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As filed with the Securities and Exchange Commission on January 30, 2003
Registration No. 333-101264
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
COMCAST CORPORATION
(formerly AT&T Comcast Corporation)
(Exact name of Registrant as specified in its charter)
----------------------
Pennsylvania 4841 27-0000798
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation or organization) Classification Code Number)
1500 Market Street
Philadelphia, Pennsylvania 19102-2148
(215) 665-1700
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Arthur R. Block
Senior Vice President
Comcast Corporation
1500 Market Street
Philadelphia, Pennsylvania 19102-2148
(215) 665-1700
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
----------------------
Copies to:
Bruce K. Dallas
Davis Polk & Wardwell
1600 El Camino Real
Menlo Park, California 94025
Tel: (650) 752-2000
Fax: (650) 752-2111
----------------------
Approximate date of commencement of proposed sale to the public: From time
to time after effectiveness of this Registration Statement upon conversion of
convertible debt securities.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
---------
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------------
Title Of Each Class Of Proposed Maximum Aggregate Amount of
Securities To Be Registered(1) Offering Price(2) Registration Fee(2)
- -------------------------------------------------------------------------------------------------------------
Class A Special Common Stock, par value $0.01 per share $85,990,751 $7,912
- -------------------------------------------------------------------------------------------------------------
Total $85,990,751 $7,912
- -------------------------------------------------------------------------------------------------------------
(1) This registration statement relates to issuances of Comcast Corporation
(formerly AT&T Comcast Corporation) Class A Special Common Stock, par
value $0.01 per share, upon the conversion of Zero Coupon Convertible
Debentures Due December 19, 2020 (the "Debentures") originally issued by
Comcast Holdings Corporation (formerly Comcast Corporation).
(2) The amount of $86,468 was paid towards the registration fee in connection
with the initial filing of the registration statement, calculated pursuant
to Rule 457(f) based on the average of the bid and ask prices in the
over-the-counter market as of November 13, 2002 of the Debentures then
eligible for conversion. The registration fee set forth above has been
recalculated pursuant to Rule 457(f) based on the average of the bid and
ask prices in the over-the-counter market as of January 24, 2003 for
$107,658,000 in aggregate principal amount of Debentures eligible for
conversion remaining outstanding as of January 24, 2003 and has been
estimated solely for the purpose of calculating the amount of the
registration fee.
The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
- -------------------------------------------------------------------------------
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and we are not soliciting offers to buy these
securities in any state where the offer or sale is not permitted.
PRELIMINARY PROSPECTUS DATED JANUARY 30, 2003
1,534,837 Shares
COMCAST CORPORATION
Class A Special Common Stock
----------------------
This prospectus relates to the issuance from time to time of up to a total
of 1,534,837 shares of our Class A Special Common Stock, par value $0.01 per
share, upon the conversion of outstanding Zero Coupon Convertible Debentures
Due December 19, 2020 issued by Comcast Holdings Corporation (formerly known as
Comcast Corporation), referred to in this prospectus as the "Debentures."
On January 27, 2003, the issue price plus accrued original issue discount
on the Debentures was $800.09, representing an accreted conversion price of
$56.12 per share of our Class A Special Common Stock. On January 27, 2003, the
last reported sale price of our Class A Special Common Stock on The Nasdaq
National Market was $24.75, or approximately 44% of the accreted conversion
price. Investors are cautioned that exercising their right to convert the
Debentures would result in an immediate economic loss to the extent that the
accreted conversion price at the time of conversion is lower than the price per
share of our Class A Special Common Stock.
We will not receive any proceeds from the issuance of shares of Class A
Special Common Stock upon conversion of Debentures.
Our Class A Special Common Stock is admitted for trading on The Nasdaq
National Market System under the symbol "CMCSK." On January 27, 2003, the
reported last sale price for shares of our Class A Special Common Stock on The
Nasdaq National Market System was $24.75.
Investing in our Class A Special Common Stock involves risks. See "Risk
Factors" beginning on page 3, as well as "Available Information" beginning on
page 52 for information on how to obtain copies of our filings with the
Securities and Exchange Commission incorporated by reference in this prospectus
discussing other risks.
- -------------------------------------------------------------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
This date of this prospectus is , 2003
TABLE OF CONTENTS
Page
COMCAST CORPORATION...........................................................2
RISK FACTORS..................................................................3
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL
STATEMENTS OF COMCAST CORPORATION.......................................11
SELECTED FINANCIAL DATA OF COMCAST HOLDINGS..................................21
SELECTED FINANCIAL DATA OF AT&T BROADBAND GROUP..............................23
MARKET PRICES AND DIVIDENDS..................................................24
DESCRIPTION OF OUR CLASS A SPECIAL COMMON STOCK AND OTHER CAPITAL STOCK......25
DESCRIPTION OF SHAREHOLDERS RIGHTS PLAN......................................27
DESCRIPTION OF AT&T BROADBAND ACQUISITION....................................29
DESCRIPTION OF THE DEBENTURES................................................37
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS......................49
LEGAL MATTERS................................................................51
EXPERTS......................................................................51
AVAILABLE INFORMATION........................................................52
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE..............................52
You should rely only on information contained in this prospectus. No one
is authorized to provide you with information that is different from that
contained in this prospectus. We do not intend the contents of any websites
referred to in this prospectus to be part of this prospectus.
We are offering to sell, and are seeking offers to buy, our Class A
Special Common Stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
its date regardless of the time of delivery of this prospectus or of any sale
of the Class A Special Common Stock.
In this prospectus, we refer to
o Comcast Corporation (formerly known as AT&T Comcast Corporation) as
"Comcast" or "we," "us," "our" or comparable terms;
o Comcast Holdings Corporation (formerly known as Comcast Corporation)
as "Comcast Holdings";
o Comcast Cable Communications, Inc. as "Comcast Cable";
o Comcast Cable Communications Holdings, Inc. (formerly known as AT&T
Broadband Corp.), as "Comcast Cable Communications Holdings";
o Comcast Cable Holdings, LLC (formerly known as AT&T Broadband, LLC)
as "Comcast Cable Holdings"; and
o Comcast MO Group, Inc. (formerly known as MediaOne Group, Inc.) as
"Comcast MO Group"
1
COMCAST CORPORATION
We were formed through the acquisition on November 18, 2002 by Comcast
Holdings Corporation (formerly known as Comcast Corporation) of the broadband
business of AT&T Corp. We believe that combining the strengths of these
businesses will create the world's premier broadband company.
We are principally involved in three lines of business through our
wholly-owned subsidiaries:
o Cable--through the development, management and operation of broadband
communications networks and regional sports programming networks;
o Commerce--through QVC, our electronic retailing subsidiary; and
o Content--through our consolidated subsidiaries, Comcast-Spectacor, E!
Entertainment Television, The Golf Channel, Outdoor Life Network and
G4 Media, and through our other programming investments.
The transactions which created Comcast were consummated on November 18,
2002 in several steps. First, AT&T transferred to Comcast Cable Communications
Holdings substantially all the assets, liabilities and businesses represented
by AT&T Broadband Group, which was the integrated broadband business of AT&T.
Second, AT&T spun off Comcast Cable Communications Holdings to its
shareholders. Third, Comcast Holdings and Comcast Cable Communications Holdings
each merged with a different, wholly-owned subsidiary of ours, and Comcast
Holdings and AT&T shareholders received our shares.
For a description of our business, financial condition, results of
operations and other important information regarding us, see our and Comcast
Holdings' filings with the SEC incorporated by reference in this prospectus.
For a description of certain continuing obligations and risks related to the
AT&T Broadband acquisition, see "Description of AT&T Broadband acquisition," and
"Risk Factors--Risks Relating to the AT&T Broadband Acquisition," as well as our
and Comcast Holdings' filings with the SEC incorporated by reference in this
prospectus. For instructions on how to find copies of these and our other
filings incorporated by reference in this prospectus, see "Available
Information."
We are a Pennsylvania corporation incorporated in 2001. Our principal
executive office is located at 1500 Market Street, Philadelphia, Pennsylvania
19102-2148. Our telephone number is (215) 665-1700. The address of our web site
is www.comcast.com.
2
RISK FACTORS
Risks Relating to the AT&T Broadband Acquisition
We may fail to realize the anticipated benefits of the AT&T Broadband
acquisition.
The AT&T Broadband acquisition combined two companies that have previously
operated separately. We expect to realize cost savings and other financial and
operating benefits as a result of the AT&T Broadband acquisition. However, we
cannot predict with certainty when these cost savings and benefits will occur,
or the extent to which they actually will be achieved. There are a large number
of systems that must be integrated, including management information,
purchasing, accounting and finance, sales, billing, payroll and benefits, and
regulatory compliance. The integration of Comcast Cable and Comcast Cable
Communications Holdings will also require substantial attention from
management. The diversion of management attention and any difficulties
associated with integrating Comcast Cable and Comcast Cable Communications
Holdings could have a material adverse effect on our operating results.
We will have to abide by restrictions to preserve the tax treatment of the
AT&T Broadband acquisition.
Because of the limitations imposed by Section 355(e) of the Internal
Revenue Code of 1986, as amended, referred to as the "Code" in this prospectus,
and by contractual agreements with AT&T, our ability and the ability of Comcast
Cable Communications Holdings to engage in specified acquisitions, redeem stock
or issue equity securities will be limited until December 18, 2004. See
"Description of AT&T Broadband Acquisition--Separation and Distribution
Agreement--Post-Spin-Off Transactions." These restrictions may limit our
ability to issue equity securities to satisfy our financing needs or to acquire
businesses or assets.
Atypical governance arrangements may make it more difficult for our
shareholders to act.
In connection with the AT&T Broadband acquisition, we implemented a number
of governance arrangements that are atypical for a large, publicly held
corporation. A number of these arrangements relate to the election of our
Board. The term of our Board will not expire until our 2004 annual meeting of
shareholders. Since our shareholders will not have the right to call special
meetings of shareholders or act by written consent and our directors may be
removed only for cause, our shareholders will not be able to replace our
initial Board members prior to that meeting. After our 2004 annual meeting of
shareholders, our directors will be elected annually. Even then, however, it
will be difficult for one of our shareholders, other than BRCC Holdings LLC, to
elect a slate of directors of its own choosing to our Board. Brian L. Roberts,
our President and Chief Executive Officer, through his control of BRCC Holdings
LLC, holds a 33 1/3% nondilutable voting interest in our stock. In addition, we
adopted a shareholder rights plan upon completion of the AT&T Broadband
acquisition that prevents any holder of our stock, other than any holder of our
Class B common stock or any of such holder's affiliates, from acquiring our
stock representing more than 10% of the voting power with respect to us without
the approval of our Board.
In addition to the governance arrangements relating to our Board, a number
of governance arrangements will make it difficult to replace our senior
management. Upon completion of the AT&T Broadband acquisition, C. Michael
Armstrong, Chairman of the Board and CEO of AT&T, became our Chairman of the
Board and Brian L. Roberts, President of Comcast Holdings, became our CEO and
President. After the 2005 annual meeting of our shareholders, Brian L. Roberts
will also be our Chairman of the Board. Prior to the sixth anniversary of our
2004 annual meeting of shareholders, unless Brian L. Roberts ceases to be our
Chairman of the Board or CEO prior to such time, our Chairman of the Board and
CEO will be able to be removed only with the approval of at least 75% of our
entire Board. This supermajority removal requirement makes it unlikely that C.
Michael Armstrong or Brian L. Roberts will be removed from their management
positions.
Our principal shareholder has considerable influence over our operations.
Brian L. Roberts has significant control over our operations through his
control of BRCC Holdings LLC, which as a result of its ownership of outstanding
shares of our Class B common stock holds a nondilutable 33 1/3% of the combined
voting power of our stock and also has separate approval rights over certain
material transactions involving us. In addition, Brian L. Roberts is our CEO
and President and will, together with our Chairman of the Board, comprise the
Office of the Chairman, our principal executive deliberative body.
3
The performance of AT&T Broadband Group prior to the AT&T Broadband spin-off
may not be representative of the results of Comcast Cable Communications
Holdings without the other AT&T businesses and therefore is not a reliable
indicator of its future results.
AT&T Broadband Group was a fully integrated business unit of AT&T, and as
a result the financial information of AT&T Broadband Group incorporated by
reference in this prospectus was derived from the consolidated financial
statements and accounting records of AT&T and reflects certain assumptions and
allocations. The financial position, results of operations and cash flows of
Comcast Cable Communications Holdings without the other AT&T businesses could
differ from those that would have resulted had its business operated with the
other AT&T businesses.
Risks Relating to Our Business
Our actual financial position and results of operations may differ
significantly and adversely from the pro forma amounts included in this
prospectus.
Our actual financial position and results of operations may differ,
perhaps significantly and adversely, from the pro forma information included in
this prospectus due to a variety of factors, including access to additional
information, changes in value not currently identified and changes in operating
results between the date of the pro forma financial data and the date on which
the AT&T Broadband acquisition was completed.
In addition, in many cases each of Comcast Holdings and AT&T Broadband
Group had long-term agreements, in some cases with the same counterparties, for
the same services and products, such as programming, billing services and
interactive programming guides. It is not clear, in the case of certain
services and products, whether after completion of the AT&T Broadband
acquisition each of the existing agreements continues to apply only to the
operations to which they have historically applied or whether instead one of
the two contracts will apply to the operations of both companies and the other
contract will be terminated. Since these contracts often differ significantly
in their terms, resolution of these contractual issues could cause our actual
financial position and results of operations to differ significantly and
adversely from those reflected in the pro forma financial information included
in this prospectus.
Programming costs are increasing and we may not have the ability to pass
these increases on to our customers, which would materially adversely affect
our cash flow and operating margins.
Programming costs are expected to be our largest single expense item in
the foreseeable future. In recent years, the cable and satellite video
industries have experienced a rapid increase in the cost of programming,
particularly sports programming. This increase is expected to continue, and we
may not be able to pass programming cost increases on to our customers. The
inability to pass these programming cost increases on to our customers would
have a material adverse impact on our cash flow and operating margins. In
addition, as we upgrade the channel capacity of our systems and add programming
to our basic, expanded basic and digital programming tiers, we may face
increased programming costs, which, in conjunction with the additional market
constraints on our ability to pass programming costs on to our customers, may
reduce operating margins.
We also expect to be subject to increasing financial and other demands by
broadcasters to obtain the required consent for the transmission of broadcast
programming to our subscribers. We cannot predict the financial impact of these
negotiations or the effect on our subscribers should we be required to stop
offering this programming.
We face a wide range of competition in areas served by our cable systems,
which could adversely affect our future results of operations.
Our cable communications systems compete with a number of different
sources which provide news, information and entertainment programming to
consumers. We compete directly with program distributors and other companies
that use satellites, build competing cable systems in the same communities we
serve or otherwise provide programming and other communications services to our
subscribers and potential subscribers. In addition, federal law now allows
local telephone companies to provide directly to subscribers a wide variety of
services that are competitive with cable communications services. Some local
telephone companies provide, or have announced plans to provide, video services
within and outside their telephone service areas through a variety of methods,
including
4
broadband cable networks. Additionally, we will be subject to competition from
telecommunications providers and Internet service providers, known as ISPs, in
connection with offerings of new and advanced services, including
telecommunications and Internet services. This competition may materially
adversely affect our business and operations in the future. In addition, any
increase in vacancy rates in multi-dwelling units has historically adversely
impacted subscriber levels and is expected to do so in the future. Subscriber
levels also have historically demonstrated seasonal fluctuations, particularly
in markets that include major universities.
We have substantial capital requirements which may require us to obtain
additional financing that may be difficult to obtain.
We expect that for some period of time our capital expenditures will
exceed, perhaps significantly, our net cash provided by operating activities.
This may require us to obtain additional financing. We may not be able to
obtain or to obtain on favorable terms the capital necessary to fund the
substantial capital expenditures described below that are required by our
strategy and business plan. A failure to obtain necessary capital or to obtain
necessary capital on favorable terms could have a material adverse effect on us
and result in the delay, change or abandonment of our development or expansion
plans.
Historically, AT&T Broadband Group's capital expenditures significantly
exceeded its net cash provided by operations. For the year ended December 31,
2001 and the nine months ended September 30, 2002, AT&T Broadband Group's
capital expenditures exceeded its net cash provided by operations by $3.5
billion and $1.5 billion, respectively. In addition, for the year ended
December 31, 2001, Comcast Holdings' capital expenditures exceeded its net cash
provided by operating activities by $952 million.
We anticipate that we will upgrade a significant portion of our broadband
systems over the coming years and make other capital investments, including
with respect to our advanced services. In 2003, we anticipate that the combined
Comcast Cable Communications Holdings and Comcast Cable cable systems will
incur capital expenditures of approximately $4.2 billion to $4.5 billion. We
are expected to incur substantial capital expenditures in the years subsequent
to 2003. However, the actual amount of the funds required for capital
expenditures cannot be determined with precision at this time. Capital is
expected to be used to upgrade and rebuild network systems to expand bandwidth
capacity and add two-way capability so that it may offer advanced services. In
addition, capital expenditures are expected to be used to acquire equipment,
such as set-top boxes, cable modems and telephone equipment, and to pay for
installation costs for additional video and advanced services customers. There
can be no assurance that these amounts will be sufficient to accomplish the
planned system upgrades, equipment acquisitions and expansion.
Some of our subsidiaries may be subject to long-term exclusive agreements
that may limit their future operating flexibility and materially adversely
affect our financial results.
Some of the entities formerly attributed to AT&T Broadband Group which are
now our subsidiaries may be subject to long-term agreements relating to
significant aspects of their operations, including long-term agreements for
video programming, audio programming, electronic program guides, billing and
other services. For example, Comcast Cable Holdings (formerly known as AT&T
Broadband, LLC), and AT&T Broadband Group's subsidiary, Satellite Services,
Inc., entered into an affiliation term sheet with Starz Encore Group LLC, an
affiliate of Liberty Media, which extended to 2022 and provided for fixed price
payments, subject to adjustment for various factors including inflation, and
purported to require Comcast Cable Communications Holdings to pay two-thirds of
Starz Encore Group's programming costs above levels designated in the term
sheet. Satellite Services, Inc. also had entered into a ten-year agreement with
TV Guide in January 1999 for interactive program guide services, which
designated TV Guide Interactive as the interactive programming guide for
Comcast Cable Communications Holdings' systems. Furthermore, a subsidiary of
Comcast Cable Communications Holdings had entered into an agreement that
extended until December 31, 2013 under which it purchased certain billing
services from CSG Systems, Inc. The price, terms and conditions of the Starz
Encore term sheet, the TV Guide agreement and the CSG agreement may not reflect
current market terms and if one or more of these arrangements were to continue
to apply to Comcast Cable Communications Holdings after completion of the AT&T
Broadband acquisition, they may materially adversely impact our financial
performance.
5
By letter dated May 29, 2001, AT&T Broadband Group disputed the
enforceability of the excess programming pass-through provisions of the Starz
Encore term sheet and questioned the validity of the term sheet as a whole. In
July 2001, Starz Encore Group filed a lawsuit in Colorado state court seeking
payment of alleged 2001 excess programming costs and a declaration that the
term sheet is a binding and enforceable contract. Since the lawsuit was filed,
there has been no significant activity in the case, except that AT&T Broadband
Group and Starz Encore Group agreed in 2001 to settle Starz Encore Group's
claim for the alleged 2001 excess programming costs. In December 2002, Starz
Encore Group filed a motion for leave to amend its complaint (discussed below),
and in January 2003, the parties participated in a court-ordered mediation
session that failed to resolve the action. Activity in the lawsuit is expected
to resume beginning January 31, 2003.
On November 18, 2002, Comcast and Comcast Holdings filed suit against
Starz Encore Group in the United States District Court for the Eastern District
of Pennsylvania. Comcast and Comcast Holdings seek a declaratory judgment that,
pursuant to their rights under a March 17, 1999 contract with a predecessor of
Starz Encore Group, upon the completion of the AT&T Broadband acquisition that
contract now provides the terms under which Starz Encore Group programming is
acquired and transmitted by the Comcast Cable Communications Holdings' systems.
In January 2003, Starz Encore Group filed a motion seeking dismissal of the
Pennsylvania lawsuit in favor of the lawsuit already filed by Starz Encore
Group against AT&T Broadband Group in Colorado. Comcast and Comcast Holdings
intend to oppose the motion.
In December 2002, Starz Encore Group filed a motion for leave to amend its
complaint in its lawsuit against AT&T Broadband Group. The amended complaint
seeks to assert new claims against AT&T Broadband Group and, in addition, would
add Comcast and Comcast Holdings as defendants. The new claims in the amended
complaint relate to the lawsuit filed by Comcast and Comcast Holdings against
Starz Encore Group in Pennsylvania and the positions taken by AT&T Broadband
Group, Comcast and Comcast Holdings with respect to the terms under which Starz
Encore Group programming is acquired and transmitted by the Comcast Cable
Communications Holdings' systems.
On March 13, 2002, AT&T Broadband Group informed CSG Systems, Inc. that
AT&T Broadband Group was considering the initiation of an arbitration against
CSG relating to a Master Subscriber Management System Agreement that the two
companies entered into in 1997. Pursuant to the Master Agreement, CSG provides
billing support to AT&T Broadband Group. On May 10, 2002, AT&T Broadband Group
filed a demand for arbitration against CSG before the American Arbitration
Association. On May 31, 2002, CSG answered AT&T Broadband Group's arbitration
demand and asserted various counterclaims. On June 21, 2002, CSG filed a
lawsuit against Comcast Holdings in federal court located in Denver, Colorado
asserting claims related to the Master Agreement and the pending arbitration.
On November 4, 2002, CSG withdrew its complaint against Comcast Holdings
without prejudice. On November 15, 2002, Comcast, Comcast Holdings, and Comcast
Cable initiated a lawsuit against CSG in federal court located in Philadelphia,
Pennsylvania. Comcast, Comcast Holdings and Comcast Cable assert that systems
owned by Comcast Holdings are not required to use CSG as a billing service or
customer care provider pursuant to the Master Agreement, and that systems owned
by Comcast Cable Communications Holdings may be added to a billing service
agreement between Comcast Cable and CSG. CSG has moved to dismiss or stay the
complaint. In the event that either the arbitration or this litigation or the
settlement thereof results in the termination of the Master Agreement, Comcast
Cable Communications Holdings may incur significant costs in connection with
its replacement of these customer care and billing services and may experience
temporary disruptions to its operations.
We are subject to regulation by federal, state and local governments which
may impose costs and restrictions.
The federal, state and local governments extensively regulate the cable
communications industry. We expect that court actions and regulatory
proceedings will refine the rights and obligations of various parties,
including the government, under the Communications Act of 1934, as amended. The
results of these judicial and administrative proceedings may materially affect
our business operations. Local authorities grant us franchises that permit us
to operate our cable systems. We will have to renew or renegotiate these
franchises from time to time. Local franchising authorities often demand
concessions or other commitments as a condition to renewal or transfer, which
concessions or other commitments could be costly to obtain.
We will be subject to additional regulatory burdens in connection with the
provision of telecommunications services, which could cause us to incur
additional costs.
We will be subject to risks associated with the regulation of our
telecommunications services by the Federal Communications Commission, or FCC,
and state public utilities commissions, or PUCs. Telecommunications companies,
including companies that have the ability to offer telephone services over the
Internet, generally are subject to significant regulation. This regulation
could materially adversely affect our business operations.
6
We may face increased competition because of technological advances and new
regulatory requirements, which could adversely affect our future results of
operations.
Numerous companies, including telephone companies, have introduced Digital
Subscriber Line technology, known as DSL, which provides Internet access to
subscribers at data transmission speeds greater than that of modems over
conventional telephone lines. We expect other advances in communications
technology, as well as changes in the marketplace, to occur in the future.
Other new technologies and services may develop and may compete with services
that cable communications systems offer. The success of these ongoing and
future developments could have a negative impact on our business operations.
In addition, over the past several years, a number of companies, including
telephone companies and ISPs, have asked local, state, and federal governmental
authorities to mandate that cable companies provide capacity on their broadband
infrastructure so that these and others may deliver high speed cable Internet
directly to customers over these cable facilities. Some cable operators have
initiated litigation challenging municipal efforts to unilaterally impose
so-called "open access" requirements. The few court decisions dealing with this
issue have been inconsistent. In connection with their review of the AOL-Time
Warner merger, the FCC and the Federal Trade Commission imposed "open access,"
technical performance, and other requirements related to the merged company's
Internet and Instant Messaging platforms. No similar requirements resulted from
the Justice Department and FCC's review of the AT&T Broadband acquisition.
Although the FCC has issued a declaratory ruling that cable modem service, as
it is currently offered, is properly classified as an interstate information
service that is not subject to common carrier regulation, the FCC is still
considering whether to impose "open access" requirements on these services,
whether certain other regulatory requirements do or should apply to cable modem
service, and whether and to what extent this service may be subject to local
franchise authorities' regulatory requirements or fees. Some local franchise
authorities have initiated litigation to collect fees they claim are owed on
the basis of cable modem service revenues, and at least one franchise authority
has sought to regulate the characteristics and quality of this service. The FCC
has also initiated a proceeding to consider requests that it impose
nondiscrimination obligations on cable operators to facilitate third-parties'
provision of interactive television services.
A number of cable operators have reached agreements to provide
unaffiliated ISPs access to their cable systems in the absence of regulatory
requirements. Comcast Holdings reached an "access" agreement with United Online
and Comcast Cable Communications Holdings reached an "access" agreement with
each of Earthlink, Internet Central, Connected Data Systems, Galaxy Internet
Services and Connect Plus International. In connection with Comcast Holdings'
and AT&T's agreement with AOL Time Warner providing for the restructuring of
Time Warner Entertainment Company L.P., or TWE, Comcast Holdings and Comcast
Cable Communications will enter into a three-year non-exclusive access
agreement with AOL Time Warner. Under the terms of the exchange agreement that
Comcast Holdings and AT&T have executed with Microsoft, now that the AT&T
Broadband acquisition has been consummated, we will be required, with respect to
each such agreement with another ISP, to offer Microsoft an access agreement on
terms no less favorable than those provided to the other ISP with respect to
the specific cable systems covered under the agreement with the other ISP.
Notwithstanding the foregoing, there can be no assurance that regulatory
authorities will not impose "open access" or similar requirements on us as part
of an industry-wide requirement. Such requirements could have a negative impact
on our business operations.
We, through Comcast Cable Communications Holdings, have substantial economic
interests in joint ventures in which we have limited management rights.
Comcast Cable Communications Holdings is a partner in several large joint
ventures, such as TWE, Texas Cable Partners and Kansas City Cable Partners, in
which it has a substantial economic interest but does not have substantial
control with regard to management policies or the selection of management.
These joint ventures may be managed in a manner contrary to our best interests,
and the value of our investment in these joint ventures, through Comcast Cable
Communications Holdings, may be affected by management policies that are
determined without our input or over our objections. Comcast Cable
Communications Holdings has cable partnerships with each of AOL Time Warner,
Insight Communications, Adelphia Communications, Midcontinent and US Cable.
Materially adverse financial or other developments with respect to a partner
could adversely impact the applicable partnership.
On June 25, 2002, three cable partnerships between subsidiaries of AT&T
and subsidiaries of Adelphia Communications Corporation commenced bankruptcy
proceedings by the filing of Chapter 11 petitions in the Bankruptcy Court for
the Southern District of New York at about the same time that other Adelphia
entities filed for bankruptcy. These partnerships are: Century-TCI California
Communications, L.P. (in which Comcast Cable Communications Holdings holds a
25% interest through a wholly-owned subsidiary and which as of December 31,
2001 had an aggregate of approximately 775,000 subscribers in the greater Los
Angeles, California area), Parnassos
7
Communications, L.P. (in which Comcast Cable Communications Holdings holds a
33.33% interest through a wholly-owned subsidiary) and Western NY Cablevision,
L.P. (in which Comcast Cable Communications Holdings holds a 33.33% interest
through a wholly-owned subsidiary and which as of December 31, 2001 had,
together with Parnassos Communications, L.P., an aggregate of approximately
470,000 subscribers in Buffalo, New York and the surrounding areas). We cannot
predict what the outcome of these proceedings will be on any of the
partnerships and the proceedings may have a material adverse impact on the
partnerships. AT&T Broadband Group recorded an impairment charge through net
losses related to equity investments of $143 million, net of taxes of $90
million, in connection with the bankruptcy proceedings of the Adelphia
partnerships.
We, through Comcast Holdings and Comcast Cable Communications Holdings, face
risks arising from their and AT&T's relationship with At Home Corporation
Through a subsidiary, AT&T owns approximately 23% of the outstanding
common stock and 74% of the voting power of the outstanding common stock of At
Home Corporation, which filed for bankruptcy protection on September 28, 2001.
Until October 1, 2001, AT&T appointed a majority of At Home's directors and it
now appoints none. Since September 28, 2001, some creditors of At Home have
threatened to commence litigation against AT&T relating to the conduct of AT&T
or its designees on the At Home Board in connection with At Home's declaration
of bankruptcy and At Home's subsequent aborted efforts to dispose of some of
its businesses or assets in a bankruptcy court-supervised auction, as well as
in connection with other aspects of AT&T's relationship with At Home. On May 1,
2002, At Home filed a proposed plan of liquidation pursuant to Chapter 11 of
the U.S. Bankruptcy Code, which, as modified on June 18, 2002, among other
things, provides that all claims and causes of action of the bankrupt estate of
At Home against AT&T and other shareholders will be transferred to a
liquidating trust owned ratably by the bondholders of At Home and funded with
at least $12 million, and as much as $17 million, to finance the litigation of
those claims. The plan was approved by the bankruptcy court on August 15, 2002
and became effective on or about October 1, 2002. On November 7, 2002, a
complaint was filed by the bondholders' liquidating trust against AT&T and
certain of its senior officers in California state court alleging various
breaches of fiduciary duties, misappropriation of trade secrets and other
causes of action in connection with the transactions in March 2000 described
below, and prior and subsequent alleged conduct on the part of the defendants.
On January 10, 2003, the defendants moved to stay or dismiss the complaint on
the ground that California is an inconvenient venue and that the action should
have been brought in the Southern District of New York, where the prior filed
shareholder suit described below is pending. Any liabilities resulting from
this lawsuit would be shared equally between AT&T and Comcast Cable
Communications Holdings.
On November 15, 2002, the bondholders' liquidating trust filed a separate
action against AT&T in the District Court for the Northern District of
California, alleging that AT&T infringes an At Home patent by using its
broadband distribution and high-speed Internet backbone networks and equipment.
On January 8, 2003, AT&T moved to transfer this action to the Southern District
of New York as being a more convenient venue. Due to the vague allegations in
the complaint, it is not clear whether any liability resulting from this
lawsuit would be shared between AT&T and Comcast Cable Communications Holdings,
and, if so, in what proportions.
In addition, purported class action lawsuits have been filed in California
state court on behalf of At Home shareholders against AT&T, At Home, Comcast
Holdings and former directors of At Home. The lawsuits claim that the
defendants breached fiduciary obligations of care, candor and loyalty in
connection with a transaction announced in March 2000 in which, among other
things, AT&T, Cox Communications Inc. and Comcast Holdings agreed to extend
existing distribution agreements, the At Home Board was reorganized, and AT&T
agreed to give Cox and Comcast Holdings rights to sell their At Home shares to
AT&T. These actions have been consolidated by the court. At the request of At
Home's bondholders, on September 10, 2002, the bankruptcy court ruled that the
claims asserted in these actions belong to At Home's bankruptcy estate, not its
shareholders, that the actions must be dismissed, and that the claims in the
actions are to be prosecuted by the At Home bondholders' liquidating trust
under the confirmed Chapter 11 plan. The plaintiffs have appealed this order,
and the appeal is pending. The liability for these lawsuits would be shared
equally between AT&T and Comcast Cable Communications Holdings.
On September 23, 2002, the Official Committee of Unsecured Bondholders of
At Home filed suit in the United States District Court for the District of
Delaware against Comcast Holdings, Cox, Brian L. Roberts in his capacity as a
director of At Home, and other corporate and individual defendants. The
complaint seeks alleged "short-swing" profits under Section 16(b) of the
Securities Exchange Act of 1934 in connection with At Home put options Comcast
Holdings and Cox entered into with AT&T. The complaint alleges a total of at
least $600 million in
8
damages in the aggregate from Comcast Holdings and Cox in connection with this
claim. The complaint also seeks damages in an unspecified amount for alleged
breaches of fiduciary duty by the defendants in connection with transactions
entered into among AT&T, At Home, Comcast Holdings and Cox. On November 12,
2002, the defendants moved to dismiss the complaint or, alternatively, to
transfer the action to the Southern District of New York, on the grounds that
Delaware is an improper and inconvenient venue. We believe this suit is without
merit and intend to vigorously defend ourselves in the action.
In March 2002, three purported class actions were filed in the United
States District Court for the Southern District of New York against, among
others, AT&T and certain of its senior officers alleging violations of the
federal securities laws in connection with disclosures made by At Home in the
period from March 28, 2000 through August 28, 2001. These actions have been
consolidated. On November 8, 2002, a consolidated class action complaint was
filed in this action. The consolidated class action complaint also names as
defendants Comcast Cable Communications, Inc. and Brian L. Roberts, in his
capacity as a director of At Home. In addition to any direct liability from the
claims against Comcast Cable Communications, Inc., any liabilities resulting
from the claims against AT&T in this lawsuit would be shared equally between
AT&T and Comcast Cable Communications Holdings.
Our indentures do not restrict our ability to incur additional indebtedness,
which could make our debt securities more risky in the future.
As of September 30, 2002, our consolidated indebtedness on a pro forma
basis to reflect the closing of the AT&T Broadband acquisition, and our and
Comcast Cable Communications Holdings' borrowings under the New Credit Facility
on the closing date, and the issuance and sale in January 2003 of approximately
$600 million of aggregate principal amount of our 5.85% Notes Due 2010 and $900
million aggregate principal amount of our 6.50% Notes Due 2015 to repay
short-term indebtedness incurred in connection with the closing of the AT&T
Broadband acquisition, was approximately $32.5 billion, of which $30.3 billion
was issued by our subsidiaries. As of September 30, 2002, our pro forma
consolidated stockholders' equity was approximately $38.5 billion. The
indentures that govern the terms of our debt do not restrict our ability or our
subsidiaries' ability to incur additional indebtedness. The degree to which we
incur additional debt could have important consequences to holders of the
securities, including:
o limiting our ability to obtain any necessary financing in the future
for working capital, capital expenditures, debt service requirements
or other purposes;
o requiring us to dedicate a substantial portion of our cash flows from
operations to the payment of indebtedness and not for other purposes,
such as working capital and capital expenditures;
o limiting our flexibility to plan for, or react to, changes in our
businesses;
o making us more indebted than some of our competitors, which may place
us at a competitive disadvantage; and
o making us more vulnerable to a downturn in our businesses.
9
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Our businesses may be affected by, among other things:
o changes in laws and regulations;
o changes in the competitive environment;
o changes in technology;
o industry consolidation and mergers;
o franchise-related matters;
o market conditions that may adversely affect the availability of
debt and equity financing for working capital, capital
expenditures or other purposes;
o demand for the programming content we distribute or the
willingness of other video program providers to carry our
content; and
o general economic conditions.
In this prospectus and in the documents we incorporate by reference, we
state our expectations of future events and our future financial performance.
In some cases, you can identify those so-called "forward-looking statements" by
words such as "may," "will," "should," "expects," "plans," "anticipates,"
"believes," "estimates," "predicts," "potential," or "continue" or the negative
of those words and other comparable words. You should be aware that those
statements are only our predictions. Actual events or results may differ
materially. In evaluating those statements, you should specifically consider
various factors, including the risks outlined under "Risk Factors" above. Those
factors may cause our actual results to differ materially from any of our
forward-looking statements.
10
UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS OF COMCAST CORPORATION
The following Unaudited Pro Forma Combined Condensed Balance Sheet of
Comcast as of September 30, 2002 and the Unaudited Pro Forma Combined Condensed
Statements of Operations of Comcast for the nine months ended September 30,
2002 and the year ended December 31, 2001 give effect to the AT&T Broadband
acquisition. The pro forma financial statements account for the AT&T Broadband
acquisition under the purchase method of accounting.
The Unaudited Pro Forma Combined Condensed Balance Sheet assumes the AT&T
Broadband acquisition occurred on September 30, 2002. The Unaudited Pro Forma
Combined Condensed Statements of Operations assume the AT&T Broadband
acquisition occurred on January 1, 2001. The unaudited pro forma financial data
is based on the historical consolidated financial statements of Comcast
Holdings and the historical combined financial statements of AT&T Broadband
Group under the assumptions and adjustments set forth in the accompanying
explanatory notes.
The AT&T Broadband acquisition was consummated on November 18, 2002 in
several steps. First, AT&T transferred to AT&T Broadband Corp. ("Broadband")
substantially all the assets, liabilities and businesses represented by AT&T
Broadband Group, which was the integrated broadband business of AT&T. Second,
AT&T spun off Broadband to its shareholders. Third, Comcast Holdings and
Broadband each merged with a different, wholly-owned subsidiary of Comcast, and
Comcast Holdings and AT&T shareholders received Comcast shares.
The AT&T Broadband acquisition has been accounted for as an acquisition by
Comcast Holdings of AT&T Broadband Group. See Note 5 to the consolidated
financial statements of Comcast Holdings for the year ended December 31, 2001
incorporated by reference in this prospectus. As Comcast Holdings is considered
the accounting acquiror, the historical basis of Comcast Holdings' assets and
liabilities were not affected by the AT&T Broadband acquisition. For purposes
of developing the Unaudited Pro Forma Combined Condensed Balance Sheet as of
September 30, 2002, AT&T Broadband Group's assets, including identifiable
intangible assets, and liabilities have been recorded at their estimated fair
values and the excess purchase price has been assigned to goodwill. No
adjustment has been made to AT&T Broadband Group's franchise rights. The fair
values assigned in these pro forma financial statements are preliminary and
represent management's best estimate of current fair value which are subject to
revision. Management currently knows of no events or circumstances other than
those disclosed in these pro forma notes that would require a material change
to the preliminary purchase price allocation. However, a final determination of
required purchase accounting adjustments will be made upon the completion of a
study to be undertaken by Comcast in conjunction with independent appraisers to
determine the fair value of certain of AT&T Broadband Group's assets, including
identifiable intangible assets, and liabilities. The actual financial position
and results of operations will differ, perhaps significantly, from the pro
forma amounts reflected herein due to a variety of factors, including access to
additional information, changes in value not currently identified and changes
in operating results between the dates of the pro forma financial data and the
date of the AT&T Broadband acquisition. See Note (b) to Unaudited Pro Forma
Combined Condensed Balance Sheet.
Upon closing of the AT&T Broadband acquisition, Comcast Holdings'
shareholders received shares of Comcast Class A Common Stock, Comcast Class B
common stock and Comcast Class A Special Common Stock in exchange for shares of
Comcast Holdings Class A Common Stock, Comcast Holdings Class B common stock
and Comcast Holdings Class A Special Common Stock, respectively, based on an
exchange ratio of 1 to 1. Comcast issued stock options to purchase shares of
Comcast Class A Special Common Stock in exchange for all outstanding stock
options of Comcast Holdings, based on an exchange ratio of 1 to 1.
The consideration to complete the AT&T Broadband acquisition consisted of
shares of Comcast common stock, assumed debt of AT&T Broadband Group, the
intercompany indebtedness Broadband paid AT&T upon closing and Comcast
Holdings' transaction costs. If the closing date of the AT&T Broadband
acquisition were as of September 30, 2002, and giving effect to the exchange
offer described below, the estimated aggregate consideration to complete the
AT&T Broadband acquisition would have been $48,067 million, consisting of
$25,551 million of Comcast common stock based upon a per share price of $18.80,
$22,091 million of assumed debt at estimated fair value, and $425 million of
Comcast Holdings' transaction costs directly related to the AT&T Broadband
acquisition.
The consideration in the form of Comcast common stock included the fair
value of the issuance of approximately 1,233 million shares of Comcast Class A
Common Stock to AT&T shareholders in exchange for all
11
of AT&T's interests in the AT&T Broadband Group, the fair value of the issuance
of 115 million shares of Comcast common stock to Microsoft Corporation
("Microsoft") in exchange for Broadband shares that Microsoft received
immediately prior to the completion of the AT&T Broadband acquisition for
settlement of its $5 billion aggregate principal amount in quarterly income
preferred securities (QUIPS), and the fair value of Comcast stock options and
stock appreciation rights issued in exchange for Broadband stock options and
stock appreciation rights.
Subsequent to the original merger agreement, economic and business factors
led AT&T and Comcast Holdings to agree to change the form of consideration to
be paid in the AT&T Broadband acquisition. On August 12, 2002, AT&T, among
others, filed a registration statement with the Securities and Exchange
Commission ("SEC") for a proposed exchange offer relating to approximately
$11.8 billion aggregate principal amount of AT&T's existing debt securities.
Modification of the original merger agreement to provide for the assumption of
a portion of AT&T's debt securities by Broadband and the related reduction in
the intercompany indebtedness represented a substantive change in the
non-equity, or "other" consideration being paid in the AT&T Broadband
acquisition resulting in a new measurement date for determining the value of
the Comcast Holdings common stock used to value the Comcast securities issued
in the AT&T Broadband acquisition. The new measurement date was established as
of the date of the substantive modification of the original merger agreement.
The consideration in the form of assumed debt included the short-term debt
due to AT&T, which was paid at closing, of $7,823 million, as well as $14,268
million of long-term debt, including current portion, of AT&T Broadband Group.
As a result of the successful completion of the exchange offer on November 14,
2002, upon completion of the AT&T Broadband acquisition $3,505 million of AT&T's
debt securities ceased being AT&T obligations and became Broadband obligations
(New Broadband Notes) guaranteed by Comcast and a number of its cable
subsidiaries. The AT&T debt securities that became Broadband obligations
reduced the intercompany indebtedness Broadband was required to pay AT&T by the
aggregate principal amount of New Broadband Notes issued.
The unaudited pro forma financial statements reflect that a substantive
modification of the original merger agreement occurred resulting in a new
measurement date for accounting purposes. The unaudited pro forma financial
statements reflect a measurement date of August 12, 2002, the date the filing
of the registration statement with the SEC related to the exchange offer was
announced. Accordingly, the fair value of the shares issued for the AT&T
Broadband Group was based on a price per share of $18.80 which reflects the
weighted average market price of Comcast Holdings common stock during the
period beginning two days before and ending two days after the new measurement
date.
Subsequent to the adoption of SFAS 142 on January 1, 2002, goodwill and
franchise rights are no longer amortized. An increase or decrease in goodwill
and/or franchise rights as a result of a change in the allocation of fair value
through the appraisal process would not affect Comcast's future results of
operations other than in periods in which Comcast may recognize an impairment
charge. A change in the recorded value of these intangible assets could
increase or decrease the likelihood that Comcast will recognize an impairment
charge related to these intangible assets at some time in the future.
Comcast intends to review the synergies of the combined business, which
may result in a plan to realign or reorganize certain of AT&T Broadband Group's
existing operations. The costs of implementing such a plan, if it were to
occur, have not been reflected in the accompanying pro forma financial
statements. The impact of a potential realignment, assuming such a plan were in
place at the consummation date of the AT&T Broadband acquisition, could increase
or decrease the amount of goodwill and intangible assets recognized by Comcast
in accordance with Emerging Issues Task Force No. 95-3, "Recognition of
Liabilities in Connection with a Purchase Business Combination." The Unaudited
Pro Forma Combined Condensed Statements of Operations exclude any benefits that
may result from synergies that may be derived, or the elimination of
duplicative efforts.
Among the provisions of Statement of Financial Accounting Standards No.
141, "Business Combinations," new criteria have been established for
determining whether intangible assets should be recognized separately from
goodwill. Statement of Financial Accounting Standards No. 142, "Goodwill and
Other Intangible Assets," provides, among other guidelines, that goodwill and
intangible assets with indefinite lives will not be amortized, but rather will
be tested for impairment on at least an annual basis. Management believes that
cable franchise rights have indefinite lives based upon an analysis utilizing
the criteria in paragraph 11 of SFAS No. 142. The pro forma adjustments to the
Unaudited Pro Forma Combined Condensed Statement of Operations for the year
ended
12
December 31, 2001 reflect the elimination of AT&T Broadband Group's
amortization expense related to goodwill and cable franchise rights since this
acquisition was accounted for under the provisions of SFAS No. 142.
Comcast Holdings incurred goodwill and cable and sports franchise rights
amortization expense of approximately $2,002 million for the year ended
December 31, 2001. The historical consolidated financial statements of Comcast
Holdings included in the Unaudited Pro Forma Combined Condensed Statement of
Operations for the year ended December 31, 2001 include the amortization
expense related to Comcast Holdings' goodwill and cable and sports franchise
rights, which has not been eliminated in the pro forma adjustments. Effective
January 1, 2002, Comcast Holdings, in accordance with the provisions of SFAS
No. 142, no longer amortizes goodwill and cable and sports franchise rights.
Management believes that the assumptions used provide a reasonable basis
on which to present the unaudited pro forma financial data. Both Comcast
Holdings and AT&T Broadband Group have completed other acquisitions and
dispositions that are not significant, individually or in the aggregate, and,
accordingly, have not been included in the accompanying unaudited pro forma
financial data. The unaudited pro forma financial data may not be indicative of
the financial position or results that would have occurred if the AT&T Broadband
acquisition had been in effect on the dates indicated or which may be obtained
in the future.
The unaudited pro forma financial data should be read in conjunction with
the historical consolidated financial statements and accompanying notes thereto
for Comcast Holdings, and the historical combined financial statements and
accompanying notes thereto for AT&T Broadband Group incorporated by reference
in this prospectus.
13
COMCAST CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF SEPTEMBER 30, 2002
Historical Historical
Comcast AT&T Pro Forma Pro Forma
Holdings(a) Broadband(a) Adjustments Comcast
----------- ------------ ----------- -----------
(amounts in millions)
ASSETS
Current Assets
Cash and cash equivalents............................. $ 569.8 $ $ $ 569.8
Investments........................................... 905.9 459.0 1,364.9
Accounts receivable, net.............................. 932.8 624.0 1,556.8
Inventories, net...................................... 482.7 482.7
Deferred income taxes................................. 132.9 132.9
Other current assets.................................. 171.5 999.0 1,170.5
---------- ---------- ---------- -----------
Total current assets................................ 3,195.6 2,082.0 5,277.6
---------- ---------- ---------- -----------
Investments............................................. 585.6 17,321.0 (986.5)(d) 16,920.1
---------- ---------- ---------- -----------
Property and Equipment, net............................. 7,035.6 15,263.0 22,298.6
---------- ---------- ---------- -----------
Goodwill................................................ 6,446.3 15,162.0 (7,699.7)(b1) 13,908.6
Franchise Rights........................................ 16,601.5 29,084.0 45,685.5
Other Intangible Assets, net............................ 1,414.6 1,416.0 2,830.6
70.0 (b2)
Other Non-Current Assets, net........................... 498.1 2,093.0 (94.5)(e) 2,566.6
---------- ---------- ---------- -----------
$ 35,777.3 $ 82,421.0 $ (8,710.7) $ 109,487.6
========== ========== ========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable...................................... $ 806.1 $ 775.0 $ $ 1,581.1
Accrued expenses and other current liabilities........ 1,805.8 1,920.0 1,434.0 (b3) 5,159.8
Deferred income taxes................................. 69.7 487.0 556.7
Short-term debt....................................... 7,823.0 (3,823.0)(c) 4,000.0
Current portion of long-term debt..................... 113.9 2,329.0 2,442.9
---------- ---------- ---------- -----------
Total current liabilities........................... 2,795.5 13,334.0 (2,389.0) 13,740.5
---------- ---------- ---------- -----------
425.0 (b4)
(761.8)(b5)
3,823.0 (c)
Long-Term Debt, less current portion.................... 9,927.9 12,701.0 (94.5)(e) 26,020.6
---------- ---------- ---------- -----------
Deferred Income Taxes................................... 6,665.0 20,219.0 43.2 (b6) 26,927.2
---------- ---------- ---------- -----------
(179.0)(b7)
Other Non-Current Liabilities........................... 1,419.9 811.0 (0.1)(b8) 2,051.8
---------- ---------- ---------- -----------
Minority Interest....................................... 1,027.4 1,214.0 2,241.4
---------- ---------- ---------- -----------
Company-Obligated Convertible Quarterly Income
Preferred Securities of Subsidiary Trust Holding
Solely Subordinated Debt Securities of AT&T.......... 4,728.0 (4,728.0)(b9)
---------- ---------- ---------- -----------
Stockholders' Equity
1,348.0(b10)
Common stock.......................................... 946.9 (47.3)(d) 2,247.6
(939.2)(d)
Additional capital.................................... 11,800.8 24,203.0(b10) 35,064.6
Retained earnings..................................... 1,391.6 1,391.6
Accumulated other comprehensive loss.................. (197.7) (197.7)
Combined attributed net assets........................ 29,414.0 (29,414.0)(b11)
---------- ---------- ---------- -----------
Total stockholders' equity.......................... 13,941.6 29,414.0 (4,849.5) 38,506.1
---------- ---------- ---------- -----------
$ 35,777.3 $ 82,421.0 $ (8,710.7) $ 109,487.6
========== ========== ========== ===========
See Notes to Unaudited Pro Forma Combined Condensed Balance Sheet
14
COMCAST CORPORATION
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA)
(a) These columns reflect the historical balance sheets of the respective
companies. Certain reclassifications have been made to the combined
historical financial statements of AT&T Broadband Group to conform to the
presentation expected to be used by Comcast.
(b) This entry reflects the preliminary allocation of the purchase price to
identifiable net assets acquired and the excess purchase price to
goodwill.
Common Additional
Stock Capital Total
----------- ----------- -----------
Calculation of consideration
Issuance of common stock to AT&T shareholders
(1,233.0 million shares x $18.80)....................... $ 1.233.0 $ 21,947.4 $ 23,180.4
Issuance of common stock to Microsoft Corporation
(115.0 million shares x $18.80)......................... 115.0 2,047.0 2,162.0
Fair value of Comcast stock options resulting from the
conversion of AT&T Broadband Group stock options in the
merger based on Black-Scholes option pricing model...... 208.6 208.6
----------- ----------- -----------
(b10) Comcast common stock equity consideration............... 1,348.0 24,203.0 25,551.0
(b4) Transaction costs (assumed to be funded with long-term
debt)................................................... 425.0
-----------
Total.............................................. $ 25,976.0
===========
Preliminary estimate of fair value of identifiable net assets
acquired
(b11) Book value of AT&T Broadband Group...................... $ 29,414.0
Elimination of AT&T Broadband Group goodwill............ (15,162.0)
(b2) Long-term portion of deferred financing fees............ 70.0
(b3) Preliminary estimate of current tax liability arising
from the transaction.................................... (1,434.0)
(b5) Preliminary estimate of adjustment to fair value of
AT&T Broadband Group assumed long-term debt............. 761.8
(b6) Preliminary estimate of adjustment to deferred tax
liability on adjustments at combined federal and state
statutory rate.......................................... (43.2)
(b7) Certain liabilities retained by AT&T related to
Excite@Home............................................. 179.0
(b8) Preliminary estimate of adjustment to fair value of
other non-current liabilities........................... 0.1
(b9) Redemption of Microsoft Corporation QUIPS............... 4,728.0
-----------
Preliminary estimate of adjustments to fair value of
identifiable net assets acquired............................... 18,513.7
-----------
Acquisition goodwill........................................... $ 7,462.3
===========
15
COMCAST CORPORATION
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA)
(CONCLUDED)
Calculation of goodwill acquisition adjustment
acquisition goodwill.................................... $ 7,462.3
Gross value of AT&T Broadband Group goodwill............ (15,162.0)
-----------
(b1) Goodwill acquisition adjustment......................... $ (7,699.7)
===========
(i) Shares of common stock issued in the AT&T Broadband
acquisition........................................ 1,235.0
Share equivalent of intrinsic value of AT&T
Broadband Group stock options and stock
appreciation rights................................ (2.0)
----------
Common stock issued to AT&T shareholders........... 1,233.0
==========
Certain programming and other contracts of AT&T Broadband Group and Comcast
Holdings may, by their terms, be assumed, altered or terminated as a result of
the completion of the AT&T Broadband acquisition. However, prior to the
completion of a review of all of AT&T Broadband Group's programming and other
contracts, management does not expect to be able to estimate the impact of
duplicate, favorable or unfavorable contracts that may result from the ultimate
allocation of purchase price. See note (l) to the Unaudited Pro Forma Combined
Condensed Statements of Operations for a sensitivity analysis of purchase price
allocation.
(c) Represents the refinancing of existing short-term debt due to AT&T
($7,823.0) with new debt of Comcast. The refinancing is assumed to be
funded with $4,000.0 of short-term debt and with $3,823.0 of long-term
debt. These amounts give effect to the exchange offer described above.
(d) Represents the reclassification of AT&T Broadband Group's investment in
Comcast Holdings as follows:
Elimination of Comcast Holdings stock held by AT&T Broadband Group......................... $ (986.5)
Reclassification of Comcast Holdings stock held by AT&T Broadband Group to equity (par
value common stock $47.3 and additional capital $939.2)................................. 986.5
---------
$
=========
(e) Represents the elimination of AT&T Broadband Group bonds owned by Comcast
Holdings at September 30, 2002.
16
COMCAST CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2001
Historical Historical
Comcast AT&T Intercompany Pro Forma Pro Forma
Holdings(a) Broadband(a) Adjustments Adjustments(d) Comcast(l)
----------- ------------ ------------ -------------- -----------
(amounts in millions, except per share amounts)
Revenues
Service revenues........................ $ 5,919.1 $ 10,132.0 $ (108.9)(b) $ $ 15,942.2
Net sales from electronic retailing..... 3,917.3 3,917.3
--------- ----------- --------- ---------- -----------
9,836.4 10,132.0 (108.9) 19,859.5
--------- ----------- --------- ---------- -----------
Costs and Expenses
Operating (excluding depreciation)...... 2,906.5 5,459.0 (62.8)(b) 8,302.7
Cost of goods sold from electronic
retailing (excluding depreciation).... 2,514.0 2,514.0
Selling, general and administrative(m).. 1,745.7 2,582.0 (22.6)(b) 4,305.1
Depreciation............................ 1,141.8 2,626.0 3,767.8
Amortization............................ 2,274.6 2,154.0 (1,882.9)(e) 2,545.7
Asset impairment, restructuring and
other charges......................... 1,494.0 1,494.0
--------- ----------- --------- ---------- -----------
10,582.6 14,315.0 (85.4) (1,882.9) 22,929.3
--------- ----------- --------- ---------- -----------
Operating loss (746.2) (4,183.0) (23.5) 1,882.9 (3,069.8)
Other income (expense)
87.5 (f)
Interest expense........................ (734.1) (1,735.0) (1.8)(g) (2,383.4)
Investment income (expense)............. 1,061.7 (1,947.0) (18.7)(b) (904.0)
(106.0)(h)
Equity in net income (losses) of
affiliates............................ (28.5) 148.0 (e) 13.5
Other income (expense).................. 1,301.0 (927.0) 374.0
--------- ----------- --------- ---------- -----------
1,600.1 (4,609.0) (18.7) 127.7 (2,899.9)
--------- ----------- --------- ---------- -----------
Income (loss) before income taxes,
minority interest and cumulative
effect of accounting change............ 853.9 (8,792.0) (42.2) 2,010.6 (5,969.7)
(561.3)(i)
Income tax (expense) benefit.............. (469.4) 3,857.0 (750.3)(c) 37.0 (h) 2,113.0
--------- ----------- --------- ---------- -----------
Income (loss) before minority interest
and cumulative effect of accounting
change................................. 384.5 (4,935.0) (792.5) 1,486.3 (3,856.7)
Net loss from equity investments.......... (69.0) 69.0 (h)
Minority interest income (expense)........ (160.4) 833.0 (24.0)(b) 160.0 (j) 808.6
--------- ----------- --------- ---------- -----------
Income (loss) before cumulative effect of
accounting change...................... $ 224.1 $ (4,171.0) $ (816.5) $ 1,715.3 $ (3,048.1)
========= =========== ========= ========== ===========
Earnings (loss) per share from continuing
operations - basic..................... $ 0.24 $ (1.35)
Earnings (loss) per share from continuing
operations - assuming dilution......... $ 0.23 $ (1.35)
Weighted average number of common shares
outstanding - basic.................... 949.7 1,300.7 (k) 2,250.4
Weighted average number of common shares
outstanding - assuming dilution........ 964.5 1,285.9 (k) 2,250.4
See Notes to Unaudited Pro Forma Combined Condensed Statement of Operations
17
COMCAST CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002
Historical Historical
Comcast AT&T Intercompany Pro Forma Pro Forma
Holdings(a) Broadband(a) Adjustments Adjustments(d) Comcast(l)
----------- ------------ ------------ -------------- -----------
(amounts in millions, except per share amounts)
Revenues
Service revenues.......................... $ 5,086.3 $ 7,512.0 $ (42.0)(b) $ $ 12,556.3
Net sales from electronic retailing....... 2,999.8 2,999.8
----------- ------------ ------------ ---------- -----------
8,086.1 7,512.0 (42.0) 15,556.1
----------- ------------ ------------ ---------- -----------
Costs and expenses
Operating (excluding depreciation)........ 2,191.4 3,889.0 (27.0)(b) 6,053.4
Cost of goods sold from electronic
retailing (excluding depreciation)..... 1,903.1 1,903.1
Selling, general and administrative....... 1,491.0 2,037.0 (15.0)(b) 3,513.0
Depreciation.............................. 1,015.5 2,043.0 3,058.5
Amortization.............................. 155.1 161.0 316.1
Goodwill and franchise impairment charges. 16,525.0 16,525.0
Asset impairment, restructuring and other
charges................................ 56.0 56.0
----------- ------------ ------------ ---------- -----------
6,756.1 24,711.0 (42.0) 31,425.1
----------- ------------ ------------ ---------- -----------
Operating income (loss)................... 1,330.0 (17,199.0) (15,869.0)
Other income (expense)....................
(101.8)(f)
Interest expense.......................... (543.5) (1,111.0) (24.2)(g) (1,780.5)
Investment expense........................ (760.4) (1,172.0) (1,932.4)
Equity in net losses of affiliates........ (59.9) (1,001.0)(h) (1,060.9)
Other income (expense).................... (10.8) 523.0 512.2
----------- ------------ ------------ ---------- -----------
(1,374.6) (1,760.0) (1,127.0) (4,261.6)
----------- ------------ ------------ ---------- -----------
Loss before income taxes, minority
interest, extraordinary items and
cumulative effect of accounting change. (44.6) (18,959.0) (1,127.0) (20,130.6)
48.9(i)
Income tax benefit (expense).............. (52.3) 5,536.0 386.0(h) 5,918.6
----------- ------------ ------------ ---------- -----------
Loss before minority interest,
extraordinary items and cumulative
effect of accounting change (96.9) (13,423.0) (692.1) (14,212.0)
Net loss related to equity investments.... (615.0) 615.0(h)
Minority interest expense................. (126.0) (206.0) 120.0(j) (212.0)
----------- ------------ ------------ ---------- -----------
Loss before extraordinary items and
cumulative effect of accounting change. $ (222.9) $ (14,244.0) $ $ 42.9 $ (14,424.0)
========= =========== ============= ========== ===========
Loss per share from continuing operations
- basic................................ $ (0.23) $ (6.40)
Loss per share from continuing operations
- assuming dilution.................... $ (0.23) $ (6.40)
Weighted average number of common shares
outstanding - basic.................... 952.2 1,300.7(k) 2,252.9
Weighted average number of common shares
outstanding - assuming dilution........ 952.2 1,300.7(k) 2,252.9
See Notes to Unaudited Pro Forma Combined Condensed Statement of Operations
18
COMCAST CORPORATION
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENT OF OPERATIONS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
(a) These columns reflect the historical statements of operations of the
respective companies.
(b) Adjustment reflects the elimination of historical intercompany
transactions between Comcast Holdings and AT&T Broadband Group as follows:
amounts charged by Comcast Holdings to AT&T Broadband Group for
programming, the gains and losses resulting from the sales of certain
cable systems by AT&T Broadband Group to Comcast Holdings and Excite@Home
transactions.
(c) Represents the elimination of the aggregate historical income tax effects
recorded by Comcast Holdings and AT&T Broadband Group on Note (b)
adjustments above.
(d) AT&T Broadband Group has certain intercompany agreements with AT&T Corp.
which were terminated as of the date of the AT&T Broadband acquisition. The
costs of replacing these services is uncertain. However, the impact of the
termination of these arrangements is not expected to be material.
(e) Represents the elimination of AT&T Broadband Group's historical goodwill
and cable franchise rights amortization expense for consolidated
subsidiaries and equity method investments. Under the accounting rules set
forth in SFAS No. 142 issued by the Financial Accounting Standards Board
in June 2001, goodwill and intangibles with indefinite lives are not
amortized against earnings other than in connection with an impairment.
(f) Represents the net effect on interest expense resulting from the
financings described in Note (c) to the Unaudited Pro Forma Combined
Condensed Balance Sheet. Pro forma interest expense was calculated based
on the historical interest rates for the historical debt outstanding and
assumed interest rates for the new credit facilities. The pro forma
financial information assumes the financings occurred on January 1, 2001.
Amortization of deferred financing costs was calculated based on the
amounts and terms of the new facilities. Short-term rates are assumed to
be 3% and long term rates are assumed to be 7%. Assuming interest rates
changed by 0.125%, the related interest expense and pre-tax impact on
earnings would be $9.8 million for the year ended December 31, 2001 and
$7.4 million for the nine months ended September 30, 2002.
(g) Represents the net effect in interest expense as a result of the
adjustment of AT&T Broadband Group's long-term debt to its fair value as
described in Note (b5) to the Unaudited Pro Forma Combined Condensed
Balance Sheet. The difference between the fair value and the face amount
of each borrowing is amortized to interest expense over the remaining term
of the borrowing.
(h) Represents the reclassification of losses in equity investments for the
year ended December 31, 2001 and losses related to equity method
investments for the nine months ended September 30, 2002 to conform with
the presentation currently used by Comcast Holdings.
(i) Represents the aggregate pro forma income tax effect of Notes (e) through
(g) above at the combined federal and state statutory rate.
(j) Represents the elimination of historical impact of the QUIPS exchanged for
AT&T Broadband Group common stock.
(k) For basic earnings (loss) per share, this adjustment represents the
issuance of Comcast shares to AT&T shareholders and Microsoft offset by
shares of Comcast Holdings owned by AT&T Broadband Group which are
classified as treasury shares (see Note (d) to the Unaudited Pro Forma
Combined Condensed Balance Sheet). In addition, earnings per share
assuming dilution has been adjusted to include the dilutive effects of
Comcast stock options issued in exchange for the AT&T Broadband Group
stock options as well as adjustment for the year-ended December 31, 2001
to Comcast's historical average dilutive shares outstanding since such
shares would be anti-dilutive on a pro forma basis.
(l) The pro forma combined condensed financial statements reflect a
preliminary allocation to tangible assets, liabilities, goodwill and other
intangible assets. The final purchase price allocation may result in
different allocations for tangible and intangible assets than that
presented in these pro forma combined condensed
19
financial statements. The following table shows the absolute dollar effect
on pro forma net income (loss) applicable to common shares and net income
(loss) per share assuming dilution for every $500 of purchase price
allocated to amortizable assets or certain liabilities over assumed
weighted-average useful lives. An increase in the purchase amount
allocated to amortizable assets or a decrease in the amount allocated to
certain liabilities will result in a decrease to net income. A decrease in
the amount allocated to amortizable assets or an increase in the amount
allocated to certain liabilities will result in an increase to net income.
Nine Month
Year Ended Ended
December 31, September 30,
Weighted Average Life 2001 2002
- -------------------------------------------------- ------------ -------------
Five years
Net Income..................................... $61.5 $46.1
Per Share...................................... $0.03 $0.02
Ten years
Net Income..................................... $30.8 $23.1
Per Share...................................... $0.01 $0.01
Twenty years
Net Income..................................... $15.4 $11.5
Per Share...................................... $0.01 $0.01
20
SELECTED FINANCIAL DATA OF COMCAST HOLDINGS
The consolidated selected financial data of Comcast Holdings below for the
nine months ended September 30, 2002 and 2001 were derived from the unaudited
condensed consolidated financial statements of Comcast Holdings, and the
consolidated selected financial data of Comcast Holdings for the years ended
December 31, 2001, 2000, 1999, 1998 and 1997 were derived from the audited
consolidated financial statements of Comcast Holdings.
Nine Months
Ended September 30, Years Ended December 31,
---------------------- -------------------------------------------------------------
2002 2001 2001 2000 1999 1998 1997
--------- --------- --------- --------- --------- --------- ---------
(Dollars in millions, except per share amounts)
Statement of Operations Data:
Revenues ........................ $ 8,086.1 $ 6,971.5 $ 9,836.4 $ 8,357.0 $ 6,632.0 $ 5,512.9 $ 4,773.0
Operating income (loss) ......... 1,330.0 (412.0) (746.2) (161.0) 664.0 557.1 466.6
Income loss) from continuing
operations before
cumulative effect of
accounting change ............ (222.9) 545.1 224.1 2,021.5 729.9 1,003.5 (213.1)
Discontinued operations(1) ...... 335.8 (31.4) (25.6)
Cumulative effect of
accounting change ............ 384.5 384.5
Net income (loss) ............... (222.9) 929.6 608.6 2,021.5 1,065.7 972.1 (238.7)
Basic earnings (loss) for
common stockholders per
common share(2)
Income (loss) from
continuing operations
before cumulative effect
of accounting change ....... $ (0.23) $ 0.58 $ 0.24 $ 2.24 $ 0.93 $ 1.33 $ (.33)
Discontinued operations(1) ... 0.45 (.04) (.04)
Cumulative effect of
accounting change .......... 0.40 0.40
--------- --------- --------- --------- --------- --------- ---------
Net income (loss) ............ $ (0.23) $ 0.98 $ 0.64 $ 2.24 $ 1.38 $ 1.29 $ (.37)
========= ========= ========= ========= ========= ========= =========
Diluted earnings (loss) for
common stockholders per
common share(2)
Income (loss) from
continuing operations
before cumulative
effect of accounting
change ..................... $ (0.23) $ 0.56 $ 0.23 $ 2.13 $ 0.89 $ 1.24 $ (.33)
Discontinued operations(1) ... 0.41 (.03) (.04)
Cumulative effect of
accounting change .......... 0.40 0.40
--------- --------- --------- --------- --------- --------- ---------
Net income (loss) ............ $ (0.23) $ 0.96 $ 0.63 $ 2.13 $ 1.30 $ 1.21 $ (.37)
========= ========= ========= ========= ========= ========= =========
Cash dividends declared per
common share(2) .............. $ .0467 $ .0467
Balance Sheet Data (at period
end):
Total assets .................... $35,777.3 $38,921.8 $38,260.5 $35,874.0 $28,823.4 $14,710.5 $11,234.3
Working capital ................. 400.1 (184.1) 1,454.6 1,694.5 4,786.1 2,505.0 13.6
Long-term debt .................. 9,927.9 11,494.8 11,741.6 10,517.4 8,707.2 5,464.2 5,334.1
Stockholders' equity ............ 13,941.6 14,838.8 14,473.0 14,086.4 10,341.3 3,815.3 1,646.5
Supplementary Financial Data:
Operating income before
depreciation and
amortization(3) .............. $ 2,500.6 $ 2,027.7 $ 2,670.2 $ 2,458.3 $ 1,879.6 $ 1,496.3 $ 1,293.1
Net cash provided by (used
in) (4)
Operating activities ........ 2,000.2 1,582.6 1,596.6 1,219.3 1,249.4 1,067.7 844.6
Financing activities ........ (1,052.4) 1,219.8 1,476.3 (271.4) 1,341.4 809.2 283.9
Investing activities ........ (728.0) (2,795.5) (3,374.4) (1,218.6) (2,539.3) (1,415.3) (1,045.8)
- ----------------
(1) In July 1999, Comcast Holdings sold Comcast Cellular Corporation to SBC
Communications, Inc. Comcast Cellular is presented as a discontinued
operation for all periods presented.
21
(2) Adjusted for Comcast Holdings' two-for-one stock split in the form of a
100% stock dividend in May 1999.
(3) Operating income before depreciation and amortization is commonly referred
to in Comcast Holdings' business as "operating cash flow." Operating cash
flow is a measure of a company's ability to generate cash to service its
obligations, including debt service obligations, and to finance capital
and other expenditures. In part due to the capital intensive nature of
Comcast Holdings' businesses and the resulting significant level of
non-cash depreciation and amortization expense, operating cash flow is
frequently used as one of the bases for comparing businesses in Comcast
Holdings' industries, although Comcast Holdings' measure of operating cash
flow may not be comparable to similarly titled measures of other
companies. Operating cash flow is the primary basis used by Comcast
Holdings' management to measure the operating performance of Comcast
Holdings' businesses. Operating cash flow does not purport to represent
net income or net cash provided by operating activities, as those terms
are defined under generally accepted accounting principles, and should not
be considered as an alternative to those measurements as an indicator of
Comcast Holdings' performance.
(4) Represents net cash provided by (used in) operating activities, financing
activities and investing activities as presented in Comcast Holdings'
consolidated statement of cash flows.
22
SELECTED FINANCIAL DATA OF AT&T BROADBAND GROUP
Presented in the table below is selected financial data of AT&T Broadband
Group. AT&T Broadband Group was an integrated business of AT&T and not a
stand-alone entity. AT&T assigned and transferred the assets, liabilities and
businesses of AT&T Broadband Group to Comcast Cable Communications Holdings,
Inc. in connection with the AT&T Broadband acquisition. AT&T Broadband Group
consisted primarily of the assets, liabilities and business of AT&T Broadband,
LLC (formerly known as Tele-Communications, Inc. and now known as Comcast Cable
Holdings, LLC), acquired by AT&T on March 9, 1999, and MediaOne Group, Inc.
(now known as Comcast MO Group, Inc.), acquired by AT&T on June 15, 2000.
The combined income statement data of AT&T Broadband Group for the years
ended December 31, 2001 and 2000 and the ten months ended December 31, 1999 and
the combined balance sheet data of AT&T Broadband Group at December 31, 2001
and 2000 were derived from the audited combined financial statements of AT&T
Broadband Group. The remaining data was derived from unaudited combined
financial statements of AT&T Broadband Group.
The financial data presented below is not necessarily comparable from
period to period as a result of several transactions, including the acquisition
and dispositions of cable systems, primarily the Tele-Communications, Inc. and
MediaOne Group, Inc. acquisitions. For this and other reasons, you should read
the selected historical financial data provided below in conjunction with the
combined financial statements and accompanying notes of AT&T Broadband Group
incorporated by reference in this prospectus.
At or for
the
Ten Months
At or for the Ended
Nine Months At or for the Years December
Ended September 30, Ended December 31, 31,
------------------------ ------------------------ ---------
2002 2001 2001 2000(1) 1999(2)
--------- --------- --------- --------- ---------
(Dollars in millions)
Income Statement Data:
Revenue ..................................... $ 7,512 $ 7,756 $ 10,132 $ 8,445 $ 5,080
Operating loss .............................. (17,199) (3,567) (4,183) (8,656) (1,177)
Loss before extraordinary gain and cumulative
effect of accounting changes ............. (14,244) (2,988) (4,171) (5,370) (2,200)
Balance Sheet Data:
Total assets ................................ $ 82,421 $ 104,261 $ 103,187 $ 117,534 $ 58,228
Total debt .................................. 22,853 23,274 23,285 28,420 14,900
Minority interest ........................... 1,214 3,319 3,302 4,421 2,327
Company-Obligated Convertible Quarterly
Preferred Securities ..................... 4,728 4,718 4,720 4,710 4,700
- ---------
(1) Effective June 15, 2000, AT&T acquired MediaOne Group, Inc., which was
attributed to AT&T Broadband Group. The acquisition was accounted for
under the purchase method of accounting.
(2) Effective March 1, 1999, AT&T acquired Tele-Communications, Inc., which
was attributed to AT&T Broadband Group. The acquisition was accounted for
under the purchase method of accounting.
23
MARKET PRICES AND DIVIDENDS
Our Class A Special Common Stock is admitted for trading on The Nasdaq
National Market System under the ticker "CMCSK." The following table sets forth
the high and low reported last sales price for our shares of Class A Special
Common Stock during the periods indicated from November 19, 2002, when the
shares of Class A Special Common Stock began trading under the symbol "CMCSK."
No dividends were paid during these periods.
For current price information, you should consult publicly available
sources.
Calendar Period High Low
--------------- -------- --------
2002
Fourth Quarter (from November 19, 2002) ....... $ 25.10 $ 22.04
2003
First Quarter (through January 27, 2003) ...... $ 27.30 $ 23.60
Prior to the completion of the AT&T Broadband acquisition on November 18,
2002, Comcast Holdings' Class A Special Common Stock was admitted for trading
on The Nasdaq National Market under the symbol "CMCSK." The following table
sets forth, for the periods indicated, the high and low last reported sales
price of Comcast Holding's Class A Special Common Stock and dividends paid on
such shares, as adjusted for Comcast Holding's two-for-one stock split in the
form of a 100% stock dividend in May 1999.
Dividends
Calendar Period High Low Paid
--------------- -------- -------- --------
1999
First Quarter ................................. $ 38.56 $ 29.63 $ .0117
Second Quarter ................................ 42.00 29.44
Third Quarter ................................. 41.56 32.63
Fourth Quarter ................................ 56.50 35.69
2000
First Quarter ................................. $ 54.56 $ 38.31
Second Quarter ................................ 44.19 29.75
Third Quarter ................................. 41.06 31.06
Fourth Quarter ................................ 43.94 34.00
2001
First Quarter ................................. $ 45.88 $ 38.69
Second Quarter ................................ 45.50 39.50
Third Quarter ................................. 43.31 32.51
Fourth Quarter ................................ 40.18 35.19
2002
First Quarter ................................. $ 37.33 $ 29.65
Second Quarter ................................ 32.15 22.33
Third Quarter ................................. 25.12 16.80
Fourth Quarter (through November 18, 2002) .... 26.24 16.93
24
DESCRIPTION OF OUR CLASS A SPECIAL COMMON STOCK AND OTHER CAPITAL STOCK
The statements made under this caption include summaries of certain
provisions contained in our articles of incorporation and by-laws. These
statements do not purport to be complete and are qualified in their entirety by
reference to such articles of incorporation and by-laws.
We have three classes of common stock outstanding: Class A Common Stock,
$0.01 par value per share; Class A Special Common Stock, $0.01 par value per
share; and Class B Common Stock, $0.01 par value per share. There are currently
authorized 7.5 billion shares of Class A Common Stock, 7.5 billion shares of
Class A Special Common Stock and 75 million shares of Class B Common Stock. At
the close of business on January 27, 2003 there were outstanding 1.355 billion
shares of Class A Common Stock, 930.9 million shares of Class A Special Common
Stock and 9.4 million shares of Class B Common Stock.
Dividends
Subject to the preferential rights of any preferred stock then
outstanding, Holders of our Class A Common Stock, Class A Special Common Stock,
and Class B Common Stock are entitled to receive, from time to time, when, as
and if declared, in the discretion of our Board, such cash dividends as our
Board may from time to time determine, out of such funds as are legally
available therefore, in proportion to the number of shares held by them,
respectively, without regard to class.
Holders of our Class A Common Stock, Class A Special Common Stock, and
Class B Common Stock will also be entitled to receive, from time to time, when,
as and if declared by our Board, such dividends of our stock or other property
as our Board may determine, out of such funds as are legally available
therefore. However, stock dividends on, or stock splits of, any class of common
stock will not be paid or issued unless paid or issued on all classes of our
common stock, in which case they will be paid or issued only in shares of that
class; provided, however, that stock dividends on, or stock splits of, our
Class B Common Stock may also be paid or issued in shares of our Class A
Special Common Stock.
We do not intend to pay dividends on our common stock for the foreseeable
future.
Voting Rights
Except as required by law, holders of our Class A Special Common Stock are
not be entitled to vote. When holders of our Class A Special Common Stock are
entitled to vote by applicable law, each share of our Class A Special Common
Stock has the same number of votes as each share of our Class A Common Stock.
On all matters submitted for a vote of holders of all classes of our
voting stock, holders of our Class A Common Stock in the aggregate hold 66 2/3%
of the aggregate voting power of our capital stock as of completion of the AT&T
Broadband acquisition.
Each share of our Class A Common Stock has the number of votes equal to a
quotient the numerator of which is the excess of (1) the Total Number of Votes
(as defined below in this paragraph) over (2) the sum of (A) the Total Number
of B Votes (as defined below in this paragraph) and (B) the Total Number of
Other Votes (as defined below in this paragraph) and the denominator of which
is the number of outstanding shares of our Class A Common Stock. "Total Number
of Votes" on any record date is equal to a quotient the numerator of which is
the Total Number of B Votes on such record date and the denominator of which is
the B Voting Percentage (as defined below in this paragraph) on such record
date. "Total Number of B Votes" on any record date is equal to the product of
(1) 15 and (2) the number of outstanding shares of our Class B Common Stock on
such record date. "Total Number of Other Votes" on any record date means the
aggregate number of votes to which holders of all classes of our capital stock
other than holders of our Class A Common Stock and our Class B Common Stock are
entitled to cast on such record date in an election of directors. "B Voting
Percentage" on any record date means the portion (expressed as a percentage) of
the total number of votes to which all holders of our Class B Common Stock are
entitled to cast on such record date in an election of directors. Initially,
the B Voting Percentage will be 33 1/3%.
If the number of shares of our Class A Common Stock or our Class B Common
Stock outstanding is reduced for any reason (e.g., by repurchase or, in the
case of our Class B Common Stock only, conversion), the aggregate voting
25
power of the applicable class of our capital stock will be proportionately
reduced. If additional shares of our Class A Common Stock or our Class B Common
Stock are issued, the relative aggregate voting power of the two classes of our
common stock will change (based on the principle that each share of our Class B
Common Stock will be entitled to 15 times the vote of each share of our Class A
Common Stock) to the extent such issuance is disproportionate as between the
relative number of shares of the two classes outstanding prior to the issuance,
but the combined aggregate voting power of the two classes of stock will remain
constant at approximately 38 47/100% (except to the extent there has been a
reduction in the aggregate voting power of either class of stock as described
in the preceding sentence).
Subject to the next sentence, on all matters submitted for a vote of
holders of one or more classes of our voting stock, holders of our Class B
Common Stock in the aggregate will hold 33 1/3% of the aggregate voting power
of our capital stock, regardless of the number of shares of our Class A Common
Stock or any other class of our capital stock outstanding at any time. If the
number of shares of our Class B Common Stock outstanding is reduced for any
reason (e.g., by repurchase or conversion), the aggregate voting power of our
Class B Common Stock will be proportionately reduced.
Each share of our Class B Common Stock has 15 votes.
Approval Rights
Except as required by law, holders of Class A Special Common Stock and
Class A Common Stock have no specific approval rights over any corporate
actions.
Holders of our Class B Common Stock have an approval right over (1) any
merger of us with another company or any other transaction, in each case that
requires our shareholders' approval under applicable law, or any other
transaction that would result in any person or group owning shares representing
in excess of 10% of the aggregate voting power of the resulting or surviving
corporation, or any issuance of securities (other than pursuant to director or
officer stock option or purchase plans) requiring our shareholders' approval
under the rules and regulations of any stock exchange or quotation system; (2)
any issuance of our Class B Common Stock or any securities exercisable or
exchangeable for or convertible into our Class B Common Stock; and (3) charter
or bylaw amendments (such as a charter amendment to opt in to any of the
Pennsylvania antitakeover statutes) and other actions (such as the adoption,
amendment or redemption of a shareholder rights plan) that limit the rights of
holders of our Class B Common Stock or any subsequent transferee of our Class B
Common Stock to transfer, vote or otherwise exercise rights with respect to our
capital stock.
Principal Shareholder
Brian L. Roberts, our CEO and President, through his control of BRCC
Holdings LLC and certain trusts, which own all outstanding shares of our Class
B Common Stock, holds a nondilutable 33 1/3% of the combined voting power of
our stock and also has separate approval rights over certain material
transactions involving us, as described above under "--Approval Rights." The
Class B Common Stock is convertible on a share-for-share basis into Class A
Common Stock or Class A Special Common Stock. As of January 27, 2003, if BRCC
Holdings LLC, the trusts and Mr. Roberts were to convert the Class B Common
Stock which they are deemed to beneficially own into Class A Common Stock, Mr.
Roberts would beneficially own 9,445,731 shares of Class A Common Stock, which
is approximately 0.7% of the Class A Common Stock that would be outstanding
after the conversion.
Conversion of Class B Common Stock
The Class B Common Stock is convertible share for share into either the
Class A Common Stock or the Class A Special Common Stock.
Preference on Liquidation
In the event of our liquidation, dissolution or winding up, either
voluntary or involuntary, the holders of Class A Special Common Stock, Class A
Common Stock and Class B Common Stock are entitled to receive, subject to any
liquidation preference of any preferred stock then outstanding, our remaining
assets, if any, in proportion to the number of shares held by them without
regard to class.
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Mergers, Consolidations, Etc.
Our charter provides that if in a transaction such as a merger,
consolidation, share exchange or recapitalization holders of each class of our
common stock outstanding on completion of the AT&T Broadband acquisition do not
receive the same consideration for each of their shares of our common stock
(i.e., the same amount of cash or the same number of shares of each class of
stock issued in the transaction in proportion to the number of shares of our
common stock held by them, respectively, without regard to class), holders of
each such class of our common stock will receive "mirror" securities (i.e.,
shares of a class of stock having substantially equivalent rights as the
applicable class of our common stock).
Miscellaneous
The holders of Class A Special Common Stock, Class A Common Stock and
Class B Common Stock do not have any preemptive rights. All shares of Class A
Special Common Stock, Class A Common Stock and Class B Common Stock presently
outstanding are, and all shares of the Class A Special Common Stock and Class A
Common Stock offered hereby, or issuable upon conversion, exchange or exercise
of securities offered hereby, will, when issued, be, fully paid and
non-assessable. We have been advised that the Class A Special Common Stock and
Class A Common Stock are exempt from existing Pennsylvania personal property
tax.
The transfer agent and registrar for our Class A Special Common Stock and
Class A Common Stock is Equiserve, 525 Washington Blvd., Jersey City, New
Jersey 07310. Their telephone number is (888) 883-8903.
DESCRIPTION OF SHAREHOLDER RIGHTS PLAN
The following description of the material terms of a rights agreement with
respect to a shareholder rights plan which we entered into in connection with
the completion of the AT&T Broadband acquisition is qualified by reference to
the terms of the rights agreement, which is included as an exhibit to the
registration statement of which this prospectus is a part.
The Rights. Pursuant to the rights agreement, our board declared on
November 18, 2002 a dividend of one preferred stock purchase right (the
"Rights") for each outstanding share of our Class A Common Stock, Class A
Special Common Stock, and Class B Common Stock payable to holders of record at
3:40 p.m., New York City time, on November 18, 2002.
After giving effect to the closing of AT&T Broadband acquisition on
November 18, 2002, (i) there were outstanding approximately 1.355 billion
shares of Class A Common Stock, 9.4 million shares of Class B Common Stock and
930.6 million shares of Class A Special Common Stock and (ii) there was
reserved for issuance under the Company's stock option plans 95.8 million
shares of Class A Common Stock and 66.2 million shares of Class A Special
Common Stock. Each outstanding share of Common Stock at 3:40 p.m., New York
City time, on the record date will receive one Right. Shares of Common Stock
issued after the record date and prior to the Distribution Date will be issued
with a Right attached so that all shares of Common Stock outstanding prior to
the Distribution Date will have Rights attached. 2.5 million shares of
Preferred Stock have been reserved for issuance upon exercise of the Rights.
Rights holders have no rights as a shareholder of the Company, including
the right to vote or to receive dividends.
The rights agreement includes antidilution provisions designed to prevent
efforts to diminish the effectiveness of the Rights.
The transferability and exercisability of the Rights will depend on
whether a "Distribution Date" has occurred. A Distribution Date generally means
the earlier of (1) the close of business on the tenth day after a public
announcement that any person or group has become an "Acquiring Person" and (2)
the close of business on the tenth business day after the date of the
commencement of a tender or exchange offer by any person that could result in
such person becoming an Acquiring Person. An Acquiring Person generally means
any person or group (other than any holder of our Class B common stock or any
of such holder's affiliates) who becomes the beneficial owner of our
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voting capital stock that represents 10% or more of the total number of votes
that holders of our capital stock are entitled to cast with respect to any
matter presented for a shareholder vote.
Transferability. Prior to the Distribution Date, (1) the Rights will be
evidenced by the certificates of the relevant underlying common stock and the
registered holders of the common stock shall be deemed the registered holders
of the associated Rights and (2) the Rights will be transferable only in
connection with transfers of shares of the underlying common stock. After the
Distribution Date, the rights agent will mail separate certificates evidencing
the Rights to each holder of the relevant underlying common stock as of the
close of business on the Distribution Date. Thereafter, the Rights will be
transferable separately from the common stock.
Exercisability. The Rights will not be exercisable prior to the
Distribution Date. After the Distribution Date, but prior to the occurrence of
an event described below under "--`Flip In' Feature" or "--`Flip Over'
Feature," each Right will be exercisable to purchase for $125 one
one-thousandth of a share of our Series A Participating Cumulative Preferred
Stock.
"Flip In" Feature. If any person becomes an Acquiring Person, each holder
of a Right, except for the Acquiring Person or certain affiliated persons, will
have the right to acquire, instead of one one-thousandth of a share of our
Series A Participating Cumulative Preferred Stock, a number of shares of our
Class A Common Stock, in each case having a market value equal to twice the
exercise price of the Right. For example, if an initial purchase price of $125
were in effect on the date that the flip in feature of the Rights were
exercised, any holder of a Right, except for the person that has become an
Acquiring Person or certain affiliated persons, could exercise his or her Right
by paying to us $125 in order to receive shares of our Class A Common Stock
having a value equal to $250.
"Exchange" Feature. At any time after a person becomes an Acquiring Person
(but before any person becomes the beneficial owner of our voting capital stock
representing 50% or more of the total number of votes which holders of our
capital stock are entitled to cast with respect to any matter presented for a
shareholder vote), our Board may exchange all or some of the Rights, except for
those held by any Acquiring Person or certain affiliated persons, for our Class
A Common Stock at an exchange ratio of one share of our Class A Common Stock
for each Right. Use of this exchange feature means that eligible Rights holders
would not have to pay cash before receiving shares of our Class A Common Stock.
"Flip Over" Feature. If, after a person becomes an Acquiring Person, (1)
we are involved in a merger or other business combination in which we are not
the surviving corporation or any of our common stock is exchanged for other
securities or assets or (2) we and/or one or more of our subsidiaries sell or
transfer assets or earning power aggregating 50% or more of the assets or
earning power of us and/or our subsidiaries, then each Right will entitle the
holder, except for any Acquiring Person or certain affiliated persons, to
purchase a number of shares of common stock of the other party to the
transaction having a value equal to twice the exercise price of the Right.
Redemption of Rights. Our Board may redeem all of the Rights at a price of
$0.001 per Right at any time prior to the time that any person becomes an
Acquiring Person. The right to exercise will terminate upon redemption, and at
that time, holders of the Rights will have the right to receive only the
redemption price for each Right they hold.
Amendment of Rights. For so long as the Rights are redeemable, the rights
agreement may be amended in any respect. At any time when the Rights are no
longer redeemable, the rights agreement may be amended in any respect that does
not adversely affect Rights holders (other than any Acquiring Person and
certain affiliated persons), cause the rights agreement to become amendable
except as set forth in this sentence or cause the Rights again to become
redeemable.
Expiration of Rights. If not previously exercised or redeemed, the Rights
will expire on November 18, 2012, unless earlier exchanged.
Anti-Takeover Effects. The Rights have certain anti-takeover effects. The
Rights may cause substantial dilution to a person that attempts to acquire us
without a condition to such an offer that a substantial number of the Rights be
acquired or that the Rights be redeemed or declared invalid. The Rights should
not interfere with any merger or other business combination approved by our
Board since the Rights may be redeemed by us as described above.
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Taxation. While the dividend of the Rights will not be taxable to
stockholders or to us, stockholders or we may, depending upon the
circumstances, recognize taxable income in the event that the Rights become
exercisable as set forth above.
Series A Preferred Stock. In connection with the creation of the Rights,
our Board authorized the issuance of shares of our preferred stock designated
as our Series A Participating Cumulative Preferred Stock. We will design the
dividend, liquidation, voting and redemption features of our Series A
Participating Cumulative Preferred Stock so that the value of one-thousandth of
a share of our Series A Participating Cumulative Preferred Stock approximates
the value of one share of our Class A Common Stock. Shares of our Series A
Participating Cumulative Preferred Stock will be purchasable only after the
Rights have become exercisable. The rights of our Series A Participating
Cumulative Preferred Stock as to dividends, liquidation and voting, and in the
event of mergers or consolidations, are protected by customary antidilution
provisions.
DESCRIPTION OF AT&T BROADBAND ACQUISITION
The following summary of material transactions and continuing obligations
in connection with the AT&T Broadband acquisition is qualified by reference to
the merger agreement, as amended, and the related agreements described below,
which are exhibits to the registration statement of which this prospectus is a
part.
The Merger Agreement
Governance Arrangements
Our Board of Directors. Our Board has twelve members, five of whom - Ralph
J. Roberts, Brian L. Roberts, Sheldon M. Bonovitz, Julian A. Brodsky and Decker
Anstrom - were designated at the time of the AT&T Broadband acquisition by
Comcast Holdings from the then-existing Comcast Holdings Board, five of whom -
C. Michael Armstrong, J. Michael Cook, George M.C. Fisher, Louis A. Simpson and
Michael I. Sovern - were designated by AT&T from the then-existing AT&T Board
and two of whom - Kenneth J. Bacon and Dr. Judith Rodin - were independent
persons jointly designated by Comcast Holdings and AT&T. At all times, our
Board will consist of a majority of independent persons. The individuals
designated by each of Comcast Holdings and AT&T were mutually agreed upon by
Comcast Holdings and AT&T. All of the initial director designees will hold
office until the 2004 annual meeting of our shareholders, which will be held in
April 2004. After this initial term, our entire Board will be elected annually.
Brian L. Roberts, through his control of BRCC Holdings LLC, holds a 33 1/3%
nondilutable voting interest in our stock.
Management. Under the merger agreement, C. Michael Armstrong, AT&T's
Chairman of the Board, will be our Chairman of the Board until the 2005 annual
meeting of our shareholders and will serve as non-executive Chairman of the
Board from April 1, 2004 until the 2005 annual meeting of our shareholders.
Thereafter, Brian L. Roberts will be the Chairman of the Board. Removal of the
Chairman of the Board will require the vote of at least 75% of the entire Board
until the earlier to occur of (1) the date on which neither C. Michael
Armstrong nor Brian L. Roberts is Chairman of the Board and (2) the sixth
anniversary of the 2004 annual meeting of our shareholders.
Upon completion of the AT&T Broadband acquisition, Brian L. Roberts,
Comcast Holdings' President, became our CEO. Brian L. Roberts will also be
President for as long as he is the CEO. Removal of the CEO requires the vote of
at least 75% of our entire Board until the earlier of the date when Brian L.
Roberts is not the CEO and the sixth anniversary of the 2004 annual meeting of
shareholders.
We will also have an Office of the Chairman comprised of the Chairman of
the Board and the CEO until the earlier to occur of (1) the 2005 annual meeting
of our shareholders and (2) the date on which C. Michael Armstrong ceases to be
the Chairman of the Board. The Office of the Chairman will be our principal
executive deliberative body with responsibility for corporate strategy, policy
and direction, governmental affairs and other significant matters.
Our charter provisions that implement the foregoing governance
arrangements may not be amended or changed except with the approval of at least
75% of our entire Board until the earlier to occur of (1) the date on which
Brian L. Roberts is no longer serving as Chairman of the Board or CEO and (2)
the sixth anniversary of the 2004 annual meeting of our shareholders.
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BRCC Holdings LLC hold shares of our Class B common stock constituting 33
1/3% of the combined voting power of our common stock. Brian L. Roberts has
sole voting power over membership interests representing a majority of the
voting power of all BRCC Holdings LLC equity.
Employee Benefits Matters; Indemnification and Insurance
In the merger agreement, we agreed to honor the terms of all Comcast Cable
Communications Holdings' employee benefit plans and arrangements and to pay and
provide the benefits required thereunder, recognizing that the AT&T Broadband
acquisition is a change in control under the plans, and to provide, until
December 31, 2003, to employees of Comcast Cable Communications Holdings and
its subsidiaries (other than those subject to collective bargaining obligations
or agreements) aggregate employee benefits and compensation that are
substantially comparable in the aggregate to those provided by Comcast Cable
Communications Holdings and its subsidiaries as of the completion of the AT&T
Broadband acquisition, other than benefits provided under severance or
separation plans of Comcast Cable Communications Holdings or its subsidiaries.
Until December 31, 2003, we have agreed to continue certain severance plans of
Comcast Cable Communications Holdings and its subsidiaries without adverse
change, including those that provide certain enhanced benefits to AT&T
executive officers who became employees of Comcast Cable Communications
Holdings prior to consummation of the AT&T Broadband acquisition. Based on
currently available information, if all such executive officers were terminated
without cause immediately following completion of the AT&T Broadband
acquisition, they would receive severance payments equal in the aggregate to
approximately $44.7 million.
Obligations Relating to Comcast Cable Communications Holdings' TOPrS
Securities
We have agreed, on the earliest date on which the Comcast Cable
Communications Holdings debt known by the acronym TOPrS as to which AT&T has
guaranteed certain obligations may be redeemed, to either redeem such series of
TOPrS, cause AT&T to be released from any such guarantee or post a letter of
credit in respect of such debt. As of the date of this filing, approximately
$500 million of outstanding TOPrS remains subject to this obligation.
The Separation and Distribution Agreement
The Separation
Assignment. AT&T assigned and transferred to Comcast Cable Communications
Holdings all of AT&T's and its subsidiaries' right, title and interest in all
of the assets of AT&T's broadband business which are not already held by
Comcast Cable Communications Holdings or a Comcast Cable Communications
Holdings subsidiary. The assets comprising AT&T's broadband business are
generally determined in the following manner:
o assets reflected in the AT&T Broadband Group balance sheet dated as
of December 31, 2000 are assets of AT&T's broadband business, except
as described below;
o assets reflected in the AT&T Communications balance sheet dated as of
December 31, 2000 are assets of AT&T's communications business,
except as described below;
o assets acquired after December 31, 2000 by AT&T or any of its
subsidiaries utilizing assets of AT&T's broadband business are assets
of AT&T's broadband business, except as described below;
o any assets acquired after December 31, 2000 by AT&T or any of its
subsidiaries utilizing assets of AT&T's communications business are
assets of AT&T's communications business, except as described below;
o certain assets are specifically assigned to AT&T's broadband business
regardless of whether or not they are reflected in the AT&T Broadband
Group balance sheet dated as of December 31, 2000;
o certain assets are specifically assigned to AT&T's communications
business regardless of whether or not they are reflected in the AT&T
Communications balance sheet dated as of December 31, 2000; and
30
o assets that are not reflected in the AT&T Broadband Group balance
sheet or the AT&T Communications balance sheet, in each case dated as
of December 31, 2000, or specifically assigned to AT&T's broadband
business or AT&T's communications business are assigned to the
business to which they primarily relate.
Assumption. At the same time as the assignment, Comcast Cable
Communications Holdings assumed all of the liabilities of AT&T's broadband
business that were not already liabilities of Comcast Cable Communications
Holdings or a Comcast Cable Communications Holdings subsidiary. The liabilities
of AT&T's broadband business were generally determined in the following manner:
o liabilities reflected in the AT&T Broadband Group balance sheet dated
as of December 31, 2000 are liabilities of AT&T's broadband business,
except as described below;
o liabilities reflected in the AT&T Communications balance sheet dated
as of December 31, 2000 are liabilities of AT&T's communications
business, except as described below;
o liabilities incurred after December 31, 2000 by entities transferred
as part of AT&T's broadband business are liabilities of AT&T's
broadband business, except as described below;
o liabilities incurred after December 31, 2000 by entities not
transferred as part of AT&T's broadband business are liabilities of
AT&T's communications business, except as described below;
o certain liabilities are specifically assigned to AT&T's broadband
business regardless of whether or not they are reflected in the AT&T
Broadband Group balance sheet dated as of December 31, 2000;
o certain liabilities are specifically assigned to AT&T's
communications business regardless of whether or not they are
reflected in the AT&T Communications balance sheet dated as of
December 31, 2000;
o certain liabilities such as liabilities arising out of the AT&T
Broadband acquisition or involving At Home or AT&T Wireless (to the
extent AT&T is not indemnified by AT&T Wireless for such liabilities)
are divided evenly between AT&T's broadband business and AT&T's
communications business regardless of whether or not they are
reflected in the AT&T Broadband Group balance sheet or the AT&T
Communications balance sheet, in each case dated as of December 31,
2000; and
o liabilities that are not reflected in the AT&T Broadband Group
balance sheet or the AT&T Communications balance sheet, in each case
dated as of December 31, 2000, or specifically assigned to AT&T's
broadband business or AT&T's communications business are assigned to
the business to which they primarily relate.
The separation occurred on November 18, 2002, immediately prior to the
mergers which occurred as part of the AT&T Broadband acquisition.
Repayment of Intracompany Debt
In connection with the closing of the AT&T Broadband acquisition, Comcast
Cable Communications Holdings repaid all intracompany debt owed by AT&T's
broadband business to AT&T's communications business. Comcast Cable
Communications Holdings effected this repayment by making a cash payment to
AT&T in an amount equal to $5.85 billion and by issuing approximately $3.50
billion in debt to retire existing AT&T debt. The cash payment referred to in
the preceding sentence reflected certain adjustments and was made with the
proceeds of (i) a borrowing by Comcast Cable Communications Holdings of $4
billion under a bridge credit agreement dated April 26, 2002 among Comcast
Cable Communications Holdings, us, the lenders party thereto and JPMorgan Chase
Bank, as administrative agent, Citibank N.A., as syndication agent, and Bank of
America, N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan
Stanley Senior Funding, Inc., as co-documentation agents, and (ii) a borrowing
by Comcast Cable Communications Holdings of $2.5 billion under a credit
agreement dated April 26, 2002 among Comcast Cable Communications Holdings, us,
the lenders party thereto and JPMorgan Chase Bank, as administrative agent,
swingline lender and issuing lender, Citibank N.A., as syndication agent, and
Bank of America, N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated and
Morgan Stanley Senior Funding, Inc., as co-documentation agents, together
referred to as the New Credit Facility in this prospectus. The retirement of
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existing AT&T debt by Comcast Cable Communications Holdings referred to above
resulted from a recently completed debt exchange offer pursuant to which
Comcast Cable Communications Holdings issued debt guaranteed by us and the
cable guarantors in an aggregate principal amount of approximately $3.50
billion consisting of approximately $2.43 billion of 8.375% Notes Due 2013 and
approximately $1.07 billion of 9.455% Notes Due 2022.
Post-Spin-Off Transactions
Our ability and the ability of Comcast Cable Communications Holdings to
engage in specified acquisitions, redeem stock, issue equity securities or take
any other action or actions that in the aggregate would be reasonably likely to
have the effect of causing or permitting one or more persons to acquire
directly or indirectly stock representing a 50% or greater interest, within the
meaning of Section 355(e) of the Code, in Comcast Cable Communications Holdings
or otherwise jeopardize the non-recognition of taxable gain or loss for U.S.
federal income tax purposes to AT&T, AT&T affiliates and AT&T shareholders in
connection with the separation and the Comcast Cable Communications Holdings
spin-off may be limited until December 18, 2004.
Disposition of Time Warner Entertainment Interest
Sharing of Proceeds. The separation and distribution agreement provides
that upon any disposition of all or any portion of its interest in TWE after
the signing of the merger agreement, Comcast Cable Communications Holdings will
pay AT&T 50% of the proceeds received from such disposition in excess of the
threshold amount described in the next sentence reduced by taxes on 50% of such
excess. The threshold amount is equal to the balance, plus 7% simple interest
per annum on the balance, of $10.2 billion reduced by the aggregate proceeds of
any previous dispositions of any portion of the TWE interest. If the TWE
interest has not been fully disposed of within 54 months of the completion of
the AT&T Broadband acquisition, the remaining TWE interest will be appraised at
fair market value. To the extent that the amount of such appraisal exceeds the
threshold amount specified above, Comcast Cable Communications Holdings has
agreed to pay AT&T 50% of such excess, on a tax-adjusted basis.
Restructuring Agreement. On August 21, 2002, AT&T and Comcast Holdings
announced that they had entered into an agreement with AOL Time Warner
providing for the restructuring of TWE. The restructuring agreement was
intended to provide for a more orderly and timely disposition of AT&T Broadband
Group's entire stake in TWE than would likely be available under the
registration rights provisions of the TWE partnership agreement, which AT&T
Broadband Group had been pursuing. Upon consummation of the AT&T Broadband
acquisition, we assumed all of AT&T's interest in TWE and in the restructuring
agreement.
Under the restructuring agreement, which is expected to close in the first
quarter of 2003, for its 27.64% interest in TWE, Comcast Cable Communications
Holdings will receive $1.5 billion in common stock of AOL Time Warner Inc.
(valued at the time of the closing and subject to certain limitations) and an
effective 21% equity interest in all of AOL Time Warner's cable properties,
including those already in TWE, and Comcast Cable Communications Holdings will
also receive $2.1 billion in cash. As part of the restructuring, TWE will
distribute to AOL Time Warner all of TWE's major content assets, which include
Home Box Office (HBO), Warner Bros., and stakes in The WB Network, Comedy
Central and Court TV. Time Warner Cable, which will own substantially all of
AOL Time Warner's cable interests, is expected to conduct an initial public
offering of common stock following the restructuring. Under the restructuring
agreement, Comcast Cable Communications Holdings has registration rights
enabling it to dispose of its shares in Time Warner Cable and in AOL Time
Warner. In connection with the transactions, Comcast Holdings and Comcast Cable
Communications Holdings will also enter into a three-year non-exclusive
agreement with AOL Time Warner under which AOL High-Speed Broadband service
would be made available on certain of our cable systems which pass
approximately 10 million homes.
On November 13, 2002, the FCC gave conditional approval to the transfer of
certain FCC licenses required to complete the AT&T Broadband acquisition. The
Memorandum Opinion and Order issued by the FCC ordered AT&T and Comcast
Holdings to place Comcast Cable Communications Holdings' interest in TWE into
an irrevocable trust prior to completion of the transaction and to fully divest
the TWE interest within five-and-a-half years after completion of the
transaction. During the divestiture period, the divestiture order prohibits us
from any involvement in the video programming activities of TWE. Copies of the
trust agreements pursuant to which Comcast Cable Communications Holdings' TWE
interest will be placed into irrevocable trust are attached as exhibits to our
Current Report on Form 8-K filed on November 18, 2002 incorporated by reference
herein.
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AT&T acquired its stake in TWE as part of its June 2000 acquisition of
Comcast MO Group. In February of 2001, AT&T requested that TWE convert from a
limited partnership into a corporation and create equity securities for
registration with the Securities and Exchange Commission. On July 30, 2002,
AT&T and TWE agreed to suspend the registration process to explore alternative
approaches that led to the transactions contemplated by the restructuring
agreement. In connection with the Comcast Cable Communications Holdings
spin-off, all of AT&T Broadband Group's interests and rights with respect to
TWE were transferred to Comcast Cable Communications Holdings subsidiaries, and
subsequently placed in trust for orderly disposition. The TWE restructuring is
subject to receipt of certain regulatory approvals and other closing
conditions, certain of which are outside our control. There can be no assurance
that the transactions contemplated by the TWE restructuring agreement will be
consummated. If the restructuring agreement is terminated without the
restructuring being consummated, the parties will return to the registration
rights process under the TWE partnership agreement.
Mutual Release; Indemnification
Mutual Release of Pre-Closing Claims. AT&T and Comcast Cable
Communications Holdings have each released the other from any and all claims
that it may have against the other party arising from any acts or events
occurring or failing to occur prior to the completion of the Comcast Cable
Communications Holdings spin-off, subject to certain exceptions specified in
the separation and distribution agreement.
Indemnification by AT&T. AT&T has indemnified Comcast Cable Communications
Holdings from any and all liabilities relating to, arising out of or resulting
from any of the following:
o the failure of AT&T or any of its subsidiaries or any other person to
pay any liabilities, or perform under any contracts, of AT&T's
communications business;
o the assets or contracts of AT&T's communications business; and
o any breach of the separation and distribution agreement or any of the
ancillary agreements by AT&T.
Indemnification by Comcast Cable Communications Holdings. Comcast Cable
Communications Holdings has indemnified AT&T from any and all liabilities
relating to, arising out of or resulting from any of the following:
o the failure of Comcast Cable Communications Holdings or any of its
subsidiaries or any other person to pay any liabilities, or perform
under any contracts, of AT&T's broadband business;
o the assets or contracts of AT&T's broadband business; and
o any breach of the separation and distribution agreement or any of the
ancillary agreements by Comcast Cable Communications Holdings;
Tax Indemnification. Subject to the exceptions described below, Comcast
Cable Communications Holdings has indemnified AT&T against 50% of the taxes and
related costs assessed against AT&T resulting from the disqualification of the
separation and the Comcast Cable Communications Holdings spin-off as tax-free
transactions under Section 355 of the Code.
If such disqualification results from a transaction involving the stock or
assets of Comcast Cable Communications Holdings occurring after the Comcast
Cable Communications Holdings spin-off, from Comcast Cable Communications
Holdings' failure to remain actively engaged in a trade or business or from the
failure of any representation made with respect to Comcast Cable Communications
Holdings in connection with certain tax opinions and Internal Revenue Service
rulings, then Comcast Cable Communications Holdings will be required to
indemnify AT&T against all such taxes and related costs.
If such disqualification results from a transaction involving the stock or
assets of AT&T occurring after the Comcast Cable Communications Holdings
spin-off, from AT&T's failure to remain actively engaged in a trade or business
or from the failure of any representation made with respect to AT&T in
connection with certain tax opinions and Internal Revenue Service rulings, then
Comcast Cable Communications Holdings is not required to indemnify AT&T against
any such taxes or related costs.
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Comcast Cable Communications Holdings has also indemnified AT&T against
50% of the taxes and related costs resulting from the Liberty Media or AT&T
Wireless spin-offs failing to be tax-free, unless either spin-off becomes
taxable as a result of an action taken by AT&T or Comcast Cable Communications
Holdings, in which case the acting party bears full responsibility for any
resulting AT&T liabilities. Comcast Cable Communications Holdings' obligation
described in the preceding sentence is reduced by Comcast Cable Communications
Holdings' share of any indemnification that AT&T receives from Liberty Media or
AT&T Wireless as a result of the relevant spin-off failing to qualify as
tax-free.
Other Indemnification. Subject to the next sentence, AT&T and Comcast
Cable Communications Holdings have indemnified each other for 50% of any
liability resulting from any untrue statement or omission of a material fact in
any registration statement relating to the Comcast Cable Communications
Holdings spin-off or in any other filing made by AT&T or Comcast Cable
Communications Holdings with the Securities and Exchange Commission in
connection with the separation, the Comcast Cable Communications Holdings
spin-off, the Comcast Cable Communications Holdings merger or any related
agreements. AT&T also indemnified us and Comcast Cable Communications Holdings
for any liability resulting from any untrue statement or omission of a material
fact in any registration statement relating to the Consumer Services charter
amendment proposal, any other proposal related to the creation of AT&T Consumer
Services Group tracking stock, the reverse stock split proposal or any AT&T
2002 annual meeting proposal related to our charter other than the AT&T
transaction proposal or the proposal.
The Tax Sharing Agreement
In General. Comcast Cable Communications Holdings' tax liability, as
described below, for the period beginning January 1, 2002 through November 18,
2002 will be included in the consolidated federal income tax return of AT&T for
2002 and for the period beginning November 19, 2002 through December 31, 2002
will be included in the consolidated federal income tax return of Comcast. The
tax sharing agreement provides for tax sharing payments between Comcast Cable
Communications Holdings and AT&T for periods prior to the Comcast Cable
Communications Holdings spin-off, based on the taxes or tax benefits of
hypothetical affiliated groups consisting of the businesses, assets and
liabilities that make up Comcast Cable Communications Holdings, on the one
hand, and all other businesses, assets and liabilities of AT&T, on the other
hand. Each group is generally responsible for the taxes attributable to its
lines of business and entities comprising its group.
AT&T and Comcast Cable Communications Holdings have agreed that the
consolidated tax liability (before credits) of the hypothetical group will be
allocated to each group based on such group's contribution to consolidated
taxable income. This allocation will take into account losses, deductions and
other tax attributes that are utilized by the hypothetical group even if these
attributes could not be utilized on a stand-alone basis. Tax sharing payments
in respect of the consolidated tax liability of the hypothetical group, after
allocation of consolidated tax credits, will be made between AT&T and Comcast
Cable Communications Holdings consistent with the allocations under the tax
sharing agreement. As between AT&T and Comcast Cable Communications Holdings,
certain tax items are specially allocated to the AT&T group and Comcast Cable
Communications Holdings group under the tax sharing agreement.
Comcast Cable Communications Holdings Spin-off. AT&T and Comcast Cable
Communications Holdings have agreed that taxes related to intercompany
transactions that are triggered by the Comcast Cable Communications Holdings
spin-off will be generally allocated to Comcast Cable Communications Holdings.
Non-Income Tax Liabilities. AT&T and Comcast Cable Communications Holdings
have agreed that joint non-income tax liabilities will generally be allocated
between AT&T and Comcast Cable Communications Holdings based on the amount of
such taxes attributable to each group's line of business. If the line of
business with respect to which the liability is appropriately associated cannot
be readily determined, the tax liability will be allocated to the AT&T group.
Audit Adjustments. AT&T and Comcast Cable Communications Holdings have
agreed that taxes resulting from audit adjustments will generally be allocated
between the two groups based on line of business. In general, AT&T controls
audits and administrative matters related to pre-spin-off periods.
Post-Spin-off Tax Attributes. Generally, Comcast Cable Communications
Holdings may not carry back a loss, credit or other tax attribute from a
post-spin-off period to a pre-spin-off period, unless Comcast Cable
34
Communications Holdings obtains AT&T's consent (which, in the case of
significant net operating or capital loss carrybacks, may not be unreasonably
withheld) and then only to the extent permitted by applicable law.
The Ancillary Agreements
In addition to the other agreements described in this section, AT&T and
Comcast Cable Communications Holdings entered into various other commercial
agreements in connection with the AT&T Broadband acquisition. A brief summary of
these agreements follows:
Network Service Agreements. AT&T and Comcast Cable Communications Holdings
entered into principal network service agreements as follows.
o Master Carrier Agreement. This agreement reflects the rates, terms
and conditions on which AT&T Business Services Group will provide
voice, data and Internet services to Comcast Cable Communications
Holdings, including both wholesale services (those used as a
component in Comcast Cable Communications Holdings' services to its
customers) and "administrative" services (for internal Comcast Cable
Communications Holdings usage). Pricing is market based, with
provisions defining an ongoing process to ensure that the prices
remain competitive.
o First Amended and Restated Local Network Connectivity Services
Agreement. This agreement reflects the rates, terms and conditions on
which AT&T Business Services Group will provide certain local network
connectivity services to Comcast Cable Communications Holdings for
use in providing local telephone services to Comcast Cable
Communications Holdings' subscribers. This agreement consists of two
parts:
o a capital lease from AT&T Business Services Group to Comcast
Cable Communications Holdings of certain network switching and
transport assets to be used exclusively by Comcast Cable
Communications Holdings for a term of up to ten years,
commencing January 1, 2002 for initial assets leased under the
agreement; and
o an operating agreement for the provision of local network
connectivity, management and operational services in support of
Comcast Cable Communications Holdings' local cable telephone
services, with a minimum term of five years commencing January
1, 2002.
o Master Facilities Agreement. This agreement permits AT&T or any of
its subsidiaries to use existing fiber facilities owned or leased by
Comcast Cable Communications Holdings or its controlled affiliates,
together with related services. In addition, Comcast Cable
Communications Holdings will construct and lease to AT&T new fiber
facilities in the areas served by Comcast Cable Communications
Holdings' cable systems for use in providing telecommunications
services. The term of the build-out period will expire on January 8,
2012. Subject to certain termination rights specified in this
agreement, the term of AT&T's right to use facilities leased under
this agreement will expire on January 8, 2028, renewable at AT&T's
option for successive 20-year terms in perpetuity.
o Interconnection and Intercarrier Compensation Term Sheet. This
agreement, which has a five-year initial term commencing January 1,
2002, specifies the terms of interconnection of the parties'
networks, and compensation for:
o the origination or termination of interexchange traffic for the
other party; and
o the exchange of local traffic between the parties' local
customers.
o High Speed Internet Services Binding Term Sheet. This agreement
reflects the rates, terms and conditions on which AT&T will provide
specified processes, procedures and services to support Comcast Cable
Communications Holdings in its provision of broadband Internet
services to Comcast Cable Communications Holdings subscribers. This
agreement has a four-year initial term commencing December 4, 2001.
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o Intellectual Property Agreement. This agreement specifies the
ownership and license rights granted by each party to the other in
specified patents, software, copyrights and trade secrets. Among
other rights granted, the effect of this agreement is to allow
Comcast Cable Communications Holdings and AT&T to continue to have
the same rights to use the intellectual property that they had at the
time of the separation and Comcast Cable Communications Holdings
spin-off.
o Corporate Name Agreement. AT&T and we entered into a corporate name
agreement immediately prior to the completion of the AT&T Broadband
acquisition pursuant to which AT&T will grant to us the right to use
the term "AT&T" as part of our full corporate name, but prohibit any
use of "AT&T" as a trade name, trademark, or service mark, or in a
domain name other than specified domain names permitted for certain
purposes. Such grant of rights will be perpetual unless terminated as
a result of the Roberts family's voting power falling below 33% or
pursuant to any other terms of the agreement. On November 18, 2002,
we changed our name from AT&T Comcast Corporation to Comcast
Corporation.
The QUIPS Exchange
Prior to the AT&T Broadband acquisition, Microsoft (through a wholly owned
subsidiary) held $5 billion in aggregate liquidation preference amount of 5%
Convertible Quarterly Income Preferred Securities, referred to in this
prospectus by their acronym "QUIPS," of AT&T Finance Trust I, a Delaware
business trust. The QUIPS were convertible into $5 billion aggregate face
amount of 5% Junior Convertible Subordinated Debentures due 2029 of AT&T, which
were in turn convertible into AT&T common stock. In connection with the AT&T
Broadband acquisition, Comcast Holdings and Microsoft entered into an exchange
agreement dated December 7, 2001 relating to the exchange of the QUIPS for a
combination of our voting and non-voting shares to be issued in the merger, and
on December 19, 2001 we became a party to the exchange agreement by executing
the instrument of admission. On March 11, 2002, the parties amended the
exchange agreement and instrument of admission. The following summary of the
exchange agreement and the instrument of admission, in each case as amended, is
qualified in its entirety by reference to the complete texts of the amended
exchange agreement and the instrument of admission, which are incorporated by
reference and attached as exhibits to the registration statement in which this
prospectus is included.
The Exchange. In the exchange agreement and instrument of admission, we
agreed to exchange the QUIPS for approximately 100.6 million shares of our
Class A Common Stock, and approximately 14.4 million shares of our non-voting
Class A Special Common Stock in the AT&T Broadband acquisition. If Microsoft
transfers shares of our Class A Common Stock or its voting interest in us is
diluted below 4.95%, subject to certain conditions, Microsoft will have the
right to cause us to exchange the shares of our non-voting Class A Special
Common Stock received in the AT&T Broadband acquisition for shares of our voting
Class A Common Stock provided that its voting interest in us does not exceed
4.95% after the exchange. Prior to six months after completion of the Microsoft
transaction, subject to certain exceptions, Microsoft has agreed that neither
Microsoft nor any of its wholly-owned subsidiaries will sell, or enter into any
agreement, arrangement or negotiations relating to the sale of, any of the
shares of our Class A Special Common Stock that it received in connection with
the Microsoft transaction. Comcast Holdings agreed to indemnify Microsoft
against any claim by Comcast Holdings, AT&T or any shareholder of Comcast
Holdings, AT&T or us for any loss arising as a result of the Comcast Cable
Communications Holdings spin-off or the mergers failing to be tax-free, except
to the extent such a failure results directly from a breach by Microsoft of the
lock-up agreement described above or of the failure of a related representation
and warranty made by Microsoft in the exchange agreement.
Internet Access. Until the fifth anniversary of the Microsoft transaction,
we have agreed that if we offer a high-speed Internet access agreement to any
third party, then we will be obligated to offer an agreement on
nondiscriminatory terms with respect to the same cable systems to Microsoft for
its ISP, The Microsoft Network. In connection with Comcast Holdings' and AT&T's
agreement with AOL Time Warner providing for the restructuring of TWE, Comcast
Holdings and Comcast Cable Communications will enter into a three-year
non-exclusive access agreement with AOL Time Warner. Because Comcast Holdings
has also entered into an access agreement with United Online and Comcast Cable
Communications Holdings has also entered into an access agreement with each of
Earthlink, Internet Central, Connected Data Systems, Galaxy Internet Services
and Connect Plus International, we will be required after the consummation of
the AT&T Broadband acquisition, with respect to each such agreement with another
ISP, including the agreement to be entered into with AOL Time Warner, to offer
an access agreement
36
to Microsoft on terms no less favorable than those provided to the other ISP
with respect to the specific cable systems covered under the agreement with the
other ISP.
Interactive Technology Agreement. In connection with the exchange
agreement, Microsoft and Comcast Cable entered into a letter of intent and are
currently negotiating a definitive agreement pursuant to which the parties will
conduct a trial during 2003 of an interactive television platform, including
set-top box middleware. If the trial results meet agreed technical standards,
the platform meets defined competitive requirements and a launch would meet
Comcast Cable's reasonable business objectives, Comcast Cable has agreed that
it will commercially launch the Microsoft platform to at least 25% of its newly
installed middleware customer base.
DESCRIPTION OF THE DEBENTURES
The Debentures were issued under an indenture dated as of June 15, 1999
executed by Comcast Holdings and the trustee. The Debentures are subject to the
terms of the indenture, as well as the terms made part of the indenture by
reference to the Trust Indenture Act of 1939, as amended. Although we have
summarized selected provisions of the Debentures and the indenture below, this
summary is not complete and is qualified in its entirety by reference to the
Debentures, the indenture, and the terms made part of the indenture by
reference to the Trust Indenture Act. A copy of the forms of the Debentures and
indenture have been filed as exhibits to the registration statement of which
this prospectus is a part.
The indenture does not limit the aggregate principal amount of indebtedness
which may be issued under it. The indenture also provides that debt may be
issued from time to time in one or more series. The Debentures constitute a
separate series under the indenture.
General
The Debentures are general unsecured obligations of Comcast Holdings. The
aggregate principal amount at maturity outstanding of Debentures as of January
27, 2003 was $107,658,000. The Debentures will mature on December 19, 2020. The
Debentures rank on a parity with all of Comcast Holdings' other unsecured and
unsubordinated indebtedness.
The Debentures were offered and sold at a discount from their value at
maturity. Comcast Holdings initially issued the Debentures at a price to
investors of $779.41 per Debenture. Over time, the amount payable on each
Debenture will increase in value until it reaches its maturity value of $1,000
on December 19, 2020. The Debentures were issued only in denominations of
$1,000 payable at maturity and multiples of $1,000 payable at maturity.
You have the option to convert your Debentures, so long as specified
conditions are met, into shares of Comcast's Class A Special Common Stock at a
conversion rate of 14.2566 shares of Class A Special Common Stock per
Debenture. All references to Class A Special Common Stock in the following
description refer to shares of Comcast's Class A Special Common Stock.
As of January 27, 2003, the conversion rate of 14.2566 was equivalent to
an accreted conversion price of $56.12 per share of our Class A Special Common
Stock. The conversion rate is subject to adjustment if some events occur.
Holders may surrender Debentures for conversion at any time prior to maturity,
unless previously redeemed, but only if the closing sale price of our Class A
Special Common Stock is greater than 110% of the accreted conversion price for
at least 20 trading days of the 30 trading days prior to conversion. Upon
conversion, you will receive only shares of our Class A Special Common Stock.
You will not receive any cash payment for the accrued original issue discount
to the conversion date.
Interest
Comcast Holdings will not pay cash interest on the Debentures unless
Comcast Holdings elects to do so following a tax event as described below. You
should be aware that original issue discount accruing for the period you hold
the Debentures must be included in your gross income for federal income tax
purposes. Original issue discount is generally the difference between the
adjusted issue price and the $1,000 principal amount of the
37
Debenture at maturity.
Redemption Rights
On or after December 19, 2005, Comcast Holdings can redeem for cash all or
part of the Debentures at any time, upon not less than 15 nor more than 60 days
notice by mail to holders of Debentures, for a price equal to the issue price
per Debenture plus accrued original issue discount at a rate of 1.25% per annum
compounded semi-annually to the date of redemption, on the basis of a 360-day
year consisting of twelve 30-day months. Comcast Holdings can also elect to pay
cash interest on the Debentures upon the occurrence of some tax events
described below instead of accruing original issue discount. See "--Tax Event."
The table below shows redemption prices of Debentures at December 19,
2005, at each following December 19 prior to maturity and at maturity on
December 19, 2020. The prices reflect the accrued original issue discount
calculated through each date. The redemption price of a Debenture redeemed
between these dates would include an additional amount reflecting the
additional original issue discount accrued since the immediately preceding date
in the table to the actual redemption date.
Accrued Original
Debenture Issue Discount Redemption
Redemption Date Issue Price Price Price
- ------------------------------------ ----------- ---------------- ---------
December 19, 2005................... $779.41 $ 50.11 $829.52
December 19, 2006................... 779.41 60.51 839.92
December 19, 2007................... 779.41 71.04 850.45
December 19, 2008................... 779.41 81.70 861.11
December 19, 2009................... 779.41 92.50 871.91
December 19, 2010................... 779.41 103.43 882.84
December 19, 2011................... 779.41 114.50 893.91
December 19, 2012................... 779.41 125.71 905.12
December 19, 2013................... 779.41 137.06 916.47
December 19, 2014................... 779.41 148.55 927.96
December 19, 2015................... 779.41 160.19 939.60
December 19, 2016................... 779.41 171.97 951.38
December 19, 2017................... 779.41 183.90 963.31
December 19, 2018................... 779.41 195.98 975.39
December 19, 2019................... 779.41 208.21 987.62
December 19, 2020................... 779.41 220.59 1,000.00
From and after the date a tax event occurs and Comcast Holdings elects to
pay cash interest at 1.25% per year on the Debentures instead of accruing
original issue discount, the principal amount for redemption will be restated,
and will be calculated by adding the issue price and the original issue
discount which had accrued up until the date on which Comcast Holdings
exercises the option to commence paying cash interest.
If Comcast Holdings decide to redeem fewer than all of the outstanding
Debentures, the trustee will select the Debentures to be redeemed by lot, on a
pro rata basis or by another method the trustee considers fair and appropriate.
If the trustee selects a portion of your Debentures for partial redemption and
you convert a portion of the same Debentures, the converted portion will be
deemed to be from the portion selected for redemption. Each Debenture will be
redeemed in whole.
Conversion Rights
You have the right to convert each Debenture into 14.2566 shares of Class
A Special Common Stock so long as the conditions described below are met. You
may convert a Debenture into shares of Class A Special Common Stock at any time
until the close of business on the last business day prior to December 19,
2020. If a Debenture has been called for redemption, you will be entitled to
convert the Debenture until the close of business on the business day
immediately preceding the date of redemption. You may convert fewer than all of
your Debentures so long as the Debentures converted are a multiple of $1,000
principal amount.
38
Holders may surrender Debentures for conversion into Class A Special
Common Stock only if the closing sale price of the Class A Special Common Stock
is greater than 110% of the accreted conversion price per share for at least 20
trading days of the 30 trading days prior to conversion. The accreted
conversion price as of any day will equal the sum of the issue price of a
Debenture plus the accrued original issue discount for the Debenture, with that
sum divided by the number of Class A Special Common shares issuable upon
conversion of a Debenture on that day. Even if the market price contingency
described above has not occurred, the Debentures may be surrendered for
conversion:
o to the extent Comcast Holdings has called the Debentures for
redemption. Debentures called for redemption may be surrendered for
conversion from the date of notice of the redemption until the close
of business on the redemption date.
o if (a) Comcast Holdings elects to make a distribution to all
stockholders that would result in an adjustment to the conversion
rate under the third or fourth bullet of the second paragraph below
and that, in the case of the fourth bullet, has a per share value
equal to more than 15% of the closing price of the Class A Special
Common Stock on the day preceding the declaration date for the
distribution and (b) Comcast Holdings does not provide that holders
of the Debentures may participate in the distribution. Debentures may
be surrendered for conversion at any time from and after the
declaration date for the distribution until the business day
immediately prior to its ex-dividend date or until Comcast Holdings
announces that the distribution will not take place.
o if Comcast Holdings is party to a consolidation, merger or binding
share exchange pursuant to which the Class A Special Common Stock
will be converted into cash, securities or other property. Debentures
may be surrendered for conversion at any time from and after the date
which is 15 days prior to the anticipated effective date of the
transaction until 15 days after the actual date of the transaction
and, at the effective time of the transaction, the right to convert
the Debentures into Class A Special Common Stock will be changed into
a right to convert them into the kind and amount of cash, securities
or other property which the holder would have received if the holder
had converted the Debentures immediately prior to the transaction. If
the transaction also constitutes a change in control, the holder will
be able to require Comcast Holdings to purchase all or a portion of
the holder's Debentures as described under "--Change in Control."
You will not receive any cash payment representing accrued original issue
discount upon conversion of a Debenture. Instead, upon conversion Comcast
Holdings will deliver to you a fixed number of shares of Class A Special Common
Stock and any cash payment to account for fractional shares. The cash payment
for fractional shares will be based on the closing price of Class A Special
Common Stock on the trading day immediately prior to the conversion date.
Delivery of shares of our Class A Special Common Stock will be deemed to
satisfy Comcast Holdings' obligation to pay the principal amount of the
Debenture, including accrued original issue discount. Accrued original issue
discount will be deemed paid in full rather than canceled, extinguished or
forfeited. Comcast Holdings will not adjust the conversion ratio to account for
the accrued original issue discount.
The conversion rate will be subject to adjustment upon the following
events:
o issuance of shares of Class A Special Common Stock as a dividend or
distribution on the Class A Special Common Stock;
o subdivision or combination of the outstanding Class A Special Common
Stock;
o issuance to all stockholders of rights or warrants that allow the
holders to purchase shares of Class A Special Common Stock at less
than the current market price; provided that no adjustment will be
made if holders of the Debentures may participate in the transactions
on a basis and with notice that the Comcast Holdings board of
directors determines to be fair and appropriate or in some other
cases;
o distribution to all stockholders of debt or other assets but
excluding distributions of rights and warrants
39
described above and all-cash distributions; provided that no
adjustment will be made if holders of the Debentures may participate
in the transactions;
o the distribution to all or substantially all stockholders of all-cash
distributions in an aggregate amount that, together with (1) any cash
and the fair market value of any other consideration payable in
respect of any tender offer by Comcast Holdings or any of its
subsidiaries for shares of Class A Special Common Stock consummated
within the preceding 12 months not triggering a conversion price
adjustment and (2) all other all-cash distributions to all or
substantially all stockholders made within the preceding 12 months
not triggering a conversion price adjustment, exceeds an amount equal
to 12.5% of the market capitalization of the common stock on the
business day immediately preceding the day on which the distribution
is declared; and
o the purchase of shares of Class A Special Common Stock pursuant to a
tender offer made by Comcast Holdings or any of its subsidiaries to
the extent that the same involves aggregate consideration that,
together with (1) any cash and the fair market value of any other
consideration payable in respect of any tender offer by Comcast
Holdings or any of its subsidiaries for shares of Class A Special
Common Stock consummated within the preceding 12 months not
triggering a conversion price adjustment and (2) all-cash
distributions to all or substantially all stockholders made within
the preceding 12 months not triggering a conversion price adjustment,
exceeds an amount equal to 12.5% of the market capitalization of the
common stock on the expiration date of the tender offer.
If Comcast Holdings were to adopt a stockholders rights plan under which
it issued rights providing that each share of Class A Special Common Stock
issued upon conversion of the Debentures at any time prior to the distribution
of separate certificates representing the rights will be entitled to receive
the rights, there shall not be any adjustment to the conversion rate as a
result of:
o the issuance of the rights;
o the distribution of separate certificates representing the rights;
o the exercise or redemption of the rights in accordance with any
rights agreement; or
o the termination or invalidation of the rights.
Comcast Holdings may increase the conversion rate as permitted by law for
at least 20 days, so long as the increase is irrevocable during the period.
Comcast Holdings is not required to adjust the conversion rate until
adjustments greater than 1% have occurred.
If you submit your Debentures for conversion after Comcast Holdings has
elected to exercise its option to pay interest instead of accruing original
issue discount between a record date and the opening of business on the next
interest payment date (except for Debentures or portions of Debentures called
for redemption on a redemption date occurring during the period from the close
of business on a record date and ending on the opening of business on the first
business day after the next interest payment date, or if this interest payment
date is not a business day, the second business day after the interest payment
date), you must pay funds equal to the interest payable on the converted
principal amount.
Repurchase Right
You have the right to require Comcast Holdings to repurchase the
Debentures on December 19, 2003, December 19, 2005, December 19, 2010 and
December 19, 2015. Comcast Holdings will be required to repurchase any
outstanding Debenture for which you deliver a written repurchase notice to the
paying agent. This notice must be delivered during the period beginning at any
time from the opening of business on the date that is 20 business days prior to
the relevant repurchase date until the close of business on the fifth day prior
to the repurchase date. If the repurchase notice is given and withdrawn during
the period, Comcast Holdings will not be obligated to repurchase the related
Debentures. Comcast Holdings' repurchase obligation will be subject to some
additional
40
conditions. Also, Comcast Holdings' ability to satisfy its repurchase
obligations may be affected by the factors described in "Risk Factors" under
the caption "Risks Related to the AT&T Broadband Acquisition."
The repurchase price payable will be equal to the issue price plus accrued
original issue discount through the repurchase date. The repurchase prices of a
Debenture as of each of the repurchase dates will be:
o $829.52 per Debenture on December 19, 2005;
o $882.84 per Debenture on December 19, 2010; and
o $939.60 per Debenture on December 19, 2015.
Comcast Holdings may choose to pay the repurchase price for the December
19, 2005 repurchase in cash or shares of Class A Special Common Stock, or a
combination of cash and shares of Class A Special Common Stock. Comcast
Holdings may pay the repurchase price for the December 19, 2010 and 2015
repurchases in cash only. For a discussion of the tax treatment of a holder
receiving cash, shares of Class A Special Common Stock or any combination
thereof, see "Certain United States Federal Income Tax Considerations."
If Comcast Holdings has previously exercised its option to pay cash
interest instead of accruing original issue discount on the Debentures
following a tax event, the repurchase price will be equal to the restated
principal amount plus the accrued and unpaid interest that accrued from the
date Comcast Holdings exercised its option through the repurchase date. See
"--Tax Event."
If Comcast Holdings chooses to pay the repurchase price in whole or in
part in shares of Class A Special Common Stock or a combination of cash and
shares of Class A Special Common Stock, Comcast Holdings will be required to
give notice on a date not less than 20 business days prior to each repurchase
date to all holders at their addresses shown in the register of the registrar,
and to beneficial owners as required by applicable law (i.e., if no notice is
given, Comcast Holdings will pay the repurchase price with cash), stating among
other things:
o whether Comcast Holdings will pay the repurchase price of the
Debentures in cash, in shares of Class A Special Common Stock, or any
combination thereof, specifying the percentages of each;
o if Comcast Holdings elect to pay all or part in shares of Class A
Special Common Stock, the method of calculating the market price of
the Class A Special Common Stock; and
o the procedures that holders must follow to require Comcast Holdings
to repurchase their Debentures.
Your notice electing to require Comcast Holdings to repurchase your
Debentures must state:
o if certificated Debentures have been issued, the Debenture
certificate numbers, or if not certificated, your notice must comply
with appropriate DTC procedures;
o the portion of the principal amount at maturity of Debentures to be
repurchased, in multiples of $1,000;
o that the Debentures are to be repurchased by Comcast Holdings
pursuant to the applicable provisions of the Debentures; and
o in the event Comcast Holdings elects, pursuant to the notice that
Comcast Holdings is required to give, to pay the repurchase price in
shares of Class A Special Common Stock, in whole or in part, but the
repurchase price is ultimately to be paid to the holder entirely in
cash because any of the conditions to payment of the repurchase price
or portion of the repurchase price in shares of Class A Special
Common Stock is not satisfied prior to the close of business on the
fifth day prior to the repurchase date, as described below, whether
the holder elects:
o to withdraw the repurchase notice as to some or all of the
Debentures to which it relates, or
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o to receive cash in respect of the entire repurchase price for
all Debentures or portions of Debentures subject to the
repurchase notice.
If the holder fails to indicate the holder's choice with respect to the
election described in the final bullet point above, the holder will be deemed
to have elected to receive cash in respect of the entire repurchase price for
all Debentures subject to the repurchase notice in these circumstances. For a
discussion of the tax treatment of a holder receiving cash instead of shares of
Class A Special Common Stock, see "Certain United States Federal Income Tax
Considerations."
You may withdraw any repurchase notice by a written notice of withdrawal
delivered to the paying agent prior to the close of business on the fifth day
prior to the repurchase date. The notice of withdrawal must state:
o the principal amount at maturity of the withdrawn Debentures;
o if certificated Debentures have been issued, the certificate numbers
of the withdrawn Debentures, or if not certificated, your notice must
comply with appropriate DTC procedures; and
o the principal amount at maturity, if any, which remains subject to
the repurchase notice.
If Comcast Holdings elects to pay the repurchase price, in whole or in
part, in shares of Class A Special Common Stock, the number of shares to be
delivered by Comcast Holdings will be equal to the portion of the repurchase
price to be paid in Class A Special Common Stock divided by the market price of
one share of Class A Special Common Stock as determined by Comcast Holdings in
its repurchase notice. Comcast Holdings will pay cash based on the market price
for all fractional shares.
The "market price" means the average of the sale prices of the Class A
Special Common Stock for the five trading day period ending on the third
business day prior to the applicable repurchase date (if the third business day
prior to the applicable repurchase date is a trading day, or if not, then on
the last trading day prior to the third business day), appropriately adjusted
to take into account the occurrence, during the period commencing on the first
of the trading days during the five trading day period and ending on the
repurchase date, of some events that would result in an adjustment of the
conversion rate with respect to the Class A Special Common Stock.
The "sale price" of the Class A Special Common Stock on any date means the
reported last sale price per share of Class A Special Common Stock (or if no
reported last sale price is available, the average of the bid and ask prices
or, if there is more than one bid or ask price, the average of the average bid
and the average ask prices) on the date as reported in composite transactions
by the Nasdaq System.
Because the market price of the Class A Special Common Stock is determined
prior to the applicable repurchase date, holders of Debentures bear the market
risk with respect to the value of the Class A Special Common Stock to be
received from the date the market price is determined to the repurchase date.
Comcast Holdings may pay the repurchase price or any portion of the repurchase
price in shares of Class A Special Common Stock only if the information
necessary to calculate the market price is published in a daily newspaper of
national circulation.
Upon determination of the actual number of shares of Class A Special
Common Stock to be paid upon redemption of the Debentures, Comcast Holdings
will issue a press release containing this information or publish the
information on its Web site on the World Wide Web or through such other public
medium as Comcast Holdings may use at that time.
A holder must either effect book-entry transfer or deliver the Debenture,
together with necessary endorsements, to the office of the paying agent after
delivery of the repurchase notice to receive payment of the repurchase price.
You will receive payment on the repurchase date or the time of book-entry
transfer or the delivery of the Debenture. If the paying agent holds money or
securities sufficient to pay the repurchase price of the Debenture on the
business day following the repurchase date, then:
42
o the Debenture will cease to be outstanding;
o original issue discount (or, if the Debentures have been converted to
interest-bearing Debentures following a tax event, interest) will
cease to accrue; and
o all other rights of the holder will terminate.
This will be the case whether or not book-entry transfer of the Debenture is
made or whether or not the Debenture is delivered to the paying agent.
Comcast Holdings will comply with the provisions of Rule 13e-4 and any
other tender offer rules under the Securities Exchange Act which may be
applicable at the time. Comcast Holdings will file Schedule TO or any other
schedule required in connection with any offer by it to repurchase the
Debentures at your option.
Ranking
The Debentures will constitute senior debt and will rank equally with all
of Comcast Holdings' unsecured and unsubordinated debt and will rank senior to
any future subordinated indebtedness of Comcast Holdings.
Comcast Holdings currently conducts substantially all its operations
through its subsidiaries, and its subsidiaries generate substantially all of
its operating income and cash flow. As a result, distributions or advances from
its subsidiaries are the principal source of funds necessary to meet its debt
service obligations. Contractual provisions or laws, as well as its
subsidiaries' financial condition and operating requirements, may limit Comcast
Holdings' ability to obtain cash from its subsidiaries that it requires to pay
its debt service obligations, including payments on the Debentures. In
addition, holders of the Debentures will have a junior position to the claims
of creditors of Comcast Holdings' subsidiaries on their assets and earnings.
Tax Event
Comcast Holdings has the option to elect to pay cash interest on the
Debentures from and after the date a tax event (as defined below) occurs
instead of accruing original issue discount. The principal amount, which will
be restated, will be calculated by adding the issue price and the original
issue discount which had accrued up until the date on which Comcast Holdings
exercises the option. This restated principal amount will be the amount due at
maturity. If Comcast Holdings elects this option, interest will be based on a
360-day year comprised of twelve 30-day months. Interest will accrue from the
option exercise date and will be payable semiannually on June 19 and December
19.
A tax event occurs when Comcast Holdings receives an opinion from an
experienced independent tax counsel stating that, as a result of either:
o any amendment, change or announced prospective change in the laws or
regulations of the United States or any of its political subdivisions
or taxing authorities of the United States; or
o any amendment, change, interpretation or application of the laws or
regulations by any legislative body, court, government agency or
regulatory authority,
there is more than an insubstantial risk that interest, including original
issue discount, payable on the Debentures either
o would not be deductible on a current accrual basis; or
o would not be deductible under any other method,
in whole or in part, by us for United States federal income tax purposes.
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Change in Control
If Comcast Holdings undergoes a change in control, you will have the
option to require it to purchase your Debentures 35 business days after the
change in control. Comcast Holdings will pay a purchase price equal to the
initial issue price plus accrued original issue discount through the purchase
date or, if Comcast Holdings has elected to pay cash interest on the Debentures
following a tax event, the restated principal amount plus accrued and unpaid
interest through the purchase date. You may require Comcast Holdings to
purchase all or any part of the Debentures so long as the principal amount at
maturity of the Debentures being purchased is a multiple of $1,000.
A change in control will also occur in the following situations:
o any person or group (other than Comcast Holdings, its subsidiaries or
any Permitted Holder, as defined below) after the first issuance of
Debentures becomes the beneficial owner of our voting stock
representing more than 50% of the total voting power of all of our
classes of voting stock entitled to vote generally in the election of
the members of our board of directors; or
o Comcast Holdings consolidates with or merges into another person
(other than a subsidiary), Comcast Holdings sells, conveys, transfers
or leases its properties and assets substantially as an entirety to a
person (other than a subsidiary), or
o any person (other than a subsidiary) consolidates with or merges with
or into our company, and our outstanding common stock is reclassified
into, exchanged for or converted into the right to receive any other
property or security,
provided that none of these circumstances will be a change in control if, after
a transaction, the persons that beneficially owned our voting stock immediately
prior to the transaction beneficially own, in substantially the same
proportion, shares with a majority of the total voting power of all outstanding
voting securities of the surviving or transferee person that are entitled to
vote generally in the election of that person's board of directors; unless, in
each case, at least 80% of the consideration, other than cash payments for
fractional shares, in the transaction or transactions constituting the change
in control, consists of shares of voting common stock of the person that are,
or upon issuance will be, traded on a national securities exchange or approved
for trading on an established automated over-the-counter trading market in the
United States.
A "Permitted Holder" means (i) Mr. Brian L. Roberts, his spouse or
children, any trust for his benefit or the benefit of his spouse or children,
or any corporation or partnership in which the direct and beneficial owner of
all of the equity interest is he or his spouse or children or any trust for the
benefit of him, his heirs, executors, administrators or personal
representatives upon his death or upon his incompetency or disability for
purposes of the protection and management of his assets, and (ii) any person or
group controlled by each or any of the persons referred to in clause (i). For
purposes of this definition "beneficially own," "beneficial owner" and
"beneficial ownership" shall have the meaning as defined pursuant to Rules
13d-3 and 13d-5 under the Exchange Act (except that a person shall be deemed to
have "beneficial ownership" of all securities that such person has the right to
acquire, whether the right is exercisable immediately or only after the passage
of time, upon the happening of an event or otherwise).
You must deliver a written notice to the paying agent prior to the close
of business on the business day prior to the date on which the Debentures are
to be repurchased to exercise the repurchase right upon a change in control.
This notice must specify the Debentures submitted for repurchase. You may
withdraw the notice by delivering a written notice of withdrawal to the paying
agent before the same date.
Within 15 business days after a change in control, Comcast Holdings will
publish and mail to the trustee and to each holder of the Debentures a written
notice of the change in control which specifies the terms and conditions and
the procedures required for exercise of a holder's right to require us to
purchase its Debentures.
If a change in control were to occur, Comcast Holdings may not have enough
funds to pay the change in control repurchase price. In addition, Comcast
Holdings has, and may in the future incur, other indebtedness with similar
change in control provisions permitting its holders to accelerate or to require
Comcast Holdings to repurchase its
44
indebtedness upon the occurrence of similar events or on some specified dates.
If Comcast Holdings fails to repurchase the Debentures when required following
a change in control, Comcast Holdings will be in default under the indenture
whether or not repurchase is permitted by the related subordination provisions.
Merger and Sales of Assets by Comcast Holdings
The indenture provides that Comcast Holdings may not consolidate with or
merge with or into any other person or convey, transfer or lease its properties
and assets substantially as an entirety to another person, unless among other
items:
o the resulting, surviving or transferee person (if other than Comcast
Holdings) is organized and existing under the laws of the United
States or any state thereof;
o the person assumes all obligations of Comcast Holdings under the
Debentures and the indenture; and
o Comcast Holdings or the successor person shall not immediately
thereafter be in default under the indenture.
Events of Default
The following are events of default with respect to the Debentures:
o Comcast Holdings' failure for 30 days to pay any interest on the
Debentures (after any election by Comcast Holdings to pay cash
interest on the Debentures following a tax event);
o Comcast Holdings' failure to pay principal of the Debentures at
maturity (or, if Comcast Holdings has elected to pay cash interest on
the Debentures following a tax event, the restated principal amount),
issue price, accrued original discount, redemption price, repurchase
price or change in control price, when the same becomes due and
payable;
o Comcast Holdings' failure to comply with any of its covenants or
agreements in the Debentures or the indenture (other than an
agreement or covenant that Comcast Holdings has included in the
indenture solely for the benefit of other series of debt securities)
for 90 days after written notice by the trustee or by the holders of
at least 25% in principal amount of all outstanding debt securities
affected by that failure;
o some events involving bankruptcy, insolvency or reorganization of
Comcast Holdings.
The trustee may withhold notice to the holders of the Debentures of any
default or event of default (except in any payment on the Debentures) if the
trustee considers it in the interest of the holders of the Debentures to do so.
If an event of default for the Debentures occurs and is continuing, the trustee
or the holders of at least 25% in principal amount of the Debentures (or, in
some cases, 25% in principal amount of all debt securities under the indenture
affected, voting as one class) may require Comcast Holdings to pay the issue
price plus accrued original issue discount on the Debentures. If an event of
default relating to some events of bankruptcy, insolvency or reorganization
occurs, the issue price plus accrued original issue discount on the Debentures
will become immediately due and payable without any action on the part of the
trustee or any holder. The holders of a majority in principal amount of the
outstanding Debentures (or of all debt securities under the indenture affected,
voting as one class) may in some cases rescind this accelerated payment
requirement. If Comcast Holdings exercises its option to pay interest instead
of accruing original issue discount on the Debentures following a tax event,
the declaration of acceleration referred to above will make the restated
principal amount plus accrued and unpaid interest immediately payable.
A holder of Debentures may pursue any remedy under the indenture only if:
o the holder gives the trustee written notice of a continuing event of
default for the Debentures;
45
o the holders of at least 25% in principal amount of the outstanding
Debentures make a written request to the trustee to pursue the
remedy;
o the holder offers to the trustee indemnity reasonably satisfactory to
the trustee;
o the trustee fails to act for a period of 60 days after receipt of
notice and offer of indemnity; and
o during that 60-day period, the holders of a majority in principal
amount of the Debentures do not give the trustee a direction
inconsistent with the request.
This provision does not, however, affect the right of a holder of Debentures to
sue for enforcement of any overdue payment.
In most cases, holders of a majority in principal amount of the
outstanding Debentures (or of all debt securities affected, voting as one
class) may direct the time, method and place of
o conducting any proceeding for any remedy available to the trustee;
and
o exercising any trust or power conferred on the trustee not relating
to or arising under an event of default.
The indenture requires us to file with the trustee each year a written
statement as to our compliance with the covenants contained in the indenture.
Modification and Waiver
Comcast Holdings may amend or supplement the indenture if the holders of a
majority in principal amount of the outstanding debt securities of all series
affected by the amendment or supplement (acting as one class) consent to it.
Without the consent of the holder of each Debenture, however, no modification
may:
o reduce the amount of Debentures whose holders must consent to an
amendment, supplement or waiver;
o reduce the rate of or change the time for payment of interest on the
Debenture;
o reduce the principal of the Debenture or change its stated maturity;
o reduce any premium payable on the redemption of the Debenture or
change the time at which the Debenture may or must be redeemed;
o change any obligation to pay additional amounts on the Debenture;
o make payments on the Debenture payable in currency other than as
originally stated in the Debenture;
o impair the holder's right to institute suit for the enforcement of
any payment on the Debenture;
o make any change in the percentage of principal amount of Debentures
necessary to waive compliance with some provisions of the indenture
or to make any change in this provision for modification;
o waive a continuing default or event of default regarding any payment
on the Debentures; or
o adversely affect the conversion or repurchase provisions of the
Debentures.
Comcast Holdings may amend or supplement the indenture or waive any
provision of it without the consent of any holders of Debentures in some
circumstances, including:
o to cure any ambiguity, omission, defect or inconsistency;
46
o to provide for the assumption of our obligations under the indenture
by a successor upon any merger, consolidation or asset transfer;
o to provide for uncertificated Debentures in addition to or in place
of certificated Debentures or to provide for bearer Debentures;
o to provide any security for or guarantees of the Debentures;
o to comply with any requirement to effect or maintain the
qualification of the indenture under the Trust Indenture Act of 1939;
o to add covenants that would benefit the holders of Debentures or to
surrender any rights Comcast Holdings has under the indenture;
o to add events of default with respect to the Debentures; or
o to make any change that does not adversely affect any outstanding
Debentures of any series in any material respect.
The holders of a majority in principal amount of the outstanding
Debentures (or of all debt securities affected, voting as one class) may waive
any existing or past default or event of default with respect to those debt
securities. Those holders may not, however, waive any default or event of
default in any payment on any Debenture or compliance with a provision that
cannot be amended or supplemented without the consent of each holder affected.
Defeasance
When we use the term defeasance, we mean Comcast Holdings' discharge from
some or all of its obligations under the indenture. If Comcast Holdings
deposits with the trustee funds or government securities sufficient to make
payments on the Debentures on the dates those payments are due and payable,
then, at Comcast Holdings' option, either of the following will occur:
o Comcast Holdings will be discharged from our obligations with respect
to the Debentures ("legal defeasance") or
o the related events of default will no longer apply to Comcast
Holdings ("covenant defeasance").
If Comcast Holdings defeases the Debentures, the holders of the Debentures
will not be entitled to the benefits of the indenture, except for Comcast
Holdings' obligations to register the transfer or exchange of Debentures,
replace stolen, lost or mutilated Debentures or maintain paying agencies and
hold moneys for payment in trust. In the case of covenant defeasance, Comcast
Holdings' obligation to pay principal, premium and interest on the Debentures
will also survive.
Comcast Holdings will be required to deliver to the trustee an opinion of
counsel that the deposit and related defeasance would not cause the holders of
the Debentures to recognize income, gain or loss for federal income tax
purposes. If Comcast Holdings elects legal defeasance, that opinion of counsel
must be based upon a ruling from the United States Internal Revenue Service or
a change in law to that effect.
Governing Law
The indenture and the Debentures will be governed by, and construed in
accordance with, the law of the State of New York, without regard to conflicts
of laws principles.
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Trustee
The Bank of New York, as successor in interest to Bank of Montreal Trust
Company, is the trustee, registrar and paying agent.
If an event of default occurs and is continuing, the trustee will be
required to use the degree of care and skill of a prudent man in the conduct of
his own affairs. The trustee will become obligated to exercise any of its
powers under the indenture at the request of any of the holders of any
Debentures only after those holders have offered the trustee indemnity
reasonably satisfactory to it.
If the trustee becomes one of Comcast Holdings' creditors, it will be
subject to limitations in the indenture on its rights to obtain payment of
claims or to realize on some property received for any such claim, as security
or otherwise. The trustee is permitted to engage in other transactions with
Comcast Holdings. If, however, it acquires any conflicting interest, it must
eliminate that conflict or resign.
Form, Exchange, Registration and Transfer
Comcast Holdings issued the Debentures in registered form, without
interest coupons. Comcast Holdings will not charge a service charge for any
registration of transfer or exchange of the Debentures. Comcast Holdings may,
however, require the payment of any tax or other governmental charge payable
for that registration.
Debentures will be exchangeable for other Debentures, for the same total
principal amount and for the same terms but in different authorized
denominations in accordance with the indenture. Holders may present Debentures
for registration of transfer at the office of the security registrar or any
transfer agent Comcast Holdings designates. The security registrar or transfer
agent will effect the transfer or exchange when it is satisfied with the
documents of title and identity of the person making the request.
Comcast Holdings has appointed the trustee as security registrar for the
Debentures. Comcast Holdings may at any time rescind that designation or
approve a change in the location through which any registrar acts. Comcast
Holdings is required to maintain an office or agency for transfers and
exchanges in each place of payment. Comcast Holdings may at any time designate
additional registrars for the Debentures.
In the case of any redemption, the security registrar will not be required
to register the transfer or exchange of any Debenture either:
o during a period beginning 15 business days prior to the mailing of
the relevant notice of redemption and ending on the close of business
on the day of mailing of the notice, or
o if the Debentures have been called for redemption in whole or in
part, except the unredeemed portion of any Debenture being redeemed
in part.
Payment and Paying Agents
Payments on the Debentures will be made in U.S. dollars at the office of
the trustee. At Comcast Holdings' option, however, it may make payments by
check mailed to the holder's registered address or, with respect to global
Debentures, by wire transfer. Comcast Holdings will make interest payments to
the person in whose name the Debenture is registered at the close of business
on the record date for the interest payment.
The trustee will be designated as Comcast Holdings' paying agent for
payments on Debentures. Comcast Holdings may at any time designate additional
paying agents or rescind the designation of any paying agent or approve a
change in the office through which any paying agent acts.
Subject to the requirements of any applicable abandoned property laws, the
trustee and paying agent shall pay to Comcast Holdings upon written request any
money held by them for payments on the Debentures that remain unclaimed for two
years after the date upon which that payment has become due. After payment to
Comcast
48
Holdings, holders entitled to the money must look to Comcast Holdings for
payment. In that case, all liability of the trustee or paying agent with
respect to that money will cease.
Book-Entry System
The Debentures will be represented by one or more Global Securities (each
a "Global Security"). Each Global Security will be deposited with, or on behalf
of, DTC and be registered in the name of a nominee of DTC. Except under
circumstances described below, the Debentures will not be issued in definitive
form.
Upon the issuance of a Global Security, DTC will credit on its book-entry
registration and transfer system the accounts of persons designated by the
underwriter with the respective principal amounts of the Debentures represented
by the Global Security. Ownership of beneficial interests in a Global Security
will be limited to persons that have accounts with DTC or its nominee
("participants") or persons that may hold interests through participants.
Ownership of beneficial interests in a Global Security will be shown on, and
the transfer of that ownership will be effected only through, records
maintained by DTC or its nominee (with respect to interests of persons other
than participants). The laws of some states require that some purchasers of
securities take physical delivery of the securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests in
a Global Security.
So long as DTC or its nominee is the registered owner of a Global
Security, DTC or its nominee, as the case may be, will be considered the sole
owner or holder of the Debentures represented by that Global Security for all
purposes under the indenture. Except as provided below, owners of beneficial
interests in a Global Security will not be entitled to have Debentures
represented by that Global Security registered in their names, will not receive
or be entitled to receive physical delivery of Debentures in definitive form
and will not be considered the owners or holders thereof under the indenture.
Principal and interest payments, if any, on Debentures registered in the name
of DTC or its nominee will be made to DTC or its nominee, as the case may be,
as the registered owner of the relevant Global Security. Neither Comcast
Holdings, the trustee, any paying agent or the registrar for the Debentures
will have any responsibility or liability for any aspect of the records
relating to nor payments made on account of beneficial interests in a Global
Security or for maintaining, supervising or reviewing any records relating to
such beneficial interests.
Comcast Holdings expects that DTC or its nominee, upon receipt of any
payment of principal or interest, if any, will credit immediately participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of the relevant Global Security as shown on
the records of DTC or its nominee. Comcast Holdings also expects that payments
by participants to owners of beneficial interests in a Global Security held
through these participants will be governed by standing instructions and
customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of the participants.
If DTC is at any time unwilling or unable to continue as a depositary and
a successor depositary is not appointed by Comcast Holdings within 90 days,
Comcast Holdings will issue Debentures in definitive form in exchange for the
entire Global Security for the Debentures. In addition, Comcast Holdings may at
any time and in its sole discretion determine not to have Debentures
represented by a Global Security and, in such event, will issue Debentures in
definitive form in exchange for the entire Global Security relating to the
Debentures. In any such instance, an owner of a beneficial interest in a Global
Security will be entitled to physical delivery in definitive form of Debentures
represented by the Global Security equal in principal amount to the beneficial
interest and to have the Debentures registered in its name. Debentures so
issued in definitive form will be issued as registered Debentures in
denominations of $1,000 and multiples thereof, unless otherwise specified by
Comcast Holdings.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the material U.S. federal income tax
considerations to U.S. holders (as described below) and non-U.S. holders (as
described below) relating to acquisition of our Class A Special Common Stock in
exchange for the Debentures. This discussion is limited to holders who acquired
shares of Class A Special Common Stock in exchange for the Debentures as
capital assets.
49
This discussion does not contain a complete analysis of all the potential
tax considerations relating to the acquisition of our Class A Special Common
Stock in exchange for the Debentures. In particular, this discussion does not
address all tax considerations that may be important to you in light of your
particular circumstances (such as the alternative minimum tax provisions) or
under certain special rules. Special rules may apply, for instance, to certain
financial institutions, insurance companies, tax-exempt organizations,
partnerships or other entities classified as partnerships for U.S. federal
income tax purposes, dealers in securities, persons who hold Debentures or
shares of our Class A Special Common Stock as part of a hedge, conversion or
constructive sale transaction, or straddle or other integrated or risk
reduction transaction, or persons who have ceased to be United States citizens
or to be taxed as resident aliens. In addition, the discussion does not apply
to holders of Debentures or shares of our Class A Special Common Stock which
are partnerships. This discussion also does not address the tax consequences
arising under the laws of any foreign, state or local jurisdiction.
This discussion is based upon the Internal Revenue Code of 1986, as
amended (the "Code"), existing and proposed Treasury Regulations, and judicial
decisions and administrative interpretations thereunder, as of the date hereof,
all of which are subject to change or different interpretations, possibly with
retroactive effect.
PLEASE CONSULT YOUR OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO
YOU OF ACQUIRING OUR SHARES OF CLASS A SPECIAL COMMON STOCK IN EXCHANGE FOR THE
DEBENTURES, INCLUDING THE EFFECT AND APPLICABILITY OF STATE, LOCAL OR FOREIGN
TAX LAWS.
As used herein, the term "U.S. holder" means a holder of a Debenture that
is, for U.S. federal income tax purposes:
o a citizen or resident of the United States;
o a corporation, or other entity taxable as a corporation for U.S.
federal income tax purposes, created or organized in or under the
laws of the United States or of any political subdivision thereof; or
o an estate or trust the income of which is subject to U.S. federal
income taxation regardless of its source.
The term U.S. holder also includes certain former citizens and
residents of the United States.
As used herein, the term "Non-U.S. holder" means a holder of a Debenture
that is, for U.S. federal income tax purposes:
o an individual who is classified as a nonresident alien;
o a foreign corporation; or
o a nonresident alien fiduciary of a foreign estate or trust.
Tax Treatment of Exchange of Debentures for Shares of Class A Special Common
Stock
U.S. Holders. A U.S. holder's exchange of a Debenture for our Class A
Special Common Stock will be a taxable event. You will recognize gain or loss
equal to the difference between (i) the fair market value of the shares of our
Class A Common Stock and any cash in lieu of fractional shares received in the
exchange and (ii) your adjusted tax basis in the Debenture. Your adjusted tax
basis in a Debenture will generally equal your cost of the Debenture increased
by any OID and market discount previously included in income with respect to
such Debenture. Gain or loss realized on the exchange of a Debenture for our
Class A Special Common Stock will generally be capital gain or loss and will be
long-term capital gain or loss if the Debenture is held for more than one year.
You should consult your tax advisors regarding the treatment of capital gains
(which may be taxed at lower rates than ordinary income for taxpayers who are
individuals) and losses (the deductibility of which is subject to limitations).
50
Non-U.S. Holders. You generally will not be subject to U.S. federal income
tax on gain realized on the exchange of a Debenture for shares of our Class A
Special Common Stock unless:
o you are an individual present in the United States for 183 days or
more in the year of such sale, exchange or redemption and either (A)
you have a "tax home" in the United States and certain other
requirements are met, or (B) the gain from the disposition is
attributable to an office or other fixed place of business in the
United States;
o in the case of an amount which is attributable to OID, you do not
meet certain conditions for exemption from U.S. federal withholding
tax; or
o the gain is effectively connected with your conduct of a United
States trade or business.
In addition, you may be subject to U.S. federal tax on gain realized on the
exchange of a Debenture for shares of our Class A Special Common Stock if
either Comcast or Comcast Holdings is a U.S. real property holding corporation
under the "FIRPTA" rules adopted in 1980. Generally, a corporation is a U.S.
real property holding corporation if the fair market value of its U.S. real
property interests, as defined in the Code and applicable regulations, equals
or exceeds 50% of the aggregate fair market value of its worldwide real
property interests and its other assets used or held for use in a trade or
business. Neither Comcast nor Comcast Holdings has determined whether it
currently is a U.S. real property holding corporation or whether it will become
one in the future.
LEGAL MATTERS
Arthur R. Block, Esquire, Senior Vice President, General Counsel and
Secretary of Comcast, will pass upon the validity of the shares of our Series A
Common Stock on our behalf, although we may use other counsel, including our
employees, to do so.
EXPERTS
Comcast
The balance sheet of Comcast at December 31, 2001 incorporated by
reference from Comcast's Current Report on Form 8-K/A dated November 18, 2002
filed on December 16, 2002 has been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report, which is incorporated herein
by reference, and has been so incorporated in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
Comcast Holdings
The consolidated financial statements and the related financial statement
schedule of Comcast Holdings incorporated in this prospectus by reference from
Comcast's Current Report on Form 8-K/A dated November 18, 2002 filed on
December 16, 2002 have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report (which report expresses an unqualified
opinion and includes an explanatory paragraph related to the adoption of
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended, effective January 1, 2001),
which is incorporated herein by reference, and have been so incorporated in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
Comcast Cable
The financial statements and the related financial statement schedule of
Comcast Cable, an indirect wholly-owned subsidiary of Comcast, and subsidiaries
incorporated in this prospectus by reference from Comcast Cable's Annual Report
on Form 10-K for the year ended December 31, 2001 have been audited by Deloitte
& Touche LLP, independent auditors, as stated in their reports (which report on
the financial statements expresses an unqualified opinion and includes an
explanatory paragraph related to the adoption of Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and
Hedging Activities," as amended, effective
51
January 1, 2001), which are incorporated herein by reference, and have been so
incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
AT&T Broadband Group
The audited historical combined financial statements of AT&T Broadband
Group incorporated in this prospectus by reference to Comcast's Current Report
on Form 8-K/A dated November 18, 2002 filed on December 16, 2002, have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
accounting and auditing.
AVAILABLE INFORMATION
We have filed this prospectus as part of a combined registration statement
on Form S-4 with the SEC. The registration statement contains exhibits and
other information that are not contained in this prospectus. Our descriptions
in this prospectus of the provisions of documents filed as an exhibit to the
registration statement or otherwise filed with the SEC are only summaries of
the documents' material terms. If you want a complete description of the
content of the documents, you should obtain the documents by following the
procedures described below.
We, and Comcast Holdings as our predecessor, file annual, quarterly and
special reports and other information with the SEC. You may read and copy any
document we, Comcast Holdings or Comcast Cable file at the SEC's public
reference room located at 450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. Our SEC filings, including the complete registration statement
and all of the exhibits to it, and the SEC filings of Comcast Holdings are
available through the SEC's web site at http://www.sec.gov.
You should rely only on the information contained in this prospectus or in
material we file with the SEC and incorporate by reference herein. We have not
authorized anyone to provide you with information that is different. We are
offering the Series A common shares, and seeking offers to buy such shares,
only where the offer and sale of the Series A common stock is permitted. The
information contained in this prospectus and our filings and the filings of
Comcast Holdings with the SEC is accurate only as of its date, regardless of
the time of delivery of this prospectus.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you directly to those documents. The information incorporated by
reference is considered to be part of this prospectus. In addition, information
we file with the SEC in the future will automatically update and supersede
information contained in this prospectus and any accompanying prospectus
supplement.
This prospectus incorporates by reference the documents set forth below
that we, Comcast Holdings and Comcast Cable have previously filed with the SEC.
Comcast SEC Filings (File No. 333-82460)
o Current Report on Form 8-K filed on October 30, 2002, Current Report
on Form 8-K filed on November 18, 2002, Current Report on Form 8-K/A
dated November 18, 2002 filed on December 16, 2002, and Current
Report on Form 8-K filed on January 10, 2003.
Comcast Holdings SEC Filings (File No. 001-15471)
o Annual Report on Form 10-K (except for Item 8) for the year ended
December 31, 2001, filed on March 29, 2002.
o Quarterly Reports on Form 10-Q for the quarters ended March 31, 2002,
filed on May 15, 2002, June 30, 2002, filed on August 14, 2002, and
September 30, 2002, filed on October 30, 2002.
52
o Current Reports on Form 8-K filed on November 18, 2002.
We also incorporate by reference into this prospectus additional documents
that we may file with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 until we sell all of the securities we are
offering. Any statements contained in a previously filed document incorporated
by reference into this prospectus is deemed to be modified or superseded for
purposes of this prospectus to the extent that a statement contained in this
prospectus, or in a subsequently filed document also incorporated by reference
herein, modifies or supersedes that statement.
We will provide free copies of any of those documents, if you write or
telephone us at: 1500 Market Street, Philadelphia, Pennsylvania 19102-2148,
(215) 665-1700.
53
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Indemnification under Pennsylvania Law and Comcast Charter and Bylaws.
Sections 1741 through 1750 of Subchapter D, Chapter 17, of the Pennsylvania
Business Corporation Law ("PBCL") contain provisions for mandatory and
discretionary indemnification of a corporation's directors, officers and other
personnel, and related matters.
Under Section 1741 of the PBCL, subject to certain limitations, a
corporation has the power to indemnify directors and officers under certain
prescribed circumstances against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with an action or proceeding, whether civil, criminal,
administrative or investigative (other than derivative actions), to which any
such officer or director is a party or is threatened to be made a party by
reason of such person being a representative of the corporation or serving at
the request of the corporation as a representative of another domestic or
foreign corporation for profit or not-for-profit, partnership, joint venture,
trust or other enterprise, so long as the director or officer acted in good
faith and in a manner reasonably believed to be in, or not opposed to, the best
interests of the corporation and, with respect to any criminal proceeding, such
officer or director had no reasonable cause to believe his/her conduct was
unlawful.
Section 1742 of the PBCL permits indemnification in derivative and
corporate actions if the appropriate standard of conduct is met, except in
respect of any claim, issue or matter as to which the person has been adjudged
to be liable to the corporation unless and only to the extent that the proper
court determines upon application that, despite the adjudication of liability
but in view of all the circumstances of the case, the person is fairly and
reasonably entitled to indemnity for the expenses that the court deems proper.
Under Section 1743 of the PBCL, indemnification is mandatory to the extent
that the officer or director has been successful on the merits or otherwise in
defense of any action or proceeding referred to in Section 1741 or 1742 of the
PBCL.
Section 1744 of the PBCL provides that, unless ordered by a court, any
indemnification under Section 1741 or 1742 of the PBCL shall be made by the
corporation only as authorized in the specific case upon a determination that
the representative met the applicable standard of conduct, and such
determination will be made by (i) the board of directors by a majority vote of
a quorum of directors not parties to the action or proceeding, (ii) if a quorum
is not obtainable, or if obtainable and a majority of disinterested directors
so directs, by independent legal counsel in a written opinion, or (iii) by the
shareholders.
Section 1745 of the PBCL provides that expenses (including attorneys'
fees) incurred by an officer, director, employee or agent in defending any
action or proceeding referred to in Subchapter D of Chapter 17 of the PBCL may
be paid by the corporation in advance of the final disposition of such action
or proceeding upon receipt of an undertaking by or on behalf of such person to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the corporation. Except as otherwise provided in the
corporation's bylaws, advancement of expenses must be authorized by the board
of directors.
Section 1746 of the PBCL provides generally that the indemnification and
advancement of expenses provided by Subchapter D of Chapter 17 of the PBCL
shall not be deemed exclusive of any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under any bylaw,
agreement, vote of shareholders or disinterested directors or otherwise, both
as to action in his official capacity and as to action in another capacity
while holding that office. In no event may indemnification be made in any case
where the act or failure to act giving rise to the claim for indemnification is
determined by a court to have constituted willful misconduct or recklessness.
II-1
Section 1747 of the PBCL grants a corporation the power to purchase and
maintain insurance on behalf of any director or officer against any liability
incurred by him in his capacity as officer or director, whether or not the
corporation would have the power to indemnify him against that liability under
Subchapter D of Chapter 17 of the PBCL.
Sections 1748 and 1749 of the PBCL extend the indemnification and
advancement of expenses provisions contained in Subchapter D of Chapter 17 of
the PBCL to successor corporations in fundamental changes and to
representatives serving as fiduciaries of employee benefit plans.
Section 1750 of the PBCL provides that the indemnification and advancement
of expenses provided by, or granted pursuant to, Subchapter D of Chapter 17 of
the PBCL shall, unless otherwise provided when authorized or ratified, continue
as to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs and personal representatives of such
person.
Article Eleventh of the Comcast charter and Article VII of the Comcast
bylaws provide that no director of Comcast will be personally liable, as such,
for monetary damages (other than under criminal statutes and under laws
imposing such liability on directors or officers for the payment of taxes)
unless such person's conduct constitutes self-dealing, willful misconduct or
recklessness. Article Eleventh of the Comcast charter also extends such
protection to officers.
Article VII of the Comcast bylaws provides that each officer and director
of Comcast is indemnified and held harmless by Comcast for all actions taken by
him or her and for all failures to take action (regardless of the date of any
such action or failure to take action) to the fullest extent permitted by
Pennsylvania law against all expense, liability and loss (including, without
limitation, attorneys' fees, judgments, fines, taxes, penalties and amounts
paid or to be paid in settlement) reasonably incurred or suffered by such
officer or director in connection with any threatened, pending or completed
action, suit or proceeding (including, without limitation, an action, suit or
proceeding by or in the right of Comcast), whether civil, criminal,
administrative or investigative.
The foregoing statements are subject to the detailed provisions of the
PBCL and to the applicable provisions of the Comcast charter and bylaws.
Merger Agreement Provision Relating to AT&T and Comcast Holdings Directors
and Officers
Comcast has agreed in the merger agreement to indemnify the present and
former officers and directors of AT&T, the AT&T subsidiaries, Comcast Cable
Communications Holdings, the Comcast Cable Communications Holdings
subsidiaries, Comcast Holdings and the Comcast Holdings subsidiaries, and each
individual who prior to the completion of the AT&T Broadband acquisition becomes
such an officer or director, from their acts or omissions in those capacities
occurring at or prior to the completion of such transaction to the maximum
extent permitted by law; provided, however, no such indemnification will be
required for officers or directors acting in a capacity for AT&T and its
subsidiaries other than in connection with either AT&T's broadband business or
the merger agreement and the transactions contemplated by the merger agreement.
AT&T (and not Comcast Cable Communications Holdings) will indemnify and
hold harmless Comcast for 50% of any losses described in the preceding
paragraph arising out of acts or omissions of the AT&T officers and directors
in connection with the merger agreement and the transactions contemplated by
the merger agreement.
For six years after completion of the AT&T Broadband acquisition, Comcast
will provide officers' and directors' liability insurance in respect of acts or
omissions occurring prior to completion of the transactions covering each
officer and director identified in the second preceding paragraph (for officers
and directors of AT&T and its subsidiaries, only for acts or omissions of such
person acting in connection with either AT&T's broadband business or the merger
agreement and the transactions contemplated by the merger agreement) currently
covered by the officers' and directors' liability insurance policy of AT&T or
Comcast Holdings, as the case may be, on terms no less favorable than those of
such policy in effect on December 19, 2001, except that Comcast will only be
obligated to pay up to 300% of the annual premium paid for such insurance by
either AT&T or Comcast Holdings as of December 19, 2001.
II-2
Item 21. Exhibits and Financial Statement Schedules
Exhibit
Number Description
------ -----------
2.1 Composite copy of Agreement and Plan of Merger dated as of
December 19, 2001, as amended, among Comcast Holdings Corporation
(formerly known as Comcast Corporation), AT&T Corp., Comcast
Cable Communications Holdings, Inc. (formerly known as AT&T
Broadband Corp.), Comcast Corporation (formerly known as AT&T
Comcast Corporation) and the other parties signatory thereto.**
2.2 Composite copy of Separation and Distribution Agreement dated as
of December 19, 2001, as amended, between AT&T Corp. and Comcast
Cable Communications Holdings, Inc. (formerly known as AT&T
Broadband Corp.).**
2.3 Support Agreement dated as of December 19, 2001, as amended,
among AT&T Corp., Comcast Holdings Corporation (formerly known as
Comcast Corporation), Comcast Corporation (formerly known as AT&T
Comcast Corporation), Sural LLC and Brian L. Roberts.***
2.4 Tax Sharing Agreement dated as of December 19, 2001 between AT&T
Corp. and Comcast Cable Communications Holdings, Inc. (formerly
known as AT&T Broadband Corp.).***
2.5 Employee Benefits Agreement dated as of December 19, 2001 between
AT&T Corp. and Comcast Cable Communications Holdings, Inc.
(formerly known as AT&T Broadband Corp.).****
2.6 Exchange Agreement dated as of December 7, 2001, as amended,
between Microsoft Corporation and Comcast Holdings Corporation
(formerly known as Comcast Corporation).***
2.7 Instrument of Admission dated as of December 19, 2001, as
amended, between Comcast Corporation (formerly known as AT&T
Comcast Corporation) and AT&T Corp.***
3.1 Articles of Incorporation of Comcast Corporation.***
4.1 Rights Agreement dated as of November 18, 2002 between Comcast
Corporation (formerly known as AT&T Comcast Corporation) and
EquiServe Trust Company, N.A., as Rights Agent, which includes
the Form of Certificate of Designation of Series A Participant's
Cumulative Preferred Stock as Exhibit A and the Form of Right
Certificate as Exhibit B.*****
4.2 Credit Agreement dated as of April 26, 2002 among Comcast
Corporation (formerly known as AT&T Comcast Corporation), Comcast
Cable Communications Holdings, Inc. (formerly known as AT&T
Broadband Corp.), the Financial Institutions party thereto, JP
Morgan Chase Bank, as Administrative Agent, Swing Line Lender and
Issuing Lender, Citibank, N.A., as Syndication Agent, and Bank of
America, N.A., Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner
& Smith Incorporated and Morgan Stanley Senior Funding, Inc., as
Co-Documentation Agents.******
4.3 Bridge Credit Agreement dated as of April 26, 2002 among Comcast
Corporation (formerly known as AT&T Comcast Corporation), Comcast
Cable Communications Holdings, Inc. (formerly known as AT&T
Broadband Corp.), the Financial Institutions party thereto, JP
Morgan Chase Bank, as Administrative Agent, Swing Line Lender and
Issuing Lender, Citibank, N.A., as Syndication Agent, and Bank of
America, N.A., Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner
& Smith Incorporated and Morgan Stanley Senior Funding, Inc., as
Co-Documentation Agents.******
II-3
Exhibit
Number Description
------ -----------
4.4 Credit Agreement dated as of May 3, 2002 among Comcast Cable
Communications Holdings, Inc. (formerly known as AT&T Broadband
Corp.), Comcast Corporation (formerly known as AT&T Comcast
Corporation), the Financial Institutions party thereto, JP Morgan
Chase Bank, as Administrative Agent, Citibank, N.A., Bank of
America, N.A., Merrill Lynch Capital Corporation and Morgan
Stanley Senior Funding, Inc.******
5.1 Opinion of Arthur R. Block, Esquire.*
23.1 Consent of Deloitte & Touche LLP with respect to Comcast
Corporation (formerly known as AT&T Comcast Corporation).*
23.2 Consent of Deloitte & Touche LLP with respect to Comcast Holdings
Corporation (formerly known as Comcast Corporation).*
23.3 Consent of Deloitte & Touche LLP with respect to Comcast Cable
Communications, Inc.*
23.4 Consent of PricewaterhouseCoopers LLP with respect to AT&T
Broadband Group.*
23.5 Consent of Arthur R. Block, Esquire (included in Exhibit 5.1).
24.1 Powers of Attorney.*******
- ---------
* Filed herewith.
** Incorporated by reference to our Current Report on Form 8-K12g3, filed
on November 18, 2002.
*** Incorporated by reference to our registration statement on Form S-4
filed on February 11, 2002.
**** Incorporated by reference to AT&T Corp.'s Annual Report on Form 10-K
for the year ended December 31, 2001, filed on April 1, 2002.
***** Incorporated by reference to our registration statement on Form 8-A12g,
filed on November 18, 2002.
****** Incorporated by reference to our Amended Registration Statement on Form
S-4/A, filed on May 14, 2002.
******* Incorporated by reference to our Registration Statement on Form S-4,
filed on November 18, 2002 and filed herewith.
Item 22. Undertakings
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(b) The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to our directors, officers and
controlling persons pursuant to the foregoing provisions, or otherwise, we have
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. If a claim for indemnification against such
liabilities (other than the payment by us of expenses incurred or paid by one
of our directors, officers or controlling persons in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in
II-4
connection with the securities being registered, we will, unless in the opinion
of its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
(d) The undersigned hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(e) The undersigned hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-5
SIGNATURES FOR COMCAST CORPORATION
Pursuant to the requirements of the Securities Act, the registrant has
duly caused this Amendment No. 1 to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Philadelphia, State of Pennsylvania, on January 30, 2003.
COMCAST CORPORATION
By: /s/ Arthur R. Block
---------------------------------
Name: Arthur R. Block
Title: Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Ralph J. Roberts Chairman of the Executive and Finance January 30, 2003
- ---------------------------- Committee of the Board of Directors;
Ralph J. Roberts Director
* Chairman of the Board of Directors; January 30, 2003
- ---------------------------- Director
C. Michael Armstrong
/s/ Julian A. Brodsky Vice Chairman of the Board of Directors; January 30, 2003
- ---------------------------- Director
Julian A. Brodsky
* President and Chief Executive Officer January 30, 2003
- ---------------------------- (Principal Executive Officer); Director
Brian L. Roberts
* Executive Vice President January 30, 2003
- ---------------------------- (Co-Principal Financial Officer)
Lawrence S. Smith
* Executive Vice President and Treasurer January 30, 2003
- ---------------------------- (Co-Principal Financial Officer)
John R. Alchin
/s/ Lawrence J. Salva Senior Vice President and Controller January 30, 2003
- ---------------------------- (Principal Accounting Officer)
Lawrence J. Salva
/s/ S. Decker Anstrom Director January 26, 2003
- ----------------------------
S. Decker Anstrom
/s/ Kenneth J. Bacon Director January 30, 2003
- ----------------------------
Kenneth J. Bacon
II-6
/s/ Sheldon M. Bonovitz Director January 30, 2003
- ----------------------------
Sheldon M. Bonovitz
/s/ J. Michael Cook Director January 27, 2003
- ----------------------------
J. Michael Cook
/s/ George M. C. Fisher Director January 30, 2003
- ----------------------------
George M. C. Fisher
/s/ Dr. Judith Rodin Director January 30, 2003
- ----------------------------
Dr. Judith Rodin
/s/ Louis A. Simpson Director January 30, 2003
- ----------------------------
Louis A. Simpson
/s/ Michael I. Sovern Director January 30, 2003
- ----------------------------
Michael I. Sovern
* By: /s/ Arthur R. Block
----------------------
Arthur R. Block
(Attorney-in-fact)
II-7
INDEX OF EXHIBITS
Exhibit
Number Description
------ -----------
2.1 Composite copy of Agreement and Plan of Merger dated as of
December 19, 2001, as amended, among Comcast Holdings Corporation
(formerly known as Comcast Corporation), AT&T Corp., Comcast
Cable Communications Holdings, Inc. (formerly known as AT&T
Broadband Corp.), Comcast Corporation (formerly known as AT&T
Comcast Corporation) and the other parties signatory thereto.**
2.2 Composite copy of Separation and Distribution Agreement dated as
of December 19, 2001, as amended, between AT&T Corp. and Comcast
Cable Communications Holdings, Inc. (formerly known as AT&T
Broadband Corp.).**
2.3 Support Agreement dated as of December 19, 2001, as amended,
among AT&T Corp., Comcast Holdings Corporation (formerly known as
Comcast Corporation), Comcast Corporation (formerly known as AT&T
Comcast Corporation), Sural LLC and Brian L. Roberts.***
2.4 Tax Sharing Agreement dated as of December 19, 2001 between AT&T
Corp. and Comcast Cable Communications Holdings, Inc. (formerly
known as AT&T Broadband Corp.).***
2.5 Employee Benefits Agreement dated as of December 19, 2001 between
AT&T Corp. and Comcast Cable Communications Holdings, Inc.
(formerly known as AT&T Broadband Corp.).****
2.6 Exchange Agreement dated as of December 7, 2001, as amended,
between Microsoft Corporation and Comcast Holdings Corporation
(formerly known as Comcast Corporation).***
2.7 Instrument of Admission dated as of December 19, 2001, as
amended, between Comcast Corporation (formerly known as AT&T
Comcast Corporation) and AT&T Corp.***
3.1 Articles of Incorporation of Comcast Corporation.***
4.1 Rights Agreement dated as of November 18, 2002 between Comcast
Corporation (formerly known as AT&T Comcast Corporation) and
EquiServe Trust Company, N.A., as Rights Agent, which includes
the Form of Certificate of Designation of Series A Participant's
Cumulative Preferred Stock as Exhibit A and the Form of Right
Certificate as Exhibit B.*****
4.2 Credit Agreement dated as of April 26, 2002 among Comcast
Corporation (formerly known as AT&T Comcast Corporation), Comcast
Cable Communications Holdings, Inc. (formerly known as AT&T
Broadband Corp.), the Financial Institutions party thereto, JP
Morgan Chase Bank, as Administrative Agent, Swing Line Lender and
Issuing Lender, Citibank, N.A., as Syndication Agent, and Bank of
America, N.A., Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner
& Smith Incorporated and Morgan Stanley Senior Funding, Inc., as
Co-Documentation Agents.******
4.3 Bridge Credit Agreement dated as of April 26, 2002 among Comcast
Corporation (formerly known as AT&T Comcast Corporation), Comcast
Cable Communications Holdings, Inc. (formerly known as AT&T
Broadband Corp.), the Financial Institutions party thereto, JP
Morgan Chase Bank, as Administrative Agent, Swing Line Lender and
Issuing Lender, Citibank, N.A., as Syndication Agent, and Bank of
America, N.A., Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner
& Smith Incorporated and Morgan Stanley Senior Funding, Inc., as
Co-Documentation Agents.******
II-8
4.4 Credit Agreement dated as of May 3, 2002 among Comcast Cable
Communications Holdings, Inc. (formerly known as AT&T Broadband
Corp.), Comcast Corporation (formerly known as AT&T Comcast
Corporation), the Financial Institutions party thereto, JP Morgan
Chase Bank, as Administrative Agent, Citibank, N.A., Bank of
America, N.A., Merrill Lynch Capital Corporation and Morgan
Stanley Senior Funding, Inc.******
5.1 Opinion of Arthur R. Block, Esquire.*
23.1 Consent of Deloitte & Touche LLP with respect to Comcast
Corporation (formerly known as AT&T Comcast Corporation).*
23.2 Consent of Deloitte & Touche LLP with respect to Comcast Holdings
Corporation (formerly known as Comcast Corporation).*
23.3 Consent of Deloitte & Touche LLP with respect to Comcast Cable
Communications, Inc.*
23.4 Consent of PricewaterhouseCoopers LLP with respect to AT&T
Broadband Group.*
23.5 Consent of Arthur R. Block, Esquire (included in Exhibit 5.1).
24.1 Powers of Attorney.*******
- ---------
* Filed herewith.
** Incorporated by reference to our Current Report on Form 8-K12g3, filed
on November 18, 2002.
*** Incorporated by reference to our registration statement on Form S-4
filed on February 11, 2002.
**** Incorporated by reference to AT&T Corp.'s Annual Report on Form 10-K
for the year ended December 31, 2001, filed on April 1, 2002.
***** Incorporated by reference to our registration statement on Form 8-A12g,
filed on November 18, 2002.
****** Incorporated by reference to our Amended Registration Statement on Form
S-4/A, filed on May 14, 2002.
******* Incorporated by reference to our Registration Statement on Form S-4,
filed on November 18, 2002
II-9
Exhibit 5.1
[LETTERHEAD OF COMCAST CORPORATION]
January 28, 2002
Comcast Corporation
1500 Market Street
Philadelphia, Pennsylvania 19102-2148
Ladies and Gentlemen:
I am Senior Vice President, General Counsel and Secretary of Comcast
Corporation, a Pennsylvania corporation (the "Company") and have acted as
counsel for the Company in connection with the Registration Statement on Form
S-4, as amended (the "Registration Statement") (File No. 333-101264) filed with
the Securities and Exchange Commission pursuant to the Securities Act of 1933,
as amended, for the registration of issuances from time to time of shares (the
"Shares") of Comcast Corporation Class A Special Common Stock, par value $.01
per share (the "Class A Special Common Stock"), upon the conversion of Zero
Coupon Convertible Debentures Due December 19, 2020 (the "Debentures") issued
by Comcast Holdings Corporation ("Holdings").
I have examined originals or copies, certified or otherwise identified to
my satisfaction, of such documents, corporate records, certificates and other
instruments as I have deemed necessary or advisable for the purpose of
rendering this opinion.
Based upon the foregoing, I am of the opinion that the Shares issued upon
conversion of the Debentures in accordance with their terms will be duly
authorized, validly issued, fully paid and nonassessable.
In connection with my opinions expressed above, I have assumed that, at or
prior to the time of the delivery of any Shares, (i) the Registration Statement
shall have been declared effective and such effectiveness shall not have been
terminated or rescinded, (ii) the due authorization, execution, authentication,
issuance and delivery of the Debentures and the due authorization, execution
and delivery of the indenture relating thereto, the validity and enforceability
of the Debentures and the indenture relating thereto, and the conversion of the
Debentures in accordance with their terms and the terms of the indenture
relating thereto, (iii) that a sufficient number of shares of Class A Special
Common Stock are authorized or reserved and available for issuance and that the
consideration for the issuance of such shares of Class A Special Common Stock
is not less than the par value of the Class A Special Common Stock, and (iv)
the compliance by the Company and Holdings with the terms of the Debentures
will not otherwise violate any applicable law or result in a violation of any
provision of any instrument or agreement then binding upon the Company or
Holdings, or any restriction imposed by any court or governmental body having
jurisdiction over the Company or Holdings.
I am a member of the Bar of the Commonwealth of Pennsylvania and the
foregoing opinions are limited to the laws of the Commonwealth of Pennsylvania
and the federal laws of the United States of America.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In addition, I consent to the reference to me under the
caption "Legal Matters" in the prospectus.
Very truly yours,
/s/ Arthur R. Block
Arthur R. Block
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement on Form S-4 (File No. 333-101264) of Comcast Corporation
(formerly AT&T Comcast Corporation) of our report dated April 29, 2002 related
to the balance sheet of Comcast Corporation as of December 31, 2001, appearing
in Comcast Corporation's Current Report on Form 8-K/A dated November 18, 2002
filed on December 16, 2002, and to the reference to us under the heading
"Experts" in the Prospectus, which is part of this Registration Statement.
/s/ Deloitte & Touche LLP
Philadelphia, Pennsylvania
January 27, 2003
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement on Form S-4 (File No. 333-101264) of Comcast Corporation
(formerly AT&T Comcast Corporation) of our report dated February 5, 2002 (July
30, 2002 as to Note 14 and December 6, 2002 as to Note 15) (which report
expresses an unqualified opinion and includes an explanatory paragraph related
to the adoption of Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities," as amended,
effective January 1, 2001) related to the financial statements of Comcast
Holdings Corporation (formerly known as Comcast Corporation), appearing in
Comcast Corporation's Current Report on Form 8-K/A dated November 18, 2002
filed on December 16, 2002, and to the reference to us under the heading
"Experts" in the Prospectus, which is part of this Registration Statement.
/s/ Deloitte & Touche LLP
Philadelphia, Pennsylvania
January 27, 2003
Exhibit 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement on Form S-4 (File No. 333-101264) of Comcast Corporation
(formerly AT&T Comcast Corporation) of our reports dated February 5, 2002
(which report on the financial statements expresses an unqualified opinion and
includes an explanatory paragraph related to the adoption of Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," as amended, effective January 1, 2001), appearing in
the Annual Report on Form 10-K of Comcast Cable Communications, Inc. for the
year ended December 31, 2001 and to the reference to us under the heading
"Experts" in the Prospectus, which is part of this Registration Statement.
/s/ Deloitte & Touche LLP
Philadelphia, Pennsylvania
January 27, 2003
Exhibit 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Amendment No. 1 to
the Registration Statement on Form S-4 (File No. 333-101264) of Comcast
Corporation of our report dated March 25, 2002 relating to the combined
financial statements of AT&T Broadband Group, which appears in the Current
Report on Form 8-K/A of Comcast Corporation filed on December 16, 2002. We also
consent to the reference to us under the heading "Experts" in such Registration
Statement.
/s/ PricewaterhouseCoopers LLP
New York, New York
January 28, 2003