SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest event reported) FEBRUARY 1, 2001
LIBERTY LIVEWIRE CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 0-1461 13-1679856
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
520 Broadway, Santa Monica, California 90401
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (310) 434-7000
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(Former name or former address, if changed from last report)
LIBERTY LIVEWIRE CORPORATION
FORM 8-K/A
FEBRUARY 1, 2001
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TABLE OF CONTENTS
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
a. Financial Statements of business acquired Page 3
b. Pro forma condensed financial information Page 21
2
Item 7. FINANCIAL STATEMENTS, PRO FORMA INFORMATION AND EXHIBITS
a. Financial Statements of business acquired:
The audited financial statements of Group W Network Services for the
year ended December 31, 1999 are being filed as part of this report
and include:
(1) Independent Auditor's Report
(2) Combined Balance Sheet at December 31, 1999
(3) Combined Statement of Operations for the year ended
December 31, 1999
(4) Combined Statement of Cash Flows for the year ended
December 31, 1999
(5) Notes to Combined Financial Statements
Audited financial statements of Group W Network Services for the
year ended December 31, 2000 will be filed as an amendment to this
8-K/A as soon as practical.
The unaudited financial statements of Group W Network Services for the
year ended December 31, 2000 are being filed as part of this report
and include:
(1) Combined Balance Sheet at December 31, 2000 (including Asia
Broadcast Centre Pte Ltd acquired 11/30/00)
(2) Combined Statement of Operations for the year ended
December 31, 2000 (excludes Asia Broadcast Centre Pte Ltd)
(3) Separate Asia Broadcast Centre Pte Ltd Statement of
Operations for the year ended November 30, 2000
3
GROUP W NETWORK SERVICES
(A Wholly Owned Operation of CBS Cable,
a division of CBS Corporation)
Combined Financial Statements
December 31, 1999
(With Independent Auditors' Report Thereon)
4
INDEPENDENT AUDITORS' REPORT
The Management
Group W Network Services:
We have audited the accompanying combined balance sheet of Group W Network
Services (a wholly owned operation of CBS Cable, a division of CBS Corporation)
as of December 31, 1999, and the related combined statements of operations and
cash flows for the year then ended. These combined financial statements are the
responsibility of Group W Network Services' management. Our responsibility is to
express an opinion on these combined financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. 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 audit provides a
reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Group W Network
Services as of December 31, 1999, and the results of its operations and its cash
flows for the year then ended in conformity with accounting principles generally
accepted in the United States of America.
/s/ KPMG LLP
June 23, 2000
5
GROUP W NETWORK SERVICES
(A Wholly Owned Operation of CBS Cable,
a division of CBS Corporation)
Combined Balance Sheet
December 31, 1999
ASSETS
Current assets:
Cash and cash equivalents $ 2,595,317
Accounts receivable:
Trade, net of allowance for doubtful accounts of $450,426 2,806,849
Non-trade 82,050
Related party 747,285
Marketable equity securities 550,000
Other current assets 666,798
------------
Total current assets 7,448,299
Property and equipment, net of accumulated
depreciation and amortization of $57,204,856 40,442,410
Investment in and advances to unconsolidated affiliate 3,029,646
Intangibles and other long-term assets 887,160
------------
Total assets $ 51,807,515
============
LIABILITIES AND INVESTED EQUITY
Current liabilities:
Short-term bank debt $ 3,720,713
Short-term related party debt 216,379
Accounts payable and accrued expenses 3,489,540
Deferred revenue 1,310,077
Current portion of capital lease obligation 896,453
------------
Total current liabilities 9,633,162
Capital lease obligation 7,155,114
Long-term bank debt 4,586,324
Long-term related party debt 1,771,345
Deferred income taxes 4,050,446
------------
Total liabilities 27,196,391
------------
Minority interest deficit (1,320,989)
Commitments and contingencies
Invested equity 25,932,113
------------
Total liabilities and invested equity $ 51,807,515
============
See accompanying notes to combined financial statements
6
GROUP W NETWORK SERVICES
(A Wholly Owned Operation of CBS Cable,
a division of CBS Corporation)
Combined Statement of Operations
Year ended December 31, 1999
Revenues, net (including $3,338,000 from
related party) $ 42,000,992
------------
Costs and expenses:
Operating expenses (including $6,512,440
to related party) 35,778,644
Depreciation and amortization 7,966,058
------------
Total costs and expenses 43,744,702
------------
Operating loss (1,743,710)
Other expense, net (67,474)
Minority interest (377,160)
Equity in income of unconsolidated affiliate 169,476
Interest expense, net (1,579,280)
------------
Loss before income tax benefit (3,598,148)
Income tax benefit 1,710,000
------------
Net loss $ (1,888,148)
============
See accompanying notes to combined financial statements
7
GROUP W NETWORK SERVICES
(A Wholly Owned Operation of CBS Cable,
a division of CBS Corporation)
Combined Statement of Cash Flows
Year ended December 31, 1999
Cash flows from operating activities:
Net loss $(1,888,148)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 7,966,058
Bad debt expense 230,724
Equity in income of unconsolidated affiliate (169,476)
Other noncash items (955,758)
Increase in accounts receivable 481,548
Decrease in other current assets (411,308)
Decrease in intangibles and other long-term assets (139,868)
Decrease in accounts payable and accrued expenses (38,710)
Increase in deferred revenue 1,083,617
-----------
Net cash provided by operating activities 6,158,679
-----------
Cash flows from investing activities:
Acquisition of property and equipment (2,424,933)
-----------
Net cash used in investing activities (2,424,933)
-----------
Cash flows from financing activities:
Repayment of related party debt, net (13,888)
Repayment of bank debt (704,836)
Reduction of obligation on capital leases (868,410)
-----------
Net cash used in financing activities (1,587,134)
-----------
Effects of the exchange rate changes on cash and cash equivalents 83,442
-----------
Net increase in cash and cash equivalents 2,230,054
Cash and cash equivalents at beginning of year 365,263
-----------
Cash and cash equivalents at end of year $ 2,595,317
===========
See accompanying notes to combined financial statements.
8
GROUP W NETWORK SERVICES
(A Wholly Owned Operation of CBS Cable,
a division of CBS Corporation)
Notes to Combined Financial Statements
Year ended December 31, 1999
(1) THE COMPANY AND NATURE OF OPERATIONS
Group W Network Services (GWNS or the Company) is an independent
full-service program production, origination, and satellite distributor
of video programming predominately in the United States and Singapore.
GWNS's operations in Singapore are conducted through Westinghouse
Electric (Asia-Pacific) Holdings Ltd.'s (WEAPHL) 51% interest in Group W
Yarra Broadcasting Pte. Ltd. (GWYB) and 49% interest in Asia Broadcast
Centre Pte. Ltd. (ABC). GWNS is a wholly owned operation of CBS Cable, a
division of CBS Corporation (CBS). On May 4, 2000, CBS was merged into
Viacom Inc. with Viacom Inc. as the surviving company. GWNS has never
been operated as a separate legal entity, but rather an integral part of
CBS Cable.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF PRESENTATION
The accompanying combined financial statements have been prepared
in accordance with generally accepted accounting principles.
Included in the accompanying combined statement of operations are
net revenues and costs and expenses that relate directly to GWNS.
Operating expenses include those accounts that relate directly to
GWNS as well as allocations from CBS (see note 10). These
allocations are considered by management to be reasonable under
the circumstances. However, there can be no assurance that such
allocations will be indicative of future results.
The financial information included herein may not necessarily
reflect the results of operations, financial position, and cash
flows of GWNS in the future or what the results of operations,
financial position, and cash flows would have been had it been a
separate, stand-alone entity during the period presented. All
significant intercompany accounts and transactions within GWNS
have been eliminated. Affiliated companies in which GWNS does not
have a controlling interest are accounted for using the equity
method.
(b) CASH AND CASH EQUIVALENTS
GWNS's domestic operations do not maintain any cash balances. All
domestic cash transactions are handled through CBS intercompany
accounts and are, therefore, reflected as adjustments to invested
equity. GWNS considers all investment securities with a maturity
of three months or less when acquired to be cash equivalents.
(c) INVESTMENTS IN MARKETABLE EQUITY SECURITIES
Investments are stated at fair value based on market quotes.
Adjustments to the fair value of equity investments, which are
classified as available for sale, are recorded in invested equity.
9
(d) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, net of accumulated
depreciation and amortization. Depreciation and amortization are
computed on a straight-line basis over the estimated useful lives
of the assets (generally 3 to 12 years) or, in the case of
leasehold improvements, over the shorter of the term of the lease
or the useful life of the improvement.
(e) TRANSPONDER RIGHTS
Transponder rights are amortized on the straight-line basis over
12 years, which is the life of the related lease.
(f) INCOME TAXES
GWNS is not subject to income taxes directly. However, the
accompanying combined financial statements reflect the accounting
for income taxes as if GWNS were to have been a separate tax filer
in accordance with the provisions of Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income
Taxes." Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax basis. Deferred tax assets
and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment
date.
GWYB was granted pioneer status under the Singapore Economic
Expansion Incentives (Relief from Income Tax) Act (Chapter 86),
effective December 1, 1995 for a period of 7 or 8 years, depending
on the stipulated conditions being satisfied. Non-pioneer
activities of the subsidiary will be taxed at the then-current
statutory tax rate.
(g) REVENUE RECOGNITION
Revenue includes income from the sale of transponder time and
studio and other postproduction services. Cash received for
services paid to delivery of such services is recorded as deferred
revenue. The revenues and related expenses are recognized in the
combined statement of operations when the services are provided.
(h) USE OF ESTIMATES
The presentation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and
liabilities at the date of the combined financial statements, and
the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
(i) FAIR VALUE OF FINANCIAL INSTRUMENTS
In estimating the fair value of financial instruments, GWNS has
assumed that the carrying amount of cash, accounts receivable,
accounts payable, and accrued expenses approximates fair value
because of the short-term nature of these instruments. The
carrying value of long-term bank debt is assumed to approximate
fair value due to the variable interest rate due on the debt. It
is not practical to estimate the fair market value of the amount
due to CBS and affiliates due to the related party nature of the
underlying transactions.
10
(j) IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE
DISPOSED OF
Intangible assets and all other long-lived assets are evaluated
whenever events and circumstances indicate that the remaining
estimated useful life of the asset may warrant revision or the
remaining carrying value of such asset may not be recoverable.
When factors indicate that an asset should be evaluated for
possible impairment, GWNS uses an estimate of the related asset's
undiscounted future cash flows over the remaining life of that
asset in measuring recoverability. If identifiable cash flows are
not available for the specific asset, GWNS evaluates
recoverability of the specific business to which the asset
relates. If such an analysis indicates impairment has in fact
occurred, GWNS writes down the carrying value of the asset to its
estimated fair value and recognizes a charge in costs and expenses
in the accompanying combined statement of operations. Estimated
fair value is generally measured by discounting estimated future
cash flows or an active market price for the asset.
(k) STOCK PLANS AND STOCK-BASED COMPENSATION
GWNS provides stock option and incentive plans in which certain of
GWNS's key employees are eligible to participate. SFAS No. 123,
"Accounting for Stock-Based Compensation," encourages, but does
not require, companies to record compensation cost for stock-based
employee compensation plans at fair value. GWNS has chosen to
continue to account for stock-based compensation using the
intrinsic value method as prescribed in Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees."
Based on the number of the options outstanding and the historical
and expected future trends of factors affecting valuation of those
options, management believes that any compensation cost which
would be expected on the combined financial statements under SFAS
No. 123 attributable to options granted is immaterial.
(l) FOREIGN EXCHANGE
Assets and liabilities of foreign operations are translated at the
rate of exchange in effect on the combined balance sheet date;
revenue and expenses are translated at the average exchange rates
in effect during the year. The resulting translation adjustments
are reflected in the cumulative foreign currency translation
adjustments in invested equity.
(3) PROPERTY AND EQUIPMENT
Property and equipment as of December 31, 1999 comprise the following:
Land $ 2,375,250
Buildings 486,661
Leasehold improvements 9,579,791
Furniture and fixtures 3,356,959
Technical and transportation equipment 71,765,869
Construction-in-process 232,736
Leased equipment under capital leases 9,850,000
------------
97,647,266
Less accumulated depreciation and amortization (57,204,856)
------------
Property and equipment, net $ 40,442,410
============
Depreciation and amortization expense was $7,861,886 for the year ended
December 31, 1999.
11
(4) INVESTMENT IN UNCONSOLIDATED AFFILIATE
The 49% ownership interest in ABC is accounted for under the equity
method of accounting. The following summarized audited financial
information reflects its balance sheet information as of November 30,
1999 and its results of operations for the year then ended:
Statement of operations data:
Revenue $11,534,824
Net profit 345,870
-----------
Balance sheet data:
Current assets $ 1,863,273
Noncurrent assets 12,800,577
-----------
Total assets $14,663,850
===========
Current liabilities $ 3,119,496
Noncurrent liabilities 12,143,175
-----------
Total liabilities $15,262,671
===========
(5) ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses as of December 31, 1999 comprise
the following:
Accounts payable $1,505,120
Accrued salaries and benefits 399,946
Other 1,584,474
----------
$3,489,540
==========
(6) DEBT
(A) RELATED PARTY DEBT
GWYB has amounts owing in local currency to its minority
shareholder which are unsecured and have no fixed terms of
repayment. In respect of the interest-bearing loan, interest of 5%
to 6% per annum was charged during 1999. Interest expense was
$59,424 for the year ended December 31, 1999. GWNS has imputed an
interest cost on the portion of non-interest-bearing debt due to
related parties. The imputed interest rate used was based on the
average annual rate charged for the interest-bearing debt due to
related parties. Interest expense imputed was $29,712 for the year
ended December 31, 1999. The amounts owing are as follows:
12
Current:
Interest-free $ 216,379
----------
Long term:
Interest-free 590,448
Interest-bearing 1,180,897
----------
1,771,345
----------
Total $1,987,724
==========
As of December 31, 1999, GWYB has a minority interest receivable
of $1,320,989.
(B) BANK DEBT
WEAPHL fixed-advance facility $2,290,981
GWYB 10-year term loan 5,420,997
GWYB 5-year term loan 595,059
----------
8,307,037
Less current maturities 3,720,713
----------
Long-term debt, net $4,586,324
==========
The WEAPHL fixed-advance facility relates to drawdowns on the May
1995 $4,500,000 fixed-advance facility, which is denominated in
local currency. The borrowings bear interest at the prevailing
SWAP Offer Rate plus 1% per annum. The related interest rate in
1999 was between 2.29% and 4.07%. The term of each advance is 1,
2, 3, or 6 months at WEAPHL's option, with the ability to
refinance the advance. The associated covenants require WEAPHL to
maintain positive net worth at all times.
The GWYB 10-year local currency term loan is unsecured and bears
interest at the prevailing SWAP Offer Rate plus 1-1/2% per annum.
The related interest rate in 1999 was between 2.79% and 4.57%. The
loan is repayable over 30 quarters of varying amounts which began
on February 1, 1998.
The GWYB 5-year local currency term loan is unsecured and bears
interest at the prevailing three-month SWAP Offer Rate plus 1-1/2%
per annum. The related interest rate in 1999 was between 2.73% and
4.87%. The loan is repayable over 12 quarters of equal amounts
which began on October 1, 1998.
GWYB also has a $600,000 overdraft facility, which is denominated
in local currency, for which GWYB had no balance outstanding at
December 31, 1999. The interest rate on the overdraft facility is
1/4% above the prevailing prime rate of the lender.
The GWYB term loans and overdraft facility are guaranteed by CBS
for up to approximately $3,800,000. The term loans and overdraft
facility also contain covenants requiring GWYB to maintain certain
financial ratios including a limitation that total liabilities to
net worth of the combined joint venture companies (GWYB and ABC)
not exceed a specified amount. Covenants relevant to the GWYB
10-year term loan also include a limitation that the combined GWYB
and ABC debt service ratio not exceed a specified amount.
As of December 31, 1999, the company was in compliance with the
financial convenants.
13
Maturities of long-term debt are as follows:
YEAR ENDING DECEMBER 31 AMOUNT
----------------------- ------
2000 $ 3,720,713
2001 1,231,376
2002 1,033,024
2003 1,033,024
2004 1,033,024
Thereafter 255,876
-----------
$ 8,307,037
===========
Interest expense was $289,039 for the year ended December 31,
1999.
(7) INVESTED EQUITY
As GWNS is an operating unit and not a distinct legal entity (see note
1), there are no customary equity and capital accounts recorded on the
accompanying combined balance sheet. Instead, invested equity is
maintained by GWNS and CBS to account for interunit transactions as
described herein. Invested equity consists of net loss and other
transactions for the year ended December 31, 1999 as shown below:
Balance at beginning of year $ 27,129,576
Net loss (1,888,148)
Unrealized gain on marketable equity securities 212,554
Foreign currency translation adjustment 83,442
Cash disbursements on behalf of GWNS in
excess of cash receipts 394,689
------------
Balance at end of year $ 25,932,113
============
(8) INCOME TAXES
The components of income tax benefit at December 31, 1999 are as follows:
Current:
Federal $ 639,000
State 137,000
----------
776,000
----------
Deferred:
Federal 769,000
State 165,000
----------
934,000
----------
$1,710,000
==========
14
If GWNS were to have been a separate tax filer, a hypothetical deferred
tax liability, primarily representing the tax-effected accelerated
depreciation, would have amounted to approximately $4,050,446 at December
31, 1999. At year-end 1999, GWYB had unabsorbed wear and tear allowances
amounting to $2 million for offset against future taxable profits from
the same trade for which the pioneer status was awarded. This offset is
subject to certain provisions. In assessing the realizability of this
allowance, management considers whether it is more likely than not that
some portion or all of the allowance will not be realized. Management has
determined that a valuation allowance for the entire amount is necessary.
(9) COMMITMENTS AND CONTINGENCIES
GWNS currently leases equipment under noncancelable operating leases
expiring in various years through 2004. Certain leases provide for
renewal options. Rental payments may be adjusted for cost increases.
Operating lease expense was $786,000 in 1999.
In January 1995, GWNS entered into an agreement to lease service on a
satellite transponder for approximately 12 years. The transaction was
treated as a capital lease and the recorded lease obligation bears
interest at 7.75%. The terms of the lease agreement require GWNS to
notify and obtain prior written consent from the lessor prior to
assigning or transferring its rights or obligations under the lease. Upon
request of an assignment or transfer, the lessor will not unreasonably
withhold consent; however, the lessor may elect, in lieu of consenting to
the assignment or transfer, to terminate the lease agreement. In the
event that GWNS resells any services provided under the lease agreement
or otherwise permits the use of such services by any third party, GWNS
will be the guarantor of compliance by the third party and any breach by
a third party will be deemed to have been committed by GWNS.
Future minimum annual rental commitments under such leases at
December 31, 1999 are as follows:
OPERATING CAPITAL
YEAR ENDING DECEMBER 31 LEASES LEASES
----------------------- ---------- -------
2000 $ 745,385 2,288,056
2001 688,238 2,103,197
2002 396,545 2,040,000
2003 249,014 2,040,000
2004 83,005 2,040,000
Thereafter -- 4,080,000
----------- ----------
$ 2,162,187 14,591,253
===========
Less estimated executory costs included
in capital lease (1,680,000)
----------
Net minimal lease payments under
capital lease 12,911,253
Less amount representing interest (4,859,686)
----------
Present value of net minimum
lease payments under capital lease $ 8,051,567
===========
15
(10) RELATED PARTY TRANSACTIONS
(a) REVENUE
GWNS provides program production origination and satellite
distribution of video programming to various CBS-owned cable
programming entities. Revenues earned by GWNS from these related
parties were $3,338,000 during 1999.
(b) SERVICE AGREEMENT
Pursuant to a service agreement, CBS Cable provides cash
management services to GWNS. The net excess or deficiency of
disbursements by CBS Cable over cash receipts to CBS Cable will
result in a payable to or receivable from CBS Cable for such
amount. At December 31, 1999, cash disbursements on behalf of the
Company exceeded CBS Cable's cash receipts on behalf of the
Company.
(c) GENERAL ALLOCATIONS
CBS allocates certain costs incurred on behalf of GWNS in
accordance with a service agreement. Such costs include: vacation
liability, payroll processing costs, insurance expense, management
information systems, human resources, legal services, and
accounting services. Allocated costs totaled $2,512,440 for the
year ended December 31, 1999.
(d) SAVINGS PROGRAM AND PENSION PLAN
GWNS employees participate in the Employee Investment Fund 401(k)
Savings Program (a defined contribution plan), the CBS Combined
Pension Plan (a defined benefit plan), and other postretirement
and postemployment medical and welfare plans of CBS.
Every full-time employee of GWNS is eligible to participate in the
CBS Employee Investment Fund (EIF) upon the first day of
employment. Eligible employees contribute a percentage of their
base pay up to the annual Internal Revenue Service (IRS) limit and
are immediately vested in their own contributions. CBS has a
performance-based discretionary match and may make contributions
matching a portion of employees' before-tax savings up to a
maximum of 5% of employee contributions. Eligible employees are
fully vested in the current value of any CBS contributions after
three years of service. The plan provisions are governed by the
plan document.
The CBS Combined Pension Plan (Pension Plan) is available to
employees hired before March 31, 1999. Plan provisions are
governed by the plan document. The Pension Plan includes three
formerly separate plans, which were merged into one plan effective
December 31, 1997. The participants of the three formerly separate
plans continue to be governed by the eligibility rules in the
respective plan documents in effect prior to the merger. The
employees of GWNS, if eligible, participate in the Group W
Component of the Pension Plan. Effective April 1, 1999, the CBS
Cash Balance Plan was created as a component of the Pension Plan
to provide a "cash balance" benefit formula for certain active
participants in the Pension Plan.
Under a service agreement with CBS Cable, CBS Cable shall be
reimbursed for expenses incurred in providing the employee benefit
services described above. The costs associated with the Savings
Program, the Pension Plan, and other postretirement and
postemployment medical and welfare plans are recorded as expenses
in the accompanying combined statement of operations.
These obligations are being accounted for by GWNS consistent with
multiemployer plans.
16
(11) YEAR 2000
GWNS has not experienced any significant disruptions to our financial or
operating activities caused by the failure of our computerized systems
resulting from Year 2000 issues. In addressing this matter, we had
undertaken efforts to identify, modify, or replace and then test systems
to ensure Year 2000 compliance by December 31, 1999. These costs were
funded through our cash flows from operations. All system modification
costs were expensed as incurred. The Year 2000 effort also included
communications with all significant third-party suppliers and customers
to determine the extent to which our systems were vulnerable to those
parties' failures to reach Year 2000 compliance. There has been no
significant loss of revenue, unanticipated costs, or service
interruptions. GWNS does not expect any future failure of our third-party
suppliers or customers to have a material adverse impact on our future
business operations or financial results.
(12) SUPPLEMENTAL CASH FLOW INFORMATION
During 1999, GWNS remitted cash of approximately $1,548,400 and $27,000
for third-party interest and income taxes, respectively, during 1999.
During 1999, GWNS accepted a $75,000 note receivable and shares of common
stock with a then-fair market value of $225,000 from a customer in
satisfaction of a $300,000 trade accounts receivable. As of December 31,
1999, an unrealized gain of $212,554, net of taxes of $112,446, was
recorded related to these shares.
(13) SUBSEQUENT EVENT
On May 26, 2000, WEAPHL amended its fixed advance facility decreasing the
available borrowing from $4,500,000 to $2,975,000. The interest rate on
the new facility is the prevailing SWAP Offer Rate plus 1/2% per annum.
The new facility is also secured by a guarantee from Viacom Inc.
17
GROUP W NETWORK SERVICES
(A Wholly Owned Operation of CBS Cable,
a division of CBS Corporation)
Combined Balance Sheet
December 31, 2000
ASSETS
Current assets:
Cash and cash equivalents $ 2,161,342
Accounts receivable:
Trade, net of allowance for doubtful accounts
of $521,618 3,240,050
Non-trade 1,208,909
Note Receivable 1,273,394
Other current assets 3,389,073
-----------
Total current assets 11,272,770
Property and equipment, net of accumulated
depreciation and amortization of $69,892,320 47,123,853
Intangibles and other long-term assets, net 11,403,009
-----------
Total assets $69,799,632
===========
LIABILITIES AND INVESTED EQUITY
Current liabilities:
Short-term bank debt $ 2,809,924
Accounts payable and accrued expenses 3,924,040
Current portion of capital lease obligation 850,000
-----------
Total current liabilities 7,583,964
Interdivisional liability 31,079,142
Capital lease obligation 6,232,000
Long-term bank debt 10,013,804
-----------
Total liabilities 54,908,910
-----------
Minority interest deficit --
Commitments and contingencies
Invested equity 14,890,722
-----------
Total liabilities and invested equity $69,799,632
===========
18
GROUP W NETWORK SERVICES
(A Wholly Owned Operation of CBS Cable,
a division of CBS Corporation)
Combined Statement of Operations
Year ended December 31, 2000
Revenues, net $ 42,823,200
------------
Costs and expenses:
Operating expenses 33,699,100
Depreciation and amortization 9,620,500
------------
Total costs and expenses 43,319,600
------------
Operating loss (496,400)
Other expense, net (20,500)
Minority interest (1,083,000)
Interest expense, net (1,576,900)
------------
Loss before income tax benefit (3,176,800)
Income tax provision 2,500
------------
Net loss $ (3,179,300)
============
19
ASIA BROADCAST CENTRE PTE LTD
Statement of Operations
Year ended November 30, 2000
Revenues, net $ 3,146,500
-----------
Costs and expenses:
Operating expenses 1,711,000
Depreciation and amortization 872,300
-----------
Total costs and expenses 2,583,300
-----------
Operating income 563,200
Other expense, net (400)
Minority interest (91,200)
Interest expense, net (469,400)
-----------
Income before income tax 2,200
Income tax provision 0
-----------
Net income $ 2,200
===========
20
b. Pro Forma Condensed Financial Information
Liberty Livewire Corporation, Goup W Network Services and Asia Broadcast
Centre Pte Ltd Pro Forma Condensed Combined Financial Statements
(Unaudited):
I. Balance Sheet as of December 31, 2000
II. Statement of income for the year ended December 31, 2000
III. Footnotes to Financial Statements
Liberty Livewire Corporation ("Liberty Livewire") purchased
substantially all of the U.S. assets of the business unit known as
Group W Network Services ("Group W") and 100% of the outstanding
capital stock of Asia Broadcast Centre Pte Ltd ("ABC") and Group W
Yarra Broadcast Pte Ltd. (collectively, the "Singapore
Corporations") on February 1, 2001 for an aggregate consideration
of $116,527,480 including $7,360,000 which represents the
assumption of debt. The following pro forma condensed financial
information and explanatory notes are presented to show the
estimated pro forma effect of the acquisition of Goup W and the
Singapore Corporations on Liberty Livewire's historical results of
operations. The acquisition is reflected in the pro forma
condensed financial information using the purchase method of
accounting.
The Pro Forma Condensed Balance Sheet as of December 31, 2000
assumes the acquisition was consummated on that date. The Pro
Forma Condensed Income Statement assumes the acquisition was
consumated on January 1, 2000 for the twelve months ended December
31, 2000. Such Pro Forma Condensed Financial Information is not
necessarily indicative of the financial position or results of
operations as they may be in the future or as they might have been
had the acquisition been effected on the assumed date.
The pro forma adjustments are based upon currently available
information and upon certain assumptions that management of
Liberty Livewire believes are reasonable. The Group W acquisition
will be recorded based upon the estimated fair market value of the
net assets acquired at the date of acquisition. The adjustments
included in the unaudited pro forma condensed combining financial
statements represent the Company's preliminary estimates based
upon available information. Although Liberty Livewire does not
believe that such preliminary estimates will differ significantly
from the actual adjustments, no assurance can be given.
21
The unaudited pro forma condensed combined financial statements
are based on the historical financial statements of each of
Liberty Livewire, Group W and ABC, and the assumptions and
adjustments described in the accompanying notes. Liberty Livewire
believes that the assumptions on which the unaudited pro forma
financial statements are based are reasonable. The unaudited pro
forma consolidated financial statements are provided for
informational purposes only and do not purport to represent what
the Company's financial position or results of operations actually
would have been if the foregoing transactions occurred as of the
dates indicated or what such results will be for any future
periods.
The Pro Forma Condensed Financial Information should be read in
conjunction with the historical financial statements and the notes
thereto of Liberty Livewire, the audited historical financial
statements and notes thereto of Group W, and notes to the
Pro Forma Condensed Financial Information.
22
LIBERTY LIVEWIRE
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(IN THOUSANDS)
ASSETS
HISTORICAL
----------------------------------
(1) (2) (3)
LIBERTY
LIVEWIRE GROUP W ABC LIBERTY
AS OF AS OF N/A LIVEWIRE
DECEMBER 31, DECEMBER 31, PRO FORMA COMBINED
2000 2000 SUBTOTAL ADJUSTMENTS PRO FORMA
------------------------------------------------- ------------- ---------
Cash and marketable $ 24,880 $ 2,161 $ 27,041 $ (2,161)(4) $ 24,880
securities
Trade accounts
receivable, net 106,158 5,722 111,880 111,880
Other current assets 26,104 3,390 29,494 29,494
------------------------------------------------- ----------- -----------
Total current assets 157,142 11,273 168,415 (2,161) 166,254
Property and equipment,
net 366,944 47,124 414,068 414,068
Investments and Other 9,690 -- 9,690 9,690
Goodwill, net 582,171 7,577 589,748 51,992(4) 641,740
Identifiable
intangibles, net 49,025 1,250 50,275 50,275
Other assets, net 10,873 2,576 13,449 13,449
------------------------------------------------- ----------- -----------
Total assets $ 1,175,845 $ 69,800 $ 62,454 $ 49,831 $ 1,295,476
================================================= =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and
accrued liabilities $ 76,627 $ 4,006 $ 80,633 $ 80,633
Other current liabilities 42,797 2,728 45,525 45,525
------------------------------------------------- ----------- -----------
Total current liabilities 119,424 6,734 126,158 126,158
Long term debt and
capital lease obligations 492,573 17,096 509,669 $ 95,801(4) 605,470
Other liabilities 10,721 31,079 41,800 (31,079)(4) 10,721
------------------------------------------------- ----------- -----------
Total liabilities 622,718 54,909 677,627 64,722 742,349
Stockholders' equity
Common stock 370 2,796 3,166 (2,796)(4) 370
Additional paid in
capital 570,185 14,347 584,532 (14,347)(4) 570,185
Deferred tax asset-parent (409) (409) (409) (409)
Unearned stock
compensation (273) (273) (273) (273)
Treasury stock (19) (19) (19) (19)
Retained earnings (9,793) (1,742) (11,535) 1,742(4) (9,793)
Accumulated other
comprehensive income
(loss) (6,934) (510) (7,444) 510(4) (6,934)
------------------------------------------------- ----------- -----------
Total stockholders'
equity 553,127 14,891 568,018 (14,891) 553,127
------------------------------------------------- ----------- -----------
Total liabilities and
stockholders' equity $ 1,175,845 $ 69,800 $ 1,245,645 $ 49,831 $ 1,295,476
================================================= =========== ===========
See accompanying notes to condensed combined financial statements
23
LIBERTY LIVEWIRE
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
HISTORICAL
-----------------------------------------
(1) (2) (3) (4)
LIVEWIRE GROUP W ABC LIVEWIRE
FOR THE FOR THE FOR THE PRIOR LIBERTY
YEAR ENDED YEAR ENDED YEAR ENDED ACQUISITION LIVEWIRE
DECEMBER 31, DECEMBER 31, NOVEMBER 30, PRO FORMA PRO FORMA COMBINED
2000 2000 2000 ADJUSTMENTS SUBTOTAL ADJUSTMENTS PRO FORMA
----------------------------------------------------------------------------------- ---------
Revenues $ 306,342 $ 42,823 $ 3,146 $ 256,996 $ 609,307 $ 609,307
Operating costs and other
expenses 264,708 33,699 1,711 211,178 511,296 511,296
SARs compensation expense (29,577) -- -- -- (29,577) (29,577)
Depreciation and
amortization 58,470 9,621 872 53,484 122,447 $ 2,600(6) 125,047
--------------------------------------------------------------------------------- ----------
Operating income 12,741 (497) 563 (7,666) 5,141 (2,600) 2,541
Interest expense, net of
interest income 20,773 1,576 469 20,897 43,715 9,209(5) 52,924
Minority interest -- 1,083 91 -- 1,174 (1,174)(7) --
Other expense (income) 198 21 1 (83) 137 137
--------------------------------------------------------------------------------- ----------
Income (loss) before (8,230) (3,177) 2 (28,480) (39,885) (10,635) (50,520)
income taxes
Provision for income taxes 3,238 2 (410) 2,830 (5,462)(8) (2,632)
--------------------------------------------------------------------------------- ----------
Income (loss) from
continuing operations $ (11,468) $ (3,179) $ 2 $ (28,070) $(42,715) $ (5,173) $(47,888)
=================================================================================== ===========
Income from continuing
operations per share:
Basic $ (0.64) $ (1.39)
Diluted $ (0.64) $ (1.39)
Weighted average shares:
Basic 34,463 34,463
Diluted 34,463 34,463
See accompanying notes to condensed combined financial statements
24
LIBERTY LIVEWIRE
FOOTNOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF DECEMBER 31, 2000
(1) Condensed from Livewire's audited balance sheets as per Livewire's 10k
report for December 31, 2000
(2) Condensed from Group W's unaudited internal combined balance sheet as of
December 31, 2000
(3) Not applicable - acquired 100% by Group W at 11/30/00 and included in
Group W combined balance sheet as of 12/31/00
(4) Purchase accounting adjustments as of 12/31/00
FOOTNOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000
(1) Condensed from Livewire's audited consolidated income statement in
Livewire's 10k report for 12/31/00
(2) Condensed from Group W's unaudited internal combined income statement for
the year ended 12/31/00
(3) Condensed from ABC's unaudited income statement for the year ended
11/30/00
(4) Pro Forma adjustments for Livewire prior acquisitions for the year ended
12/31/00
(5) To adjust interest expense to Group W remaining debt and acquisition debt
incurred by borrowings from Livewire's subordinated debt agreement with
Liberty Media Corp (approx $96 million) and from its institutional
lenders (approx $13 million)
(6) To record amortization of goodwill arising from Group W acquisition based
on 20 yr life
(7) To eliminate minority interest for Singapore subsidiary acquired 100% in
Group W acquisition
(8) To adjust income tax provision based on Livewire's historical provision +
Liberty Media tax rate (39.55%) on income of Group W, ABC, prior
acquisition and pro forma adjustments excluding goodwill amortization
25
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized
LIBERTY LIVEWIRE CORPORATION
----------------------------
(Registrant)
/s/ M. David Cottrell
--------------------------------------
M. David Cottrell
Chief Accounting Officer
April 13, 2001
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Date