8-K 1 a33234.txt TIME WARNER ENTERTAINMENT COMPANY, L.P. 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): August 1, 2002 Commission File Number: 001-12878 TIME WARNER ENTERTAINMENT COMPANY, L.P. (Exact name of registrant as specified in its charter) Delaware 13-3666692 (State or other jurisdiction (I.R.S. Employer of incorporation) Identification No.) American Television and Communications Corporation Delaware 13-2922502 Warner Communications Inc. Delaware 13-2696809 (Exact name of registrant as specified in its charter) (State or other jurisdiction (I.R.S. Employer of incorporation) Identification Number)

75 Rockefeller Plaza, New York, New York 10019 (Address of principal executive offices) (zip code) 212 484-8000 (Registrant's telephone number, including area code) Not Applicable (Former name or former address, if changed since last report) Item 2. Acquisition and Disposition of Assets As of June 30, 2002, the TWE-Advance/Newhouse Partnership ("TWE-A/N") was owned approximately 64.8% by Time Warner Entertainment Company, L.P. ("TWE"), the managing partner, 33.3% by the Advance/Newhouse Partnership ("Advance/Newhouse") and 1.9% indirectly by AOL Time Warner Inc. ("AOL Time Warner"). TWE-A/N owns cable television systems (or interests therein) serving approximately 7.0 million subscribers, of which 5.9 million subscribers are served by consolidated, wholly owned cable television systems and 1.1 million subscribers are served by unconsolidated, partially owned cable television systems. Prior to the TWE-A/N restructuring discussed below, the financial position and operating results of all of TWE-A/N's operations were consolidated by TWE, and the partnership interest owned by Advance/Newhouse was reflected in the consolidated financial statements of TWE as minority interest. As of June 30, 2002, Road Runner, a high-speed cable modem Internet service provider, was owned by TWI Cable Inc. (a wholly owned subsidiary of AOL Time Warner), TWE and TWE-A/N, with TWE owning approximately 67% on a fully attributed basis. TWE's interest in Road Runner was, prior to the TWE-A/N restructuring, accounted for using the equity method of accounting because of certain approval rights held by Advance/Newhouse. On June 24, 2002, TWE and Advance/Newhouse agreed to restructure TWE-A/N, which will result in Advance/Newhouse receiving effective ownership of certain TWE-A/N cable systems serving approximately 2.1 million subscribers located primarily in Florida (the "Advance/Newhouse Systems"). Specifically, on August 1, 2002 (the "Debt Closing Date"), Advance/Newhouse and its affiliates arranged for a new credit facility to support the Advance/Newhouse Systems and approximately $775 million of TWE-A/N's senior indebtedness was repaid. Additionally, as of the Debt Closing Date, Advance/Newhouse assumed management responsibilities for the Advance/Newhouse Systems, to the extent permitted under applicable government regulations, and its partnership interest began to track only the performance of the Advance/Newhouse Systems, while TWE's and AOL Time Warner's interests began to track the performance of the remaining TWE-A/N assets and liabilities. Accordingly, effective the Debt Closing Date, TWE will no longer consolidate the financial position and results of operations of the Advance/Newhouse Systems. In conjunction with the restructuring of TWE-A/N, on the Debt Closing Date, a subsidiary of AOL Time Warner which is not consolidated by TWE, acquired Advance/Newhouse's entire interest in Road Runner. Accordingly, AOL Time Warner's ownership interest on a fully attributed basis increased from 65% to 82%, while TWE's ownership interest of approximately 67% remained unchanged. In addition, in connection with this acquisition, certain approval rights held by Advance/Newhouse expired. As a result, beginning on the Debt Closing Date, TWE consolidated the financial position and results of operations of Road Runner with the financial position and results of operations of TWE's Cable segment, retroactive to the beginning of the year. Item 7. Financial Statements and Exhibits (b) Unaudited Pro Forma Consolidated Condensed Financial Statements: (i) Time Warner Entertainment Company, L.P.: (A) Pro Forma Consolidated Condensed Balance Sheet as of June 30, 2002; (B) Notes to the Pro Forma Consolidated Condensed Balance Sheet; 1 (C) Pro Forma Consolidated Condensed Statement of Operations for the six months ended June 30, 2002; (D) Pro Forma Consolidated Condensed Statement of Operations for the year ended December 31, 2001; and (E) Notes to the Pro Forma Consolidated Condensed Statements of Operations. The following unaudited pro forma consolidated condensed financial statements are presented to illustrate the effects of the TWE-A/N restructuring, including the deconsolidation of the Advance/Newhouse Systems and the consolidation of Road Runner, on the historical financial position and operating results of TWE. The unaudited pro forma consolidated condensed balance sheet of TWE at June 30, 2002, gives effect to the restructuring as if the restructuring had occurred on that date. The unaudited pro forma consolidated condensed statements of operations of TWE for the six months ended June 30, 2002 and the year ended December 31, 2001, give effect to the restructuring as if the restructuring had occurred on January 1, 2001. 2 TIME WARNER ENTERTAINMENT COMPANY, L.P. PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET JUNE 30, 2002 (IN MILLIONS, UNAUDITED)

3 TIME WARNER ENTERTAINMENT COMPANY, L.P. NOTES TO THE PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET (UNAUDITED) (a) Reflects the historical financial position of TWE at June 30, 2002. (b) Reflects the historical financial position of the Advance/Newhouse Systems at June 30, 2002. (c) Reflects the historical financial position of Road Runner at June 30, 2002. (d) Pro Forma adjustments to record the TWE-A/N restructuring and Road Runner acquisition as of June 30, 2002 are: o The increase in cash of $54 million primarily relates to $40 million of cash received by TWE from Advance/Newhouse on the Debt Closing Date, with respect to note receivables from Advance/Newhouse and the repayment of excess cash distributions made to Advance/Newhouse in prior periods. In addition, $14 million of cash in transit between TWE and Road Runner has been reflected in the consolidated cash account; o The decrease in other current assets of $27 million primarily relates to the elimination of intercompany receivables between TWE, Advance/Newhouse and Road Runner; o The increase in investments of $92 million reflects the elimination of TWE's negative investment in Road Runner; o The increase in intangibles not subject to amortization of $1.188 billion reflects the net franchise intangibles recognized in connection with TWE's acquisition of Advance/Newhouse's former interest in the remaining TWE-A/N businesses; o The increase in goodwill of $69 million reflects the recognition of goodwill in conjunction with the consolidation of Road Runner by TWE; o The decrease in other assets of $224 million relates to the elimination of a TWE note receivable from Road Runner; o The increase in current liabilities of $181 million reflects the settlement of intercompany liabilities between TWE, other subsidiaries of AOL Time Warner, Advance/Newhouse and Road Runner in conjunction with the TWE-A/N restructuring and Road Runner acquisition; o The decrease in long-term debt relates to $246 million net incremental debt assumed by Advance/Newhouse in the TWE-A/N restructuring; o The decrease in other long-term liabilities of $278 million reflects the settlement of certain intercompany liabilities between TWE, other subsidiaries of AOL Time Warner, Advance/Newhouse and Road Runner in conjunction with the TWE-A/N restructuring and Road Runner acquisition; o The increase in minority interest of $358 million primarily reflects the net impact of the removal of Advance/Newhouse's minority interest in TWE-A/N; and o The increase in total partners' capital of $1.137 billion primarily reflects an increase associated with TWE's acquisition of Advance/Newhouse's former interest in the remaining TWE-A/N businesses and the elimination of Road Runner's negative equity upon consolidation. 4 TIME WARNER ENTERTAINMENT COMPANY, L.P. PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2002 (IN MILLIONS, UNAUDITED)

5 TIME WARNER ENTERTAINMENT COMPANY, L.P. PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 2001 (IN MILLIONS, UNAUDITED)

6 TIME WARNER ENTERTAINMENT COMPANY, L.P. NOTES TO THE PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) (e) Reflects the historical operations of TWE for the six months ended June 30, 2002 and the year ended December 31, 2001, which includes the impact of the Emerging Issues Task Force ("EITF") Topic No. D-103, "Income Statement Characterization of Reimbursements Received for 'Out-of-Pocket' Expenses Incurred" ("Topic No. D-103"). For additional information on EITF Topic No. D-103, see Management's Discussion and Analysis of Results of Operations and Financial Condition in TWE's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002. (f) Reflects the historical operations of the Advance/Newhouse Systems for the six months ended June 30, 2002 and the year ended December 31, 2001, which includes the impact of EITF Topic No. D-103. (g) Reflects the historical operations of Road Runner for the six months ended June 30, 2002 and the year ended December 31, 2001. (h) Pro Forma adjustments to record the TWE-A/N restructuring and Road Runner acquisition for the six months ended June 30, 2002 and the year ended December 31, 2001 are: o The decrease in Subscription revenues of $57 million for the six months ended June 30, 2002, reflects the elimination of $83 million of Road Runner's revenue derived from transactions with TWE Cable segment, partially offset by $26 million of revenue that no longer needs to be eliminated in consolidation as it relates to the sale of cable programming by the TWE Networks segment to the Advance/Newhouse Systems. For the year ended December 31, 2001, a decrease in Subscription revenues of $70 million reflects the elimination of $114 million of Road Runner's revenue derived from transactions with TWE's Cable segment, partially offset by $44 million of revenue that no longer needs to be eliminated in consolidation as it relates to the sale of cable programming by the TWE Networks segment to the Advance/Newhouse Systems; o The decrease in cost of revenues of $57 million for the six months ended June 30, 2002 and $70 million for the year ended December 31, 2001, reflects the impact of eliminating the TWE Cable segment's expenses relating to transactions with Road Runner, offset in part by expenses that no longer need to be eliminated in consolidation as they relate to the purchase of cable programming from the TWE Networks segment by the Advance/Newhouse Systems; o The decrease in other expense, net of $71 million for the six months ended June 30, 2002 and $238 million for the year ended December 31, 2001, reflects the elimination of TWE's share of Road Runner's results which were previously reflected as a part of other expense, net, under the equity method of accounting, as well as the elimination of certain preferred dividend activity between TWE and Road Runner; and o The decrease in minority interest expense of $201 million for the six months ended June 30, 2002 and $471 million for the year ended December 31, 2001, reflects the elimination of the expense related to Advance/Newhouse's ownership interest in TWE-A/N. 7 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, each of the registrants has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. TIME WARNER ENTERTAINMENT COMPANY, L.P. By: WARNER COMMUNICATIONS INC., as General Partner By: /s/ Wayne H. Pace -------------------------------- Name: Wayne H. Pace Title: Executive Vice President and Chief Financial Officer AMERICAN TELEVISION AND COMMUNICATIONS CORPORATION WARNER COMMUNICATIONS INC. By: /s/ Wayne H. Pace -------------------------------- Name: Wayne H. Pace Title: Executive Vice President and Chief Financial Officer Date: August 16, 2002

AMERICAN TELEVISION & COMMUNICATIONS CORP 8-K