-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, G24XyG01jD8Kz7Ne+13A9PzV+4TNGubR3s62GK8dE/0apwuJcXFaALV+IQlSTK0d oTSU+2tmPYlLwnuvL0Rc4g== 0000950109-96-007657.txt : 19961120 0000950109-96-007657.hdr.sgml : 19961120 ACCESSION NUMBER: 0000950109-96-007657 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19961115 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19961115 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: C TEC CORP CENTRAL INDEX KEY: 0000310433 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 232093008 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-11053 FILM NUMBER: 96667896 BUSINESS ADDRESS: STREET 1: 105 CARNEGIE CENTER CITY: PRINCETON STATE: NJ ZIP: 08540 BUSINESS PHONE: 6097343855 MAIL ADDRESS: STREET 1: 105 CARNEGIE CENTER STREET 2: PO BOX 3000 CITY: PRINCETON STATE: NJ ZIP: 08540 FORMER COMPANY: FORMER CONFORMED NAME: COMMONWEALTH TELEPHONE ENTERPRISES INC DATE OF NAME CHANGE: 19860501 8-K 1 FORM 8-K 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) November 15, 1996 (September 16, 1996) C-TEC CORPORATION (Exact name of registrant as specified in its charter) Pennsylvania 0-11053 23-2093008 State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 105 Carnegie Center, Princeton, NJ 08540 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (609) 734-3700 (Former name or former address, if changed since last report). Item 2. Acquisition or Disposition of Assets On September 16, 1996, C-TEC Corporation filed a Form 8-K to announce that the Company purchased from RCN Corporation, the Company's controlling shareholder ("RCN"), RCN's 80.1% interest in Freedom New York, L.L.C., a Delaware limited liability company ("Freedom") and all related rights and liabilities (collectively, the "Freedom Interest") for $29,847,364. Previously, Freedom, an affiliate of RCN, purchased 80.1% of the assets of Liberty Cable Television Inc. et al ("Liberty"). Liberty contributed the remaining 19.9% of the assets of Liberty to Freedom. Additionally, in connection with this acquisition, the Company acquired from RCN a note issued by Freedom in connection with a loan from RCN to Freedom. The purchase price for the note was $1,518,603, an amount equal to the accreted value of the note. The required financial statements of Liberty and Freedom and pro forma financial information are included in Item 7 of this Form 8-K. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits (a) Financial Statements of Business Acquired 1. Financial Statements of Liberty Cable Television, Inc. and affiliates as of and for the periods ended December 31, 1995 and 1994 2. Financial Statements of Freedom New York, L.L.C. as of and for the period ended September 30, 1996. (b) Pro Forma Financial Information 1. Pro Forma Condensed Consolidated Statements of Operations (Unaudited) of C-TEC Corporation taking into consideration the acquisition of the Freedom Interest Item 7(a) 1 LIBERTY CABLE TELEVISION, INC. AND AFFILIATES Combined Financial Statements December 31, 1994 and 1995 (With Independent Auditors' Report Thereon) Independent Auditors' Report The Board of Directors Liberty Cable Television, Inc. and affiliates: We have audited the accompanying combined balance sheets of Liberty Cable Television, Inc. and affiliates as of December 31, 1994 and 1995, and the related combined statements of operations, changes in shareholders' deficit and cash flows for the years then ended. These combined financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these combined financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of Liberty Cable Television, Inc. and affiliates as of December 31, 1994 and 1995, and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles. As discussed in note 10 to the financial statements, during March 1996, substantially all of the assets and operations of Liberty Cable Television, Inc. and affiliates were sold. KPMG Peat Marwick LLP New York, New York November 6, 1996 LIBERTY CABLE TELEVISION, INC. AND AFFILIATES Combined Balance Sheets (note 10) December 31, 1994 and 1995
Assets 1994 1995 ---- ---- Cash $ 76,717 17,122 Receivables from subscribers, net of allowance for doubtful accounts of $168,943 in 1994 and $223,381 in 1995 266,187 177,445 Prepaid expenses and other assets 23,411 -- Cable television systems, net of accumulated depreciation of $4,134,613 in 1994 and $5,988,862 in 1995 (note 3) 7,965,216 9,586,633 ----------- ----------- Total assets $ 8,331,531 9,781,200 =========== =========== Liabilities and Shareholders' Deficit Payable to banks (note 6) 7,686,305 15,000,000 Other notes payable (note 7) 189,168 -- Accounts payable 377,218 580,191 Accrued programming (note 4) 288,826 291,844 Accrued expenses and ligitation costs (note 9) 435,451 1,984,045 Due to affiliates (note 5) 8,631,040 10,002,417 ----------- ----------- Total liabilities 17,608,008 27,858,497 ----------- ----------- Commitments and contingencies (notes 4, 5, 6 and 9) Shareholders' deficit (note 8): Common stock 450 450 Additional paid-in capital 6,314,058 6,314,058 Accumulated deficit (15,590,985) (24,391,805) ----------- ----------- Total shareholders' deficit (9,276,477) (18,077,297) ----------- ----------- Total liabilities and shareholders' deficit $ 8,331,531 9,781,200 =========== ===========
See accompanying notes to combined financial statements. LIBERTY CABLE TELEVISION, INC. AND AFFILIATES Combined Statements of Operations Years ended December 31, 1994 and 1995
1994 1995 ---- ---- Revenues $ 4,394,866 5,955,864 ---------- ---------- Operating expenses: Programming expenses (note 4) 1,701,465 2,697,500 Repairs and maintenance 1,395,120 1,717,412 General and administrative (note 6) 1,082,646 1,408,955 Legal, professional fees and ligitation costs (note 9) 1,175,816 3,557,908 Salaries and employee benefits 1,275,455 1,371,244 Marketing and related 949,962 879,890 Depreciation and amortization 1,332,557 1,854,249 ---------- ---------- Total operating expenses 8,913,021 13,487,158 ---------- ---------- Operating loss (4,518,155) (7,531,294) Interest expense (note 5) 623,968 1,269,526 ---------- ---------- Net loss $ (5,142,123) (8,800,820) ========== ==========
See accompanying notes to combined financial statements. LIBERTY CABLE TELEVISION, INC. AND AFFILIATES Combined Statements of Cash Flows Years ended December 31, 1994 and 1995
1994 1995 ---- ---- Cash flows from operating activities: Net loss $ (5,142,123) (8,800,820) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 1,332,557 1,854,249 Changes in operating assets and liabilities: (Increase) decrease in receivables from subscribers (78,341) 88,742 (Increase) decrease in prepaid expenses and other assets (2,262) 23,411 Increase in accounts payable 240,422 202,973 (Decrease) increase in accrued programming and other liabilities (228,795) 1,551,612 ---------- ----------- Total adjustments 1,263,581 3,720,987 ---------- ----------- Net cash used in operating activities (3,878,542) (5,079,833) ---------- ----------- Cash flows from investing activities: Purchases of cable television system (2,407,558) (3,475,666) ---------- ----------- Net cash used in investing activities (2,407,558) (3,475,666) ---------- ----------- Cash flows from financing activities: Proceeds from bank loans 1,000,000 7,325,000 Repayments of bank loans (426,390) (11,305) Repayments of other notes payable (200,444) (189,168) Advances from affiliates 6,941,416 14,779,377 Repayment of advances from affiliates (1,000,000) (13,408,000) ---------- ----------- Net cash provided by financing activities 6,314,582 8,495,904 ---------- ----------- Net increase (decrease) in cash 28,482 (59,595) Cash at beginning of year 48,235 76,717 ---------- ----------- Cash at end of year $ 76,717 17,122 ========== =========== Supplemental cash flow information: Interest paid $ 676,378 1,229,320 ========== ===========
See accompanying notes to combined financial statements. LIBERTY CABLE TELEVISION, INC. AND AFFILIATES Combined Statements of Changes in Shareholders' Deficit Years ended December 31, 1994 and 1995
Additional Common paid-in Accumulated stock capital deficit Total ----- ------- ------- ----- Balance at December 31, 1993 $ 450 6,314,058 (10,448,862) (4,134,354) Net loss -- -- (5,142,123) (5,142,123) ---- --------- ----------- ----------- Balance at December 31, 1994 450 6,314,058 (15,590,985) (9,276,477) Net loss -- -- (8,800,820) (8,800,820) ---- --------- ----------- ----------- Balance at December 31, 1995 $ 450 6,314,058 (24,391,805) (18,077,297) ==== ========= =========== ===========
See accompanying notes to combined financial statements. LIBERTY CABLE TELEVISION, INC. AND AFFILIATES Notes to Combined Financial Statements December 31, 1994 and 1995 (1) Organization and Nature of Business Liberty Cable Television, Inc. and affiliates operated a wireless cable television system serving subscribers who primarily reside in multiple dwelling units in New York City and certain areas of New Jersey. Liberty Cable Television, Inc. and its affiliates, Birdsong Communications, Inc., Liberty Cable Newport, Inc., Liberty Cable Company, Inc. and E.T. Vision, Inc. (collectively, the "Company"), are owned by a group of related individuals and share operating facilities and personnel. In March 1996, the Company sold substantially all of its assets and operations (see note 10). (2) Summary of Significant Accounting Policies (a) Principles of Combination The combined financial statements include the operations of Liberty Cable Television, Inc. and its affiliates. All intercompany accounts have been eliminated in combination. (b) Revenue Recognition The Company recognizes revenues as cable television services are provided to subscribers. Subscription revenues billed in advance for services are deferred and recorded as income in the period in which the related services are rendered. (c) Cable Television Systems Cable television systems are carried at cost and are depreciated using the straight-line method over the estimated useful lives of the respective assets. (d) Income Taxes Each of the companies in the group is an S corporation, as defined by the Internal Revenue Service. No provision for Federal or state income taxes has been made in the accompanying combined financial statements since any liability for such income taxes is that of the shareholders and not of the Company. Certain assets have bases for income tax purposes that differ from the carrying value for financial reporting purposes, primarily due to differences in depreciation methods. The reported combined assets reflected in these combined financial statements exceeded their aggregate tax basis by approximately $1,700,000 at December 31, 1995. (e) Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosures of contingencies at the date of the financial statements and revenues and expenses recognized during the reported period. Actual results could differ from those estimates. 2 LIBERTY CABLE TELEVISION, INC. AND AFFILIATES Notes to Combined Financial Statements, Continued (2), Continued (f) Fair Value of Financial Instruments The Company's carrying value of its receivables from subscribers, prepaid expenses and other assets and its payable to banks and all its other liabilities and accounts payable approximate fair value due to their short-term nature. (3) Cable Television Systems Cable television systems are depreciated over their estimated useful lives of seven years. (4) Accrued Programming During 1994, the Company resolved its obligations for payment for programs provided by certain suppliers in prior years at amounts that were approximately $330,000 less than the Company had accrued in its combined financial statements at December 31, 1993. Such amount was recorded as a reduction in programming expenses in 1994. (5) Transactions with Affiliates The Company's primary headend and operations department is maintained at a building owned and operated by a company whose shareholders include the shareholders of the Company. Pursuant to an agreement, beginning JanuaryE1, 1994 the Company is charged $30,000 per month for the use of the facilities and for certain administrative services provided to it by the affiliated company. The Company's operations are funded in part by cash advances from an entity which is partially owned by the shareholders. The Company was indebted to this entity in the amounts of $8,225,380 and $9,596,756 as of DecemberE31, 1994 and 1995, respectively. Beginning in 1993, interest on outstanding advances is charged at the lower of LIBOR plus 1% or the greater of the prime rate less 3/4% or the Federal Funds Rate plus 1/2%. Interest expense under this arrangement was $241,479 in 1994 and $424,184 in 1995. The Company is also indebted to another entity owned by the shareholders in the amount of $405,660 as of December 31, 1994 and 1995. No interest was charged on this balance owed. The Company and a shareholder of the Company entered into a loan agreement with a bank for $500,000, which was used to purchase an interest in an unaffiliated cable venture. Prior to JanuaryE1, 1991, the investment was transferred to the shareholder. The shareholder has assumed the total obligation to the bank; however, the Company is still listed as borrower of record. This obligation is not reflected in the Company's combined financial statements. The Company obtains insurance coverage with entities that are partially owned by the Company's shareholders at no cost to the Company. 3 LIBERTY CABLE TELEVISION, INC. AND AFFILIATES Notes to Combined Financial Statements, Continued (6) Loans Payable - Banks The Company has the following loans payable to a bank, all of which are guaranteed by shareholders of the Company:
1994 1995 ---- ---- Demand note (a) $ 11,305 -- Term notes (b) 7,675,000 15,000,000 ---------- ---------- $ 7,686,305 15,000,000 ========== ==========
(a) On November 1, 1991, the Company executed an unsecured demand note with a bank in the amount of $445,000 which was completely repaid in 1995. Interest was payable at the bank's prime lending rate. (b) During 1993, the Company entered into an agreement with the bank allowing borrowings up to $7,700,000 under a credit facility. The agreement calls for interest to be paid on the loan at LIBOR plus 1/2% or the greater of prime less 3/4% or the Federal Funds Rate plus 1/2%. The notes matured on June 30, 1995. On July 1, 1995, the Company entered into a new agreement with the bank increasing the borrowings to $15,000,000 with interest payable under the same formula as the notes that matured in June 1995. The new agreement matured on December 31, 1995 and was extended to March 1996. The loan was repaid in March 1996 upon the sale of substantially all of the Company's assets and operations (see note 10). (7) Other Notes Payable Other notes payable consist of the following at December 31:
1994 1995 ---- ---- Installment note, collateralized by equipment and payable in 36 monthly installments of $8,233, including interest at 10.5% per annum, through May 1995 $ 63,344 -- Installment note, collateralized by equipment and payable in 36 monthly installments of $11,091, including interest at 10.5% per annum, through November 1995 125,824 -- ------- ------- $ 189,168 -- ======= =======
4 LIBERTY CABLE TELEVISION, INC. AND AFFILIATES Notes to Combined Financial Statements, Continued (8) Shareholders' Equity (Deficit) The following is a summary of the capital accounts for each of the companies included in the combined financial statements:
Common stock ----------------- Number of Par Additional Shareholders' shares value paid-in Accumulated equity issued amount capital deficit (deficit) ------ ------ ------- ------- --------- Liberty Cable Television, Inc. Balance at December 31, 1992 300 $ 300 749,700 (1,728,595) (978,595) Net loss -- -- -- (4,306,030) (4,306,030) --- --- ------- ----------- ----------- Balance at December 31, 1993 300 300 749,700 (6,034,625) (5,284,625) Net loss -- -- -- (5,574,022) (5,574,022) --- --- ------- ----------- ----------- Balance at December 31, 1994 300 300 749,700 (11,608,647) (10,858,647) Net loss -- -- -- (8,908,590) (8,908,590) --- --- ------- ----------- ----------- Balance at December 31, 1995 300 $ 300 749,700 (20,517,237) (19,767,237) === === ======= =========== =========== This company has authorized 1,000 shares of common stock at $1.00 par value per share. Birdsong Communications, Inc. Balance at December 31, 1992 150 $ 150 1,213,288 (965,810) 247,628 Capital contributions, net -- -- 29,004 -- 29,004 Net loss -- -- -- (66,262) (66,262) --- --- --------- ----------- ----------- Balance at December 31, 1993 150 150 1,242,292 (1,032,072) 210,370 Net income -- -- -- 76,897 76,897 --- --- --------- ----------- ----------- Balance at December 31, 1994 150 150 1,242,292 (955,175) 287,267 Net loss -- -- -- (3,141) (3,141) --- --- --------- ----------- ----------- Balance at December 31, 1995 150 $ 150 1,242,292 (958,316) 284,126 === === ========= =========== =========== This company has authorized 1,000 shares of common stock at $1.00 par value per share.
5 LIBERTY CABLE TELEVISION, INC. AND AFFILIATES Notes to Combined Financial Statements, Continued (8), Continued
Common stock ----------------- Number of Par Additional Shareholders' shares value paid-in Accumulated equity issued amount capital deficit (deficit) ------ ------ ------- ------- --------- Liberty Cable Newport, Inc. Balance at December 31, 1992 100 $ -- 1,936,789 (1,614,087) 322,702 Net loss -- -- -- (2,638) (2,638) --- --- --------- ---------- -------- Balance at December 31, 1993 100 -- 1,936,789 (1,616,725) 320,064 Net income -- -- -- 236,215 236,215 --- --- --------- ---------- -------- Balance at December 31, 1994 100 -- 1,936,789 (1,380,510) 556,279 Net income -- -- -- 133,601 133,601 --- --- --------- ---------- -------- Balance at December 31, 1995 100 $ -- 1,936,789 (1,246,909) 689,880 === === ========= ========== ======== This company has authorized 100 shares of common stock at no par value. Liberty Cable Company, Inc. Balance at December 31, 1992 100 $ -- 1,318,474 (946,789) 371,685 Capital contributions, net -- -- 6,400 -- 6,400 Net income -- -- -- 119,928 119,928 --- --- --------- ---------- -------- Balance at December 31, 1993 100 -- 1,324,874 (826,861) 498,013 Net income -- -- -- 52,792 52,792 --- --- --------- ---------- -------- Balance at December 31, 1994 100 -- 1,324,874 (774,069) 550,805 Net loss -- -- -- (83,202) (83,202) --- --- --------- ---------- -------- Balance at December 31, 1995 100 $ -- 1,324,874 (857,271) 467,603 === === ========= ========== ========
This company has authorized 200 shares of common stock at no par value. 6 LIBERTY CABLE TELEVISION, INC. AND AFFILIATES Notes to Combined Financial Statements, Continued (8), Continued
Common stock ----------------- Number of Par Additional shares value paid-in Accumulated Shareholders' issued amount capital deficit equity ------ ------ ------- ------- --------- E.T. Vision, Inc. Balance at December 31, 1992 400 $ -- 1,082,670 (968,250) 114,420 Capital distributions, net -- -- (22,267) -- (22,267) Net income -- -- -- 29,671 29,671 --- --- --------- --------- -------- Balance at December 31, 1993 400 -- 1,060,403 (938,579) 121,824 Net income -- -- -- 65,995 65,995 --- --- --------- --------- -------- Balance at December 31, 1994 400 -- 1,060,403 (872,584) 187,819 Net income -- -- -- 60,512 60,512 --- --- --------- --------- -------- Balance at December 31, 1995 400 $ -- 1,060,403 (812,072) 248,331 === === ========= ========= ========
This company has authorized 400 shares of common stock at no par value. Because the companies share personnel, facilities and equipment, the capital contributions and certain expenses that were recorded in the records of the individual companies may not be reflective of what might have been if these companies were not affiliated. (9) Commitments and Contingencies The Company has oral agreements with an officer and certain directors under which such individuals would be entitled to a portion of the increase in value of the Company, over a predetermined amount, realized as a result of an initial public offering or sale of substantially all of the Company's assets. 7 LIBERTY CABLE TELEVISION, INC. AND AFFILIATES Notes to Combined Financial Statements, Continued (9), Continued In connection with objections raised with the Federal Communications Commission ("FCC") over the Company's applications for Operational Fixed Microwave Service Licenses, the Company and the FCC moved jointly for a summary decision before the presiding administrative law judge. The joint motion asked that a decision be issued granting Liberty the licenses it seeks and imposing a forfeiture of approximately $780,000 for violation of certain FCC rules. Two intervenors have opposed this motion which is pending before the presiding judge. The Company believes that the result contemplated by the joint motion will likely be ordered by the FCC and has accrued the forfeiture costs at December 31, 1995. During 1996, the Company agreed to settle litigation resulting from a dispute relating to copyright royalties to certain programs it had broadcast. The Company also settled a separate litigation relating to franchise operation issues. Both litigation costs have been accrued at December 31, 1995. The Company is party to other legal proceedings generally incidental to its business. Although the ultimate outcome of other legal proceedings cannot be readily determined, management believes that the outcome of such proceedings will not have a material adverse effect on the combined financial position of the Company. (10) Subsequent Events During March 1996, the Company entered into an agreement to sell substantially all of its assets and operations for an amount in excess of the carrying value of these assets. Assets that were not disposed and liabilities of the Company were retained by a successor entity to the Company. Freedom New York, L.L.C. Condensed Balance Sheet September 30, 1996 (Unaudited) Dollars in Thousands Assets & temporary cash investments $ (183) Accounts receivable: Trade, net allowance for doubtful accounts of $95 323 Other 559 Prepaid expenses and other current assets 372 ------- Total current assets 1,071 Property, plant and equipment, net of accumulated depreciation of $846 17,366 Intangible assets, net of accumulated amortization of $2,462 15,772 ------- Total assets $34,209 =======
Liabilities and Partners' Capital Current liabilities: Accounts payable: Trade $ 1,614 Affiliate 734 Other 550 Notes payable, affiliate 4,070 Accrued expenses 1,289 ------- Total liabilities 8,257 Partners' capital 25,952 ------- Total liabilities and partners' capital $34,209 ======= Freedom New York, L.L.C. Condensed Statement of Operations For the Period March 6, 1996 to September 30, 1996 and for the Three Months ended September 30, 1996 (Unaudited) Dollars in Thousands
Three months Period ended March 6, 1996 September 30, 1996 September 30, 1996 ------------------ ------------------ Sales $ 2,074 $ 4,590 Costs and expenses, excluding depression and amortization 2,852 5,963 Depreciation and amortization 1,518 3,309 -------- ------- Operating los (2,296) (4,682) Interest income 1 5 Interest expense (189) (581) -------- -------- Net loss $ (2,484) $ (5,258)
Note to condensed Statement of Operations: Information for the corresponding periods of the prior year is not presented since Freedom New York, L.L.C. was formed in March 1996. Freedom New York, L.L.C. Condensed Statement of Cash Flows For the Period March 6, 1996 to September 30, 1996 (Unaudited) Dollars in Thousands Cash flows from operating activities $ 983 ------- Cash flows from investing activities Capital expenditures (3,736) Acquisition of Assets of Liberty Cable Television, Inc. et al (26,500) ------- Net cash used in investing activities (30,236) ------- Cash flows from financing activities: Advances from affiliates: 4,070 Partners' capital Contributions 25,000 ------- Net cash provided by operating activities 29,070 ------- Net decrease in cash and temporary cash investments (183) Cash and temporary cash investments, beginning -- ------- Cash and temporary cash investments, ending $ (183) =======
Item 7(b)1 PRO FORMA FINANCIAL STATEMENTS The following unaudited Pro Forma Condensed Consolidated Statements of Operations for the nine months ended September 30,1996 and the year ended December 31, 1995 give effect to the acquisition of the Freedom Interest as though it had occurred on January 1, 1995. These pro forma financial statements should be read in conjunction with (i) the historical financial statements and notes thereto of Liberty Cable Television, Inc. and affiliates ("Liberty") and (ii) the Company's historical consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the year ended December 31, 1995 and in the quarterly report on Form 10-Q for the nine months ended September 30, 1996. The Pro Forma Condensed Consolidated Statements of Operations are not necessarily indicative of the actual results of operations or financial position which would have been reported if the transaction had occurred on the respective dates referred to above nor do they purport to indicate the results of future operations or financial position of the Company. In the opinion of management, all adjustments necessary to present fairly such pro forma financial statements have been made. Information with respect to Liberty and the historical information regarding Liberty was provided by Liberty. A Pro Forma Condensed Consolidated Balance Sheet as of September 30, 1996 has not been included since the Company's Condensed Consolidated Balance Sheet included in its Form 10-Q as of and for the nine months ended September 30, 1996 reflects the acquisition. Pro Forma Condensed Consolidated Statement of Operations for the Nine Months Ended September 30, 1996 (Dollars in Thousands Except Per Share Amounts) (Unaudited)
C-TEC Liberty Freedom Corporation January 1, 1996- March 6, 1996 - Pro Forma (Historical)(b) March 5, 1996(b) August 31, 1996(b) Adjustments Pro Forma --------------- ----------------- ------------------ ----------- --------- SALES $272,503 $1,330 $3,876 - $277,709 COSTS & EXPENSES, EXCLUDING DEPRECIATION AND AMORTIZATION 172,249 2,696 4,866 - 179,811 DEPRECIATION AND AMORTIZATION 71,350 379 2,799 1,931(a) 76,459 -------- ------- ------- ------- -------- OPERATING INCOME (LOSS) 28,904 (1,745) (3,789) (1,931) 21,439 INTEREST & DIVIDEND INCOME 10,967 - 4 - 10,971 INTEREST EXPENSE (20,745) (263) (474) - (21,482) OTHER (EXPENSE) INCOME, NET 2,046 - - - 2,046 -------- ------- ------- ------- -------- INCOME (LOSS) ROM CONTINUING OPERATIONS BEFORE INCOME TAXES 21,172 (2,008) (4,259) (1,931) 12,974 PROVISION (BENEFIT) FOR INCOME TAXES 8,788 - - (1,674)(d) 7,114 -------- ------- ------- ------- -------- INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE MINORITY INTEREST AND EQUITY IN UNCONSOLIDATED ENTITIES 12,384 (2,008) (4,259) (257) 5,860 MINORITY INTEREST IN LOSS OF CONSOLIDATED ENTITIES 960 - - 1,631(c) 2,591 EQUITY IN LOSS OF UNCONSOLIDATED ENTITIES (578) - - - (578) -------- ------- ------- ------- -------- INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE EXTRAORDINARY CHARGE $ 12,766 $(2,008) $(4,259) $ 1,374 $ 7,873 ======== ======= ======= ======= ========
Pro Forma Condensed Consolidated Statement of Operations for the Nine Months Ended September 30, 1996 (Dollars in Thousands Except Per Share Amounts) (Unaudited)
C-TEC Corporation (Historical)(b) Pro Forma --------------- --------- Primary earnings (loss) per average common share: Income from continuing operations before extraordinary charge $0.46 $0.28 Average common shares and common stock equivalents outstanding 27,735,389 27,735,389 Fully diluted earnings (loss) per average common share: Income from continuing operations before extraordinary charge $0.44 $0.27 Average common shares and common stock equivalents outstanding 29,192,532 29,192,532
See accompanying notes to pro forma condensed consolidated financial statements. Pro Forma Condensed Consolidated Statement of Operations for the Year Ended December 31, 1995 (Dollars in Thousands Except Per Share Amounts) (Unaudited)
C-TEC Liberty Cable Corporation Television, Inc. Pro Forma (Historical) and Affiliates Adjustments Pro Forma ------------ ----------------- --------------- ---------- SALES $324,688 $ 5,956 - $330,644 COSTS & EXPENSES, EXCLUDING DEPRECIATION AND AMORTIZATION 209,201 11,633 - 220,834 DEPRECIATION AND AMORTIZATION 72,958 1,854 5,176(a) 79,988 -------- ------- -------- -------- OPERATING INCOME (LOSS) 42,529 (7,531) $(5,176) 29,822 INTEREST & DIVIDEND INCOME 14,930 - - 14,930 INTEREST EXPENSE (26,513) (1,270) - (27,783) GAIN ON SALE OF INVESTMENTS 3,038 - - 3,038 OTHER (EXPENSE) INCOME, NET 592 - - 592 -------- ------- ------- -------- INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 34,576 (8,801) (5,176) 20,599 PROVISION (BENEFIT) FOR INCOME TAXES 8,856 - (2,855)(d) 6,001 -------- ------- ------- -------- INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE MINORITY INTEREST AND EQUITY IN UNCONSOLIDATED ENTITIES 25,720 (8,801) (2,321) 14,598 MINORITY INTEREST IN (INCOME) LOSS OF CONSOLIDATED ENTITIES (329) - 2,781(c) 2,452 EQUITY IN LOSS OF UNCONSOLIDATED ENTITIES (2,665) - - (2,665) -------- ------- ------- -------- INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE EXTRAORDINARY CHARGE AND CUMULATIVE EFFECT OF ACCOUNTING PRINCIPLE CHANGES $ 22,726 $(8,801) $ 460 $ 14,385 ======== ======= ======= ========
Pro Forma Condensed Consolidated Statement of Operations for the Year Ended December 31, 1995 (Dollars in Thousands Except Per Share Amounts) (Unaudited)
C-TEC Corporation (Historical) Pro Forma ------------ --------- Primary earnings (loss) per average common share: Income from continuing operations before extraordinary charge and cumulative effect of accounting principle change $0.83 $0.52 Average common shares and common stock equivalents outstanding 27,597,783 27,597,783 Fully diluted earnings (loss) per average common share: Income from continuing operations before extraordinary charge and cumulative effect of accounting principle change $0.81 $0.51 Average common shares and common stock equivalents outstanding 28,144,472 28,144,472
See accompanying notes to pro forma condensed consolidated financial statements. Notes to Pro Forma Condensed Consolidated Financial Statements (a) Adjustments to record additional depreciation and amortization resulting from recording the fair value of tangible and identifiable intangible assets acquired from Liberty Cable Television, Inc. and affiliates. The purchase price of approximately $29,000 was allocated based on preliminary information and the final allocation may differ from assumptions used in the preparation of the pro forma statements. (b) The Company purchased from RCN Corporation, the Company's controlling shareholder ("RCN"), RCN's 80.1% interest in Freedom New York, L.L.C. ("Freedom Interest"). Previously, in March 1996, Freedom, an affiliate of RCN, purchased 80.1% of the assets of Liberty Cable Television, Inc. et al ("Liberty"). Liberty contributed the remaining 19.9% of the assets of Liberty to Freedom. The operating results of Freedom for September 1996 are reflected in C-TEC's historical financial results for the nine months ended September 30, 1996. (c) Adjustment to reflect minority interest of 19.9% in the depreciation/ amortization adjustment and the operating losses of Freedom and/or Liberty, as appropriate. (d) Adjustment to reflect tax benefits associated with the depreciation/ amortization adjustment and with the Company's share of the operating losses of Freedom and/or Liberty. The separate historical financial statements of Freedom and Liberty do not reflect provisions for income taxes because Freedom is treated as a partnership and Liberty was an S corporation for federal tax purposes. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. C-TEC Corporation By: \s\ Bruce C. Godfrey ------------------------------ Name: Bruce C. Godfrey Title: Executive Vice President and Chief Financial Officer Date: November 15, 1996 -----END PRIVACY-ENHANCED MESSAGE-----