HomeMy WebLinkAbout31- CATV Manager mITY OF SAN BERN RDINO - REQUEST VIR COUNCIL ACTION
tom: FRANK KELLER Subject: Resolution transferring ownership
CATV Manager of Southland Cablevision to
ept: TC I--CA
ate: March 29 , 1993
mopsis of Previous Council action:
ecommended motion:
Adopt resolution.
Signature
ontact person: Frank xQ1 I Pr Phone: 5147
ipporting data attached: Ward:
UNDING REQUIREMENTS: Amount:
Source: (Acct No.)
(Acct Description)
Finance:
:)uncil Notes:
Agenda Item No-
-0262
•0262
American Cable of Redlands (Southland Cablevision) has entered in
an Asset Purchase Agreement with Tele-Communications , Inc and
will acquire all of the assets used in the ownership and
operation of American Cable of Redlands . Tele-Communications ,
Inc . has agreed to assign all of its right , title and interest in
the agreement to TCI Cablevision of California corporation ( "TCI-
CA" ) .
TCI-CA, as a wholly-owned subsidiary of TCI , upon review has all
the financial and technical ability to operate the Redlands cable
television system pursuant to the terms of the Franchise. The
current franchise is due to be renegotiated on June 10 , 1996. In
addition to the above , the current franchise is in full effect
and good operating condition.
TCI ' s latest financial statements are enclosed for your review.
(TCI-CA is a consolidated entity within TCI ' s financial
statements . ) TCI-CA does not anticipate changes in the Redlands ,
Ca system, nor disruption of service as a result of this change
in ownership.
Upon review, staff can find no reason why the transfer of
franchise to TCI-CA should not take place.
1 RESOLUTION NO.
2 RESOLUTION OF THE CITY OF SAN BERNARDINO APPROVING THE
TRANSFER OF CABLE TELEVISION FRANCHISE FROM AMERICAN CABLE TV OF
3 REDLANDS JOINT VENTURE (SOUTHLAND CABLEVISION) TO TCI CABLEVISION
OF CALIFORNIA.
4
5 WHEREAS, American Cable TV of Redlands Joint Venture d/b/a
6 Southland Cablevision, a Colorado general partnership [ "Seller"]
'
7 and affiliated entity of Tele-Communications, Inc. , a Delaware
8 Corporation [ "TCI"] , is a duly authorized holder of a franchise
9 authorizing the operation and maintenance of a cable television
10 system within the City of San Bernardino, pursuant to City of San
11 Bernardino Ordinance No. MC-59 and Resolution No. 84-93 ["the
Franchise"] ; and,
12
WHEREAS, Seller and TCI are parties to that certain Asset
13
14 Purchase Agreement dated January 28, 1993 [ "the Agreement"]
wherein Seller and TCI agree that TCI will acquire all of the
15
assets used in the ownership and operation of the cable television
16 system; and,
17
WHEREAS, TCI has agreed to an assignment of all of its
18
right, title and interest in the Agreement to TCI Cablevision of
19 California, Inc. , a California corporation and direct subsidiary
20 of TCI ["TCI-CA"] ; and,
21
WHEREAS, TCI-CA desires to acquire from Seller all the
22 rights and privileges of the Franchise and assume all of the
23 obligations of Seller under the Franchise accruing from the date
24 of closing under the Agreement; and,
25 WHEREAS, the Franchise authorizes the transfer and
26 assignment of the Franchise by Seller, subject to the adoption of
27 a Resolution authorizing such transfer; and,
28
1
1 RESOLUTION OF THE CITY OF SAN BERNARDINO APPROVING THE TRANSFER OF
CABLE TELEVISION FRANCHISE FROM AMERICAN CABLE TV OF REDLANDS
2 JOINT VENTURE TO TCI CABLEVISION OF CALIFORNIA.
3
4 WHEREAS, Seller has requested the approval and consent of
5 the City for the transfer and assignment of the Franchise by the
6 Seller to TCI-CA; and,
7 WHEREAS, the City has received evidence of financial
8 responsibility submitted by TCI, Inc. , and Subsidiaries and has
9 found that TCI, Inc. , including its subsidiary TCI-CA, has the
10 financial and managerial ability to operate the system in a proper
11 manner;
12 BE IT RESOLVED BY THE MAYOR AND COMMON COUNCIL OF THE CITY
13 OF SAN BERNARDINO AS FOLLOWS:
14 SECTION 1. The Mayor and Common Council of the City of San
15 Bernardino hereby consent to and approve the assignment of the
16 Franchise and related assets of the cable television system by
17 Seller to TCI-CA, conditioned upon and effective upon the filing
18 with the City Clerk by TCI-CA its written assurance that it agrees
19 to comply with all the provisions of San Bernardino Municipal Code
20 Chapter 14.08 and the Franchise.
21 SECTION 2. The Mayor and Common Council hereby affirm that:
22 (a) the Franchise was properly granted; (b) the Franchise is in
23 full force and effect; (c) the Franchise is scheduled to expire on
24 June 10, 1996; and (d) to the City's knowledge there exists no
25 fact or circumstance which constitutes or which, with the passage
26 of time or giving of notice or both, would constitute a default
27 under the Franchise or will entitle the City to cancel or
28 terminate the rights thereunder, except upon the expiration of the
2
1 RESOLUTION OF THE CITY OF SAN BERNARDINO APPROVING THE TRANSFER OF
CABLE TELEVISION FRANCHISE FROM AMERICAN CABLE TV OF REDLANDS
2 JOINT VENTURE TO TCI CABLEVISION OF CALIFORNIA.
3
4 full term thereof.
5 SECTION 3. The authorization of the transfer and assignment
6 of the franchise from Seller to TCI-CA is expressly conditioned
7 upon, and shall be deemed effective upon, the consummation of the
8 sale to TCI-CA of the Franchise and related assets and the closing
9 of the transactions under the Agreement.
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1 RESOLUTION OF THE CITY OF SAN BERNARDINO APPROVING THE TRANSFER OF
CABLE TELEVISION FRANCHISE FROM AMERICAN CABLE TV OF REDLANDS
2 JOINT VENTURE TO TCI CABLEVISION OF CALIFORNIA.
3
4 I HEREBY CERTIFY that the foregoing resolution was duly
5 adopted by the Mayor and Common Council of the City of
6 San Bernardino at a meeting thereof, held on the
7 day of 1993, by the following vote, to wit:
8 Council Members: AYES NAYS ABSTAIN ABSENT
9 ESTRADA
10 REILLY
11 HERNANDEZ
12 MAUDSLEY
13 MINOR
14 POPE-LUDLAM
15 MILLER
16
17 City Clerk
18 The foregoing resolution is hereby approved this day
of 1993.
19
20
W. R. Holcomb, Mayor
21 City of San Bernardino
22 Approved as to
form and legal content:
23 JAMES F. PENMAN,
24 City Attorney
25 By:
26
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4
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
( X J QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1992
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
Commission File Number 0-5550
TELE-COMMUNICATIONS INC
(Exact name of registrant as specified in its charter)
State of Delaware 84-0588868
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5619 DTC Parkway 80111
Englewood Colorado (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (303) 267-5500
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
The number of shares outstanding of the Registrant's common stock (net of
shares held in treasury) , as of November 1, 1992, was:
Class A common stock - 377,567,871 shares; and
Class B common stock - 47,951,609 shares.
PART I - FINANCIAL INFORMATION
TELE-COMKUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(unaudited)
September 30, December 31,
Assets 1992 1991*
amounts in millions
Cash $ 54 32
Trade and other receivables, net 159 228
Prepaid expenses 23 14
Investment in Liberty Media Corporation 418 370
("Liberty") (note 5)
Investments in other affiliates, accounted for under
the equity method, and related receivables (note 6) 1,213 1,152
Investment in Turner Broadcasting System, Inc. (note 7) 463 463
Other investments, at cost, 373 235
and related receivables (note 8)
Property and equipment, at cost: 64 59
Land 5,224 4,923
Cable distribution systems
Support equipment and buildings 5,949 5,580
Less accumulated depreciation 2.034 1.702
3.915 3.878
Franchise costs 6,300 6,162
Less accumulated amortization 701 581
5.599 5,581
Net assets of discontinued operations (note 14) -- 242
Other assets, at cost, net of amortization 163 165
1380 12,360
*Reclassified and restated - see notes 2 and 5.
(continued)
I-1
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets, continued
(unaudited)
September 30, December 31,
Liabilities and Stockholders' Equity 1992 1991*
amounts in millions
Accounts payable $ 70 95
Accrued interest 123 92
Other accrued expenses 430 355
Debt (note 9) 9,188 9,455
Deferred income taxes 247 160
Other liabilities 129 164
Total liabilities 10.187 10.321
Minority interests in equity
of consolidated subsidiaries 614 574
Redeemable preferred stocks (note 10) 115 115
Stockholders' equity (note 11) :
Preferred stock, $1 par value.
Authorized 10,000,000 shares; issued and
outstanding 5,028,595 shares of redeemable
preferred stocks in 1992 and 1991 -- --
Class A common stock, $1 par value.
Authorized 1,000,000,000 shares;
issued 456,876,069 shares in 1992
and 449,124,604 shares in 1991 457 449
Class B common stock, $1 par value.
Authorized 100,000,000 shares;
issued 47,977,461 shares in 1992
and 48,790,443 shares in 1991 48 49
Additional paid-in capital 1,828 1,738
Accumulated deficit (536) (553)
1,797 1,683
Treasury stock, at cost (79,335,038 shares
of Class A common stock) (333) (333)
Total stockholders' equity 1.464 1.350
Commitments and contingencies (note 13)
380 J2 360
*Reclassified and restated - see notes 2 and 5.
See accompanying notes to consolidated financial statements.
I-2
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited)
Three months Nine months
ended ended
September 30 Se tember 30
1992 1991* 1992 1991T
amounts in m ons
except per share amounts
Revenue $ 896 803 2,631 2,389
Operating costs and expenses:
Operating 255 239 763 756
Selling 1 general and
administrative (note 6) 220 208 650 563
Depreciation ill 141 131 128
Amortization � �,
Operating income 265 190 730 579
Other income (expense) :
Interest expense (172) (202) (545) (626)
Interest and dividend income note 6 20 10 50 41
Share of earnings of Liberty ote 53 14 13 20 25
Share of losses of other affiliates, net (29) (12) (61) (31)
Gain (loss) on disposition of assets, net (1 7 (1 3
Loss on early extinguishment of debt
(note 9) (3) -- (15) --
Minority interests in earnings
of consolidated subsidiaries, net (12) (10) ) )
Other, net -- -- )) ))
�) �)
Earnings (loss) from continuing
operations before income taxes 82 (4) 133 (28)
Income tax expense (52) (20) (101) (46)
Earnings (loss) from
continuing operations 30 (24) 32 (74)
Loss from discontinued operations,
net of income taxes (note 14) (2) (15) (3)
Net earnings (loss) 30 (26) 17 (77)
Dividend requirement on redeemable
preferred stocks (3) -- _(11) -'
Net earnings (loss) attributable
to common shareholders S 27 (26) 6 (77)
Primary and fully diluted earnings (loss)
attributable to common shareholders
per common and common equivalent
share (note 3) :
Continuing operations $ .06 ( .07) .05 (.21)
Discontinued operations ( .04) ( .Ol)
06 (te) 01 22)
*Reclassified and restated - see notes 2 and 5.
See accompanying notes to consolidated financial statements.
I-3
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
Nine months ended September 30, 1992
(unaudited)
Additional Total
Common stock paid-in Accumulated Treasury stockholders'
Class A Class B capital deficit stock equity
amounts in millions
Balance at January 1, 1992* S 449 49 1,738 (553) (333) 1,350
Net earnings 17 -• 17
Conversion of public debentures
(note 9b) 7 105 -- •• 112
Issuance of common stock upon
exercise of options 1 7 8
Issuance of Class A common stock
upon acquisition 3 -• - 3
Dividends on redeemable
preferred stocks
Acquisition and retirement
of common stock ) (14) - 15)
Balance at September 30, 1992 S�457 �8 1�828 JL3 ) L)
*Restated - see note 5.
See accompanying notes to consolidated financial statements.
I-4
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited)
Nine months
ended
S_evtembe 9
1992 91*
amounts in m1111—ons
(see note 4)
Cash flows from operating activities: $ 17 (77)
Net earnings (loss)
Adjustments to reconcile net earnings (loss) to
net cash rovided by operating activities:
p 15 3
Discontinued operations
Depreciation and amortization (20) (25)
Share of earnings of Liberty
Share of losses of affiliates 61 (3)
Loss (gain) on disposition of assets
Loss on early extinguishment of debt 96 4
Deferred income tax expense ( 5)
Payment for stock appreciation rights 44 17
Minority interests in earnings
Amortization of debt discount (29) (223
Noncash interest and dividend income
Other noncash credits
Changes in operating assets and liabilities,
net of the effect of acquisitions: 25 13)
13
Change in receivables
Change in prepaid expenses (3
Change in accrued interest a ables 49 12
Change in other accruals and p y --� --47
Net cash provided by operating activities
Cash flows from investing activities: 164 303
Cash paid for acquisitions 6� 892
Capital expended for property nd equipment 23 24
Proceeds from disposition of assets
Cash proceeds from disposition of 135 --
discontinued operations 9 42
Discontinued operations
Additional investments in and (180) (186)
8
loans to affiliates and others
Return of capital from affiliates 37 38
Repayment of loans to affiliates and others 22) --
Repayment of short-term notes to Liberty 68) f80�
Other investing activities )) -
Net cash used in investing activities
Cash flows from financing activities:
3,015 3,919
Borrowings of debt (3,1 9 (3'515)
Repa ents of debt ))
Pre erred stock dividends of subsidiaries __ 17
Sales of equity securities of subsidiaries (1 )
5
Preferred stock dividends 3)
Issuances of common stock (12)
Repurchases of common stock )
Net cash provided (used) by financing activities
Net increase in cash
22 13
Cash at beginning of period
30
Cash at end of period
$ . 54
*Reclassified and restated - see notes 2 and 5.
See accompanying notes to consolidated financial statements.
I-5
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 1992
(unaudited)
(1) General
The accompanying consolidated financial statements include the accounts of
Tele-Communications, Inc. and those of all majority-owned subsidiaries ("TCI"
or the "Company") . All significant intercompany accounts and transactions
have been eliminated in consolidation.
The accompanying interim consolidated financial statements are unaudited but,
in the opinion of management, reflect all adjustments (consisting of normal
recurring accruals) necessary for a fair presentation of the results for such
periods. The results of operations for any interim period are not necessarily
indicative of results for the full year. These consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto contained in the Company's Annual Report on Form
10-K for the year ended December 31, 1991.
Certain amounts have been reclassified for comparability with the 1992
presentation.
(2) Reclassified Financial Statements for Discontinued Operations
On May 12, 1992, the Company sold its motion picture theatre business and
certain theatre-related real estate assets. Through this sale, the Company
discontinued its ownership of motion picture theatre exhibition business. The
accompanying 1991 consolidated financial statements and related notes have
been reclassified to report separately the discontinued operations (see note
14) .
(3) Earnings (Loss) Per Common and Common Equivalent Share
Primary earnings per common and common equivalent share attributable to common
shareholders for the three months and the nine months ended September 30, 1992
was computed by dividing net earnings attributable to common shareholders by
the weighted average number of common- and common equivalent shares outstanding
(467.7 million and 422.9 million for the three months and the nine months
ended September 30, 1992, respectively) . Shares issuable upon conversion of
the Convertible Notes (see note 9c) have not been included in the computation
of weighted average shares outstanding for the nine months ended September 30,
1992 as their inclusion would be anti-dilutive.
Fully diluted earnings per common and common equivalent share attributable to
common shareholders for the three months and the nine months ended
September 30, 1992 was computed by dividing earnings attributable to common
shareholders by the weighted average number of common and common equivalent
shares outstanding (467.7 million and 422.9 million for the three months and
the nine months ended September 30, 1992, respectively) . Shares issuable upon
conversion of the Convertible Notes (see note 9c) have not been included in
the computation of weighted average shares outstanding for the nine months
ended September 30, 1992 as their inclusion would be anti-dilutive. Shares
issuable upon conversion of the Liquid Yield OptionTM Notes (see note 9a) and
the 6-3/48 Convertible Preferred Stock (see note 10) have not been included in
the computation of weighted average shares outstanding for either the three
months or the nine months ended September 30, 1992 because their inclusion
would be anti-dilutive.
(continued)
I-6
TELE-COMKUNICATIONS, INC.' AND SUBSIDIARIES °-
Notes to Consolidated Financial Statements
Loss per common share attributable to common shareholders for the three months
and nine months ended September 30, 1991 was computed by dividing net loss
attributable to common shareholders by the weighted average number of common
shares outstanding during such periods (353.5 million and 354.7 million for
the three months and the nine months ended September 30, 1991, respectively) .
Common stock equivalents were not included in the computation of weighted
average shares outstanding because their inclusion would be anti-dilutive.
(4) Supplemental Disclosures to Consolidated Statements of Cash Flows
Cash paid for interest was $494 million and $593 million for the nine months
ended September 30, 1992 and 1991, respectively. Also, during these periods,
cash paid for income taxes was not material.
Significant noncash investing and financing activities for the nine months
ended September 30, 1992 and 1991 are as follows:
1992 1991
amounts in millions
Contribution of certain interests to affiliate
in exchange for preferred stock (see note 5)
Preferred stock received as portion of
consideration upon disposition of $93 --
discontinued operations —�
Exchange of preferred stock investment for
marketable equity securities
Common stock issued upon conversion of debentures $112 4
Common stock received upon redemption of
preferred stock of an affiliate $
Common stock surrendered in lieu of
cash upon exercise of stock options
Note payable issued for repurchase S— 5
of common stock
Acquisitions: $146 331
Fair value of assets acquired 21 -�
Assets, net of liabilities, assumed
Value of TCI common stock given as portion (3) (11)
of purchase price (14)
Liabilities assumed
Minority interests in equity of acquired entities _(3)
Cash paid for acquisitions 164 33
(continued)
I-7
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(5) Investment in Liberty Media Corporation
On March 28, 1991, Liberty Media Corporation ("Liberty") , an indirect, wholly-
owned subsidiary of the Company until said date, issued shares of its common
stock to TCI shareholders who, in the aggregate, tendered 8,713,696 shares of
TCI Class A common stock and 2,737,712 shares of TCI Class B common stock to
Liberty pursuant to an exchange offer. Also, on March 28, 1991, the Company
contributed its interests in certain of its cable television programming
businesses and cable television systems to Liberty in exchange for several
different classes and series of preferred stock of Liberty with an aggregate
issue price of $624 million. No gain or loss was recorded in connection with
this transaction and, accordingly, the initial carrying amount of such
preferred stock of Liberty equals the aggregate carrying amount of the net
assets contributed ($423 million) .
Of the classes of preferred stock of Liberty held by the Company, one class
entitles TCI to elect a number of members of Liberty's board of directors
equal to not less than 208 of the total number of directors, another class is
exchangeable for TCI common stock and another class is convertible into common
stock (less than 58) of Liberty.
Due to the significant economic interest held by TCI through its ownership of
Liberty preferred stock and other related party considerations, TCI accounts
for its investment in Liberty under the equity method although TCI owns none
of the outstanding common stock of Liberty. Accordingly, the Company does not
recognize any income relating to dividends, including preferred stock
dividends, and the Company has continued to record the earnings or losses
generated by the interests contributed to Liberty (by recognizing 1008 of
Liberty's earnings or losses before preferred stock dividends) .
The Company purchases sports and other programming from certain subsidiaries
of Liberty. Charges to TCI (which are based upon customary rates charged to
others) for such programming were $33 million and $17 million for the nine
months ended September 30, 1992 and 1991, respectively. Certain subsidiaries
of Liberty purchase, at TCI's cost, certain pay television and other
programming. Charges for such programming were $2 million and $1 million for
the nine months ended September 30, 1992 and 1991, respectively.
TCI and Liberty have entered into a services agreement pursuant to which TCI
provides, among other things, certain financial reporting, tax and other
administrative services. In addition, the employees of certain of Liberty's
subsidiaries have remained on the TCI payroll. Liberty reimburses TCI for
their salaries and related employment expenses. A subsidiary of Liberty also
leases office space and satellite transponder facilities from TCI. Charges
for such arrangements amounted to $2 million for each of the nine month
periods ended September 30, 1992 and 1991.
(continued)
I-8
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Summarized unaudited consolidated results of operations of Liberty for the
nine months ended September 30, 1992 and from March 29, 1991 through
September 30, 1991, respectively, are as follows:
1992 1991
amounts in millions
Revenue $111 53
Operating expenses (95) (45)
Depreciation and amortization (11) (8)
Operating income 5 --
Interest expense (6) (3)
Other, net 21 28
Net earnings 20
On December 30, 1991, the Company entered into a Commercial Paper Purchase
Agreement with Liberty whereby the Company may sell short-term notes to
Liberty of up to an aggregate amount of $100 million. The Company borrowed
$22 million from Liberty on December 31, 1991, pursuant to the Commercial
Paper Purchase Agreement. The full amount, including interest, was repaid on
January 15, 1992. Interest rates on the short-term notes are determined by
the parties by reference to prevailing money-market rates.
In January of 1992, subsidiaries of Liberty and TCI created a partnership
(owned 50.001% by Liberty and 49.9998 by TCI) for the purpose of acquiring and
operating cable television systems. The partners each agreed to contribute
certain non-cash assets to the partnership and up to $25 million of cash as
needed to fund mutually acceptable acquisitions. The non-cash assets were
contributed to the partnership on April 24, 1992. TCI contributed all of its
shares of one of the four classes of Liberty preferred stock.
Also, during the nine months ended September 30, 1992, Liberty increased its
economic and voting interest in Lenfest Communications, Inc. ("LCI") to 508
and, accordingly, adopted the equity method of accounting. Liberty's
investment in LCI, which was previously accounted for under the cost method,
was received from TCI in the March 28, 1991 transaction described above. As a
result of the foregoing, TCI restated its investment, results of operations
and stockholders' equity with respect to its ownership interest in LCI up to
March 28, 1991. As of that date, the Company reduced the carrying amount of
its investment in Liberty preferred stock and, correspondingly, increased
accumulated deficit by $72 million. The restatement did not affect the
Company's results of operations for the nine months ended September 30, 1991
because, on a restated basis, the Company's investment in LCI was reduced to
zero prior to 1991.
(continued)
I-9
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Also, during the nine months ended September 30, 1992, Liberty increased its
economic and voting interest in Columbia Associates, L.P. ("Columbia") to
39.6098 and, accordingly, adopted the equity method of accounting. Liberty's
investment in Columbia, which was previously accounted for under the cost
method, was received from TCI in the March 28, 1991 transaction described
above. As a result of the foregoing, TCI restated its investment, results of
operations and stockholders' equity with respect to its ownership interest in
Columbia up to March 28, 19.91. As of December 31, 1991, the Company reduced
the carrying amount of its investment in Liberty preferred stock and,
correspondingly, increased accumulated deficit by $17 million.
(6) Investments in Other Affiliates
Investments in affiliates, other than Liberty (see note 5) , accounted for
under the equity method, amounted to $1,154 million and $1,107 million at
September 30, 1992 and December 31, 1991, respectively. Included in these
amounts are the Company's investments in the common stock of SCI Holdings,
Inc. ("SCI") and the preferred stock of SCI's wholly-owned subsidiary, Storer
Communications, Inc. ("Storer") , which investments aggregated $759 and $767
million at September 30, 1992 and December 31, 1991, respectively.
In connection with the Company's 1988 acquisition of an equity interest in
SCI, a subsidiary of the Company issued certain debt and equity securities to
Storer for $650 million. Interest charges and preferred stock dividend
requirements on these debt and equity securities aggregated $66 million and
$67 million for the nine months ended September 30, 1992 and 1991,
respectively. The Company's share of losses of SCI for the nine months ended
September 30, 1992 and 1991 amounted to $34 million and $38 million,
respectively, as adjusted for the effect of interest and dividends accounted
for by Storer as capital transactions due to their related party nature.
In order to meet a certain 1992 debt obligation, SCI is currently pursuing
various plans, including the possibility of -a transaction that would result in
the ownership of its cable systems being split, on a tax-free basis, between
the Company and the other shareholder. This transaction is expected to occur
during 1992, although there can be no assurance that it will occur during 1992
or at all since consummation of the transaction is subject to various
conditions including the receipt of certain regulatory and other consents and
approvals, and the execution by the parties of binding agreements. As of
October 31, 1992, certain of the more significant of such conditions had been
satisfied. In any event, it is expected that the Company's investment in SCI
will remain recoverable whether or not the aforementioned transaction is
consummated.
The Company has a management consulting agreement with Storer which provides
for the operational management of certain of Storer's cable television systems
by TCI. This agreement provides for a management fee based on 3.58 of the
revenue of those cable television systems managed by the Company. The Company
also has a programming service agreement with Storer whereby the Company, for
a fee, manages Storer's purchases of programming. The total management fees
under the consulting and programming service agreements amounted to $6 million
and $5 million for the nine months ended September 30, 1992 and 1991,
respectively (which amounts are recorded as a reduction of selling, general
and administrative expenses in the accompanying consolidated statements of
operations) .
(continued)
I-10
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Summarized unaudited results of operations for affiliates (including those
contributed to Liberty through March 28, 1991) are as follows:
Nine months
ended
Combined Operations September 30,
1992 1991
amounts in millions
Revenue $ 881 1,195
Operating expenses (540) (818)
Depreciation and amortization (228) (258)
Operating income 113 119
Interest expense (226) (293)
Other, net (39) (24)
Net loss 152) (198)
Certain of the Company's affiliates are general partnerships and any
subsidiary of the Company that is a general partner in a general partnership
is, as such, liable as a matter of partnership law for all debts of that
partnership in the event liabilities of that partnership were to exceed its
assets.
(7) Investment in Turner Broadcasting System. Inc.
The Company has an investment in the common stock and the convertible
preferred stock of Turner Broadcasting System, Inc. ("TBS") . Shares of the
preferred stock have voting rights and are convertible into shares of TBS
common stock. The holders of those preferred shares, as a group, are entitled
to elect seven of fifteen members of the board of directors of TBS, and the
Company appoints three such representatives. However, voting control over TBS
is held by its chairman of the board and chief executive officer (an unrelated
third party) . The Company's total holdings of TBS common and preferred stocks
represent an approximate 128 voting interest.
The Company's investment in TBS common stock had an aggregate market value of
$554 million (which exceeded cost by $243 million) at September 30, 1992. In
addition, the Company's investment in TBS preferred stock had an aggregate
market value of $667 million (which exceeded cost by $515 million) at
September 30, 1992.
(continued)
I-11
TELE-COMMUNICATIONS, -INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(8) Other Investments
Other investments, accounted for under the cost method, and related
receivables are summarized as follows:
September 30, December 31,
1992 1991
amounts in millions
Limited partnership interest in,
and related receivables from,
Intermedia Partners $ 73 70
Convertible preferred stock investment 60 61
Preferred stock investment 88 --
Other investments and related receivables 152 104
373 235
The Company's interest in Intermedia Partners ("Intermedia") is accounted for
under the cost method although TCI's ownership approximates 328. The cost
method of accounting is considered appropriate because the limited partners
(including TCI) of Intermedia have no voting control over Intermedia's
operating and financial policies. Such control rests entirely with the
general partner (an unrelated third party) .
(9) Debt
Debt is summarized as follows:
September 30, December 31,
1992 1991
amounts in millions
Parent company debt:
Senior notes $ 1,962 981
Liquid Yield OptionTM Notes (a) 379 360
78 Subordinated debentures (b) -- 245
Bank credit facilities 238 365
Commercial paper 101 38
Other debt 2 1
2,682 1,990
Debt of subsidiaries:
Bank credit facilities 4,474 5,428
Commercial paper 9 9
Notes payable 1,412 1,413
Notes payable to Storer 475 475
Convertible notes (c) 48 48
Other debt 88
9,188 9.455
(continued)
I-12
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(a) These subordinated notes , which are stated net of unamortized discount
of $771 million and $790 million at September 30, 1992 and December 31,
1991, respectively, were issued through a public offering. These notes
are not redeemable prior to April 25, 1993, unless the closing sales
price of TCI Class A common stock equals or exceeds $27.09 per share for
a specified period. Subject to the foregoing, the notes are redeemable,
in whole or in part, at the option of the Company at the issue price
plus accrued original issue discount. Additionally, the Company will
purchase any note, at the option of the holder, as of April 25, 1996,
April 25, 2001 or April 25, 2006 at the issue price plus accrued
original issue discount through such dates. The Company, at its option,
may elect to pay the purchase price in cash and/or shares of TCI Class A
common stock. The notes mature on April 25, 2008. At September 30,
1992, these notes were convertible, at the option of the holders, at any
time prior to maturity, into an aggregate of 18,975,000 shares of
Class A common stock.
(b) During the nine months ended September 30, 1992, TCI called for
redemption all of its 78 convertible subordinated debentures.
Debentures aggregating $114 million were converted into 6,636,881 shares
of Class A common stock and the remaining debentures were redeemed at
104.28 of the principal amount together with accrued interest to the
redemption date.
(c) These convertible notes, which are stated net of unamortized discount of
$201 million at September 30, 1992 and December 31, 1991, mature on
December 18, 2021. The notes require (so long as conversion of the
notes has not occurred) an annual interest payment through 2003 equal to
1.858 of the face amount of the notes. At September 30, 1992, the notes
were convertible, at the option of the holders, into an aggregate of
41,879,990 shares of Class A common stock. During the nine months ended
September 30, 1992, certain of these notes were converted into 62,000
shares of Class A common stock.
The Company's bank credit facilities and various other debt instruments
generally contain restrictive covenants which require, among other things, the
maintenance of certain earnings, specified cash flow and financial ratios
(primarily the ratios of cash flow to total debt and cash flow to debt
service, as defined) , and include certain limitations on indebtedness,
investments, guarantees, dispositions, stock repurchases and/or dividend
payments.
As security for borrowings under one of its credit facilities, the Company
pledged a portion of the common stock (with a quoted market value of
approximately $449 million at September 30, 1992) it holds of TBS.
In order to provide interest rate protection on a portion of its variable rate
indebtedness, the Company has entered into various interest rate exchange
agreements. The Company is exposed to credit losses for the periodic
settlements of amounts due under these interest rate exchange agreements in
the event of nonperformance by the other parties to the agreements. However,
the Company does not anticipate nonperformance by the counterparties and, in
any event, such amounts were not material at September 30, 1992.
TCI and certain of its subsidiaries are required to maintain unused
availability under bank credit facilities to the extent of outstanding
commercial paper.
(continued)
I-13
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(10) Redeemable Preferred Stocks
September 30, December 31,
1992 1991
amounts in millions
12-7/88 Cumulative Compounding
Preferred Stock, Series A;
issued and outstanding 5,022,394
shares (a) $ 97 97
6-3/48 Convertible Preferred Stock,
Series B; issued and outstanding 18 18
6,201 shares (b)
115 115
(a) The 12-7/88 Cumulative Compounding Preferred Stock is stated at its
redemption value of $19.25 per share. Dividends are cumulative and
accrue at 12-7/88 of the redemption value. Accrued dividends are
payable quarterly and unpaid dividends are added to the redemption price
and accrue dividends until paid. This preferred stock is redeemable at
the option of the Company at any time after January 1, 1992 in whole or
in part, at the redemption value plus accrued dividends. On January 1,
1999, the Company is required to redeem one-half of the shares then
outstanding. The remaining shares outstanding must be redeemed on
January 1, 2000.
(b) The 6-3/48 Convertible Preferred Stock is stated at its redemption value
of $3,000 per share, and each share is convertible into 204 shares of
TCI Class A common stock. Unpaid dividends will be added to the
redemption value and will accrue interest, until paid, at 6-3/48 per
annum thereafter. Interest charged on unpaid dividends outstanding for
two consecutive quarters will increase to 158 per annum. This preferred
stock is subject to optional redemption by the Company, in whole or in
part, with mandatory redemption by May 25, 1999, in each case at the
redemption value plus accrued dividends. The stock is also subject to
redemption by the Company at the option of the holder, in whole or in
part, at the redemption price plus accrued dividends.
Each of the preferred stock issues are senior to the Company's common stock
and equal with each other with respect to the declaration and payment of
dividends and liquidating distributions and have no voting rights except the
right to vote as a separate class on any amendment to the Company's Restated
Certificate of Incorporation (as amended) that would adversely affect the
preferences and rights of such holders.
(11) Stockholders' Equity
Common Stock
The Class A common stock has one vote per share and the Class B common stock
has ten votes per share. Each share of Class B common stock is convertible,
at the option of the holder, into one share of Class A common stock.
(continued)
I-14
TELE-COMMUNICATIONS , INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Stock Options
Two officers (one of whom is also a director) hold options to purchase TCI
Class A common stock. The officer who is also a director holds an option to
acquire 200,000 shares at an adjusted purchase price of $10.00 per share and
the other officer holds an option to acquire 50,000 shares at the same price.
These options expire in June of 1993.
The Company had an Incentive Stock Option Plan ("ISOP") which has expired.
Options granted under the ISOP (prior to its expiration) have an option price
equal to the fair market value on the date of grant, are all currently
exercisable and expire five years from the date of grant. Options to purchase
524,101 shares of TCI Class A common stock are outstanding at September 30,
1992, with prices ranging from $10.00 to $17.25 per share. During the nine
months ended September 30, 1992, options to acquire 136,555 shares were
exercised and options for 11,000 shares were cancelled.
In connection with the 1991 merger whereby TCI acquired the remaining minority
interest in United Artists Entertainment Company ("UAE") , TCI assumed certain
stock options previously granted by UAE to certain of its employees. These
options, which are currently exercisable, represent the right, as of
September 30, 1992, to acquire 270,348 shares of TCI Class A common stock at
adjusted purchase prices ranging from $8.83 to $18.63 per share. During the
nine months ended September 30, 1992, options to acquire 709,168 shares were
exercised and options for 369,241 shares were cancelled. No additional
options may be granted by UAE.
At the Annual Meeting of Stockholders, held on June 11, 1992, the Company's
stockholders approved the adoption of the 1992 Stock Incentive Plan (the
"Plan") . The Plan provides for awards to be made with respect to a maximum of
10 million shares of Class A common stock. Awards may be made as grants of
stock options, stock appreciation rights, restricted shares, stock units or
any combination thereof. As of September 30, 1992, no awards had been made
under the Plan.
Other
The consideration
ercised over the par value of ctheesto k debentures
ed is converted
creditedto additional
paid-in capital.
At September 30, 1992, there were 63,164,443 shares of TCI Class A common
stock reserved for issuance under exercise privileges related to options and
convertible debt securities described in this note 11 and in notes 9 and 10.
In addition, one share of Class A common stock is reserved for each share of
Class B common stock.
(continued)
I-15
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(12) Income Taxes
TCI files a consolidated Federal income tax return with all of its 808 or more
owned subsidiaries. Consolidated subsidiaries in which the Company owns less
than 808 each file a separate consolidated Federal income tax return. TCI and
such subsidiaries calculate their respective tax liabilities on a separate
return basis and combine them in the accompanying consolidated financial
statements.
Deferred tax expense or benefit results from timing differences in the
recognition of revenue and expense for income tax and financial statement
purposes and from adjustment of deferred tax credits. The primary source of
these differences is excess depreciation and amortization for income tax
purposes.
The Company has net operating loss carryforwards for income tax purposes
which, if not utilized to reduce taxable income in future periods, expire at
various dates through 2006. Substantially all such net operating losses have
been recognized for financial statement purposes as a reduction of deferred
income taxes. To the extent the net operating loss carryforwards are utilized
for income tax purposes, deferred tax credits will be restored at the then
current rates. Additionally, certain subsidiaries of the Company have net
operating loss carryforwards for income tax purposes and these net operating
losses are subject to certain rules limiting their usage. Also, one of the
Company's subsidiaries (which had filed a separate consolidated Federal income
tax return) has a net operating loss carryforward for financial statement
purposes.
The Company has available investment tax credits which, if not utilized to
offset future Federal income taxes payable, expire at various dates through
2005. Substantially all such investment tax credits have been recognized for
financial statement purposes as a reduction of deferred income taxes. To the
extent the investment tax credit carryforward is utilized for income tax
purposes, deferred tax credits will be restored at the then current rates.
The benefits from investment tax credits are recorded when such credits are
used to reduce current or deferred income taxes payable. Additionally,
certain subsidiaries of the Company have investment tax credit carryforwards
and these investment tax credit carryforwards are subject to certain rules
limiting their usage. Also, one of the Company's subsidiaries (which had
filed a separate consolidated Federal income tax return) has an investment tax
credit carryforward for financial statement purposes.
Certain of the Federal income tax returns of TCI and its subsidiaries which
filed separate income tax returns are presently under examination by the
Internal Revenue Service ("IRS") for the years 1978 through 1991. In the
opinion of management, any additional tax liability, not previously provided
for, resulting from these examinations, ultimately determined to be payable,
should not have a material adverse effect on the consolidated financial
position of the Company. The Company pursued a course of action on certain
issues (primarily the deductibility of franchise cost amortization) the IRS
had raised and such issues were argued before the United States Tax Court.
During 1990, the Company received a favorable decision regarding these issues.
The IRS has appealed this decision.
(continued)
I-16
TELE-COMMUNICATIONS,' INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" , which will
supersede Statement No. 96, "Accounting for Income Taxes". The Company
currently accounts for income taxes under Accounting Principles Board Opinion
No. 11, having elected not to adopt Statement No. 96 prior to its required
effective date. Statement No. 109 will change the Company's method of
accounting for income taxes from the deferred method required under APB No. 11
to the asset and liability method. The Company presently does not know and
cannot reasonably estimate the impact of Statement No. 109 on its financial
statements. Statement No. 109 is effective for fiscal years beginning after
December 15, 1992. The Company is currently determining whether it will
restate any prior years or adopt Statement No. 109 in 1993 on a prospective
basis.
(13) Commitments and Contingencies
In connection with the acquisition from TCI of a 19.9% minority interest in
Heritage Communications, Inc. ("Heritage") by Comcast Corporation ("Comcast") ,
Comcast was granted the right, beginning in July of 1993, to require TCI to
purchase or cause to be purchased from Comcast all shares of Heritage directly
or indirectly owned by Comcast for either cash or, at TCI's election, shares
of TCI Class A common stock.
The Company has contingent liabilities related to legal proceedings and other
matters arising in the ordinary course of business. In the opinion of
management, it is expected that amounts, if any, which may be required to
satisfy such contingencies will not be material in relation to the
accompanying consolidated financial statements.
(14) Discontinued Operations
The Company sold its motion picture theatre business and certain theatre-
related real estate assets on May 12, 1992. The selling price (including
liabilities assumed) was approximately $680 million, of which $92.5 million
was paid in the form of preferred stock of the buyer. No gain or loss was
recognized in connection with this transaction as the net assets of
discontinued operations were reflected at their net realizable value.
Operating results for the theatre operations for the nine months ended
September 30, 1992 and 1991 are reported separately in the consolidated
statement of operations under the caption "Loss from discontinued operations"
and include:
1992 1991
amounts in millions
Revenue $ 211 471
Loss before income taxes $ (16) (2)
Income tax benefit (expense) $ 1 (1)
Net loss $ (15) (3)
The net assets of discontinued operations on the consolidated balance sheet at
December 31, 1991 consists primarily of the theatre operations property and
equipment, net of debt and miscellaneous liabilities.
I-17
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(1) Material changes in financial condition:
The Company had approximately $1 billion in unused lines of credit at
September 30, 1992, excluding amounts related to lines of credit which provide
availability to support commercial paper. Although the Company was in
compliance with the restrictive covenants contained in its credit facilities
at said date, additional borrowings under the credit facilities are subject to
the Company's continuing compliance with the restrictive covenants (which
relate primarily to the maintenance of certain ratios of cash flow to total
debt and cash flow to debt service, as defined) after giving effect to such
additional borrowings. See note 9 to the accompanying consolidated financial
statements for additional information regarding the material terms of the
Company's lines of credit.
As security for borrowings under one of its credit facilities, the Company
pledged a portion of the common stock it holds of TBS. Borrowings under this
credit facility (which amounted to $205 million at September 30, 1992) are due
in August of 1994. On or before such date, assuming there has been no
significant decline in the value of the underlying collateral (approximately
$449 million at September 30, 1992) , the Company expects to refinance these
borrowings and extend the maturity date. However, there can be no assurance
that such a refinancing will be accomplished on terms acceptable to the
Company.
One measure of liquidity is commonly referred to as "interest coverage".
Interest coverage, which is measured by the ratio of operating income before
depreciation and amortization ($1,218 million and $1,070 million for the nine
months ended September 30, 1992 and 1991, respectively) to interest expense
($545 million and $626 million for the nine months ended September 30, 1992
and 1991, respectively) , is determined by reference to the consolidated
statements of operations. The Company's interest coverage ratio was 2238 and
1718 for the nine months ended September 30, 1992 and 1991, respectively.
Management of the Company believes that the foregoing interest coverage ratio
has improved due to improved operating results of the Company as well as a
general decline in interest rates and such interest coverage ratio is adequate
in light of the consistency and nonseasonal nature of its cable television
operations and the relative predictability of the Company's interest expense,
more than half of which results from fixed rate indebtedness.
The Company owns an equity interest in SCI (see note 6 to the accompanying
consolidated financial statements) . SCI is obligated to repay $398 million in
principal amount of its zero coupon senior notes on December 5, 1992.
However, SCI does not expect cash flows generated from operations and
available borrowing capacity under its existing credit agreements to be
sufficient to satisfy the aforementioned 1992 debt obligation. As a result,
SCI is pursuing various plans to meet this obligation, including the
possibility of a transaction that would result in the ownership of its cable
systems being split, on a tax-free basis, between the Company and the other
shareholder. This transaction is expected to occur during 1992, although
there can be no assurance that it will occur during 1992 or at all since
consummation of the transaction is subject to various conditions including
receipt of certain regulatory and other consents and approvals, and the
execution by the parties of binding agreements. As of October 31, 1992,
certain of the more significant of such conditions had been satisfied. In the
event this transaction cannot be accomplished, SCI will need to seek
alternative financing. (continued)
I-18
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
(1) Material changes in financial condition (continued) :
Other than SCI, the Company's various partnerships and other affiliates
accounted for under the equity method generally fund their acquisitions,
required principal repayments and capital expenditures through borrowings
under their own credit facilities (which are generally not guaranteed by the
Company) and through net cash provided by their own operating activities.
Certain subsidiaries' loan agreements contain restrictions regarding transfers
of funds to the parent company in the form of loans, advances or cash
dividends. The amount of net assets of such subsidiaries exceeds the Company's
consolidated net assets. However, net cash provided by operating activities
of other subsidiaries which are not restricted from making transfers to the
parent company have been and are expected to continue to be sufficient to
enable the parent company to meet its cash obligations.
Management believes that available lines of credit, net cash provided by
operating activities, proceeds from disposition of assets and the Company's
ability to obtain additional financing will provide adequate sources of short-
term and long-term liquidity in the future.
(2) Material changes in results of operations:
Revenue increased by approximately 10.18 and 11.68 for the nine months and
three months ended September 30, 1992, as compared to the corresponding
periods of the prior year. Approximately 38 of these increases resulted from
growth in subscriber levels within the Company's cable television systems and
an additional 48 was attributable to the increase in prices charged for cable
television service.
On October 5, 1992, Congress enacted the Cable Television Protection and
Competition Act of 1992 ("1992 Cable Act") . This law greatly expands federal
and local regulation of the cable television industry. Among other matters,
it mandates regulation of basic service, provides for the choice by the
broadcast television stations of either "must carry" rights or "retransmission
consent" rights, regulates the sale of cable programming and implements other
operational restrictions. Because rules and regulations implementing the 1992
Cable Act will not be adopted by the Federal Communications Commission until
the spring of 1993 through the fall of 1993, it is not possible to fully
predict the effect of this legislation upon the Company.
Operating costs and expenses have historically remained relatively constant as
a percentage of revenue. However, in 1992 the Company experienced an
improvement in its operating costs and expenses due primarily to certain
efficiencies and cost savings arising from the integration of the operations
and management of TCI and United Artists Entertainment Company upon TCI's
acquisition in late 1991 of the remaining minority interests in the equity of
United Artists Entertainment Company. The Company cannot determine whether
and to what extent increases in the cost of programming will affect the prices
charged by it for its cable television services or the manner in which these
services are offered.
(continued)
I-19
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
(2) Material changes in financial position (continued):
The Company's earnings from continuing operations (before preferred stock
dividends) for the nine months and the three months ended September 30, 1992
represented an improvement as compared to the Company's net loss for the
corresponding periods of 1991 due primarily to improved operating results by
the Company in its cable television business. Also, the general decline in
interest rates had a positive impact on the Company's net results. These same
factors led to an improvement in the Company's interest coverage ratio.
On May 12, 1992, the Company sold its motion picture theatre business and
certain theatre-related real estate assets (see note 14 to the accompanying
consolidated financial statements) . Accordingly, the operations of the
Company's motion picture theatre exhibition industry segment have been
reclassified and reflected as "discontinued operations" in the accompanying
consolidated financial statements.
I-20
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
There were no material legal proceedings instituted during the quarter ended
September 30, 1992 to which the Company or any of its consolidated
subsidiaries is a party or of which any of their property is the subject.
There were no material developments during the quarter ended September 30,
1992 in any of the existing legal proceedings which were previously reported
in the Company's Annual Report on Form 10-K for the year ended December 31,
1991.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits - None.
(b) Reports on Form 8-K filed during the quarter ended September 30, 1992:
None
II-1
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
thereunto duly authorized.
TELE-COMMUNICATIONS, INC.
Date: November 9, 1992 By: /s/ Donne F. Fisher
Donne F. Fisher
Executive Vice President
Date: November 9, 1992 By: /s/ Gary K. Bracken
Gary K. Bracken, Controller
and Senior Vice President
(Principal Financial Officer and
Chief Accounting Officer)
11-2