SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
May 30, 1995
TIME WARNER INC.
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(Exact name of registrant as specified in its charter)
Delaware 1-8637 13-1388520
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
75 Rockefeller Plaza, New York, NY 10019
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(Address of principal executive offices) (zip code)
(212) 484-8000
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name or former address, if changed since last report)
Item 5. Other Events.
Time Warner Inc. ("Time Warner") and Time Warner Entertainment
Company, L.P. ("TWE"), 63.27% of the residual equity as well as certain
priority capital interests of which are owned by subsidiaries of Time
Warner, have recently entered into, or intend to enter into, the
transactions described below:
(i) on May 18, 1995, Time Warner announced the sale by
TWE of 15 of its unclustered cable television systems serving
approximately 144,000 subscribers (the "Unclustered Cable
Disposition");
(ii) on May 2, 1995, Time Warner closed the acquisition of
Summit Communications Group, Inc. ("Summit"), which owns cable
television systems serving approximately 162,000 subscribers (the
"Summit Acquisition");
(iii) on April 17, 1995, TWE entered into certain
agreements, pursuant to which, subject to certain conditions, (A)
Six Flags Entertainment Corporation ("Six Flags") will be
recapitalized and TWE will sell 51% of the capital stock of Six
Flags to a third party and (B) TWE will grant certain licenses to
Six Flags (the "License") (collectively, the "Six Flags
Transaction");
(iv) on April 1, 1995 (as previously reported on the Form
8-K of Time Warner dated April 1, 1995), TWE closed its
transaction (the "TWE-A/N Transaction") with the Advance/Newhouse
Partnership ("Advance/Newhouse"), pursuant to which TWE and
Advance/Newhouse formed the Time Warner
Entertainment-Advance/Newhouse Partnership, a New York general
partnership (the "TWE-Advance/Newhouse Partnership"), in which
TWE owns a two-thirds equity interest and is the managing partner
and Advance/Newhouse owns a one-third equity interest. The
TWE-Advance/Newhouse Partnership owns cable television systems
(or interests therein), serving approximately 4.5 million
subscribers, as well as certain foreign cable investments and
certain programming investments;
(v) on February 6, 1995 (as previously reported on the Form
8-K of Time Warner dated February 6, 1995), Time Warner entered
into certain agreements with Cablevision Industries Corporation
("Cablevision"), certain affiliated entities of Cablevision (the
"Gerry Companies" and, together with Cablevision, the "Cablevision
Companies"), the direct holders of certain interests in the Gerry
Companies and Alan Gerry, the principal stockholder of Cablevision
and the Gerry Companies (the "CVI Acquisition"), pursuant to which
Time Warner will acquire Cablevision, and Time Warner or certain
subsidiaries of Time Warner will acquire each of the Gerry
Companies. Cablevision and the Gerry Companies own cable
television systems serving approximately 1.3 million subscribers;
(vi) on January 26, 1995 (as previously reported on the
Form 8-K of Time Warner dated January 26, 1995), Time Warner
entered into certain agreements with KBLCOM Incorporated
("KBLCOM") and its parent, Houston Industries Incorporated (the
"KBLCOM Acquisition"), pursuant to which Time Warner will acquire
KBLCOM, which owns cable television systems serving approximately
690,000 subscribers, and a 50% interest in Paragon
Communications ("Paragon"), which owns cable television systems
serving approximately 967,000 subscribers (the other 50%
interest of which is already owned by TWE); and
(vii) Time Warner and TWE are currently in negotiations
with an administrative agent for a bank syndicate regarding a
five-year revolving credit facility (the "New Credit Agreement"),
expected to be executed in July 1995, pursuant to which TWE, the
TWE- Advance/Newhouse Partnership and a wholly owned subsidiary
of Time Warner ("TWI Cable") will be borrowers. The New Credit
Agreement will enable such entities to refinance certain
indebtedness assumed from the companies acquired or to be
acquired in the Acquisitions (as defined below), to refinance
existing indebtedness and to finance the ongoing working capital,
capital expenditure and other corporate needs of each borrower
(the "1995 Debt Refinancing").
The Unclustered Cable Disposition and the Six Flags Transaction
are referred to herein as the "Asset Sale Transactions"; the Summit
Acquisition, KBLCOM Acquisition and CVI Acquisition are referred to herein
as the "Acquisitions"; the Acquisitions and the TWE-A/N Transaction are
referred to herein as the "Cable Transactions" and the Asset Sale
Transactions, the Cable Transactions and the 1995 Debt Refinancing are
referred to herein as the "Transactions".
Pro Forma Consolidated Condensed Financial Statements
The following pro forma consolidated condensed balance sheets of
Time Warner and the Time Warner Entertainment Group (the "Entertainment
Group"), principally consisting of TWE, at March 31, 1995 give effect to
the Asset Sale Transactions, the TWE-A/N Transaction and the 1995 Debt
Refinancing and, with respect to the balance sheet of Time Warner only,
also give effect to the Acquisitions, in each case as if the Transactions
occurred at such date. The following pro forma consolidated condensed
statements of operations of Time Warner and the Entertainment Group for the
three months ended March 31, 1995 and the year ended December 31, 1994 give
effect to each applicable Transaction as if it had occurred at the
beginning of such periods. The pro forma consolidated condensed financial
statements should be read in conjunction with the historical financial
statements of Time Warner and TWE, including the notes thereto, which are
contained in the Time Warner Quarterly Report on Form 10-Q for the three
months ended March 31, 1995 and the Time Warner Annual Report on Form 10-K
for the year ended December 31, 1994, as well as the historical financial
statements of Cablevision and Summit (which reports are incorporated herein
by reference) and the historical financial statements of (i) Vision Cable
Division of Vision Cable Communications Inc. and Subsidiaries and Newhouse
Broadcasting Cable Division of Newhouse Broadcasting Corporation and
Subsidiaries (which entities contributed substantially all of their assets
to Advance/Newhouse prior to the closing of the TWE-A/N Transaction), (ii)
Cablevision Industries Limited Partnership and the Combined Entities (which
financial statements are the combined financial statements of the Gerry
Companies) and (iii) KBLCOM (which financial statements, in the case of
(i), (ii) and (iii), are attached as Exhibits hereto). The pro forma
consolidated condensed financial statements have been derived from the
historical financial statements of the respective entities as of and for
the three months ended March 31, 1995 and for the year ended December 31,
1994, except in the case of the Newhouse Broadcasting Cable Division of
Newhouse Broadcasting Corporation and Subsidiaries, which entities have
different fiscal years and, consequently, such pro forma financial
statements have been derived from the unaudited combined financial
statements of such entities as of and for the three months ended January
31, 1995 and for the twelve months ended October 31, 1994, respectively.
The pro forma consolidated condensed financial statements are
presented for informational purposes only and are not necessarily
indicative of the financial position or operating results that would have
occurred if the Transactions had been consummated as of the dates
indicated, nor are they necessarily indicative of future financial
conditions or operating results.
The one-third equity interest in the TWE-Advance/Newhouse
Partnership owned by Advance/Newhouse is reflected in the Entertainment
Group pro forma consolidated condensed balance sheet as minority interest.
In accordance with the partnership agreement for the TWE-Advance/Newhouse
Partnership, Advance/Newhouse may require TWE to purchase its equity
interest for fair market value at specified intervals following the death of
both of its principal shareholders. Following the third anniversary of
the closing of the TWE-Advance/Newhouse Transaction, either partner can
initiate a dissolution in which TWE would receive two-thirds and
Advance/Newhouse would receive one-third of the partnership's net assets.
The assets contributed by TWE and Advance/Newhouse to the
TWE-Advance/Newhouse Partnership were recorded at their predecessor's
historical cost. No gain was recognized by TWE upon the capitalization of
the TWE-Advance/Newhouse Partnership.
As a result of the Acquisitions, Time Warner will acquire cable
television systems serving approximately 2.2 million subscribers and a 50%
interest in Paragon, which owns cable television systems serving
approximately 967,000 subscribers (the other 50% interest is already owned
by TWE). As described below, in order to consummate the Acquisitions
(including the Summit Acquisition), Time Warner will issue approximately
5.1 million shares of Common Stock, par value $1.00 per share, of Time
Warner (the "Common Stock") and approximately $2.1 billion aggregate
liquidation value of new series of convertible preferred stock, and will
assume or incur, directly or indirectly, approximately $3.4 billion of
debt.
In connection with the Summit Acquisition, Time Warner issued
1,550,936 shares of Common Stock and 3,264,508 shares of a new series of
convertible preferred stock (the "Series C Preferred Stock") and assumed or
incurred approximately $146 million of indebtedness. The Series C Preferred
Stock has a liquidation value of $100 per share, is convertible into 6.8
million shares of Common Stock at a conversion price of $48 per share
(based on its liquidation value), receives for five years an annual
dividend per share equal to the greater of $3.75 and an amount equal to the
dividends paid on the Common Stock into which a share of Series C Preferred
Stock may be converted, and is redeemable for cash at the liquidation value
plus unpaid dividends after five years, or exchangeable for Common Stock by
the holder beginning after the third year and by Time Warner after the
fourth year at the stated conversion price plus a declining premium in
years four and five and no premium thereafter.
In connection with the KBLCOM Acquisition, Time Warner will issue
one million shares of Common Stock and 11 million shares of a new series of
convertible preferred stock (the "Series D Preferred Stock") and assume or
incur approximately $1.3 billion of indebtedness, including $111 million of
Time Warner's allocable share of Paragon's indebtedness. The Series D
Preferred Stock will have a liquidation value of $100 per share, will be
convertible into 22.9 million shares of Common Stock at a conversion price
of $48 per share (based on its liquidation value), and will receive for four
years an annual dividend per share equal to the greater of $3.75 and an
amount equal to the dividends paid on the Common Stock into which a share of
Series D Preferred Stock may be converted. After four years, Time Warner
will have the right to exchange the Series D Preferred Stock for Common
Stock at the stated conversion price and after five years Time Warner will
have the right to redeem the Series D Preferred Stock, in whole or in part,
for cash at the liquidation value plus accrued dividends.
In connection with the CVI Acquisition, Time Warner will issue
2.5 million shares of Common Stock and 3.25 million shares each of two new
series of convertible preferred stock (the "Series E Preferred Stock" and
"Series F Preferred Stock") and assume or incur approximately $2 billion of
indebtedness. The Series E Preferred Stock and Series F Preferred Stock
will have a liquidation value of $100 per share, will be convertible into
an aggregate of 13.5 million shares of Common Stock at a conversion price
of $48 per share (based on its liquidation value), and will receive, for a
period of five years with respect to the Series E Preferred Stock and a
period of four years with respect to the Series F Preferred Stock, an
annual dividend per share equal to the greater of $3.75 and an amount equal
to the dividends paid on the Common Stock into which a share of Series E
Preferred Stock or Series F Preferred Stock may be converted. Time Warner
will have the right to exchange each of the Series E Preferred Stock and
Series F Preferred Stock for Common Stock at the stated conversion price
after five years and four years, respectively, and will be permitted to
redeem each series, in whole or in part, for cash at the liquidation value
plus accrued dividends, in each case after five years. The amount of Series
F Preferred Stock and Common Stock to be issued in connection with the CVI
Acquisition will be adjusted if the aggregate level of indebtedness,
negative working capital and related items at the closing differs from
approximately $2 billion.
To the extent that any of the Series C Preferred Stock, Series D
Preferred Stock, Series E Preferred Stock or Series F Preferred Stock
remains outstanding at the end of the period in which the minimum $3.75 per
share dividend is to be paid, the holders thereafter will receive dividends
equal to the dividend declared on shares of Common Stock multiplied by the
number of shares into which their shares of preferred stock are
convertible. Holders of each series of preferred stock will be entitled to
vote with the Common Stock on all matters on which the Common Stock is
entitled to vote, and each share of each such series will be entitled to
two votes on any such matter.
The Acquisitions will be accounted for by the purchase method of
accounting for business combinations and, accordingly, the estimated cost
to acquire such assets will be allocated to the underlying net assets in
proportion to their respective fair values. The valuations and other
studies which will provide the basis for such an allocation have not been
completed. As more fully described in the notes to the pro forma
consolidated condensed financial statements, a preliminary allocation of
the excess of cost over the book value of the net assets acquired or to be
acquired has been made for pro forma purposes to investments and cable
television franchises in proportion to their estimated fair values.
In connection with the Cable Transactions, TWE will enter into
management services agreements pursuant to which TWE will be responsible for
the management and operations of the cable television systems owned by Time
Warner and the TWE-Advance/Newhouse Partnership, other than the cable
television systems located within the 14-state telephone service area of U S
WEST, Inc. The pro forma consolidated condensed statements of operations of
Time Warner and the Entertainment Group each reflect annual management fees
to be paid by Time Warner and the TWE-Advance/Newhouse Partnership to TWE,
based on a preliminary allocation, which management believes to be
reasonable, of the corporate expenses of the cable division of TWE in
proportion to the respective number of cable subscribers of Time Warner and
the TWE-Advance/Newhouse Partnership to be managed by TWE's cable division
as a percentage of the aggregate number of subscribers of all cable
television systems to be managed by TWE's cable division. As a result of
TWE's management of the Time Warner and the
TWE-Advance/Newhouse Partnership-owned cable television systems, the pro
forma consolidated condensed statements of operations of Time Warner also
reflect certain reductions in corporate expenses of the acquired entities
relating to the closing of certain facilities and the termination of
related personnel as a direct result of the Acquisitions. Time Warner and
TWE expect to realize certain additional cost savings as a result of
initiatives to integrate the acquired cable television systems' operations
into TWE's operating structure; however, such cost savings have not been
reflected in the pro forma consolidated condensed statements of operations
of Time Warner due to the preliminary nature of such initiatives at this
time.
It is anticipated that the New Credit Agreement will permit
borrowings in an aggregate amount of up to $9 billion, which Time Warner
and TWE may reduce to the extent of any excess availability resulting from
the anticipated debt reductions associated with the Asset Sale
Transactions. Any reductions in excess availability under the New Credit
Agreement would not affect the pro forma consolidated condensed financial
statements. Based upon an assumed $9 billion of aggregate availability
under the New Credit Agreement, borrowings are expected to be limited to $4
billion in the case of TWI Cable, $5 billion in the case of the
TWE-Advance/Newhouse Partnership and $9 billion in the case of TWE, subject
in each case to certain limitations and adjustments. It is also anticipated
that such borrowings will bear interest at different rates for each of the
three borrowers, generally equal to LIBOR plus a margin ranging from 50 to
87.5 basis points based on the credit rating or financial leverage of the
applicable borrower.
Pro forma adjustments for the 1995 Debt Refinancing reflect
borrowings of $5.077 billion in the aggregate under the New Credit
Agreement. The proceeds of such borrowings are expected to be used to repay
or redeem $2.552 billion of indebtedness to be assumed in the
Acquisitions, plus redemption premiums thereon of $25 million; to repay
$2.45 billion of indebtedness outstanding under the existing TWE bank credit
agreement at March 31, 1995; and to pay for $50 million of financing costs.
In addition to such $5.077 billion of refinancings, $262 million is expected
to be borrowed under the New Credit Agreement to refinance additional
indebtedness incurred in connection with the Cable Transactions, of which
$193 million relates to the consummation of the CVI Acquisition and $69
million relates to the payment of transaction costs and other liabilities.
Based on the average LIBOR rates in effect during the three months ended
March 31, 1995 and the year ended December 31, 1994, LIBOR has been assumed
to be 6% and 4.5% per annum, respectively, and accordingly, the pro forma
consolidated condensed statements of operations reflect interest on
borrowings at estimated rates of (i) 6.875% and 5.375% per annum,
respectively, for TWI Cable, (ii) 6.5% and 5% per annum, respectively, for
TWE and (iii) 6.5% and 5% per annum, respectively, for the
TWE-Advance/Newhouse Partnership. Each 12.5 basis point increase in the pro
forma interest rate applicable to the aggregate $5.339 billion of assumed
borrowings under the New Credit Agreement would have the approximate effect
of increasing Time Warner's annual interest expense and net loss by $3
million and $4 million, respectively, and, in the case of borrowings by TWE
and the TWE-Advance/Newhouse Partnership only, of increasing TWE's annual
interest expense and decreasing its net income by $3 million.
The New Credit Agreement is expected to contain certain covenants
for each borrower relating to, among other things, additional indebtedness;
liens on assets; cash flow coverage and leverage ratios; and loans,
advances, distributions and other cash payments or transfers of assets from
the borrowers to their respective partners or affiliates.
The Asset Sale Transactions reflect the disposition by TWE of 51%
of its interest in Six Flags, the payment by Six Flags of certain
intercompany indebtedness and licensing fees to TWE in connection
therewith, and the sale of certain unclustered cable television systems for
aggregate gross proceeds of approximately $1.14 billion. TWE will
deconsolidate the assets, liabilities and operating
results of Six Flags, including approximately $126 million of third-party
indebtedness, and will account for its remaining 49% interest in Six Flags
under the equity method of accounting. As a result of these transactions,
TWE will reduce debt by approximately $1.050 billion, after related taxes
and fees. TWE will realize aggregate net income of approximately $300
million as a result of the Asset Sale Transactions, of which approximately
$170 million will be recognized currently and approximately $130 million
will be deferred as a result of TWE's guarantee of third-party, zero-coupon
indebtedness of Six Flags due in 1999. Such income has not been
reflected in the pro forma consolidated condensed statement of operations
of the Entertainment Group included herein.
TIME WARNER INC.
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
March 31, 1995
(millions, unaudited)
Time Warner Summit KBLCOM CVI 1995 Debt TWE Pro
Historical Acquisition(a) Acquisition(b) Acquisition(c) Refinancing(d) Transactions(e) Forma
A S S E T S
Cash and equivalents $ 309 $ 80 $ - $ 8 $ - $ 185 $ 582
Other current assets 2,331 2 32 26 - - 2,391
------ ------ ----- ----- ------ ------ ------
Total current assets 2,640 82 32 34 - 185 2,973
Investments in and amounts
due to and from Entertainment
Group 5,443 - - - (27) (15) 5,401
Other investments 1,543 - 843 17 111 - 2,514
Property, plant and equipment 748 51 280 385 - - 1,464
Goodwill 4,589 171 662 835 - - 6,257
Cable television franchises - 421 1,469 2,370 - - 4,260
Other assets 1,645 - 6 35 11 - 1,697
------ ------ ------ ------ ----- ----- ------
Total assets $16,608 $ 725 $3,292 $3,676 $ 95 $ 170 $24,566
======= ====== ====== ====== ===== ===== =======
LIABILITIES AND SHAREHOLDERS'
EQUITY
Total current liabilities $ 2,713 $ 6 $ 59 $ 129 $ (21) $ 185 $ 3,071
Long-term debt 9,001 146 1,130 1,950 147 - 12,374
Deferred income taxes 2,657 191 968 859 - (119) 4,556
Other long-term liabilities 1,124 1 - - - - 1,125
Shareholders' equity:
Preferred stock 1 3 11 7 - - 22
Common stock 380 2 1 2 - - 385
Paid-in capital 2,600 376 1,123 729 - - 4,828
Unrealized gains on certain
marketable securities 148 - - - - - 148
Accumulated deficit (2,016) - - - (31) 104 (1,943)
------- ------ ------ ------ ----- ----- -------
Total shareholders' equity 1,113 381 1,135 738 (31) 104 3,440
------- ------ ------ ------ ----- ----- -------
Total liabilities and
shareholders' equity $16,608 $ 725 $3,292 $3,676 $ 95 $ 170 $24,566
======= ====== ====== ====== ===== ===== =======
See accompanying notes.
TIME WARNER INC.
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
Three Months Ended March 31, 1995
(millions, unaudited)
Time Warner Summit KBLCOM CVI 1995 Debt TWE Pro
Historical Acquisition(f) Acquisition(g) Acquisition(h) Refinancing(i) Transactions(j) Forma
Revenues $1,817 $ 16 $ 67 $ 125 $ - $ - $2,025
Cost of revenues<F1> 1,103 12 45 84 - - 1,244
Selling, general and
administrative<F1> 576 4 26 26 - - 632
------ ------ ------ ------- ------ ------ ------
Operating expenses 1,679 16 71 110 - - 1,876
------ ------ ------ ------- ------ ------ ------
Business segment operating
income (loss) 138 - (4) 15 - - 149
Equity in pretax income
of Entertainment Group 22 - - - 11 23 56
Interest and other, net (155) (4) (30) (39) 8 - (220)
Corporate expenses (20) - - - - - (20)
------ ------ ------- ------- ------ ------ ------
Income (loss) before
income taxes (15) (4) (34) (24) 19 23 (35)
Income tax (provision) benefit (32) 1 13 11 (8) (9) (24)
------ ------- ------ ------ ------ ------ ------
Net income (loss) (47) (3) (21) (13) 11 14 (59)
Preferred dividend requirements (3) (3) (10) (6) - - (22)
------ ------- ------ ------ ------ ------ ------
Net income (loss) applicable
to common shares $ (50) $ (6) $ (31) $ (19) $ 11 $ 14 $ (81)
====== ======= ====== ====== ===== ====== ======
Net income (loss) per
common share $ (.13) $ (.02) $ (.08) $ (.05) $ .03 $ .04 $ (.21)
====== ======= ====== ====== ===== ====== ======
Average common shares 379.5 1.6 1.0 2.5 - - 384.6
====== ======= ====== ====== ===== ====== ======
<FN>
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<F1> Includes depreciation and
amortization expense of: $ 112 $ 8 $ 43 $ 69 $ - $ - $ 232
====== ======= ====== ====== ====== ====== ======
See accompanying notes.
TIME WARNER INC.
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
Year Ended December 31, 1994
(millions, unaudited)
Time Warner Summit KBLCOM CVI 1995 Debt TWE Pro
Historical Acquisition(f) Acquisition(g) Acquisition(h) Refinancing(i) Transactions(j) Forma
Revenues $7,396 $ 63 $ 265 $ 493 $ - $ - $8,217
Cost of revenues<F1> 4,307 48 201 426 - - 4,982
Selling, general and
administrative<F1> 2,376 13 98 103 - - 2,590
------ ------ ------ ------ ----- ----- ------
Operating expenses 6,683 61 299 529 - - 7,572
------ ------ ------ ------ ----- ----- ------
Business segment operating
income (loss) 713 2 (34) (36) - - 645
Equity in pretax income
of Entertainment Group 176 - - - 29 12 217
Interest and other, net (724) (15) (104) (147) 52 - (938)
Corporate expenses (76) - - - - - (76)
------ ------ ------ ------ ----- ----- ------
Income (loss) before income taxes 89 (13) (138) (183) 81 12 (152)
Income tax (provision) benefit (180) 3 55 45 (33) (1) (111)
------ ------ ------ ------ ----- ----- ------
Net income (loss) (91) (10) (83) (138) 48 11 (263)
Preferred dividend requirements (13) (12) (41) (24) - - (90)
------ ------ ------ ------ ----- ----- ------
Net income (loss) applicable to
common shares $ (104) $ (22) $ (124) $ (162) $ 48 $ 11 $ (353)
====== ====== ====== ====== ===== ===== ======
Net income (loss) per
common share $ (.27) $ (.06) $ (.33) $ (.42) $ .13 $ .03 $ (.92)
====== ====== ====== ====== ===== ===== ======
Average Common shares 378.9 1.6 1.0 2.5 - - 384.0
====== ====== ====== ====== ===== ===== ======
<FN>
- ---------------
<F1> Includes depreciation and
amortization expense of: $ 437 $ 33 $ 173 $ 275 $ - $ - $ 918
====== ====== ====== ====== ===== ===== ======
See accompanying notes.
TIME WARNER INC.
NOTES TO THE TIME WARNER PRO FORMA CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
(a) Reflects the historical assets and liabilities of Summit as of March
31, 1995, including $140 million of indebtedness that is outstanding
following the Summit Acquisition, as well as certain pro forma
adjustments directly related to the Summit Acquisition. The pro forma
adjustments reflect (1) the issuance by Time Warner of 1,550,936
shares of its common stock and 3,264,508 shares of Series C preferred
stock, valued for pro forma purposes at an aggregate amount of $381
million, (2) the exclusion of approximately $48 million of net assets
principally related to the payment of certain liabilities prior to the
closing of the Summit Acquisition, (3) the incurrence of $6 million of
additional indebtedness for the payment of transaction costs and other
related liabilities, (4) the allocation of the excess of the purchase
price over the book value of the net assets acquired of $417 million
to cable television franchises, based on the estimated fair value of
such assets, (5) an increase of $171 million in deferred income tax
liabilities and goodwill, resulting from the fact that the tax basis
of the acquired assets will not be adjusted as a result of the Summit
Acquisition and (6) the elimination of Summit's historical
stockholders' equity.
(b) Reflects the historical assets and liabilities of KBLCOM as of March
31, 1995, including a 50% interest in Paragon not previously owned by
TWE and $1.124 billion of indebtedness that will be assumed in the
acquisition, as well as certain pro forma adjustments directly related
to the KBLCOM Acquisition. The pro forma adjustments reflect (1) the
issuance by Time Warner of 1 million shares of its common stock and 11
million shares of Series D preferred stock, valued for pro forma
purposes at an aggregate amount of $1.135 billion, (2) the exclusion of
approximately $301 million of net indebtedness and other liabilities of
KBLCOM that will not be assumed by Time Warner and the exclusion of
$505 million of pre-existing goodwill, (3) the incurrence of $6 million
of additional indebtedness for the payment of transaction costs and
other related liabilities, (4) the allocation of the excess of the
purchase price over the book value of the net assets acquired of $1.615
billion to the investment in Paragon in the amount of $659 million and
to cable television franchises in the amount of $956 million, based on
the estimated fair values of such assets, (5) an increase of $662
million in deferred income tax liabilities and goodwill, resulting from
the fact that the tax basis of the acquired assets will not be adjusted
as a result of the KBLCOM Acquisition and (6) the elimination of
KBLCOM's historical stockholders' equity.
(c) Reflects the historical assets and liabilities of CVI and the Gerry
Companies as of March 31, 1995, including $1.706 billion of
indebtedness that will be assumed in the acquisition, as well as
certain pro forma adjustments directly related to the CVI Acquisition.
The pro forma adjustments reflect (1) the issuance by Time Warner of
2.5 million shares of its common stock, 3.25 million shares of Series
E preferred stock and 3.25 million shares of Series F preferred stock,
valued for pro forma purposes at an aggregate amount of $738 million,
(2) the exclusion of approximately $303 million of net assets of CVI
and the Gerry Companies that will not be assumed by Time Warner, of
which $225 million represents pre-
existing goodwill, (3) the incurrence of $244 million of additional
indebtedness, consisting of $193 million to consummate the CVI
Acquisition and $51 million to pay for transaction costs and other
related liabilities, (4) the allocation of the excess of the purchase
price over the book value of the net assets acquired of $2.036 billion
to cable television franchises, based on the estimated fair value of
such assets, (5) an increase of $835 million in deferred income tax
liabilities and goodwill, resulting from the fact that the tax basis
of the acquired assets will not be adjusted as a result of the CVI
Acquisition and (6) the elimination of the historical stockholders'
equity of CVI and the Gerry Companies.
(d) Pro forma adjustments to record the 1995 Debt Refinancing as of March
31, 1995 reflect (1) $2.477 billion of borrowings by TWI Cable under
the New Credit Agreement, the proceeds of which will be used (i) to
repay or redeem $2.33 billion of indebtedness assumed or incurred in
the KBLCOM and CVI Acquisitions, plus redemption premiums thereon of
$25 million, (ii) to repay on behalf of Paragon $111 million of its
aggregate $222 million of indebtedness, the other half of which will
be repaid by TWE, and (iii) to pay for an allocable $11 million of
deferred financing costs in connection with the New Credit Agreement
and (2) a reduction in Time Warner's investment in and amounts due to
and from the Entertainment Group and shareholders' equity by $31
million to reflect the one-time write-off by TWE of $27 million of
deferred financing costs with respect to the existing TWE bank credit
agreement and the $25 million of redemption premiums to be paid by TWI
Cable, net of $21 million of related tax benefits.
(e) Pro forma adjustments reflect the effect on Time Warner's financial
position from TWE's Asset Sale Transactions, as more fully described
in the notes to the Entertainment Group pro forma consolidated
condensed financial statements contained elsewhere herein. Pro forma
adjustments to record the Asset Sale Transactions as of March 31, 1995
reflect (1) an increase in Time Warner's investment in and amounts due
to and from the Entertainment Group and shareholders' equity of $170
million with respect to the aggregate net income on the transactions
to be recorded currently by TWE, (2) a decrease in shareholders'
equity of $66 million with respect to income taxes provided by Time
Warner on such net income, (3) a decrease in Time Warner's investment
in and amounts due to and from the Entertainment Group and an increase
in cash of $185 million with respect to the receipt from TWE of
tax-related distributions to reimburse Time Warner for the payment of
income taxes on its allocable share of the taxable income arising from
the Asset Sale Transactions, in accordance with the terms of the TWE
Partnership Agreement and (4) an increase in current liabilities of
$185 million with respect to the related current income tax payable
due as a result of the transaction, of which $119 million has been
reclassified from Time Warner's previously-provided deferred income
tax liability.
The TWE-A/N Transaction and TWE's consolidation of Paragon, as more
fully described in the notes to the Entertainment Group pro forma
consolidated condensed financial statements contained elsewhere
herein, have no pro forma effect on the underlying capital of TWE and,
accordingly, have no effect on the pro forma financial position of
Time Warner.
(f) Reflects the historical operating results of Summit for the three
months ended March 31, 1995 and the year ended December 31, 1994, as
well as certain pro forma adjustments directly related to the Summit
Acquisition. The pro forma adjustments reflect (1) the exclusion of an
aggregate $32 million and $15 million, respectively, of net income
relating to (i) Summit's broadcasting operations that were sold by
Summit prior to the closing of the Summit Acquisition and (ii)
reductions in Summit's corporate expenses principally relating to the
closing of facilities and the termination of related personnel as a
direct result of the transaction, (2) an increase of $6 million and
$25 million, respectively, in cost of revenues with respect to the
amortization of the excess cost to acquire Summit that has been
allocated to (i) cable television franchises and amortized on a
straight-line basis over a twenty-year period and (ii) goodwill and
amortized on a straight-line basis over a forty-year period, (3) an
increase of $1 million and $2 million, respectively, in selling,
general and administrative expenses with respect to payments to be
made to TWE for its management of Summit's cable television systems,
(4) a decrease of $2 million and $9 million, respectively, in income
tax expense as a result of income tax benefits provided at a 41% tax
rate on the additional amortization expense and management fees to be
paid to TWE and (5) an increase of $3 million and $12 million,
respectively, in preferred dividend requirements of the Series C
Preferred Stock issued in the Summit Acquisition.
(g) Reflects the historical operating results of KBLCOM for the three
months ended March 31, 1995 and the year ended December 31, 1994, as
well as certain pro forma adjustments directly related to the KBLCOM
Acquisition. The pro forma adjustments reflect (1) the exclusion of an
aggregate $9 million and $14 million, respectively, of net losses
relating to (i) interest costs on the portion of KBLCOM's indebtedness
that will not be assumed by Time Warner, (ii) reductions in KBLCOM's
corporate expenses principally relating to the closing of facilities
and the termination of related personnel as a direct result of the
transaction and (iii) for the year ended December 31, 1994 only, the
pro forma effect of certain KBLCOM acquisitions which occurred during
the year, (2) an increase of $20 million and $78 million,
respectively, in cost of revenues consisting of a $5 million and $20
million, respectively, reduction of KBLCOM's historical amortization
of pre-existing goodwill and a $25 million and $98 million,
respectively, increase in amortization with respect to the excess cost
to acquire KBLCOM that has been allocated to (i) investments and
amortized on a straight-line basis over a twenty-year period, (ii)
cable television franchises and amortized on a straight-line basis
over a twenty-year period and (iii) goodwill and amortized on a
straight-line basis over a forty-year period, (3) an increase of $2
million and $8 million, respectively, in selling, general and
administrative expenses with respect to payments to be made to TWE for
its management of certain of KBLCOM's cable television systems, (4) a
decrease of $9 million and $36 million, respectively, in income tax
expense as a result of income tax benefits provided at a 41% tax rate
on the additional amortization expense and management fees to be paid
to TWE and (5) an increase of $10 million and $41 million,
respectively, in preferred dividend requirements of the Series D
Preferred Stock to be issued in the KBLCOM Acquisition.
(h) Reflects the historical operating results of CVI and the Gerry
Companies for the three months ended March 31, 1995 and the year ended
December 31, 1994, as well as certain pro forma adjustments directly
related to the CVI Acquisition. The pro forma adjustments reflect (1)
the exclusion of $6 million and $21 million, respectively, of net
losses with respect to reductions in the corporate expenses of CVI and
the Gerry Companies principally relating to the closing of facilities
and the termination of related personnel as a
direct result of the transaction, (2) an increase of $28 million and
$111 million, respectively, in cost of revenues consisting of a $3
million and $12 million reduction, respectively, of CVI's historical
amortization of pre-existing goodwill and a $31 million and $123
million increase, respectively, in amortization with respect to the
excess cost to acquire CVI and the Gerry Companies that has been
allocated to (i) cable television franchises and amortized on a
straight-line basis over a twenty-year period and (ii) goodwill and
amortized on a straight-line basis over a forty-year period, (3) an
increase of $4 million and $15 million, respectively, in selling,
general and administrative expenses with respect to payments to be
made to TWE for its management of the cable television systems of CVI
and the Gerry Companies, (4) an increase of $4 million and $13
million, respectively, in interest expense on the $244 million of
borrowings under the New Credit Agreement, which will be used to
consummate the CVI Acquisition and to pay for transaction costs and
other related liabilities, (5) a decrease of $14 million and $53
million, respectively, in income tax expense as a result of income tax
benefits provided at a 41% tax rate on the additional amortization
expense, interest expense and management fees to be paid to TWE and
(6) an increase of $6 million and $24 million, respectively, in
preferred dividend requirements of the Series E Preferred Stock and
Series F Preferred Stock to be issued in the CVI Acquisition.
(i) Pro forma adjustments to record the 1995 Debt Refinancing for the
three months ended March 31, 1995 and the year ended December 31, 1994
reflect interest savings of $19 million and $81 million, respectively,
from $5.077 billion of aggregate borrowings under the New Credit
Agreement, which are expected to be used to refinance $5.002 billion
of indebtedness (plus $75 million of related financing costs), as
follows (in millions):
Three Months Ended Year Ended
March 31, 1995 December 31, 1994
---------------------------- -----------------------------
Equity in Pretax Equity in Pretax
Income of Income of
Interest and Entertainment Interest and Entertainment
Other, Net Group Other, Net Group
------------ ---------------- ------------ ----------------
Increase (Decrease)
o Borrowings by TWI Cable, TWE and the
TWE-Advance/Newhouse Partnership in
the amounts of $2.477 billion,
$2.586 billion, and $14 million,
respectively, under the New Credit
Agreement, at estimated annual
interest rates of 6.875%, 6.5% and
6.5%, respectively, for the three
months ended March 31, 1995 and
5.375%, 5% and 5%, respectively,
for the year ended December 31, 1994 $ 43 $ 42 $133 $130
o Repayment by TWE of $2.45 billion
of outstanding indebtedness under
the existing TWE bank credit agreement - (41) - (124)
o Repayment by TWI Cable of $1.206 billion
of indebtedness assumed in the
CVI Acquisition (22) - (83) -
o Repayment by TWI Cable of $1.124 billion
of indebtedness assumed in the
KBLCOM Acquisition (30) - (104) -
o Repayment of $222 million of Paragon's
indebtedness, funded equally by
Time Warner and TWE - (5) - (18)
o Amortization of $11 million and
$39 million of deferred financing
costs allocated to Time Warner and the
Entertainment Group, respectively, in
connection with obtaining the New Credit
Agreement on a straight-line basis for
a five-year period 1 2 2 8
o Reduction of historical amortization of
deferred financing costs recorded with
respect to the existing TWE
credit agreement - (9) - (25)
---- ---- ---- ----
Net decrease in interest costs $ (8) $(11) $(52) $(29)
==== ==== ==== ====
Income taxes of $8 million and $33 million, respectively, have been
provided at a 41% tax rate on the aggregate net reduction in interest
costs.
(j) Pro forma adjustments to record $23 million and $12 million,
respectively, of increased income from Time Warner's equity in the
pretax income of the Entertainment Group reflect the aggregate effect
on TWE's operating results from (1) the TWE-A/N Transaction, (2) all
of the fees to be earned by TWE with respect to its management of
certain of Time Warner's cable television systems and (3) the Asset
Sale Transactions, as more fully described in the notes to the
Entertainment Group pro forma consolidated condensed financial
statements contained elsewhere herein.
TWE's consolidation of Paragon, as more fully described in the notes to
the Entertainment Group pro forma consolidated condensed financial
statements contained elsewhere herein, has no pro forma effect on the
net income of TWE and, accordingly, the consolidation of Paragon has no
effect on the pro forma operating results of Time Warner.
Income taxes of $9 million and $1 million, respectively, have been
provided at a 41% tax rate on the aggregate increase in income from
Time Warner's equity in the pretax income of the Entertainment Group,
adjusted for certain temporary differences.
TIME WARNER ENTERTAINMENT GROUP
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
March 31, 1995
(millions, unaudited)
Entertainment
Group TWE-A/N Consolidation 1995 Debt Asset Sale Pro
Historical Transaction(a) of Paragon(b) Refinancing(c) Transactions(d) Forma
A S S E T S
Cash and equivalents $ 1,267 $ - $ 8 $ - $ (10) $ 1,265
Other current assets 2,453 - 14 - (96) 2,371
------- ------ ------ ------- ------- -------
Total current assets 3,720 - 22 - (106) 3,636
Noncurrent inventories 1,752 - - - - 1,752
Loan receivable from Time Warner 400 - - - - 400
Investments 795 26 (340) - - 481
Property, plant and equipment 4,083 313 396 - (486) 4,306
Goodwill 4,400 68 86 - (279) 4,275
Cable television franchises 3,189 3 295 - (73) 3,414
Other assets 704 10 3 12 (77) 652
------- ------ ------ ------- ------- -------
Total assets $19,043 $ 420 $ 462 $ 12 $(1,021) $18,916
======= ====== ====== ======= ======= =======
LIABILITIES AND PARTNERS' CAPITAL
Total current liabilities $ 2,945 $ - $ 66 $ - $ (19) $ 2,992
Long-term debt 7,162 6 222 (72) (1,050) 6,268
Other long-term liabilities 777 414 174 111 63 1,539
Time Warner General Partners'
senior capital 1,696 - - - - 1,696
Partners' capital 6,463 - - (27) (15) 6,421
------- ------ ------ ------- -------- -------
Total liabilities and partners' capital $19,043 $ 420 $ 462 $ 12 $ (1,021) $18,916
======= ====== ====== ======= ======== =======
See accompanying notes.
TIME WARNER ENTERTAINMENT GROUP
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
Three Months Ended March 31, 1995
(millions, unaudited)
Entertainment TWI-TWE
Group TWE-A/N Consolidation 1995 Debt Management Asset Sale Pro
Historical Transaction(e) of Paragon(f) Refinancing(g) Fees (h) Transactions(i) Forma
Revenues $2,073 $ 137 $ 87 $ - $ 6 $(39) $2,264
Cost of revenues<F1> 1,426 51 67 - - (26) 1,518
Selling, general and
administrative<F1> 446 56 15 - - (10) 507
------ ------ ----- ----- ----- ----- ------
Operating expenses 1,872 107 82 - - (36) 2,025
Business segment
operating income (loss) 201 30 5 - 6 (3) 239
Interest and other, net (164) (27) (5) 11 - 17 (168)
Corporate expenses (15) - - - - - (15)
------ ------ ----- ----- ----- ----- ------
Income before income taxes 22 3 - 11 6 14 56
Income tax provision (11) - - - - (4) (15)
------ ------ ----- ----- ----- ----- ------
Net income $ 11 $ 3 $ - $ 11 $ 6 $ 10 $ 41
====== ====== ===== ===== ===== ===== ======
<FN>
- ---------------
<F1> Includes depreciation and
amortization expense of: $ 230 $ 26 $ 20 $ - $ - $ (6) $ 270
====== ===== ===== ===== ===== ===== ======
See accompanying notes.
TIME WARNER ENTERTAINMENT GROUP
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
Year Ended December 31, 1994
(millions, unaudited)
TWI-TWE
TWE-A/N Consolidation 1995 Debt Management Asset Sale Pro
Historical Transaction(e) of Paragon(f) Refinancing(g) Fees (h) Transactions(i) Forma
Revenues $8,509 $ 527 $ 348 $ - $ 25 $(619) $8,790
Cost of revenues<F1> 6,003 209 270 - - (511) 5,971
Selling, general and
administrative<F1> 1,654 206 60 - - (29) 1,891
------ ----- ----- ----- ------ ----- ------
Operating expenses 7,657 415 330 - - (540) 7,862
Business segment
operating income (loss) 852 112 18 - 25 (79) 928
Interest and other, net (616) (99) (18) 29 - 53 (651)
Corporate expenses (60) - - - - - (60)
------ ----- ----- ----- ------ ----- ------
Income (loss) before
income taxes 176 13 - 29 25 (26) 217
Income tax (provision) benefit (40) - - - - 6 (34)
------ ----- ----- ----- ----- ----- ------
Net income (loss) $ 136 $ 13 $ - $ 29 $ 25 $ (20) $ 183
====== ===== ===== ===== ===== ===== ======
<FN>
- ---------------
<F1> Includes depreciation and
amortization expense of: $ 959 $ 104 $ 63 $ - $ - $ (86) $1,040
====== ===== ===== ===== ====== ===== ======
See accompanying notes.
TIME WARNER INC.
NOTES TO THE ENTERTAINMENT GROUP PRO FORMA CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
(a) Reflects the historical assets and liabilities of Advance/Newhouse as
of March 31, 1995 (and as of January 31, 1995 with respect to the
Newhouse Broadcasting Cable Division of Newhouse Broadcasting
Corporation and Subsidiaries, which entities have different fiscal
years), as well as certain pro forma adjustments directly related to
the TWE-Advance/Newhouse Transaction. The pro forma adjustments reflect
(1) the exclusion of approximately $38 million of negative working
capital that was not assumed by the TWE-Advance/Newhouse Partnership
and (2) the incurrence of $6 million of additional indebtedness for the
payment of transaction costs. TWE owns a two-thirds equity interest and
will consolidate the partnership. Accordingly, the one-third equity
interest in the partnership owned by Advance/Newhouse has been
reflected in the Entertainment Group pro forma consolidated condensed
balance sheet as minority interest. The assets contributed by TWE and
Advance/Newhouse to the TWE-Advance/Newhouse Partnership have been
reflected in the pro forma consolidated condensed balance sheet at
their predecessor's historical cost. No gain was recognized by TWE upon
the capitalization of the partnership.
(b) Pro forma adjustments reflect the consolidation of Paragon's financial
position as of March 31, 1995 as a result of TWE's control over the
management of such entity. Minority interest of $174 million has been
recorded as a component of other long-term liabilities reflecting Time
Warner's interest in the joint venture.
(c) Pro forma adjustments to record the 1995 Debt Refinancing as of March
31, 1995 reflect (1) a net decrease in debt of $72 million, consisting
of (i) $2.6 billion of aggregate borrowings by TWE and the
TWE-Advance/Newhouse Partnership under the New Credit Agreement, (ii)
the repayment of $2.45 billion of outstanding indebtedness under the
existing TWE bank credit agreement at March 31, 1995 and (iii) the
repayment of $222 million of Paragon's indebtedness, (2) an increase of
$111 million in Time Warner's minority interest in Paragon,
representing Time Warner's capital contribution to Paragon in the form
of the repayment of its allocable share of Paragon's indebtedness, (3)
the payment of an allocable $39 million of deferred financing costs in
connection with the New Credit Agreement and (4) a reduction in TWE's
partners' capital by $27 million to reflect the one-time write-off of
deferred financing costs with respect to the existing TWE bank credit
agreement.
(d) Pro forma adjustments to record the Asset Sale Transactions as of
March 31, 1995 reflect (1) the receipt by TWE of approximately $1.14
billion of aggregate gross proceeds with respect to the disposition by
TWE of 51% of its interest in Six Flags, the payment by Six Flags of
certain intercompany indebtedness and licensing fees to TWE in
connection therewith and the sale by TWE of certain unclustered cable
television systems, (2) a reduction in debt of approximately $1.050
billion, principally consisting of the use of the aggregate net
proceeds received, after related taxes and fees, to repay indebtedness
under the New Credit Agreement, (3) the deconsolidation of the assets
and liabilities of Six Flags, including $126 million
of third-party indebtedness, and a reduction in net assets with
respect to the cable television systems to be sold and (4) the payment
of $185 million in tax-related distributions that will reimburse Time
Warner for the payment of income taxes on its allocable share of the
taxable income arising from these transactions in accordance with the
terms of the TWE partnership agreement.
(e) Reflects the historical operating results of Advance/Newhouse for the
three months ended March 31, 1995 and the year ended December 31, 1994
(and for the three months ended January 31, 1995 and for the twelve
months ended October 31, 1994 with respect to certain contributed
businesses which have different fiscal years), as well as certain pro
forma adjustments directly related thereto. The pro forma adjustments
reflect (1) an increase of $1 million and $2 million, respectively, in
cost of revenues with respect to TWE's amortization of transaction
costs on a straight-line basis over a three-year period and (2) an
increase of $27 million and $99 million, respectively, in interest and
other, net, representing Advance/Newhouse's minority interest in the
net income of the TWE-Advance/Newhouse Partnership, including their
one-third share of $45 million of annual management fees to be paid by
the partnership to TWE.
(f) Pro forma adjustments reflect the consolidation of Paragon's operating
results for the three months ended March 31, 1995 and the year ended
December 31, 1994, offset by Time Warner's minority share of the net
income of Paragon in the amount of $16 million and $34 million,
respectively.
(g) Pro forma adjustments to record the 1995 Debt Refinancing for the
three months ended March 31, 1995 and the year ended December 31, 1994
reflect lower interest costs of $11 million and $29 million,
respectively, from (i) $2.6 billion of aggregate borrowings under the
New Credit Agreement, which are expected to be used to refinance
$2.561 billion of indebtedness (plus $39 million of related financing
costs) and (ii) the repayment by Time Warner of $111 million of
Paragon's indebtedness, as follows (in millions):
Three Months Ended Year Ended
March 31, 1995 December 31, 1994
------------------ -----------------
Increase (Decrease)
o Borrowings by TWE and the TWE-
Advance/Newhouse Partnership in the
amounts of $2.586 billion and
$14 million, respectively, under the
New Credit Agreement, at estimated
annual interest rates for each
borrower of 6.5% for the three
months ended March 31, 1995 and 5%
for the year ended December 31, 1994 $ 42 $130
o Repayment by TWE of $2.45 billion
of indebtedness under the
existing TWE bank credit agreement (41) (124)
o Repayment of $222 million of
Paragon's indebtedness, funded
equally by TWE and Time Warner (5) (18)
o Amortization of an allocable
$39 million of deferred financing
costs in connection with obtaining
the New Credit Agreement on a straight-
line basis for a five-year period 2 8
o Reduction of historical amortization
of deferred financing costs
recorded with respect to the existing
TWE credit agreement (9) (25)
----- -----
Net decrease in interest costs $(11) $(29)
===== =====
(h) Pro forma adjustments for the three months ended March 31, 1995 and
the year ended December 31, 1994 reflect fees to be received from Time
Warner in the amount of $6 million and $25 million, respectively, with
respect to TWE's management of certain of Time Warner's cable
television systems.
(i) Pro forma adjustments to record an increase of $10 million and a
decrease of $20 million in net income, respectively, from the Asset
Sale Transactions for the three months ended March 31, 1995 and the
year ended December 31, 1994 reflect (1) the deconsolidation of the
operating results of Six Flags, (2) the elimination of the operating
results of the cable television systems to be sold and (3) a decrease
in interest expense, representing interest savings from the repayment
by TWE of indebtedness under the New Credit Agreement using the
aggregate net proceeds received in these transactions. TWE will
realize aggregate net income of approximately $300 million on these
transactions, of which approximately $170 million will be recognized
currently and approximately $130 million will be deferred as a result
of TWE's guarantee of third-party, zero-coupon indebtedness of Six
Flags due in 1999. Such income has not been reflected in the
pro forma consolidated condensed statement of operations included
elsewhere herein.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired:
(i) Summit Communications Group, Inc. and Subsidiaries (the
documents listed in this paragraph (i) being referred to as the
"Financial Statements of Summit Communications Group, Inc."):
(A) Unaudited Consolidated Financial Statements
as of March 31, 1995 and for each of the three months
ended March 31, 1994 and 1995; and
(B) Consolidated Financial Statements as of
December 31, 1993 and 1994 and for each of the years
ended December 31, 1992, 1993 and 1994, including the
report thereof of Deloitte & Touche LLP, independent
auditors ("Deloitte & Touche LLP");
(ii) Newhouse Broadcasting Cable Division of Newhouse
Broadcasting Corporation and Subsidiaries (the documents listed in
this paragraph (ii) being referred to as the "Financial Statements
of Newhouse Broadcasting Cable Division of Newhouse Broadcasting
Corporation"):
(A) Unaudited Condensed Financial Statements as
of January 31, 1995 and for each of the six months ended
January 31, 1994 and 1995; and
(B) Financial Statements as of July 31, 1993
and 1994 and for the three years ended July 31, 1992,
1993 and 1994, including the report thereon of Paul
Scherer & Company LLP, independent auditors ("Paul
Scherer & Company, LLP");
(iii) Vision Cable Division of Vision Cable Communications,
Inc. and Subsidiaries (the documents listed in this paragraph
(iii) being referred to as the "Financial Statements of Vision
Cable Division of Vision Cable Communications, Inc."):
(A) Unaudited Condensed Financial Statements as
of March 31, 1995 and for each of the three months ended
March 31, 1994 and 1995; and
(B) Financial Statements as of December 31,
1993 and 1994 and for each of the years ended December
31, 1992, 1993 and 1994, including the report thereon of
Paul Scherer & Company, LLP;
(iv) Cablevision Industries Corporation and Subsidiaries
(the documents listed in this paragraph (iv) being referred to as
the "Financial Statements of Cablevision Industries
Corporation"):
(A) Unaudited Consolidated Financial Statements
as of March 31, 1995 and for each of the three months
ended March 31, 1994 and 1995; and
(B) Consolidated Financial Statements as of
December 31, 1993 and 1994 and for each of the years
ended December 31, 1992, 1993 and 1994, including the
report thereon of Arthur Andersen LLP;
(v) Cablevision Industries Limited Partnership and
Combined Entities (the documents listed in this paragraph (v)
being referred to as the "Financial Statements of Cablevision
Industries Limited Partnership"):
(A) Unaudited Combined Financial Statements as
of March 31, 1995 and for each of the three months ended
March 31, 1994 and 1995; and
(B) Combined Financial Statements as of
December 31, 1993 and 1994 and for each of the years
ended December 31, 1992, 1993 and 1994, including the report
thereon of Arthur Andersen LLP;
(vi) KBLCOM Incorporated (the documents listed in this
paragraph (vi) being referred to as the "Financial Statements of
KBLCOM Incorporated"):
(A) Unaudited Consolidated Financial Statements
as of March 31, 1995 and for each of the three months
ended March 31, 1994 and 1995; and
(B) Consolidated Financial Statements as of
December 31, 1993 and 1994 and for each of the years
ended December 31, 1992, 1993 and 1994, including the
report thereon of Deloitte & Touche LLP;
(b) Pro forma Consolidated Condensed Financial Statements:
(i) Time Warner Inc.:
(A) Pro Forma Consolidated Condensed Balance
Sheet as of March 31, 1995;
(B) Pro Forma Consolidated Condensed Statement
of Operations for the year ended December 31, 1994 and
the three months ended March 31, 1995; and
(C) Notes to Pro Forma Consolidated Condensed
Financial Statements.
(ii) Entertainment Group:
(A) Pro Forma Consolidated Condensed Balance
Sheet as of March 31, 1995;
(B) Pro Forma Consolidated Condensed Statement
of Operations for the year ended December 31, 1994 and
the three months ended March 31, 1995; and
(C) Notes to Pro Forma Consolidated Condensed
Financial Statements.
(c) Exhibits:
(i) Exhibit 23(a): Consent of Deloitte & Touche LLP.
(ii) Exhibit 23(b): Consent of Paul Scherer & Company LLP.
(iii) Exhibit 23(c): Consent of Arthur Andersen LLP.
(iv) Exhibit 23(d): Consent of Deloitte & Touche LLP.
(v) Exhibit 99(a): Financial Statements of Summit
Communications Group, Inc. (incorporated by reference from
pages 34 to 49 of the Annual Report on Form 10-K for the
year ended December 31, 1994 and from pages 3 to 8 of the
Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 1995 of Summit Communications Group, Inc.)
(vi) Exhibit 99(b): Financial Statements of Newhouse
Broadcasting Cable Division of Newhouse Broadcasting Corporation.
(vii) Exhibit 99(c): Financial Statements of Vision Cable
Division of Vision Cable Communications, Inc.
(viii) Exhibit 99(d): Financial Statements of
Cablevision Industries Corporation (incorporated by
reference from pages 30 to 49 of the Annual Report on Form
10-K for the year ended December 31, 1994 and from pages 2
to 11 of the Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 1995 of Cablevision Industries
Corporation).
(ix) Exhibit 99(e): Financial Statements of Cablevision
Industries Limited Partnership and Combined Entities.
(x) Exhibit 99(f): Financial Statements of KBLCOM
Incorporated.
(xi) Exhibit 99(g): Pro Forma Consolidated Condensed
Balance Sheet as of March 31, 1995, Pro Forma Consolidated
Condensed Statement of Operations for the year ended
December 31, 1994 and the quarterly period ended March 31,
1995 and Notes to Pro Forma Consolidated Condensed Financial
Statements of Time Warner Entertainment Company, L.P. (the
"Pro Forma Financial Statements of Time Warner Entertainment
Company, L.P.") (incorporated by reference from pages 3 to
15 of the Current Report on Form 8-K of Time Warner
Entertainment Company, L.P. dated May 30, 1995).
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, in the City of New York,
State of New York, on June 1, 1995.
TIME WARNER INC.,
By: /s/ Richard J. Bressler
-------------------------
Name: Richard J. Bressler
Title: Senior Vice President
and Chief Financial
Officer
EXHIBIT INDEX
Exhibit No. Description of Exhibit Sequential
Page Number
23(a) Consent of Deloitte & Touche LLP,
Independent Auditors.
23(b) Consent of Paul Scherer & Company LLP,
Independent Auditors.
23(c) Consent of Arthur Andersen LLP, Independent
Public Accountants.
23(d) Consent of Deloitte & Touche LLP,
Independent Auditors.
99(a) Financial Statements of Summit <F2>
Communications Group, Inc. (incorporated by
reference from pages 34 to 49 of the Annual
Report on Form 10-K for the year ended
December 31, 1994 and from pages 3 to 8 of
the Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1995 of
Summit Communications Group, Inc.)
99(b) Financial Statements of Newhouse Broadcasting
Cable Division of Newhouse Broadcasting
Corporation.
99(c) Financial Statements of Vision Cable Division of
Vision Cable Communications, Inc.
99(d) Financial Statements of Cablevision Industries <F2>
Corporation (incorporated by reference from
pages 30 to 49 of the Annual Report on Form
10-K for the year ended December 31, 1994 and
from pages 2 to 11 of the Quarterly Report on
Form 10-Q for the quarterly period ended
March 31, 1995 of Cablevision Industries
Corporation).
99(e) Financial Statements of Cablevision Industries
Limited Partnership and Combined Entities.
Exhibit No. Description of Exhibit Sequential
Page Number
99(f) Financial Statements of KBLCOM Incorporated.
99(g) Pro Forma Financial Statements of Time <F2>
Warner Entertainment Company, L.P.
(incorporated by reference from pages 3
to 15 of the Current Report on Form 8-K
of Time Warner Entertainment Company,
L.P. dated May 30, 1995).
[FN]
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<F2> Incorporated by reference.