for Southwest is Southwest Cablevision Associates, L.P. A general partner of that company is Daniels Private Venture, Inc. Daniels is owned by Tele-Communications, Inc. As you can see from the information which is attached, TCI Cablevision of Colorado, Inc., is ultimately owned by Tele-Communications, Inc. The bottom line is that one portion of the big conglomerate wants to buy another portion of the big conglomerate. I am not really sure why all this is desirable, but TCI has provided me with all the information which is necessary, pursuant to Weld County Ordinance 94, as amended. I recommend that the Board authorize the transfer and assignment of the cable TV franchise from Southwest Cablevision, Ltd., to TCI Cablevision of Colorado, Inc. y�i y., Bruce T. Barker ` Assistant County Attorney 920850 Un Artists Cable of Greeley 3737 West Tenth Street Greeley, CO 80634 (303) 351-0669 August 27, 1992 W, to/1 K ' ral ��*- • Cabler Weld County Mr. Bruce Barker, Attorney 915 10th Greeley, Co 80631 Dear Bruce, As per your request, enclosed you will find the ownership structure and a channel line up, including price structure. As of August 19th our count for Basic customer was 490; Plus Service customers, 486; premium units, 503; homes wired to cable, 999. If I can supply any further information, please call me at 356-1079. Sincerely, —VQ):11IT Kathy Stewart General Manager 920850 OWN2R3HIP STRUCTURR CHART Tele-Communications, Inc. a Delaware corporation I , 100%* TCI Development Corporation 95.28% a Colorado corporation 4 .I72% TCI Holdings, Inc. a Colorado corporation 100% TCI Central, Inc. a Delaware corporation 100% I TCI Cablevision of Colorado, Inc. a Colorado corporation * TCI of New Jersey, Inc. owns .9% and TCI Cablevision of New Mexico, Inc. owns .3% of TCI Development Corporation. Both TCI of New Jersey, Inc. and TCI Cablevision of New Mexico, Inc. are indirectly held, wholly owned subsidiaries of Tele- Communications, Inc. 920850 GREELEY CHANNEL LINEUP - , CHANNEL_ L_[NEE-UP United Artists Cable Channel Line Up (Greeley, LaSalle, and Evans) r BASIC $19.50 25 channels �M wrr w4 m.... •rz!, ' . I 1 HI3O .,z• 20 :., PLUS $1.45 Discovery, KWGN t 2 't rr' ,....,._. 21 CNBC, PSN OTNN . .,.:° 3 at . t.. 22 -, ESPN, CNN KCNC =11 4 �•c ', -- 23 - - TNT, USA, KGWN ;:;/KTVD'" 5 c c --_ 24 : E[ / ; & AMC a, KRMA Z 6 Bari r 4: 25 F,� KMGH p4 ON 26 PREMIUM CHANNELS Encore $1 .50 fliitg /cr . 8 ,.. 27 w/premium $1.00 KUSA r 9 try ,•..4,, 28 . L'FET:ME „m,_, 10 if (IS;E 'IF= 29 HBO, Cinemax, Showtime, and 11 ?C' p..e. 30 ; •-•" ,.--." Disney V84 mYmr mmL 12 KDVR er. 31 ! ._ ' - 13 DISTRIC #6 Zr 32fa-ri First premium $7.95 © W„ =" each additional $6.95 .w..,,_., . 14 ar/ l.,._•.. 33 ;:: ..r.,. 15 UNC/KBDI ;� 34 r- CHANNELSELECTORS E,.COE ,.t•z., 16 45PAf1 ,S.•.4 35 r' :; ? (for non CATV's) i / 17 ILNnnsloN 36 •--C ` remotes $2.95 SHOW TIME ...;•::.. 18 TBN 37 _ sound remotes " $3.95 „ ,,1=c. ; 19 61 PPV remotes $5.00 Black-Basic Channel FREE ACTIVE OUTLETS _ TV GUIDE SUBSCRIPTION Gold-Plus FREE FM STEREO per month $2.40 Red•Premium FREE SERVICE CALLS See Reverse Side for Details ' k 3737 W.10th St.Greeley,CO.80634 351-0669 ` ,M 920850 OSc r.-.: -z- ' . GfAhiNEL .` LINE UF' 0 ma a) `1 . II O r N [? C c9 N G O: O r N C) Q Ip tow N I'' W O J a "_ ' IS 1 i N N N N N N N N NN C! CI C) CI CI CI ra in b I— la Q O O ;_ _ 6 a mei €0 ci d p ffpC ' Et U !"•F W sc s ° Ef: G c ¢ Y OWN ° ,g° . If W r N C) e in to CO Of O r N C> a Ip ID N CO O 2. LL LL a U �n1c tec U �N m 1. GI fair Me kr - if 7 r - E 5 ei (• eGI 0 C C 4g e C -C li ai i[ a. wo :r 4_ r IE`6Pir Q -' it _ 8 S` E LW W Y U ? CO �' CL! o a m (5Y Y Y Y Y Y -. * 0 fa C . o m M al I7 B w u • OP C I [�] 2 2 N Om! m m y m !fi m % N `f ° N y .. .. 0 y N CO W y € U y 9 WO r, 24$` e a ii m � — w 3 IIiI1 ! IhJ111i ! J ! 4 in ° iipyye Sjj ≥; O > m ea Is.... iiiiiiii1131 IA A C/1 wm i5-4 rn ts Gmdm ° 8 Oa c 8 > g :t & Ea, 1CffiC $ B 8S8 'oei6Eee iIt ' R -.5. •. P. m u CL G75 - Pis DUY pp m g °g g as r[�+ .r] it u as us . g.. y rail l ! it ■ € I�tE tE a �+ e i t 1 bpi* rC go g Q : IF � 8iIIi6Sj [ f1Ioidb1C $ u•3 E.,..?; 0•H•••• Q0EE Ex, e . Uwe m Cl2p tH,� do ° ms tc. a '� 2or $ • E 2 Z O �i LC 2t• t • QU ? 0. ' � gggtk giEli > � 2g $ yiiii 4 a1 : 8 Y mt L m K ° o County of Weld August 5, 1992 page 2 Thank you for your consideration. SOUTHWEST CABLEVISION, LTD., a Colorado limited partnership By: Southwest Cablevision Associates, L.P., a Colorado limited partnership, General Partner By: Daniels Private Ventures, Inc., General Partner By: Title: Vice President TCI CABLEVISION OF COLORADO, INC., a Colorado corporation cpBy: Vice President Title: MAS\mas enclosures 920850 Un Artists Cable of Greeley 3737 West Tenth Street Greeley, CO 80634 (303) 351-0669 WI I tU/IK I sr Cable August 5, 1992 George Kennedy County of Weld 915 10th Street Greeley, Colorado 80631 Dear Mr. Kennedy: Southwest Cablevision, Ltd., a Colorado limited partnership ("Southwest"), owns the cable television systems (the "Systems") which provide cable television service to the city of Greeley, town of Garden City, city of Evans, town of LaSalle, town of Dacono, town of Frederick, town of Firestone, town of Windsor and the county of Weld. Daniels Private Ventures, Inc. is a general partner of Southwest Cablevision Associates, L.P., a Colorado limited partnership, which is the sole general partner of Southwest. The Systems are currently managed by TCI Cable Management Corporation. TCI Cable Management Corporation and Daniels Private Venture, Inc. are both affiliates of Tele-Communications, Inc. ("TCI"), one of the largest MSO's in the nation. Southwest has entered into negotiations to sell the Systems to TCI Cablevision of Colorado, Inc., a Colorado corporation ("TCIC-CO"), an indirectly held, wholly owned subsidiary of TCI. TCIC-CO has the legal, financial and technical ability to operate the Systems. A copy of the TCI annual report is enclosed for your information. TCIC-CO does not anticipate changes in management or personnel of the Systems, nor disruption of service as a result of the transition. Southwest and TCIC-CO respectively request that the Weld County Commissioners consent to the transfer of the Weld County system and the respective franchise. A form resolution is enclosed with this letter. 3"0350 Tele-Communications, Inc. Annual Report MI upflY $m Aotz-P, •Y t pRyy 1991 920856 • CONTENTS Operations Highlights 1 2 Letter To Shareholders S Introduction Management for the Future 6 Leading Edge Technology 11 14 QualityService 19 Strategic Alliances FINANCIALS Market for the Company's Common 2.1 Equity and Related Stockholder Matters Selected Financial Data 2.2 Management's Discussion 24 Consolidated Balance Sheets 2.8 0 Consolidated Statements of Operations Consolidated Statements of Stockholders'Equity 2.11 Consolidated Statements of Cash Flows 2.12 Notes to Consolidated Financial Statements 2.13 Independent Auditors' Report 2.27 2.28 Corporate Data OPERATIONS HIGHLIGHTS The fundamentals of Tele-Communications, Inc.'s core business have never been better. Cable continues to be one of the best performing industries in the nation while offering increasing levels of very popular programming. The Company's domestic cable operations, operating under TC1 Cable Management, at year-end served 8,868,000 basic customers, up 250,000 over last year and 5,919,00 pay television or premium subscriptions, up 26,000.We currently pass over 15 million homes. 3,827 3425 • On March 28, 1991, Liberty Media Corporation's 33,000 consolidated and 1,629,000 _ • 3,026 non-consolidated subscribers were spun off TCI's rolls along with the majority of • non-consolidated investments in both cable operations and programming services. On December 2, 1991,'ICI acquired the remaining minority interest of United Artists Entertainment Company and their cable operations were merged into'l'CI's seven divisions adding 2,327,000 basic subscribers and 1,974,000 pay television subscribers. Financially, 1991 was a very rewarding year. The Company continued its growth 1989 1990 1991 in revenue and cash flow, reduced losses, consolidated overhead and operations and REVENUE amounts in millions moved into new capital markets to prepare'l'CI for future growth and emerging opportunities. Despite recessionary pressures,'l'CI's cable revenues grew by 9 percent. Because of continued cost controls and increased efficiencies of scale, cable operating margins improved by 1.8 percent and cash flow from cable operations increased by 13.6 percent, giving the Company its best cash flow generation in its history. The Company's net loss of over$102 million for 1991 represented an improvement of $185 million over last year due primarily to improved operating results by the Company and its affiliates, gains from dispositions of certain assets and a continued decline in interest rates during the year. : LETTER TO Si AEHOLDERS Dear Shareholder, This was the best year in your Company's history, despite a struggling economy and the uncertainty over cable legislation and re-regulation. Our basic subscriber growth continued consistent with prior periods. When coupled 2 with modest rate changes and tight cost control, there was a 13.6 percent increase in cable cash flow. The rationalization of our assets moved forward,with Heritage Communications, Inc. and United Artists Entertainment Company becoming fully consolidated and brought under TCI's operating management. Liberty Media Corporation was successfully divested, and we reached agreement for the sale of our United Artists Theatre Circuit. In addition, TCI successfully entered the public debt market this year, issuing$350 million in seven- to 10-year debt. These transactions took advantage of TC!'s position as investment grade debt issuers, and substantially extended the average maturity of our debt and reduced our dependence on the domestic banking market. '!'he most significant changes, however, were not reflected in the financial statements. The cable industry is on the verge of a major technological revolution, and TO is in the vanguard of that movement. Operating with other cable Donne Fisher Executive Officer operators through CableLabs, Finance AC.Sparkman and directly with joint venture Executive Officer Cable-Domestic Fred A.Vierra Executive Officer International& Programming left to right a2O85 _ • 11 partners such as AT&T, US West,McCaw Cellular, FoxNet and Digital Equipment Corporation,your Company is deploying and testing a wide range of new technologies and services which will allow us to maintain our growth into the next century. We are now the largest industry user of optical fiber in the world. We arc upgrading our cable plant to improve capacity, quality and reliability of existing service, and to build an a infrastructure to offer broadband interactive services in the future. Coupled with digital compression of video signals and other state-of-the-art technologies, we will provide services ranging from multichannel pay-per-view to very high capacity telecomputing. These advancements do not stop at our national boundaries. Demand for American programming and communications technology is spreading rapidly around the world. We are participating in that growth in our programming investments such as Discovery, CNN and The Children's Channel, and also in the communication infrastructure in countries such as the lJnited Kingdom, Norway, Sweden, Hungary, Ireland, Israel, Malta and New Zealand. Of particular interest is the U.K., where we are in a joint venture with US West to provide CAIN and telephone services to almost four million homes and tens of thousands of busi- nesses. Such ventures are a proving ground for the advanced services we will explore for domestic use in the future. Reacting to the management challenges of this explosion of opportunities, we have reorganized Barry Marshall Senior Vice President our senior staff to better manage the tasks ahead. Brendan B.tlousroa Senior Vice President and Chief Operating Officer kit to right • Vii. 920850 Joining me as executive officers are J.C. Sparkman, Donne Fisher and Fred Vierra to manage TCFs strategic direction. We will work as a team in planning and overseeing ICI's future with specific focus on domestic cable, finance and international cable, respectively. We have appointed Brendan Clouston as Chief Operating Officer. He was 4 formerly Chief Financial Officer of United Artists Entertainment Company(UAF.). Brendan has a well-earned reputation for getting things done and was largely responsible for the smooth and efficient merger of'1'CI and IIAE. Taking the job of Chief Operating Officer of domestic cable is Barry Marshall, who has demonstrated his skill in nearly every management position at TCI during his 19 years of service. With this new management in place, we plan to continue TCI's historic role as an aggressive growth company, exploiting these robust new techniques on a worldwide basis. Bob Magness (/ Dr.John C.Malone Chairman of the Board President Bob Magness Chairman of the Board Founder of'ICI ' Dr.John C.Malone President Chief Executive Officer kft to te/it • 920850 1991: BUILDING A PLATFORM FOR T' 'UTURE ha odudioii In the process of becoming the nation's leading distributor of cable television services, TCI has been building a platform to become the low-cost provider of quality broadband services—such as telephony, alternate access, teleconferencing, local area networks and personal communications networks. This platform for the future, as well as the Company's core cable business, has been built on four principles: 5 1 2 A N1ANAGM MI NT s I'Iu(:'I I:81.: I HA LEADING EDGE. FECUND!OGV (:AN PRO\IDE S I'RA'ILGIG C ISION AM) IIIAI ENHANCES'I'I11<011,11,1'1Y AND TAPER RII'LIAIIN'IA I ION FOR QI.AN"I'1'IY OI:CABLE SLRV ICES IMPROVING'I'III.CONIPANY'S CORE WIIII.IS I.AING'I'IIF.BROADBAND PI SINESS AM)POSI'IIONINO mr FOR ARCH!'I'EC'l I RE FOR NEW II II RV GROWTH. IEl.l COMM(MICA PIONS CAPAIIII.I'I'IES. iii ,,,,,. In 1991,the Company made significant accomplishments in each of these four areas. t IS 1 I 3 4 QCAI.1'IY SERVICE MINI' SI'RAI'EGIC ALLIANCES WI'I'II IREA"lS Cl.S'IIINIIIRS NOT ONLY COMPANIES r11Ar ARE LEADERS AS CAR! E IISI'.RS ItllAY RE F AS IN"I HEIR RMSPECI IA E"I'ELECOMV1I NI- POI EN"I'IAI, I EEECOAIA11'NR:A PIONS CATIONS FIELDS, ro GIVE'MI ACCESS (NISI 0AIERS"IOA10RR0W. to NEW REVENI E STREAMS AND e EXI'ER'I'ISIE IN NEW I ECIINOLOGIES, r y AIAIIEP:I:S AND',ROMIG IS WWI MINIMIZING RISE. 920850 MANAGEMENT FOR THE FUTURE• To focus on the new challenges presented to ICI and to steer the Company through the complex collaborations that will he necessary to position it for future growth, ICI rationalized its business and created a new Office of the Chief Executive. 6 In 1991,'ELI accomplished a goal it had • L'AE, consisted of two operating compa- • set for itself the year before: to rationalize its nies, United Artists Cable and United Artists business, simplify its balance sheet and Theatres. CAE cable operations owned or focus on its core business of providing cable managed cable television systems serving • service to nearly 10 million customers approximately 2.8 million subscribers. The around the nation. merger of LIAE's cable operations is expected • to save the Company nearly$36 million in Rationalizing and Consolidating TCI United Artists Entertainment Merged annual overhead in 1992 alone. The theatre division, which did not fit In 1991, the 54 percent-owned subsidiary, with ICI's strategic vision, was put up for • United Artists Entertainment Company sale toward the end of 1991; an agreement to (UAE), was merged into'MI. purchase was signed with UAE's former chief Under the merger agreement, 1.02 executive officer, several key employees and shares of'ICI Class A common stock were an investment g oup• United Artists • exchanged for each share of UAE Class A Theatres, the nation's largest theatre chain, common stock and l IAA: Class B common owns or manages approximately 2,406 stock. Shares of UAE's preferred stock were motion picture screens in approximately converted into a comparable preferred stock 504 locations as of December 31, 1991. of'I'C1. Holders ofTele-Communications, • • Inc. Rights (TCOMR) units issued in the Liberty Media,Spun Off 1989 merger of I1AE and United Cable Early in 1991, Liberty Media Corporation, Television received $17.17 for each right then a wholly-owned subsidiary of the delivered with a share of I.AF Class A corn- Company, was spun off as an independent mon stock or UAL; Class B common stock. concern. In an effort to streamline the Company, TCI contributed the majority of • its non-consolidated investments in cable operations and programming investments to Liberty. 020850 . The TCI assets contributed to Liberty Debt Structure were cable television systems representing 'Fo fuel the Company's internal growth 33,000 consolidated and 1,629,000 non- and investments in new services and busi- consolidated subscribers, equity positions in nesses, access to diverse sources of capital cable television programming interests, and with prudent leverage and at reasonable regional sports channels. rates remains a crucial goal. e In exchange for the assets it contributed, In 1991,TCI continued its efforts to TCI received preferred stock in Liberty. realign its debt structure to meet this goal. A Liberty then was offered to TCI shareholders key strategy for broadening funding sources in exchange for a portion of their'ICI stock in 1991 has been to access the public invest- holdings. '['he spin-off was concluded at the• ment grade market. From April 1991 end of March 1991. through the end of the year the Company came to market with three public bond Senior Management Reorganized issues totaling$350 million. With the consolidation completed, TO Historically, the Company has relied on • had nearly doubled in size. 'lb focus on the the banking community to finance its assets new challenges presented to the Company and investments. These loans, however, and to steer the Company through the typically have a five-to seven-year maturity • complex collaborations that will he necessary which does not match the 20-year life of a to position it for future growth, a new Office typical cable television system. While bank of the Chief Executive was created. financing remains and will continue to he an Details of this organization are in the Letter integral part of TCI's financing structure, to Shareholders. our assets, operating commitments and investments into the future are better served by an expansion into long-term capital sources. • 320850 As a result, 'cc' placed$100 million of end carried an average cost of 8.1 percent seven-year notes in April 1991, followed by with an average life that had been extended $100 million of 10-year notes in July and to more than seven years. $150 million of 12-year amortizing notes in Looking forward, the Company will October. And subsequent to 1991's activity, continue to reinvest cash flow back into our in January 1992 the Company issued$600 core business. The Company also will access million of 20-year notes and in April 1992 it diverse capital markets opportunistically 9 sold$200 million of 10-year notes and$150 and with prudence to pursue its longer-term million of 30-year notes. growth strategies. By cultivating relation- In an effort to balance its debt and equity, ships with diverse funding sources, and by in 1991 'I'CI also issued $342 million in con- anticipating future business needs, the 1,516 vertible debt securities, placed four major Company has positioned itself to best take • 1,361' bank financings for$1.2 billion and two advantage of the synergies between cable • private placements for$168 million while and the telecommunications industry. 1,107 retiring$1.3 billion in bank commitments. Consequently, by year-end, the Company had reduced its dependence on domestic �. bank financing to 23 percent of its capital structure, increased its international bank debt to 39 percent, maintained its private placements at 25 percent and increased its public financings to 13 percent. 1989 19900 1991 The results of the realignment were sig- nificant. '1'CI's total debt is now spread over OPERATING CASH FLOW 64 diverse debt arrangements that at year- amounts m millions*Before theatre rem-suturing charge of$26 million Bernard W.Schotters Senior Vice President, Finance and Treasurer Gary K.Bracken,C.P.A. Senior Vice President and Controller left to right ts 1950 LEADING EDGE TECHNOLOGY The cable industry is on the verge of a major technological revolution and TCI is in the vanguard of that movement. That is why TCI was the largest industry user of fiber optic cable in the nation in 1991. Ii TCI and the cable television industry are • Improve the reliability and quality of at the beginning of another technological the signal a difference that is very explosion, not unlike what the industry perceptible to the customer. experienced in the mid-1970s when cable • Provide for cost-effective increases to satellites were first launched, ushering in the channel capacity. With fiber as part of a era of multichannel programming. system's architecture, the coaxial cable „ Fiber optic cable trans- mits signal through glass With the new technology and equipment that enters a customer's home can carry fiber using light waves. Fiber enables a cable available today—fiber optics, digital tom- greater signal potential -over 100 system to improve the pression, high definition television, personal channels. reliability and quality of its TV signal,reduce communications networks, digital radio, • Reduce operating costs. operating expenses while increasing the pay-per-view, and direct broadcast satellites These benefits arc immediate to the capacity for adding new channels as well as —the cable television business is quickly cable system and its customers. But fiber's new broadband services evolving into the highest quality and lowest capacity also enables the Company to posi- such as data and voice transmission. cost distributor of broadband telecommuni- tion itself for future growth and businesses cations services to the home and business. —in short, to become the lowest cost The platform for this explosion is optical provider of broadband network facilities. fiber. In 1991, TCI continued its aggressive What does that mean? With a coaxial deployment of fiber in its systems across cable and fiber optic distribution system the country. (coupled with digital compression), the Company now can plan to provide for its Fiber Optics: customers: The Mai form/or;Yew liyhnologies and,S'eryi(CS • 100 or more channels of video, which can The main advantage of fiber's optical be used for new a la carte programming; technology is that its signal can he carried "multiplexing" which enables a customer greater distances without amplification to view a favorite show at different times compared with traditional coaxial cable. By of the day; video on demand; numerous eliminating the need for expensive ampli- simultaneous PPV and pay-per-event fiers between the system headend and the offerings and other entertainment ideas customer's home, the cable system can: yet to be developed. 9 Z035g • Low cost data and information services. • Other alternative communications and • Home security, and possibly home phone systems. energy management. For these reasons, the Company made • The potential for personal communica- the deployment of fiber a priority in 1991. tions networks (PCNs),which enable a TCI has already begun installing an customer to use low-cost mini-cellular increasing amount of fiber in its cable 12 phones anywhere in their own systems as part of scheduled rebuilds or communities. upgrades. The Company also will be able to use its The Company's first fiber was installed fiber systems for commercial services sold several ycars ago to improve signal quality in directly to business customers or wholesaled the Corvallis, Oregon system. Some 39 more to other telecommunications providers, such projects were completed in 1991, bringing as cellular and local phone companies. our total of installed fiber to 2,200 miles. The commercial services the Company is Some 25 percent of our customers now ben- exploring are: efit from fiber installations in their service • Alternate access for high volume data areas. The Company will accelerate its fiber and voice users, giving them direct deployment in 1992 and beyond. access to long distance carriers. But that's not all TCI is doing. The • Local area networks, using point-to- Company is taking its fiber deployment one point fiber links to connect companies, important step further. Rather than installing schools, civic buildings, and so on. fiber to meet only the current and anticipat- • Teleconferencing and telecommuting. ed needs of its cable systems, the Company is installing fiber to meet the future needs of the emerging broadband telecommunications services industry. What does that look like? When the fiber distribution system is designed, the Company also looks at potential broadband users in the local marketplace: office parks, hospitals, phone companies, and so on. It is Larry E.Romrell incrementally very cost effective to add Senior Vice-President capacity to serve those potential users. Consequently, instead of laying one fiber strand which would more than handle cable 9208543 television needs, the Company is installing High Definition Television (HDTV): multiple strands in certain parts of the distri- Finding Me Rig/ndpplimiion.c bution network. High Definition Television (HDTV) is a That is why in 1991, TCI was the single technology that has long remained on the largest buyer of fiber in the nation. drawing board,caught in a battle among competing factions for an international Digital Compression: standard. Moreover, consumers have given 13 Squeezing Sevin/(/ug,unefc Into One HDTV unclear signals as to its viability. Going hand in hand with the Company's Now, with the flexibility provided by fiber deployment is its experimentation digital compression, HDTV—or some hybrid with digital compression. Presently, cable —may prove to be a technology ready for • a-% systems use analog technology to transmit consumers. For the time being, the - nv their product. But in the very near future, Company is experimenting with new I. systems will switch to digital transmission HDTV technologies and looking for other Digital compression will which will enable a fiber-coaxial system to applications. enable cable systems to "squeeze"upwards of transmit between 300 and 400 channels. In one experiment early in the year, 12 channels into the spDigitally transmitted product will deliver TCI and the Faroudja Su erN1;SCrm team pie by one.us ally noes• J P pied by When used better pictures and sound to the customer's provided an unprecedented long range with fiber and coaxial cable,this will enable television set, a switch not unlike going from "improved definition television" (ID'1'V) the system to transmit between 300 and 400 record albums to compact discs. signal to physicians across the country via a channels of service. Digital signals will also Video signals transmitted by the digital new service called "Medical Videocare." improve the qualify of data stream are virtually free of"noise" or Physicians in Washington, D.C. were linked the pictures and sound, y �' like going from a record snow; digitized images can be reproduced with physicians in Sunnyvale, California album to a compact disc. almost perfectly. The most dramatic aspect using the SuperN'I'SCTM Advanced of digital TV, however, is the possibility that Television system over satellite and cable upwards of 12 digital video channels can be television transmission lines. The pictures "compressed" into the spectrum usually showed a high level of detail and faithful occupied by one channel. reproduction, allowing doctors to consult We look forward in 1992 to standardizing with each other from a distance with the compression criteria through CableLabs and advantage of close-up visual detail. to the first tests and installations soon thereafter. • t . c - yule - 9so QUALITY SEn/ICE A transactional relationship requires a whole new level of quality to keep customers satisfied with existing product and receptive to purchasing new product, be it enhanced cable services, or in the future, an array of broadband telecommunications services. 14 Service became "job one" for TCI and of a 22-point "Customer 1st" service program its employees in 1991. Over the years, cable that, among other things, involved detailed has moved from being perceived by its employee training and motivation. Simply customers as a necessity—something you put, our customers became our first priority. had to have like electrical service or water The Company is also focusing more delivery—to a discretionary service pur- attention on how to communicate with its chased on a transactional basis, almost daily. consumers. In 1991 TCI implemented an And a transactional relationship requires a extensive customer communications and whole new level of quality to keep customers information campaign, involving an ongoing satisfied with existing product and receptive multimedia outreach to all 'ICI customers; to purchasing new product, be it enhanced cable services, or in the future an array of an ongoing customer satisfaction tracking survey of all TCI systems; and the intro- broadband telecommunications services. duction of two employee motivational With quality service, TCI will have the awards, one for customer service and one • platform for growing its core business and its for community involvement. future products. Quality service means: Results from the latest customer satisfac- • Knowing what the customer wants and tion survey show that'I'CI's systems have delivering it when the customer wants it steadily improved on every measure of without mistakes. customer service tracked since polling • Staffing, training and motivating began in 1988. employees for customer service and providing them with the tools and Programming: programs to do their jobs. Continuigg a Commitment to b�oiehT and Oua/ih • Offering quality and quantity of program- The Company continues to provide its ming options to our customers. customers more and better programming • Giving something back to the community choices. Some of the quality offerings intro- by way of personal and professional duced in 1991 include: involvement. ENCORE ENCORE offers hit movies of the 60s, 70s and 80s, all uncut and commer- Customer Service: '/'rating the Customer 1st- cial free, 24 hours a day. The service has a pricing structure that is the lowest among Efforts to improve customer service at 7Y:1 kicked into high gear with the creation all premium services (such as HRO and 6°k� Showtime) to encourage cust ll7 r.�ri$Y R taro their present premium channel services Making Cable"Hollywood-Friendly" The while adding ENCORE. Company believes that if pay-per-view is to The strategy worked. By year end, be successful, the film industry must view approximately 30 percent of TCI subscribers cable and PPV as an important and exciting were receiving ENCORE—an unprecedented revenue stream. With that in mind,TCI has launch of a pay service in only six months. set out to make its offerings "Hollywood- v ENCORE'S success heralds the beginning friendly." 1of a new way of thinking about how mere- The first step in this strategy was mental services are sold to customers—on a taken when TCI began carrying the Fox low-cost, a la carte basis. Broadcasting Co. Network(FoxNet) on its Digital Music Express In 1991,TCI became cable television systems where it otherwise 15.2 14.9 • the first in the industry and in the nation to was unavailable as a basic service. 13.5 • offer the new cable music service, Digital • The Company anticipates pursuing more Music Express(DMX), to its subscribers in direct studio involvement in the pay-per- numerous systems. DMX is a 30-channel view area in 1992. audio service which delivers CD-quality vcTv Test The Company has joined with music to cable television customers 24 hours US West and AT&'1'in aviewer-controlled xa day. The Company plans a major rollout cable television (VCTV) market test in the of DMX in 1992. Denver suburbs.The test is designed to dis- 3� t, Pay-Per-View, Par Per-Events: cover how much extra value customers . The Summer Olympics Triplecast TCI attribute to an "entertainment on demand" z.-_,-,-.7:4-,,,,:a. rolled out a nationwide campaign to offer 1989 1990 1991service compared to an expanded pay-per- subscribers pay-per-event addressable view offering of pre-scheduled movies. If BASIC SUBSCRIBERS converters. Pay-per-event programming, results are encouraging, development could amounts in millions such assorts and concerts, willprovide P follow quickly. customers with an appealing new cable Stereo Audio In response to a growing programming option. TCI's immediate number of customer requests, TCI is explor- goal is for every owned and affiliated cable ing the possibility of bringing stereo audio to television system to offer both pay-per-view all of the Company's systems.Studies show (PPV) network movie services and pay-per- that stereo-equipped televisions add dramat- event(PPE)television. ically to customer enjoyment of programming. Driving this effort is the 1992 Summer The plan would entail outfitting all premium Olympics pay-per-event, one of the most channels with stereo capability. exciting sports event packages in history, A Deep Commitment to Community Service: offering up to three channels of continuous One part of the Company's commitment to Olympic coverage over 15 days. the communities we serve is "Cable in the 1'Ct's short-term goal is to use the Classroom," an innovative education program Olympics as a means of introducing pay- launched by the industry three years ago. per-event to a wider audience followed by Under the "Cable in the Classroom" events and films of similar quality. program, the Company wires participating schools for cable, and then provides�sfr of >s }i - L AD charge educational programming on topics The Federal Communications such as math, history and science as well as Commission(FCC)adopted new standards data services and a program guide designed for rate regulation in 1991 which subject a for teachers. majority of the Company's cable systems to TCI is taking the program a step further. municipal regulation of prices for basic cable The Company has conducted several "lab- services, but within guidelines largely oratories" in schools to encourage teachers already followed by the Company over the 17 and students to use "Cable in the Classroom" last four years. services and materials in innovative ways. It is not possible to predict with certainty ICI's goal is to bring our communities' what will emerge from the legislative or reg- school systems to the next level of techno- ulatory arena. However, as cable continues logical sophistication by exploring ways in to grow in popularity among consumers, it is • lr E which advanced cable television (such as likely that cable's competitors will continue - �rrnn- 112 "Cable in the Classroom")and computer to seek special relief in Washington. '1'CI's Cable in the Classroom technology can make teaching more position will be to oppose onerous legislation is an innovative educa- efficient, compelling and effective. and regulation while workingbecome to byte program launched by the industry and TCI The Debate over Regulation: Federal and more sophisticated in explaining the advan- over three yeas ago. Under the program,TCI state public policy makers are now engaged tages of freedom in the television market- wires a school for cable and then provides,free in a multi-year effort to determine how gov- place to our customers. of charge,a variety of ernment should relate to the new industry From a business standpoint, the Company ming and d ucationala services h cable has pioneered—that of broadband remains flexible enough to respond to a science. topics h as math, history and science. telecommunication services to the home. broad range of legislative or regulatory There has been action in Congress and actions. We are confident that our prospects several agencies, accompanied by for future growth will be significant. skirmishes between the cable industry, • which favors a "free market" approach and others who favor more government regula • - tion. Throughout the year, the Company continued to monitor and participate in the debate over regulation of cable television. As in past years, Congress is considering a Robert J.Lewis number of proposals calling for regulation of Senior Vice President Corporate Development subscriber fees, mandatory access to cable Robert Thomson programming at regulated wholesale prices, Senior Vice President requiring cable customers to pay for broad- Communications and cast programming, and mandating that cable Policy Planning systems give up exclusivity in the program- ns„git ming it has fostered. Many of these propos- als could adversely affect cable customers, vendors of cable programming and hardware and cable operators. STRATEGIC ALLIANCES By cultivating relationships with industry leaders and diverse funding sources, and by anticipating future business needs, TCI has positioned itself to best take advantage of the svneigies between cable and the telecommunications industry. 19 The Company historically has used Programming(UAEP). 1IAEP has won the strategic alliances with industry leaders to right to turn its U.K. tape-delayed, govern- develop and acquire expertise in new mar- ment network into a live service on its kets, products and technologies. Parliamentary Channel and is putting In 1991, the Company's strategic alliances together or planning to distribute other served two goals: to grow the core business cable networks. of cable television and to explore the future business of providing broadband telecom- munications vCTv 'teaming with A%' % and US hest services. In 1991,'1'Cl teamed with A'I'&'1'and US West to market test"viewer-controlled GROWING THE CORE BUSINESS OF CABLE TV cable television" (VC'I'V). Going International Miming 117th (IV West The tests will offer two services movies TCI is actively seeking sound cable fran- on demand and expanded pay-per-view chise opportunities around the globe. —to 300 selected customers on a Denver, Its agreement to enter into a joint venture Colorado suburban cable system. The first with US West in the United Kingdom will service will allow customers to order from a make it the largest cable operation in that list of 2,000 movies for$3.99 each. Users will country, with franchises totaling 2.9 million he able to start the movie when they wish households. The proposed investment in the and even pause for a 10-minute break. The U.K. also represents the Company's first sig- second service will initially offer 24 channels • • nificant venture as an equity player in local of pay-per-view hit movies that start every • telephone exchange service.The 50/50 joint half hour for$2.99. Following an 18-month venture is expected to spend upwards of test period, the Company will evaluate the $1 billion developing cable and telephone results for possible system-wide carriage. systems in the U.K. in the coming years. The U.K. operations provide attractive • strategic value to the Company: it's the only market where the Company can deliver telephone and video as one entity. • Another ep# reruriii, resence in Europe is UmtM A2tists Entertainment • 920350 • Advertising: 7vrruiiq,� 111th J,yhwjr:lad Cable:l MAW Direct to the Non-cabled Home: TCI continues to position itself to bring Netlink, USA, a subsidiary of the in new revenue streams from ancillary husi- Company, became the nation's largest nesses that will also build on the traditional provider of cable programming to the TVRO industry(satellite dishes)in 1991. This is a basic cable television service. One such 20 ancillary business, cable advertising sales, is form of direct broadcast satellites (OBS). relatively new but has had a strong and Netlink's 215,000 customers include both steady growth. home users and retail establishments such as • In 1988 the entire industry sold $1..5 hotels, restaurants and condominium devel- • billion in cable ad sales; by 1991 that figure °Pments—those traditionally not serviced had doubled, by hard-wired cable systems. In addition, Tribune Broadcasting Co.'s, Tribune Netlink also provides services to cable televi- sion companies to help them import distant Regional Programming, Inc., has agreed to provide a 24-hour news and information ser- television and superstation signals. vice to TCI's 300,000 cable television sub- With Netlink, the Company is well posi- scribers in the Chicago metro area. This basic tioned to reach non-cabled customers, there- cable service, "Chicagoland Television," will by providing a valuable service to local feature local news coverage, sports news, communities while making the Company y a weather, traffic, lifestyle reports and politics more diversified provider of video services. for the area. TCI has the right to one minute In addition, the Company is positioned to tap an hour of ad time and up to three minutes the potential for OBS, satellite delivered an hour, 18 hours daily for the Company's PPV and satellite delivered HDTV—all of which are emerging entertainment promotional programming. During 1991, the Company enhanced businesses. its ad sales efforts with the purchase of 100 percent of Cable AdNet Partners, which coordinates advertising placement on cable systems nationwide. TCI plans to run Cable AdNet independently from the Company's in-house advertising sales operations. L. • 920850 EXPLORING THE BROADBAND BUSINESS When coupled with DDI's networks, Personal Communications Network(PCN): 'ICI's cable systems can offer a broad array 7enmin,�11'ith.11/Cawof alternative access and information age Late in the year,TCI began a market services to commercial clients not yet test in its Medford, Oregon cable television serviced by cable. system for a personal communications net- As a further commitment to these services, work(PCN). The test, held in conjunction TCI has agreed to purchase upwards of 49.9 21 with McCaw Cellular Communications, Inc. percent of the nation's largest alternative will interconnect McCaw's cellular sites with phone carrier,7eleport Communications TCI's fiber optic transmission facilities. The Group, Inc. The Staten Island, N.Y.—based companies envision the PCN to he a less company competes with regional phone F expensive cellular service with fewer features companies to provide alternate access tv and limited mobility. and data communications services in . The goal of the PCN test is to determine markets including New York, Chicago A personal communica- market demand for and interest in this mod- and Los Angeles. - tions network(PCN)is crate) priced, wireless telephone service. If Together,Teleport and DDIprovide the a wireless telephone Y P g 1 service that links cellular there is a market, the cable industry can capacity to build the Company's broadband and cable television technologies to provide greatly accelerate its deployment in coopera- cable terrestrial facilities nationwide. The customers with a low- cost(and lower-range) tion with the nation's cellular providers. Company hopes to forge partnerships with alternative to cellular telephone service. numerous other cable companies to provide Alternate Access: Twining Direct this service beginning in late 1992. .land I /rpiuvCommunirniioasGimp Digital Direct, Inc. (DDI)was founded by the Company to build metropolitan area networks (MANS) in cities where TCI has significant cable operations. Using fiber optics, MANs provide high quality, cost effective and reliable voice, data and video links among telecommunications users in a metro area—users such as businesses, bank ATM networks, hospitals and government. DDI currently is in three cities—Chicago, Dallas and Seattle—with plans to expand to Pittsburgh, St. Louis and Denver. . 920350 SM TCI We're taking television into tomorrow. 140 ems %rle-Cnmmuniadiaas,lni.ar,d Sobsidia ies MARKET FOR THE COMF._4Y'S COMMON EQUITY AND RELATED STO....HOLDER MATTERS Shares of the Company's Class A and Class B common stock arc traded in the over-the- counter market on the National Association of Securities Dealers Automated Quotations ("NASDAQ") National Market System under the symbols TCOMA and TCOMB, respec- tively. The following table sets forth the range of high and low sales prices of shares of Class A and Class B common stock for the periods indicated as furnished by NASDAQ. The prices have been rounded up to the nearest eighth, represent prices between dealers, do not include retail markups, markdowns, or commissions and do not necessarily represent actual transactions. 4•1 Class A Class B 1990 High Low High Low First Quarter 18'h 12'/4 19'/4 14 Second Quarter 16'k 117/8 16% 12'k Third Quarter 15% 9'/4 143/4 9'/4 Fourth Quarter 14'/4 81/8 13% 9 1991 First Quarter 16'/8 11% 16 11'/4 Second Quarter 17'h 13 17'h 13 Third Quarter 16'% 12'/4 16 13 Fourth Quarter 17'% 13 171 13 As of February 1, 1992, there were 5,065 holders of record of the Company's Class A common stock and 821 holders of record of the Company's Class B common stock (which amounts do not include the number of shareholders whose shares are held of record by brokerage houses but include each brokerage house as one shareholder). The Company has not paid cash dividends on its Class A or Class B common stock and has no present intention of so doing. Payment of cash dividends, if any, in the future will be determined by the Company's Board of Directors in light of the Company's earnings, financial condition and other relevant considerations. Certain loan agreements contain provisions that limit the amount of dividends, other than stock dividends, that the Company may pay (see note 8 to the consolidated financial statements). See also related discussion under the caption Managements Discussion and Analysis of Financial Condition and Results of Operations. SELECTED FINANCi”. DATA The following tables present selected information relating to the financial condition and results of operations of the Company for the past five years: Balance Sheet Data: December 31, 1991 1990 1989 1988 1987 amounts M millions Prperry and equipment, net Propert e costs, net $ 4,443 4,526 4,179 3,141 2,445 ,131 4,649 $ 5,723 5 3,144 2,375 2.2 Total assets Debt $13,010 12,310 11,432 8,574 6,296 Stockholders' equity $ 9,910 9,487 8,176 6,202 4,905 Shares outstandin $ 1,439 622 908 1,206 787 g (net of treasury shares): Class A common stock Class B common stock 370 9 3111 305 304" 254' 49 48 48 48* 48" Years ended December 3/, Summary of Operations Data: 1991 1990 1989 1988 1987 Revenue amounts in millions, except per share data$ �— Operating income 3,827 3,625 3,026 2,282 1,709 Net earnings (loss) $ 804 654 569 491 358 Primary and fully diluted earnings (loss) $ (102) (287) (257) 56 6 per common share Primary and fully diluted weighted $ (.28) (.81) (.73) 15 .02 average common and common equivalent shares outstanding 360 355 353 385" 306" "Restated to give effect to the September 29, 1989 distribution of one share of Class A common stock for each outstanding share of Class A common stock and one share of Class B common stock for each outstanding share of Class B common stock, held of record on September 8, 1989, by way of a stock split effected in the form of a dividend. f, 5'" e we • 920350 lele-Lommunncntrmcv,Inc.aim/.S uGsuhui>es MANAGEMENT'S DISCL_�ION AND ANALYSIS OF FINANCIAL CONL..iON AND RESULTS OF OPERATIONS Summary of Operations The following table sets forth, for the periods indicated, the percentage relation- ship that certain items bear to revenue and the percentage increase or decrease of the dollar amount of such items as compared to the prior period. This summary pro- vides trend data relating to the Company's normal recurring operations. Other items of significance are discussed separately under the captions "Other Income and Expense", "Income Taxes" and "Net Loss" below. Relationship to Revenue Period to Period 2 3 by Industry Segment Increase (Decrease) Years ended Years ended December 31, December 31, Cable 1991 1990 1989 1990-91 1989-90 Revenue 100.0% 100.0% 100.0% 9.0 % 24.6 % Operating, selling, general and administrative 55.4 57.2 57.4 5.5 % 24.2 % Depreciation and amortization 20.9 21.5 20.8 6.2 % 28.5 % Operating income 23.7% 21.3% 21.8% 21.0 % 21.7 % Theatre Revenue 100.0% 100.0% 100.0% (9.1)% 2.9 % Operating, selling, general and administrative 86.1 85.1 84.9 (11.9)% 3.0 % Restructuring charge — 3.8 — n/m n/m Depreciation and amortization 6.8 7.3 7.1 (16.0)% 6.4 % Operating income 7.1% 3.8% 8.0% 69.2 % (50.9)% n/m=not meaningful As shown above, cable television revenue increased 9.0% and 24.6% for 1990 to 1991 and 1989 to 1990, respectively. Approximately 3-5% of such increases resulted from growth in subscriber levels within the Company's cable television systems and an additional 5-7% was due to increases in prices charged for cable television service. The balance of the increases in cable television revenue was attributable to acquisitions. On December 2, 1991, the Company acquired the remaining minority interest in United Artists Entertainment Company ("UAE"). However, since UAE was previously consolidated, the Company's revenue was not affected by this transaction. Certain proposed changes to the legislative and regulatory environment in which the cable television industry operates could limit future increases in prices charged for cable television service. The effect of such limitations, if imposed, on the future growth of cable television revenue of the Company cannot be predicted at this time. • 920,350 50 r,. Increased programming costs and certain one-time charges have caused cable television operating costs and expenses to be higher than normal. It is anticipated that the Company's cost of programming will continue to increase in the future as program suppliers increase their rates (faster than the inflation rate) and additional sources of programming become available. Additionally, certain proposed changes in the legislative and regulatory environment in which the cable television industry operates could have the effect of increasing certain programming costs. The Company cannot determine whether and to what extent increases in the cost of programming will affect the prices charged by it for its cable television services or the manner in which these services are offered. The decrease in theatre revenue for 1990 to 1991 reflects a 7% decline in 2 4 attendance, net of a 4% increase in average ticket prices. The decline in attendance partially results from the theatre restructuring described below. The increase in theatre revenue for 1989 to 1990 reflects a 7-8% increase in average ticket prices and a 3-4% decline in attendance. The decline in attendance partially results from a 7% decrease in the number of screens in operation at December 31, 1990 as com- pared to the prior year. Theatre operating expenses for 1991, as a percentage of revenue, were comparable to those for prior years (exclusive of the 1990 theatre restructuring charge). During the fourth quarter of 1990, UAE recorded a $26 million charge in connection with its December of 1990 plan to restructure its theatre operations. This charge included the net estimated costs associated with the anticipated closure of 23 theatres (73 screens) located in seven states and the anticipated sale of 52 theatres (215 screens) located in thirteen states. This plan was implemented because such theatres generally were unprofitable or located in nonstrategic areas. Additionally, UAE disposed of approximately 70 screens at 22 locations in 1991. Many of the screens were single or twin screen locations which did not meet UAE's operating criteria or were located in nonstrategic areas outside major theatrical markets. Other Income and Expense Interest expense decreased during 1991 as a result of declining interest rates. During 1990 and 1989, interest expense increased due principally to additional borrowings by the Company in connection with acquisitions. The Company's weighted average interest rate on borrowings was 9.0%, 9.8% and 10.4% during 1991, 1990 and 1989, respectively. At December 31, 1991, after giving effect to various interest rate hedge and exchange agreements (see note 8 to the consolidated financial statements) aggregating $1,996 million, the Company had $5,421 million (or 55%) of fixed-rate debt with a weighted average interest rate of 9.9% and $4,489 million (or 45%) of variable-rate debt with interest rates approximating the prime rate (6.5% at December 31, 1991). The Company sold certain investments and other assets for an aggregate net pre- tax gain of $36 million and $61 million in 1991 and 1989, respectively. In 1990, the Company recognized a $17 million loss in connection with the sale or other disposi- tion of assets. Subsequent to December 31, 1991, TCI agreed to sell UAE's motion picture theatre business and certain theatre-related real estate assets. No gain or loss will be recognized in connection with this disposition. During 1991, 1990 and 1989, the Company recorded losses of $7 million, $12 million and $26 million, respectively, resulting from early extinguishment of debt during such periods. Although these losses were incurred in each of the last three years, they resulted from transactions which are considered to be nonrecurring in nature; however, there may be additional early extinguishments of debt in the future. 920359 •.F. - , , During 1990 and 1989, the Company recorded expenses of $25 million and $75 million, respectively, for stock appreciation rights granted in 1987 to certain members of senior management and other key managers of Heritage Communications, Inc. ("Heritage") to induce them to remain with Heritage following consummation of its 1987 merger with 'I'CI. During 1990, Heritage purchased all of the aforementioned stock appreciation rights for $165 million. Accordingly, there was no compensation relating to these rights in 1991. Income Taxes The Company recorded tax expense in 1991 and 1990 although there was an expected benefit based upon the statutory rate. This is principally the result of nondeductible depreciation and amortization relating to acquisitions and the nonrecognition of net operating losses of a subsidiary for financial statement purposes. ''s Income tax benefit in 1989 is lower than the expected benefit based upon the statutory rate. This results from nondeductible depreciation and amortization relating to acquisitions, nondeductible losses of corporate affiliates and gain on sales of assets for income tax purposes, net of the effect of investment tax credits recognized for financial statement purposes. The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," which will supersede Statement 96, "Accounting for Income Taxes." The Company currently accounts for income taxes under Accounting Principle Board Opinion No. 11, having elected not to adopt Statement 96 prior to its required effective date. Statement 109 will change the Company's method of accounting for income taxes from the deferred method required under APB 11 to the asset and liability method. The Company presently does not know and cannot reasonably estimate the impact of Statement 109 on its financial statements. Statement 109 is effective for fiscal years beginning after December 15, 1992. The Company has not made a determination whether it will restate any prior years or adopt Statement 109 in 1993 on a prospective basis. 'The Tax Reform Act of 1986 included transitional rules whereby investment tax credit could continue to be earned, under certain circumstances, through December 31, 1990. The Company recognized investment tax benefits under such transitional rules amounting to $12 million and $15 million for 1990 and 1989, respectively. Net Loss The Company's net loss of $102 million for 1991 represented an improvement of $185 million as compared to the Company's net loss for 1990 due primarily to improved operating results by the Company and its affiliates, and an increase in gain on dispositions of assets. Also, the general decline in interest rates during the year had a positive impact on the Company's net results. The Company owned a majority interest in UAE through December 2, 1991, the date on which TCl acquired the remaining minority interest in UAE. During 1990, the minority interest in UAE's net loss attributable to common shareholders amounted to $78 million, which amount represented substantially all of the remaining minority interest in the equity of UAE other than that attributable to preferred stock and common stock issued with rights. Accordingly, the minority interest in UAE's losses during 1991 was not material. See note 7 to the accompanying consolidated financial statements for pro forma information regarding the effects of the acquisition of the remaining minority interest in UAE. F rar- The Company's net loss of $287 million for 1990 represented a decline of $30 million as compared to the Company's net loss for 1989. The Company incurred additional interest expense during 1990 as compared to 1989, had an incremental $78 million negative impact from 1989 to 1990 resulting from dispositions of assets and had an incremental $68 million increase from 1989 to 1990 in income tax expense primarily attributable to nonrecognition of net operating losses of a subsidiary for financial statement purposes, but experienced improved operating results (both on a consolidated basis and by its affiliates accounted for under the equity method) and reduced compensation relating to stock appreciation rights. Inflation has not had a significant impact on the Company's results of operations during the three-year period ended December 31, 1991. 2.6 Liquidity and Capital Resources The Company generally finances acquisitions and capital expenditures through net cash provided by operating and financing activities. Although amounts expended for acquisitions and capital expenditures exceed net cash provided by operating activities, the borrowing capacity resulting from such acquisitions, construction and internal growth has been and is expected to continue to be adequate to fund the shortfall. The Company had approximately $1 billion in unused lines of credit at December 31, 1991, excluding amounts related to lines of credit which provide availability to support commercial paper. Although the Company was in compliance with the restrictive covenants contained in its credit facilities at said date, additional borrowings under the credit facilities are subject to the Company's continuing compliance with such restrictive covenants (which relate primarily to the maintenance of certain ratios of cash flow to total debt and cash flow to debt service, as defined). See note 8 to the accompanying consolidated financial statements for additional information regarding the material terms of the Company's lines of credit. One measure of liquidity is commonly referred to as "interest coverage." Interest coverage, which is measured by the ratio of operating income before depreciation and amortization ($1,516 million, $1,335 million and $1,107 million in 1991, 1990 and 1989, respectively) to interest expense ($877 million, $918 million and $817 million in 1991, 1990 and 1989, respectively), is determined by reference to the consolidated statements of operations. The Company's interest coverage ratio was 173%, 145% and 135% for 1991, 1990 and 1989, respectively. Management of the Company believes that the foregoing interest coverage ratio is adequate in light of the consistency and nonseasonal nature of its cable television operations and the relative predictability of the Company's interest expense, more than half of which results from fixed rate indebtedness. As previously noted, the Company experienced improved operating results and there was a general decline in interest rates during 1991. These same factors led to an improvement in the Company's interest coverage ratio. In connection with its merger with TCI in 1987, Heritage entered into certain credit facilities. Borrowings under such credit facilities (which aggregated $383 million at December 31, 1991) are due in June of 1992. On or before such date, the Company expects to refinance such borrowings along with any remaining liability ($80 million at December 31, 1991) related to the 1990 purchase of stock appreciation rights described above. Historically, the Company has been able, with the consent of its lenders, to refinance these types of borrowings and extend the scheduled maturities, although there can be no assurance that refinancings will continue to be accomplished on terms acceptable to the Company. 90138JM1I As security for borrowings under one of its credit facilities, the Company pledged a portion of the common stock it holds of Turner Broadcasting System, Inc. ("TBS"). Borrowings under this credit facility (which amounted to $238 million at December 31, 1991) are due in August of 1994. On or before such date, assuming there has been no significant decline in the value of the underlying collateral (approximately $550 million at December 31, 1991), the Company expects to refinance these borrowings and extend the maturity date. However, there can be no assurance that such a refinancing will be accomplished on terms acceptable to the Company. The Company owns an equity interest in SCI Holdings, Inc. ("SCI"). SCI is obligated to repay $398 million in principal amount of its zero coupon senior notes on December 5, 1992. However, SCI does not expect cash flows generated from operations and available borrowing capacity under its existing credit agreements to y.7 satisfy the aforementioned 1992 debt obligation. As a result, SCI is pursuing various plans to meet this obligation, including the possibility of a transaction that would result in the ownership of its cable systems being split, on a tax-free basis, between the Company and the other shareholder. 'This transaction is expected to occur during 1992, although there can be no assurance that it will occur during 1992 or at all since consummation of the transaction will require the obtaining of private and/or public debt financing, certain regulatory and other consents and approvals, and the execution by the parties of binding agreements. In the event this transaction cannot be accomplished, SCI will need to seek alternative financing. Other than SCI, the Company's various partnerships and other affiliates accounted for under the equity method generally fund their acquisitions, required principal repay- ments and capital expenditures through borrowings under their own credit facilities (which are generally not guaranteed by the Company) and through net cash provided by their own operating activities. Certain subsidiaries' loan agreements contain restrictions regarding transfers of funds to the parent company in the form of loans, advances or cash dividends. The amount of net assets of such subsidiaries exceeds the Company's consolidated net assets. However, net cash provided by operating activities of other subsidiaries which are not restricted from making transfers to the parent company have been and are expected to continue to be sufficient to enable the parent company to meet its cash obligations. Management believes that available lines of credit, net cash provided by operating activities, proceeds from disposition of assets and the Company's ability to obtain additional financing will provide adequate sources of short-term and long-term liquidity in the future. tell(Q//lll]G//!i:%//!1//s,l//i:.///l[/.\///ll///lil/l/J CONSOLIDATED B.._..NCE SHEETS December 31, 1991 and 1990 Assets 1991 1990 amounts in millions Cash $ 35 31 Trade and other receivables, net 249 278 Prepaid expenses 35 58 Investment in Liberty Media Corporation ("Liberty") (note 3) 459 — Investments in other affiliates, accounted for zee under the equity method, and related receivables (note 4) 1,159 1,246 Investment in Turner Broadcasting System, Inc. (note 5) 463 380 Other investments, at cost, and related receivables (note 6) 231 420 Property and equipment, at cost: Land 157 168 Cable distribution systems 4,923 4,708 Theatre buildings and equipment 654 639 Support equipment and buildings 515 464 6,249 5,979 Less accumulated depreciation 1,806 1,453 4,443 4,526 Franchise costs 6,310 5,579 Less accumulated amortization 587 448 5,723 5,131 Other assets, at cost, net of amortization 213 240 $13,010 12,310 r Liabilities and Stockholders' Equity 1991 1990 amounts in millions Accounts payable $ 148 150 Accrued interest 97 111 Other accrued expenses 373 366 Debt (note 8) 9,910 9,487 Deferred income taxes 158 132 Other liabilities 183 231 Total liabilities 10,869 10,477 ].9 Minority interests in equity of consolidated subsidiaries 587 1,211 Redeemable preferred stocks (note 9) 115 — Stockholders' equity (note 10): Preferred stock, $1 par value. Authorized 10,000,000 shares, issued and outstanding 5,028,595 shares of redeemable preferred stocks in 1991 — — Class A common stock, $1 par value. Authorized 1,000,000,000 shares; issued 449,124,604 shares in 1991 and 310,483,215 shares in 1990 449 310 Class B common stock, $1 par value. Authorized 100,000,000 shares; issued 48,790,443 shares in 1991 and 47,465,826 shares in 1990 49 48 Additional paid-in capital 1,738 626 Accumulated deficit (464) (362) 1,772 622 Treasury stock, at cost (79,335,038 shares of Class A common stock in 1991) (333) — Total stockholders' equity 1,439 622 Commitments and contingencies (note 1 2) $13,010 12,310 See accompanying notes to consolidated finandal statements. • • 1dr-Grimrnuaicananc,Int.and Subsidimies CONSOLIDATED Sift iEMENT5 OF OPERATIONS Years ended December 31, 1991, 1990 and 1989 1991 1990 1989 amounts in millions, except per share amounts Revenue (notes 4 and 7) $3,827 3,625 3,026 Operating costs and expenses: Operating 1,519 1,554 1,287 Selling, general and administrative (note 4) 792 710 632 Theatre restructuring charge — 26 — Depreciation 541 503 410 2.10 Amortization 171 178 128 3,023 2,971 2,457 Operating income 804 654 569 Other income (expense): Interest expense (877) (918) (817) Share of earnings of Liberty (note 3) 43 — — Share of net losses of other affiliates (note 4) (55) (60) (89) Gain (loss) on disposition of assets, net 36 (17) 61 Loss on early extinguishment of debt(note 8) (7) (12) (26) Compensation relating to stock appreciation rights — (25) (75) Minority interests in losses (earnings) of consolidated subsidiaries, net (25) 62 33 Other, net (note 4) 47 52 42 (838) (918) (871) Loss before income taxes (34) (264) (302) Income tax benefit (expense) (note 11) (68) (23) 45 Net loss (note 7) $ (102) (287) (257) Loss per common share (note 7) $ (.28) (.81) (.73) See accompanying notes to consolidated financial statements. [dc-Luauuuunecr/mite.Lib and Sohuthane, CONSOLIDATED STATEM_.4TS OF STOCKHOLDERS' EQUITY Years ended December 31, 1991, /990 and 7989 Additional Retained %dial Common stack --- - -. paid-in earnings Treasury stockholders' (lass A Class R capital /deficit) stock equip, amounts in millions Balance at January 1, 1989 $308 48 687 196 ( 33) 1,206 Net loss — — — (257) — (257) Adjustment arising from business combination — — — (14) — (14) Issuance of common stock upon exercise of options — — 1 — — 1 Acquisition and retirement of common stock — — (9) _ _ (9) 2 11 Issuance of shares of Class A common stock for an acquisition from a related party (note 7) — — 5 — — 5 Repurchase and retirement of warrants — — (24) — — (24) Retirement of treasury stock (I) — (12) — 13 — Balance at December 31, 1989 307 48 648 (75) (20) 908 Net loss — — — (287) — (287) Issuance of common stock upon conversion of notes 3 — 1 — — 4 Reduction of paid-in capital resulting from issuance of treasury shares at less than cost upon exercise of warrants — — (19) — 20 1 Acquisition and retirement of common stock — — (4) — — (4) Balance at December 31, 1990 310 48 626 (362) — 622 Net loss — — — (102) — (102) Issuance of common stock upon conversion of debentures — — 4 — — 4 Issuance of common stock upon exercise of options — 2 3 — — 5 Income tax effect of stock option deduction — — 7 — — 7 Retirement of common stock upon redemption of Liberty preferred stock (note 3) (5) — (86) — — (91) Issuance of shares of Class .A common stock for an acquisition 1 — 10 — — 11 Issuance of common stock upon acquisition of remaining minority interest in UAE (note 7) 143 — 1,190 — (333) 1,000 Acquisition and retirement of common stock — (1) (16) — — (17) Balance at December 31, 1991 $449 49 1,738 (464) (333) 1,439 See accompattying notes to consolidated financial statements. ;@ t 320350 . CONSOLIDATED Sl._EMENTS OF CASH FLOWS Years ended December 3/, 1991, 1990 and 1989 1991 1990 1989 amounts in millions (see note 2) Cash flows from operating activities: Net loss $ (102) (287) (257) Adjustments to reconcile net loss to net cash provided by operating activities: Theatre restructuring charge — 26 — Depreciation and amortization 712 681 538 Share of earnings of Liberty (43) _ - Share of losses of other affiliates 55 60 89 2,12 Loss (gain) on disposition of assets (36) 17 (61) Loss on early extinguishment of debt 7 12 26 Compensation relating to stock appreciation rights — 25 75 Payment for stock appreciation rights (45) (40) — Minority interests in earnings (losses) 25 (62) (33) Deferred income tax expense (benefit) 58 19 (50) Amortization of debt discount 16 2 1 Noncash interest and dividend income (28) (33) (8) Other noncash charges — 12 — Changes in operating assets and liabilities, net of the effect of acquisitions: Change in receivables (16) (23) (53) Change in prepaid expenses 19 (5) (7) Change in accrued interest (14) (32) 59 Change in other accruals and payables 44 71 87 Net cash provided by operating activities 652 443 406 Cash flows from investing activities: Cash paid for acquisitions (399) (859) (1,424) Capital expended for property and equipment (592) (645) (628) Proceeds from disposition of assets 129 210 579 Additional investments in and loans to affiliates and others (280) (429) (503) Return of capital from affiliates 41 8 5 Repayment of loans to affiliates and others 38 71 3 Other investing activities (56) (27) (201) Net cash used in investing activities (1,119) (1,671) (2,169) Cash flows from financing activities: Borrowings of debt 5,988 8,196 7,663 Repayments of debt (5,498) (6,960) (5,871) Sales of equity securities of subsidiaries 7 28 13 Preferred stock dividends of subsidiaries (19) (21) (11) Issuances of common stock 2 1 — Repurchase of common stock and warrants (9) (4) (32) Net cash provided by financing activities 471 1,240 1,762 Net increase (decrease) in cash 4 12 (1) Cash at beginning of year 31 19 20 Cash at end of year $ 35 31 19 See accompanying notes to consolidated financial statements. hie-Lommumtalracu,bee an/Sul/salaries NOTES TO CONSOLIDA._j FINANCIAL STATEMENTS December 31, 1991, 1990 and 1989 1 Summary of Significant Accounting Polities Principles of Consolidation The consolidated financial statements include the accounts of Tele-Communications, Inc. and those of all majority-owned subsidiaries ("TCI" or the "Company"). All significant inter- company accounts and transactions have been eliminated in consolidation. Receivables Receivables are reflected net of an allowance for doubtful accounts. Such allowance at December 31, 1991 and 1990 was not material. Investments 2-13 Investments in which the ownership interest is less than 20% are generally carried at cost. Investments in marketable equity securities are carried at the lower of aggregate cost or market and any declines in value which are other than temporary are reflected as a reduction in the Company's carrying value of such investment. For those investments in affiliates in which the Company's voting interest is 20% to 50%, the equity method of accounting is generally used. Under this method, the investment, originally recorded at cost, is adjusted to recognize the Company's share of the net earnings or losses of the affiliates as they occur rather than as dividends or other distributions are received, limited to the extent of the Company's investment in, advances to and guarantees for the investee. The Company's share of net earnings or losses of affiliates includes the amortization of purchase adjustments. Property and Equipment Property and equipment is stated at cost, including acquisition costs allocated to tangible assets acquired and theatre lease acquisition costs. Construction costs, including interest during construction and applicable overhead, are capitalized. During 1991, 1990 and 1989, interest capitalized was not material. Depreciation is computed on a straight-line basis using estimated useful lives of 5 to 15 years for cable distribution systems, 13 to 30 years for theatre buildings, theatre lease acquisition costs and equipment and 3 to 40 years for support equipment and buildings. Repairs and maintenance are charged to operations, and renewals and additions are capitalized. At the time of ordinary retirements, sales or other dispositions of property, the original cost and cost of removal of such property are charged to accumulated depreciation, and salvage, if any, is credited thereto. Gains or losses are only recognized in connection with the sales of properties in their entirety. However, recognition of gains on sales of properties to affiliates accounted for under the equity method is deferred in proportion to the Company's ownership interest in such affiliates. Franchise Costs Franchise costs include the difference between the cost of acquiring cable television systems and amounts assigned to their tangible assets. Such amounts are generally amortized on a straight-line basis over 40 years. Costs incurred by the Company in obtaining franchises are being amortized on a straight-line basis over the life of the franchise, generally 10 to 20 years. Minority Interests Recognition of the minority interests' share of losses of consolidated subsidiaries is limited to the amount of such minority interests' allocable portion of the common equity of those consolidated subsidiaries. Further, the minority interests' share of losses is not recognized if the minority holders of common equity of consolidated subsidiaries have the right to cause the Company to repurchase such holders' common equity. Included in minority interests in equity of consolidated subsidiaries are $334 million and $433 million, at December 31, 1991 and 1990, respectively, of preferred stocks (and accumu- lated dividends thereon) of certain subsidiaries. The current dividend requirements on these preferred stocks aggregate $54 million per annum and such dividend requirements are reflected as minority interests in the accompanying consolidated statements of operations. Also included in minority interests in equity of consolidated subsidiaries was $579 million, at December 31, 1990, relating to the rights described in note 7. 32035• (GC' Jl nilept (GCL ✓. �✓"' Loss Per Common are The loss per common share for 1991, 1990 and 1989 was computed by dividing net loss by the weighted average number of common shares outstanding during such periods (359.9 million, 354.9 million and 353.0 million for 1991, 1990 and 1989, respectively). Common stock equivalents were not included in the computation of weighted average shares outstanding because their inclusion would be anti-dilutive. Reclassification Certain amounts have been reclassified for comparability with the 1991 presentation. 2 Supplemental Disclosures to Consolidated Statements of Gash blow's Cash paid for interest was $875 million, $947 million and $757 million for 1991, 1990 and 1989, respectively. Also, during these years, cash paid for income taxes was not material. Significant noncash investing and financing activities are as follows: 2.14 Years ended December 31, 1991 1990 1989 amounts in millions Acquisitions: Fair value of assets acquired $1,540 969 2,608 Liabilities assumed (12) (68) (303) Minority interests in equity of acquired entities (3) (42) (876) Value of TCI preferred stock issued in acquisition (115) — — Value of TCI common stock issued in acquisitions (1,011) — (5) Cash paid for acquisitions $ 399 859 1,424 Contribution of certain interests to affiliate in exchange for preferred stock (see note 3) $ 511 — — Common stock received upon redemption of preferred stock of an affiliate (see note 3) $ 91 — — Contribution of assets to an affiliate $ 108 Common stock issued upon conversion of debentures (with accrued interest through conversion) $ 4 4 — Common stock surrendered in lieu of cash upon exercise of stock options $ 3 — 1 Note payable issued for repurchase of common stock $ 5 Exchange of cable television systems for limited partnership interest $ — 60 — Deferred tax liability resulting from stuck option deduction $ 7 3 hlvestulent in Liberty Media Golporation On March 28, 1991, Liberty Media Corporation ("Liberty"), an indirect, wholly-owned subsidiary of the Company until said date, issued shares of its common stock to TCI shareholders who, in the aggregate, tendered 8,713,696 shares of TCI Class A common stock and 2,737,712 shares of TCI Class B common stock to Liberty pursuant to an exchange offer. Also, on March 28, 1991, the Company contributed its interests in certain of its cable television programming businesses and cable television systems to Liberty in exchange for several different classes and series of preferred stock of Liberty with an aggregate issue price of $624 million. No gain or loss was recorded in connection with this transaction and, accord- ingly, the initial carrying value of such preferred stock of Liberty equals the aggregate carrying amount of the net assets contributed ($511 million). In April of 1991, Liberty elected to exercise its right under the terms of its Series 2 Class B Exchangeable Serial Preferred Stock to redeem all of such preferred stock in exchange for 5,725,687 shares of TCI Class A common stock. The Class B Exchangeable Preferred Stock was one of four classes of preferred stock issued in connection with the March 28, 1991 transaction. All of the other classes of preferred stock issued to TCI, including the Series 1 Class B Exchangeable Serial Preferred Stock, remain outstanding. The 5,725,687 shares of its Class A common stock received by TCI were retired. as°.° 920359 Of the classes of prefe._•d stock of Liberty held by the Company, on, Jass entitles TCI to elect a number of members of Liberty's board of directors equal to no less than 20% of the total number of directors, another class is exchangeable for TCI common stock and another class is convertible into common stock (less than 5%) of Liberty. Due to the related party nature of the transaction, TCI accounts for its investment in Liberty under the equity method. Accordingly, the Company does not recognize any income relating to dividends, including preferred stock dividends, and the Company has continued to record the earnings or losses generated by the interests contributed to Liberty (by recognizing 100% of Liberty's earnings or losses before deducting preferred stock dividends). On April 24, 1991, a subsidiary of Liberty purchased a 7.5% interest in the net assets, net losses and cash distributions of American Movie Classics Company, an affiliate of Liberty, from a subsidiary of the Company for $4 million in cash. On December 30, 1991, the Company entered into a Commercial Paper Purchase Agreement with Liberty whereby the Company may sell short-term notes to Liberty of up to an aggregate amount of $100 million. The Company borrowed $22 million from Liberty on December 31, 1991, pursuant to the Commercial Paper Purchase Agreement. The full ]•IS amount, including interest, was repaid on January 15, 1992. Interest rates on the short-term notes are determined by the parties by reference to prevailing money-market rates. On December 31, 1991, a subsidiary of Liberty purchased certain securities of QVC Network, Inc. ("QVC") from TCI for $28 million in cash. The consideration for the QVC securities was based upon quoted market prices. At the same time, another subsidiary of Liberty sold a certain note receivable from American TeleVenture Corporation ("ATV") to the Company for $5 million in cash, and another subsidiary of Liberty sold all of the common stock of Cable Television Advertising Group, Inc. ("CTAG") to the Company for $23 million in cash. The only asset held by CTAG is a 49% general partnership interest in Cable AdNet Partners. The remaining 51% general partnership interest in Cable AdNet Partners is held by another subsidiary of the Company. The consideration for the ATV note was determined by reference to its face value, plus accrued interest. The ATV note bears interest at 2% above the prime rate. The consideration for the stock of CTAG was determined by reference to the price paid for the 51% general partnership interest in Cable AdNet Partners, which was acquired by the Company in November of 1991. Also, on December 31, 1991, an Exchange Agreement among TCI (and certain of its subsidiaries) and Liberty (and certain of its subsidiaries) was consummated. Pursuant to this Exchange Agreement, TCI received 69% of the stock of ATV, 2,024,063 shares of common stock of International Cablecasting Technologies, Inc., a release from an obligation to reim- burse Liberty related to the repurchase of QVC stock, a release of the option with respect to Cencom Cable Associates, Inc., and a note in the amount of $4 million issued by a subsidiary of Liberty. Liberty received a release from an obligation to provide two free months of Court TV, a 0.1% general partnership interest in US Cable of Northern Indiana, a 25% general partnership interest in SportsChannel Chicago Associates, an option to acquire an additional 25% general partnership intererst in SportsChannel Chicago Associates, and less than $1 million in cash. In the opinion of the respective managements of TC1 and Liberty, the aggregate values of the assets exchanged were substantially equivalent. Further, the Exchange Agreement was approved by the respective Boards of Directors of TO and Liberty. No gain or loss was recorded on the foregoing transactions. Accordingly, the carrying amount of the Company's investment in Liberty preferred stock was adjusted to reflect these transactions, net of their related tax effects. The Company purchases sports and other programming from certain subsidiaries of Liberty. Charges to TO (which are based upon customary rates charged to others) for such programming were $25 million for the period from March 28, 1991 to December 31, 1991. Certain subsidiaries of Liberty purchase, at 'I'C1's cost, certain pay television and other pro- gramming. Charges for such programming were $2 million for the period from March 28, 1991 to December 31, 1991. TCI and Liberty have entered into a services agreement pursuant to which TCI provides, among other things, administrative and operational services. Charges by TCI in connection with the rendering of such services amounted to $3 million for the period from March 28, 1991 to December 31, 1991. �! � 7.1 Summarized unau...,.ed financial information of Liberty as of DecL...oer 31, 1991 and for the period from March 29, 1991 through December 31, 1991 is as follows (amounts in millions): Consolidated Financial Position Consolidated Operations Cash and cash equivalents $100 Revenue $ 85 Investment in TCI common stock 104 Operating expenses (74) Receivable from TCI 26 Depreciation and amortization (10) Other investments and related receivahles 486 Operating income 1 Other assets, net 102 Interest expense (5) 'Ibtal assets $818 Other, net 47 Debt $ 64 Net earnings $ 43 Deferred income taxes 56 Other liabilities 35 Minority interests 14 Redeemable preferred stocks 142 Stockholders'equity 507 4.16 Total liabilities and stockholders'equity $818 Subsequent to December 31, 1991, subsidiaries of Liberty and TCI created a partnership for the purpose of acquiring and operating cable television systems. The partners each agreed to contribute certain non-cash assets to the partnership and up to $25 million of cash as needed to fund mutually acceptable acquisitions. TCI will contribute all of its shares of one of the four classes of Liberty preferred stock to the partnership. Also, subsequent to December 31, 1991, Liberty entered into an agreement to increase its economic and voting interest in Lcnfest Communications, Inc. ("LCI") to 50%. Liberty's investment in LCI, which was previously accounted for under the cost method, was received from TCI in the March 28, 1991 transaction described above. Upon consummation of the agreement to increase its interest in I,CI to 50%, Liberty will adopt the equity method of accounting. As a result of the foregoing, TCI will restate its investment, results of operations and retained earnings with respect to its ownership interest in LEI up to March 28, 1991. As of that date, TCI will reduce (by $72 million) the carrying amount of its investment in Liberty preferred stock. 4 Investments in Other/VI iates Investments in affiliates, other than Liberty (see note 3), accounted for under the equity method, amounted to $1,107 million and $1,132 million at December 31, 1991 and 1990, respectively. Included in these amounts are the Company's investments in the common stock of SCI Holdings, Inc. ("SCI") and the preferred stock of its wholly-owned subsidiary, Storer Communications, Inc. ("Storer"), which investments aggregated $767 million and $886 million at December 31, 1991 and 1990, respectively. Certain of the Company's affiliates are general partnerships and any subsidiary of the Company that is a general partner in a general partnership is, as such, liable as a matter of partnership law for all debts (other than non-recourse debts) of that partnership in the event liabilities of that partnership were to exceed its assets. In connection with the Company's 1988 acquisition of an equity interest in SCI, a subsidiary of the Company issued certain debt and equity securities to Storer for $650 million. Interest charges and preferred stock dividend requirements on these debt and equity securities aggregated $89 million, $87 million and $86 million for 1991, 1990 and 1989, respectively. The Company's share of losses of SCI for 1991, 1990 and 1989 amounted to $54 million, $54 million and $60 million, respectively, as adjusted for the effect of interest and dividends accounted for by Storer as capital transactions due to their related party nature. In order to meet a certain 1992 debt obligation, SCI is currently pursuing various plans, including the possibility of a transaction that would result in the ownership of its cable systems being split, on a tax-free basis, between the Company and the other shareholder. This transaction is expected to occur during 1992, although there can be no assurance that it will occur during 1992 or at all since consummation of the transaction will require the obtaining of private and/or public debt financing, certain regulatory and other consents and fr' t approvals, and the execution by the parties of binding agreements. In any event, it is t` expected that the Company's investment in SCI will remain recoverable whether or not the aforementioned transaction is consummated. 920850 The Company has a ❑...eagement consulting agreement with Storer w,..oh provides for the operational management of certain of Storer's cable television systems by TCI. This agree- ment provides for a management fee based on 3.5% of the revenue of those cable television systems managed by the Company. The Company has also entered into a programming service agreement with Storer whereby the Company, for a fee, manages Storer's purchases of programming. The total management fees under the consulting and programming service agreements amounted to $7 million, $7 million and $8 million during 1991, 1990 and 1989, respectively (which amounts are recorded as a reduction of selling, general and administrative expenses in the accompanying consolidated statements of operations). In addition to its investment in Liberty (see note 3), the Company has other investments in affiliates accounted for under the equity method. Summarized unaudited financial information for such affiliates (including those contributed to Liberty through March 28, 1991), which operate principally in the cable television and motion picture theatre exhibition industries, is as follows: December 31, 2.17 Combined Financial Position 1991 1990 amounts in millions Property and equipment, net $1,149 1,637 Franchise costs, net 2,712 3,004 Other assets, net 305 1,408 Total assets $4,166 6,049 Debt $2,606 3,846 Due to'101 52 114 Deferred income taxes 867 879 Other liabilities 221 507 Redeemable preferred stock 674 576 Owners'equity 1,280 1,582 Investment in related parties (1,534) (1,455) Total liabilities and equity $4,166 6,049 Years ended December 31, Combined Operations 1991 1990 1989 amounts in millions Revenue $1,481 2,100 1,375 Operating expenses (1,010) (1,540) (909) Depreciation and amortization (330) (397) (357) Operating income 141 163 109 Interest expense (374) (477) (463) Other, net (47) (5) (22) Net loss $ (280) (319) (376) Certain affiliates and other companies buy programming under contractual arrangements with the Company at a price which, in certain circumstances, is greater than the Company's cost of acquiring such programming. Billings by the Company for such programming were $16 million, $55 million and $50 million for 1991, 1990 and 1989, respectively (which amounts are included in revenue in the accompanying consolidated statements of operations). The Company has interest bearing receivables due from certain affiliates and other companies. Income on such receivables amounted to $52 million, $64 million and $45 million for 1991, 1990 and 1989, respectively (which amounts are included in other income in the accompanying consolidated statements of operations). 5 investment in Turner Broadcasting System, Inc. In 1987, the Company and several other cable television operators purchased shares of two classes of preferred stock of Turner Broadcasting System, Inc. ("IBS"). During 1991, TBS made an offer to exchange shares of one class of its preferred stock (and accrued dividends thereon) for shares of TBS common stock and, as a result, the Company received common shares valued at $178 million. Shares of the other class of preferred stock have voting rights and are convertible into shares of'IBS common stock. The holders of those preferred shares, as a group, are entitled to elect seven of fifteen members of the board of directors of TBS, . lutist • and the Company appoints three such representatives. However, votoig control over TBS continues to be held by its chairman of the board and chief executive officer (an unrelated third party). The Company's total holdings of TBS common and preferred stocks represent an approximately 12% voting interest. The Company's investment in TBS common stock had an aggregate market value of$679 million and $157 million (which exceeded cost by $368 million and $59 million) at December 31, 1991 and 1990, respectively. In addition, the Company's investment in TBS preferred stock had an aggregate market value of$817 million and $527 million (which exceeded cost by $665 million and $245 million) at December 31, 1991 and 1990, respectively. 6 Other Divestments Other investments, accounted for under the cost method, and related receivables are summarized as follows: 2.78 December .3/, 1991 1990 amounts rn Limited partnership interest in, and related receivables from, millions Intermedia Partners 0 Convertible preferred stock investment $ 6 11 1 155 Assets, purchased in acquisitions, held for resale 21 Common stock investment 11 45 72 Convertible debt, accrued interest and preferred stock investment Other investments and related receivables 45 89 127$231 420 The Company's interest in Intermedia Partners ("Intermedia") is accounted for under the cost method although TCI's ownership approximates 32%. The cost method of accounting is considered appropriate because the limited partners (including TCI) of Intermedia have no voting control over Intermedia's operating and financial policies. Such control rests entirely with the general partner (an unrelated third party). 7 /kg/tuitions In connection with the merger pursuant to which United Artists Communications, Inc. ("UACI") and United Cable Television Corporation ("United") became wholly-owned subsidiaries of United Artists Entertainment Company ("UAE"), TCI issued certain rights which entitled each holder thereof to sell to TCI, at certain defined times in the future, a share of either class of UAE common stock at a price equal to 90% of its appraised value. During May of 1991, 'PC! commenced a tender offer for the rights referred to in the preceding paragraph. The tender offer expired on June 21, 1991 and the Company acquired 29,326,374 rights for an aggregate consideration of $139 million. The exercise period for the remaining 742,746 rights was accelerated by virtue of the signing of the merger agreement described in the next paragraph. An aggregate of 535,680 rights were validly exercised in the accelerated exercise period for an aggregate consideration of $9 million. On June 7, 1991, the Company and UAE entered into an Agreement and Plan of Merger pursuant to which the Company would acquire all remaining shares of UAE stock not already owned by "ICI. The acquisition was structured as a tax-free merger in which shares of UAE common stock were exchanged for shares of TO Class A common stock and UAE's outstand- ing preferred stock was converted into comparable preferred stock to he issued by TCI. Under the terms of the merger, each outstanding share of UAE Class A or Class B common stock was converted into 1.02 of a share of TCI Class A common stock. The merger was consummated on December 2, 1991 and 63,754,709 shares (net of treasury shares) of TO Class A common stock were issued, valued at $1 billion. The acquisition of the remaining minority interest in UAE was accounted for by the purchase method. On a pro forma basis, the Company's revenue would have remained unchanged, net loss would have increased by $13 million and $40 million, and loss per common share would have been reduced by $.01 and $.03 for 199] and 1990, respectively, had the acquisition of the remaining minority interest of LEAF occurred at the beginning of 4 1990. Although the Comr,_.ry's net loss would have increased, the loss p... common share would have been reduced, on a pro forma basis, as a result of the significant number of shares of common stock issued by TCI in the aforementioned merger. Additionally, during 1991, the Company acquired the stock, assets, remaining minority interests or additional interests in partnerships of various cable television systems and motion picture theatres for aggregate consideration of $392 million, including liabilities assumed. These acquisitions were accounted for by the purchase method. Accordingly, the results of operations of such acquired entities have been included with those of the Company since their respective dates of acquisition. The Company and a number of other cable television system operators entered into separate purchase agreements in 1989 to acquire certain cable television systems owned by Jack Kent Cooke Incorporated, Cooke Media Group Inc. and certain of their direct and indirect subsidiaries. The Company's acquisition of the cable television systems specified in its own purchase agreement was consummated in January of 1990 for $398 million. The Company and WestMarc Communications, Inc. ("WestMarc"), one of its then majority- 2.19 owned subsidiaries, entered into a merger agreement in 1989 providing for the acquisition of the remaining minority interest in WestMarc. This acquisition was consummated in January of 1990 for $205 million. Additionally, during 1990, the Company acquired the stock, assets, remaining minority interests or additional interests in partnerships of various cable television systems and motion picture theatres for aggregate consideration of $366 million, including liabilities assumed. These acquisitions were accounted for by the purchase method. Accordingly, the results of operations of such acquired entities have been included with those of the Company since their respective dates of acquisition. During 1989, the Company acquired the remaining 50% interest in a cable television com- pany from an officer of TCI for an aggregate consideration of $7 million (including 345,438 shares of TCI Class A common stock), plus liabilities assumed amounting to $8 million. 8 Debi Debt is summarized as follows: Weighted-average December 31, interest rate at December 31, 1991 1991 1990 amounts in millions parent company debt: Senior notes 9.9% $ 981 684 Liquid Yield Option" Notes (a) 7.3% 360 — Subordinated debentures (b) 7.0% 245 261 Bank credit facilities .5.5% 365 544 Commercial paper 5.7% 38 — Other debt 1 1,990 1,490 Debt of subsidiaries: Bank credit facilities 6.2% 5,728 5,769 Commercial paper 6.2% 9 7 Notes payable 10.6% 1,512 1,490 Notes payable to Storer 9.0% 475 475 Convertible notes (c) 9.5% 48 48 Other debt 148 208 $9,910 9,487 (a) These subordinated notes, which arc stated net of unamortized discount of$790 million at December 31, 1991, were issued through a public offering. These notes arc not redeemable prior to April 25, 1993, unless the closing sales price of TCI Class A common stock equals or exceeds $27.09 per share for a specified period. Subject to the foregoing, the notes are redeemable, in whole or in part, at the option of the Company at the issue price plus accrued original issue discount. Additionally, the Company will purchase any note, at the option of the holder, as of April 25, 1996, April 25, 2001 or April 25, 2006 at the issue price plus accrued original issue discount through such dates. The Company, at its option, may elect to pay the purchase price in cash and/or shares of Tel Class A common stuck. The notes mature on April 25, 2008. These notes are convertible, at the option of the holders, at any time prior to b ,4inaturity, into an aggregate of 18,975,000 shares of Class A common stock. 920350 • . t,w Ier (b)These subordino._d debentures were issued through public offerings are redeem- able, in whole or in part, at the Company's option, at par plus declining premiums, beginning at various dates. Interest Maturity Cmvenion December 31, Rate Date Purr 1991 1990 amou nt,in millions 7% October, 2012 $17.00 $245 250 114x% October, 2003 None — 1 I $245 261 At December 31, 1991, the 7% subordinated debentures were convertible, at the option of the holders, into an aggregate of 14,402,294 shares of Class A common stock. (c) These convertible notes, which are stated net of unamortized discount of $201 and 2.20 $202 million at December 31, 1991 and 1990, respectively, mature on December 18, 2021. The notes require (so long as conversion of the notes has not occurred) an annual interest payment through 2003 equal to 1.85% of the face amount of the notes. At December 31, 1991, the notes were convertible, at the option of the holders, into an aggregate of 41,941,990 shares of Class .A common stock. During 1991, certain of these notes were converted into 92,000 shares of Class A common stock. The Company's bank credit facilities and various other debt instruments generally contain restrictive covenants which require, among other things, the maintenance of certain earnings, specified cash flow and financial ratios (primarily the ratios of cash flow to total debt and cash flow to debt service, as defined), and include certain limitations on indebtedness, investments, guarantees, dispositions, stock repurchases and dividend payments. The maximum dividends allowable under the most restrictive debt covenant was $1,373 million at December 31, 1991. Certain of the Company's subsidiaries are subject to loan agreements that prohibit or limit the transfer of funds of such subsidiaries to the parent com- pany in the form of loans, advances or cash dividends. The amount of net assets of subsidiaries subject to such restrictions exceeds the Company's consolidated net assets. As security for borrowings under one of its credit facilities, the Company pledged a portion of the common stock (with a quoted market value of approximately $550 million at Decem- ber 31, 1991) it holds of TBS. During 1991, TCI repurchased and cancelled $11 million of its 111/8% senior subordi- nated debentures and $5 million of its 7% convertible subordinated debentures. Also during 1991, the Company repurchased $115 million of the public notes, with rates ranging from 111/2% to 13%, of Heritage Communications, inc. ("Heritage"), an 80.1%-owned subsidiary of TCI. In December of 1990, $100 million of 63/8% convertible debentures of [JAR were redeemed at 101% of the principal amount. In order to provide interest rate protection on a portion of its variable rate indebtedness, the Company has entered into various interest rate exchange agreements pursuant to which it pays fixed interest rates, ranging from 7.72% to 12.56°/n, on notional amounts of $1,161 million. The Company is exposed to credit losses for the periodic settlements of amounts due under these interest rate exchange agreements in the event of nonperformance by the other parties to the agreements. However, the Company does not anticipate nonperformance by the counterparties and, in any event, such amounts were not material at December 31, 1991. The Company has also entered into various interest rate hedge agreements on notional amounts of $835 million which fix the maximum variable interest rates, at rates ranging from ,10% to 12%. The term of such agreements is generally from two to five years. r er .' y' a43 93so 'Is i �1 TCI and certain of its s,..,sidiaries arc required to maintain unused avai.. ility under bank credit facilities to the extent of outstanding commercial paper. Also, TCI and certain of its subsidiaries pay fees, generally 1/4% to 1/8% per annum, on the average unborrowed portion of the total amount available for borrowings under bank credit facilities. Annual maturities of debt for each of the next five years are as follows: Parent iota amounts in millions 1992 $ 89' 624'" 1993 47 279 1994 45 424 1995 104 393 1996 125 503 "Includes $38 million of commercial paper. *Includes $47 million of commercial paper. 2.21 9 Redeemable Preferred Stocks December 31, 1991 1990 amounts in mil ions 12/3 LI Cumulative Compounding Preferred Stock, Series A; issued and outstanding 5,(122,394 shares (a) $ 97 — 63/4% Convertible Preferred Stock, Series H: issued and outstanding 6.20) shares (h) 18 — $115 — (a)The 12%8% Cumulative Compounding Preferred Stock was issued in conjunction with the UAE merger and is stated at its redemption value of $19.25 per share. Dividends are cumulative and accrue at 12'/s% of the redemption value. Accrued dividends are payable quarterly and unpaid dividends are added to the redemption price and accrue dividends until paid. This preferred stock is redeemable at the option of the Company at any time after January 1, 1992 in whole or in part, at the redemption value plus accrued dividends. On January 1, 1999, the Company is required to redeem one-half of the shares then outstanding. The remaining shares outstanding must be redeemed on January 1, 2000. (b)The 63/4a/e Convertible Preferred Stock was also issued in the UAE merger and is stated at its redemption value of$3,000 per share, and each share is convertible into 204 shares of TCI Class A common stock. Unpaid dividends will be added to the redemption value and will accrue interest, until paid, at 6'/4% per annum thereafter. Interest charged on unpaid dividends outstanding for two consecutive quarters will increase to 15% per annum. This preferred stock is subject to optional redemption by the Company, in whole or in part, with mandatory redemption by May 25, 1999, in each case at the redemption value plus accrued dividends. The stock is also subject to redemption by the Company at the option of the holder, in whole or in part, at the redemption price plus accrued dividends. Each of the preferred stock issues are senior to the Company's common stock and equal with each other with respect to the declaration and payment of dividends and liquidating distributions and have no voting rights except the right to vote as a separate class on any amendment to the Company's Restated Certificate of Incorporation (as amended) that would adversely affect the preferences and rights of such holders. • 920859 ,. 10 Stotkholders'A.ynity Common Stock 'l'he Class A common stock has one vote per share and the B common stock has ten votes per share. Each share of Class B common stock is convertible, at the option of the holder, into one share of Class A common stock. Employee Benefit Plans The Company has an Employee Stock Purchase Plan ('BSPP') to provide employees an opportunity for ownership in the Company and to create a retirement fund. Terms of the ESPP provide for employees to contribute up to 10% of their compensation to a trust for investment in TCI common stock. The Company, by annual resolution of the Board of Directors, contributes up to 100% of the amount contributed by employees. Certain of the Company's subsidiaries have their own employee benefit plans. Contributions to all plans aggregated $13 million, $12 million and $9 million for 1991, 1990 and 1989, respectively. Stock Options 2.22 The Company has employment agreements with two officers (who are also directors) pursuant to which each such officer was granted an option, expiring December 31, 1991, to acquire 1,200,000 shares of Class B common stock at an adjusted purchase price of $1.10 per share. In June of 1991, one of the aforementioned officers exercised in full his option to acquire 1,200,000 shares of Class B common stock by delivery of 80,000 shares of Class B common stock valued at $16.50 per share and, on the same date, sold 400,000 of such option shares (at a price of $16.50 per share) to TCI for cash and a short-term note. In December of 1991, the other officer exercised his option to purchase 900,000 shares of Class B common stock by delivery of 63,871 shares of Class A common stock valued at $15.50 per share. Such officer agreed to forego exercising the balance of his option to purchase 300,000 shares of Class B common stock in exchange for the payment by the Company of $4,320,000 as compensation to be applied towards federal and state income taxes withheld by the Company for his account. Two other officers (one of whom is also a director) were granted options to purchase the Company's stock. Each of these officers hold an option to acquire 200,000 shares of Class A common stock at an adjusted purchase price of $10.00 per share. One of such officers received payment of $550,000 from the Company in December of 1991 upon cancellation of a portion of his option covering 100,000 shares. The amount paid was based on the then market value of Class A common stock of $15.50 per share. The remaining options expire in June of 1993. The Company has an Incentive Stock Option Plan CISOP") originally covering 3,000,000 shares of Class A common stock and 900,000 shares of Class B common stock. Options granted under the ISOP must have an option price equal to the fair market value on the date of grant, become exercisable beginning one year from the date of grant and expire five years from the date of grant. There have been no options granted to purchase Class B common stock. The following table presents information relating to options to purchase Class A common stock under the ISOP: 1991 19911 1989 Outstanding at January 1 765,298 921,098 712,268 Granted — — 415,000 Exercised ($3.875 per share) — (139,100) (127,368) Exercised ($10.00 per share) (63,642) (11,400) (78,802) Exercised ($17.25 per share) (15,000) Cancelled (15,000) (5,300) — Outstanding at December 31 671,656 765,298 921,098 Price range at December 31 $10.00 $10.00 $3.875 to $17.25 to $17.25 to $17.25 Exercisable at December 31 671,656 765,298 506,098 Available for grant at December 31 1,080,900 1,065,900 1,060,600 In connection with the JAE merger, TCI assumed certain stock options previously granted by CAE to certain of its employees. These options, which are currently exercisable, represent the right to acquire 1,348,758 shares of ICE Class A common stock at adjusted purchase prices ranging from $8.83 to $18.63 per share. No additional options may be granted by UAE. • 920350 Other The excess of consideration received on debentures converted or options exercised over the par value of the stock issued is credited to additional paid-in capital. At December 31, 1991, there were 78,904,70Z Class A shares of TCI common stock reserved for issuance under exercise privileges related to options and convertible debt securities described in this note 10 and in notes 8 and 9. In addition, one share of Class A common stock is reserved for each share of Class B common stock. 1 1 Income Vexes TCI files a consolidated Federal income tax return with all of its 80°/n or more owned subsidiaries. Consolidated subsidiaries in which the Company owns less than 80% each file a separate consolidated Federal income tax return. TO and such subsidiaries calculate their respective tax liabilities on a separate return basis which are combined in the accompanying consolidated financial statements. 2.23 Income tax benefit (expense) consists of: Yeats ended Dezember 71, 1991 1990 /989 amounts in mJ/inns Current tax benefit (expense), net: Federal $ (3) _ 2 State (7) (4) (7) (10) (4) (5) Deferred tax benefit (expense) (58) (19) 50 $(68) (23) 45 "Total income tax benefit (expense) differed from the expected statutory tax benefit (expense) as follows: Yeats ended December Jl, 1991 1990 1989 e m ants in and/inns Expected statutory tax benefit $ 14 90 11)3 Benefit arising front investment tax credit ("I'T'C'), net of corresponding basis reduction and recapture — 12 15 Limitation on utilization of net operating losses of a subsidiary for financial statement purposes (18) (53) _ Depreciation and amortization not deductible for income tax purposes m ! rP (51) (S0) (,3i) Dividends excluded for income tax purposes 13 _ Loss on disposition of assets not deductible for income tax purposes — (111) (3) Losses of corporate affiliates (4) (21) (27) Minority interests in losses (earnings) of consolidated subsidiaries (13) IS 12 State and local income taxes, net of Federal income tax benefit (5) (3) (4) (Jain on sale of assets for income tax purposes in excess of gains for financial statement purposes — _ (19) Rate differential related to financial statement net operating loss carrvback _ _ 4 Alternative minimum tax (1) Other, net (I) (1) (I) $(68) (23) 45 :92a ' Deferred tax ben—it (expense) results from timing differences in ..te recognition of revenue and expense for income tax and financial statement purposes and from adjustment of deferred tax credits. The sources of these differences and the tax effect of each were as follows: Yvan ended Derem/er 3/, 1991 /990 /989 amounts in millions Excess depreciation and amortization for income tax purposes $(91) (90) (81) Partnership losses for income tax purposes in excess of financial statement losses (40) (43) (26) Differences in recogoition of gains on disposition of assets (25) 10 52 Differences in recognition of compensation relating to stock appreciation rights for income tax and financial statement purposes _ (22) 24 Differences in recognition of CAB merger costs (5) 2'24 Differences in dividend income recognized for financial statement purposes and income tax purposes 4 (If,) Income tax deductions for stock options exercised (5) _ (6) Other, net (1) (5) (9) Deferred tax expense before adjustment of deferred tax credits (163) (166) (46) Benefit ausing from ITC recognized for financial statement purposes, net of corresponding basis reduction and recapture — 12 15 Increase in rl'C carryforward resulting from tax net operating loss carryback _ I)iffcrences in recognition of tax net operating losses for tax and financial statement purposes 105 135 76 Rate differential related to financial statement net operating loss carrvback _ 4 $158) (19) Si) At December 31, 1991, the Company had net operating loss carryforwards for income tax purposes aggregating approximately $1,257 million of which, if not utilized to reduce taxable income in future periods, $31 million expires through 1998, $30 million in 1999, $144 million in 2000, $31 million in 2001, $76 million in 2002, $152 million in 2003, $132 million in 2004, $383 million in 2005 and $278 million in 2006. Substantially all such net operating losses have been recognized for financial statement purposes as a reduction of deferred income taxes. 7o the extent the net operating loss carryforwards are utilized for income tax purposes, deferred tax credits will be restored at the then current rates. Certain subsidiaries of the Company had additional net operating loss carryforwards for income tax purposes aggregating approximately $611 million and these net operating losses are subject to certain rules limiting their usage. At December 31, 1991, one of the Company's subsidiaries (which had filed a separate consolidated Federal income tax return) had a net operating loss carryforward for financial statement purposes of approximately $121 million. At December 31, 1991, the Company had remaining available investment tax credits of approximately $110 million which, if not utilized to offset future Federal income taxes payable, expire at various dates through 2005. Substantially all such investment tax credits have been recognized for financial statement purposes as a reduction of deferred income taxes. lb the extent the investment tax credit carryforward is utilized for income tax purposes, deferred tax credits will be restored at the then current rates. The benefits from investment tax credits are recorded when such credits are used to reduce current or deferred income taxes payable. Certain subsidiaries of the Company had additional investment tax credit carryforwards aggregating approximately $81 million and these investment tax credit carryforwards are subject to certain rules limiting their usage. At December 31, 1991, one of the Company's subsidiaries (which had filed a separate consolidated Federal income tax return) had an investment tax credit carryforward for financial statement purposes of approximately $9 million. Certain of the Federal income tax returns of TO and its subsidiaries which filed separate income tax returns are presently under examination by the Internal Revenue Service ("IRS") • for the years 1978 through 1991. In the opinion of management, any additional tax liability, e.tb not previously provided for, resulting from these examinations, ultimately determined to be 4 903350 payable, should not have material adverse effect on the consolidated fii._.aial position of the Company. The Company pursued a course of action on certain issues (primarily the deductibility of franchise cost amortization) the IRS had raised and such issues were argued before the United States Tax Court. During 1990, the Company received a favorable decision regarding these issues. The IRS has appealed this decision. The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 109, "Accounting for Income "[axes," which will supersede Statement 96, "Accounting for Income Taxes." The Company currently accounts for income taxes under Accounting Principle Board Opinion No. 11, having elected not to adopt Statement 96 prior to its required effective date. Statement 109 will change the Company's method of accounting for income taxes from the deferred method required under APB 11 to the asset and liability method. The Company presently does not know and cannot reasonably estimate the impact of Statement 109 on its financial statements. Statement 109 is effective for fiscal years beginning after December 15, 1992. The Company has not made a determination whether it will restate any prior years or adopt Statement 109 in 1993 on a prospective basis. 2-25 1 2 Commitments and Contingencies In connection with the acquisition from TCI of a 19.9% minority interest in Heritage by Comcast Corporation ("Comcast"), Comcast was granted the right, beginning in July of 1993, to require TCI to purchase or cause to be purchased from Comcast all shares of Heritage directly or indirectly owned by Comcast for either cash or, at 'I'D's election, shares of "I"CI common stock. The Company leases business offices and motion picture theatres, has entered into pole rental agreements and uses certain equipment under lease arrangements. Minimum rental expense under such arrangements, net of sublease rentals, amounted to $99 million, $104 million and $94 million for 1991, 1990 and 1989, respectively. Contingent rentals for 1991, 1990 and 1989 were $5 million, $6 million and $7 million, respectively. Future minimum lease payments under noncancellable operating leases for each of the next five years are summarized as follows (amounts in millions): Yevs ending December 31, 1992 $67 1993 66 1994 62 1995 58 1996 54 It is expected that, in the normal course of business, expiring leases will be renewed or replaced by leases on other properties; thus, it is anticipated that future minimum lease commitments will not be less than the amount shown for 1992. 1 3 Information //bout the Company's Operations The Company principally operates in two industries, cable television ("Cable") and motion picture theatre exhibition ("Theatre"). Subsequent to December 31, 1991, the Company agreed to sell its motion picture theatre business and certain theatre-related real estate assets. However, "[CI's Board of Directors has not adopted a formal plan of disposition in the event that the aforementioned agreement is not consummated. Accordingly, the operations of the Company's motion picture theatre exhibition industry segment will not he reflected as "discontinued operations" unless and until the proposed sale is consummated. t .. .4210350 Operating incom, ., total revenue less operating costs and expet.,s which includes an allocation of corporate general and administrative expenses. Identifiable assets by industry are those assets used in the Company's operations in each industry. The Company has several investments, accounted for under the equity method, which operate primarily in the United States and are principally in the cable television and motion picture theatre exhibition industries. 'lie following is selected information about the Company's operations for 1991, 1990 and 1989: Cable Theatre Total amounts in millions 1991: Revenue $ 3,_116 621 3,827 Operating income $ 760 44 804 Depreciation and amortization $ 670 42 712 4.46 Capital expenditures, including acquisitions $ 667 27 694 Identifiable assets $12,300 710 13,010 1990: Revenue $ 2,942 683 3.625 Operating income $ 628 26 654 Depreciation and amortization $ 631 50 681 Capital expenditures, including acquisitions $ 958 32 990 Identifiable assets $11,535 775 12,310 1989: Revenue $ 2,362 664 3,026 Operating income $ 516 53 569 Depreciation and amortization $ 491 47 538 Capital expenditures, including acquisitions $ 1,454 57 1,511 Identifiable assets $10,547 885 11,432 1 4 Quarterly hinancia/bitot ration (Undueliiec/) 1sT 2nd 3rd 4th Quarter Quarter Quarter Quarter amounts in millions, except per than amounts 1991: Revenue $963 922 975 967 Operating income $210 204 212 179 Gain (loss) on disposition of assets $ — (2) (2) 40 Income tax expense $ (20) (7) (20) (21) Net loss $ (25) (25) (26) (26) Loss per common share $(.07) (.07) (.07) (.07) 1990: Revenue $861 890 942 932 "Theatre restructuring charge $ — — — (26) Operating income $ 165 173 192 124 Gain (loss) on disposition of assets $ — 31 (12) (36) Income tax expense $ (8) (4) (2) (9) Net loss $ (67) (44) (52) O24) Loss per common share $(.19) (.12) (.15) (.35) /'/c-(nmmuniodiorzv Luc and Subsidiaries INDEPENDENT AUDITOR_ REPORT The Board of Directors and Stockholders Tele-Communications, Inc.: We have audited the accompanying consolidated balance sheets of Tele-Communica- tions, Inc. and subsidiaries as of December 31, 1991 and 1990, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1991. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. 2 27 We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Tele-Communications, Inc. and subsidiaries as of December 31, 1991 and 1990, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1991, in conformity with generally accepted accounting principles. K ? 7J KPMG Peat Marwick Denver, Colorado March 21, 1992 41. • 9202 CORPORATE DATA Officers Executive Offices Bob Magness Terrace Tower II Chairman of the Board 5619 DTC Parkway John C.Malone,Ph.D. Englewood,CO 80111-3000 President and Chief Executive Officer 303-267-5500 Donne F. Fisher,C.P.A. Board of Directors Executive Vice President Donne F. Fisher J.C. Sparkman John W.Gallivan Executive Vice President Kim Magness 2.R8 Bob Magness Fred A.\Tierra Executive Vice President John C.Malone Robert A.Naify Brendan R.Clouston Paul J.O'Brien Executive Vice President Gary K. Bracken,C.P.A. Auditors Senior Vice President and Controller KPMG Peat Marwick Stephen M. Brett Denver,Colorado Senior Vice President and Transfer Agents and Registrar General Counsel First Security Bank of Utah,N.A. Robert J. Lewis Salt Lake City, Utah Senior Vice President The Bank of New York Corporate Development New York, New York Larry E. Romrell Counsel Senior Vice President Law Offices of Jerome H. Kern Bernard W.Sehotrers New York,New York Senior Vice President, Finance and Treasurer Sherman &Howard Robert N.Thomson Denver,Colorado Senior Vice President The Company's securities are traded in the Communications and Policy Planning National Association of Securities Dealers(NASD) Gary S. Howard National Market System under the symbols TCOMA, Vice President TCOMB for the Common Stock,TCOMH for the Merlin L.Anderson Convertible Debentures, and TCOMG for the Liquid Assistant Vice President and Yield Option"Notes. Assistant Controller- The Form 10-K filed with the Securities and Exchange Commission may be obtained without David R. Humphrey,C.P.A. charge by written request to the Investor Relations Assistant Vice President Department at Tele-Communications,Inc., Financial Reporting P.O.Box 5630,Denver,Colorado 80217 Colin R. Stoner,C.P.A. or by calling(303)843-8877. Assistant Vice President Taxation Patti,r''O'Brien Secretary '°Merrill Lynch&Co.,Inc. ©1992 I'elcCommunications,Inc. Gerald Sokol Assistant Treasurer Editor:Carolyn M.Smith:Culenherg.Damn.Simon&Miller Design:111 r'„nu o:ig.,Group Photography: ArlWpc Typography 4,..n l}pcc ,� IIIusDnien:Ia,,, ,. � (2 I /, TERRACE TOWER II Post Office Box 5630 5619 DTC Parkway Denver,Colorado 80217-5630 Englewood,CO 80111-3000 (303)2675500 .TELECOMMUNICATIONS,INC. October 28, 1992 CERTIFIED MAIL RETURN RECEIPT REQUESTED Mr. George Kennedy. Chairman Weld County Board of County Commissioners 915 10th Street Greeley, CO 80631 Dear Mr. Kennedy: The purpose of this letter is to notify you that the contemplated sale of assets of the cable television system serving your community, including the assignment of the franchise rights, as previously approved by you, from Southwest Cablevision, Ltd. to TCI Cablevision of Colorado, Inc., was completed on September 30, 1992, and effective as of that date, TCI Cablevision of Colorado, Inc. became the new cable operator in your community. TCI Cablevision of Colorado, Inc. does hereby accept the franchise granted pursuant to Ordinance No. 94 adopted December 14, 1981, Resolution adopted September 15, 1982, and Grant of Franchise dated September 15, 1982, as amended by Resolution adopted December 30, 1985, Resolution adopted February 26, 1986, Resolution adopted June 20, 1988, and Resolution adopted September 9, 1992 (the "Franchise"), and does hereby agree that it will comply with and abide by all of the provisions, terms, and conditions of the Franchise, subject to federal, state, and local law. TCI Cablevision of Colorado, Inc. intends to continue to provide quality cable service to the subscribers within your community and to be a responsible corporate citizen therein. Thank you for your cooperation in handling our request. If you have any questions, please do not hesitate to contact Kathryn Stewart, the system manager, at 356- 1079. Sincerely, TCI CABLEVISION OF COLORADO, INC. Terrel E. Davis Vice President An Equal Opportunity Employer ol)G-, 9:e850 a 77) • i 0 a) › o o .-ItJ r0 `:5 -H �`') O }-i U) W • rd U) �J d • 0 .r 0) ooi a) ant a) >, 0 -PP 0 b'CUcnV k >r A O O -P -P >r a) U qo a) O j ri ri r0 O a) • ri U in a) B � S mc�7 i II .Ln ill o 111" Q IT • W RI J a• m � tic m Q •` °V M M1 C cc r- 0 G Q. U a \‘,4e) cn Hello