proceedings or as the result of subsequent negotiations for all payments from
January 1, 1986. All ASCAP claims prior ro January 1, 1986 have been settled and
are final.
On November 1, 1991, USAN and BMI agreed to terms on a license which
provided for a payment of a stipulated sum as final payment for all periods
prior to and including December 31, 1989 for the payment of license fees, which
are now final, amounting to three-tenths of one percent (0.3%) of USAN's gross
revenues for the period from January 1, 1990 through June 30, 1992 and for
interim fees of three-tenths of one percent (0.3%) from July 1, 1992 forward.
This arrangement is terminable by either party upon 30-days notice. In December
1994, a BMI "rate court" was established under the provisions of BMI's own
government consent decree. The establishment of this rate court could, by the
terms of the BMI license, subject the interim fees to upward or downward
adjustment, resulting from a rate determination proceeding before that court
should such a proceeding be initiated.
Note 9 - Subsequent Event
On February 11, 1998, Universal and HSN, inc. ("HSNi") announced they had
finalized a transaction under which HSNi acquired a substantial portion of UTG's
television assets, including 100% of USA Networks, in exchange for $4.075
billion of value, comprised of a combination of securities that in effect
represent approximately 45% of HSNi's outstanding equity equivalents, plus
approximately $1.3 billion in cash. In addition, HSNi has changed its corporate
name to "USA Networks, Inc." .
An international television joint venture, consisting of the international
operations of USA Networks and the Sci-Fi Channel and certain international
digital programming services owned by Universal, has been created and will be
equally owned by USA Networks, Inc. and Universal. Universal will manage the
joint venture and retain ownership of its television library and its
international television production and distribution operations.
8
Exhibit 99.2
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial statements
(the "CONDENSED STATEMENTS") have been prepared to give effect to the portion of
Universal Studios, Inc.'s ("UNIVERSAL") domestic television production and
distribution businesses ("UTV"), including its wholly owned subsidiary USA
Networks ("USAN"), and the pro forma results of operations, acquired by USA
Networks, Inc. ("USAI") on February 12, 1998 (the "UNIVERSAL TRANSACTION").
The Condensed Statements reflect certain assumptions regarding the
Universal Transaction and are based on the historical consolidated financial
statements of Universal Television Group. The Condensed Statements, including
the notes thereto, are qualified in their entirety by reference to, and should
be read in conjunction with, the audited and unaudited financial statements,
including the notes thereto, of Universal Television Group, including its wholly
owned subsidiary USAN which are included herein or incorporated by reference in
this Form 8-K from USAi's Proxy Statement dated January 12, 1998.
The pro forma combined condensed balance sheet as of December 31, 1997
gives effect to the Universal Transaction as if it had occurred on December 31,
1997. The pro forma combined condensed statement of operations for the year
ended December 31, 1997 gives effect to the Universal Transaction as if it had
occurred on January 1, 1997.
The historical combined financial statements of Universal Television Group
include UTV and other television programming which Universal has retained.
Excluded programming includes substantial television products owned by Universal
as part of its television library (such as series no longer in production, "made
for television" movies, animated programs, action adventures and certain talk
shows and other programming). The pro forma financial statements reflect the
exclusion of assets and corresponding liabilities, revenues and expenses, for
programming not acquired by USAi. Prior to October 21, 1997, USAN was a 50%
owned joint venture between Universal and Viacom Inc. ("VIACOM"). On October 21,
1997, Universal acquired from Viacom the remaining 50% interest in USAN and
Sci-Fi Europe. The Universal Television Group historical combined financial
statements include the results of operations of USAN, its wholly owned
subsidiary, as if the acquisition of the remaining interest in USAN took place
on January 1, 1997.
The Condensed Statements are presented for illustrative purposes only and
are not necessarily indicative of the financial position or results of
operations which would have actually been reported had the Universal Transaction
occurred as of December 31, 1997, or for the year ended December 31, 1997, nor
are the Condensed Statements necessarily indicative of future financial position
or results of operations.
UNIVERSAL TRANSACTION
UNAUDITED PRO FORMA ADJUSTED COMBINED CONDENSED BALANCE SHEET
DECEMBER 31, 1997
(in thousands)
Universal
Television Pro Forma Universal
Group Adjustments(A) Transaction
------------ ---------------- -----------
ASSETS
Current Assets:
Cash and short-term investments $ 27,325 $ (20,167) $ 7,158
Accounts and notes receivable, net 389,826 (262,136) 127,690
Program inventory 328,501 (58,405) 270,096
Other 17,864 (8,863) 9,001
------------ ------------- -------------
Total current assets 763,516 (349,571) 413,945
Program inventory 389,810 (197,882) 191,928
Property, plant and equipment, net 37,300 (7,001) 30,299
Intangible assets, net 2,456,771 2,456,771
Long-term investments 9,062 3,385 12,447
Long-term receivables, deferred charges 153,464 (142,546) 10,918
and other -- --
========== =========== ===========
Total assets $ 3,809,923 $ (693,615) $ 3,116,308
============ ============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable, accrued and other
current liabilities $ 179,009 $ (27,372) $ 151,637
Program liabilities 311,225 (150,413) 160,812
Deferred revenue 35,808 (35,808) 0
------------ ------------- -------------
Total current liabilities 526,042 (213,593) 312,449
Other long-term liabilities 97,246 (65,728) 31,518
Program liabilities 229,710 (71,548) 158,162
Equity:
Universal equity investment 2,956,925 (342,746) 2,614,179
---------- ----------- -----------
Total equity 2,956,925 (342,746) 2,614,179
------------ ------------- -------------
Total liabilities and equity $ 3,809,923 $ (693,615) $ 3,116,308
============ ============= =============
UNIVERSAL TRANSACTION
UNAUDITED PRO FORMA ADJUSTED COMBINED CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(in thousands)
Universal
Television Pro Forma Universal
Group Adjustments Transaction
-------------- ------------- -------------
NET REVENUES:
UTV $ 706,472 $ (346,056)(B)$ 370,853
10,437 (D)
USAN 759,509 (20,844)(C) 738,665
------------ ----------- -----------
Total net revenues 1,465,981 (356,463) 1,109,518
-------------- ------------- -------------
Operating costs and expenses:
Program costs 962,110 (238,777)(B) 703,619
(19,714)(C)
Other costs 267,683 (27,803)(C) 241,725
12,057 (F)
(10,212)(E)
Depreciation and amortization 60,520 -- 60,520
------------ ----------- -----------
Total operating costs and expenses 1,290,313 (284,449) 1,005,864
-------------- ------------- -------------
Operating profit 175,668 (72,014) 103,654
Interest income (expense), net 730 52 (B) 782
Other expense, net -- (13,337)(C) (13,337)
-------------- ------------- -------------
Income (loss) before income taxes 176,398 (85,299) 91,099
Income tax (expense) benefit (70,559) 34,119 (36,440)
============ =========== ===========
NET EARNINGS $ 105,839 $ (51,180) $ 54,659
============== ============= =============
UNIVERSAL TRANSACTION
NOTES TO UNAUDITED PRO FORMA ADJUSTED
COMBINED CONDENSED FINANCIAL STATEMENTS
(A) Adjustments to reflect UTV assets and liabilities not acquired or
assumed by USAi.
(B) This adjustment reflects the exclusion of Universal Television Group
revenues and expenses for programming not acquired. See adjustment (E).
(C) Adjustment to eliminate previously consolidated foreign operations and
reflect 50-50 joint venture between a newly-formed subsidiary of USAi (the
"LLC") and Universal with respect to the international development of USAN,
Sci-Fi Europe and the new action/suspense channel known as "13th Street."
(D) Adjustment to reflect the effect of LLC's exclusive domestic
distribution arrangement for television programs and theatrical films for which
Universal will retain ownership.
(E) Net adjustment to reflect the effect of Universal's exclusive
distribution arrangement for UTV television programs in the pay television and
home video markets and the related merchandising rights.
(F) Net adjustment to reflect the effect of Universal's exclusive
international distribution arrangement for television programs that are being
acquired and other productions of UTV, USAN and affiliates of USAi.
